Chip Lewis is "All In"
No matter what the state of the U.S. economy is – whether we’re experiencing an economic downturn, mired in a stagnant economy or benefiting from strong economic growth, the decision whether or not to grow your business is one of the most difficult choices a business owner or chief executive has to make. Deciding whether to acquire another business, venture into new business silos or expand your workforce is never easy, no matter what the economic indicators are. However, for Chip Lewis, managing director at PSA Insurance and Financial Services, whether or not his company grows is a no-brainer.
“We are obnoxiously committed to growth. If you aren’t growing, you’re dying. It’s never been a thought that we would not grow our workforce year after year. In fact, I am afraid of not growing as a company,” says Lewis. “I’m all in. I believe that you cannot be lukewarm if you are going to be successful, and I truly believe that businesses are like airplanes – if you don’t have your nose up with forward momentum, you’re going to crash. A growing business is a healthy business; a stagnant business is in trouble.”
Even during the economic downturn of 2008-2009 – a time period that involved the largest economic crisis since the Great Depression of the 1930s, the crumbling of financial industry giants, plunging home values, massive job layoffs and the Dow Jones Industrial Average shedding more than half of its value, Lewis says that PSA took calculated, yet aggressive, steps to not only survive, but also thrive.
“We pulled back on some expenses, focused on efficiency, cried and prayed,” he recalls. “We were all scared. When something like that happens, business leaders fall into three categories – they run for the hills, pull the cover over their eyes or see an opportunity for growth.”
Lewis says that through the leadership of PSA’s Employee Benefits Group Senior Vice President Ken Huber, the company decided to borrow money in order to make investments for new opportunities in the benefits arena. “We didn’t just survive; we skyrocketed,” Lewis says proudly. Hunt Valley-based PSA (www.psafinancial.com), regarded as the region’s leading independent insurance brokerage and risk management firm, provides employee benefits, risk management and personal insurance solutions, and is now the nation’s ninth-fastest-growing benefits broker, according to Business Insurance’s list of “Top 25 Benefits Brokers by Growth.”
Much of the growth PSA has experienced since the economic crisis has been as a result of companies switching their benefits business to PSA from another broker – mostly from brokers who were unable or unwilling to make the investments needed to respond to clients’ changing needs spurred by the Affordable Care Act, which came into effect in the midst of the recession. “Companies were aware of PSA’s history of making necessary investments and felt assured that we would be there in the long run,” he says.
Growth Through Acquisition
Lewis has been at the helm at PSA for 45 years, and during that time the company has grown significantly from two employees to over 160 and is consistently ranked as one of the Top 100 Largest Brokers in the U.S. by “Business Insurance.” What’s especially notable is that the list of 100 largest brokers includes only a few dozen independently owned companies such as PSA. One of the keys to PSA’s growth in recent years is the acquisition of other companies to expand its portfolio of services and better serve its clients.
Lewis says that no two acquisitions are the same, of course, and each company has its own variables and considerations that play key roles as to whether PSA pursues the acquisition. However, when looking back at the over 30 company acquisitions he has overseen, Lewis stresses that it’s not just about what the companies in question do, but also who they are.
“An acquisition is just like developing a new client. You have to get in front of them face to face and learn who they are, what they are all about and how you feel about them. The right chemistry is a critical part, Lewis says. “We’ve had phenomenal success, but we’ve had a few failures. With those that failed, it was primarily due to the fact that the companies said they were willing to adapt, make changes and address what needed to be done to improve their business, but when they got to PSA, they couldn’t change. It’s difficult for some leaders to recognize that they are no longer the owner but now part of a larger team.”
Lewis recalls when PSA acquired a small company who insured colleges sending students to study abroad. Despite the fact that PSA was able to grow the company into a $1 million business, it was not synergistic to what was happening at PSA. Lewis says that the previous owners were resistant to technology – they still did everything on paper – which did not align with PSA’s heavy emphasis on utilizing technology. So, PSA sold the company to colleague in the industry. “It was a home run for them, and it was a good move for us.”
One of the most recent acquisitions by PSA was the October 2016 acquisition of NextLogical Benefit Strategies, a full-service benefits consultancy with a specialty in using advanced analytics and clinical intervention to reduce health care costs. With all the uncertainty surrounding health care and health insurance, many companies would have shied away from acquiring a company like NextLogical … but not PSA. Instead, Lewis saw it as the perfect time to acquire a company focused on reducing health care costs.
“They were a wonderful competitor, and we knew their client base well. The owner had a health care technology business and a brokerage business, and when we acquired NextLogical, he was able to focus more on the technology business but still be involved in the brokerage business, as he and his entire team came aboard at PSA.” NextLogical founder Aaron Davis became the new Vice President of Healthcare Solutions at PSA, which is not an unusual approach – Lewis says that 11 previous owners of companies acquired still work at PSA. One employee, a successful commercial and personal lines professional, sold his business to PSA 17 years ago and plans to retire from PSA early next year.
“We average about two acquisitions a year and probably buy 20 percent of the firms we look at. We have a reputation of aggressive growth, and I am always looking for new opportunities. Sometimes, I will ask companies that I am looking to acquire 10-12 times before they agree,” says Lewis, who adds that mergers and acquisition consulting firms nationwide also come to PSA based on the company’s reputation as one always looking to grow.
“In any acquisition interview I do, I start the conversation the same: ‘Here are the Rules of Engagement: Rule No. 1, there are no rules.’ I will tell company representatives that there are things I cannot ask, but there is nothing they cannot ask me. They have an obligation to ask me and my team everything to make sure it’s the right fit and only they know what is important to them and their employees,” says Lewis, who adds that PSA is eyeing acquisition opportunities in Washington, D.C., and the neighboring suburbs in Maryland and northern Virginia.
In addition to acquiring other companies, PSA also has been able to grow its business by expanding into new ventures, one of which is cybersecurity by offering cyber insurance, cyber remediation and cyber consulting services. “Ten years ago I couldn’t spell cyber,” Lewis laughs. “Today it’s in our faces all the time, but individuals and businesses have still not grasped the severity.”
And despite the increased awareness of cybersecurity and its potential catastrophic effects on businesses of all sizes, establishing a dedicated cyber practice was still seen as a risky move by PSA, which brought in Mike Volk, a cybersecurity expert, to lead the effort. An academic by trade – Volk worked in cyber and technology training at Anne Arundel Community College – PSA hired him for his cybersecurity expertise and then taught him the insurance industry.
“I say that we were on the ‘bleeding edge’ in the cyber insurance business. The P&L may not have looked great, but we are investing in the future, which we must do in order to protect our clients. We are opening up opportunities that would not have been there unless we were committed to long-term growth,” Lewis says.
Lewis sees parallels between the cybersecurity business and another buzz-worthy business – medical cannabis. “This is an industry that is going to grow, and it has very unique issues that require expertise, very similar to cybersecurity. Lewis says he approached a PSA team member and attorney, Steve Sherman, who specializes in professional liability insurance. After some initial hesitation, Lewis says, Sherman has now embraced the
growth opportunities and is emerging as a leading insurance expert in the industry. PSA builds insurance programs for medical marijuana businesses such as medical cannabis dispensaries, processors, growers and testing labs.
“It’s a tiny industry now, but there is so much potential. We have developed specialty knowledge and education and now have a national network. We are always looking for new specialties to complement our existing portfolio of services,” he says.
Lewis also credits the success of PSA to its culture and core values. Lewis, a Northern Baltimore County native, who, along with his son also owns Gunpowder Bison & Trading Company in Monkton, Md., says PSA incorporates its cultural acronym ‘CAPP’ – Continuous Improvement, Alignment, Performance and Partnership – into all aspects of the business.
“We attract and retain uniquely special individuals who love what they do, where they are and who they are, and our turnover rate is about 4-6 percent with five individuals with over 35 years of experience at PSA,” he says.
PSA is also growing its workforce by attracting millennials to the company. Lewis notes that eight years ago, PSA had zero employees who were in their early 20s but now has 25. “Two years ago, I had never met anyone who said, ‘When I grow up, I want to be in the insurance business.’ Then I got connected to Temple University, which offers one of the country’s largest risk management programs. One hundred percent of Temple’s insurance students graduate with a job offer, and we partner with them and other universities to send these young professionals to work at PSA.” I95