Don Daseke, president and CEO of Daseke, Inc., was recently selected by the editors of the Dallas Business Journal as a thought leader in the Dallas/Fort Worth business community. He discussed the business climate and economic opportunities for his company and other leading businesses in the region. Don also discussed the regulatory challenges facing the trucking industry as well as the opportunities he sees for the company’s continued growth and leadership in the flatbed, open-deck and specialized transportation field.
See below for the Dallas Business Journal’s coverage of the roundtable discussion.
Middle Market Roundtable: Four CEOs of Midsize Firms Discuss Growth, Leadership
Middle-market firms are a fast-growing lot in North Texas. Recently, as part of our continuing coverage of expanding midsize companies, we sat down with four CEOs to learn more about their growth strategies, biggest challenges and how they navigate an increasingly challenging regulatory environment.
What are some of the challenges faced by middle market companies in terms of compliance and regulatory issues associated with quick growth?
Campbell: On the compliance side, we need to become Sarbanes-Oxley compliant. Before we went public last year, we were small enough that we fell under some exemptions, but we need to be compliant within a company of our size. The Sarbanes-Oxley component is a good thing. You want to have the right controls in place, but it definitely becomes a material part of your expense trajectory. We are only in Texas, and we’re in a business that is highly regulated. We do think the Texas regulatory construct is a positive one. As a middle market company, we want to be nimble and try to get growth in our business, not having to respond to changes in the regulatory framework. Recently, particularly on the national level, we’ve had less predictability and stability than I need.
Ryan: Probably the most challenging regulatory issues we deal with have been the expansion overseas and dealing with all the labor laws, the employment provisions and the tax provisions. The regulatory matrix that we have to deal with operating in 40 countries, it’s Byzantine. Much of the tax regulatory framework that our clients are subject to, we have to deal with as well because we’re helping them navigate those regulatory issues. Recently, we’ve seen the Internal Revenue Service at the federal level, we’ve seen California and others are moving to try to interfere with the relationship between a service provider and their client with regard to how they’re paid. Just keeping the government out of the CPA/attorney relationship with their client has been probably the single biggest regulatory challenge we’ve faced over the last couple of years.
Daseke: Federal regulation on interstate commerce is a very heavily regulated environment. We’re faced with very precise rules on hours of service and logging and electronic logging and how much rest time you take, and the driver qualifications or the errors that drivers cause on the road, inspections of your truck and your equipment. It takes an incredible amount of planning on our part to do all of those things. It also makes some drivers want to leave the business because it’s too heavily regulated. From the motoring public standpoint, part of the regulations are obviously important to keep the highways safe. We really believe in that, but it’s a challenge. One of our companies based in Fort Worth has six people just in the permitting department, and we get literally hundreds and hundreds of permits every month just to do what we have to do to move the freight that we need.
Baker: We’re in the people business. Having employees presents a lot of different compliance issues. California is a very employee-friendly state and we don’t do any business there by design. My back office is not ready to take on some new set of wrinkles to comply with laws in California. New York is right behind it, No. 2, and the No. 3 worst place to be from an employee friendly perspective for us is Illinois. But we started off in Illinois, so I don’t have any choice there. Compliance is just a part of what we do. We’re actually helping our customers comply with laws. Regulation hardly ever comes up, but it’s a big part of having to know what you’re doing.
Are any of you concerned about the increase in interest rates and how that affects your business?
Ryan: Not really. We’re hedged. We’ve got a fair amount of debt on the business through acquisition, but we swap that debt so the interest rate moves. A quarter percent move definitely didn’t do anything.
Campbell: As an infrastructure provider, the cost of capital’s a big deal for us. As a publicly traded security, we’ve had a lot of volatility in our stock even though the performance of our business has been unchanged or matched what we said we’d do. All yield-oriented stocks and our dividend paying yield-oriented stocks have really taken a hit, partly because of economic uncertainty and the China situation. It’s been remarkable to see how sensitive the markets have been to both speculating about what the Fed will do and then overreacting or under-reacting to it.
Ryan: For international companies, the much bigger concern is the exchange rate. Interest rates don’t really worry us, but the exchange rate this year has been a bear. It’s been a significant challenge for us.
What makes Texas, in particular North Texas, unique and what do you like about having your headquarters here?
Ryan: Texas is by far the best place to be if you’re a CEO because you don’t have a personal income tax here. All things being equal, why not be in a vibrant place where you don’t have a personal income tax and you’re taxed based on what you can consume? Another big driver is D/FW Airport, which is essential to the operations of a global company. Dallas has much easier access to the rest of the world than just about any place, and you’re equal distance between the two coasts. You can day trip almost all of North America and yet you can be international just about anywhere as quickly and efficiently as you can be.
Campbell: Our entire business is in Texas, so I think the regulatory framework and the pro-business climate, that is not a given. It’s not perfect, but compared to other states and compared to other economies, the electric business is flat and declining in many parts of the U.S. and the thicket of regulations make it difficult. The overall economic framework in Texas is great for businesses that are here, and it creates a growing economy, an ethic and a can-do outlook that is hard to quantify exactly the impact, but I think it’s real. It’s a great place to be.
Is the growing population along with more traffic and a potential water shortage of concern to you as CEOs running companies here?
Ryan: It’s becoming more expensive to be here and it’s becoming more competitive to be here, but it’s still very favorable compared to most economic regions in the country.
Daseke: The good thing about DFW is there’s so many submarkets. If you want to be in Manhattan, there are just a couple of basic areas that you’re in. In this area, there’s a dozen different markets and you can draw a potential employee from a dozen different areas. Certainly, the overall commuting environment, work environment, is a challenge, but we can all draw from so many different talent pools in the Dallas area. This is a great market for young people to live, to come after college and to grow up for a number of years. That makes it attractive for us to find the right people to add to our growing businesses.
Baker: When you work at a staffing company, you’ve always got a problem. It’s either too many people, or not enough. I’d just as soon that we have not enough.
Campbell: We love it when there’s more infrastructure needed. On a relative basis, we do very well, but there are things we need to do. We had one of the wettest years on record, but prior to the spring, we had a building situation in Texas. That’s something that, over time, we will have to keep our eye on. With the ongoing population growth, that could be an issue we could track over time, but in general Texas has found a way to address its issues.
What’s the one thing that keeps each of you up at night that you worry about?
Baker: Nothing really keeps me up at night. Goals and all that, being a public company, we have chosen not to give guidance, so I really can’t talk about that.
Campbell: Our business is not one that changes overnight, so I could stay up at night and not much is going to move. We’re a long-term infrastructure. For us, staying the course and keeping that focus and commitment is what we make sure we do and deliver on growth expectations that we have communicated.
Ryan: If there’s anything that keeps me up at night, it’s certainly not the external environment. If the IRS wants to take a shot at us, we’ll sue them and our lawyers are better than theirs, so we’ll win. That doesn’t bother me. What does bother me is can we remain disciplined. Can we continue to execute as we scale the business and not lose that culture, that secret sauce that got us to where we’re at?
Daseke: The biggest challenges are attracting and retaining drivers. There are some truck driving statistics on the most attractive fleets to drive for and we’re fortunate that several of our operating companies have been on those. How do you be an outstanding company to attract drivers, keep drivers and where the driver pool is essentially fixed? Young people don’t want to be just a truck driver, so we’re doing a lot of creative things in that area. The biggest risk of our business is the risk of accidents and litigation. We’re an inherently litigious society. We drove 250 million miles last year and we have accidents. We have a $100 million umbrella insurance policy, which most trucking companies don’t have, so that’s some protection in that area. Our objective is to hit $1 billion in revenue this year. We’re in a position to be choosy about companies that we want to be part of our family of companies. That’s a good position, but how do you continually assess the companies out there and pick just the right ones that aren’t going to screw up your culture? That’s the challenge.
Written by Karen Nielsen and approved for reprint by Dallas Business Journal. Photography Rob Schneider.