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amounts that are distributed quarterly. We are not always profitable in every quarter and profit sharing is adjusted accordingly (i.e., different percentages for employees, managers, owners, etc.) “LACO has had success as rural generalists providing a range of professional services rather than as an urban specialist or being a very large firm.” TZL: Have you ever closed an under-per- forming office? If so, tell us about it. MN: Yes. It was about 10 years ago. We si- multaneously opened offices in Concord, California (one hour east of San Francis- co), and Ukiah, California (two-and-a-half hours north of San Francisco). Both were a slow start, but Ukiah has grown signifi- cantly since then; Concord failed and we closed it after one year. There were sever- al contributing factors to the differences between the two office locations. Concord was a more sophisticated and expensive lo- cation and was a bigger stretch for us, geo- graphically. The San Francisco Bay area is a challenging market with well-established competition that was much better capital- ized than we were at the time. In general terms, successful Bay Area firms are either very large or highly specialized niche pro- viders (there are successful firms outside these parameters, but most have been es- tablished for a longer time). We couldn’t get traction in the Bay Area market in a time frame that we could capitalize on. Overall, LACO has had success as rural gen- eralists providing a range of professional services rather than as an urban specialist or being a very large firm. Other factors in- clude the quality of the leadership in each location and the ability to capture market share. In Concord, we were a small fish in a very large pond whereas in Ukiah we be- came big fish in a small pond in a rural area that was more similar to our experience and history in Eureka. Ukiah now accounts for 41 percent of LACO gross revenues. TZL: Internal transition is expensive. How do you “sell” this investment oppor- tunity to your next generation of princi- pals? How do you prepare them for the next step? MN: This is a great question. LACO had challenges with this during the economic downturn. In 65 years of business, LACO has had to navigate at least three major

ownership transitions and several smaller transactions with shareholders. During the lean years, it wasn’t very attractive to be- come an owner. We had difficulty in retir- ing underperforming principals as well as attracting new owners. We have since im- proved our financial performance and fo- cused on attracting more shareholders by having tangible benefits of ownership and cultivating our rising stars. We now have eight owners, but it’s still a challenge. Pre- paring the next generation for ownership is an area we can still improve on, but we start with identifying candidates and pair- ing them up with a strong leader. They do things like go to client meetings together. Last year we also acquired a small firm of eight that had strong leaders that could be on track for ownership. TZL: Describe the challenges you en- countered in building your management teamover the lifetime of your leadership. Have you ever terminated or demoted long-time leaders as the firm grew? How did you handle it? MN: We had a principal who had kind of “retired in place.” I had to deal with that and really retire the person through ter- mination. It was time to make room for new leadership. We’ve also grown to a size that is beyond some of our expertise and, as a result, are looking to add more people from the outside to join the board, includ- ing people from other industries. “Preparing the next generation for ownership is an area we can still improve on, but we start with identifying candidates and pairing them up with a strong leader.” TZL: In one word or phrase, what do you describe as your number one job respon- sibility as CEO? MN: Keep everyone going in the right di- rection. TZL: The seller-doer model is very suc- cessful, but with growth you need to adapt to new models. What is your pro- gram? MN: It’s a current challenge. All of our key managers are in seller/doer roles. They do it all. The challenge is there is too much on their plate. It’s a bandwidth situation. We

YEAR FOUNDED: 1954 HEADQUARTERS: Eureka, CA OFFICE LOCATIONS: 3, Eureka, Ukiah, and Santa Rosa NO. OF EMPLOYEES: 85 MIKE NELSON: He has extensive experience in project management, financial pro formas, entitlement, environmental compliance, design, construction, and operation of hospitality projects, commercial facilities, residential developments, subdivisions and municipal planning projects. He now leads the firm’s strategic planning. THEIR SERVICES: ❚ ❚ Engineering ❚ ❚ Building design ❚ ❚ Planning ❚ ❚ Permitting and environmental compliance consulting ❚ ❚ Engineering geology ❚ ❚ Geotechnical engineering ❚ ❚ Hydrogeology ❚ ❚ Environmental science and geology ❚ ❚ Materials testing ❚ ❚ Special inspection and surface mining and reclamation act (SMARA) compliance

THEIR CLIENTS: ❚ ❚ Agriculture ❚ ❚ Commercial

❚ ❚ Education ❚ ❚ Healthcare ❚ ❚ Industrial ❚ ❚ Local and regional governments ❚ ❚ Professional ❚ ❚ Residential ❚ ❚ State, federal, and tribal governments MISSION AND VISION: LACO’s mission is to advance the quality of life for generations to come. Its vision is to be a fast growing firm and be named a Best Firms To Work For every year. To achieve these goals, they create a unified team working together.

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May 6, 2019, ISSUE 1295

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