Ep 114- Say What You Can Do: Building Trust and a Life Safety Business with Shannon Payne

Transcript

Transcripts are generated by machine learning, so typos may be present.

Chris Hanslik: We’re good. All right, Shannon, thanks for coming in today. It’s been great to see you; it’s been too long.

Shannon Payne: Yeah, it has. My pleasure being here, and I’m looking forward to it.

Chris Hanslik: Well, you know, I always like to start these conversations by asking people to tell us and introduce yourself, but more importantly, your company to the audience. Tell us what you do and what you’re known for.

Shannon Payne: Yeah, my name’s Shannon Payne. I’m a co-founder and CEO of Allied Fire Protection. It’s a beautiful thing. I’m in the business of saving lives and protecting property. I don’t know how it gets any better than that. I still get little chills and goosebumps when I say it. But we do that through the engineering, construction, service, and maintenance of life safety fire sprinkler and fire alarm systems. And I’ve been doing that since our 28th year.

Chris Hanslik: Congratulations. So let’s go back then to the beginning. What was it that inspired you to start the company, and how did you get it going?

Shannon Payne: That’s a good question. I would think if I look back, that’s about 30 years ago. I had that entrepreneurial spirit, right? I got out of college, went and worked for Corporate America, and learned some really valuable lessons—and we might get there. But, you know, I realized that that wasn’t my path. And so, as I started venturing from there, Chris, it really could have been any business. It just so happened that the operational strength, which I had found to be super important, was right there in front of me. And it was with a lifelong friend with whom I even dreamed of opening up a business when we were teenagers. And he happened to be in the fire sprinkler business. He started out as a helper to a fitter, then to a foreman, to a superintendent, and on to sales. So really, that’s what it was. It could have been fishing; it could have been a lot of different things. But that’s how I fell into this.

Chris Hanslik: So he had the knowledge of the industry, and you had the passion to go do something different.

Shannon Payne: And there you go. Yeah, that’s exactly right. At the end of the day, it was a lesson that I learned from a mentor that stuck with me. In my first job out of college working for Laidlaw Environmental—a big hazardous waste management company—the CEO came over at a Christmas party and asked me what I wanted to do with my life. I said, “Well, I want to be the CEO just like you.” Immediately he jumped to the importance of operations. He said, “You’re always going to have to count on people, delegate, and do those things. But if you have the opportunity to master operations, seize it.” I did it for five years. If it’s a four or five-year path, seize that opportunity because, at the end of the day, that’s what your business is. Everything. If you’re selling it, you’re selling operations, managing operations, or supporting operations. So why wouldn’t you want to master operations? So while I wasn’t able to master operations myself, the next best thing was my best friend whom I trusted. And I thought, “It’s right there. This is what I need to be doing.”

Chris Hanslik: That’s great. Great advice, too, that you got so early. I don’t know if I’ve ever heard it articulated that way, but it makes sense. That way you’re on top of an efficient, cost-managed business if you’re on top of operations, right? That’s right. So you and your friend started, and that was 28 years ago? Yeah, ’98. So how did it evolve and grow from there? Because now you’re all over the state of Texas and beyond. Tell us a little bit about that growth trajectory and how that journey has been.

Shannon Payne: Sure. In ’98, there were just three of us in my garage there in Pearland with a vision. We kept it simple. I think a lot of people complicate business, but we just wanted to be the best. So we started in our garage, and it wasn’t too long before I had a little five-year plan, a vision, and a business plan. Then it took off. I would say in a few years we were doing two or three million, all the way up to 2001 where we were doing seven million, which exceeded what my original plans were. It started there in the garage, and we eventually moved to a little place on Telephone Road. From there, as we were building and growing the business, I didn’t put any limits on it. I literally wanted to be the best at what we did. There are a lot of things that take you from good to great. It was easier said than done, and I was a little naive. But at the end of the day, if that’s the driver, that’s a good way to be driven—to be the best. Then I had some opportunities early in my career to expand the business. I was still learning a lot and developing myself, but one thing I did know is that the people were a real important piece of this. I had met a gentleman in the Hill Country area who was really focused on the service side of the business; we were doing mostly construction. Immediately, I saw he was the right person and a great partner. On the business side, I recognized the balance he brought to the organization. He joined the company, and immediately our service side of the business went up 15 to 20 percent, providing the long-term balance we needed. That was an interesting time, and that’s when I had my first expansion into San Antonio and McAllen. From there, you look at crises that hit, like 9/11 early in my career. You just don’t study that in school. We talk about these black swan events, and that was a shocker. We can go in a lot of different directions here, but if I look at that decade, we remember after 9/11 that interest rates started dropping and you had a construction boom. The state of Texas had a lot of growth, and that was really our first construction boom. The growth really took off, and my customer base became really solid. The growth was at 20, 30, and 40 percent clips for that first five years. That’s tough to manage. It’s good to have, but it can be tough to manage. One of the things I always said is that you’ve got to manage that growth; you can’t get over your skis. It’s a lot easier to grow at 30 or 40 percent when you’re starting from a base of three to five million. You try to do that at 40 or 50 million, and things can rattle and come apart really quick. But if I look at that decade, it was about surrounding myself with quality people. It became really evident that I’m in the people business. By surrounding myself with good quality people, some great things can happen, and they sure did. We took off in that first decade. We had four offices, and then the next black swan event came—the financial crisis. That was almost like a little depression and an interesting time. We were a pretty sizable company, doing $35 million at that time. But then you go from $35 million down toward $16 million while trying to manage and make money on a downturn like that. That was really challenging. But the beautiful thing about that, Chris, is that our profitability as a percentage of revenue actually went up during that downturn. People always ask me how we did that. I was in survival mode, but I believe you put yourself in a position to get lucky. Looking back at those ten years leading up to it, it was the solid relationships we built. When that turn came, I had a tremendous amount of relationship equity. Lo and behold, oil dropped to $20 a barrel and then jumped to $110, and the oil service companies were just blowing up. We were doing design-build work, and I had enough of a customer base in that industry that we excelled. It helped us come out of it real quick. When I came out of that, I thought, “Okay, we had two black swan events in six years. These aren’t once-in-twenty-year events anymore. What am I going to do differently for the next one?” That’s when I realized I had to continue to diversify. That took me into the alarm side of the business. It was market-driven but also customer-driven. I had customers who had one subcontractor doing alarms, one doing sprinkler inspections, and another doing extinguishers. Who wouldn’t want to deal with one company to do all of them? That diversification into alarms made us vertically integrated.

Chris Hanslik: That’s right. So let’s pull you back a little bit because you couldn’t have survived those events without surrounding yourself with good people. What were some of the things you were doing, even at the early stages, to vet and make sure you were bringing on the right people? Are there any lessons learned you can share about how that helped position you to have that solid base to get through those black swan events?

Shannon Payne: I would think if I look back at the early part of my career, there were more mistakes made. When you’re actively involved in building a business and only counting on yourself, you have a lot more control. But at that time, you’re growing and looking for talent that can simply do the job. However, it doesn’t take very long to realize if you don’t have the right people. We call them principle, value-based people. We have our own set of values that we think define success. It doesn’t mean that if you don’t share those, you’re a bad person; you’re just not an Allied Fire Protection person.

Chris Hanslik: I think more so—we say that here about our mission and values every day.

Shannon Payne: That’s right. So I think what happened was you still surround yourself with good people, but you might get carried away and get lured in by someone who’s very technical. You might forget about the heartbeat or the soul of the individual because they are so overwhelmingly smart. It’s easy to get caught up in that, and all those things did happen. I think it’s not really what I was doing right then, but what I learned through continuous improvement to get where I am today. One of the things we do today—and have for about nine or ten years—is that we hire 100 percent on values first. We have a lot of smart people, and we have technical people in various roles, but at the end of the day, we just want solid people. We believe if we get solid, good, value-based people, we can do anything.

Chris Hanslik: I think that’s great. As I referenced, we do the same. We call it hiring and firing based on culture or mission values. I also think it’s the place you hope to reach as an organization. I don’t know if you can do it early on because you may not even know who you are yet. You’re still finding yourself as an organization and determining your true values. But once you figure that out, if you hold true to them, then more often than not, the decisions you make will be good decisions.

Shannon Payne: That’s a really good point. Can I share a story on that? When we rebranded in 2017, I hired a consultant and asked, “Who is Allied Fire Protection?” I had my own thoughts, but at the end of the day, it doesn’t really matter what I think. Each team member and my customers are the face of the company; it’s what they think. When I first jumped into rebranding, I was thinking about the logo and the website. But as I dug into it, I wanted to know more about who we were. This consulting company went out to every one of my team members, from the field to the office, and to my customer base, asking them those same questions: Why are you here? What do you do? What keeps you here? It was from that process that our mission and our values were developed. Our team said, “This is why we’re here, this is why we enjoy our customers, and this is why we use Allied.” So I took that information and said, “That’s who we are.” It was that day that I rolled out a new mission, vision, and logo. It was a new day for Allied, so it really plays into your point.

Chris Hanslik: I think what you got out of that was twofold: one, you learned a lot that helps you lead; and two, your people felt heard and listened to. When they saw you take what they said and implement it, their engagement went through the roof. They’ll do more for you, the company, and the customer. By reaching out to the customers, you built a sense of loyalty because you care about their opinion. Those are great lessons to learn. You mentioned coming out of the financial downturn by being in Texas. Let’s talk briefly about your experience with the value of being a Texas-based business. I also want to talk later about how you’ve now expanded everywhere in Texas you’d want to be.

Shannon Payne: Yeah, that’s a good question. There’s just a tremendous amount of value. First, we’re in a growth state, and we have been for a long time with no signs of stopping. We’re in a pro-business, business-friendly state where they want you here. They know the value of what that does for the communities. Culturally, it’s been like that in Texas for a long time. Look at Houston with no zoning; they’ve always been pro-business through permitting, legislation, and everything else. That pro-business atmosphere feeds on itself, and more people want to be here. If you look at the growth, the culture, the legislative setup, and the government, there’s really no other place to be. There are a lot of great opportunities because the legislature, by and large, tries to stay out of the way and let business do its thing.

Chris Hanslik: That’s right. What is that? Laissez-faire, right? Hands off a little bit.

Shannon Payne: That’s true.

Chris Hanslik: Yeah. You mentioned San Antonio a minute ago, but I know you’ve gone to Dallas-Fort Worth and other parts of the state. What are some of the things that have driven the vision for expansion? How do you internally take that step? There’s risk in opening in a different geographic location where you, the founder, can’t be every day. What are some of the things you found helpful in evaluating that decision and monitoring it to ensure it’s making the progress you want?

Shannon Payne: Well, when we looked at it, we first considered where we wanted to be. Obviously, we looked for a pro-business friendly climate where growth is projected over the next 10 to 20 years, which happened to be in the South and Southeast. Beyond the markets, the most important thing is the people. Where can I find awesome people to help continue to grow this company? We’re currently in Nashville and Tampa, but it could have been Charlotte or Atlanta. I met some awesome individuals I could build around who believed in our vision and mission, and that’s where it starts. Of course, there’s risk in everything, but I believe in the people. If you get the right people, you can do some wonderful things. It comes down to your appetite for risk and your capital position. Everything we’ve done has been organic.

Chris Hanslik: That’s what’s so impressive to me—that your growth outside of Houston has all been organic. You’re finding the right person, believing in them, and investing in them.

Shannon Payne: Yeah, supporting them and believing in them. Again, you surround yourself with people who believe in your mission. We always say the most important hire is the next hire because you want to keep the culture intact. Each individual plays a role in that hiring and onboarding process. If you get the right people, wonderful things can happen. That’s how we look at it.

Chris Hanslik: Keeping the culture consistent across different geographic regions must be challenging because you aren’t there. You have to ingrain the importance of that culture into other people and trust that they’re going to be the culture cheerleaders within that new location, fostering the culture you established.

Shannon Payne: Yeah, and we try to keep the same playbook. I’ve emphasized the people part, but we have one operating system; we operate this specific way. The expectations aren’t different from one location to the next. We’re very active in the community, with spring picnics and other ways of giving back. We do that in every office. We celebrate life and birthdays in the same way. We try to mirror what’s been successful for us here and not deviate from it. There are challenges, but when you scale a company, you can’t be everywhere. It comes back to the people you surround yourself with and learning to let go. When you build a business, everything initially rests on your shoulders, but as you grow, you have to let go, count on others, and empower people to make decisions. That is a shift from starting in your garage to where we are now. The structure, processes, and procedures change. You can’t do it all yourself, even if you think you’re capable. It’s not a good practice anyway. So, it’s a big change, but nothing about business or life is easy, right?

Chris Hanslik: Definitely not. It’s a challenge, and not everybody can do it. Let’s talk a little bit about innovation. What have you done at Allied over the last several years that you think is innovative and sets your company apart from the competition?

Shannon Payne: I think there are a couple of things. One of the big challenges we—and many other companies—have is finding the right people, especially in the trades. About four or five years ago, I realized how difficult it was to find the right talent. So, we built out a talent acquisition department and a really robust training and development department. Instead of trying to poach someone, we decided to go to the high schools and the military. We introduced them not only to Allied Fire Protection but to the life safety fire sprinkler industry. We showed them a career path. Developing relationships with school districts and their technical wings has been a big win for us. We get the opportunity to tell these kids that there are many paths to success, and this is one of them. It might not sound innovative, but I don’t think my competition is doing it. We want to introduce you to this trade and put you on a path. I also have a leadership development program because you’re always looking for where the next generation is coming from. Because of the importance of operations, we have a program where we recruit from colleges. It doesn’t have to be someone with a construction background, just kids who want to get into this trade. This Rotational Development Program (RDP) is like getting a master’s degree. We put you where you can truly understand operations. It’s an 18-month program, which isn’t the easiest thing to sell to a recent college graduate who thinks they’re done with school. But when they hear the vision, it’s been successful for us; we’re in our third class and have found great, talented people. That is our future. On the technology front, we’ve really turned our company upside down over the last two years. Going into 2025, we changed all our software at once—from our ERP and CRM to our construction and service software—and we’re now integrating AI. I believe our talent acquisition and training programs put us in a leading position.

Chris Hanslik: I would say that talent acquisition definitely sounds innovative. I know an electrical company here in town that started their own school for the same reason. The competition for talent is robust, and once you get them, you have to keep them. If you invest in their training from the ground floor, you’re building loyalty because you took the time to invest in them. I can see how that would make you stand out. That leadership program also creates retention by investing in them once they’re there.

Shannon Payne: That’s exactly right. You hit it. We want 100 percent retention, but as realists, we know that’s not possible. However, we’ll do anything to raise our percentages and differentiate ourselves.

Chris Hanslik: When you look back, Shannon, can you think of a time you made a mistake or had a learning moment that really stuck with you? Maybe a moment where you thought you were done for, but you pulled yourself up and the company got better because of it?

Shannon Payne: There are probably a few if I’m being honest. It’s okay to make a mistake as long as you learn from it and don’t make it twice. Unfortunately, I’m going to share a story where I didn’t learn the first time. After 9/11, there was an economic boom, interest rates were lowered, and construction was taking off. Well, commodities took off, too. At the time, I had many jobs under contract that didn’t start for six months. I was pricing material at current prices, but after five years of flat prices, they suddenly jumped. I didn’t have any protection in the contracts. I learned real quick that I had to protect the company. Because material costs went up, I lost more money in the first quarter, right when I was building a house and dealing with cost overruns there. It was a real gut check. We overcame that because the market was hot enough to raise prices, and then the steel market collapsed, so we ended up making back all that money and more. It ended up being our best year on record. My lesson was that I had to protect us in contracts going forward. But then you get into a lull. For 15 years, steel prices stayed in a range, and I got caught again in 2021 during the pandemic. Steel prices jumped three times as high as they’d ever been and stayed there three times as long. You’re just chasing it, trying to raise prices on new jobs, but you can’t keep up. The reckoning was not nice at all. I went to my team and was 100 percent transparent about what happened and what we lost. I told them it wouldn’t happen again. I realized that since suppliers couldn’t protect me, the only way to protect myself was to buy the pipe myself. That required more capital outlay, but I’ve tried everything else. I can gladly say that since ’21, I haven’t had to tell my company we’re going to lose money that way. That was one big lesson.

Chris Hanslik: Yeah, it was a big one. I remember conversations with you back in 2017 or 2018 when those prices were running away from you. So, one of the things you’ve done now is outlay capital to increase your inventory, which acts as a hedge against future fluctuations.

Shannon Payne: That’s it. If you look back over the last four or five years, you see a cycle of ups and downs. We aren’t in the commodity business, yet I am. So yes, it’s a hedge. It has worked out really well for us, and we’re a big end-user of steel.

Chris Hanslik: Well, I think the lesson there for anyone listening is to understand your cost components and how those prices may fluctuate, then figure out what you can do to guard against that, because those market dynamics are completely out of your control.

Shannon Payne: That’s right. There are ways to put collars in contracts, but not all customers will go for that. So you have to figure out what you can do to protect yourself, and that’s what I found to be the most effective.

Chris Hanslik: You mentioned earlier having strong customer relationships. Let’s talk briefly about what you’ve done to build and solidify those relationships to create loyalty among your customer base.

Shannon Payne: At the end of the day, we have the ability to make things more difficult than they need to be. I found out what my customers’ pain points were. Often it was simple stuff—people not getting back in touch with them or not doing what they said they would do. I built relationships because, when dealing with million-dollar deals, I wanted them to know who they were dealing with. I could guarantee that if I said I was going to do something, I was going to do it. I might not be a personal expert in fire sprinklers, but I am a value-based person. If I tell you I’m going to get it done at a certain time, I’ll do it. Relationships are built on trust, and the only way you can trust someone is to get to know them. I made a big effort to know my customers on a personal level so they knew what made me tick and the values I stood for. I kept it that simple. I told my son fifteen years ago when he was a teenager, “If you can do two things, you’ll be 90 percent better than most companies: say what you can do, and do what you say.” It’s just that simple. He got firsthand experience of that at 13 when a subcontractor for a barn didn’t even call us back. He learned the value of showing up and doing what you say. You’ll be surprised how you pull away from the pack.

Chris Hanslik: I love what you said about not making things more complicated than they need to be. It really comes down to that, no matter what business you’re in. Everyone successful will tell you it’s about people and relationships. Whatever widget or service you’re selling can vary, but if you master those two things, your chances of success increase exponentially.

Shannon Payne: That’s 100 percent correct. I made it clear that you can have strong relationships, but you still have to do a wonderful job. These relationships help people get to know you, but at the end of the day, you still have to produce.

Chris Hanslik: You’ve still got to deliver. You’re a busy guy, so what do you like to do to rest and recharge?

Shannon Payne: I love the outdoors. You can put me anywhere outdoors—the water or the bush—and I’ll be happy. I love to hunt and fish, but even without those, anything outdoors with my family makes me a happy character. Just going outdoors and doing a little fishing, even by myself, is my getaway. I enjoy that.

Chris Hanslik: I get you on that. All right, we’re going to wrap this up, but I have to ask one more question: do you prefer Tex-Mex or barbecue?

Shannon Payne: Oh, goodness. You have to pick one, huh? Those are my favorites. If I had a gun to my head and could only pick one, I’d pick barbecue.

Chris Hanslik: All right, there you go. It’s funny; we can talk about complex business and fascinating things, but that question stumps more people than anything else. Shannon, this has been great. Thanks for taking the time to share your story. I’ve been proud to be your friend and see what you’ve done with this company. I know you’re going to continue to grow it even bigger.

Shannon Payne: Well, I appreciate you having me. It’s been a nice ride, and you’ve been a part of that over the last 10 or 15 years, too. It’s been great catching up today. All right, well, good luck to you.

Chris Hanslik: Bye.