Entrepreneurship

Key Takeaways

  • Legacy is important. Making sure the company survives and thrives after the owner has sold the business is paramount.
  • Business owners identify with their company, so they should have a clear vision for after they exit the business. If an owner doesn’t know what their plans are after the sale of their business, then the transaction's likely to go badly.
  • Preparedness is important when selling a business. A business owner should put processes in place so that a third party could take over what they are doing. Sharing and teaching others what they know on how to run the business is essential. The more a business relies on one person, the less its value.
  • Business owners planning to sell their business should seek help from a professional who understands business and value drivers to take a realistic outside look at their business. The professional will help them gauge whether they meet buyers’ expectations compared with competitors.

Read Full Interview


From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk", brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.

Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk," it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.
 
One thing we like to do here on "Deal Talk" when we can is speak to those individuals who have an opportunity to work directly with people who are in a transition or considering transitioning from their business to the next chapter of their lives, whatever that might be. And this is a particularly interesting time in our history here in the United States as entrepreneurs, as business owners, people who are looking at building a business for sale whenever that might be. 
 
But right now, in particular, is a time when we've got a lot of folks who are exiting or thinking about exiting. And this is a very large group of people known as the baby boomers, right? We've all got them in our families. I'm kind of yours truly right here, just on the closing end, the fringe, the last vestige of those baby boomers if you were born in the early 1960's.
 
I've got a guest here with me today on "Deal Talk" that I'd like you to meet. His name is John Dini. He is a speaker, author, and exit strategy coach, president of MPN Inc. And John has a chance to work and talk with baby boomers from all over the country about doing one thing, about exiting their companies. And he is someone with a tremendous amount of skin in the game.
 
John, first of all, before we get started I want to say hello, welcome to "Deal Talk," nice to have you join us today.
 
John: Thanks for inviting me on, Jeff.
 Experience is what you get when you don't get what you want. We learn very little from our successes. 
Jeff: Thank you for making time for us. John, you have a great perspective in the area of helping business owners sell their companies, but not just any business owners who are a very large portion of them; however, those baby boomers out there who own such a large percentage of businesses today. But at the same time, they form a very large group who are exiting. And what I'm interested to know is someone who specialized in helping thousands of baby boomers prepare to exit their businesses.
 
What can you tell us about the important role that this generation — perhaps some of them are grandparents, or uncles and aunts — that they've played in the development of not only the American economy but also the concept of entrepreneurialism?
 
John: Well, Jeff, the reign of the boomers, the pig and the python is an anomaly in our history. The circumstances that brought it about, which was World War, led to this explosion in children until the point where by 1965, 40% of the United States was under 21 years old. That's the profile that we would today consider to be a developing nation. 
 
Jeff: Absolutely.
 
John: The world became oriented around children whether “Dr. Spock's Baby and Child Care,” the best-selling book of the 21st century outside of the bible, and so many other things were built around the boomers. They became accustomed to being the center of attention. They're fastidiously called the “Me Generation.” 
 
They fueled 40 years of growth in our economy. But there was an irony to it, and I call it scarcity in a time of plenty. While the economy was growing by leaps and bounds because of all these new workers and new consumers that came into it, there was scarcity in the sense that every ambition a boomer had, five other baby boomers had the same ambition. They all wanted a corporate office. They had been raised to believe by their World War II parents that success was their birthright. They could be president of the United States. They could be chairman of General Electric. They could be anything if they so choose. 
 
And there was a lot of disappointment as they came out of college in record numbers and lined up outside corporate America waiting for their corner office fast-track jobs and found out that somebody else had gotten there first, and was probably going to be there for the next 30 to 35 years, so waiting wasn't an option. That scarcity became what drove boomers into entrepreneurial pursuits like no other generation before. 
 
When I calculated all the numbers I think boomers were about two and a half times more likely to form a business than the generations before or after. And that was because they identify with what they are, they identify with what they own. The trappings of success were critical to the boomer's self-esteem. And if they couldn't get the executive job that was going to provide it, they're going to find another way. And that way was the ownership of a small business. 
 
Jeff: It's truly fascinating when you really consider what the overall general mindset was to have that corner office in corporate America. And then they ended up actually having to set that idea aside and then go into business for themselves. Did college prepare them for that though do you think, John? If they didn't have that corporate background and then were left to, if you would, fend for themselves and start their own business, were they equipped adequately to be able to start their own businesses, do you think? Or did they just have to, like we do today, make their mistakes and learn from them?
 
John: Let's say college prepares them just as well as it prepares young people today for a business career, which is not very.  
 
Jeff: It's true.
 
John: They were educated, but most of them weren't educated in business, certainly the explosion of MBA programs wasn't until the late 1980s or early 1990s. They came out with English degrees, History degrees, and Biology degrees, and it was good training. As an employer, it was an indication that you could set a goal and stick to it because the boomers are achievement- and goal-oriented, but they weren't really business-trained. 
 
Fortunately, what really sprung up at the right time, at a fortuitous time both for the American economy, for American consumers, and for boomers who wanted to be entrepreneurs was the dawn of franchising. I give this lecture around the country about what made the boomers the boomers. From 1975 to 1986, in those 11 years, franchising saw its annual sales increase by 1,100%. 
 
Jeff: Staggering.
 
John: They went one from under 2,000 franchises sold to over 22,000 franchises sold a year in that period of time. And what was driving that was boomers looking for better income than a nine-to-five job could offer them. And what drove the success of the businesses was other boomers who were too busy in two income families going out, earning the money to acquire this stuff that they wanted, to do those service jobs that we did for ourselves, whether it was cooking, or cleaning, or doing homework with the kids, or teaching them how to throw a baseball, we outsourced all that. 
 
Jeff: John Dini, speaker, author, and expert strategy coach, president of MPN Inc. is my guest. My name is Jeff Allen. You're listening to "Deal Talk." In your conversations with your baby boomer clients, John, what do they think of today's business climate versus the old days? They knew that they had it tough. They were able to overcome those obstacles then and they succeeded, but what do they think about it today as they’re making plans to leave or maybe after they've already left?
 
John: The business climate has clearly changed. I ask my clients this all the time, "Do you think you could start the business again today?" And most of them say no. The two reasons they say that are, one, because of regulation. Because so much of their time or their employees' time now was taken up with dotting t's and crossing i's, filing for permits, getting permission, licensing, and auditing of their various work. For those that bootstrap their companies out of the trunk of a car or their garage, you can't do that anymore. You just can't meet the regulatory requirements. 
 
And the other reason is so many of the boomers started really successful companies. With successful, I mean 50, 100, 200 employees, $5, $10, $25, $15 million worth of revenue, and they bootstrapped them. They made them work through their own effort, through hard work. And most of them don't believe that hard work alone is enough to really get you over the top anymore.
Financial gain is great when you sell your company, but for many, many of the owners that we work with, the more important thing is to make sure the business, the culture, the employment, and the services that the customers are used to survives.  
Jeff: What do you think today's entrepreneurs, let's talk about the XY and millennials, could learn from baby boomers then? You may have just touched on something when you talk about hard work. Then your clients say, hard work just isn't enough to get by anymore. But what is it that we could learn from those baby boomers, from the older generation that would be of greatest value toward running a successful business today for maybe those young people who are either in college, or maybe those 30- and early 40-somethings who are working a desk job or tired of doing what they want to do and they want to start their own business now?
 
John: Obviously, as a boomer, I'm biased. Every generation has complained about the work ethic of the generation that follows it. There’s a quote by Aristotle bemoaning young Greeks being lazy and unproductive.
 
I think what they really need to learn from the boomers — especially the millennials, Gen X not so much, but the millennials certainly — is that personal contact is a good thing. I can't imagine a lot of these younger folks running an establishment where they have to deal with customer complaints or returns or push back of any sort, or have to go out and shake somebody's hand and talk to them face to face about why their product or service is the one they should buy. They want to text them. They want to send mass emails and have the business roll back in, and it's really becoming an issue.
 
I have a friend that's a professor in college and he studies the millennials. He asks a great question in his course. He says, "How many friends do you have?" The students will all say, "300, 700, a thousand, two and a half thousand." "And how many of those would show up at the emergency room at two o'clock in the morning to pick you up after an accident?" Silence. Because they just don't have that person-to-person contact that forms relationships. And that's key to what makes so many boomers successful in business. 
 
Jeff: It's funny, we do hear from time to time, John, when you're out there and about, at least I certainly do. We continue to hear the drumbeat, depending on what business you have, that relationships do matter, that relationships are critical in order to have that long-term client, that client who is willing to stick with you through the good times and the bad. They may not be buying $100,000 of product from you every year, but they're going to be there. The importance is to keep them happy.
 
But you seem to think that that is lost on the newer generations today. And that sounds like certainly an advantage that the older clientele that you may have or that we know of, the older generation, they had an advantage of being able to form those relationships and pick up the telephone and meet with someone for lunch, or hop on an airplane or something like that to be able to wine them, and dine them, and see them once a year at least to keep up appearances.
 
With that as a backdrop, as a frame of reference, you mentioned that your clients said that they probably would not be able to start in business today or start over again. But let me ask you in a slightly different way, if they were to start over now, do you think, with all that they knew then and what they know now, even if they're not experts with social media, for example, how do you think most baby boomers might do? If we had a contest, you have them over on one side on the left and you have the new entrepreneurs today on the right, how do you think they might do?
 
John: Well, you said knowing what they know today. Obviously, there's no substitute for experience. Experience is what you get when you don't get what you want. We learn very little from our successes. Boomers know how to avoid pitfalls. Experienced business owners just instinctively know the kind of “don't do that” reaction because of what they've been through in the past.
 
But if we're talking about starting in 2017, I think it's a different world. I think business models are very different now. Their dependence on technology, their dependence on national branding, the noise that's out there that they have to get through. Boomers who go into service businesses, whether it's professional services, residential services or business-to-business services, I think would do very, very well.  The question is how long are those services going to be able to survive in the face of all the other models that are coming out, the disruptors, and the arm's length, do-it-for-yourself models. 
 
A friend of mine, an influential technology guy, just wrote a whole post on disintermediation. I wouldn't tell a boomer or an X'er to go into one of the intermediary businesses right now. I'm not sure what the future is for real estate agents, insurance brokers, or distribution companies.  
 
Jeff: Interesting point. You're listening to my conversation with Mr. John Dini. He is a speaker, author, and expert strategy coach, president at MPN Inc. My name is Jeff Allen. John, when we come back what we'll do is we'll take a different track, and we're going to talk a little bit more about preparedness. And your perspective on preparation and readiness of baby boomers for exiting. This is the sweet spot for you. This is your business, and we want to get your thoughts on this when "Deal Talk" resumes right after this.
 
If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on the future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message, include your name, title, area of specialty, and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com
Selling your business may be the most important business transaction you'll ever undertake so don't go it alone. Work with an organization that has made it their business to sell businesses, and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield, we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy, to preparing a comprehensive appraisal and locating the right buyers. 
 
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
 
Jeff: If you have any questions about "Deal Talk," if there's a topic that you'd like us to cover we'd be happy to hear from you. In fact, we encourage your communication to us right here. Simply drop us a line, and you can send that message to us at dealtalk@morganandwestfield.com. Once again, dealtalk@morganandwestfield.com. And you can also send us a personal voice mail message to us by calling 888-693-7834 extension 350. Again, the number, 888-693-7834 and just simply leave your message at extension 350. Let us know your thoughts, let us know your attitudes about the program, and how we can better help you by suggesting a topic of interest or simply asking us a question. We'd be happy to get back to you.
 
My name is Jeff Allen today speaking with Mr. John Dini. And he is an expert in this area of exit strategies and helping business owners plan their exit, so they can not only exit gracefully of course, but they can also hopefully profit from a well-timed, and not only that, but a well-planned exit.
 
That's an area that I think many business owners may not necessarily get a passing score in. And particularly, if you are a younger business owner and you're just getting started. Maybe you're more concerned about lifting the value of your company or growing your business. 
 
But, John, it does beg the question though, in all honesty, we've got a lot of people right now retiring, a lot of folks making plans to move into that next stage in their lives and that means leaving their companies, selling their business. Of those business owners who are retiring out right now, they're done, they're ready to go and go fishing, or hunting, or do any number of things, travel, whatever it may be, those folks who want to sell their companies right now. How many do in fact have a solid exit plan in place after being in business all these many years?
 
John: Not enough, that's the simplest answer. I lean on evidence from two surveys, one back in 2008, but I don't think it would change one bit today. PricewaterhouseCoopers, before they were PwC, surveyed business owners and asked, “what is your exit plan?” Eighty-five percent of the owners said, "I'm going to sell to a third party in five years." Eighty-five percent of all 60-year-olds said, "I'm going to sell to a third party in five years." Eight-five percent of all 65-year-olds said the same thing. Eighty-five percent of all the 70-year-olds said the same thing. It doesn't matter what age they were or what point in their career they were asked, they all said selling to somebody in five years. That's kind of become axiomatic for "I haven't thought about it, and I don't want to think about it."
 
As recently as 2014, the Business Enterprise Institute did a survey about which professionals were helping business owners plan their exits. And they found that less than 25% had talked to either an accountant or an attorney about eventually leaving their company. And those were the two most named professions. Everybody else was in the single digits. 
  
Jeff: Accountants and attorneys?
 
John: I think it's fair to say about three-quarters of owners are not planning.
  
Jeff: Oh my gosh. That's staggering. Of course, it means that you and people like you, John, have plenty of work, and obviously, it's got to be nice. But it is, at the same time, staggering because while you've got a business owner, an entrepreneur who takes a lot of pride in his work and what his company has had to offer his clients for all these many years, and his business is a well-oiled machine, he or she has no plans for leaving, and that makes it difficult on the company. Why? 
 
Why is that problematic to not have an exit strategy not just for the owner themselves but for the company as a whole?
 
John: Well, companies are immortal. They'll go on forever if you build them that way. And certainly, your employees and your customers are not planning to be left in the lurch on the day you don't feel like going to work anymore. That would be pretty inconsiderate. Legacy is important.
 
Financial gain is great when you sell your company, but for many, many of the owners that we work with, the more important thing is to make sure the business, the culture, the employment, and the services that the customers are used to survives. They build their exit plans not around every last dollar they can squeeze out of it but around how do I maintain these relationships, which we spoke about before, and how can I leave without people feeling that I've abandoned them.
 
 Jeff: There's really a deeper ideology or reason for a more constructive strategy here. It's, as you said, it's not simply for financial gain. That's going to come likely as long as they're well prepared and their books are in order, and everything is tidied up. But the fact of the matter is, the financial rewards at the end of all of this are just a part of the really important reasons to have your act together, to have your exit strategy in place. 
 
What do you think are the biggest concerns or questions that baby boomer owners need to address in order to prepare themselves? And not just their companies, but to prepare themselves mentally and get their head wrapped around this in order to transition away from business ownership.
 
John: Number one and number one with a bullet is, “what are you going to do after the sale of business?” Business owners identify with their companies. They built them by their own hands. Everything in them is a result of their influence, and most small businesses up to mid-market businesses, they pick the furniture, they taught everybody how to do the jobs, they landed all the original key customers themselves. 
 
I used to do business brokerage, I don't any longer. But one of the things that I always made sure of, and I talk about it in one of my books that I wrote, is what is the vision for after the business. If an owner can't tell you, if the owner says, "I don't know, I'll figure that out when it comes along," then the transaction's going to go badly. Because the closer they get to that big, black void of having no identity to their family, to their community, to the people in their church, when they lose that identity, they don't know who they are. And the closer they get to that event, the more problems they find with the transaction. 
 Companies are immortal. They'll go on forever if you build them that way.
 
Jeff: And it's a frightening place to be and particularly if you, all of a sudden, need to get out and you need to speed up that transition much more quickly, whether it be for health-related reasons or something like that. One of the things, John, we hear about from time to time, stories about successful businesses, legacy businesses they were in the community for years and years and years serving the local clientele and customers, and then all of a sudden we drive by one day and they're just closed up. Or the owner just decides to retire and doesn't really have anybody to take over his business. He just closed his shop and that's it.
 
When we hear these stories and based on what you know from being in the middle of all of this and working with baby boomers, in particular, these stories that involve them. Is it really a matter of not having a strategy and not knowing what to do, how to transition your business, how to sell and profit from that, and get the rewards that you're after? Or is it one of those things where some of these folks think, "You know what, no one's going to want this. It's outdated and I've been here a long time, and there are other people doing what I do. There's no value involved here in my company."
 
John: And you said successful business. Obviously, some industries go away. There's probably a buggy manufacturer somewhere that's still surviving, but not many. In that case, it's a business that just hasn't failed because the owner didn't need much out of it to keep it going. But when a successful business closes, it's almost always a case of the more you work in your business, the less it is worth.
 
The owner was doing too much. He or she didn't teach others how to produce what he was producing, didn't teach other people how to manage, didn't put in processes so a third party could take over what they were doing. It's still an owner-centric operation. And quite frankly, it may look like a successful business from an outsider, but it's just an owner with a job and a lousy boss.
 
 Jeff: Working in the business and on the business at the same time. And he plays a boss, owner, and employee all at once, except for maybe Matthew comes in from time to time to take some phone calls and do the books.
 
What are some basic tips then, John, to close out? And we could go on and on, and this has been a very, very enlightening conversation, very eye opening. What are some basic tips or guidelines that you would be willing to share at this time, as we wrap here, that can help those boomers in our audience begin to think and plan more earnestly for the sale of their business and transition to the next chapter of their lives, even if they're thinking, "You know what, I'm never going to retire. This is just the best damn thing in the whole world, and this is my hobby too." But what can you do to share with us the types of things that can make us better prepared when we're eventually ready to say, "You know what, I think I'm going to go ahead and hang up my shingle here."
 
John: I think one is get realistic outside look at your business, someone objective. And when I say “outside look,” I don't necessarily mean an appraisal, I mean a professional who understands business, understands value drivers, and can tell you where you meet expectations or not as far as in a buyer's eyes compared to others in your industry.
 
There are tools out there like Sageworks that most people, accountants and virtually all their banks subscribe to where they can run metrics against other people in your exact same industry. And believe me, in this day and age of the internet, if you're going to sell to a third party, your buyer is looking up that information. And you don't want to be selling to somebody who knows more about your business than you do. 
 
Jeff: Amen to that.
 
John: And then training successors, whether you want management to help a new owner get off on the right foot or whether you're training them for employees to be your eventual successors in ownership and buy the company from you. Either way, training is absolutely worthwhile, and you have to build a team. 
 
And if you don't mind me putting in a plug, there are a lot of free resources that we put on yourexitmap.com. There are tools up there, assessments, educational materials, and articles just posted all over, and it's all free. We're missionary about business owners understanding that they need to start planning. 
  
Jeff: John, not only do I not mind you giving a plug, but I do encourage you now to give your telephone number and email address, or whatever you'd like to leave us for anyone who might be listening to this program right now who likes what you've had to say to this point and who would like to take advantage of some of the free materials. But also may want to speak with you on a deeper, more confidential level about their own particular situation, and to perhaps work with you and have you work with them a little bit about how they can better prepare themselves. How can they reach you?
 
John: Our phone number is 800-653-5405. They're welcome to email me at jdini@exitmap.com
 ...you don't want to be selling to somebody who knows more about your business than you do. 
Jeff: John has, like he mentioned, a tremendous wealth of resources for you to take a look at, and he's got a number of different websites out there. We were really just blessed to have him on our program today. John, I want to thank you so much for your time. This has been a great conversation. And again, I think it's one that we could probably have expanded a little bit, but we have run out of time. Thank you so much for joining us today on "Deal Talk" and hopefully we can have you back on the program.
 
John: Thank you, Jeff, and I hope I was of help to your listeners. 
 
Jeff: We appreciate it. That's Mr. John Dini right there. Great call, great conversation. Speaker, author, exit strategy coach, president of MPN Inc., John Dini. I hope that you enjoyed this program.
 
And again, we do ask that you let us know how we're doing. Let us know your thoughts on today's show on this conversation. We'd love to hear more from you. Simply go to your PC, your mobile device, whatever it is that you use to type up an email and send us a note to dealtalk@morganandwestfield.com. Comments, compliments, and criticisms all welcome, dealtalk@morganandwestfield.com
 
"Deal Talk" in fact is brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com or by calling 888-693-7834. For John Dini, I'm Jeff Allen, here's to your success.
 
While we take reasonable care to select recognized experts for our podcasts, please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.

Key Takeaways

  • A coach will help you take a step back, look at the bigger picture, and review whether you are actually focused on the right things, and if you are, whether you are approaching them in the most effective way.
  • If coaching is offered as a remedial measure, it's often too late. The real benefits are generated when it's used proactively.
  • The right chemistry between the coach and the coachee is important to create the necessary level of openness to achieve the desired results.
  • When working with a coach, you need to define your overall objective and then spend time with your coach to agree on very specific goals upfront so that you can evaluate the benefits for yourself.

Read Full Interview

Jeff: Professional coaches are not just for athletes and sports teams. In fact, if you've ever wondered just how much a coach can make a difference to your bottom line and business valuation, well, then you've come to the right place.
 
From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk,” brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.
 


Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk" it's our mission to provide information and guidance from our growing list of trusted experts worldwide that you and all small business owners can use to help you build your bottom line and improve your company's value.
 
There are many varied perceptions out there about the value of a coach or coaching teams. One common perception is that coaches consult primarily with individuals to help them improve their individual performance. But my guest on this edition of "Deal Talk" is here to talk about business and how working with a coach can have a positive, enduring influence on your company's overall performance.
 
Joining me from her home office in the U.K. is Dr. Janine-Nicole Desai, professional business coach at the company she founded, Outside Partner. Dr. Desai, welcome to "Deal Talk," it's good to have you.
 
Dr. Janine: Thank you very much, Jeff. Thank you for inviting me to talk to you today.
 


Jeff: Well, it's my pleasure entirely. And if you don't mind, I'd like to call you Janine. Will that work for you?
 
Dr. Janine: Of course, thank you.
 

Being at the top for extended periods of time can be a very lonely place. And having somebody whose only reason for being there is for you to be as successful in your professional life and as relaxed in your personal time as you can, that's what many coachees value very highly.


Jeff: You have a very interesting story. And I thought maybe before we break into this conversation here, we get all serious here. But Outside Partner, the name stands out, Outside Partner. Tell us, you've got an interesting story about your company name.
 
Dr. Janine: Yes. I'm a very passionate ballroom dancer. Outside Partner is a position in ballroom dancing that allows one partner to move forward more freely. Ballroom dancers need to find their own equilibrium and coordination despite requiring continuous support through their partners to create the most impactful moves. In the Outside Partner position, the contact points are minimal. But they continue to be highly effective to complete the picture. And that's exactly what coaching is about and what I'm trying to do with my coaching approach.
 


Jeff: And obviously, you have a passion about ballroom dancing, something you're very accomplished at and then, of course, coaching. And so Outside Partner, through your company, you've managed to marry two ideologies or philosophies, or two passions that you have.
 
I thought that what we would do is we would start by talking to those entrepreneurs and our audience a little bit. So many of us and for so many important reasons are very narrowly focused on growing our businesses and improving our company's value at the same time. Can you talk to us, Janine, about a link, if any, between coaching and the improvement of bottom line numbers that in fact show your growth?
 
Dr. Janine: You talk about focus. And being focused is probably the best way to increase the value of your business. But when you're fully absorbed by something, it is also easy to ignore what's going on around you. So it's critical to also take a step back, look at the bigger picture, and review whether you are actually focused on the right things, and if you are, whether you are approaching them in the most effective way. And this is where coaching comes in.
 
By now, the benefits are very well researched and documented. A study by PricewaterhouseCoopers is one of those widely quoted. PwC concluded mean ROIs of about seven times the original investment. And that's your bottom line impact. Other studies are going much, much higher than that.
 


Jeff: That's quite fascinating, very, very convincing figures indeed or so it seems. But it must be difficult to make a clear link to financial results. Is that correct, or am I just thinking that it might be difficult to make that link?
 
Dr. Janine: No, Jeff, that's right, absolutely. You have to be very clear about what you are aiming to achieve with coaching and then put measures around it. But by now, the impact of coaching has been studied so many times and in so many different contexts delivering similarly positive results so that you can have confidence in the bottom line impact of professional coaching.
 
Another valuable indicator is the direct feedback from executives who've actually done it. The most recent study that I've seen was published by the Chartered Institute of Personality Development (CIPD) in the U.K., and that was only a few weeks ago.
 
The CIPD is one of the most preeminent professional bodies conducting independent research into people and organization development globally. And their study concluded that 92% of coachees rate coaching as highly beneficial in delivering the results.
 
The reality is that there are a lot of variables at play in making a direct link between any business initiative and financial results. And there can be very valuable targets that are not directly quantifiable in dollar, pound, or Euro returns. But they still have a significant impact on the bottom line.
 
So I would recommend to measure return on expectations. Meaning, when you know why you want to do it you define your overall objective, and then you need to spend time with your coach to agree on very specific goals upfront so that you can in a very straightforward way evaluate the benefits for yourself.
 


Jeff: There's a very interesting statistic that you mentioned in the middle of your comments there. You talked about 92% of coachees rate coaching as highly beneficial. So that's over 9 out of 10. And you can't help but really wonder of those 92% of coachees rating coaching as being beneficial how many of those individuals may have had their doubts in the beginning, or may have not even considered getting the services of a professional coach to help them in improving their company's performance. It's really quite stunning when you think about it.
 
Dr. Janine: Yes. Actually, another very interesting statistic because only 9% of employees according to this same study are currently receiving coaching.
 


Jeff: Only 9%...
 
Dr. Janine: Yeah, 9% of employees enroll.
 


Jeff: That's fascinating. How do I know who if not me, how do I know who in my company would benefit from having a coach to work with? Is there a way that I can put together some evaluation process to help me determine which departments or aspects of my business could benefit most from coaching?
 
Dr. Janine: Everybody can benefit from coaching. So the question would be where you get the highest returns, and that usually takes you to the leadership roles, because they cast the longest shadow. For anyone with people management responsibility, you usually get a multiplying effect, as they often start to approach their line management job in a different way, and then over time, coaching techniques also transferred.
 
Then there are other critical positions in the business. Anyone who has a particular demanding target or a special challenge to navigate at the moment.
 


Jeff: Dr. Janine-Nicole Desai is the founder of Outside Partners. She's a professional business coach, and she comes to us today from the U.K. My name is Jeff Allen. You're listening to "Deal Talk," and we're once again glad to have you with us, everyone.
 
When you see a client for the very first time, what are some of the most common issues, Janine, that you find that can be improved through coaching?
 
Dr. Janine: Any themes relating to leadership are very common, and that could include shaping and executing business strategy, structure resourcing reviews, what to focus on and sticking to it, managing difficult relationships whether that be internally or externally, having those critical conversations.
 
There's a long list. More examples delivering positive change in self and others, and that covers a lot of coaching assignments. What is in particular demand at the moment are themes around overcoming obstacles and developing resilience. And that's because the demand and complexities of the business environment are constantly rising, be that due to new technologies, globalization, the political environment, etc.
 


Jeff: And I know that when you go into a situation, no matter how many you go into, every situation of every client is a little bit different, because every company is different, their needs, as a result, are completely different because we're talking about different personalities, different expectations, and different strengths and skill sets.
 
I'm under the assumption that many businesses also draw on coaches to tackle underperformance on very specific issues, very specific problems, before they become a real issue to the overall performance of the company. Tell us a little bit about that. Is that true? Are you often called in to just speak to certain types of problems, to help businesses overcome these piecemeal, a la carte-type issues?
 
Dr. Janine: Yes, again, Jeff, that's a good observation. Historically, lots of organizations have used coaches to tackle specific issues before they became derailers. But that is less and less the case. If coaching is offered as a remedial measure, it's often too late, and the real business benefits are generated when it's used proactively.
 
So today, coaching is seen more and more as an investment in the best people. I remember reading an article published in the Harvard Business Review calling having a coach a badge of honor. The same article suggests that there is no question that leaders today need constant coaching because of the ever-increasing complexities we just mentioned in the business environment.
 
Thinking specifically about your listeners, I would imagine that for many of them, coaching would be an investment in themselves. I understand many are self-made leaders with an exceptional commercial nose. Often, they've built their businesses to a size, but they may need to rethink, adjust their own style, and perhaps review ingrained personal or business practices.
 
Where do they get their inspiration from? How to know where to start? In the end, they're very smart, determined people. They could do it on their own. They probably could take anything on, but may find it much more enjoyable to have somebody to work with.
 
Being at the top for extended periods of time can be a very lonely place. And having somebody whose only reason for being there is for you to be as successful in your professional life and as relaxed in your personal time as you can, that's what many coachees value very highly.
 

Everybody can benefit from coaching. So, the question would be where you get the highest returns, and that usually takes you to the leadership roles, because they cast the longest shadow.


Jeff: It just seems to me that the longer that we're in a position, the longer that we are ensconced in perhaps a situation where our judgment is clouded or our judgment or our mindset is so narrowly focused. We don't always have the luxury of being able to have this 50,000-foot elevated view of what's going on.
 
My next question before we go to the break then, Janine, how can we be certain whether hiring a coach would actually create the kind of change that can drive improved, measurable results?
 
Dr. Janine: The Harvard Business Review study I quoted earlier came to another key conclusion. Those executives who have a fierce desire to learn and grow, they get the best results. And if they are partnered with a quality coach, that's a powerful combination.
 
The critical ingredient for me is the right chemistry between the coach and the coachee. This is hugely important to create the necessary level of openness, and balance support and challenge to achieve the desired results. Of course, we coaches, we are no magicians. In the end, taking action and sticking to commitments come down to the individual.
 
Let me give you an example from the world of sports. I don't know whether you happen to be into tennis, Jeff. Novak Djokovic, for example, he's had a series of great coaches, and not long ago changed to Boris Becker. This has refreshed his approach successfully again and helped him move into the next phase of his game. But in the end, it's not Becker, it is Djokovic who has to go out there and do the job. And even the number one doesn't win every time.
 
Coaching is about raising awareness, looking at situations from all angles, and then finding solutions from within yourself. A quality coach not only facilitates that process but then also encourages you to take responsibility for action and holds you to account to your commitments. Committing to a coaching program is about stretching yourself and doing a bit more every time.
 


Jeff: Excellent points. And I enjoyed your example of using Novak Djokovic, too, in your story and relating just how important using a coach is. Such as Boris Becker and his particular situation have been so key to his continued success.
 
My name is Jeff Allen, and we are going to come back with special guest today Dr. Janine-Nicole Desai of Outside Partner talking about how impactful having a professional business coach can be to you and your business, your company and why when "Deal Talk" resumes after this.
 
If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on a future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com.
Selling your business may be the most important business transaction you'll ever undertake, so don't go it alone. Work with an organization that has made it their business to sell businesses and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy, to preparing a comprehensive appraisal, and locating the right buyers.
 
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
Are you a professional adviser, accountant, attorney or a wealth manager, or do you provide other professional services? Contact us today to see how our reliance program can help you increase your firm's revenues. Call Morgan & Westfield at 888-693-7834. That's 888-693-7834.
 


Jeff: "Deal Talk" is the show, my name is Jeff Allen talking today with Dr. Janine-Nicole Desai. She is a professional business coach from Outside Partner in the U.K. Dr. Desai, once again, I appreciate having you on this program, wondering if you might have there with you an example of a real-life story that you'd be willing to share with our audience or case study showing just how important coaching can be in creating real results in the improvement of businesses.
 
Dr. Janine: Well, Jeff, there's a variety of case studies and lots of them are published. It really depends on what situations your listeners are facing at any particular time to choose the most interesting scenario.
 
But let me give you an example of somebody I worked with recently that may resonate in the context of the broader theme of increasing the value of a business. It is one of those examples that really shows you can just be too close to the issues and make assumptions. And often it is the questions that may appear naive and very basic at first which deliver the best results.
 
In this case, a general manager of a business just ahead of 40 million turnover, so that's in pounds, in dollars that's just under 60 million, I suppose, has been running the business quite successfully for many years. And successfully in this case meant the business has always been profitable and showing some top line growth. But the margin started to be increasingly under pressure as competition was heating up and growth flattened.
 
This general manager probably started moaning and cursing the competition before he decided he needed to do things differently. In this case, it was coaching that made him step back and go through the most fundamental questions articulating his thoughts aloud, questioning himself aloud. And then in turn, that made him ask very different types of analyses from his team.
 
And looking at the numbers differently, they, as a team, realized that they had always been very volume-focused and never really analyzed the profitability of every single piece of business they took on. And over time, they gave more and more margin away trying to keep some long-standing customers. And even lost money on a series of contracts without any contribution benefit.
 
He only then realized that he had always taken for granted that the wider team was sufficiently commercially aware, but for all intents and purposes as a team, they had become what can only be described as busy fools. There was never sufficient time to think about it more and to think things through.
 
And with these new insights, he initiated a big profitability drive in the business, geared everybody up to drop any profitable contracts almost with immediate effect, as much as that was possible, even if that meant a short-term revenue drop. And the time gained could then be channeled into replacing that business profitably, and also better looking after their existing still profitable clients, keeping them from considering other competitive offers.
 
It all comes back to the point of proactivity we touched on earlier, how much value could've been created much sooner if that level of reflection had been part of general business practice rather than something which only happened as a result of pressure?
 


Jeff: Which begs the question, does this not suggest that coaching should happen internally, inside the company as part of day-to-day business interactions on a regular and frequent basis?
 
Dr. Janine: Absolutely. Many progressive organizations are now spending time to build coaching cultures, making a big difference to their businesses, the key benefits around improved communication, clarity of expectation, and drive to improve.
 
The role of an external coach is different and complementary. Very often, businesses don't yet have the capability to coach internally and may need somebody to help them in developing it. But even if they do, a professional coach offers an external perspective. They're not involved in internal politics, and there's no confidentiality or sensitivity barrier. And therefore, external coaches can challenge in a very different way. They work with you as a partner and are not there to judge you or evaluate your performance in any way.
 



Jeff: Very important indeed, because you've got somebody that you're talking about bringing into your company who has no biases. There are no axes to grind. They don't know you. They are trying to get to understand where the weaknesses are to help you overcome your challenges, to think differently, and to do some different things that will help get you from point A to point B.
 
Dr. Janine-Nicole Desai is the founder of Outside Partner. She is a professional business coach joining us from the United Kingdom today on "Deal Talk," and we're so happy to have her with us. Janine, is there anything that our business owners or listeners can do right now to help them determine if hiring a professional coach is in fact something that they should consider?
 
Dr. Janine: Yes, they could just have a go and perhaps ask themselves some coaching questions. Examples could be, do I take sufficient time to reflect on what the biggest levers are to drive my business forward? Do I have enough challenge around me? How sure on a scale from 1 to 10 am I that people speak their mind around me? Does my leadership team give sufficient time to coach people? Do we actually know how to do it? What are the critical roles in my business who have a particular challenge on their hands at the moment, and are we doing enough to support them? Who are the people I really don't want to lose, and do I invest in their ongoing development? What is our main business priority at the moment, and how do we align everybody to it? And then finally, what type of business organization do I want to leave behind when I eventually hand over?
 
These are just a few examples of questions that might lead your listeners to consider hiring a professional coach.
 


Jeff: We're all interested in added value. And I'm wondering just how much staying power the coaching that I will be provided will provide me with as I move on through the years well after my business is done and I've long since retired. Tell us about any benefits that we might see from coaching that will continue to influence us long after we've left our companies perhaps.
 
Dr. Janine: Managing transition is another very common area of coaching at various stages of people's lives. Typical crossroads are which job to take, which business to go after, when to retire, what to do next. Letting go is hard to do for many people, and the coach is great to help you think these questions through and prepare for the transition after retirement.
 
Goodness, it depends whether you are looking to take on a new challenge straight away in a completely different field perhaps. But the techniques that you would've learned whilst undergoing coaching yourself, you're doing coaching for a significant time and trying different approaches, they will always stay with you.
 


Jeff: So as we begin to wind things down here on this edition of "Deal Talk," Janine, tell us, how do we find a good coach? And I ask that question because from our interactions, there are so many folks out there who have decided to make consulting or coaching their life's work after they've gone on to do some other things. But you're someone who is focused in this area. This is your business. This is what you do. And you've had a chance to talk to and consult with many businesses, many individuals and professionals. And so I know that you can help us cut through the clutter and make some important decisions here. How do we find that coach that we need?
 
Dr. Janine: Yes, of course, I also base my experience on 20 years of work on the corporate side.
 


Jeff: And that's so key, that's important.
 
Dr. Janine: ...for coaches and what I would've looked for. And of course, word of mouth is always a good start, or somebody you've come across and feel you would like to work with that person. A quality coach is likely to have complete and substantial accredited training with a reputable academic or coaching provider, and have a good amount of life experience.
 
A good coach does not need to understand your business nor your sector. Actually, that can be counterproductive. But you need to be able to respect your coach for who they are and what they've done. In the world of coaching, there are many different schools of thought and approaches. I would suggest that you are very open in your exploratory conversation about what works for you and what doesn't. And the rest is about chemistry.
 
Some shared interests and common values will help the relationship initially. But please, please, don't look for somebody like you. Feel-good chats are unlikely to lead to meaningful personal change. A rich conversation comes through diverse perspectives and adding different angles. And that is the main purpose of your coach. On the other side, you should enjoy having a conversation with your coach and be able to trust him or her quite quickly.
 
For coaching to work, openness is vital. And you must allow your coach to challenge you, challenge you quite hard. Look for somebody where you would find that easy to do.
 

Of course, we coaches, we are no magicians. In the end, taking action and sticking to commitments come down to the individual.


Jeff: Dr. Desai, if there are those individuals who would like to get in touch with you, how can they reach out to you, connect with you, and talk to you about their particular situation with the possibility of obtaining your services as a business coach?
 
Dr. Janine: That's very easy to do. Look up the Outside Partner website on www.outsidepartner.com, and you can get in touch very easily by email via that website.
 


Jeff: Dr. Janine-Nicole Desai, we have really enjoyed our time with you today. And I want to thank you so much for making time in your schedule to join us today on "Deal Talk" to share your perspective, your insights, and why coaching can benefit your business, your business's bottom line, and your ultimate value. Thank you so much for joining us today.
 
Dr. Janine: It has been wonderful, Jeff. Thank you very much.
 


Jeff: Dr. Janine-Nicole Desai, business coach and founder of Outside Partner joining us from the United Kingdom today. Morganandwestfield.com, it is the only one of the four channels online where you can not only hear this show, but you can download the complete show notes. There is a summary there and also a PDF file with all of the comments. Everything that you hear us say right here on this program you can download in text form to whatever device that you're using there and you can share it with others.
 
Don't forget that "Deal Talk" is brought to you by Morgan & Westfield, the nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com or by calling 888-693-7834. I'm Jeff Allen, until next time, here's to your success.
 
While we take reasonable care to select recognized experts for our podcasts please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.
 

Key Takeaways

  • A potential buyer will want to get a sense of who the key employees are and what the impact could be if they decided to leave the company.
  • It is important to be open and honest with your buyer about both the positives and the negatives of your company because they will conduct due diligence and find out anyway.
  • A strategic buyer is basically looking for ways in which they can accelerate their business.
  • A seller should think about how to reduce risk from the buyer's perspective, because the riskier they think the deal is, the lower the price they’ll be willing to pay.

Read Full Interview

Jeff: There are different kinds of buyers out there interested in your business, believe it or not. And it's important that you know what they're thinking before you engage them when selling your company. If you want to know why what they are thinking matters to you, you've come to the right place.
 
From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk," brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.
 


Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk," it's our mission to provide information and guidance from our growing list of trusted experts worldwide that you and all small business owners can use to help you build your bottom line and improve your company's value.
 
If you are interested in selling your business at some point — as listeners to "Deal Talk" are — this program is for you because we're going to tell you why it is important that you get to know your buyers, those prospective buyers out there. You may not even have any contact with them any time soon, but you need to understand what people might be thinking, the stuff that's going on in their head about your company. It's very important. 
 
Why does it matter? We're going to find out. We're talking with the President of Telementrix today. His name is Mr. Mark Johnston. We're so glad to have you on the program today. Thank you for joining us. 
 
Mark: Thanks for having me on the program. I appreciate that.
 

A key part of what you want to do as a seller is make the buyer as comfortable as possible.


Jeff: It's just a way to break the ice a little bit, Mark. Let's talk a little bit about your background. You have depth of experience in the M&A space. Tell us a little bit about where you've been and what you do.
 
Mark: Thanks. I took an unconventional route to M&A frankly. I started with an engineering degree with no intention at all of doing even though I knew what M&A was. And I got from there into technical sales and marketing, and product development, and strategic planning. And then finally I got into M&A. I actually went through most of the different paths you take in a company and as a result it really taught me how engineering works, sales, marketing, operations, how these aspects of the company work, which really helped me when I got on to M&A.
 
So while most people come to M&A from a financial perspective or with a financial degree, I come from more of a strategic and operational perspective. I can certainly read and understand income statements and balance sheets. My focus has always been more on attractiveness of the business and the market they're in.
 


Jeff: I think that's OK. I'm not a numbers guy myself, quite frankly, Mark. So you and I, I think can relate on a very level wavelength. And I'm so glad once again that you've agreed to join us on our program today, really looking forward to our conversation. 
 
One thing that we know about buyers, we may not necessarily know what's going on in their heads right away, but we do know that there are kinds of buyers. We understand that there are financial buyers and we understand that there are strategic buyers. If you could share what some of those fundamental differences are to help us understand what separates the two.
 
Mark: A financial buyer, or in fact all buyers clearly are looking for a good return on their investment, that's pretty obvious. But for a financial buyer, that's really their only focus. They're looking to see if they can increase revenues. So if they buy your company, their thesis is I can increase the revenue, I can decrease the expenses, I can increase the profitability so that in three to five years, I can flip the company and make money. So they see it basically as a financial investment where they can apply operational excellence to improve your performance and profitability, and then sell you at a higher price. That's really their only focus.
 
A strategic buyer is also looking for a good deal, of course, but they have other concerns. For example, a strategic buyer might say, "We want to increase our share in a certain market, or consolidate a fragmented market, or maybe take out a competitor, or maybe the market they're in is not growing that quickly but there's an adjacent market that's much more attractive and they want to get into that market. And so they're going to buy a company that helps them get into that more attractive market segment, or maybe they want to gain access to a key customer or a set of customers they don't have currently. 
 
Or maybe the market that your in is a desirable geographic location, and the market they're in is not, and they want to gain that geographic capability. Or perhaps your company has got some patents or some manufacturing process know-how, or some other trade secrets that really give you an advantage in the market and they want to gain that intellectual property. 
 
A strategic buyer basically is looking for ways that they can accelerate their business. So often, an acquisition is done to simply accelerate that internal strategy the buyer has.
 


Jeff: Given what we know then about financial and strategic buyers, which one of those would be more likely to give me more for my company, do you think, based on your experience?
 
Mark: The financial buyer is going to have a hard-nosed approach. They're going to look at the spreadsheet they put together, they got a financial model, and the information you provide. And then they're going to run some numbers, and they're going to look at the return on invested capital or some other similar metric, and compare this investment against other alternatives that they have. 
 
And often they're going to have an internal, what they call a hurdle rate, they're not going to disclose. That's their go, no-go limit. They might say, for example, we want to have at least a 10% return on invested capital by the third year. 
 
And they're not going to pay more than what I would call a market rate. And they can go and look in the market, and they can see what have similar companies in the same space sold for in the last 18-24 months. And that gives them an idea whether it's a multiple of profitability of EBITDA, or multiple of revenue, they get an idea for what the market rate is for your kind of a company. They don't want to overpay for that.
 
They're going to have this financial model template, and they're going to plug in your actual historical numbers for bookings, revenue expenses, head count, things like that, and they're going to forecast the future outlook. And this outlook is going to be based on several factors, obviously the data you provide, including the future forecast, and then their own assessment of how likely those numbers are to be true, how well they're supported, how consistent they are with prior periods and growth rates, and how much confidence you inspire on other factors.
 
For example, are your revenue forecasts optimistic or reasonable? For example, do the numbers tie? I've seen as an illustration where a company shows a big ramp up in forecasted revenue after you buy the company, but only a very small change in sales head count, which if you do the math implies a massive increase in salesforce effectiveness, which doesn't compute. So obviously there's no basis upon the higher forecast. 
 
Are you depending too much on a small number of key customers, or is there a risk that your key customer goes to a different player and they lose a whole lot of business. These are the sort of things that they're looking at. Strategic buyers have got a similar process. Because of the strategic considerations, they might pay more. 
 
So generally the short answer is a strategic buyer will often pay more because maybe what you've got is scarce and they covet what you have and they really need it. The financial buyer doesn't care. They’ll go to a different market and buy some other company. They don't care what market as much but the space you're in, whereas a future buyer does care about that.
 
Sometimes there's a sense of competition to buy your company, and they want to deny your company to a competitor of theirs. A buyer's going to try to get as much information as they can without having to make an offer. And once they make the offer, they're probably going to request what they call exclusivity. And this means that so long as you're in an active process with that buyer you're not going to discuss the company or accept any other offers from any other parties.
 
The rationale for the buyer is twofold. First, obviously they want to eliminate any potential buying competition, and any kind of upward pressure on valuation. And second, they tend to commit significant human and financial resources and diligence, and they want your undivided attention if they do so.  Generally speaking, I would say the strategic buyer is the one who is more likely to pay more than a financial buyer.
 


Jeff: You talked about due diligence there or the diligence and taking extra time for that. It sounds to me like any more these days, and you can confirm this, the tendency these days is to spend a significant amount of time where diligence is concerned, and particularly you might say for the financial side, the financial due diligence is concerned, because the value that is placed on value is in fact so high on either side, is that right?
 
Mark: Yes, it is. There are actually several types of diligence that people can do. The first one might actually surprise you but it's what we call market diligence. The buyer's going to be interested in how well you understand your market. Is the market growing, by how much, how to segment it, what are the market drivers, who are the competitors, what head winds are there or tail winds are there? Do you have a sustainable, competitive differentiation? 
 
A buyer is more interested in a weak company in a great market than a great company in a weak market. Because in a great market, you can have a mediocre company and they can improve your performance. A rising tide raises all ships, so you still get good results. But in a weak market, even the best performers are going to get clobbered. So to the extent you can show your buyer that you understand the market you're in, your positioning, and you can articulate why the market is attractive. That's going to help increase their confidence in buying your company.
 
Beyond that, the phase of diligence they would look at, diligence of course happens after they submit non-binding offers, so the process would be... They may contact you first and you go back and forth a few times in conversations. You sign a nondisclosure agreement typically. Then you might release a little more information. And then you may say, "Now, I want to get a nonbinding offer." If the other party's interested, they lobby a nonbinding offer, and that's subject to diligence, and typical financial diligence, legal diligence, and so on. 
 
And then at that point, you would then open the kimono and disclose pretty much everything that they would want to ask about your company, and the talent, and all aspects of your business. The first phase that a buyer's going to go through at this point is business diligence, which typically looks at your historical and forecasted revenues and profitability, the talent, the org chart, business segments you're in, trends that you have. 
 
The phase of this diligence, the purpose here is to verify whether your original business case or thesis still stands, and there aren't any major customers who are going to defect, or problems with IP ownership, or some other disaster. And assuming this toll gate passes, there’s a lot of toll gates, it's a step they have to get through. 
 
Then the next phase would be legal and tax diligence, which involves all the lawyers and costs the most money, and that's why it's usually delayed until the end. If anything is found in diligence, what the buyer is going to typically do is propose a haircut on the price or some other concession. Like you might say, I want to have a portion of the total price as an earn out rather than I'll pay to closing. So maybe rather than saying, "We're going to pay you $25 million in cash," they might say, "I'm going to pay you $18 million, and then I'm going to pay you another 7 after 12 months if you hit the forecast that you promised in your diligence information you provided." 
 
This means that your company has to perform as you predicted in order to get fully paid. If you're the seller, you should be thinking about how you can reduce risk from the buyer's perspective, because you can bet that the riskier they think the deal is the lower the price they're willing to pay, or the more portion they want to push into an earn out.
 
So to the extent, you can show a buyer that you have clean, consistent financial, stable employment with key employee retention, clear records of IP ownership, clean sales pipeline, good customer list with stable and consistent buying behavior, all these things are going to decrease your risk from a buyer's perspective and help support the valuation that you're seeking.
 
Let me tell you about my $3 million stapler. This is a funny story. Earlier in my career, actually before I was in M&A, I worked for a firm that acquired a small company with some innovative intellectual property based in Silicon Valley. And this small company had two key guys who developed intellectual property. 
 
And the founders got $3 million for their company, and shortly after the acquisition, they decided they didn't want to work for us and they both quit. And it turned out that we couldn't monetize very well what they had done in the past. We're really counting on their help in integrating their intellectual property into our next generation of products. But with both of those guys gone, all we really had was a company name, which had little value, and some basic office equipment.
 
Years later, I ended up inheriting the last remaining item, which was an electric stapler. I still have it on my desk. And it's a great reminder that buyers need to structure any agreement to ensure that the key contributors are identified, and there's a mechanism to keep them what I call in the socket, or at least as long as it takes to assimilate their IP or their key customer relationships, or any other specialized knowledge they've got into the organization of the buyer.
 

Because in a great market you can have a mediocre company, and they can improve your performance. A rising tide raises all ships, so you still get good results. But in a weak market even the best performers are going to get clobbered.


Jeff: Mark, having said that, how often will a buyer know right away from the get-go who those key individuals are? That's actually something that is going to be born out of that business diligence that's done later on as we get further into the process, is that right?
 
 Mark: Yes, it is. And they're going to count on you for that. If you're the seller, they're going to say, "Let's sit down and go through the org chart. And let's talk about every single person here. What is their role, what are their responsibilities, how long have they been employed, how much are you paying them, and what do you see their outlooks are going forward? Are they an A, B or a C? That's often asked. How would you rank them in terms of priority if you're picking people for a baseball team? How important is this guy to be on the team going forward? 
 
And from that, they're going to get a sense of who the key people are. And they'll also get a sense from the description on what the rule is, what the impact could be if they decided to leave the company or bail out.
 
So typically what happens in a deal structure is the buyer will include in their financial model some money that they're going to have to pay to retain key people. So when the business closes, they're going to pull on the key folks one at a time and they're going to say, "We've identified you as a key employee. You're vital to the business going forward. And to keep you here, we'd like to provide a special incentive, so that if you still show up and have a pulse after 12 months we're going to give you $100,000," or something like that.
 
That's obviously done to keep the key folks employed there so that you have enough time to learn what they know, to replicate the relationships they have with key customer sites or understand the R&D information that they have, things like that.
 


Jeff: Good stuff, Mark Johnston, President of Telementrix, an M&A and strategic planning firm, with us. Once again, Jeff Allen with you looking forward to continuing our conversation with Mr. Mark Johnston when "Deal Talk" returns right after this.


 
If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on a future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com. 
Selling your business may be the most important business transaction you'll ever undertake, so don't go it alone. Work with an organization that has made it their business to sell businesses and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield, we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy, to preparing a comprehensive appraisal, and locating the right buyers. 
 
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
Are you a professional adviser, accountant, attorney or a wealth manager, or do you provide other professional services? Contact us today to see how our reliance program can help you increase your firm's revenues. Call Morgan & Westfield at 888-693-7834. That's 888-693-7834.
 


Jeff: Welcome back to "Deal Talk." This is Jeff Allen along with Mark Johnston. He's the president of Telementrix of Scottsdale, Arizona. And we're talking about what the buyer is thinking. We talked about those four areas of diligence, market diligence, business diligence, legal and tax diligence. Which of those areas have you found in the past that really do have the most questions, where the most questions seem to come up, where the most issues arise?
 
Mark: The market diligence is usually invisible to the seller. The buyer is going to look at a market they may be interested in and they're going to spend a fair bit of time trying to understand the science of the market, what are the market drivers and tail winds. How is this segmented? What is the outlook for the market, how fragmented is the market, things like that. We're trying to understand what is the attractiveness of the space and what are the things that are really key to being successful in that space. 
 
They're going to be looking at a competitive situation, the customer concentration. How actionable, for example, are the valuations rational? We've all seen markets that are really hyped. For example, a few years ago, the security market was super high tide. And it's pretty hard to do a deal on the security market and feel confident you got a good price, because the prices were just sky high for any kind of security company.
 
So you might look at markets, understand you're going to have rational price points. And they're going to do all that work before they reach out to you for the very first time because they're going to have already decided that they think the market you're in is attractive. Obviously you're a key player in that market, so part of what they do when they talk to you is they're going to try to verify some of the hypothesis they've developed in their original market work when they talk to you and see whether you understand the market as well. But much of the work is done before they knock on your door. 
 
Then after that, the business diligence is usually where deals fall through. In the business diligence, and I've covered some of these things before, there's a lot of things that can go sideways. And in fact, if I could take a bit of a detour here and talk about why deals may fail and what you can do to try and correct them, the first thing that's going to be a big turn-off in business diligence is if the information you provided turns out not to be quite true, that you exaggerate the revenue, that you claim a major customer, it was key to you. In fact, it turned up to be only a trivial purchase they made. Are your books clean? Do you have some big debt or some other unpleasant financial surprise they find out in business diligence? Are you paying a big licensing fee to someone who is going to cripple the profitability? Is your forecast well-supported? Do you have a lot of stale or obsolete inventory?
 
All these sorts of things are going to diminish, if you get the wrong answer, the attractiveness of the company. Maybe you've recently cut way back on expenses to make the company look good. They're going to find that out in diligence. 
 
I can't tell you how many times I've seen presentations with this hockey stick revenue forecast. So the revenue up to now has been maybe a 5% growth rate. But as soon as we buy the company, it's going to be a 25% growth rate. So do you have a solid sales pipeline that you can show a buyer that is it more of a wish or is it a real forecast? Do you have trends that show sharp changes and what's happened? These are going to be red flags and investigated extensively by the buyer. In fact, you may find out as a diligence process, whereas as on and on you get what we call “deal fatigue.”
 
That's where you have to be firm with the buyer and let them know, to say, "Enough is enough." We've spent enough time looking at this stuff and I've given you all the information you asked for. Let's do the deal or part ways. Because some buyers will keep asking forever until you just go crazy. 
 
During diligence, the one thing a buyer is going to do is probably give a haircut to his valuation internally. It's rare they're going to find something you didn't disclose that's going to increase the amount they're willing to spend. Usually the only reason for a price increase is if you're in the very fortunate position of a competitive bidding situation with two buyers that are competitors. 
 
It's almost impossible to bring someone back to the table who's walked away. This is not the situation where you want $30 million and they're offering $25 million and they walk away. That's just negotiation. What I'm talking about is where they decided your company is no longer attractive and they're going to break off the diligence process and return all your materials. 
 
You get a formal letter that says, “We've decided that it's not going to work for us. Here's all your materials back. We're done. Thanks very much.” They often don't give a reason, which can be really frustrating for the seller. But usually the reason is that their adjusted financial model now looks so ugly that the return says there's no point for us in continuing. And when that happens, typically the CEO of the other company has made the decision and they're going to move on to focus on something else. So once they made that decision, it's rare that you're going to have some new piece of information you can give them that will reverse that. 
 
Sometimes you might just be the victim of bad luck. I've seen situations where the CEO or the responsible executive of the buyer suddenly gets fired or replaced, and the new guy doesn't want to do what the old guy was doing. Or sometimes some unforeseen major issue comes up in the buyer company that distracts them from the deal, and they decided they want to bail out. 
 
This comes back to the point I made earlier about the whole risk mitigation. A key part of what you want to do as a seller is make the buyer as comfortable as possible that this is a low-risk transaction. That the revenue is supportable, it's profitable, there's opportunity for improvement, sky's the limit as far as growth possibilities, the talent is strong and will be retained. All these things make the buyer feel comfortable and lessen the risk that they're going to lower their evaluation internally, and therefore make the model look less attractive and have the whole thing go south on you.
 
After the business diligence, which is the major reason things fall apart, you get to the financial and the tax diligence. And this is where you get the CPAs and the lawyers involved, and they're digging into things. Usually that's not a problem here. Sometimes there's intellectual property, sometimes there's some software companies, for example, that are a bit sloppy. There are some regulations we have in the U.S. that say, for example, that you can't sell software, you can't give some of the intellectual property to companies like North Korea and Libya, and places like that.
 
I've seen companies that have had free, try-it-before-you-buy download capabilities on their website. Somebody in North Korea clicks on “try it before you buy” and downloads the website, suddenly creates, say, a $500,000 fine liability to your company. In your website, if you haven't put structures in there to ensure that anybody from restricted countries cannot perform this download, you're actually setting yourselves up to be very liable for some big risks. 
 
But beyond things like that, I think the financial and the legal diligence — as long as you don't have any big skeletons or lawsuits you haven't disclosed or things like that — they're usually fairly perfunctory. And you'll end up going to a close if you pass the business diligence.
 


Jeff: Is there any assurance that I have as the seller, and I'm a good guy. I try to keep my books clean. I try to do everything I can to lift the value of my company. I do have some people of value here. I want to be able to ensure that they continue on with the new organization. Is there any way that I can work to make that happen or try to make that happen for them?
 
Mark: That's a tough one, Jeff. The easiest way to avoid staff layoffs is to be running lean and profitability in the first place. A financial buyer is generally an expert at process improvement and cost reduction. And they're going to be looking with a very sharp pencil at your average spend in G&A, in R&D, in sales and marketing. They're going to compare those percentages against industry averages. And if they see that you're high, you can bet they're going to plan to make some cuts.
 
A strategic buyer is likely to be looking for opportunities for staff reduction where there's overlap with their firm. For example, if they're buying your company because you have more products in their same market they're going to say, "Look, we don't need to have two sets of payroll departments. We don't need two IT departments. We don't need two marketing departments." 
 
Maybe some of your product lines overlap with theirs and some of the R&D people are redundant. And there's opportunities for cost savings. The word they use, they've got a code word for this. The word is “synergy” in the sense of we see good acquisition synergies. That means we find ways we can cut costs by reducing some head count.
 
A certain amount of acquisition synergy with a strategic buyer is usually inevitable, especially in the G&A area, like accounting and areas like that. You don't need to have two sets of AP and AR people, and two sets of payroll people. So unfortunately some of those people, it may not be yours. They're going to look at the talent, and they may find that some people you have are more talented than the people that they have in the same role and they may cut their own people. No guarantees of one way or the other there. 
 
But unless there's really no overlap at all of the new parent company and you're running lean in the first place, the best way you can protect yourself is to be running very efficiently and very effectively so that every single person is vital in your organization. They're all contributing a lot, and they're being paid at market rates, then those people are pretty safe. But to the extent you have overlap with the buyer, that's where they're going to look for opportunities for consolidation.
 


Jeff: Mark Johnston, we have arrived at the end of the program or nearly the end. And as we have just a couple of minutes left I was wondering if you might be able to provide our audience here a couple of takeaways that are really, really key about our discussion we've had today about why it matters what a business thinks when it comes time to sell your company.
 
Mark: I think to the extent you understand how a buyer thinks, you're going to make them more comfortable with their process and get a better price. So we’ve talked extensively about how you can mitigate risk. I think you want to be honest with the buyer. If you have a situation where you have a very competitive environment and a lot of price compression, you want to say that. And you want to say, "Here's the situation in our market, but it's a very competitive market. But we have some differentiated products, and here's what we're doing to mitigate this problem." 
 
The extent they can see that you're open and honest and transparent with them, and clear about both the positives and the negatives, because every company's got warts. It's not that you want to make them front and center, you don't want to hide them necessarily. They're going to be found in diligence anyway. And they're going to respect you a lot more and tend to believe what you say if you disclose things. They're going to find out anyway. 
 
When you do that I think you'll find that the process goes faster and it costs you less money. And you'll have a better result that gives you the best price you want.
 


Jeff: If we've got some folks out there who are listening to you right now and they would like to talk to you about utilizing your services, Mark, they've got specific issues or they have needs that they know that only you would be able to address for them. Maybe they're in your area of the country, how can they reach out to you, how can they connect?
 
Mark: They can reach me by email at mark.johnston@telementrix.com. And also on LinkedIn, you can find me there. That's got my contact information as well.
 

Generally speaking, I would say the strategic buyer is the one who is more likely to pay more than a financial buyer.


Jeff: Great conversation today, Mark Johnston. Really appreciated having you, and I would like to maybe hope that you would consider joining us again on a future edition of "Deal Talk."
 
Mark: Thanks very much, Jeff. I enjoyed it.
 


Jeff: That's Mr. Mark Johnston. He is President at Telementrix, an M&A and strategic planning firm in Scottsdale, Arizona. And I hope that you enjoyed our conversation today as much as I did. 
 
Let us know how we're doing, won't you? We'd like to hear more from you. Send us your comments, compliments and criticisms, we like to hear those too, at dealtalk@morganandwestfield.com. Send them to once again that email address, dealtalk@morganandwestfield.com.
 
"Deal Talk" is brought to you by Morgan & Westfield, the nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com or by calling 888-693-7834. I'm Jeff Allen, until next time, here's to your success.
 
While we take reasonable care to select recognized experts for our podcasts please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.
 

Key Takeaways

  • A business needs to compare itself with the best in class and understand how the company is performing against them.
  • When customers have a better experience through the purchasing process, they will come back and recommend other people.
  • It is important for businesses to look in the mirror and take both an internal and an external view at the company.
  • An internal look at your company notes the strengths and weaknesses, and an external view looks at the opportunities and threats.

Read Full Interview

Jeff: Getting the most and best out of your team, if you want to know what that means with examples of how human performance directly impacts your company's bottom line and overall value, you've come to the right place.
 
From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk," brought to you by Morgan & Westfield, a nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.
 

Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk" it's our mission to provide information and guidance from our vast, growing list of trusted experts that you and all small business owners can use to help you build your bottom line and hopefully improve your company's value. 
 
This idea of human performance and the idea of getting more not only out of yourself but out of your people. We're wondering how does that translate to increasing the value of your company or certainly making it more productive. We've got somebody on the line today who I believe is going to be able to really give us some true insight into this idea. 
 
If you are wondering about how you might be able to improve your performance, improve the performance of others who work with you in your organization to get the best out of them and to be the best that you can be, you've come to the right place. This show is for you.
We're joined by our special guest today. His name is Darrell Gunter, he's Digital Publishing Executive, Executive Coach, M&A advisory, he wears many hats, as the President and CEO of Gunter Media Group. Darrell Gunter, I want to welcome you to the program. Welcome to "Deal Talk," sir, it's good to have you.
 
Darrell: Thank you so much, Jeff. It's a pleasure to be on your program.
 

There's something in the psychology term called Johari's window. It's the side that other people see that you don't see, and that's what a business wants to do, a business really wants to have someone to help them see their Johari's window so that they could address those particular issues.


Jeff: I was looking forward to chatting with you, Darrell, because we deal with so many tangibles on this program. We talk about the process of selling a business, the process of the M&A process, and the different stages and steps. We talked to people about how others can improve their businesses by things that you can almost touch, feel, taste and hold, the things we know about: financing, capitalizing and equipment purchases, real estate, lending, all of these things, and how to get legal, and how to do things properly, and how to grow your business, take it to the next level. 
 
The idea, though, of improving performance, this is something that is a little bit different. I know a lot of people may have different views on it. This is your specialty. Tell us a little bit, first of all, about yourself, how you got into this area, and how you've actually seen it work to improve those companies that you have consulted with.
 
Darrell: Absolutely. I'm a Seton Hall graduate, born and raised in Atlantic City, New Jersey, grew up in my family's grocery store business. I went to work for Xerox. I wanted to get the training from the best. That was back in '81. After two successful years at Xerox, I went to work for Dow Jones Financial News Services, which deals with the news wires, which becomes The Wall Street Journal the next day. 
 
And after a very successful year at Dow Jones, I was recruited over to be one of the first managing directors of Elsevier's regional sales office. They have four regions across the world, and I was interviewed for the Americas position. I was there for 11 years, led sales globally. After 11 years at Elsevier... I come from a family of entrepreneurs, so I decided to launch Gunter Media Group, focus on helping businesses to scale.
 
We've been in business now for over five years, and I'm also an adjunct professor at Seton Hall University, where my colleague and I, John Hoffman, we teach Consultative Sales to the MBA program. I also lecture at Rutgers-Newark, and I lecture to their Entrepreneurs Pioneers Initiative Program. And what I've been lecturing to them over the last five years is how do you build a high-performing team.
 

Jeff: Well, Darrell it's really fantastic getting to hear your story, and we appreciate you taking the time out to be with us today. I'm a business owner. I'm interested in taking my business to the next level. Tell me, is there any proof to show that improving my team's performance can, in fact, lead to measurable business growth that can also result in improved value of my company?
 
Darrell: No doubt about it. I'm sure if your audience is not familiar with the net promoter score, net promoter score is a device where you have folks give you a rating, one to ten. And nine and ten is what is considered positive, whereas six to eight is considered ambivalent. And of course, anything five and under is considered to be not good. And you always want to have a positive net promoter score.
 
And what you'll find is if you look at the particular critical path of your customer, and if you really look in the mirror and be honest with yourself, and you ask yourself, is it easy for people to do business with us? And when you look at that and get a look at how easy is it for someone to do a transaction with you, if someone is purchasing an item and you have to ship it to them, are there any glitches along the way? Are your folks being polite to your customers genuinely so that the customers would want to come back and also recommend?
 
What you'll find is that folks who are suffering from problems from their folks being polite, knowing processes and procedures, and managing the customers’ critical path through your business, when you find that that is not going well, you will see that your performance will be greatly affected. If you were to greatly improve all of those various different factors, you're going to speed up the process by which customers do business with you. You're going to get more transactions. People are not going to, as they say, get out of line and decide to buy it somewhere else. So absolutely, there's no doubt it. 
 
There's a lot of different studies where folks have shown that when folks have a better experience through the purchasing process, with the service process, that they will come back and they'll recommend other people. 
 

Jeff: Many business owners may already feel that they and their teams are giving it 110% every day. Just touching on some of those things, for example, that you just talked about, about understanding the true significance, the value of the relationship that you have with your customers, and the regular nuts and bolts thing, the pencil pushing that we have to do, and the calls that we have to make, the orders that we have to fill, the people we need to speak to. We're trying to cram as much stuff as we can into every day that we go to work. How can we possibly give more than that, Darrell?
 
Darrell: I think each business has to really look in the mirror. I’m always talking about looking in the mirror. They need to compare themselves against the best in class. If you compare yourself against the company that's best in class, you're going to find some serious warts on your own business that gives you the opportunity to address them. 
 
There's something in the psychology term called Johari's window. It's the side that other people see that you don't see, and that's what a business wants to do, a business really wants to have someone to help them see their Johari's window so that they could address those particular issues. And sometimes those issues, especially in small businesses, family-owned businesses, it could be a relative that is underperforming but no one wants to talk to Jimmy's nephew because they're afraid there's going to be some repercussions. Or it could be a husband-and-wife team, and of course, you have those dynamics that you have to deal with. And then there's the inconsistency of managers, how they might treat one employee one way and another employee who's doing something similar a different way.
 
It's a lot to look in the mirror and say, "What is my SWOT analysis, what is PMI, my pluses, minuses, and interesting points?" Because, as you know, we're all humans and we're all capable of making many mistakes. But what does Einstein say? The definition of insanity is doing the same thing over and over again expecting a different result.
 

Jeff: Darrell, Einstein was right. I believe that absolutely to this day, and I think about that every so often because I can do some pretty insane things. Quite frankly my wife will make sure that she lets me know about that. But tell me, you talked about SWOT analysis. I've heard about SWOT analysis. There might be members of our audience who aren't familiar. Can you tell me what that is and how that works with you and your clients, and how you use that SWOT analysis?
 
Darrell: Absolutely. Back in the day when I was at Seton Hall, still in the School of Business as an undergraduate, we were not taught SWOT analysis. I did not get that until graduate school, at the Lake Forest Graduate School of Management. Now they are teaching the SWOT analysis in undergraduate business school, and I think it's very important. 
 
When you look at a business, a proprietor needs to look at whether there's strengths, whether there are weaknesses. And this relates to their product, their pricing, their process and procedures, all of the different dynamics that make up a business, and that's an internal look. And then the opportunities and threats is an external look. Whether there are opportunities in this marketplace that we’re currently not taking advantage of that we could take advantage of if we do some things differently, or after some new blue ocean space, and then what are the threats. 
 
And we think about threats, threats, of course, you're competitors, it could be technology, it could be government sanctions, it could be a host of things depending upon your business. I'll give you an example. You know those hoverboards that people are riding now? 
 

Jeff: Yes.
 
Darrell: Now people are saying, "This is a great business." However, the government has started to clamp down on those particular products because they're not safe and they're catching on fire. When you look in that particular business you really need to understand the macro and microeconomics of your business. And so your strengths and weaknesses focus on your internal look, and then your opportunities or threats is an external view in regards to how you have to look at your business as well as your competition. 
 
And you need to understand and look at everything from, like I like to say, a macroeconomics point of view, and microeconomics in regards to your local environment that you have in your city, state and county government. And so it allows the individual to do the self-analysis.
 

This is going to be a day-in and day-out process. But with a road map or with a plan you'll be able to mark that improvement, and see that improvement, and see that improvement drops right to your bottom line.


Jeff: Darrell, how do we get from where we're at now, from the level of performance that we're seeing not just in our people and in ourselves, but at the end of the day the level of performance of our company. We're bottom-line type folks. We look at the dollar signs at the end of the day, the amount of money that we have in our bank accounts. We know where we're at. We also know where we'd like to be. So how do we get from point A to point B?
 
Darrell: You’ve got to establish a performance dashboard for yourself, you have to measure yourself, you have to set goals for yourself and measure yourself against those goals. Just recently I was talking to a gentleman, David S. Rose, who has a great book called “The Startup Checklist.” One of the things that he said is very key and applies to everyone is that you have some people who talk about starting a business, then you have people who start a business. It's about the business of doing.
 
But in the business of doing, you have to establish performance goals and measure yourself against those performance goals. And then you need to understand if you set a particular goal and you overachieved it, so maybe the goal was a little bit too easy and you need to set a tougher goal. Or if you set a goal with a performance measurement of 10 and you only got 2, maybe you made it too hard. What are the particular nuances about that particular performance measurement?
 
And what you do is that you say, "OK, in this business that we have we're going to use these measurements to gauge that success." And then you have to measure that every week and determine where are you in that process. And then you see that you're achieving your goals, then you need to establish higher goals for yourself. 
 

Jeff: But I think the thing here that is important too to follow up with, Darrell, and I'm sure that you'll agree with me, and we can come back and talk about it after the break, is the fact that if you're going to make this commitment toward improving the performance of not only you but your team, and you're going to be checking these goals and you're going to be finding out how you're doing, and you're going to be doing a lot of self-evaluation, you need to stick to it. You need to be consistent about it. You need to follow a routine schedule, and like you said, regular commitment to this is really, really critical in order to make sure that the process works and you can, in fact, get to where you want to go over time.
 
My name is Jeff Allen. We're talking about the correlation between performance improvement and increased value of your company, how you go about it, can it, in fact, be done, and what in fact you need to do in order to put all of these things in place in order to have the success that you want for your business. My name is Jeff Allen. I'm going to be back with Darrell Gunter, he's CEO of Gunter Media Group, when "Deal Talk" continues right after this.

If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on a future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty, and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com. 
Selling your business may be the most important business transaction you'll ever undertake, so don't go it alone. Work with an organization that has made it their business to sell businesses and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy, to preparing a comprehensive appraisal and locating the right buyers. 
 
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
Are you a professional adviser, accountant, attorney, or a wealth manager, or do you provide other professional services? Contact us today to see how our reliance program can help you increase your firm's revenues. Call Morgan & Westfield at 888-693-7834. That's 888-693-7834.
 

Jeff: I'm Jeff Allen. Welcome back to "Deal Talk." My guest is Darrell Gunter. He is in New York and he is head of Gunter Media Group where he's President and CEO, a lot of experience as an M&A adviser with some of the biggest names in the industry. And he's put together high-performance teams that have led their industries. 
 
And he's joining us today because the idea of performance is something that is near and dear to his heart and he has been able to over the last 10 years work with a number of organizations both small and large across the country, coast-to-coast, to help them get the most out of their people, the most out of their organizations as a whole in order to take the performance of the companies to a higher level, and in the process, by the way, increase their values.
 
Darrell, I wanted to continue our focus on getting the most out of our teams. How can we begin the process once we know that we can, in fact, do better? Let's take a look at our teams. Let's say I've got it all together, I've got things figured out as the owner. You come in and maybe you'll evaluate and say, "Yeah, Jeff gets it." So how can we start to address the issues with our team in order to make sure that we are performing at the highest level possible?
 
Darrell: As I mentioned before, I think it's important that you have to really compare yourself to the best in class, and understanding where the top company in your particular business, where they're performing, and how you're performing against that. 
 
There's a great book called “How to Outthink The Competition.” And it's all about comparing yourself against the best of class. And then doing a gap analysis on your own business and being honest with yourself in regards to where you're doing well, where you're not doing well, where you could do better. And then seek out the various different tools and mechanisms that you can utilize to help you to achieve that, and realize that you're not going to change your organization overnight. This is going to be a day-in and day-out process. But with a roadmap or with a plan, you'll be able to mark that improvement, and see that improvement, and see that improvement drops right to your bottom line. 
 

Jeff: Have you seen instances, Darrell, where a business owner, or a CEO, or C-suite executive maybe at another level, will go in and he'll talk to his team, and have trouble getting buy-in right away because a lot of folks might think, "You know what, I'm doing as much as I possibly can do. I'm doing everything you're saying that you need me to do and then some.” But you just at first have trouble getting others on the team convinced that there are changes that need to be made in order for the company to perform at the level that really would benefit everyone.
 
Darrell: That's a very good question. You have to look first at… you got to have the right people on the bus. In Jim Collins’ book “Good to Great,” it's hard to get the right people on the bus. Which means that you really have to have your business well-defined in regards to what is the business that you're in and what type of people with what skill sets, and knowledge, and experience that you need to help fulfill that vision. 
 
And then, of course, meeting with your team and working with them. Make it a group think type of project where they're going to have input and they're going to be able to provide you with their feedback. And when you do that, when you're working with them hand in hand, it's coming from the ground up, which is a very, very good thing. 
 
You might have heard of Total Quality Management. Taguchi was the godfather of Total Quality Management. And it's really helping everyone who is in that value chain of events for your customer having them to be fully versed in regards to what their role is, and how they need to interact and communicate with their team members.
 
You do it in that type of way. You're going to get buy-in. And then for those who, let's say don't want to do it, they have the skill but not the will, they will most likely self-select out of the company.
 

Jeff: That sometimes can make somebody, a hiring manager's job, actually either easy or really, really difficult depending on the needs of your organization and how prepared you are to fill those shoes. Darrell, let me jump into something else right now. Actually, it's not completely disconnected because I know that you have some experience as an M&A adviser and you have had a chance to witness a number of deals and transactions over the years, and play a variety of roles within that. 
 
Have you seen situations where in your experience, a sell-side company, for example, may not have gotten all that it wanted to or expected to out of a deal, or thought that it might mainly because there might have been one issue somewhere down the line that actually was a flaw that was easy to fix but maybe the business owner or the people in charge were just too close to it? And maybe this has something to do with performance-related factors. 
 
And you were there and you thought, "Gosh, if they had only taken care of this and addressed it years ago or even last year before we sat down today they could probably be getting a heck a lot more out of this deal than they're getting today.”
 
Darrell: I call that the pebble in the shoe syndrome. As I walk to the train from South Orange to the train station to get to New York, sometimes a pebble will jump in my shoe. And I feel that pain, but because I'm trying to make that train I don't take it out. But when I get on the train I take the pebble out of my shoe. A lot of times businesses, they know where the pebble in the shoe is, but for whatever reason, they choose not to deal with it. And that pebble in the shoe doesn't go away. So when it's time to sell the company it's one of those issues that to the buyer is a huge deal. And it can really, really hurt the valuation of the company.
 
Let me tell you a true story. There was a company once, and I'll leave the name blank just to protect the names of the innocent. The company didn't have a CFO. And one board member said, "If you don't have a CFO by April, I'm going to resign from the board because your processes are way off. Your pricing doesn't make sense." The CEO eventually did hire a CFO. But unfortunately, the CFO started drinking the CEO's Kool-Aid. Therefore the pricing was still not consistent. 
 
Let's fast forward. We're now in a meeting with a company to acquire us and they asked the fundamental question about our pricing metrics. And the CFO could not answer the question. I think that company that day lost $5 million off of their valuation because of it. 
 
When you think about it ― if the CEO had truly addressed that issue that that board member had complained about... And by the way, that board member eventually did resign. He was just fed up with the inconsistencies. But had that problem been addressed, that company probably would not have needed to sell at that point, and if they did, they certainly would've received a higher amount.
 

Jeff: Absolutely. But right there that's a sobering story and a sobering reminder about having that pebble in our shoe, take the doggone thing out. You'll probably make your train anyway.
 
Darrell: That's right.

I think each business has to really look in the mirror. I’m always talking about looking in the mirror. They need to compare themselves against the best in class.


Jeff: Darrell, we're starting to wind down this program and I really enjoyed this conversation today. But what I like to finish off with today is to find out maybe a thing or two or three that you can share with us that you yourself practice in order to perform at your very best each and every day.
 
Darrell: Number one is that I have a couple of mentors and I have a couple of mentees. I often take a course in Coursera once or twice a year on something that I know absolutely nothing about, which allows me to what I call to sharpen my blade. Then I always try to teach someone something, because if I believe I know a particular topic I could be more effective in doing it if I can teach it.
 

Jeff: I don't think we can end on a better note than that. And with that in mind, I think it just serves as a final thought that if there is someone that we can help or someone that we can help improve, make their job easier for them, or help them perform at a higher level. And there's something that we can share that we know might add value to their life, to their job, to their company, and to others that they touch, that we're foolish not to share that with. 
 
Darrell, I just want to thank you so much for that. I know that we have a number of people who might be very interested indeed in talking to you about how you can probably help them in their particular situation. We know that everybody is different. Every situation in every company is different. But if they'd like to reach out to you, how can they connect?
 
Darrell: Two ways, one is my email address which is d.gunter@guntermediagroup.com, or via our website, guntermediagroup.com. I'm available on LinkedIn, Facebook, Twitter. I can be reached at 973-454-3475.
 

Jeff: This guy is real, he's grounded, and he knows a lot of stuff, folks. Please if you would, get in touch with Darrell when you can. It's going to be a great conversation you'll have with him. And I'm sure that he can answer some basic questions and his service is also there, of course, provided for you. If you have reason to call upon him for the purpose of seeking greater performance out of you, your team, your company as a whole, he'd love to talk to you more about what he can do for you.
 
Darrell, that's it for our time today. I want to thank you again for joining us on "Deal Talk," really enjoyed it.
 
Darrell: Thank you so much, Jeff, it was a pleasure.
 

Jeff: Darrell Gunter, CEO of Gunter Media Group, has been our guest today. He is a digital publishing executive, executive coach, and M&A advisory, and I hope that you enjoyed our conversation.
 
"Deal Talk" is available at morganandwestfield.com where you can find the complete show notes from this discussion. So after listening to the program if you'd like to go ahead and print that PDF and have it where you can find it and get access to it, look up some important key points from this discussion and share it with others, it's right there for the taking. Once again, the website is morganandwestfield.com. You can also listen to "Deal Talk" in any one of three other channels, available at iTunes, Stitcher and Libsyn. 
 
"Deal Talk" is brought to you by Morgan & Westfield, a nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com, or by calling 888-693-7834. I'm Jeff Allen, I'll talk to you again soon. Here's to your success.

 
While we take reasonable care to select recognized experts for our podcasts please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.
 
 

Key Takeaways

  • Morgan & Westfield’s one and only specialty is selling and valuing businesses. By specializing on this one endeavor, we have become focused, thus substantially increasing the quality of our services. As we’ve been in the business for more than a decade, we’ve become very good at what we do.
  • Our large backend support team is what mainly sets us apart from other business brokers, who work solo and have no support staff at all. Having a team of experts allows us to be more efficient in our processes, as opposed to a typical business broker who plays the role of a jack-of-all-trades.
  • Another main differentiator is that we cut the most time-consuming yet unnecessary roles of a broker in the deal, which is physically meeting with the buyers. We believe that there’s no one better than you, the owner, when it comes to showing your business to a buyer.
  • Our fees are highly competitive because we model them after other professionals like accounting and law firms. Because we’re efficient, we spend less time on each deal. By spending less time, our costs are reduced, and thus we can charge lower fees.
  • Everything we offer is on an a la carte basis. You have the option to select only the services that you need. You can even bring in your professional advisors, such as your accountant or attorney, to the conversation to help you make the most intelligent decision.
  • Whether you’re ready to sell now or later, Morgan & Westfield can help you. If you’re set to sell, we’ll prepare a framework of recommended steps that is customized for your business and walk you through the sale process. If you wish to prepare for the sale in advance, we can provide you an exit plan, value your business, and help you increase the value of your company.

Read Full Interview

Jeff: The Morgan & Westfield Podcast, an ongoing series of conversations with Morgan & Westfield President Jacob Orosz. On this edition, who is Morgan & Westfield? And that’s exactly what we start by asking Jacob.

Jacob: Jeff, thanks for having me. We are business brokers and appraisers. Our one and only specialty—and that is our one and only specialty—is selling and valuing businesses. We have sold businesses in nearly every industry and in every state in the country. Personally, I’ve been in the industry for nearly two decades, and I started Morgan & Westfield almost 10 years ago. 

Jeff: You said something very interesting, your one and only specialty. Now, you've made that sound very important. Why is it so critical to be good at just that one thing?

Jacob: It's just too hard to be all things to all people. When I first got started in this almost 20 years ago, I tried to be all things to all people. I tried to do too many things at once. Selling a business is hard enough, let alone when you try to, let's say for example—and a lot of people do this—but let's say you're trying to sell residential real estate or commercial real estate, or you're doing leasing, or you’re a financial advisor, accountant or attorney, and on top of that you’re trying to sell businesses. It’s just way too difficult. 

We have found that by specializing, that has allowed us to become very focused and actually substantially increase the quality of what we do. When you do one thing over and over again, you tend to get very good at it.
 
We have found that by specializing, that has allowed us to become very focused and actually substantially increase the quality of what we do. When you do one thing over and over again, you tend to get very good at it.

Jeff: Let's learn a little bit more about the person who makes up Jacob Orosz. How did you get into this business, Jacob?

Jacob: Well, I come from a line of entrepreneurs in our family, and I worked in our family manufacturing business for several years. And I got into selling businesses almost 20 years ago when businesses were actually sold in the newspaper. And I toured the whole country, traveling from Florida to California looking for the top business brokerage company to work for. And I ended up working for one of the most successful, top-ranked offices in the country. They had a total of about 200 offices, and I worked for their top office. 

I actually ended up leaving because I saw that their model for selling a business was broken. Their platform was modeled after the process of selling residential real estate, where real estate agents work on a local level. They advertise houses in the newspaper, drive the buyers around in their car, and work on a straight commission. 

Now don't get me wrong, that model works very, very well for the real estate industry, but it's proven that it is just not that successful for the business brokerage industry. 

The International Business Broker's Association, or the IBBA, publishes an annual survey. And in that survey, they ask brokers what percentage of their listings they actually sell. That number has hovered around 30% to 40% for the last 10 years, so the proof is right there. The model that is currently being used is not the most successful model that could be used. And because it was a larger corporation I was working for, there really wasn't much I could do to improve the system. And I really wanted to change the industry, so I decided to start my own company.


Jeff: So with all of that in mind and with the things that you thought were broken at that larger corporation, what did you bring to your concept for Morgan & Westfield to make your business different? How is Morgan & Westfield different, and in fact better than the way that other brokers may be used to working?

Jacob: The biggest difference is that we have a large support staff, like accounting and law firms. Most brokers are solo, with no support staff at all. Or if it is an office with multiple agents, again, zero support staff. So what impact do you think that's going to have on quality and efficiency? Quality and efficiency go hand in hand. If you're not efficient, what impact is that going to have on cost? What's more efficient: a team of experts or a jack-of-all-trades who has to juggle it all and juggle it all for dozens of clients at the same time?


Jeff: I know that certainly with the companies that I have dealt with, with both personal- and business-related matters, I've always found it easier to work with an organization that did have individuals that handle different aspects of what I needed to be done, and so I agree with you completely. It does certainly seem that your particular business model is much more efficient than what we would typically be used to from traditional business brokers. 

Let's talk about any other differences or advantages that you can point to with Morgan & Westfield.

Jacob: Another major difference is that we cut out the number one investment of time in the deal, which is physically meeting with the buyers. We feel very strongly that this is unnecessary.
 
The biggest difference is that we have a large support staff, like accounting and law firms. Most brokers are solo, with no support staff at all... Another major difference is that we cut out the number one investment of time in the deal, which is physically meeting with the buyers. We feel very strongly that this is unnecessary.

Jeff: Why is it that you decided that it's not really important to meet with a customer face-to-face?

Jacob: Two reasons. Number one, the buyer feels more comfortable meeting with the seller directly, as opposed to having an experienced broker sit there observing and analyzing their every move. 

And number two, it's just not a technical conversation. The buyer wants to know about the business at this point, and who better to tell them than you, the owner. It's a simple meet-and-greet, ask-questions-about-the-business-type of conversation. The technical conversations happen once the buyer is prepared to make an offer, and that’s when we become involved again. 

There's really no need for us to be there at this point. And I've been to hundreds of these meetings earlier in my career, and we can provide the same level of value by being just a phone call away if we are needed. Not to mention that when my expertise was needed before, I usually wasn’t available because I was sitting at a meeting with another buyer. So, again, we've cut that step entirely out of the process.


Jeff: Why do you believe that other brokers do continue to do that, continue to meet with their clients and meet with the buyers?

Jacob: It's simple, one word: “commission.” They need to protect their commission. If they're not at those meetings—and it's happened a lot in the past—the buyer and the seller meet, the buyer asks, "Hey, what are you paying this broker?" Say it is 10%, 50 grand, 80 grand, whatever the cost is, and the conversation goes from there, and they find a way to cut the broker out. So once that has happened to a broker once, the broker then feels the need to be at all of those meetings and to babysit the transaction simply to protect their commission.
 
We model our fees after other professionals like accounting and law firms. We work on a fee basis with a small success fee on the backend of the transaction.

Jeff: And talking now, Jacob, about fees, do you structure your fees the same way? 

Jacob: We model our fees after other professionals like accounting and law firms. We work on a fee basis with a small success fee on the backend of the transaction.


Jeff: So tell us how the fees compare with those of traditional brokers. Are they competitive?

Jacob: Yes, they are. Let me give you a solid example. Say you sold a $500,000 business, you'd pay the average broker 10% to 12%, or $50,000 to $60,000. For us, it would typically range from 1% to 5% of the selling price, or $5,000 to $25,000. And this equals a savings of $25,000 to $55,000 on a half-million-dollar transaction. 


Jeff: Why are Morgan & Westfield’s fees so low?

Jacob: Two reasons. Number one: We're more efficient. Because we're more efficient, we spend less time on each deal. And because we work only by email and phone, we spend less time on each deal. Obviously, when you spend less time, you can charge a lower fee. 

Reason number two: Commission-based brokers need to pad their fees for the 60% to 70% of transactions that don't close. So if you end up selling your business and paying a broker $100,000, about $60,000 to $70,000 of that represents a fee that the broker's charging you as a pad just for the other transactions that they were working on that did not close. So for those two reasons alone, we've been able to significantly lower the fees that we charge our clients.


Jeff: As a business owner and someone who decides to work with you to sell my business, what am I paying for? How are those fees actually parsed out?

Jacob: Again, we are not primarily commission-based. We do have a small success fee on the backend of most deals to motivate us to close the deal. But, we work similar to other professional advisors, like attorneys and accountants. 

Once we meet with an owner, we prepare a proposal, and in that proposal is a list of the services that we recommend and the fees for each of those services. We have another show that will walk you through our proprietary process of selling a business.

Everything that we offer is optional. So the owner can go through that list and say, "You know what, I don't really think that we need a formal business appraisal." And that’s okay. If they want to meet with their attorney or accountant and discuss that, or bring them into the conversation with us, that would be fine as well. So they can help them oversee the process and the fees, and try to make the most intelligent decision possible.


Jeff: Give us some sense right now, if you could, in summary form, how the process works with Morgan & Westfield. So if I were to pick up the phone right now, give you a call, and tell you, "Jacob, I think I'm ready to sell my company. Let's go ahead and let's get started," what happens next?

Jacob: First, we would have a phone meeting with you, the owner. We discuss your objectives, your business, the industry, and dozens of other questions about your business. After that meeting, we would prepare a framework of our recommended steps. And no two transactions or businesses are the same. So every single one of those is customized. Next, you would review the process or framework, discuss it with your advisors if you want to, and then we can tweak the process if necessary.
 
First, we would have a phone meeting with you, the owner. We discuss your objectives, your business, the industry, and dozens of other questions about your business. After that meeting, we would prepare a framework of our recommended steps. And no two transactions or businesses are the same. So every single one of those is customized. Next you would review the process or framework, discuss it with your advisors if you want to, and then we can tweak the process if necessary.

Jeff: What about in those cases where you have a business owner who's not exactly sure if they're ready to sell right now. Is there anything that you're able to do to help them improve their company's value, help them get their business ready to sell?

Jacob: Absolutely. Number one we can do an exit strategy. And that's primarily a qualitative look at the company. We do look at it quantitatively as well. But it's primarily a qualitative review of hundreds of factors that we take into consideration before selling your business. Then we prepare a game plan, that’s typically 50+ pages, of steps you need to take to prepare your business for the sale. 

Secondly, we can value the business. That's helpful because let's say that you want to get 2 million for your business and we only think it's worth 1 million. Obviously, you shouldn't put it on the market now. And again, that is an impartial view of your business because we're not being paid a commission. That offers us the ability to give you an unbiased opinion on the value of your company. 

And then third, if your company isn't worth what you would sell it for, we can help you increase the value of your company.


Jeff: Jacob Orosz, thank you so much for joining us.

Jacob: Thank you, Jeff.


Jeff: And thank you for listening. I’m Jeff Allen.

 
 

Key Takeaways

  • For business buyers, an accountant and CPA are the two most important people one needs in their team to help with buying and validation processes. A broker may not be necessary for someone who is looking to buy a business. 
  • Employees' reactions to the change in ownership of a business may be mixed. Those who provide the business's services, the ones in the field, tend to be less concerned about changes, especially changes in their roles. Others who hold management positions are more prone to worry, as there might be changes in their usual way of doing things. 
  • For a new business owner, building good working relationships with employees is important because doing so will motivate them to provide the best possible service to customers.
  • In buying a business, being thorough in due diligence is paramount, as this will enable the new business owner to run the business more easily and effectively.  Business sellers, in turn, should prepare in advance the data and documents that buyers usually request to save time during due diligence.

Read Full Interview

From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk", brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.


Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk," we share real stories and information from business owners and industry experts that you and all small business owners can use to help you improve your company's value, sell your business successfully, and enjoy what life brings next.

On the program, we have talked in the past to a number of experts who are in the business of helping business owners transition, and in transition help them sell their companies. And they have given us a good taste for what buyers are looking for when they are out prospecting and seriously considering your company. But on today's edition of "Deal Talk," we're going to be speaking with one of the buyer's first-person perspective of what this particular buyer was looking for in the company that he ended up buying, what he has been able to do with his company in a short space of time, and just get a feel for what it is like from a buyer's perspective when they are going through the process of buying a business.

And what we hope to accomplish by doing this is so that obviously business owners can get a clearer understanding of what's going through a buyer's head. Number one, sellers understand what's going through a buyer's head, and number two, if you're considering buying a business yourself, maybe this will give you some sense of what it is like to go through the process before you've had a chance to go through it. That way, maybe you'll be able to form some questions on your own based on this conversation, some things that you should consider asking sellers eventually when you're in the market to buy a business. 

And to help us do all of this stuff today, we are talking with a gentleman who is the new and recent buyer of a business. As a matter of fact a Miracle Method franchisee now, and we've had a couple of folks from Miracle Method join us on this program. His name is Mike Rabinovich. Mike, I want to thank you for your time and welcome you to "Deal Talk," sir. It's good to have you.

Mike: Thank you for having me.


Jeff: Mike, you have purchased a business that we have featured on this program in the past. We spoke with a gentleman who is the former owner, in fact now, of the very location that you own and operate. That gentleman, Dan Ness, we spoke with him some time ago on "Deal Talk" and now you own that same location.

Mike: That's right. 

I think due diligence is extremely important, and both a CPA and a lawyer [are] the two primary people who would help with the process.

Jeff: I was wondering if you can share with us, Mike, what factors made you decide to buy this specific location from Dan Ness and this specific business, Miracle Method?

Mike: The location was pretty simple. We moved here to Portland, and I was looking to settle down, and I was looking for a business in Portland area. I was tied to a location. When I started looking for a business to buy, I initially started looking for manufacturing businesses because that's something that I was more comfortable with. 

But as I was looking, it's a fairly long and complex process looking for a business. There are not very many for sale, and the ones that are for sale I was looking for the right business. And as I was digging through a pile of businesses for sale, this one appeared on my screen. There are a few things that I really liked about it. I thought the buyer was selling it for the right reason. The business was well-established and well-known in the community, and I really like the product. So those are the main things that drove me eventually to purchase the business.


Jeff: How long was the process for you? Once you arrived in Portland, did you start looking for opportunities before you arrived in town, or was it after you arrived in Portland that you wanted to get a lay of the land and see what's available out there before you finally started to zero in on your target?

Mike: It was after I arrived. I came here and then within about three or four months, I started looking. I had a corporate job before that. I have plenty of time to look. I knew I wanted to buy a business, but I knew I could take my time looking for one. And once I started looking, I think it took about six to seven months until I stumbled upon Miracle Method.


Jeff: Mike, for those people who are tuning in for the very first time who may not know what Miracle Method is and what it does, tell us a little bit about your company and what you offer your customers?

Mike: What Miracle Method does is refinish surfaces. A lot of our work is tubs, showers, tile countertops, and recently a more advanced commercial project. We do refinish concrete countertops, concrete floors. But essentially, any hard surfaces, instead of doing a demolition and put new ones in, we'll refinish them and make them look and feel new.


Jeff: And the advantage here to a lot of people and I think many customers are interested in this is the cost savings over demoing an existing countertop or an existing tub and replacing with brand new. You provide a cost-effective option, correct?

Mike: Exactly. Not just cost but also convenience and time. A lot of people don't want to leave for a demolition process of their house or their business. They would rather have it refinished, done in two or three days, especially if the business, as we see it, is very attractive. They want to get back to doing business. They don't want to shut down for two weeks for a complete remodel.


Jeff: Mike, let me ask you. You had a choice. You could have purchased an independently owned business. You ended up though buying an existing franchise instead of an independent business. Why did you decide to select an existing franchise?

Mike: To be honest with you, initially I was a little apprehensive about the franchise. I did not know much about them, but my perception was that a franchise would dictate a lot of what I do and how I do it. And once I started investigating, I actually like the franchise model. And now, I like it even more that I have been a part of it. 

The reason I like it is it gives me a lot of the support network that otherwise I would not have. If I have a question about something, there are other franchisees I can go to and ask them. And somebody always has an answer for me. They help with purchasing. They negotiate national contracts, so I don't have to. There is a lot more negotiating power when you do the franchise. 

From the back-office support, anywhere between constructing a website and doing national promotions, all of those things become a lot easier and more cost-effective when you share the cross, 144 franchisees or however many we have right now.


Jeff: And we've heard similar explanations given from others who also elected to go the franchise route and simply because you have that tremendous support mechanism. You've got it not only in support from, the quality of support you get from corporate but also in the quantity of support, the number of individuals who are there to help you out along the way and in that chain.

When you were ready to get started with the buying process, which professionals did you consult during the process who ended up being most helpful to you?

Mike: I think when I started out, a lot of the background work I've done myself. Once I did not go through a broker directly, I kind of looked online. I contacted a couple of brokers initially, and none of them ended up being exceptionally useful. But when I found this franchise, the main thing was an accountant and a lawyer. Those are the two professionals who helped me go through the steps of the process as well as the validation process.


Jeff: Is that something that you would advise other potential business buyers to do in terms of taking the steps that you did in order to ensure a smooth process?

Mike: Absolutely. I think due diligence is extremely important, and both a CPA and a lawyer, the two primary people who would help with the process.


Jeff: Mike, how long did the process take, the entire buying process?

Mike: It took us about seven months, from the time that I found this business, which was in about April, and we ended up closing at the end of the year, which was more of a convenient thing because the calendar year and fiscal year align. So it was easier. We could probably close a little sooner.

I thought we could do it a little quicker. My expectation was probably three to four months to close, but it took longer. Due diligence took a little longer. Financing took a little longer. Basically, everything took a little longer than I thought it would, but it didn't take too much longer. 


Jeff: Did the people that you worked with and the seller of the company too, were there any concerns or was there anything that they thought could actually contribute to the length of time before things were done, maybe some things that were just entirely out of your control that nobody really expected?

Mike: No, I don't think so. I think everything was... And again, not that it was really delayed. Most things took about as long as they should take. From my perspective, I expected to see a lot more data. I'm a very mathematical person, so I kept asking for more data. 

The previous ownership I think they were running business more by the field than data-driven. And when I asked for data that seemed obvious to me, they just did not have it ready. So it took a little time for them to dig up the data when they could find it. And then it would take for me some more time to analyze what they actually provided.


Jeff: And by the way, Mike, one thing I should probably point to those people who have listened to "Deal Talk" for some time, we've mentioned this before, the fact that it is very common to run into the situation that you yourself found out in working with the previous owner that most business owners do kind of operate that way. 

To say it's “by the seat of your pants” is not accurate, but it is certainly one of those things where you said yourself, “more by feel.” Where the data is not always the most important thing, the analytics of it all. Those types of things oftentimes end up following well down the line, and they present themselves in that due diligence. 

And I'd like to camp out on that for just a second, talking about the due diligence, and we've already touched on that just a little bit. As far as the due diligence process itself, were there any significant challenges that you came across that maybe you didn't necessarily expect and that you feel now, as a business owner yourself, you will be better prepared for, so that when you get ready to sell, whenever that might be, that you'll be able to avoid those issues yourself in your next business transaction?

Mike: There was nothing very difficult, there was nothing critical; otherwise, we probably would not be able to close. But I feel like if our seller took a little longer to dig through data that they have and prepare it... For example, because this is a franchise and there are specific territories that I have to buy, one of the questions that I had, “how much business do you do in each one of your territories?” 

And to answer this question probably took about a month and a half because they did not have the data structured in a way that this was easy to calculate or easy to extract. Now that I own this business, because of the way I maintain my data, I can give you that answer probably within five minutes. 

And to them, it wasn't very important because the way their territories were, they've had it forever, and they probably did not care very much. But as a buyer, I care because I needed to figure out which territory I should assume, which territories I should not assume, does it make sense the way the territories I'm going to structure, do I need to negotiate something with the franchise master. That probably took the longest just because the data wasn't there and it wasn't available.


Jeff: We're talking with Mike Rabinovich. He is the new owner of the Miracle Method franchise in Portland, Oregon. And we're talking to him about his experience in purchasing this company. In fact, from a former "Deal Talk" guest who also ran it very successfully, by the way, Mr. Dan Ness. And we've heard that Dan has quite a name in that business and with that company. He'd been with them for such a long time. And now Mike, of course, doing very well there himself. Our conversation with Mike will continue when "Deal Talk" resumes right after this.

If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on the future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message, include your name, title, area of specialty, and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com. 
Selling your business may be the most important business transaction you'll ever undertake, so don't go it alone. Work with an organization that has made it their business to sell businesses, and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield, we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy, to preparing a comprehensive appraisal and locating the right buyers. 

Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.

If you have any questions about any of the topics you've heard us discuss here on "Deal Talk," or if you would simply like to give us your feedback, we'd love to hear from you, all you have to do is send us an email to dealtalk@morganandwestfield.com. Once again that's dealtalk@morganandwestfield.com. You can also make a phone call and leave us a message at 888-693-7834. Again, that's 888-693-7834 extension 350.

My name is Jeff Allen, pleased to be joined on this edition of "Deal Talk" by Mr. Mike Rabinovich, and he is the owner of the Miracle Method franchise in Portland, Oregon. And we're talking a little bit about his experience buying a business. 

You've heard us talk on this show to a number of experts, people who are in the business of helping individuals buy companies, and they had been able to share with us what goes through a business owner's mind and what they're looking for. Well, now we're getting it from a truly first-person's perspective here, Mike as the business owner, what it was that he went through, what it was that he was thinking, what was important to him. And he's sharing with us the experience.

Right now, Mike, what I'd like to do is I'd really be interested in talking to you about the people, the human element, the folks in the background who do a lot of the work for the company. Those are the folks who get out into the trucks and the cars. They go out in their vehicles, they go out into the field, they do the work. You obviously had a chance to gauge the employees’ reactions when they found out that you were the new owner of the business. Just give us a glimpse into what that was like from your eyes, seeing their reactions, what those reactions were, and how you were able to deal with them.

Mike: I would say the reaction was definitely mixed. I would say from the technicians' perspective, the guys who actually go and do the work, they probably have a little bit less of a reaction because they knew that they were the ones delivering work, and there would probably not be a huge change for them.

Office personnel knew there would be a big change for them, and some of them were excited, and some of them were scared. So that was essentially the mix of people. We had a general manager who was here for, I think, 25 or 27 years with the previous owner, and she was probably the one that was the most nervous about changes because she had just been used to running the business in a specific way. The rest of the people in the office seemed more excited about the changes than were nervous about them.


Jeff: And that obviously makes you feel, I think and correct me if I'm wrong, Mike, a little bit more comfortable because you have to do a little bit less, say, coddling or maybe you don't need to provide as much assurance as some individuals might where they have an environment where all of the employees, all the staff members are really concerned and really feel badly about the changes that are taking place. And let's face it, sometimes you hear some of those stories. There is such a change in culture from one owner to the next. But here you are, you walk into a situation where you were able to take and you were able to bring people into the fold and make them feel comfortable.

Let me ask you then now, Mike, we've had a chance to go through, the business has changed hands, you've been at it now for several months and with this particular location. Let's find out how you're performing and how you're doing based on what you've been able to see so far from the numbers and from the business that you've been able to bring in. How is Miracle Method Portland performing now?

Mike: We've been doing extremely well. It's been just over a year, in fact, it's been 13 months since I bought it. Last year, our revenue increased by 47% compared with the year before. It was significant. Our net has basically doubled. 


Jeff: Wow, unbelievable. And so you've really got to be feeling tremendously confident about your operation, and the corporate office has got to be pleased with how everything's going as well.

Mike: Oh yeah, absolutely. I'm very happy with the way things worked out. It exceeded my expectations. I expected we would grow, and I expected we would find some cost savings. It just ended up being much better than I even projected.

When you own a small business, your employees or your team members really look up to you, and you need to be able to connect to them. You need to make sure that they're comfortable with you. That's the only way that they're going to perform well. That's the only way that they're going to give their best to work on your business.

Jeff: Do you essentially have the same number of people, the same number of personnel on board now that you had when you first started? Or have you been able to grow the team at all to this point, or is that still in the works?

Mike: We grew the team a little bit. We added a few people. When I took over, I have 13 employees and we're up to 17 right now. And we're always hiring. As we are growing, and I know this year I'm projecting another 20% to 25% growth. I need to hire more employees, both office employees as well as technicians.


Jeff: This is outstanding. Congratulations so far on the early returns. It just sounds like everything has been working very, very favorably for you, Mike Rabinovich. Would you consider that by now, it's been about 13 months, you say. Is this still a transition period for the business, or right now the business has its legs underneath it, you're in full control, and you consider this pretty much in its new evolutionary phase, and the transition period is all entirely over with?

Mike: I don't think the transition period is over yet. I think we have picked a lot of low-hanging fruits in the way of business improvement, but it's not fully running the way I like it to run. And there are quite a few changes that are forthcoming that will alter the business pretty significantly. So probably by the end of this year is when I would consider the transition phase complete.


Jeff: What are your goals, what are your objectives, what kinds of improvements are you looking to make?

Mike: Both from a sales perspective, I'm looking at essentially more growth and specifically targeting a few of the sectors that have been underdeveloped, specifically hospitals is one place where we haven't done as much work as we should, and so is universities. 

Then from a quality perspective, we're looking to improve our quality, which has been really good compared to our competition, but there are a few changes that need to be made operationally to make it even better. And as well as software, we are looking to replace our existing software system in the next couple of months. And that will give us quite a few tools for customer relationship management as well as cloud to track in as well as purchasing.


Jeff: Mike Rabinovich is the owner of the Portland area franchise of Miracle Method. Is there anything that you can offer in the form of advice to either business sellers or business buyers that would allow them with their transactions, no matter what kind of business or industries that they're involved in, to help them make the transition process go more smoothly? You've had a chance to participate in it. You've lived it. Is there anything at all that people can do to ensure that the transition moves as smoothly as it possibly can to help both the buyer and seller reach their goals?

Mike: I would say spend as much time as you need for due diligence. Bring in people who you trust to help you review documents, review numbers, review contracts, talk to customers, talk to suppliers. Spend time on that because the more time you spend doing that, the easier it is going to be to run the business once you actually take it over.


Jeff: Mike, I'd also like to ask you too, if you could, because you're such a down-to-earth-sounding guy. We haven't met face to face, but I can tell just by chatting with you that you're a pretty reasonable guy to deal with and easygoing as it can be for a business owner to be that way. 

Are there any characteristics or traits that you can think of, or any particular qualities in general terms, that a business buyer should have when they get ready to engage in the process of buying their own business? Maybe it's for the first time, as a matter of fact. What should business owners have inside them to help them get through the process smoothly and get to where they want to go?

Mike: I think a big part, from a personality perspective, is the ability to connect with your employees. Most business buyers, so this is their first business, they probably have been managers or organizational leaders of some sort before, but they were never the only ones making decisions. When you own a small business, your employees or your team members really look up to you, and you need to be able to connect to them. You need to make sure that they're comfortable with you. That's the only way that they're going to perform well. That's the only way that they're going to give their best to work on your business.


Jeff: This has just been an absolutely fascinating conversation. I've really enjoyed it a lot, Mike, and I appreciate you taking the time. And what I'd like to do now is offer you the opportunity to provide your contact information for those people who obviously would like to do some business with you and would like you to come on out and take a look at what they have, to find out about how Miracle Method can help resurface and bring back to life maybe a counter top, or a tub, or any other surfaces, maybe floor or whatever they have in their business or their residence, number one. 

And number two, if you don't mind also sharing your number for those business owners or those people who are looking to buy a business who might want to just tickle your brain a little bit to get some information from you, some of your input in terms of expertise that you now have as a business buyer to help them in case they might be looking for tips on how to buy a business themselves.

Mike: Absolutely. They can always call us at 503-256-3405. I'm mostly in the office, and if I'm not, the office staff will always relay a message to me. Or they can email at portland@miraclemethod.com.


Jeff: Very good. Again, Mike Rabinovich, I appreciate all of your time, really a great story, and I thank you so much for taking time out of your busy day today to talk with us a little bit about your experience and just share your expertise as a business buyer. And I do wish you much success with your location there in Miracle Method in Portland and continued success.

Mike: Thank you so much, Jeff. Thank you for having me.


Jeff: That's Mike Rabinovich. He is the owner/operator of Miracle Method, the franchise located in Portland, Oregon. Again, I hope that you enjoyed the conversation. It really is nice to talk to the business owners themselves, to learn about what it was that they went through, what they were thinking, and the process and how they saw it, and now how they're getting along and how their companies are doing. 

And speaking of how companies are doing, let us know how we're doing. Again, we'd love to hear from you and hear from you more often. Send us comments, compliments, and criticisms to dealtalk@morganandwestfield.com. 

"Deal Talk" is brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com or by calling 888-693-7834. I'm Jeff Allen, again, thanks so much for listening. Here's to your success.

While we take reasonable care to select recognized experts for our podcasts, please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.

Key Takeaways

Essential components of a successful branding in a new market:
  • Understand who your target audience is.  Are you targeting businesses (B2B) or consumers (B2C)? Don’t go to an international arena or promote in a certain geographical area without clearly understanding who you’re talking to.
  • Understand how the market behaves.  How do people make decisions in those markets? Learn about the market through research, through your partners or a consultant.
  • Clearly communicate your message. You might be targeting the right audience in the right place, but without clarity of message, you will fail.
  • Employ a multi-channel communication. Use online and social media, besides physical communication. Build a network of strategic alliances that are useful to your business.
Effective and affordable ways to promote a brand in a new market:
  • Participating in trade shows that allow companies not only to promote their brands but also to learn about the market – the behaviour of the competition, the tricks of the trade, among others.  
  • Form strategic alliances. Find an alliance with the supplier, client or with a similar company that can help you promote your brand.
  • Sponsor a small, meaningful event in one of your target markets.

Read Full Interview

Jeff: Thinking of expanding your business globally? Your marketing efforts need extra attention in this case, specifically if you're looking to attract prospective customers to your brand … you've come to the right place.
 
From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk," brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.
 


Jeff: Hello and welcome back to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk" it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.
 
One area of business that I really enjoy discussing and we don't talk enough about here on "Deal Talk" is marketing, marketing communications, and understanding what you need to do to put together an effective marketing strategy. If you have the goal in mind of taking your business to the global marketplace. Maybe you're strictly domestic where you are. Whether you are listening from the United States or some other country where you can hear "Deal Talk" online, it's important to know that you really need to be very focused on your marketing efforts, and that really includes a major concentration on your brand, making sure that you can create the kind of brand awareness and the kind of trust that goes along with that. 
 
And I have somebody joining us today who can speak a lot to this issue. Joining me is a gentleman who is very qualified in this area. His name is Axel Hofmann. He's the Managing Director of RED International. Mr. Hofmann is chatting with us today via Skype from his home and office in Dubai, U.A.E. Axel Hofmann, sir, welcome to "Deal Talk." I'm so glad to have you.
 
Axel: Thank you very much, Jeff. I am honored to be part of your program. I think this is great. And I really hope I can add some value to your audience.
 

International trade shows are an excellent opportunity to learn about the market — because this is a marketplace. This is like going to a traditional marketplace 2,000 years ago when all the traders were in the same place.


Jeff: Well, I wouldn't have had you on if I didn't think you could, Axel. I appreciate those kind remarks to open. Let's find out a little bit about you to start the program. RED International, tell us a little bit about your organization and what you do.
 
Axel: OK, great. I've been managing RED International for the last two years. And just as a quick background, as you know, I was a banker, and I've been a banker for 25 years. Two years ago, I discovered this gem of a company. I decided to invest in it. And today I am a major shareholder and Managing Director of RED International. 
 
As you mentioned branding, we work a lot with our clients’ branding basically in three areas. We work with exhibitions. We work in interior solutions and we work in event management. We have a portfolio of clients from Europe and from the Middle East. And we deliver solutions to our clients in the form of stand designs and production of stands all over the Middle East. 
 
And like I said, although this is a little bit less related to branding, but we always touch the clients’ brand when we do interiors and when we manage events for them.
 


Jeff: I know that you feel very strongly when you work with companies about making certain that when the work is all done, that your team does, that your client's brand has been amplified to a level that will bring them success in their business. And that's why I wanted to talk with you today.
 
For small businesses, Axel, that are looking to grow beyond their borders, internationally, just how important is it that we take the necessary time for promotion of the corporate brand, not just simply our products but of the brand itself?
 
Axel: In my view, Jeff, this is extremely important. The international market is a very extremely competitive place, and, of course, many local markets as well. But it's become more and more competitive because as many new markets are coming out and are trying to attract new companies and new players, there are companies all over the globe that are trying to take advantage of that. 
 
Being in such a competitive place, how do you expect to do business or to try to attract any kind of attention if your brand is not recognized? Because once you try to enter new markets, you will need to find alliances, partnerships, clients, suppliers. How do you expect people to support you if you are nobody, if you don't exist?
 
If people don't recognize your brand, it will be very difficult to do any kind of business. You will struggle to find any representatives, any distributors, and even it will be difficult to find clients.
 

I believe you need to spell out very clearly — first to yourself, to your team — what are you trying to communicate? Because you might be targeting the right audience in the right place, understand the people, but if you don't communicate clearly your brand, you may fail.


Jeff: No matter how outstanding your product or service is, Axel. And we've had Axel on today because in Dubai, of course, really I consider it kind of the global hub of this new capitalism evolution. You are in the middle of all of this and you have a chance to see brands come and brands go. And with your financial background I'm just kind of wondering, and your exposure to so many companies and businesses that you've seen. And of course, in your past with Citigroup as a vice president there, and all the other financial experience that you have.
 
Is it possible that a company can actually build its value in terms of real dollars now with a well-constructed brand awareness campaign that aims at helping that company draw the attention of prospective clients in foreign markets outside of its own domestic operations?
 
Axel: Absolutely, Jeff. First of all, let me just emphasize what you've said. Dubai is a fascinating place. A lot of things happen here. They're doing local authorities a huge effort to be number one in everything. So, yes, on that front. 
 
And regarding the value of the company, absolutely. I think one thing you need to understand... We all understand that the value of the company is closely linked to the number of clients and the value of those clients, the value that these clients can bring to your company. There are many factors, but your portfolio is one of the major factors in the evaluation of your company. 
 
Let me give you an example of another factor that I believe is very critical. The distribution of your clients. Let's say that you have 100 clients in your company. And all 100 clients are concentrated into one single place, into one single city. 
 
Let's think of a second scenario in which those same 100 clients are distributed around the world. Clearly, and I think this makes sense, in the second case the value of your company will be higher just because the potential for growth of that portfolio will be higher. It's the same 100 clients, it's a similar value portfolio, but the potential is higher, automatically the value of your company will be higher. I think this is extremely important. You need to work on this concept to develop new markets. And automatically that will bring you value to your company. 
 

Define clearly what is your goal in the [trade] show, and then make sure you select the right show. Once you do, the benefits are tremendous.


Jeff: You know, Axel, I kind of think about it like I would a financial portfolio. For example, not having all of your eggs in one basket, because we know that sometimes when the market is having some difficulties, the stock market, it's always good to have your finances divided up to other asset classes that might benefit when perhaps the economy may not be so good or the market may be weak in equities. Maybe you're talking about having your portfolio maybe cut more into real estate, or bonds, or something like that, or commodities. You're kind of trying to protect yourself against the risk of losing all that money in just having your finances or investments in stocks.
 
The same is true for your business, where if your clients are spread out into other countries, let's face it, recession is not always necessarily felt throughout the world at the same time. So while times might be difficult here in the United States, for example, you may have investors or clients, for example, customers in China, or India, or any other country, or Europe perhaps, where the recession is not being felt at all, or not to such a great extent. And you could still be doing very, very well in terms of generating revenue and sales in those countries while maybe your sales are lagging in the U.S. or domestically. So I think you bring up a very, very good point.
 
True or False, Axel, let me ask you. A manufacturer can essentially build its brand organically by simply entering a foreign market and selling a new, cutting-edge product without the need for a comprehensive advertising strategy, true or false?
 
Axel: Well, let me tell you, this is a yes and no answer in my view. Because advertising and promotion go hand in hand. What you're trying to do is you're trying to develop the value of your brand. Because you're saying once you are into a foreign market you can grow organically. The question is how do you access that market without making an effort to make your brand be recognized? 
 


Jeff: A very good point.
 
Axel: Either you have to do advertising, you have to do promotion, you have to do something to make the brand be recognized. And by the way, going back just for a second one step to what you said before, diversification is one of the factors, because your future sales will be more predictable. 
 
But on the other hand, brand recognition is also very important. If I only have a presence in one city, my city, my brand recognition will be only there. If I have one client in each of the 100 cities around the world, there's at least a little bit of a brand recognition in 100 cities. So you're building a brand when you build new markets.
 


Jeff: Very good. Understood, and I appreciate that point. Why is it that some small businesses don't spend enough time, energy and money on promoting their brand to create awareness and drive interest, do you think, Axel?
 
Axel: First of all, as you know, the SME market, and especially the small companies, are extremely cash flow sensitive. And I think they should be, and they should be extremely cautious when they decide where to invest the marketing money. 
 
This is correct. Many times, they are a bit concerned. They're not sure about where to spend and how to spend. Many of them just stick with what they know, the local city, the local place. They don't do enough to expand the brand. I have seen companies, or, for example, when they do, they make a mistake. So, the second time they say, "No, I'm not going to invest any more money." 
 
I have seen small companies investing money, for example, in the wrong exhibition. Then they fail in the exhibition, they don't do well, and they say, "I'm going to stick to what I know. I'm going to stay in my own place, and I'm not going to invest anymore." I think sometimes they're conservative and sometimes they make mistakes and they just back off simply.
 


Jeff: Axel Hofmann, Managing Director of RED International is with me today on "Deal Talk" talking about the importance of branding and focusing on your branding efforts particularly when you are taking your company globally into global markets. 
 
As someone who works, Axel, with so many successful international brands from all over the world, you've had the chance to see what really works. What do you believe are some of the most essential components that are necessary for any successful branding campaign to be effective?
 
Axel: First of all, you need to understand who is your target audience, what is your market. We talk a lot about target market when we talk about marketing. When you go into an international arena, when you want to decide where to do your promotions, etc., you need to understand who you're talking to.
 
Are you in a business that is B2B? Is it B2C? Are you trying to reach people from a certain geographical area? You need to be very, very clearly aware of that before you make any decision to go into any markets because the markets behave differently. The target market is not necessarily the same as in your local place. So you need to identify who is your target audience.
 
Then you need to understand, "If my decision is to go into market A or B, I need to understand how these markets behave. Let's make sure that I understand those markets before I jump into making any kind of investment, any kind of commitment." How do people make decisions in those markets? What are the preferences of the final consumers in this new market? You need to understand that. So that would be my second point.
 
Also, I believe you need to spell out very clearly, first to yourself, to your team, what you are trying to communicate. Because you might be targeting the right audience in the right place, understand the people, but if you don't communicate clearly your brand, you may fail. Just to make the point clear, Jeff, you are in an exhibition, you are offering your product in one stand and the people surrounding you are offering similar products. If the communication from these people around you is more clear, is better than yours, these people might be doing a great business while you're not doing anything.
 
This is very clear, one factor. Also you need to have a multi-channel communication. Nowadays this is something that is a global truth, a physical communication as well as on the web, social media, through your partners, etc. And I think a very important point for me is to build strategic alliances. Don't try to go alone. You may of course, but my recommendation is build a good network of strategic alliances, not anyone, but alliances that are useful to your business.
 

If people don't recognize your brand, it will be very difficult to do any kind of business. You will struggle to find any representatives, any distributors, and even it will be difficult to find clients.


Jeff: Axel, I know that one of the things that you do provide, one of the services you provide is a consultation with businesses. You're a business coach, but you're also a business consultant. So you do work with companies to try to help them grow their organizations, find out what they need to do to drive value, and whatever it is that they need to do to expand. 
 
You had touched on something I thought was very interesting, and that is clarity of communication. You could be surrounded by a number of companies that offer similar products and services. It's those companies that communicate more clearly. 
 
How important is it, Axel, that a company that is interested in entering a market that it previously is unfamiliar with that they speak with a consultant or work with someone perhaps from that area, with experience in that area to craft their messages in such a way that they appeal to that marketplace, so that they can communicate more clearly with that target audience?
 
Axel: I think, to put it clearly, it's a very good idea. I think the point is you need to understand the market through service, though research, through partners, through a consultant. There are many ways. I cannot tell you the only way is through a consultant. I think it would be a little bit unfair. 
 
You can go by participating in an exhibition or in a trade fair. You're going to learn a lot about the local business. Because you have to travel to that place, you have to stay at a hotel, you will have to move around, learn a little bit about the local culture, the local language. When you are in the fair you are going to interact with other people. There are many ways.
 
One way of course is to talk to a consultant, somebody who is very familiar with the market. In my case my advantage is that I have experience across different industries. But of course I think at the end of the day the point is you need to understand where you're getting into, what is this market about.
 


Jeff: Basically, what we're talking about is the fact that your advertising or marketing message, which may be very, very effective wherever it is that you are, where you do business domestically, is not going to be as effective overseas perhaps. Axel, I appreciate your expertise and the information that you shared there that a consultant wouldn't necessarily be the end all, be all solution for helping you enter a market. But very important suggestions that you've made there and we appreciate that.
 
Axel Hofmann, Managing Director of RED International talking with me about the importance of focusing your branding message, your branding efforts when you are looking at entering foreign markets. And we're going to continue our conversation when "Deal Talk" returns right after this.
 
If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on a future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com
Selling your business may be the most important business transaction you'll ever undertake, so don't go it alone. Work with an organization that has made it their business to sell businesses and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy, to preparing a comprehensive appraisal, and locating the right buyers. 
 
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
Are you a professional adviser, accountant, attorney or a wealth manager, or do you provide other professional services? Contact us today to see how our reliance program can help you increase your firm's revenues. Call Morgan & Westfield at 888-693-7834. That's 888-693-7834.
 


Jeff: Any questions about the topics you hear us discuss on "Deal Talk," we would appreciate it if you would ask. Simply leave your questions on our Ask "Deal Talk" info line at 888-693-7834 extension 350. We have instructions there for you to follow to leave your questions. We will reach out to one of our guest experts to answer your question and we will provide their taped response to your question on a future edition of "Deal Talk." So once again, Ask "Deal Talk" at 888-693-7834 extension 350.
 
My name is Jeff Allen, Axel Hofmann on the other end of our Skype line today. He's Managing Director of RED International talking about the importance of branding and properly branding for your company to enter international markets successfully.
 
For those with fairly limited budgets, Axel, those who want to grow their brand internationally, give us some examples of maybe some effective or affordable ways to begin to introduce your brand to offshore prospects for the first time. What would you recommend?
 
Axel: I have seen many small companies taking the first step into international markets. One of the ways they do it is by, for example, participating in trade shows, but as part of a country pavilion. As you know the U.S. is very active in all the internationally significant trade shows, as are many other countries as well. So to have a small booth in that pavilion is not very expensive. You are able to learn a lot from the exhibition, and you can present your products as well.
 
You can also share a stand with a partner. I have seen, for example, companies that are in the same industry, for example, auto parts, but one is providing brake parts, the other one is providing filters. And they get together and they share the cost of a small stand. That would be another idea. 
 
Another idea could be to close strategic alliances. I am a very strong believer in strategic alliances. I apply it all the time for my own business. So I suggest that you have to find an alliance with the supplier, with a client, or with another similar company that will help you in the promotion of your brand. 
 
And finally if you want to invest a little bit of money as a small company, you may sponsor a small event in one of your target markets. So let's say that you want to enter the Middle East and you come to Dubai. You sponsor a small event here or you go to China, or Hong Kong, wherever. This event has to be somehow related to your industry. It has to be meaningful, and you may sponsor that.
 
I think these are some of the ideas. You can start small. But these ideas will help you promote the brand and learn about the market at the same time.
 


Jeff: Axel, we hear different messages from different people, different comments regarding trade shows. And most of us, I think, have been to a trade show or two, and sometimes more than that. Or have certainly worked with those who have been to trade shows and made that a very important part of their yearly marketing strategy, regardless of whether their business is domestic or international.
 
Kind of interested in knowing how and why these particular events can be so useful in helping a company build its brand. I can tell you that on the negative side, messages that I've heard from some people is that, "Well, I don't sell a lot of products there." But I think that we're kind of being maybe a little bit narrow minded in how these events can actually be most useful. These are not simply events that are used and designed to help business owners sell their goods and services necessarily there at the event specifically. But tell us how in fact they can be successful and why they're so successful for so many companies all over the world.
 
Axel: I think the international trade shows are an excellent opportunity to learn about the market. Because this is a marketplace. This is like going to a traditional marketplace 2,000 years ago when all the traders were in the same place. You're going to learn about the products from your competition. You're going to learn about the behavior of your target market. You're going to learn about the tricks of the trade, what people are doing around there. I think this is a fantastic place. This is a fantastic way of showcasing your brand among the big brands in the business. So I think it has a number of advantages. 
 
On the negative side or not the negative side, on the warning side, the common mistakes that people do is that sometimes they go to the wrong show. If I participate in the wrong show … for example, I helped an Italian client in the linen industry, and they had very high-end, very high quality linen, like bed sheets, towels, and those kind of things. They participated in an interior exhibition where the target market and the target audience was the final consumer, where people coming to a trade show to buy these materials. While he was trying to find distributors in the Middle East.
 
So first of all define clearly what is your goal in the show, and then make sure you select the right show. Once you do, the benefits are tremendous, Jeff. 
 


Jeff: You had a situation there where someone was interested more in a B2B relationship, and they entered an exhibition or an event that was more business to consumer, and they really lost out on the opportunity to showcase their products in front of the proper audience. And I think the same thing could be said, too, with understanding the proper industries and business sectors to market to or to present your products or services to.
 
It's all about getting in front of these people, getting your name, demonstrating or having your products that perhaps they can touch or feel, having the use of video and multimedia also perhaps in those event spaces, those exhibition booths and so forth. And I've been to some of these things. You've got thousands of people who are coming through every day, and they are not bringing their checkbooks or their credit cards there with them necessarily to place an order. They're collecting business cards, they're collecting your information that they're going to contact you later on.
 
Do you believe that some companies may fall prey to thinking too big in trying to appeal to the worldwide marketplace all at one time?
 
Axel: There's no harm in thinking big. But before you jump into action, you have to understand whether you are ready for it. So you need to evaluate the readiness of your company to go into international markets. This is not easy. Do you have an offering that is competitive? Do you have the production volume capacity? Is your pricing competitive in the market that you plan to enter? Do you have the licenses, the permits, some kind of legal clearance, etc.?
 
You have to do an exercise of readiness. And that exercise I think is fantastic because the same exercise will bring you some questions that you need to answer that will help you get ready as well. Then of course once you decide that you're ready, then you can think big. And of course you have to learn, every time you go into a new market you have to learn how to get into that particular market, and that's a separate process. So I would say think big first, set your goals, set your strategy, and then evaluate your readiness to go for it.
 


Jeff: For those business owners who are looking and thinking about taking their business to the global marketplace and they're looking for extra advice that may be specific to their organization, they're also perhaps thinking about getting involved in a trade show perhaps offshore, they're looking at going someplace else, whether that be Dubai or that be a location in Europe perhaps, or a place in Asia where they're interested in penetrating and finding their next global clients, how can they connect with you?
 
Axel: It would be my pleasure. They can contact me via email at axel@redexdubai.com. They can also send a note via our website, www.redexdubai.com, and it will be our pleasure to respond to any inquiry, and to work together to help any of your audience.
 


Jeff: And it has been my pleasure, Axel Hofmann, having you on the program today. Thank you so much for joining us from Dubai here on "Deal Talk." 
 
Axel: Thank you, Jeff.
 


Jeff: Axel Hofmann, Managing Director, RED International has joined us today and I hope that you enjoyed the program. Let us know how we're doing. We'd love to hear more from you. Send us your comments, compliments and criticisms to dealtalk@morganandwestfield.com. Once again, that's dealtalk@morganandwestfield.com.
 
"Deal Talk" is brought to you by Morgan & Westfield, a nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com or by calling 888-693-7834. That's 888-693-7834. I'm Jeff Allen, looking forward to joining you again next time. Here's to your success.
 

While we take reasonable care to select recognized experts for our podcasts please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.

Key Takeaways

  • A business broker will qualify buyers and ensure they have the financial capability to buy the business.
  • When going to sell their business, an owner needs to make sure that all of their agreements are up-to-date, including leases or contracts with suppliers, and get the business running as best they can.
  • It is important to remain in touch with your customers beyond the time of the transaction.
  • Confidentiality is critical; a business broker needs to create a platform where a seller can comfortably speak with the business broker about their business in detail without worrying about where the information is going to go. 

Read Full Interview

Jeff: Business brokers aren't merely in the business of selling your company and making a quick dollar. In fact, if you want to know how valuable a business broker can be to the value of your company, you've come to the right place.
 
From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk," brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.
 

Jeff: Welcome to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk" it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.
 
If you're tuning in to get some guidance, some tips, some information on how you might be able to today improve the value of your company, I am talking with someone today on our program who is in the business of helping his clients do just that. And who knows, maybe somewhere down the line you might be able to get in touch with him. We're going to provide his contact information later about your particular situation, if you're interested in selling your business that is. His name is Nelson Bayford, and Nelson is a business broker and commercial specialist with Business Finders Canada. And what we want to talk to Nelson about today is how he works with people, and really kind of get his general thoughts on how business brokers can best help their clients, and that is you. If you've got a business for sale and you're looking for a way to elevate its value. 
 
We're out to prove today that business brokers are far more than those individuals that you would go to just for the purpose of selling your company. They provide greater value than that. Nelson Bayford, I want to welcome you to "Deal Talk." It's good to have you in. Thanks for joining us today.
 
Nelson: Hey Jeff, thanks for having me.

We talk about a lot of different business owners that own a lot of different types of businesses. But in the end, all businesses are there to generate income and profits for the shareholders.

 
Jeff: We appreciate you, and what I thought might be kind of a nice way to get started here just as an icebreaker is to tell our audience a little about yourself and how much skin you have in the game of not only selling companies and finding buyers for them, but also in business ownership yourself. Your experience goes way back and it's pretty deep. Tell us about it.
 
Nelson: Yeah, that's right, Jeff. In the real estate investment, finance, business brokerage business for a long time now. I guess about 40 years. And obviously I enjoyed it because I stayed in the same industry that long. Now, here in this stage of my career I'm really enjoying a business brokerage which I started with Business Finders Canada about six years ago, and really enjoyed the process of helping business owners first of all find a way to speak with someone confidentially to talk about their business and help them determine the most probable selling price through a very detailed valuation system and take it from there. 
 
Nelson, we appreciate having you on board today, and I'm really looking forward to this conversation with you. We may have already kind of given away the answer, or at least a majority of the answer to my first question, which is really kind of helping to clarify what a business broker does. Because a lot of folks nowadays in business for themselves, entrepreneurs have a lot of choices, they have a lot of directions that they can go when it comes time to sell their companies. 
 
But if you could, could you clarify exactly what a business broker is and does these days, or at least what the really good ones should be doing these days. I know that you've got enough experience in the background. You can kind of share with us on that.
 
Nelson: I think the primary role of a business broker is to create that platform where a seller can comfortably speak with the business broker really detailed about their business without worrying about where the information is going to go. So confidentiality is so critical that a good business broker has to be very versatile in being able to understand all kinds of different businesses. 
 
We talk about a lot of different business owners that own a lot of different types of businesses. But in the end, all businesses are there to generate income and profits for the shareholders. And so we key on just what that number is and place our valuations around that key number, which is referred to as normalized earnings, or seller discretionary earnings, or many different ways that people talk about that.
 
But I think the key job of a good business broker is to really help a business owner get a good opinion of value through a detailed valuation process and then take that business to market and work with qualified buyers.
 

Jeff: What have you found in your experience, Nelson, to be some of the most common yet fixable factors that actually hinder value or could stall a company from being able to improve its value?
 
Nelson: I think probably the old saying, “it's all about details.” In business what I've seen a lot is where companies have agreements and contracts with suppliers where they have some exclusive right to sell or distribute something. Or some proprietary method of doing something. And perhaps what's happening is that they go to sell their business and those contracts aren't up-to-date. Or they have some special way of doing things but they haven't patented it or branded that. 
 
And so I think it's all about making sure that anything that you are selling forward, contracts or customers that you've dealt with for a long time, if you're selling your goodwill you want to make sure that you've got an up-to-date customer records, any contracts, leases. I think that's one of the primary things that an owner has to look at when they're going to sell a business, make sure that all the details are in order.
 

Jeff: Nelson Bayford joins us today on "Deal Talk." Nelson is a business broker and commercial specialist with Business Finders Canada. Nelson, the website for that, is that BusinessFindersCanada.com, is that correct?
 
Nelson: Yes, BusinessFindersCanada.com.
 

Jeff: Very good. And we're going to provide Nelson's contact information so you can reach him directly at the end of this program. Nelson, you typically have a goal for how much you try to get your sell-side client as a percentage of your opinion of value, for example. In other words, should a business broker, and obviously we're kind of looking at you today. Should a business broker in general have a pretty good idea when they sit down with you as the business owner or the client about how much they would look or try to get you in terms of what your valuation is?
 
Nelson: Yes, I think definitely. For example, going back to this whole idea of having a good market valuation or opinion of value. That's why I think it's so important, because that to me becomes the basis of moving forward with the seller. That's why we always insist that we get a market opinion done by ourselves. We want to go in there and do this valuation. We're not looking for anyone else to do it. 
 
Because when we sit down with a seller after we've gone through that process of looking at their three to five years of financial assets their balance sheets, etc. And we've come forward and say, “Based on what we see here is our opinion of value," we want to be able to look square in the eyes and say, "This is what we can sell this business for," and to your other part of the question, how much do we try to realize. One we've got that opinion of value we tried to add a little bit on there for negotiation as well. Because we know that in any, probably in most, I guess, buying and selling situations is going to be some negotiations.
 
I would say that we achieve approximately 80%-85% of our opinion or value on our sales. And our sales, by the way, our sell through rate is approximately 80%. And I think that's because we've spent so much time on the front end, getting on the same page with the seller as to what the value is.
 

Jeff: When you say “sell through rate,” exactly what is that? Define what you mean by sell through rate.
 
Nelson: OK. What I mean by that is once we've established and we’re on the same page with the seller about what the price is and what the selling price should be, once we begin our marketing, we know it takes us seven to nine months to sell a business typically. Sometimes sooner, of course. But our success rate is well over 80% of the listings that we take. It's sold within the listing time frame for 80% of the price, which it has that 80% is allowed for some negotiation. Did that clarify that for you?
 

Jeff: It sure does. You make every attempt to get to 80%-85% of that valuation for the seller. That's kind of your target zone. And of course the rest of that room for negotiation above and beyond that there. And then your sell through rate, which means your rate of success is 80%. And it would seem to me that compared to industry averages that's pretty good isn't it?
 
Nelson: It is. I think we're probably at … But Jeff, I go back to, and I know I sound like a broken record on this. But I go back to the fact that it's all on the front-end how much time you spend with that seller getting whatever information you need to do a proper opinion of value. A lot of sellers might think their business is worth X dollars because that's what they want to retire on, whatever reason they come up with that number.

I think that's one of the primary things that an owner has to look at when they're going to sell a business, make sure that all the details are in order.

Jeff: Usually it's much higher isn't?
 
Nelson: Most of the time. And sometimes lower, but most of the time higher. And the key I think to be a good business broker, I think you've got to be willing to say to a seller, "Based on our analysis, and here's how we've come up with this number, look at our methodologies here. This isn't where we're coming up with the value, this is how.” And if we can't get on the same page, there's no sense of trying to do business because we can't achieve a sale if there is an unreasonable asking price that's not supported by the financials and the assets of the business.
 

Jeff: Nelson, once you've submitted your opinion of value, and you believe that value can be elevated, you may have some ideas for how the business owner can do that prior to actually selling their companies. How do you work with those business owners to discover and implement important value drivers that you may in fact recommend?
 
Nelson: A lot of times when business owners are thinking about selling the business, maybe to some degree that they've taken their foot off the gas pedal over the last two or three years. So maybe it's just as much to say, encouraging them to really get on top of their game, run the business with enthusiasm during the early years. Make sure that sales are trending upward and do everything possible to make that happen. 
 
Some of the things that you can do is just simply, if you've been in business a long time start making sure you're in touch with your customers. Make sure that you're providing the best quality service that you can. Some of the other things you need to that we've already talked about, make sure that all your agreements are up-to-date, whether they're leases, or contracts with suppliers, etc. Just get your business running as best you can.
 

Jeff: Nelson Bayford, business broker and commercial specialist with Business Finders Canada joins us on this edition of "Deal Talk." My name is Jeff Allen. And when we come back from this short break I'd like to talk to you, Nelson, about maybe any stories or real life examples you may have of having worked with a client and you were able to help that company perhaps raise its value and maybe even received more than the business owner had originally thought that he might get at the signing table. Or maybe got more than maybe you might have even thought that you got at the signing table.
 
We're going to do all of this when "Deal Talk" resumes right after this.
 
If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on a future edition of "Deal Talk." Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty  and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com.


Selling your business may be the most important business transaction you'll ever undertake, so don't go it alone. Work with an organization that has made it their business to sell businesses and that's all they do. Morgan & Westfield at 888-693-7834. At Morgan & Westfield we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. And Morgan & Westfield will help you every step of the way, from helping you plan your exit strategy to preparing a comprehensive appraisal and locating the right buyers. 
 
Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance. Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.


Are you a professional adviser, accountant, attorney or a wealth manager, or do you provide other professional services? Contact us today to see how our reliance program can help you increase your firm's revenues. Call Morgan & Westfield at 888-693-7834. That's 888-693-7834.
 
Jeff: You're listening to "Deal Talk," and if you have any questions about any of the topics you hear us discuss here on this program, all you have to do is simply call our Ask Deal Talk info line 24 hours a day, 7 days a week, 365 days a year.  The number to dial is 888-693-7834. The extension is 350. Simply follow the easy instructions to leave your question and we'll reach out to one of our guest experts so we can feature your question and their response on a future edition of "Deal Talk." That's Ask Deal Talk, 888-693-7834 extension 350. 
 
I'm Jeff Allen with Nelson Bayford, business broker and commercial specialist at Business Finders Canada. Nelson, what I'd like to do is find out from you maybe a short story that you may have from your past and working with your clients the situation where maybe you were able to help a company elevate its value and receive more than maybe either of you had originally thought when it comes time to selling that business and they were able to take home more money at the end of the day. Do you have anything that you can share with us?
 
Nelson: Yeah, that's really pleasant with something like that happens when you actually realize more in a sale than what you originally anticipated, and that's happened a few times. One story that comes to mind was a small manufacturing company. They have been doing things pretty much the same way for the last 20 years. 
 
One of the things that they were not doing is they weren't really reaching out to new customers. They didn't really recognize that it was going to be such a... And I'm going to say easy way for them to increase your sales fairly quickly by just adapting some search engine optimization ads out there, and they started doing some email marketing campaign based on what we're talking about. And these might sound like really simple things, but this was an older couple and a family business with some long term employees both in the administrative and marketing part of their business and they just weren't on top of that. 
 
I just made a few suggestions and it happened very quickly that their sales started to increase so we had to go back and review where we had put the value on the company. And it's pretty obvious this company was going to continue to grow their sales with some additional marketing. We sold it for a little bit more than we'd originally listed. So that was all about just getting the company to go after their sales a bit more.
 

Jeff: And I know, Nelson, that you said you have some other examples, and we might ask you to come back and share those with us at another time. After you've rendered your opinion of value, typically speaking, what is the process like for the business seller from that point? What happens after that? You talked about the sales process being seven to nine months, but what does that seven to nine month period entail with all the steps that are involved? 
 
Nelson: That's a good question. Because I think that one of the most frustrating things for sellers. And it's really, really important as I said to get the valuation. There's different people that get valuations, but when it comes to actually selling the business I think it's really being able to follow up with people that are inquiring about the business, and really, really being able to qualify these buyers as to... First of all, do they have the financial capability to buy the business? Do they have the relevant experience? What is their time frame? 
 
Today, our business is all technology driven; 99% of our leads come through the internet. And it's really easy for people to hit a button on the internet, so that it's really, really important to qualify people. The process starts with qualifying that buyer, and then disseminating information out to them on a confidential basis. And eventually getting that conversation going between buyer and seller. And being that buffer between the emotions between buyers and sellers. And then negotiating a contract that makes sense to both parties. And just carrying that all the way through to the end of the deal.

I'd say the most important thing when you start a business is determination to succeed, because I don't think there's a business out there that is going to perform exactly the way you've laid it out there. There's going to be all kinds of things happening. It could be labor issues or employee issues. It could be initial sales aren't meeting your targets, it can be suppliers, or not giving you what you need. There's many, many challenges in running a business. I think number one is determination.

Jeff: How many bids will you receive, or how many interested buyers might you be working with at one time in the early stages to kind of vet them out and determine which ones are most suitable? Are we talking three, five, 10 perhaps? Or maybe you can kind of shed some light. 
 
Nelson: I think if a business has been exposed for a month or two, I would say that within a month you'd probably... our office anyways, I have five colleagues that work with me in Business Finders, in our particular office. And I would say that within a month or two of having a business properly promoted and marketed, you're going to have a half a dozen of interested parties. And so it becomes a person in the middle which is the buyer that is best suited and moving forward with that particular buyer.
 

Jeff: How involved is the seller in kind of the process of getting the company ready to sell and preparing for that occasion when the negotiation actually begins?
 
Nelson: I think by the time we get to writing a contract of purchase and sale for an asset sale, or a shared purchased. I think the seller's probably done most of the work that you need to do at that point because we've gathered that information on the front and we know that business pretty intimately by trying to get to a contract stage.
 
So basically I'd say at that point there’s not much the seller really needs to do other than to maybe provide additional documents for the buyer's due diligence, ultimately the formal contract is done between the buyer and seller's attorney.
 

Jeff: I wanted to save some time here in the program for you, Nelson, to just kind of put it in your own words. I know that you're very passionate and you've shared this with me about helping first time business owners grow their companies. And I was wondering if there's any guidance that you can kind of share, words of wisdom perhaps to help entrepreneurs of early stage businesses work toward a pattern of sustainable growth. And if you can share that that would be wonderful. What are some of those most important keys to success in the early stages of owning a business?
 
Nelson: Well, I'd say the most important thing when you start a business is determination to succeed, because I don't think there's a business out there that is going to perform exactly the way you've laid it out there. There's going to be all kinds of things happening. It could be labor issues or employee issues. It could be initial sales aren't meeting your targets, it can be suppliers, or not giving you what you need. There's many, many challenges in running a business. I think number one is determination. I think is the number one key to succeed in business. Because if you have a goal, have an objective, and you really want the business to succeed, stick to it, make it happen. 
 
One of the things that's golden in any business is the old golden rule, take care of your customers. And that doesn't mean just during the time of the transaction but staying in touch with your customer, and there's so much good software out there today that helps people stay in touch with their customers, whether it's remembering birth dates, or remembering important things for the customer, a little note here a little thank you note there. I just can't say enough about just staying in touch. It doesn't take that much to do that.
 

Jeff: Those are great words of advice and very, very simple it seems. But sometimes I think, Nelson, we forget about the common sense types of things because we get so wrapped up in the day-to-day. And common sense really, it works in our personal lives, it can work in our business lives as well and help our business overall. And also, too, not only that but you're making people feel good about you. You're heightening your credibility and integrity. And that helps not just you, your clients, but also the other members of your team as well, and I want to thank you for that. 
 
There may be some individuals listening to this program right now who'd be very interested, Nelson, in talking to you about ways that you might be able to help them, help them with their businesses, help them sell their companies. How can they connect with you?
 
Nelson: They can connect with me by my email is nelson@businessfinderscanada.com. And one of the things I was interested in when I was invited to come on the show, Jeff, one of the things I just put out there is that I live in a beautiful area called the Okanagan Valley of British Columbia. And we have a really, really good economy right now, and it's a great time for U.S. investors and buyers to look at this market because of the exchange rate on the dollar. Plus, our economy is very strong and there's lots of good opportunities up here in Canada. 
 

Jeff: And I'll bet you that there's some residential real estate available too to new and aspiring business owners in your neighborhood. And I'll tell you something, it is beautiful there. I know people who frequent that area very, very often, in fact have second homes there. Nelson, I really appreciate you for taking time out of your day and out of you schedule to give us a call and talk to us about what a business broker is and how they add value to a company prior to its sale. And again, I want to thank you so much and I hope that we can reconnect again in the future.
 
Nelson: Yes, it's been a pleasure, and I just hope that your audience got some value from this. And again, thanks for having me.
 

Jeff: I know that they did, Nelson, thank you. Tell a friend about "Deal Talk," won't you? We feature guests like Nelson Bayford on each and every program. We try to find the best of the best. Nelson Bayford, of course, business broker and commercial specialist with Business Finders Canada, and you can listen to this show all over again on any one of our four channels. We are featured on iTunes, Stitcher and Libsyn in addition to morganandwestfield.com. Now, if you tune in to morganandwestfield.com for this program we'll feature the entire transcript of today's conversation there for you so you can download it, print it out, and refer to it again and again.
 
"Deal Talk" is brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. My name is Jeff Allen, thanks again for tuning it, and we'll talk to you again soon.
 
While we take reasonable care to select recognized experts for our podcasts please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.

Key Takeaways

  • Business owners need to have management strategies in place so that their key employees can be delegated to and can take over the reins of control when a new owner comes in to buy the business.
  • In today's market, prospective buyers are looking at the social media side of the business and want to know that it’s being managed properly and is up-to-date.
  • If exit planning isn't done correctly, the owner won’t get as much money for the business as they would like. So, to do it properly and effectively, you need to bring in a specialist.
  • It’s important to concentrate on running the business and keeping it profitable during a sale so that its value is not reduced.

Read Full Interview

Jeff: Business owners who don't take vacations could be doing much more harm than good to their companies, and that includes to the very value of your company. If you want to know how in the world that could possibly be true, you've come to the right place.

From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk," brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.

Jeff: Hello, and welcome to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk," it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.

Seriously, think about it. My set-up just a minute ago, I talked about business owners who don't take vacations, and we all know them. We've all met one or two in our lives, and we might even be one of those individuals ourselves. Are you one of those people who don't take a vacation? Why not? Well, chances are it's because you can't trust anyone other than yourself to run your business. And that's why you don't break away. 

But did you know that that could actually be causing a problem with respect to the value of your company? That's right. The value of your company may be taking a direct hit as a result of your not being able to get away, or that mindset that you think you can't get away. 

Here to join us to talk all about it and why it's important for you to have an exit plan in place, and yes, it's all related, is Mr. Mark Oxenham, Principal at KLO Partners in London. Mark, I appreciate you joining us today on "Deal Talk." Thank you so much for setting aside some time.

Mark: You're very welcome.

The first thing they have to admit is that they're not the expert at selling their business, and they really do need to get a specialist involved. I've said it before, it's the old story. You do need to let specialists help you, because they will benefit you and benefit the final price you get.

Jeff: Let's just go ahead and hear a little bit about your background, if you could kind of share where you've been, what you're currently doing now with KLO.

Mark: Originally I trained in hospitality. And I worked in Bermuda, in the Bahamas. And then in Canada in five star hotels and resorts. But I always wanted to run my own restaurant, so I got out of the hotel business and got into the restaurant business. 

I ran two successful restaurants, but restaurants don't mix necessarily with young families, so I decided to get out of that restaurant business. I sold my restaurants and became the GM of a private gentleman's club in Canada. I was successful there and was headhunted out into the U.K. to set up part of the major Canary Wharf development, which is in East London. 

And after that I was encouraged to join an American business since I set up the U.K. division of an American leisure company, open three large health clubs. And then we sold that into another business. And then I grew that business to 16 units nationally in the U.K.

But after nine years of corporate slog, as it were, I sold out my interest, and since 2005 I've been advising small- to medium-sized business, and in buying and selling businesses along the way. 



Jeff: Of course, Mark, another thing that you do is you're the owner of your own privately held business, Oxenham Associates Limited. And you have really spent the last many years of your career really working in helping business owners to do one very important thing, and that is planning their exit. 

So many businesses today just simply disappear. They just vanish into thin air. Once their leader has left the business, the doors close and it just shuts down. The business owners are not taking full advantage of all those years of hard work, blood, sweat, tears and all the effort they put in to creating a successful business. They're not taking advantage of the rewards at the end of the day. 

What are the one or two things that prevent a business owner from coming up with a workable exit strategy for themselves?

Mark: I think it's understanding of the process and what happens. They don't have the experience to do it themselves. They've got lots of limits on their time, shall we say, they're very much involved in running their business. 

How do they do it? They don't know how to get it... They'll know somebody that's sold their business successfully, but they don't always take the right advice. And they'll speak to their accountant who may be able to help. But accountants, not wishing to denigrate accountants, of course, but they tend to know the way but they can't necessarily drive the car. So a business owner really does need to have a specialist who knows what they're doing to work with them on their exit plan.



Jeff: How much of this is really getting over that emotional hurdle? We've heard so many times, and I speak from experience, I'm very emotionally attached to my business. It's part of me. I think about it all the time. I think about it at night. I'll wake up from a sound sleep and maybe I'll have trouble getting back to sleep because I'm thinking about these things that I have to do or I'm thinking about a special client that I want to put together a proposal for, something like that. 

In any case, how can a business owner or business owners shed that emotional overcoat to allow them to kind of move forward to seeking that help that they need from a trusted adviser to help them get in that mode of planning their exit?

Mark: There are different people who have different attitudes toward their business. Some are very, very involved with their employees. It's like a family, and those I just find it more difficult. Because as you said, they've been very emotionally involved, the blood, the sweat, the tears, the frustration, the euphoria. 

They've experienced it all and they want to get out but they really want their employees to be taken care of. And my discussions with owners like that are to talk to them about visualizing how the future will look without the responsibility of their business. But also working with a specialist to plan their exit to include and involved their employees in the process as much as they can, given the constraints and confidentiality in transactions.



Jeff: Mark, how much of a business owner's decision to not move ahead, or their rather unconscious avoidance of planning their exit has something to do with the fact that there is nobody on board, a good, trustworthy second-in-command, someone that they can trust to move forward, to even allow them to take a vacation, who can run that business and understands it as well as they do?

Mark: Most small business owners unfortunately don't delegate nearly as much as they can and should. They sometimes have key employees, they sometimes don't. Lots of successful business owners have got major control of their business and that one of the bigger issues in selling a business is that in the exit planning they need to have management strategies in place so that their key employees can be delegated to and can take the mantle of responsibility from the owner so that when a purchase comes in to buy the business, they are buying a management team who know what they're doing and they're not reliant upon buying a business where the employees don't know what to do at the top end.

And that's a real critical point, being able to manage a business with your key employees and not do everything yourself. The old adage is working on the business, not in the business all the time.



Jeff: Mark Oxenham is Principal at KLO Partners in London. He joins us today on "Deal Talk." My name is Jeff Allen, and we appreciate you for joining us today. 

Mark, I guess the question is I'm a business owner. I love my team. I love my staff. I love my job. And what I do I enjoy going to work and I've been doing this for 10 or 11 years. I'm bringing my value to my clients, my customers. Business is good, but I still haven't taken that vacation in many years. We just kind of touched on that a little bit. 

I've got some really good people. I've got some great managers below me. But how do I go about beginning to open up a little bit and trust that one person that I know I've got on my team who has a lot of tremendous potential? They know everything that I do. How can I begin to open up and begin to trust that person a little bit more so that I can step away? Is there any kind of formula to follow there?

Mark: It's the old aspect of trust. If you know and trust this employee and you want them to be successful, you will have put in a process, or if you haven't, you should put in a process of employee reviews and appraisals. And have their goals align with your business goals and bring them along that way. Business owners do not necessarily like to give up their hands on the wheel. They like to do it themselves. 

When a business is being sold, if the purchaser cannot basically tick the boxes when they buy, it's very difficult. Let me explain that. When a purchaser buys a business, they want to be able to tick a box in every area. They want to be able to tick the box that the taxes have been paid, that the sales are good and they're going up, that the margins are good, that the employees are happy and motivated, that everything in the business looks good, almost its curb appeal. 

So when I take a perspective purchaser into a business, they've seen the numbers and they looked at it and they take them in, it looks really well-thought-out, well-organized, it's neat, it's clean, it's tidy, the systems work, the processes work, the people smile. Big thing, that smile. The sales are good and growing, the profits are growing, that is what a purchaser will look at.
If they come into a business where the owner is doing everything, they think, "Hang on, I can't tick that box because where's the management team?" And when I buy this business and our friend Joe here goes off to sale in his yacht, how's the business going to be managed? 

And importantly, when you buy a business, the last thing you want is the revenues, the sales, and the profits to fall. You want them to stay the same and grow. So in order to have that happen, you must have processes and systems working. 



Jeff: And that's what you call curb appeal. It's the same kind of thing when you approach a home that' you're very interested in buying. It's the same kind of thing in a business, maybe a little bit more involved, but it's everything in its place. And not just the numbers, but the people also there and the strategies and processes behind the scenes that put the shine on the place. It really does interest those interested buyers.

Mark: What I would say in addition to that, what I look at in KLO partners, we always look at is what are the premium value drivers for a business. What is the revenue picture look like? It's going up. Are the skills there? Are the systems and processes good and operating well? The products and the services are great. The brand is positioned correctly. 

If I want to grow it I can scale it up this effective sales and marketing processes, and the intellectual properties all sorted out. They've got all the patents done properly. They've got depth of management, great quality service, all things like this which add to the value of the business. And when people look at the business and say, "Wow, this is really well run." 

And as you know, Jeff, in today's market people are looking at the social media side of it. Do they manage their Twitter feeds properly? Do they do their Facebook properly? Are their websites absolutely up-to-date, really working well? But simple stuff like, "How's the phone answered when I call the business?" It's all those things that add to the value.



Jeff: Are these the types of things, Mark, that you would advise your customers, your clients that is who come to you for your consultation to begin working on, to begin taking the steps regardless of how soon from now or how long from now they plan on selling their business?

Mark: Selling a business is not an event, it's a process. And if the exit planning is done properly, some businesses, it might take two months, three months, some businesses may take two or three years to get it in the right position for sale. Because if exit planning isn't done correctly and isn't done properly, what happens? The owner doesn't get as much money for the business as they would like -- pure and simple. So to do it properly and to do it effectively, you need to bring in a specialist to help you do that.



Jeff: Very, very good. That's Mark Oxenham. He's a Principal at KLO Partners in London. We're going to continue our conversation with him in just a moment. Mark, what I'd like to do is when we come back from the break, I'd like to talk to you about maybe those first few important steps that a business owner can take once they've decided to seriously pursue the sale of his or her business, what are those first few steps that they need to take? 

My name is Jeff Allen you're listening to "Deal Talk," and I'll be back with Mark Oxenham right after this.


If you'd like to share your knowledge and expertise on any subject related to selling businesses or helping business owners improve the value of their companies, we'd like to talk with you about joining us as a guest on the future edition of Deal Talk. Interested? Contact our host Jeff Allen directly. Just send a brief email with "I'd like to be a guest" in the subject line. In a brief message include your name, title, area of specialty, and contact information, and send it to jeff@morganandwestfield.com, that's jeff@morganandwestfield.com. 
Selling your business may be the most important business transaction you'll ever undertake so don't go it alone. Work with an organization that has made it their business to sell businesses and that's all they do. Morgan & Westfield at 888-693-7834.

At Morgan & Westfield we know that selling your company is not something you should take lightly. It can be a stressful, difficult, even emotional process. That's why it's important to work with a team whose one and only specialty is selling businesses throughout the United States. Morgan & Westfield will help you every step of the way. From helping you plan your exit strategy, to preparing a comprehensive appraisal, and locating the right buyers.

Without the right team behind you, you could be leaving money on the table. So don't leave your most important business transaction to chance.
Call Morgan & Westfield for a free consultation at 888-693-7834, 888-693-7834, or visit morganandwestfield.com.
Are you a professional adviser, accountant, attorney or a wealth manager, or do you provide other professional services? Contact us today to see how our reliance program can help you increase your firm's revenues. Call Morgan & Westfield at 888-693-7834. That's 888-693-7834.

When a purchaser buys a business, they want to be able to tick a box in every area. They want to be able to tick the box that the taxes have been paid, that the sales are good and they're going up, that the margins are good, that the employees are happy and motivated, that everything in the business looks good.

Jeff: Just to let you know, if you're listening to the program today on iTunes, or maybe Stitcher, or Libsyn, thank you so much. We appreciate your comments and feedback there, and your reviews are also welcome. 

We would also like to let you know that if you go to morganandwestfield.com, not only will you find this program there as well, but you will also find a complete transcript of everything that we're discussing right here on this program. Once again, morganandwestfield.com, so we hope that you'll do that at some point.

My name is Jeff Allen, and I am pleased to be joined by Mr. Mark Oxenham. He is a Principal at KLO Partners in London, and we are talking about exit planning and really the importance of getting started on that. And we know that it's not always easy to do, to take those first steps you'll have to go through. As Mark has said, selling your business is a process. And so is really the process of planning your exit strategy.

So, Mark, tell me, with your experience in having worked with your own clients, what are some of the first few important, critical steps that I as a business owner need to take in order to start to put some exit plans together?

Mark: First of all, you need to have the management quality and depth, excluding yourself, and understand that you have to have a really solid base for your business when you leave it. Looking at your sales mix, are you dependent on just one customer or two or three customers? And if you lost one of those customers, what would happen? Because that is something negative that a purchaser would look at. So you have to be very concerned about your sales mix, making sure that your processes and systems are up-to-date and well-managed. 

I think that's really important, because people like simple systems that work, preparing monthly management accounts, having accurate forecasts and prepared cash flows that are not just done because you do them but are managed on a very, very regular basis, and you understand what's happening with your money.

Consistent and historic and forecast growth, people want to buy businesses that are growing. If your business isn't growing, why isn't it growing? You need to look at those issues. What's your pipeline like? How many orders have you got? Are you subject to seasonality? Do you have no business at Christmas and loads of business in the summer? How can you improve your seasonality by doing other things? Do you have good profits? How can you improve those profits? What do you need to do?  That's really important. People want to buy a business that's profitable. And are you the bottleneck in your business?



Jeff: Oh my goodness. That sounds like something that I wouldn't want to deal with personally.

Mark: A lot of owners are bottlenecks. Everything has got to go through them and they can't delegate. Buyers seek a smooth transformation without an ex-founder or an ex-owner that would inhibit the growth. So it's really important that you're not the bottleneck.



Jeff: It could be a slap to one's ego. But you know what, a true wake-up call, and a wake-up call that could also be an aha moment. Because imagine, if you could discover where the fault lies with you as the business owner, as the bottleneck in your company, imagine that you too can take the steps to improve that situation and really talk about improving the value of your company. 

Can you imagine if you are able to find out that you were in your own way of growth but you are able to take the steps to fix the problem?

Mark: Indeed. And the other issue is that when people buy businesses, they will look at the industry sector that your business is in and are your pretext profits and your margins above that industry sector? And if they're not the average level or below, that's not quite as good. 

And the other issue that does sometimes raise its head is how complicated the share structure within the business has to be. You've got relatives or you've got a small investor, or you've got something else and somebody wants to buy it has got to deal with the complicated corporate structure. And that is a negative. So one of the things that needs to be done is that needs to be smoothed out so it’s an easy transformation to a new owner.



Jeff: Mark, I know, we kind of got an answer to the next question that I was going to ask and that I am going to ask you in your last response. You talk about are you a bottleneck in your own operation. I guess what are some of the other significant things aside from being a bottleneck in your own organization, or maybe we can kind of break it down a bit, the significant things that business owners are reluctant to do that could get in the way of selling their company successfully?

Maybe these are things that make a business owner uncomfortable, or they're things that they should have been doing all along that they just simply don't want to do. They don't have the time or they don't feel that it’s productive for them.

Mark: Well, the first thing they have to admit is that they're not the expert at selling their business, and they really do need to get a specialist involved. I've said it before, it's the old story. You do need to let specialists help you, because they will benefit you and benefit the final price you get.

But more importantly, not concentrating on running the business and keeping it running well and profitable, and making sure that sales are continuing. Because if you get distracted by a business sale, and you're not running the business, and it's not making the money, the money it was all of a sudden it's starting to slide, which will reduce the value.

They've got to concentrate on keeping the business running well, that's very important. But we've talked about it before, Jeff, getting and having an effective second in command, a good core senior management team ready to work on the transition and transformation so that the purchaser is going to feel really comfortable with that team in place.



Jeff: One of those words that I like to use lately, because it's become such a fashionable term to use when you're talking about narrow-mindedness is that we all tend to at one time or another exist in our own little silo, where we're kind of busy doing this, that and the other. And that might include not just working on our business but in our business.

And you know, Mark, very, very well that so many of small business owners are guilty of doing that. It's just kind of a fact of life where we almost kind of see our own businesses, quite frankly it's a job that we have to do. It's our going to work, it's going to our job. And so you're talking about finding that second person in charge to help you move your company forward. That's the overall operation. Your company, this is not just a job it is your business. You're serving others. 

Speaking of others, all those people who work underneath you, when I say you I mean business owners, your staff, the people perhaps on your manufacturing lines, the people who work in your hotel from the maid services, to the folks who bus the tables, to the people who work in the offices, everybody involved, supervisors, upper division management, what have you. 

These people, how important is the team toward helping you sell your business successfully, with the understanding, of course, that there are confidential concerns that need to be adhered to in order to allow that sale to go through smoothly. For some of us, do we still take for granted the people that work for us that really kind of help to make our engine go?

Mark: I think that's true to a certain extent, Jeff. But I have to say that a well-run business, doing the right things for their employees, paying them properly, giving them the correct benefits, nurturing them in the work place, proper training programs and ongoing training programs, all those good things, and staff employee welfare, they want to be successful. They want to see progression. 

And if you're selling your business, first things first when employees find out they will be apprehensive. But if they know that they've been well-trained, that they've helped the business grow, they will be far more appreciative of when the business is sold, that the new owner will understand that they have been bought through and been trained well, and will be an asset to the business moving forward.

And it's particularly key for the senior management team who will have been or should have been bonus by performance and all that sort of thing. But getting those key people involved in this exit process with not making deals with them but explaining why you're doing it. 

And most people that work in the business will understand if the owners in his late 50s, early 60s, they're going to want to move on. And they will have subconsciously thought about that anyways. So it's managing your key employees through the process and making them absolutely key to the new business owner. The new business owners will want them. 

Selling a business is not an event, it's a process.

Jeff: Mark, we're running short of time here, so I'd like to kind of jump ahead a little bit and ask this question of you with respect to getting down to the end of the line. 

Everything seems to have been addressed and you've got essentially a deal on the table and you've been at it for a while in these negotiations with the buyer of your company, and you're finally getting closer. The finish line is coming up and you can see it, and all of a sudden, things just kind of come to a halt.

Mark: Let me talk to that. It's what I call deal fatigue. Deal fatigue means that it's taken too long, that the lawyers have gotten involved and they're making their money by sending emails backwards and forwards on minor points. 

When I do a deal I set a time frame, and that time frame is never more than 12 weeks from start to finish. There's a time table we go to and we let the agreement that the first agreement, the share-purchase agreement, go backwards and forwards once. Each side had a go at it. 

And once that happens, I then insist that the lawyers from each side, together with the principals, together with the accountants and the advisers, sit down around a table in a conference room, with an empty room available. And we go through that document line by line, clause by clause. And if one side doesn't like it or can't agree with the other, you can go out to the empty room and discuss strategy. Come back in and make a proposal, and the other side can do the same. And it is torture for both parties. 

But if there's goodwill on both sides, what happens is at the end of a period, which has been for me as long as two and a half days, as little as a morning, you've got basically the deal done. Because if you let the lawyers get a hold of it, they will run it forever, but you know that.



Jeff: We also do know that there are many attorneys out there who their hearts are in the right place and they're really trying to kind of work to make sure that the deal does end with a win-win solution for everybody. And that certainly is what we would like to hope for. 

Mark Oxenham, maybe there are people in your region who would be very interested indeed in chatting with you about their circumstance, and they'd like you to help them plan their exit from their company, and perhaps even sell their business, how can they reach out to you?

Mark: They can contact me by email. I'm mark@klopartners.co.uk. Or you can look up the KLO Partners' website, www.klopartners.co.uk. And indeed if you look me up on the internet under Google you can find me very simply.



Jeff: Mark, this has been an insightful conversation. I appreciate all of your time and I'd like to have you back on this program again at some point in the future. Would you like to do that with me?

Mark: I'd be very happy to. Thank you, Jeff.



Jeff: Mark, thank you again. Tell a friend about "Deal Talk," won't you? And about our guest on this segment, Mark Oxenham from KLO Partners. In addition to morganandwestfield.com, you can find us on iTunes, Stitcher and Libsyn.

"Deal Talk" has been brought to you by Morgan & Westfield, a nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. My name is Jeff Allen, thanks for much listening and we'll talk to you again soon.

While we take reasonable care to select recognized experts for our podcasts please note that each podcast presents the independent opinions of such experts only and not of Morgan & Westfield. We make no warranty, guarantee, or representation as to the accuracy or sufficiency of the information provided. Any reliance on the podcast information is at your own risk. The podcast is for general information only and cannot be considered professional advice.
 

Key Takeaways

  • Businesses can benefit greatly by taking a systematic and critical approach to negotiating their contracts.
  • It’s important to understand that the relationships that business owners have with their supply chain members are in fact partnerships, they go both ways.
  • When evaluating your supply chain, first look at the performance of your current suppliers then look at agreements with the suppliers.
  • Talk to other companies and find out who they're working with, what they liked about them and what's effective.

Read Full Interview

Jeff: Is your supply chain working for you or is it holding you back and costing you serious money? If you're looking for answers to help you fix potential supply chain issues, you've come to the right place.

From our studio in Southern California, with guest experts from across the country and around the world, this is "Deal Talk," brought to you by Morgan & Westfield, nationwide leader in business sales and appraisals. Now, here's your host, Jeff Allen.



Jeff: Welcome to the web's number one content source for small business owners committed to building a business for eventual sale. Here on "Deal Talk" it's our mission to provide information and guidance from our growing list of trusted experts that you and all small business owners can use to help you build your bottom line and improve your company's value.

Joining us back here on the program to talk all about supply chain management and how to heal those relationships, or if they're not broken at least improve them, is Mr. Tim Van Mieghem. He is a partner at the ProAction Group in Chicago, Illinois. Tim, good to have you back on the program, sir. How are you?

Tim: I'm doing well, Jeff. It's good to be here with you. Thank you.

When I negotiate every dollar of benefit that I negotiate for myself is a dollar out of your pocket and vice versa, there's no value created. When we're negotiating between two companies to provide a product, we can negotiate many items beyond price. … We can negotiate those issues and develop a contract where we actually create value.


Jeff: Thank you. Today we're talking about supply chain logistics. When we think of supply chain, many of us immediately consider manufacturers first and foremost. But might this discussion that we have today, Tim, also be helpful to other types of businesses and industries as well?

Tim: Yeah, absolutely, Jeff. And certainly when you think about cost of goods sold for a manufacturing company the cost of direct materials can be 60% to 80% of the cost of goods sold. So clearly for manufacturing companies negotiating good contracts with our suppliers is absolutely critical.

Distribution is the same. And one thing that I would add to it there's a complication with distribution companies. Oftentimes they're selling products that are branded and their customers are committed to buying a certain brand. And a lot of distributors we work with think that if their hands are tied because of that pull-through, and that perhaps their ability to negotiate a better deal is limited. 

Health care is another great example of a company that can benefit greatly by negotiating contracts. And to some degree as well it may not be the largest item on the income statement, but even professional services and service-based companies are still spending money every month that can be improved, sometimes dramatically, by taking a systematic approach and critical approach to negotiating their contracts. 



Jeff: So we're really talking about supply chain as far as... This is part of a company is doing business every single day. A portion of your supply chain is affected by what you do and your business is in turn affected a little bit by what they do, by the amount that they charge you by delays in service, by breakdowns. Whether any number of things that could influence the cost that you pay both in the short run and in the long-term because these costs that you end up paying, these expenses could really mount up, Tim, I think that you would agree.

Why is that, do you think, just kind of based on your travels and dealing with your clients, that so many business owners fail to take note of issues in their supply chain that could be holding them back from continuing to grow as an organization, and continuing to improve that value over the long run?

Tim: That's a great question, Jeff. And I think there's a couple of really important pieces here that prevent people from really evaluating it, knowing what's possible. The first one is I think it's the basic tendency that many of us have to look at price as the primary issue when negotiating with our suppliers and looking at our supply chain. And that is such a limiter. 

And actually one thing I will tell you that's kind of counterintuitive is that when we do an assessment and we talk to the people who negotiate purchasing contracts in a company, the more hardcore they are in terms of talking about getting the best price the more we find that we can help them dramatically improve the cost structure. 

And when we sit down and we work to become a good customer to a supplier, and we sit down and we have a rational, thoughtful conversation about who should do what to minimize the total cost of the supply chain, we can create a ton of value for our collective supply chain and how we serve our collective customers.


Jeff: Interesting.

Tim: Yes. When people talk about how they have a really hardcore negotiator it's often an indicator that they've been focusing on price and that there's great opportunities to improve. There's a second one too which is, it's that old comfort zone issue. 

And here's what I'm talking about here. Our biggest dollars when we're looking at what we buy in our supply chain are what I would call direct materials. It's the items that go into our product. So for a manufacturing company it's our raw materials, our ingredients, our purchased goods and services. If we're a distribution, it's the products that we sell to our customers. 

These are oftentimes they're strategic relationships. And what I found is that people get comfortable with their existing supplier and they do not like having a difficult conversation periodically that we're going to be putting it out to bid. And in fact they're concerned that they could disrupt their supply chain if they go down that path. And so there's a certain level of fear of change and of unknown that kind of prevents people from taking a deeper dive.



Jeff: And also, too, I think that there could be a comfort factor with the fact that you might believe that, "Hey, I've been with this guy for years. He's given me the best possible deal I could possibly get from anyone," when in fact that deal may be on price but there may be certain limitations that you don't understand that exist that maybe the guy down the road or someone across town may not necessarily be limited to providing you. And it may be better deliver time, shorter delivery times, maybe more trucks on the ground. It could be any number of things, right?

Tim: I'll give you an example. We just completed an assessment of a client spend for labels. It's a healthy spend, $2 million a year. And they've been buying from the same company for almost 20 years. And we put it out to bid and have looked at and received bids from alternative suppliers and here's what we found. There are suppliers who have different technology than the supplier we're using today. 

We also have different locations. You can serve in a different way the different plants and factories that our customer has. And in fact what we found is that the alternative suppliers that we're talking to can provide the same or higher quality product. And I'm talking about a 25% to 28% cost reduction. So this is something that occurred over time. We had a supplier that worked for us when we were a certain size, and a certain area, and a certain location. And over time they became less relevant and we never looked at it until very recently. And now when we look at it we find a tremendous opportunity, and you hit on a really important topic.

Back in the old days, it was the good old boys club. One of the primary methods that people use to select their suppliers was who they have a good relationship with. And then they then worked with that supplier and do the best they can. What we're doing today, it seems a little cold, but it's so much more effective, is you find the company with the right infrastructure that has the ability to serve you and your customers in the lowest cost and in the best, highest quality methodology possible. And then you build a relationship with that company. It's completely flipping the model on its head, and it works.



Jeff: And so really though, one of the keys I would think though is you've always got to have added value in mind, what is it that this next company over here can provide me that I'm not getting over here? Maybe it's for the same price, maybe it's for slightly more. But this is all business, this isn't personal here. We're trying to do things to help us get that ... 

I've got a plan to sell my company about 10-15 years and obviously I want to get as much for it as I can. But if I'm losing money here, and all of it seems to be invisible to me, I've got a guy, Jerry here has been great to me. He's fantastic. We've been working together for many years, that doesn't make any difference at the end of the day really because ...

Tim: Here's another quick story for you, Jeff, that tells this pretty well. We negotiated for a company a whole bunch of different things but including their outbound freight, their truckload shipping. And it wasn't a big spend. It was about half a million dollars a year, and the person who was doing it currently was a personal friend. And in fact their kids stood up at each other's weddings. And they had a long-term relationship. As it turned out we found an alternative that would save him $100,000 a year. And you know what the conversation was between the CEO of the two companies?



Jeff: What's that?

Tim: He said, "I love you, man, but I'm not going to write you a check for $100,000 a year."



Jeff: How did that go?

Tim: I'm sure it doesn't always end this well, but in this case the guy said, "That's the right choice. They're a different company, they're set up to serve you, and I understand." And it was truly the right decision. There are many times where companies decide to stay with the current supplier, but here's what I want it to be is a conscious choice with the facts on the table.



Jeff: Tim Van Mieghem is with us and he's been with us before here on “Deal Talk.” He's a partner at the ProAction Group, and we're talking about supply chain. We're talking about improving those relationships in your supply chain. And in fact Tim Van Mieghem is the author of a book, textbook, “Implementing Supplier Partnerships.” And this is really important because we don't tend to think of our partnerships and our relationships as partnerships with the suppliers and our vendors so much I think as much as we need to because really it's a two-way street, we're helping each other here, right, Tim?

And so you've got this book, “Implementing Supplier Partnerships.” Tell me, Tim, in your studies of kind of the improvements that are required, the relationship building that is necessary, in order to get the best value out of the partnerships that you should have with your suppliers and all of those vendors and people along the supply chain, what are two or three of the areas within that supply chain where businesses tend to lose the most money whether due to high cost or losses resulting from inefficiencies?

Tim: Sure. Another good question. Let me provide a little bit of a thought background on this, too, because we talked about price before. Here's the one big aha that really helps to paint a picture of why this is so effective. When we negotiate, for example, for a used car and it's a one-time deal it's a zero sum gain negotiation. 

When I negotiate every dollar of benefit that I negotiate for myself is a dollar out of your pocket and vice versa, there's no value created. When we're negotiating between two companies to provide a product we can negotiate many items beyond price. We can negotiate inventory programs, hedging programs, pricing terms, quality, new product development, when does title pass, how do we ship the product, and 20 other issues. Here's what's wonderful about it, is that we can negotiate those issues and develop a contract where we actually create value.

One of my favorite examples comes back to a tour I took of a forklift factory. One of the stories that came up was a supplier was coming through a factory that provided the wheels for the forklift company, the steel wheels. And they noticed that when they brought the wheels in the first thing that happened is they went over to a drilling station. And the representative from the supplier asked them, "What was going on here? Because once we receive your wheels we bring it over here and we've changed our drawings and we've added some things that we needed to put a couple of additional holes in these areas for this new application that we have." And the supplier said, "If you let me know, I can do that and I can actually design it into our computer, design our CNC machines and have it done automatically." 

This might seem like an obvious example, but, Jeff, I'll tell you, one, it happens all the time because people don't have time to review every process and have these kind of aha's. But what this exemplifies is that if you move a step to the right part of the supply chain you can dramatically change cost structure. And when we sit down and we work to become a good customer to a supplier, and we sit down and we have a rational, thoughtful conversation about who should do what to minimize the total cost of the supply chain, we can create a ton of value for our collective supply chain and how we serve our collective customers. 

And that's the first half of our negotiation. Our negotiation process is set up to understand that dynamic and to negotiate to provide the best cost structure and service to our collective customers. Then the second part of our negotiation is how do we divide up that value, and that's where we have the negotiation about things like price and what terms do we get and what do we give to the supplier. That process is where a lot of the value to the company can come from sourcing.



Jeff: This is a really important conversation we're having here, Tim, and I hope that our business owner audience, our listeners do take note of some of the things we're talking about because I think so much of it can't be taken for granted, particularly when you might think that you've already got some very, very strong relationships that are built on trust over the years. But there are always things you needed to do and take some time to re-evaluate particularly if you own a business where the supply chain plays such a vital role and such a vital part of your being able to satisfy your own clients.

My name is Jeff Allen. I'm going to be back with Tim Van Mieghem. He's partner at the ProAction Group in Chicago. We're talking about supply chain management or supply chain rather partnerships and your relationships with your supply chain members. And we're going to do more of this when we return on "Deal Talk" right after this.

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Jeff: I'm Jeff Allen with my guest Tim Van Mieghem, partner at the ProAction Group. We're talking about your supply chain and how you should work toward kind of bolstering those relationships with your supply chain partners. And really it's trying to have that mindset, maybe change the mindset that you might already have to understanding how these relationships that you have with your supply chain members are in fact partnerships, they go both ways, OK. But you need to really think first of all about your own business first. Are you really getting the value that you need to get from these partnerships, from these relationships to keep cost manageable while continuing to bring that value of your company up and delivering to your clients in an efficient way that helps them get what they want, you get what you want, your supply chain members they get what they want? Everybody is a winner across the board. I think, Tim, at the end of the day that's what we all want.



Jeff: I would like to ask you about the process. I'm a business owner and I am re-evaluating my supply chain from top to bottom. Walk us through the process. How do we start to take stock of things where a supply chain is concerned in order to start to make some improvements that are going to get us the results that really we're looking for?

Tim: Sure, good question. Here's what we do. If somebody asks us to look at their company, here's what we look for to find the smoke that tells us there's fire, the indicators that there's opportunities to perhaps get more value out of our supply chain.

The first place to start is to look at the performance of our current suppliers. Here, I'm going to start with things like inequality issues and returns. What kind of support are we getting from our suppliers for new product development? And I'm going to talk to the people in my company in each of the different departments and I'm going to ask them questions about which suppliers are your favorite, why are they your favorite, which suppliers make it more difficult for you to do your work, which ones would you prefer to not work with again, which ones would you like to work with more? 

It's amazing what you learn. It's like that old Yogi Berra quote, it's amazing what you see when you look. And by looking at this and asking questions we find out so much where there's pain that we may not have known about it before.

The second thing we like to do is actually look at our agreements with our suppliers. And this first assumes that there are documented agreements. If there are not documented agreements, then that is a meaningful sign that there's an opportunity. If we are not measuring something, then it's difficult to know that we're doing it well. So that would be the next piece. 

And here's a real important tip when we look at our agreements. There's two kinds of agreements that we consider to be technical and ineffective. One, our agreements that are less than a year where we're essentially negotiating each need as we go. And the other one is what I consider evergreen contracts which are ones that essentially just go on infinitum. Neither of those provide value. 

A supplier, what they want is commitment. They want to know that they're going to have your volume over a period of time. That is how they can evaluate their ability to invest in you as a customer. So if we're simply negotiating for the next order or for one year, that's a very short period of time that they are getting a return on any investment they make in you as a customer. 

If it's a very long term contract where it continues to just get renewed, then in a sense it's never being reviewed. And it becomes a cash cow for the supplier. It becomes something that they assume. What we want, what typically makes sense in many cases a 3-to-5-year contract that provides a real window for the supplier to get a return on their investments in us as a customer. And it gives us a real window to go back to the market and test our agreement, and see is this still the best supplier, is this still the hungriest supplier, is there someone out there who's better for us, and for our customers, and for our shareholders? And many times we end up staying with the incumbent and we simply improve our contract, and there are other times that we change.

Another step that we take is we talk to our suppliers. And we ask them how good are we as a customer to you, what could make us better, what are your best customers doing, and what do we have to do to be a better customer? What do we have to do to get the best deal that you offer? And it's amazing what we learn by asking these questions. 

Here's the basic premise, Jeff, on this line of thinking, is that if we want to get more value out of a supplier relationship, we want to be the customer that we can. We want to be easy to work with, we want to be dependable, we want them to be able to count on us and to have good transparency. And to be flexible in allowing them to solve our issues in the most efficient way possible. We could tell stories all day long about examples of this but having those conversations is a great place to start. 

And the final one I'll mention is talking to peers. Talk to other companies and find out who they're working with, what they liked about them, and what's effective.



Jeff: Tim, do you have any other maybe examples or stories for us of maybe some clients that you've worked with who had some what you might consider somewhat common or... I won't necessarily say every day, but maybe a situation with the members of their supply chain regardless of exactly what function that they perform where they had this issue. It was something that was longstanding, they couldn't see it, but they were able to make a small change, or maybe even just through conversations or something, able to turn their situation around and save them a lot of money.

Tim: Here's a great example. This is a food client that manufactured a retail item that people would consume and eat, and their negotiations with their packaging suppliers. So suppliers have provided labels and the cardboard packages with graphics, and the boxes that you use to ship. 

What was happening is that, and this is one of the examples of a client that had a really tough negotiator, negotiating with suppliers and prices all the time. And one of the things that ended up that they did to negotiate a good price is that they would commit to buying an entire season's worth of packaging at a time. 

So they would commit to... Let's say the next three months they would commit to a volume and they would have three months to take it over time. What ended up happening is we looked at their inventory, they had inventory left over from last year, very often. And here's the problem with that, is labeling requirements change every year. Products change every year.

So they're getting a good price. And actually in their income statement, based on what they actually sell, they're able to show a good profit margin. But for a company as a whole they've got this balance sheet with items on it that they can never use, that they're going to have to write off at some point, and it's going to hit their income statement anyway. But it doesn't hit the regular cost of goods for the items that they're selling. 

Here's the reality. Packaging suppliers today, many of them have gone through the lean manufacturing transformation. And they have improved their processes, they've changed over times, and now there are suppliers out there who offer the good pricing without requiring that you buy a whole year's worth of product at one time, or a whole season's worth at one time. 

Here's what we're able to negotiate. Their inventory levels went down by 80%. Every single week they would simply let the supplier know what they used, and that supplier would replenish that and send out a shipment every week. So their inventories fell through the floor. And their cost per unit was down by 20%. So we negotiated a 20% improvement and we eliminated this obsolescence issue and excess inventory issue that we were fighting with the whole time. 

This was a great example of stepping back and looking at the market to find a supplier who had the actual capabilities to supply what we needed.

And what I found is that people get comfortable with their existing supplier and they do not like having a difficult conversation periodically that we're going to be putting it out to bid. And in fact they're concerned that they could disrupt their supply chain if they go down that path. And so there's a certain level of fear of change and of unknown that kind of prevents people from taking a deeper dive.


Jeff: There are cases, Tim, where it's just not always really that obvious, right? You could be losing some money and you could be scratching your head thinking, "I'm not exactly sure where this is going or why this has become such a problem?" But it's true that you sometimes kind of have to step outside yourself and have a third party come in and kind of take a look at the environment, don't you?

Tim: I think that's a very good example. I always would start with our internal pain, what pains do we feel and let's make sure we address those. But the other piece of this that's so easy to forget is good companies can get to become great companies by challenging even the things where they're not obvious, where they don't have pain, and just by simply talking to their peers.

And of course I love the idea of bringing in external consultants who can help identify areas that may not have been obvious for other reasons.



Jeff: Tim, we've no doubt got people out there in the audience who will probably taking a look now at their own particular situations with regard to their supply chains trying to get on top of any issues that potentially they could be facing right now or determine whether or not that there any concerns they might have. But if someone wanted to kind of pick your brain and maybe potentially talk to you about their particular situation and having your company help them deal with issues that they might be having, how can they reach you?

Tim: Well, they can certainly go to our website, which is www.proactiongroup.com. They can send me an email at any time, which is tvm@proactiogroup.com, or call our company at 312-726-6111.



Jeff: Tim Van Mieghem, once again I appreciate your time and you taking just kind of a moment out of your schedule to chat with us a little bit about a very important topic indeed. And we hope that at some point we'll able to revisit with you one more time.

Tim: Thank you, Jeff. It was such a pleasure to be here with you today and I look forward to talking to you soon.



Jeff: There he goes, Tim Van Mieghem, partner at the ProAction Group has been my guest and we hope you enjoyed this discussion. 

Tell a friend about this show, won't you? You can always find us at morganandwestfield.com. Remember the name of the show, it's "Deal Talk," and if not morganandwestfield.com, iTunes and Stitcher also carry the program.

"Deal Talk" is presented by Morgan & Westfield, a nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. My name is Jeff Allen. Thanks so much for listening and we'll talk to you again soon.

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