How to avoid the $300K premium trap in workers' compensation with Todd Thams

Now their mod score crept above a 1 because the broker wasn't actively forecasting. Looking at that and the shifting landscape, everything changes annually. But now that million dollar account to them can't bid for work. Now it's you're out of business. If you can't bid for work because you have a Mod score above 1, what do you do? Welcome to the Canary Report, the podcast where risk leaders, safety professionals and and operational executives come for real world stories and smarter strategies to keep people safe. I'm your host, Michael Zao. In each episode, I sit down with exceptional leaders who are transforming how risk and safety are managed. Whether you're a leader of a nationwide EH&S program in a high risk industry or you champion workplace safety across 200 retail locations, this podcast is for you. Let's get into it. Welcome to the Canary Report. I am your host, Michael Zhao, founder and CEO of yellowbird, the most trusted solution for delivering safety and risk programs nationwide. Joining us today is a dear friend of mine and colleague, Todd Tams. He is the founder of ModAdvisor and a 20 year veteran of the commercial insurance and workers comp industry. Todd comes to us from Iowa, but he also comes from a background very similar to my own and as the founder of Mod Advisor, which is a software platform focused on workers compensation analysis and claims visibility. He was first a broker and a man of the relationship sale and now he has moved into the world of serving the industry as a whole. And for me, he and I have become dear friends, we have become colleagues and it is one of those things that I've been excited about this podcast. So Todd, thank you for joining us today. Well, thank you for having me, Michael. I'm excited for this as well. You're a great friend. We've had a lot of great conversations over the years. So excited to be on this podcast and join you today. Thanks man. You've got the greatest radio voice on earth. I always have to point it out, man, because seriously, I'm surprised you're actually not on the radio because you've just got the perfect radio V. So, funny enough, I actually just called my own podcast the Canary Club instead of Canary Report. That tells you how comfortable I am because I'm not even paying attention to the name of my own podcast. So first and foremost, I want to talk about the things that we as men and humans and leaders are doing this all for, which is the personal side of the who you are in your journey. So we'll eventually get to claims and cost drivers and EMODs EMR rates, all that stuff. But first, tell us a little bit about where were you born, folks, where did you grow up, all that good stuff. Who is Todd Tames? I'm an Iowa native. Actually grew up in a small town in western Iowa, town of 8,200. Lived there for most of my life. Moved to the city for a short period of time. And then as we started having kids and growing our family, there was an opportunity to go back and work at our family insurance business. I took the plunge. I'm kind of like, I'm a risk on guy, so, like, let's go do it. And went back and started working at the family business and started selling everything and then started selling commercial lines, which is what I really liked, and ended up doing that for about 20 years. I've been married now for 25 years. We've got three daughters. All of our daughters are grown and out of the house, and they're starting to have kids of their own. So the schedule's been a little crazy lately with grandkids and baptisms and everything going on there. Wow. I imagine so. And I remember I spoke with you and last time we talked, I am at my daughter's house waiting, because any moment now, she is about to have my granddaughter and. Or a grandbaby. I don't even know if we knew what it was going to be a granddaughter at that point. But I'm super excited for you guys. You said you're a risk on guy, so I've been married 25 years as well. So you don't know how to do math either. So you went with year 2000 just like I did, huh? We actually just celebrated 25 years in February, believe it or not. So you even went early in year 2000. So you can always see I am August. So half the year it's 25, half the year it's 24. So, you know, that's for me. I still have to do math. So how have you and your wife navigated this risk on philosophy and strategy at home over these years? Takes a very special person to be married to somebody like us. So how is your wife with regards to risk on and you following your passions? Oh, that's a loaded question. I have a great partner. She's ride or die, and she's been by my side every step of the way through the good times, the bad times, the crazy times. I couldn't do what I do honestly, without her and the support. And I mean, there's give and take on both sides, but I would say that our kids would tell you that we have one of the strongest marriages that they've ever seen and they would hope for that in their marriage as well. Very fortunate, honestly. Like, we don't have fights, we don't have disagreements, we don't have arguments. Some of our friends in their marriages, they have problems and we've never had that. Our problems are self created, like building quitting a stable job that you do well at and then starting a startup. Like let's. Why did we do that? Why do we do that? In our 40s? Yes, exactly. Well, and I like the fact that you said why did we do that? Because that tells you that she was with you. Truly ride or die. And that takes a very special person and modeling, especially for young ladies. And I don't know what you did in a past life to deserve three daughters. I won't even go there. But I love my daughter. I also have a son. They're both challenging at times as, as parenting and I make a joke about three daughters and. But the reality is there's nothing like being a girl dad. And I can tell you that if I had two daughters, it would have been just fine. I only have two. Two sons, it would have been just fine. But I am so glad that I have a daughter. It's a very special thing. So you started early on your family, they're starting to have kids. My oldest is 21, so your oldest is probably around the same or maybe a little older. But now starting their own journey. Right. We got the cart in front of the horse. Emily was pregnant when we got married with our first kid. And really I kind of needed that. I was stupid in my 20s and maybe not as focused as I should have been. And when you find out your girlfriend at the time is pregnant with your first child, it really gets you to grow up and straighten out very, very quickly. You know, when we got married, I'll never forget the day that we found out she was pregnant. And it was kind of life altering because we weren't expecting it, we weren't planning on it. It was, what are we going to do now? We sat down at a restaurant that doesn't even exist anymore and I said, well, I love you, I want to marry you. Let's do this. I don't even have enough money to buy a wedding ring. And she says, okay, let's do it. And saved up enough money and got our life on track and bought a house and started down the family path. But I needed that first kid to straighten us up. That is A beautiful and very honest story. And thank you for telling that story on, on the podcast. It's not something that a lot of people would talk about and you're such a success story for families and for people that it's not the end of the world. Things occur, you take the things that happen, you adjust. Probably why you're such an incredible entrepreneur is because things happen and you have to be willing and able to adapt and learn and adjust and move forward 100%. What's interesting, when you tie that back to resiliency and kids are a blessing. Our first grandkid came from our 17 year old daughter and her boyfriend. I'll never forget the day. And you know, in business we take things with a grain of salt. Good things happen, bad things happen, you have to be ready to pivot. But I had gone to bed and I was asleep when the doorbell rings and it's my daughter's boyfriend's mother and my wife goes out to talk to her and the kids are sitting downstairs in the basement. And we lived in a small town, so word had gotten out that they were pregnant and the mom found out about it and the kids had not found a way to tell us and you hadn't known yet. And so she's 17, he's 17. Their life is about to be altered in a way that they can't even fathom as high schoolers. My wife comes in and wakes me up. She goes, wake up, your daughter's pregnant. Come downstairs. Act surprised. I am surprised. Act surprised. I'm like, not a problem. I got it. Yeah, I am surprised. This is not the news I was expecting, but some people get upset. And I think the older you get, especially the grandparents, they're like, kids are a blessing. Kids will be a blessing. Now they're happily married, they just had another grandkid this year. They're doing well. That's awesome. Good for you, man. And you are such a testament to how you can take things in stride. You know, I do admire that about you. It's not to make this a whole Tom Tams love fest, but it's going to be for a moment there, so I appreciate it. You know, the reality is, you know, even being in the insurance industry for 20 years, we would see people get upset. Their car got wrecked, they have hail damage on their house. There's something that they need to stress about. But you didn't die. You have a home, it's going to be fixed, you're okay. Take things. You know, it's a cup half full Kind of a mentality. And. And I don't know if you can teach that to some people, unfortunately, but I'm very, very blessed to have that myself. Things happen in life. So segueing. When you took over on the business and you came and got into the family insurance business. Tell me a little bit about that. Who had started it? What was the journey like for your folks, and are they still with us? What's the story on that front? When I came back to our family business, the year was 2004. We had just had two kids, found out we were pregnant with our third. I was working all the time at a prior career. The opportunity came to. To go back and work at the family business. And I took a massive pay cut because my parents really didn't have enough money to pay me, but they wanted us to join. And so if we were going to live the lifestyle that we wanted, we had to get out and sell. And selling is not easy. And it takes two or three years to, as you know, to get critical mass. And we finally hit that stride in year three and continued to just grow and grow and grow. Now, my family would tell you we experienced what I would call explosive growth at our agency, and it was disruptive. A lot of agencies, they can make a couple hundred thousand bucks a year, provides them a nice lifestyle. It's a staff of two, and there's nothing wrong with that. But that was not what I wanted. I wanted a lot of people. We wanted scale. And I would say that there was a lot of angst in that, and it caused some family dynamics that were certainly challenging, not only for our family, but for my parents as well. How about your siblings? Do you have siblings? I have a younger brother and sister. It caused strain there as well. Were they in the business? No. Ultimately became. I tried to buy the business or ended up buying it because it came to the point where if something were to happen to my parents or doing estate planning, I'm a third owner in a business that I write most of the revenue on. And so there are challenges here, like, how do we protect that? And so in 2012, my parents finally said, why don't you own the agency? You take it over. We did a buyout and borrowed some money, and away we went. That's fantastic. And it was good forethought on their front to recognize that. Are they still with us? My mom's still with us. My dad is no longer with us. He died in 2019. Cancer. I'm sorry to hear that, but glad you still have your Mother and Happy Mother's Day. And she has great grandchildren, which is quite an achievement and something for anybody to say. I don't know a lot of people who can say that they've actually been able to put their eyes and hold their great grandbabies. So that's a beautiful thing, man. That's beautiful thing. So you went through that and did you seek to sell the business or did you decide you really wanted to do Mod Advisor? And it was something that was in the back of your head and it's like, I can't do both. How did that journey begin on the Mod Advisor side? So there were a lot of things going on, let's say early 2000s, and obviously Covid was one of them. But owning a family business that is in rural western Iowa brings about a lot of legacy challenges. And the direction that I wanted to go, we really couldn't transition to. I wanted to be a solely large commercial shop. We had farm business, we had personal auto. We're in a small town, people can drive right to your front door, walk in to make a payment and it would just disrupt what we were trying to do. And you don't get that in the city. No one's going to drive 25 minutes to their broker's office to make a payment. And so there was frustration on my end, like we were hitting the point where our kids were leaving, they were never going to move back. I wasn't happy with how things were going in my world and we wanted to do something different. And I started building Mod Advisor as a work comp claims platform because I wanted a better way to analyze stuff. We started doing this during COVID actually found a development team in India. They helped us launch version one, get off the ground. We got some immediate traction on that. And then what was exciting is we got picked up by a new group called Broker Tech Ventures that sponsored by two of the largest brokerages in the country, holmes, Murphy and M3. They were the founding partners and we made the cut. And so they interview 150 people. They whittle that down to 12. And I sat in the room with all these mega brokers and they're like, we love your product. We want to help you succeed. We want to start using it. And this was the path. We were like, hey, we have this shiny new object. Should we go follow that or should we do more of the same that I'm kind of frustrated with. We ended up selling the business and packing up our family and moving and we moved to Des Moines and we Went on Mod Advisor full time. Now the interesting thing about that is as a large broker in a small town, we knew everybody. Like you can't go to the grocery store, to the restaurant, to the golf course. Like we're connected to all these people and we would do renewal meetings and you'd see them. And we had clients all over western Iowa. Now I live in West Des Moines. I don't see any of those people anymore. And the software that we sell is nationwide and I never see any of those people unless they schedule a call. Tech doesn't have the same type. While we have a relationship, the relationship is like what we have through now, like through Zoom or teams meetings. It's a little different. And let's be honest, the way to build a business like ours, both of our businesses, it is a matter of providing value to an industry, not necessarily to an individual. Where when you're a broker, you can sell a policy that's a decent sized policy and earn that right to serve them. And that policy can be your big win for the year. It really can. Like if you're a small two person, you know, type of brokerage and you end up with a $50,000 a year type of a fee or more on that policy that is can be meaningfully impactful on your small brokerage. When you're doing what we've built, both of us, it takes understanding a market, an industry, the problem of every broker, the problem of every risk manager and serving an industry or a market which is such a different experience. I know you and I have talked about it, it's a very different sale and we both had to adapt to that through that journey. So I met you in Key west, which was a such a wonderful way to start this conversation because we both were part of a community of broker and we were sponsor of this Key west adventure that they do down there. And these are a lot of mid sized brokerages that are kind of cutting their teeth and they get together as a community and we were telling them what we were doing and being part of that. And I remember sitting there and it was before you were selected on BrokerTech ventures, I was actually part of the cohort that you were part of and I was not selected, which good for you and kudos on you because they only go right over the plate on brokerage, on value to insurance, like dead on. And we'll talk about that in a second. There's no question you are a mod advisors, mod rates, EMRs. There is no question who you serve and what industry you Focus on. Right. You know, all top 100 brokers have a module. It's a small pond, but it's an important one and it's one that is really a great opportunity. So when we met originally, we were talking about this. And through the journey of the product, it wasn't an overnight success, nor was ours. It took time. You had to raise some capital, you had to develop, you had to figure out what was working, what wasn't. What was the first feature or offering that Mod Advisor offered that really people were like, wow, this is really something. What was the. Because you never really know until you start rolling out different features. And I don't know about you, but you're like, huh, this is what they're valuing. Do you have a feature that first golden egg that started the traction? Well, I can go back to. There was a lot of things I didn't know. So when we launched the first version of Mod Advisor, I launched it from a small price point which was quickly picked up by small brokers who only did maybe five or ten mod files a year. I think one of the reasons that we got into the broker track, venture cohort and I can share this, but Interwest Insurance Services out of California, top 100 broker, they bought our product back then you could buy our product for 24.99 a year. It's super cheap. And I couldn't believe that this top 100 broker bought a subscription to Mod Advisor and dished the legacy software. And they liked the reports, but we learned a lot of the stuff that we built they didn't use. They were very specific in the reports and how they wanted deliverables, but they were huge in telling us you're not going to make it to the next level unless you get better software and fix a lot of things. And so as I look at the evolution of our company, we started with probably your minimum viable product that carried us through for about two years and then we had to redo that entire thing if we were going to go nationwide and go up market. And the problem that happened is as we go up market, we lose those smaller brokers because your price point goes up, the complexity and sophistication of the software goes up. But now you're into the large brokers that want the data, they want the analytics, they want the stuff. And we're actually working on reiterating that to our next version 3, enhanced with AI right now. Like, everybody is never stop evolving. No, that's fantastic. So I want to take a step back for a second because you and I have now officially become those people that we can't stand, which is we have made the assumption that the listener knows what a moderate is, what an EMR is. So for the layperson for we have a lot of safety and loss professional trainers and people who run logistics companies and manufacturing organizations and things like that, can you explain in layman's terms how it works and why an EMR matters 100%. So if the listener is a safety manager, so there may be a disconnect in an organization, especially the larger you get. You may have a purchasing division or the C suite that handles the purchase of workers compensation that may not involve the risk management person who's dealing with OSHA compliance and regs and things of that. Right. And at the end of the day on the workers compensation policy, there's a number, we call it the experience mod. It works just like a credit score. And so historically the more depending upon the type of claims that a business has, the frequency of claims, the severity of claims, it moves that number and it moves it upward. That ends up costing the C suite more money. Now if you want to tie that back to ROI and show like the cost of claims. So maybe a safety manager is going to look at the historical claims and say we have a certain number of claims that keep reoccurring. Maybe it's a specific type of strain or laceration or we just did one the other day. Rhett rolls over a forklift training or maybe a chemical burn or something like that. So like whatever it happens to be the normal doing business. But you have to do a claim because you've had an injury on your site. Yes, you have to do a claim. It may probably is also an OSHA recordable now involves a bunch of people. So the business owner or the C suite may not really understand the financial impact of that claim and the fact that it's going to live with them for three years and a lot of time there's a disconnect in lack of education in these smaller claims, how significantly they impact their experience mod. And when you take the experience mod and if you value that like a credit score, the worse your credit, the more you pay to borrow money, the better your credit, the less you pay to borrow money. If you knew that there were things that you could do to lower your interest rate, you probably want to do that, especially when you're borrowing hundreds of thousands or millions of dollars. We do the same thing at Mod Advisor and we tie that those claims back to an roi, back to a mod Impact back to premium. And really the conversation then becomes at the business is if we were to solve this risk management problem, here's what the ROI would be. How much money do we want to throw at this to solve the problem going forward? And it's not always about money. I mean, we're a people business. You've got people that are getting hurt, that are getting severely injured. I know of a person that had a small shoulder injury and they were working at a medical care facility, they worked in the birth department. And when they had a shoulder injury, you're no longer allowed to pick up a baby, right? Because you've got a shoulder injury, you're on a lifting requirement, you can't do your job. So how we handle claims also has an impact. This medical facility thought it was the best interest to put this person scanning documents in the basement while they tried to get better. It took a year and a half. The first surgery was botched, they had to go through surgery again. And so now you've got a person that was injured at work, that's had two botched surgeries, that it's affecting how they sleep, that the insurance company has to pay for all of it, which is a reflection on you, on your moderate and your cost of insurance. Ultimately, because the process was handled so poorly, not only is there the workers compensation premium impact, but then there was the employee impact and then employee end up leaving. So now you've got a 30 year veteran of industry knowledge, safety, training, procedures, all of that stuff that walks out the door and you've got to hire, retrain. It's not just the mod score and the premium impact, it's a total business impact here of how do we fix this so we can prevent turnover, we can prevent injuries, we have a safe working environment, we're responsible to our employees. And you do that through tools like Mod Advisor, tools like what you have where you help diagnose, fix and solve those problems going forward. You're dead on. And people don't often understand that if you look at the paper and you see a number and you just go off of the number, then you're doing yourself and everybody in the organization a disservice. You need to think about the drivers of these numbers. And it often is something that is so foreign even to the people who are cutting the checks that to understand why this is such an important thing, and I guess the other piece is, and maybe you can explain how a baseline is set is an industry standard. So when somebody's mod score or risk score is at a 1.0 comparative to 1.2 or whatever it is. Can you explain what the numbers mean so that we can set kind of a standard understanding for folks who are listening? Absolutely. So in a workers compensation policy, there's three things that affect pricing. There's the rating company that we put it in, and those companies can have best in class rates, worst in class rates. We have credits and debits where we can apply an incur a surcharge or a discount. And then we have the mod score. And so at a high level, if you're paying a hundred thousand dollars a year in workers compensation premium, you have a Mod score of 1.5. Now you're paying 150,000. If your minimum mod or best in class mod is 0.5, you take that same hundred thousand times 0.5, and now you're paying 50,000 instead of the 150. So the spread's 100 grand a year over the course of three years, that's $300,000. And I think the other side of that is how much more product or service does a business have to sell to make up for that $100,000? Is it a million dollars in revenue or a million dollars in sales to pay everybody to pay the people to get to that extra hundred thousand dollars to cover their fixed costs? So there's always an ROI and having a high mod and having a low mod. And what's interesting is the industry will tell you that the average company, which if they through actuaries, we can model out what expected losses are going to be if their actual losses are the same as expected losses, they have a model one that's everybody's average. Our data will tell us that that's not true. And what happens is, theoretically a mod score of 1 does mean your average, you have a C. But in our system, we see a curve. We see a lot of people positioned at the 0.8.9, meaning they're getting a discount. And we see a lot of people positioned at the 1.2 to the 1.5. It's kind of this way, nobody's just average. They're either better than average or they're worse than average. And you blend those together and you get the wine. Which is exactly why an average is what it is. And you're dead on. And it's funny because people will often ask yellowbird, why are you so involved in the insurance ecosystem? And this is the reason why we do so much work on identifying what the risk that is impacting the mod rate for each organization and it is very different. You can have an organization that has a systematic problem with sprains and strains where we need to put a training program that goes out to every single location and put best practices in place with localized talent. But that same type of organization potentially has in another company. They're dealing in chemicals and they've had some things with airborne particulates and they need a fit testing for their respirators. So anybody who's spraying or using this stuff, make sure that they're doing the right things. From a breathing apparatus perspective of the drivers of these things are truly unique. That's the piece that people don't really understand. It's like, oh, we know the risk in this industry. I'm in trucking and therefore it's going to be forklifts and Department of Transportation. Well, no, you could be hauling chemicals and you've had a couple of chemical issues, or you could be dealing with. You don't have the man, you don't have the jack lifts that you should have. And so you've got to train people how to lift things safely or use equipment and so forth. So it's just such an interesting. That's why I'm so pleased to have you on here because these are related and people don't understand that. That's why I find this interesting and I find what you do interesting. You would think people would know how to lift. Like it's a common thing. Like we bend down, we pick stuff up, we're all adults. But then you look at a loss history or a loss summary and you're like, why do we have all these strains? Apparently we don't know how to lift or we don't have the right equipment for people to be able to lift things safely. And you need to do the risk hazard analysis, need somebody like you to come in and solve that problem for them, to show them the roi. Assuming that people know, I think is a bad path. And I mean trust, verify, educate, that's the path forward. And the interesting thing that you bring up such an interesting point there, Todd, because I think people fundamentally know how to lift once, but it is different when that is what you do for a living every single day. And the minor changes, the things that you can do things more safely, you can use different methodologies. That's why in this industry of health and safet, there's the human hop, basically human operator procedure process, but operational process. Basically HOP looks at the actions to improve the action on a repetitive basis based on the number of. Based on the activity. And it's so fascinating because people are like, well, you just need to bend with your knees. You'll be fine. It's like, well, there's more to it than that, you know, and that's just one example. Lacerations is another really big one. And people cutting themselves. We've had more than our fair share of amputations of fingertips and fingers. And it happens in 2026. It's still happening. This is not from 1932 when there was no labor laws. People were still having these situations happen thousands of times every single day. Well, workers comp's a $50 billion industry and they're paying a lot of billions of dollars of claims. So yeah, we still have claims. And the interesting thing is, and let me ask you this because I'm leading the witness and leading the interviewee a little bit, but we also do a lot in property and casualty here because things like fire and other risk. Is there an equivalent to a risk mod when it comes to non workers comp, like when it comes to property and casualty? And what are the levers? And are you going to be going that direction from an organizational perspective at some point? You obviously have a massive market to own before you go there. And I recognize that. Is there a tie in to fire protection and sprinkler systems and things that are ancillary to work comp? So for today, we're going to stay in our lane of workers compensation because that's the one line that businesses can control. You know, if you have a fleet of 50 vehicles, you can't make your vehicles safer. The airbags work, the tires work. Now you can do maintenance and things like that. You can do distracted driving training and so forth. But the reality is, is that if there's a probabilities thing that if you're doing the work on a road, there's a percentage of car accidents that could occur or a percentage of failures that could occur. That's just probabilities. So. Yeah, I understand. Well, I think if you look at most businesses and you get their claim history, sure, you might have property claims, you might have auto claims, but the number one driver is people. This is the workers compensation claims. You can't control. When hail comes through and damages your cars in your building, you can't control those type of things. But when you see people getting hurt stepping out of a vehicle or slipping in the parking lot or cutting themselves, those are things that you have direct control over. That's a great point. You know, even in the example that I gave when it comes to distracted driving. We do a ton of distracted driving training. That's actually a work comp thing because they get in an accident, they have an injury, they're injured on the job. It goes as a work comp claim. It doesn't go as a property claim. So. Yeah, or an auto claim, you know, and it's quite interesting. So one of the things that people ask us a lot about is occupational accident coverage. So it's different than or comp because it's for subcontractors and contractors. Is that under the same umbrella for organizations? So we have five insurance policies that we give to every pro on our platform. So literally 9,000 people are covered by Yellowbird on everything from extended driving to accident coverage to professional liability coverage, all that kind of stuff. It's a huge expense for us. But I wonder, for an organization that has temporary staff come in, they're a 1099 employee or 1099 worker, is that under your work comp or is that under another policy? It's actually going to be under work comp. There's a lot of rules. This is where people kind of get in trouble. So let's say you're a general contractor and you've got a GL policy. That GL policy may exclude subcontractors. So if the subcontractor is doing work, damages a property and the ensuing insurance claim may be denied because that liability policy does not cover the subcontractor. But that's not the way it works in workers compensation. And the courts, the courts are always looking to find coverage for any worker that's working on behalf of. Of an organization. And there's a lot of gamification. You know, people will say, well, there are 1099 workers, so we don't have to buy a worker's compensation. Well, what the tax law says and what the workers compensation law says are maybe two totally different things. And so this is why you see a lot of certificates of insurance flying around making sure that the subcontractor has workers compensation insurance. It's interesting we would see in rural western Iowa, maybe a lot of cash deals. I pay them cash so I don't have to pay work comp. That's fine. Let me ask you what's going to happen when that 1099 worker that you pay cash under the table so you don't have to pay work comp has a serious accident? Do you think his wife made that deal with you? Do you think she's going to care? Because I guarantee you, when her husband can't work or is dead. She's hiring an attorney and they're coming back after you. And now you've got maybe potential work comp fraud, things that aren't going to be covered. You're putting your personal assets on the line. It's funny, I talked about the holy grail for your business of what was the thing which that first client who really helped you with those reports that they valued the most and helped you on the things that were not working quite to their satisfaction. Our thing honestly, as silly as it is, we've discovered one hiring 30 subcontractors to do work and doing all of that to make sure that their coverage to make sure that they have the right level of coverage and all of that stuff is almost impossible for a decent sized organization. So they end up hiring one person to fly to 50 locations over two years to do something because they just can't dealing with 50 contractors. And so the coverage of centralization of coverage is a really big one. And the other one for us honestly is just transparency of communication where you can see the communication between the professional and the edge and you can just knowing the schedule's been done, the job's been done. They asked this question because our pros are often representing the company to go out to their sub. If you've got a big distributor, they're going to their end client and they're like, no, I'm not letting you. I'm the broker and I'm going to send you out to my client. But you need to have the professional contact me and I'll work with the client sites. You know how inefficient that is. That is insane. You can't do 700 locations like we just did. And you're the central hub. You're gonna die. You're going to die. You have to release that and use a platform of any sort, even if it's not mine. So I find it so interesting that you should say that the insurance for subcontractors is a big thing. And it's great to hear that I'm not wasting all that money. No. Well, somebody's got to pay for it one way or the other. And this is where we hear a lot from premium audits where the general contractor hired subs. They didn't get the certificates of insurance or those certificates of insurance that the sub didn't buy work comp. Well technically they're eligible then to use the general contractors workers compensation policy. That's going to be the law. I mean it's not going to be the law. It is the law. So if, if you're directing somebody and you've got an uninsured sub that you hired, their first claim is going to be on that general contractor's workers compensation policy. So the insurance company then at the end of the audit will say you hired all these subs. They didn't have work comp. We were on the hook for paying those claims on your behalf. Here's the premium charge for it. And this causes a lot of angst in the broker community. Is that a federal thing? Is that going to be, is that nationwide or is that a state by state circumstance? So workers compensation. Well you're asking a couple different things here. The insurance policies, they're standardized across the country like it's a six page document. As I recall the specific coverage varies from state to state but the definition of who is an employee is going to be somebody at your direction and control. And subcontractors are just that. So the only method for a general contractor or what we see in the insurance industry is making sure they've got those valid certificates of insurance. We see the construction industry being held to a mod score of 1 or less and the reason for that is a general will ask for a subs experience mod worksheet because they want to see their history of safety. The last thing that general wants is a subcontractor with a poor safety record working on their site having a claim, inviting in an OSHA investigation and just the problems compound after that. So that's why when we talk about the construction industry being mod sensitive a lot of these contracts stayed in the contract. If you have a mod above one, we don't hire you. And I, I can't tell you how many conversations with brokers who have these multi million dollar clients and now their mod score crept above a 1 because broker wasn't actively forecasting looking at that. And it's a shifting landscape. Everything changes annually. But now that million dollar account to them can't bid for work. Now it's you're out of business. If you can't bid for work because you have a Mod score above 1, what do you do? That's a non starter and that's where these vendor managers, that's one of their obligations to the company is to make sure that, that those organizations are properly covered and at rightfully so. So going back and geeking out on being a startup CEO, who is your icp, your ideal customer Persona? You know when you're sitting there at night and you're thinking about I'm going to spend X dollars on marketing to a group of leaders who can invest in our product to improve their business practices. Who are those people? And is it a risk manager at a large corporation, Is it a broker, is it a carrier, who's your idea or all the above I imagine. But you have $1, where does it go? So we don't do a whole lot for marketing. Believe it or not, when it comes to looking for a software solution that does experience mod management like what we do, it's a small pawn and an even smaller vendor list. So most people who come to us say I need SOC2 compliance, I need to make sure you're protecting our data. There's two people in the country that do it, us and another one. And so it's just a matter of unseating the other one with a better product that's easier to use. So who uses US Brokers on behalf of their clients. Insurance carriers were used in new business development. The underwriting desk. And then what's interesting that I didn't foresee five years ago is we actually do work for captives. A self insured captive still wants to apply experience rating to all of their policyholders. And because they don't report to rating organizations that do that, they need someone like us to come in there and do it. And then so that was an interesting one. And then we've also seen private equity backed groups that are buying organizations and they're buying organizations so fast that they needed our software. Because when you buy an organization you bring buying the employers workers, right? You're bringing that history with you and it can affect your mod score as well. Interesting. So how does a roll up work? Let's just say an organization, let's say they're at 0.9 on their general mod, you know, their rating and then they acquire an organization and roll them into their company. Does that mod roll in? Like how does that work functionally? And you may not know and that's okay, I'm literally spitballing here. And so it's interesting, there's a specific document for most states it's called an ERM14 and it's a combination of entities but that doesn't mean the rating bureau knows. So it's not uncommon that one year an organization exists and another year it doesn't. And the rating organization may not know that organization was acquired by company A. So company B was acquired by company A. Technically company A is supposed to bring in company B's data. Typically the broker will do that. But to Your point? Most people, if it's going to be bad, don't submit that, but if it's going to be good, they will. Interesting. Do no harm. Exactly. What you talk about, you talk about captives. Captives are a very big opportunity for us as an organization. A dollar saved is a dollar earned in a captive environment because they are self insuring. And so there's a certain, there's a high threshold that if they're running a better program and they are investing in reducing injuries and reducing losses, then they're going to materially benefit themselves. And so I find that captive insured is a really great opportunity for us just because they'll invest in improving programs. And you have to be big, generally speaking, you have to be sizable to be a captive. And so that means that your risk and loss control team may be decent sized 30 people, but you could have 1500, 2000 locations and those 30 people aren't enough. And so it's a fascinating thing. We're certainly seeing the rise of captives, but captives, they have a lock on the door, they don't let everybody in. And it's a great way to drive down your workers compensation costs. But you got to earn it to get there. Yes, you absolutely do. So as we wrap up for today, I want to talk about what, 12 months from now, 18 months from now, what does Mod Advisor look like? You and I have taken very different paths. You have kept it mostly self funded, you've brought in some investors, but very few. You have been slow. Steady wins the race and you are doing great at that. And we took a different path. We took a venture capital path. We hired a bunch of people, we made mistakes, we learned from them, we adapted. But when you're a vc, private equity, kind of hyperscale mindset, it's a different play. And now we're finally at the inflection point where we're profitable and we are, which I'm so pleased we survived long enough to say that. And we are thriving as an organization, but took years off of my life. So what does 12 months from now look like for you? Are you going to continue? Slow, steady wins the race, landing the business, growing profitably, getting to where you want to go over a longer play, or are you going to kind of go down the path of okay, now I'm going to bring in some growth capital and I'm going to hire a bunch more people. Because you've always been a relatively modest size company and you've been extremely powerful with using subcontractors and other things to Execute. And I'm not saying you're much more than a single person. You have to be the face. But I know that you've got many more people than that. But you're not a throw bodies at a guy. You're not going to go and hire 40 people if you can't afford to cash flow it. So what does it look like for you? What's the future look like? Our model is a little different. You're right. I actually did some studies the other day. It seems like in the startup world Most startups raise $3 million just to get to that first bridge of a million dollars of ARR. Right. We raise significantly less than that. We've got some great investors. Slow and steady wins a ways for us. But the challenge in our sales cycle is contracts. So just like we do contracts. So if our primary focus in the small pond is let's say the top 50 insurance brokers or the top 250 insurance brokers, maybe a few insurance carriers or the top 50 insurance carriers, they're only looking at a purchase decision maybe once every three years. So throwing 40 more people on the sales team is just going to burn 40 peoples of sales. 40 all of their payroll dollars. So we just kind of have a steady flow comes in all the time. We own our own team, all of our people are our own. We don't use any third party contractors. But there's no way to make that contract pull up faster. And most brokers like us, we don't double pay for software. We don't want to waste dollars. So you honor your contract and then roughly 120 to 180 days before that contract renews is kind of when they go out and they look for the market, they find out what's available. Usually we pop up or we've already reached out to them. They want to see what exists today and that's when they make that buying decision. That's fantastic. Most often we win when we're pitted against a legacy platform or we're cutting edge. Unless there's some bundling or some other like reason they can't leave, they end up switching. Yeah, you must make it very simple for them to move over. And because that is if the reality is that the problem is already being solved elsewhere but you do it in a better way, then the only friction that exists is how difficult is it to move over. And so you must have a very efficient way of doing that. What does your onboarding process look like? Is it very well set up? Is it challenging? Is it easy, like for anybody and by the way, is not a pitch for you. I really don't know the answer. I don't know the answer, but I know that you're being successful, so it obviously has been solved. It's interesting. I liken our software to like driving a car. If you know how to drive one car, you know how to drive another. Now, just because you bought a new one, you may not know how the software works or how to connect your phone or how to set up the garage door programming, but 30 to 45 minutes can probably, at the dealership take care of that and you're not going back. The same is true of our software. What we do is very nuanced. We're only looking at a specific set of data. And so most of the brokers that we work with have teams of people that do this. And so the training curve is not huge. We've significantly enhanced that training curve to make it super simple with some of the features and things that we have. And we're going to continue to evolve that. The onboarding process is very quick and painless. That's fantastic, man. Thank you so much. It was funny I texted you this morning, so I'm looking forward to our podcasts in a little bit. And you're like, I'm not really even sure what we're going to be talking about, but I know you and trust you, Mike, and so I'm an open book. And as I expected, we've had so many of these conversations over time. I knew it was going to be a great chat. I'm honored, man, that you joined me and thank you so much. I'm looking forward. I'm actually going to be doing a webinar with you in a few weeks on your side and how we can help serve the community at the edge. You know, it's the hardest part about all of this stuff is actually implementation of the things necessary to change your risk profile. So I just want to thank you, congratulations on, on your. Your newest grandbaby and know how proud you are. I love watching you on Facebook with your family and just thank you for just a great representation of our community. Michael, you got all the feels. Thanks for having me on. It's always great talking with you. All right, brother, we'll talk soon. Thanks, buddy. Thanks. That's it for today's episode of the Canary Report. If this conversation helped you reframe how you think about risk and safety, please do me a favor. 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