Perry A. Sook Featured

8:00pm EDT March 26, 2007
Perry A. Sook took a big risk in 2005 when he told cable companies that unless they were willing to pay to retransmit his TV stations’ signals, they would no longer be able to include those stations in their cable packages. They declined, so he pulled the stations comprising Nexstar Broadcasting Group Inc. off of cable. Sook was only trying to get the payment that cable-only stations were already receiving, and his peers in the industry praised his courage — but none stood up to back him. Even his board had doubts — its members said they would support him, but added that he’d better not be wrong. Eight months later, his risk paid off as cable companies agreed to his demands and began paying to retransmit Nexstar’s signals. Today, that income contributes to Nexstar’s annual revenue, with 2006 revenue of $265 million, up nearly 16 percent over 2005 revenue of $226 million. Smart Business spoke with Sook about how he grows Nexstar and why he doesn’t want to be the bottleneck to growth.

Manage growth effectively. I don’t want to be written on my tombstone, ‘He couldn’t manage what he built.’ When I started the company, I was the only corporate employee.

We have scaled up the corporate staff and the support staff to now a staff of nearly three dozen people. We have the ability to grow. We have the ability to manage growth and to scale the organization.

We spent a lot of time trying to anticipate, stay out in front of problems, talk about what the different scenarios are that could happen and try to have a plan for each of those scenarios and try to guide the company down the course that is the most likely one.

Invest in acquisitions. We look to acquire businesses that are underperforming or have not reached their long-term potential in either top-line revenue or bottom-line margin maximization, so we try to find underperforming assets, pay an appropriate price and then invest the necessary human and capital resources to build the business into a more competitive position.

We don’t overpay for acquisitions, so we don’t have to cut corners in the way we operate. It all starts with investing in the business and investing time in the community.

Get involved in the acquisition process. It is important to be personally involved in the diligence process and not outsource it completely to an accounting or law firm.

I have visited every acquisition that we have made, and I have interviewed the managers and spent time in the community before we have signed a purchase agreement to acquire that business. It’s important to see for yourself where the challenges are, where is the opportunity, where’s the weak underbelly, where is investment required immediately and over the long term.

Not only do you need to articulate that to your board and outside investors as to why you’re deploying capital in this particular instance, but you need to be able to, in your own mind, establish the benchmarks for performance of gauging the development of that acquisition over time.

Integrate acquisitions immediately. The first thing we do is attempt to integrate a new acquisition from a financial control — financial systems, sales reporting, basically put all of our financial systems and sales and revenue recognition systems in place. I need apples-to-apples financial information if I’m going to benchmark this acquisition against others.

We spend a lot of time and effort at the front making sure the accounting, the billing and the revenue and sales, and all of those tracking systems are on a common platform, a common chart of accounts, so we know the information we’re getting is comparable to the information we get from every other property. That is key. That is also the quickest way to introduce the employees of the new station to our way of doing business.

Make it clear that there’s a new sheriff in town. Leave no doubt that this is a takeover by another company, that things are changing. Many times, we will also bring in a new general manager or market manager that has either been promoted from within or has been trained in our way of doing business, so they can be our eyes and ears as we try to get a good start but also evangelize our business practices throughout the building.

We literally have a five-, six-person acquisition SWAT team that will go in at the time that an acquisition is consummated, train people on our systems, help install, help convert old historic information into our database, so we not only have accurate information going forward, but that it’s compared for the prior period on an apples-to-apples basis. It’s a lot of labor-intensive, people-intensive work, but it eliminates all of the language barriers, if you will, at the time of acquisition because the information flow starts from a common place. And that helps people not only as they’re learning, but if they have a problem as they’re learning, they can call 29 other peers in the company and say, ‘Help me out with this.’

It doesn’t always have to come from the corporate office. It helps them feel a part of the community of the businesses by realizing they’re on the same platform being measured and graded the same way out of the gate.

Give up control. We have diversified our management team and that has removed me from a certain level of involvement, but that is also important for entrepreneurs. They are going to have to give up some level of detail and some level of control if they want to scale a business, and it’s hard but it has to be done if you’re going to be successful.

There was a time when I knew the name of every department head in the company, visited each of the properties several times a year. You just can’t do that anymore.

You have to decide what you want to do, what you want to be. If we want to be a Top 10 broadcast group, I need to revert to what I do best, which is to surface, identify and negotiate good business opportunities, find key management talent to run these businesses and then repeat the process. I have delegated responsibility and authority in operations and finance.

I attempt to stay current with what’s going on, but I can’t micromanage — that will stunt our growth. I don’t want to be the bottleneck to decisions being made to opportunities being acted on. Hire good people, give them the guardrails and then send them down the road.

HOW TO REACH: Nexstar Broadcasting Group Inc., (972) 373-8800 or www.nexstar.tv