Exit Planning

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

  • Retirement, just like selling a business, requires preparation. Emery Orosz suggests involving your spouse in planning for your retirement. 
  • While most Americans retire between age 60 and 65, Emery Orosz was fortunate to have retired at 48. Early retirement enabled him to do what he loved doing – traveling and living in a foreign country while enjoying a convenient life – and taught him the value of having a plan post-retirement.  
  • If you’re considering moving to a foreign country upon retirement, make sure that you do your due diligence. Get to know the culture and assess if you are fit to live in that place. 
  • If you’re used to an active, busy lifestyle prior to retirement, you can find it a challenge to not having anything to do once you’ve realized that “you can only take so many vacations.” When it comes time to sell your business, you must think about how you are going to fill in a lot of empty time post-retirement.

Read Full Interview

Jeff: So you're contemplating selling your company or maybe retiring for good rather than going on to the next thing. If you've been wondering just how much greener the grass is on the other side of your working life 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 looking to build 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.

What are you going to do when it's time to hang them up, or maybe between this business that you might own right now and your next one? Today on "Deal Talk" what I thought I'd do is have a conversation with someone who has been there. He was involved in selling a business working with his wife, and after working in corporate America. And we're going to have him kind of give us all the details. 

And then he went on to see what it was like to do some other things, to relax, to take it easy. Was it all that and a bag of chips? Was it something to look forward to or are there other reasons, other things that we need to consider before we decide to cut bait before we decide to hand over this business to the next in succession in our families, or to sell our company to somebody else.

What drives people to sell their businesses and go on and do other things? And is it all that they expect? We'll find out in my conversation today with Mr. Emery Orosz. He's Senior Vice President of Franchise Resales and Transfers at, you guessed it, Morgan & Westfield, the presenting sponsor of this program "Deal Talk." Emery Orosz, welcome, it's nice to have you. 

Emery: Good morning to you as well Jeff. It's nice to be with you. 

Jeff: Emery let's get kind of a quick sense, just very, very briefly about what it is that you do with Morgan & Westfield and how long you've been with the company?

Emery: I've been with the company about six years and I work with franchisors around the country and helping with their resales. And for those that don't know what a resale is, it's simply a business that a franchisee has decided to sell. So I help with the selling of that business. I also work on developing new territories for franchisors and I've just recently started working with private business owners and helping them sell their businesses as well.

Jeff: You have not always owned your business. You're not a lifelong business owner yourself but you spend a lot of time in corporate America when you decided that you were done. You wanted to go on and do some other things. First of all, tell us why it was decided at some point that the time was right for you to retire. Walk us through that thought process that you had when you knew that the time was getting near and the time was right to do that.
 

On life after retirement: You can only take so many vacations. You can only play so much golf. There's going to be a lot of empty time, and just think about what you're going to do with that time, how are you going to fill it?


Emery: Yeah, that's a pretty simple story. I started at Ford Motor Company in Cleveland, Ohio when I was 18 years old. I did a lot of different positions with the company and I got my 30 years in. I was 48 years old and they were offering a full retirement package, full benefits. So I said, "You know what, why not? Let's do something different." 
That's what I did. At 48 years old I retired with full benefits, full retirement package, and never looked back, never regretted it for a moment.

Jeff: When you made that decision, were there some ideas that you had in your head about things that you'd like to do with your free time? Did you have an early bucket list? You were only 48 years old to walk away with that very generous retirement package I'm sure from Ford at that time. Any plans that you might have had at that time for what you do?

Emery: My wife and I always wanted to move. We had spent our whole lives in Cleveland, Ohio and we had a house built in Coeur d'Alene, Idaho while I was phasing out last days of my job. The very day and this is literally the very day that I had my retirement party. 

I came home. The U-Haul was in the street all loaded up with all of our worldly possessions. And so I jumped in and drove to our new home in Coeur d'Alene. But we had sold a business that my wife and I had developed. It was a sign and graphics business.

We were just fortunate enough to not only sell our house quite easily but sell the business to some friends of ours. So it was a very smooth transition to retirement. Things went very, very smoothly with the sale of the house and our business to some good friends of ours. We were on our way to our new life in Coeur d'Alene, Idaho.
 
Jeff: And with no regrets, there weren't any regrets about selling that company.

Emery: None whatsoever. We just looked forward to our next adventure.

Jeff: When you got to Idaho, obviously you had that house built and life seemed fantastic. But tell me about what it was like for you once you realized, it finally dawned on you, "Hey, I don't have to go into the shop anymore. We're living across the country from where we were in this beautiful place here in Idaho. What did you do next? What went through your mind? Did you go stir crazy or did you find something immediately to occupy your time? Do some hunting, fishing? What was it? What came next?

Emery: I did get a little bored. We had a nice place out in the country and I started to get a little bored. So I started and I don't know how I met this gal that we started a business together. And back in those days selling long distance, it's unheard of today. Everybody has free long distance on their phones. We started a little company that sold long distance. I did that for a little while.

And then I got the itch to, it was kind of a forced itch that my retirement was not enough to support our lifestyle. Because we had horses, we had a ranch out in the country. I basically had to go back to work but I was still relatively young. I worked for FedEx for about six years and then a really good opportunity arose with the Census Bureau. I was a manager of field operations for the Census. That was a great job.

And then that obviously came to an end because the Census came to an end. Then I got the brilliant idea that I talked to my wife about this. I said, "Why don't we do something really exciting and move to Mexico?" Because we have been talking about moving to a foreign country off and on for years. We had looked at Costa Rica, Belize, a lot of places in Central America. 

And so we had some friends that had moved to Mexico and I was in constant email contact with my friend down there, Craig. He kept telling me, "Oh Emery, you got to come down here and at least check it out. It's great." I said, "Let me talk to Mary about that and maybe we'll do that." We ended up, and this kind of a long story. 

Over the 13 years that we lived in Coeur d'Alene we've built three different homes. We would build the first one we lived in just two or three years and the market was so good back then that I said, "You know what, why don't we try to sell this house. Let's put a really high asking price on this house and see what happens." 

We did and that house sold in seven days. And I thought, "Wow, this is easy." So we built another one in the same area. We lived as I mentioned out in the country. We built our second home and lived there for about three years. I said, "Let's try that again. Let's ask a lot and see what happens."

Jeff: Was your wife completely open to the idea and she had no objections? She wasn't so in love with the house that she didn't feel like...? All right.

Emery: And I'll tell you why. My wife loves to design. She is a great designer. She would design these homes that we built.

Jeff: What? Are you serious? Really, she did?

Emery: I'm totally serious. She is just a fantastic designer. She would design the home and they were all within a five- to six-mile radius of each other. We're very comfortable with the area out in the country. It was called Cougar Gulch. I'm sure some listeners may have heard of that area. It was a very nice area, a lot of horse ranches.

Anyway, we built the second house and lived there for I think I said three years, and I said, "Let's try that again. Let's put an above market price on it." And sure enough about a week or two later we had a full price offer and we did it again. We sold the second one. 

Jeff: The take on both of these homes, when all that stuff was in the bank, did this kind of help to feather the next nest, so the third house, right?

Emery: Definitely. But then comes the third house and this is where things went a little south. We built the third house and this is nearing a great recession of '08. And so we built the third house, a beautiful horse ranch, and this is when I started to get the itch to move to Mexico just for our new adventure. We have been in Coeur d'Alene almost 13 years. And so this is where I really started to get serious about moving to Mexico.
 

On moving to another country after retirement: If you're thinking of moving to another country, do your due diligence. Get to know the culture and the people. See if you could really live in a place like that. 


We put the house on the market and then the recession hit. But we were very fortunate, I was just ready to take the house off the market in the winter time when this gal from California told the realtor she wanted to look at our house. She came over and looked around for about a half hour. She said, "This is so beautiful. I could live here." I didn't think much of it because we had gotten the same kind of responses before. It was a beautiful home.

About two days later she told the realtor, "I'm going to go back and look at that house out there again." She came back and mind you, this was right when the recession had started. And so she ended up making us a pretty good offer, not as good as I would've liked but the recession was here, what are you going to do?

And so we took the offer. We ended up selling basically everything we owned. I had been in contact with Craig, my friend down in Mexico. I said, "Craig, we're on our way, man. Be on the lookout for us." We took everything that we owned and put it into our Ford Edge SUV, not a huge vehicle. But everything we owned was in that SUV. 

We drove from our home in Coeur d'Alene all the way down to in the vicinity of Guadalajara, Mexico. We lived in a place called Lake Chapala, the largest lake in Mexico. That's what we did. We just took all of our stuff and moved to Mexico.

Jeff: What was it about moving away to a foreign country? The United States is a huge country, a lot of beautiful scenery and a lot of great places to go. What was it that lured you across borders?

Emery: Just the cultural differences and just the excitement of living in a foreign country. It was exciting. We had a good time. We traveled a lot. We either took a big tour bus down to Mexico City. We drove to beautiful places in Mexico, Guanajuato, just beautiful, gorgeous places. 

But you can only travel so much, so I started to get a little bored you might say with just laying around the pool when we weren't traveling, working on my tan. So I started to get a little bit bored. I miss the action of business you might say.

Jeff: What we're going to do is we're going to pause right there. But I don't want to give everything here in the first segment of the program. But we're going to come back and we're going to kind of pick up where we leave off here.

We're talking with Emery Orosz. he's Senior Vice President of Franchise Resales and Transfers at Morgan & Westfield. And it's life after selling your business, the transitioning. And we're going to continue this conversation with Emery when "Deal Talk" returns 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, the 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: We're interested to know your thoughts about "Deal Talk," what you like and your suggestions for how we can make the show even better for you. So take a moment when you can please and send us an email to dealtalk@morganandwestfield.com. Again, that's dealtalk@morganandwestfield.com.

I'm Jeff Allen back with Emery Orosz, he's Senior VP of Franchise Resales and Transfers at Morgan & Westfield. We're talking about life after selling your business, the transitioning. Emery owned a business along with his wife, a sign business back in Cleveland, Ohio, very successful. But they decided upon his retiring from the Ford Motor Company that they were going to go on and see some other sites. And they were going to move across the country as they did to Idaho. 

You've heard him talk a little bit about that, owning his homes and going from retirement to deciding, "You know what, we better go back to work to be able to fund this extravagant lifestyle we didn't plan on having necessarily." And he went ahead and did that. 

So now you're in Mexico and this is after Ford and FedEx, and working for the Census Bureau. And you've done very well for yourself. You've sold three amazing homes that you and your wife designed and built, and you're in Mexico. You were there for how long Emery?

Emery: Two years.

Jeff: Two years, what was it that changed your mind at that point? It was something that you wanted to do, was to move to a foreign country but what changed?

Emery: I had been doing a little bit of work for Jacob when we were in Idaho, just some phone calls, nothing serious, just helping him out a little bit. In Mexico, I wasn't doing anything for Morgan & Westfield until Jacob called me and said, "Dad, I could really use your help with the business. It's really taken off. I could use your people skills and your expertise." I said, "Well, mom and I are thinking of moving back to the States. Why don't we explore that once we decide where we're going to move next." Anyway, that's what planted the seed of wanting to work again. I love talking to people. I love the business, and so the seed was planted.

Jeff: But what about your wife Emery? What did she think about this? "Emery, you bring me all the way down to Mexico. We're going back home. You're going back to work. What?"

Emery: She was totally on board with coming back to the States.

Jeff: You have a very agreeable lady.

Emery: Oh yeah, totally.

Jeff: What an amazing story that is in itself. You and I may have to have a talk about this after the program.

Emery: Yeah, for sure. That's a conversation. There was not much arm twisting to get her to leave. We had been there two years, experienced the culture, and my wife had some medical issues so that was the real trigger that motivated us to move back to the States -- more advanced medical care. 

And so we picked... My parents had lived in Las Cruces, New Mexico for years after my dad retired from Ford Motor. We came up to New Mexico where we looked at some different places, different cities, and we settled on Santa Fe. Actually, I set my wife up while we were living in Mexico. I said, "Mary, why don't you fly up to Santa Fe and buy a house?" She says, "Are you sure? Do you trust me to do that?" I said, "Absolutely, I trust you to do this."

She flew up to Santa Fe. She called me. She says, "Emery, I found a house. Put an offer." I said, "Great, sounds good. Good job." She came back down to Mexico. We sold everything we owned again. And we have been renting it down there. We lived in two different houses. We never did actually buy a house in Mexico. We rented some nice homes with pools and a lot of amenities. 

We sold everything. Again, we load up the car. We still had that Ford SUV. We loaded it up with everything we owned. I had given away so much stuff. We have developed a lot of good friendships in Mexico and I just basically gave everything away to friends. I loaded up the car and moved to Santa Fe and that's when I really got fully involved in the business.

Jeff: We don't need to do any math and it's not complicated so leave your calculators where they are because we've already found out how old Emery was when he retired from Ford, and so you kind of fast forward. 

Emery is like a lot of us. He's an older guy who has gone back to work, and I would imagine to a certain degree Emery, you sound like the kind of person who just enjoys working, really and doing something that is fulfilling. Is that correct?
 

At 48 years old, I retired with full benefits, full retirement package, and never looked back, never regretted it for a moment.


Emery: Yeah, that's correct. I'm 66. I still got a little bit of juice, I like to think. I enjoy what I do. I have a great office. I think I mentioned to you before we went on the air my little Doberman Buttercup lays by my feet and keeps my feet warm while I'm working. I have a companion for the day, my little Buttercup. I love what I do. I love talking to people. I talk to people literally all over the world, so I have to be really careful with the time zones that I'm not calling them at six o'clock in the morning. 

And that's probably my greatest struggle, is figuring out the time zones. Everything else is easy. But I'm sure you can relate to the time zone issue.

Jeff: I can relate on the other end. I've been contacted at 4 AM by people on the East Coast who are getting into their office at 7:30 or seven o'clock in the morning and they thought they'd drop me a line and there we go. And then you have to explain why it is that you answered the phone in a whisper.

Emery: Yeah. It's a good thing we don't work in Russia.

Jeff: Oh my gosh, no kidding.

Emery: I think there are 12 or 13 time zones in Russia.

Jeff: Yeah, you're absolutely right. That's a big country. Again, Emery, we had touched on the fact that you work with franchise owners working to sell their businesses, and you have no doubt heard a number of different stories and we don't have a lot of time for a lot of the stories here that I'm sure that you could talk to us about. 

But you have had an interesting transition yourself and back into a working role in kind of a small, corporate type of capacity, very small, and kind of really a family-owned business when you get right down to it. But not everybody really has the same kind of fortune that you did by being able to take time away from work, enjoy life a little bit, and then go back to work doing something you liked.
What do you think has been kind of the key to your being able to do what you've done this last 20 or so years really since Ford, leaving, going back to work, traveling, moving to a different country, and getting to where you are now? What do you think is the key to what you've been able to do and do it well and be happy, and making sure that your clients perhaps will be able to leave their businesses and have the same kind of happiness or at least find some happiness down the road after they've left their companies?

Emery: Well, that's a good question. There are a lot of elements to that question. Maybe I can just share an experience that's pretty common among a lot of people that I talk to. Guys or women in corporate America, a lot of those folks are losing their jobs because of downsizing and then making great salaries and never saw it coming. They would lose their high paying job.

That's when they start looking at other businesses. Maybe they have a pretty good nest egg built up and that's when they call me, and that's when I try to match them up with a good business. So there's an element of risk involved in starting a business, buying a business. Obviously, the risk element cannot be ignored. But in my case, I was just blessed and fortunate that things just fell into place for me. 

When you look back at all the that I've done things could've gone wrong. There were times when things could've gone very, very south on me. But in my case there's a lot just plain, old-fashioned good fortune I guess you could say. I didn't plan. My wife and I are risk takers obviously. My story we've taken a lot of risk in our lives. Generally speaking, things have turned out very well for us. So I feel very, very blessed in that respect.

Jeff: Is there a piece of advice that you might be able to offer business owners just in general terms in terms of preparing themselves, not just their companies or their businesses rather but in preparing themselves mentally, emotionally, psychologically for that period when they feel like they're ready to sell their companies and move on because we've heard stories of people who thought that they were prepared to do that. They sell their business and then they walk away thinking, "Uh-oh, what am I going to do now? I'm not sure whether or not that decision was the right one to make."

Emery: My recommendation would be to just think it through. Make sure that your wife or significant other is on board with your plan. If she's not then I just foresee a lot of problems. So talk to your spouse. Look down the road. If you're thinking of moving to another country do your due diligence. Just don't read the travel websites that tell you how great it is everywhere in the world.

Really, if you're considering moving to another country, retiring, visit the place you would like to move to for at least a month if you can afford to do that. Get to know the culture and the people. See if you could really live in a place like that. 

And when it comes to selling your business, like we've talked about Jeff, just think about those days. How are you going to fill all of that time? You can only take so many vacations, you can only play so much golf. There's going to be a lot of empty time, and just think about what you're going to do with that time, how are you going to fill it?

Jeff: It seems to me that that would probably be my biggest problem because even just around the house I find myself when I'm sitting down to watch a game or something like that or a movie I feel like I can sit down for about 10 or 15 minutes and then I've got to get up and mow someone's lawn. I just cannot sit still very long. And maybe that's just nervous energy.

Emery Orosz, really a great conversation. I appreciate your insight, your recommendations, and really that story of kind of your life in transition really from one part of the country to the other, and then from that part of the country to another country. After you have decided to make some changes and retire, and as we found out that retirement was only temporary, so really interesting stories and I appreciate you sharing.

Now, for those individuals who may be listening who own their own franchise business no matter where it is in the country, no matter what industry they might be in, and they'd like to talk to you possibly Emery about helping them sell their company, how can they reach you?

Emery: I can be reached directly at 928-793-3000. Or just email me, emery@morganandwestfield.com. I look forward to hearing from you folks. I'd love to talk to you and I'd love to help you develop an exit strategy and just talk about your plans for the future.

Jeff: Emery, great talk. Once again, thank so much for sharing, we appreciate it.

Emery: You're welcome Jeff, you take care.

Jeff: You do the same. That's Emery Orosz, Senior Vice President of Franchise Resales and Transfers at Morgan & Westfield. I hope that you enjoyed the conversation.

Once again we would appreciate it very much if you'd take just a few minutes to let us know how we're doing. We'd love to hear more from you. Send us your comments, compliments, and criticisms, all to 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. 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

  • 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

  • Separate your identity from your business. Some people think that your self-value as a business owner is tied to what you do for a living. However, it’s good to be able to separate yourself from your business — they are not the same.
  • Be prepared with the emotional aspect that comes with selling your company. Selling a business is not only a business transaction but also an emotional experience. Valuing your company and keeping the sale confidential from your employees (and finally breaking the news to them after the closing) can make the process emotional. Be prepared to manage your emotions if you want to succeed.
  • Don’t let anyone discourage you from getting what you want from the sale. As you go through the process of selling your business, you may encounter unexpected things like unreasonable demands or even insulting statements from a buyer. However, to succeed in the sale, you have to “keep your eyes on the goal that you want to accomplish.”
  • Be patient. Patience is key in successfully selling a business. You will not sell your company overnight. Maintain as much patience as possible as you go through the process.

Read Full Interview

Jeff: What now? A fellow entrepreneur talks about selling his business and life after the sale. If you're a business owner looking to grow or sell 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: Hello and welcome back to the web's number one content source for small business owners looking to build 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.I don't know about you but I always learn a lot from my fellow business owners and I hope the same goes for you. It really kind of depends on the topic that you cover and what you discuss. On this edition of "Deal Talk" though we're going to speak with another business owner who recently sold his company in order to learn more about his unique experience with the hope that we can learn a little bit to help us successfully sell or at least prepare our business for sale with the time comes.

I'm happy to welcome today Ed Ketchoyian, joining us from Sterling, Virginia. Ed is now the former owner of a highly successful PuroClean franchise. PuroClean is a company that provides restoration services specializing in fire and water damage recovery for its residential and commercial customers. Ed Ketchoyian, welcome to "Deal Talk" sir, it's good to have you on.

Ed: Hi Jeff, good to be here.
Jeff: Why did you sell your business Ed? You sound like kind of a young guy and I understand that you had a very successful franchise where you are.

Ed: I'm not sure I'm that young but I appreciate the compliment anyway. Why did we sell? In the beginning, when we were considering buying a franchise we had a plan coming in for how long we wanted to be in the business. We're sort of thinking ahead from the beginning about how and when we might want to exit. The original plan was to exit if we could in five to seven years after establishing the business and growing it.

Unfortunately, the economy didn't quite cooperate for that time frame. So we sort of toughed it out a year or two beyond that and had some good success, and decided it was the right time after about eight and a half years to sell on a high note. And that's pretty much what we did.
Jeff: So you really only kind of missed that deadline I guess, that self-imposed time frame by maybe about a year and a half there at the very, very end. If you don't mind my asking — why did you choose that space of time to sell? Was it purely a business decision, strategic in that regard, or was it more of a personal decision to sell your company within that short five- to seven-year, but actually eight-year window?

Ed: It was primarily a business decision in the beginning. Of course, once you get into a business as an owner your emotions become involved because it's just the nature of small business ownership is you end up putting a lot of yourself into it. But in the end, it was a business decision.

Owning and selling a business is just one more business and life experience that I can take with me to whatever I’m going to be doing in the future.


Jeff: If you could summarize now for us and give us a high-level overview of the process and how it worked and who is involved.

Ed: Okay. The first step for us was after making the decision that it was time was to notify the home office at PuroClean of our intentions. That sort of got the ball rolling. After that we were referred to Morgan & Westfield who worked with us pretty closely. We decided to work with them as the broker. And they helped us a lot in terms of putting together a business summary which is essentially your marketing document or your sales document for perspective buyers.

And then Morgan & Westfield also helped as far as listing the company out on the various sites where businesses are listed. And the home office also helped out as well because they get prospects coming in all the time as part of their franchise development organization.
Jeff: I was just going to say obviously they have a real keen interest in trying to find someone that they'll be able to work with and that they know will do a great job as a new member/owner of the organization and of their own franchise. So they obviously want to find somebody who's going to be able to come in and do just as good a job if possible as you did.

Ed: Yeah, exactly. And whoever the perspective buyer is has to be vetted anyway. So it's not like I could just sell it off to some guy off the street who just expresses an interest on my own. So the home office is a party in the end to the transaction because there's a franchise license involved.
Jeff: What was the role, Ed Ketchoyian, of your wife in this process?

Ed: My wife had a very important role. In fact, she was the most important stake holder since she's also a co-owner of the business. She was very important. She provided the constant counseling and was instrumental in terms of acting as a sounding board in making sure that I'm doing my job. She was important.
Jeff: Then the process, let's get back into maybe just some of the details as we start to talk a little bit more specifically about how the process unfolded. Was this something that required a few weeks, a few months, a year, or two years? How long did it take altogether?

Ed: For us it took about a year just to go through the whole process from the time we started listing the company and having various people come along. We had some tire kickers with various level of interest. But once we had the final buyer or the serious buyer, the person who ended up buying the business have contact with us, that process took about three months. I was just looking at my emails the other day and it was almost exactly three months from first contact to the closing date.
Jeff: And so that was from the time that the buyer was actually located, the person that actually ended up buying your particular franchise, is that correct?
Ed: Yes.
Jeff: Okay, very good. The buyer, was that someone who presented themselves through the franchisor? Where did they come from, actually, Ed?

Ed: He came from another business broker that I had signed some kind of agreement with early on in the process as somebody who could find prospects. That other broker may have been funneling other candidates as well.
Jeff: I see.

Ed: It's sort of like a real estate deal. You have agents for the buyers and agents for the sellers. And this person was provided to us by an agent who specializes in helping out buyers I think.
Jeff: I see. It's not like you were working with that agent before to help you sell your company, but rather you were working with them to essentially find prospect if you would for perspective buyers out there for your company. Were they ever in contact with Morgan & Westfield, the company that actually helped you sell your business?

Ed: I don't know.

To small business owners: “Your identity is not your business. It’s good to keep that perspective and be able to separate.” 


Jeff: Whether agents were in touch with each other or they just came to you directly?

Ed: I think the leads were all funneled through Morgan & Westfield.
Jeff: I see. What was in your view during this process, because you probably had not yet gone through a business sales process before Ed. What was the most stressful part of the entire process from your perspective?

Ed: From my perspective, the most stressful part was after we had gone through the high-level negotiations and we were in the final weeks before close where real money is transacting and being deposited into escrow. A couple of weeks before the close, there's always that feeling or irrational anxiety that the buyer just might change his mind for some reason and just disappear or walk away.
Jeff: It may not necessarily be an irrational fear to some people listening out there because it's obviously very real, it's part of the process. And in fact, someone can get up and walk away. That's well within the right to be able to do that.

Did you feel that you and your wife as co-owners of this business were really prepared as well as you could be for the process of selling your company? Or was there kind of that get ready phase where once you met with Morgan & Westfield you realized there were some things that you had to do?

Ed: Actually, we felt pretty well-prepared for the process — I think from a business point of view. And it felt pretty good for me on the financial and negotiation aspect. That actual exercise of valuing your company is an interesting one. There are different rules of thumb out there that are like if you're in a corporate world where you just look at cash flows and do a net present value. There are different methodologies of doing that. We felt fairly well-prepared. But the other part was that we weren't necessarily prepared for the emotional part. This is more than just a business transaction, so there are certain emotions that came to play at the end that I wasn't quite expecting.
Jeff: Which, by the way, are also the types of things that we have found in our discussions with other business owners which are actually very natural. It's kind of when you feel like you're walking away from a business whether or not you're happy with how the transaction, whether or not you're getting the money that you wanted for your company you're still kind of leaving something behind that was very much a part of your life. Would you not agree that that's kind of the way that it worked for you?

Ed: Yeah, absolutely. Regardless of what your status is in the business or how the business itself is doing or has done, something that put so much of your time in especially after all of our years, about eight and a half years. It's really hard to describe to somebody else who isn't already a small business owner. It’s the expression of having your skin in the game it's just adds a different dimension to things. It's still there when you're on your way out.
Jeff: Ed Ketchoyian, what we're going to do is take a short break and when we come back what I would like to do is really kind of focus on Morgan & Westfield's role in helping you sell your business really from beginning to end where we can talk about the specifics that the company was involved in in terms of helping you get ready all the way through the final process and through the closing of your deal.

I'm Jeff Allen, I'll be back with Ed Ketchoyian. He's the former owner along with his wife of PuroClean franchise in Virginia. And we're going to continue our conversation 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.


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: We're interested to know your thoughts about "Deal Talk," what you like, and your suggestions for how we can make this show even better for you. Send us an email to dealtalk@morganandwestfield.com. That's dealtalk@morganandwestfield.com.

I'm Jeff Allen with Ed Ketchoyian, former owner of a PuroClean franchise in Sterling, Virginia, and we're talking about his experience selling his business and working a little bit with Morgan & Westfield to help him do that. We kind of want to now jump in to once again some of the details following your conversation the first half. We kind of talked a little bit more about things from your perspective. But what we want now to understand a little bit more about is the role that Morgan & Westfield played specifically in helping you sell your company.

Let's talk about it, exactly what did Morgan & Westfield do and you can summarize this a little bit but from the time that you contacted them what were some of the real important things that stood out about what they did for you.

Ed: Well, like I mentioned before the break they put together a business summary document which is the document that contains an overview of the business and financials, and other pictures of the business and equipment and all of that which becomes available to perspective buyers. Obviously that's a really important piece. And that's one of the things that Morgan & Westfield put together.

And so besides providing the actual listing service for the business Morgan & Westfield was available to almost anytime I have a question, providing advice. They provided help and guidance on doing the valuation exercise for helping me determine what price I wanted to list companies for. Ultimately it was my decision but it was very good to have that input.

And then second phase I guess I'll call it or in the final phase that Morgan & Westfield helps a lot in the final phase of putting together the agreement. Morgan & Westfield took the lead in putting together all the closing documents and attachments and things like that that were necessary in order to actually do the asset sale.

And that's pretty much what we had. We did an asset sale of the company or the franchise assets from my entity to the entity of the buyer and Morgan & Westfield put together the contract that enabled that to happen. The way they did that is they had a very detailed questionnaire that I filled out along with the buyer and that was used by Morgan & Westfield to put into some of their templates. And of course some items were customized. And that's pretty much how it worked. It was a very easy process for us.

We felt pretty well-prepared for the process — from the business point of view. But we weren’t necessarily prepared for the emotional part ... certain emotions came into play at the end that I wasn’t quite expecting.


Jeff: Would you call it an efficient process?

Ed: Yes, it was a very efficient process. The people at Morgan & Westfield gave us very quick turnarounds in the timetable that we had and I was pretty satisfied.


Jeff: Let's fast forward just a little bit to the closing process, what role did they play there? Because I know that obviously you are in contact with a lot of these perspective buyers and they were being funneled to you through the other broker and also too of course you had a lot of input from the franchisor. But once you got to that closing table what happened then? What was your mindset like and how did everything go for you?

Ed: A lot of the documents that we had talked through and negotiated points on, we're already completed. And when we were there it was just a matter of signing things off. Again, more like a real estate transaction where you just have a bunch of forms that you need to sign. This was not as detailed if you've ever been through a real estate transaction.
Jeff: What you're saying is it's a little bit more simplified there in this particular instance with you working with Morgan & Westfield to sit down there and get the documents and all the formalities taken care of in order to close the deal?

Ed: Yeah, exactly. On closing day it was more of a crossing the finished line kind of thing and shaking hands, and making sure, confirming checks and wires are being available. But otherwise it was more like a formality once we got to closing day.
Jeff: Let me ask you, in terms of the value that you received from Morgan & Westfield what was it that they did that they provided you with the most value? You came away thinking, "You know what, this was a really good decision."

Ed: I just felt like the overall services were provided at a very reasonable rate or price. It's hard to put my finger on just one thing. It started from the beginning of the relationship with Morgan & Westfield and toward to the end. We paid for different aspects of services that we got. But the value in what was provided was very good.

One thing that Morgan & Westfield pointed out to me which had a lot of value, I guess this could be the most valuable thing was that a lot of these closing documents that they have already been reviewed legally many times and they've already had a lot of legal scrutiny. So that by the time our closing documents were prepared there really wasn't much review needed from a legal standpoint in order to come to agreement. There could've been some negotiation points, again, between me and the buyer. But from a legal point of view the documents were pretty tight to begin with.
Jeff: So you had a lot of confidence going in whenever you receive these documents that all the details were absolutely final and ironclad from a legal perspective. Did you ever meet with anyone from Morgan & Westfield and face-to-face? Was that even necessary?

Ed: No, I never met with anybody from Morgan & Westfield face-to-face and it wasn't necessary. We did all our correspondence by email and phone conversation, and that worked out just fine.
Jeff: It had to work out fine that you didn't have to hope into a car and drive some place. And you were able to do everything, take care of everything right there in the office or wherever it was that you were. Ed Ketchoyian is with us. He is the former owner of a PuroClean franchise business in Sterling, Virginia.

PuroClean, for people who don't know, is a home and business water damage and fire damage restoration services company and they have offices from coast to coast. If you could tell us Ed in just the few minutes that we have left, maybe offer some advice and maybe discuss with us some of the challenges or maybe the most challenging part of this process of selling your business that you will take with you to maybe your next business wherever it is that that might be or whatever it is that you choose to do.

Ed: As far as the process is concerned I think the biggest thing for me is just to have patience with the process. That's probably the advice that I would give to any other person trying to sell their business is that it's not going to happen overnight. And just keep a long view perspective on it.

In the more general sense I like to look at the whole experience of owning a business and selling a business as just one more business and life experience that I can take with me to whatever I'm going to be doing in the future. All of our life experiences end up benefiting us at some point in the future.
Jeff: This is interesting. So the way you're talking about it you're talking about owning a business. In general terms, and certainly with regard to PuroClean here in this particular instance it also just kind of boils down to basically just a step in life's journey for you anyway. That's kind of how you look at it isn't it?

Ed: That is how I look at it. Sometimes it's difficult to do, and I think sometimes for a small business owner as well is to realize your identity is not your business and you're a separate person. And sometimes people feel that their sell value is tied to what it is that they're doing for a living. It's good to keep that perspective and be able to separate.
Jeff: I do want to ask you about your separation from your company and in kind of those final days or weeks in the transition or as the transition was going from the time that you stepped away, to the new owner of your franchise. What was it like working with your employees and the people on your staff?

I'm assuming obviously there was the need to keep things pretty quiet in order to make sure that the sale would go through and that services and work within your organization would go on as usual. How was it for your employees to find out that you were selling the company and that they were then going to have to work for a different owner.

Ed: That was difficult. We were working with the owner for months and we couldn't reveal anything that was going on. We chose not to reveal anything that was going on to the employees. And so we were absolutely certain the deal was going to happen.

For obvious reasons if the buyer were to back out before the deal closed after we told employees there'd be instability and it would just not be a good thing. So we had to wait. And in this case we had to wait until less than a week before the closing date to inform everybody. Everybody was very surprised. Shocked is a strong word but they really had no idea that we were in the process of selling.

There's a lot of uncertainty and people wondering how it affects themselves and their livelihoods. And the message that we gave is the message the buyer wanted us to communicate which is that he really didn't want to change anything that was going on. The people that were there are assets in the sense of they're essential for what the owner wanted to have in place. People weren't going to lose their jobs or anything like that. That was really important to try to get across. Change in general is not a welcome thing.

I never met with anybody from Morgan & Westfield face-to-face and it wasn't necessary. We did all our correspondence by email and phone conversation, and that worked out just fine.


Jeff: No, it's not by anybody at any level. And particularly when you have employees who are used to working for a boss and everything seems to be going along very smoothly. And then all of a sudden you find out there are changes at the top and you've got somebody else new coming in. I can understand that. And I think that we've all been there to a certain degree Ed.

I am interested in knowing what you did or what role you played in the transition from one owner to the next. Were you asked to provide some guidance and consultation to the new owner coming in?

Ed: Yeah, sure. As part of the deal itself I stayed on for 30 days to help with training the new owner. And then it was important to the new owner that stay beyond that or an additional two months to help transfer my institutional knowledge over to them. And also just to maintain business continuity with the business and our relationships with partners and customers out there. I'm actually still there and still working as a contractor toward the next couple of months.
Jeff: That is now but obviously an evergreen program. This'll be heard by people well down the line. Looking back let's pretend maybe it's six months or a year after having sold your business and your two-month stay period, the transition period is over. How do you feel about how the overall process worked selling your business, getting it ready to sell and in selling your company, and moving on into other chapters starting new chapters of your life. Looking back at it, you're happy with the way things went? Are there things that you would've done differently? Just give us your final thoughts there.

Ed: Sure. I'm very happy with the way things went and I'm not sure what I would do differently honestly because I have a clear conscience. I don't have any special wisdom to add here at this time.
Jeff: You are definitely in the top 1% because there are so many other people that we've talked to who've had things to say about different things that they might have a little bit differently in order to maybe make things smoother or what have you. But you definitely do sound like you're very clear on that key point.

I guess the real final thought here as I have some seconds left on the program in order to wrap up. If you could give one piece of advice to a business owner who is planning to sell his company and maybe it's not necessarily tomorrow, or next year, or even two years from now, but they do have it in their mind to sell their company at some point and that they plan on building their business for the purpose of selling it. Having gone through the process of selling your own business what piece of advice would you give?

Ed: I'm going to go back to something I said before. It's the patience thing. It's a business situation, it's a business transaction and try to approach it that way. And, again, try to maintain as much patience as possible as you're going through it. Valuing your company can also be an emotional thing as well, obviously.

And I think the important thing here is that as you go through the process there are certain things that may or may not happen in terms of say, if a buyer shows up and they say or demand some things that may seem totally unreasonable, or might be in some ways even insulting depending on how you want to take it. You just have to keep your eyes on the prize so to speak and keep your eye on the goal that you want to accomplish.

If your goal is to sell your company at a price that you're happy with you have to be able to move beyond little bumps on the road that might distract you from getting there.

Jeff: Really simple words of advice from Ed Ketchoyian, patience in looking at it as just kind of a business deal or scenario not to be taken personally, one to be taken certainly very seriously for sure but all the more reason that we need to have that patience and be able to rest on that. Ed Ketchoyian, such a pleasure to chat with you my friend. All the best of luck to you in the future and congratulations on the successful sale of your business.

Ed: Thanks Jeff. Good talking to you.
Jeff: Good talking to you too, sir. Thank you so much. That's Ed Ketchoyian, now the former owner of a PuroClean franchise, Sterling, Virginia has been our guest to kind of share his thoughts and his perspective having just gone through the business transaction process.

"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. Again, 888-693-7834. For Ed Ketchoyian, I'm Jeff Allen. Thanks again for listening to "Deal Talk." 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

  • Business owners can get wrapped up in the day-to-day activities of running their business and neglect to plan for their eventual exit.
  • Having a strong second in command is important, because a buyer will look to see if there is someone in place who can run the business when the current owner exits.
  • If you’re getting started planning an exit strategy late, you might not get everything accomplished, but it's important to do a diagnosis to determine the big issues that you could move the needle on to increase value.
  • If you have too much customer concentration, you raise risk and lower value.

Read Full Interview

Jeff: Planning your exit can be difficult to do when you’re busy trying to grow your company and run your business. So if you haven't given it much thought and you kind of need a little help getting started, 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.
 
Well, you've heard us talk about it on this program before, the all-important exit strategy, planning your exit. It's so important to do. But let's face it, many of us are in our businesses because we love it, because this is our life. We can't imagine ourselves doing anything else. We're paying bills, we're trying to grow our companies, we got a lot to think about. And yeah, OK, we've got a loose idea for the process that we're going to have to go through to move somebody else into our position when it's time for us to hang it up, or when it's time for us to sell our company, if there's nobody to succeed us currently in our organization.
 
And because of that, quite frankly, we don't give it any thought and we sometimes need a boost. We sometimes need some motivation. We need some inspiration. We need someone like Bob Kroon to come by and give us a little talking to. 
 
Bob Kroon is an executive coach, mentor, adviser and business owner himself. And we're going to talk to him today about something very, very important indeed, and that is getting started. That is the reason that planning your exit strategy now is so crucial not only to you but to the other folks on your team. Bob Kroon, welcome to "Deal Talk," sir, it's good to have you.
 
Bob: Thank you, Jeff, and thank you for having me. 
 


Jeff: We appreciate your valuable time today. And, Bob, like I said before, we've talked about this issue on our program. But I know that as an executive coach and someone who is really involved very heavily in helping managers and business owners improve their own performance, make them better leaders, and give them more to think about than just simply the day-to-day operations of your business, you feel very strongly about this particular subject.
 
How can having, Bob, an exit strategy in place actually help to improve the value of your company? Because that's something that we really like to focus on here on "Deal Talk," all these various ways that we can work toward improving the value of our organizations.
 
Bob: The value really comes down to reducing risk. The lower the risk the higher the value. That sounds overly simplistic. But if you have too much concentration with customers you raise risk, you lower value. If the business depends on a key person, maybe the owner, and they have too big a role in the business, that raises risk and lowers value. 
 
So it's really about walking around your business plan and looking things through that lens of risk versus valuation.
 


Jeff: And so it sounds to me that by having that exit strategy in place, having something that's fairly concrete, something that's well planned out, you are helping to stabilize potentially, Bob, correct me if I'm wrong, the future of your company. There is less uncertainty because you have a plan in place. Perhaps it's part succession plan. 
 
You've got a strong number two there in charge who is going to pick up the ball and run with it after you leave. And having that strong second person in charge there, or having the objective in mind of selling your company three to five years in advance, and knowing for sure where you're going to go. That just, like you said, reduces that risk, reduces that certainty, and provides that stable base underneath you that eliminates a lot of the concerns, and perhaps an even reduction in the value of your company.
 
Bob: Oh, I agree. A strong number two, it could be important two ways. One, that might be the person you sell the business to, the one you finance to. And if you are financing their purchase because you carry equity, you want to know that they're going to perform, that they're going to run the business to your benefit. 
 
But on the other hand, if it's a financial buyer, let's say, who really doesn't get into the operations part, their diligence is to look to see if there's someone inside who already can run the business. So having a strong number two is really important.
 

When we coach owners we try to understand their personal goals as well as their professional goals. And we value the personal goals slightly more than the professional goals. We never want to advise something professionally that damages your personal goals.


Jeff: Executive Coach Bob Kroon joins us today on "Deal Talk" talking about the importance of planning of your exit. When it comes time at the end of the day you're ready to leave, how important that is to your company right now in fact to have the exit strategy in place.
 
Bob Kroon, let me ask you, what are a couple of the biggest roadblocks that business owners face that may delay or prevent planning for exit?
 
Bob: For many they're involved in the day-to-day. Planning for an exit is not something you do in six months or two months. You hear owners sometimes say, "I'm not ready to sell the business now but maybe six months from now I am." That's not true at all. Sometimes these issues take years to unfold and develop. And an exit plan that is on a short timeline isn't much of an exit plan. 
 
And owners get involved in the day-to-day and wrapped up in that and don't stop to think about what they have to do. I understand, time is valuable here. Many of them are working 60-80 hour weeks already. It's hard to get away from your business to work on it rather than work in it.
 


Jeff: Boy, that's for sure. And I can just see all of the heads nodding right now as we're talking here, Bob, and that is true. For me as well, you don't for whatever reason always seem to have that sense of urgency about your future down the line as much as you might have about the importance of getting that order out, or calling that important client that you haven't heard from in some time. And making sure that you take care of all these other little details, things that you have to, the emails that are flooding your inbox. So I agree with you 100%. 
 
Let's talk about, Bob, any differences that there may be out there. And as far as the philosophies and the way that they handle their business between Gen Xer's, millennial owners, and baby boomer business owners who may be running their businesses trying to maybe to continue to grow their businesses, or in the case of maybe baby boomers right now on the verge of making a decision whether or not to retire or sell their companies. How have you seen based on your experience the differences between the various generations and how they handle their business, and plan for their exits? Anything that you can share that some of us older guys might be able to learn from?
 
Bob: This has been very fascinating to me. Having the chance to talk to many business owners I start to see patterns. Now, I'm a baby boomer myself, so I get to say this, I get to be critical. But I'm really bothered by the baby boomers. And not all of them. It's unfair to say that. 
 
But the trend I see is many of them have been in business a long time. And either they're happy or satisfied with where they're at and unwilling to take a risk at this point or take any chances with their business. Or they're jaded, tired, discouraged, and their view of the future is that I'm just going to shut this business down. 
 
I talked with an owner last year. He'd been in business. He'd made it through the '81 recession. He'd made it through the '91. He made it through the .com recession. He made it through the '08 recession. He had about a 30-employee business, a pretty good sized business. And I said, "Where are you headed next?" "Oh, next year I'm just going to shut this down." I said, "Really? You made it through all of these recessions and you were smart enough to do all of that. And now you're not smart enough to find a way to exit in a different way?" I was discouraged by that.
 


Jeff: Did he not understand the reward behind leaving in another way? Making sure that the business could continue, but under the control of somebody else who is extremely capable and could continue to grow the organization?
 
Bob: I would've thought that. But he wasn't the only one. I used him as an example, but I've seen others that maybe it's their frame of mind. They just get to a point where they're tired and they just don't want to work on it anymore. Maybe it's an emotional thing. And it just seems too much work to them at that point to create an exit plan.
 


Jeff: Do you think the millennials and the Gen Xer's are going to be any better prepared? What can they learn from the baby boomers' mistakes?
 
Bob: Well, the Gen Xer's, they're more interesting in another way. Sometimes I pose the question to them. The industry you're in, is it expanding or is it consolidating? And their industry is a little more mature. It's likely consolidating. And so in that picture are you a buyer or are you a seller? 
 
And they tend to see themselves as a buyer. They're more aggressive. They want to grow their business either organically or through an acquisition, and they'd consider either. There's a different perspective.
 


Jeff: Very, very interesting.
 
Bob: The millennials, they see the world of business through a computer. And they want to be entrepreneurial in a destructive way. At least here, I'm in the Bay Area. A good portion are foreign born and very smart, extremely smart, and that's how they got here in the first place. 
 
And they put together very disruptive business models, and not so much interest in buying old smokestack business. They're more interested in starting something that can be more disruptive. They'll live in their car. They'll share roommates, whatever to get to that point. And they're not well-financed but they have a very big vision.
 

The value really comes down to reducing risk. The lower the risk, the higher the value.


Jeff: It's a new world as we all know, Bob. And we're going to continue to see changes I think as we go through and maybe it's true. Maybe some of us older guys, you and I can learn something from these young whippersnappers about their business. But I tend to think that maybe they may fall prey to some of the same habits. And one of those habits might be simply taking and focusing too much on the here and now and what we have to do right now or within just a couple of weeks rather than what we need to focus on 20-30 years down the line in order to get ready for that transition somewhere down the line.
 
My name is Jeff Allen. Bob Kroon joins us today on "Deal Talk," executive coach, mentor and adviser. We're talking about the importance of planning your exit. We talked about it before but not quite in the same way. We're very glad to have Bob with us. 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: Don't forget when you listen to "Deal Talk" at morganandwestfield.com. It is the only one of our four channels where you can actually get the full transcript of the program. So in addition to the summary there, you can download the PDF for the full transcript of the show. So even if you can't finish for whatever reason listening, you can print out that transcript. You can look at it later when you're on your lunch break. Or of course you can just keep that for easy reference for some of the key points we've discussed on the program if you want. 
 
Of course, with all of our channels you can hear this program on. We're really convenient. We fit very nicely into any portable device you might have, whether that be your iPhone, your smartphone, Android, your tablet, your iPad. It doesn't matter where "Deal Talk" is portable, convenient and, of course, in the written form in our transcripts available only at morganandwestfield.com.
 
My name is Jeff Allen with my guest today Bob Kroon, executive coach, mentor and adviser talking about the importance of exit planning or planning your exit strategy as a business owner really regardless of where you are in the stage of the ownership of your business, whether you're talking about early stage startups, or you're kind of somewhere in the middle, or maybe even in that twilight stage of your business career as far as an owner is concerned.
 
Bob, that's kind of where I want to camp out right now, and maybe they don't have a comprehensive exit strategy planned out for themselves. But they still know that, "You know what, I'm getting tired. I've got other interests. I want to do some fishing or I want to go and do this in about another two or three years’ time." They want to sell their companies in two or three years. They don't have a comprehensive or well thought out exit strategy. Is it too late to put something together?
 
Bob: You might not get everything accomplished, but it's important to sort of do a diagnosis. What are the big issues that you could move the needle on? Maybe it is finding and hiring that number two, and getting that in place. Or maybe if you could acquire one or two more customers to diversify your sales base, that would help. If there's two or three years left, identify a couple of big things that you could do to move the needle to increase value. 
 


Jeff: Bob, we had a very exciting guest on the program in the name of Bo Burlingham, the author of the best-seller “Small Giants: Companies That Choose to Be Great Instead of Big.” And then he came out with a follow-up as you well know, “Finish Big.” 
 
And he profiled a number of businesses and their owners, those owners who sold their companies. And half of those owners he found were just delighted. They were happy. They went off doing other things. And the other half felt empty. They felt like there was a void in their life after they sold their companies. And partly because of the fact that in many cases they were so emotionally attached, their businesses were part of them. It was actually part of their soul, if you would. In some cases their entire soul, I guess you could probably look at it that way.
 
How can we begin to detach ourselves emotionally from our companies to make it a little bit easier to plan our exits, to move forward with our exit plans to sell our companies and get on with our lives after our businesses?
 
Bob: I think the easiest way for me to think about this is to put yourself in the shoes of a buyer, pretend yourself to be a buyer of the business. And a buyer... I like to say sometimes it's a messenger. And the message they're bringing you is how much money they can raise. It's often very difficult. 
 
Potential buyers, if they're an individual, don't always have the personal wealth that might support what is required to buy your business. So they have to rely on loans or other investors or partners that they bring into the deal. 
 
And so the message they bring you about the price or value of the business has to do with the money they can raise. And emotionally you may feel very strongly about the employees you've hired, maybe the machinery or buildings you have in the business, and the equipment you've purchased. And you see that is value. But if it isn't creating cash flow the buyer can't pay for that what you may have paid in the first place.
 
I'd like to encourage sellers to see through that lens of if they were buying the business how much money could they raise and look at it that way somewhat dispassionately.
 


Jeff: It beautifully blends into my next question, Bob. How can we really change the way that we think or how we view our businesses? You talk about looking at it from a higher elevation, from the way that buyers look at it. But it's not always that easy. It may not necessarily be that cut and dry. How else can we kind of, in the grand scheme of things, put us in an exit mindset? 
 
Is it something as easy as looking through books, magazines, and I'm talking about the old fashioned way. Sometimes they tend to be a little bit more inspiring than going online and looking at things in kind of a viral sort of environment. But is it a matter of trying to find new hobbies and new interests to kind of pique our level of interest and send it off into a different direction to take our minds off of our businesses a little bit?
 

If all you've ever done in your life is run the business 80 hours a week, of course there's nothing to do after the exit. And people feel lost at that point.


Jeff: What other kinds of things might you be able to suggest that help us get into this future planning mode to do other things to take those next steps in our lives?
 
Bob: Back up a little bit. If you're putting 60 or 80 hours into the business every week, there's probably not enough time for you to develop any outside interest or passions. And so if you do that up to the last day and then you exit, then what do you do with your time? 
 
Some years earlier if you can find a way to manage the business by putting less hours into it that gives you a spot personally to develop some other kind of passions or causes that you want to support so there's a place to go after you exit. If all you've ever done in your life is run the business 80 hours a week, of course there's nothing to do after the exit. And people feel lost at that point.
 


Jeff: By the way, Bob, let me ask you a question. You're touching on something very interesting, and it kind of strikes a chord here. I think a lot of people would probably agree with this. I hope that some of them do anyway, that when you are the owner of a business you tend to more often than not put your business ahead of yourself. 
 
And you might think it's one in the same really. The business is me. I'm the guy who runs it. My face or my name is on the door, or whatever you want to say. But the fact of the matter is as we end up spending a lot of time working on the brand of our business, trying to heighten its credibility and build its integrity, and we want everybody to know about it. 
 
But isn't it true then based on what you say that if you try to spend a little bit more time on yourself when you can, taking those few spare moments that you have to discover some new areas of interests, some new passions, some organizations that you want to help, that maybe you want to sit on a board, for example. 
 
That in turn can actually enhance our own reputations, can actually build our own self-images, and that projects outward. Our reputations become more widely known throughout the community as identified with us as individuals personally. And that could actually build our own brands, build our own value as people that could open up some doors after we decide to sell our companies, or after we leave. Isn't that possible?
 
Bob: Absolutely. There is a demand for the experience that someone may have in their business. You can serve on a board. You can be someone else's mentor. You can help your children in their business. There's places to go. 
 
When we coach owners we try to understand their personal goals as well as their professional goals. And we value the personal goals slightly more than the professional goals. We never want to advise something professionally that damages your personal goals.
 


Jeff: Very, very good. That is a great, I think, remark to kind of lead toward what unfortunately now is kind of the end of the program. Our time is short there, Bob. Any couple, two or three takeaways you can leave us with before we close things out on this edition?
 
Bob: I think that it's really important to think through how a buyer might do diligence on your business and put yourself in those shoes. I think it's important to assess your own values. I've experienced people who've committed fraud or other things. There's no place for that in this. The other takeaway I would have is, and this comes to things we talked about earlier, is to plan this well in advance. 
 
And in many ways, the very first day you start your business should be the very first day you think about selling your business. And created as something that will be passed on or sold later. And don't get wrapped up totally in the day-to-day.
 


Jeff: We've heard this before but it bears repeating, Bob. And certainly you bring a tremendous amount of weight to this particular subject with your experience and all. If anyone would like to get in touch with you, Bob, about their particular situation and talk to you about ways that you might be able to help them with their questions, with all the experience that you have in executive coaching, how can they reach you?
 
Bob: A couple of ways. I have a very extensive LinkedIn profile. You can find me there under Bob Kroon. I also have a website, expeerious.com. Either of those would be, you can find easy ways to connect with me through those.
 


Jeff: Bob Kroon, this has been an outstanding conversation. I really enjoyed it, having you as a guest for the first time here on our program. And hopefully in the future we can catch up with each other and have you back on again.
 
Bob: Thank you, Jeff. I appreciate it.
 


Jeff: That's Bob Kroon. He is an executive coach, mentor and business adviser, and we're very glad once again to have had him on the program today. I hope that you enjoyed the conversation as much as I have. So I appreciate once again your tuning in to "Deal Talk." In addition to morganandwestfield.com, you can find us on 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. My name is Jeff Allen, thanks so much for listening. 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

  • In order to avoid being surprised by the value of your company when beginning the process of selling your business, start the valuation process early and continue to have a business valuation every couple of years so.
  • A business is less desirable to buyers if it relies on one or two vendors, or one or two customers.
  • Reducing the areas of risk in a business will increase its value.
  • Ways to cut expenses, without jeopardizing revenue, and show the highest earnings possible include adjusting officer compensation to industry standards, putting a management team in place so that customers are not dependent upon one or two key employees and broadening your customer base. 

Read Full Interview

Jeff: The results of a business appraisal can be surprising, and sometimes even shocking. If you want to learn how to improve value after a less than desirable appraisal, or how to avoid shocking results in the first place, 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 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 that information to help you build your bottom line and improve your company's value.
 
What's all the big deal then about business appraisals and valuations? Well, sometimes we found out that oftentimes we get those calculations back and they are far less than we expect. At least they're different anyway. Sometimes they're maybe a few thousand or a few $10,000 off what we kind of expected in other times, for most of us anyway. Those folks who order valuations are often mystified by the gap, the difference between what you believe your business might be worth or might have been worth, and what your valuation consultant says. It actually is in fact worthwhile. 
 
I want you to stand up and take notice, or sit forward and take notice of this program, because it is in fact for you if you have had a valuation in the past that did not meet your expectations. And you're not exactly sure what you need to do to bridge the gap between the information that you got back and where you think your business needs to be. And this is particularly important if you have designs on selling your company sometime in the next few years.
 
Here to talk with us all about this particular subject, Matt Turpin. He's joined us in the past here on "Deal Talk." He's a CPA licensed in Florida and Alabama, and also a certified valuation analyst with Carr, Riggs & Ingram, LLC. Mr. Turpin carries additional designations, including certified mergers and acquisitions professional, and chartered global management accountant. Matt Turpin, welcome back to "Deal Talk." It's good to have you back on the program.
 
Matt: Great to be back, Jeff. Thank you for having me.
 

Jeff: Well, it's good to hear the gentleman with the Southern draw back amongst us here and providing his information that we have really been looking forward to you sharing, Matt. I get these numbers back, and the first question that pops to mind, well this can't be right. How do I know that these in fact are right? How do I as a business owner know, Matt, that the valuation that you've calculated for me and my business is in fact complete and accurate?
 
Matt: That's a great point, Jeff. The quickest way and probably one of the easiest ways is to look at the valuation report. Is the valuation report under the guidelines of a governing body such as the National Association of Certified Valuation Analysts, or NACVA? Or is it under the American Institute of Certified Public Accountant, the Accredited Business Valuator Designation, or the ABV Designation? Those are just two of the designations, but probably the most common when it comes to a CPA-backed valuation credential.
 
We have guidelines and standards that we have to follow in preparing a business valuation. You're right. A lot of business owners, particularly member-managed businesses, are not particularly thrilled when they see the results of their business valuation. So the best way to not be surprised is to start that process early and fairly regularly, or often, to have a business valuation every couple of years so that you are not surprised when you see the value of your business. 
 
I tell potential clients this almost every meeting. If you are a business owner that is relying upon your business for your retirement, if you had a retirement account with one of the large financial institutions, you would get a monthly if not an annual statement that shows the value of your retirement plan. If you're using the sale of your business more importantly as the indicator of when you can retire, or that money will be used for your retirement, it would be questionable not to have a valuation done every few years, so that you do know the value of your retirement.

There are no two businesses that are alike.

Jeff: Is it flawed thinking on a business owner's part, Matt, to believe that, OK , I get this calculated value here and I'm not exactly thrilled with it. But I'm inclined to believe that I can get more for my company than what these numbers are telling me I can get. Is that wrong for a business owner to think that way and would they in fact be making a mistake by listing their business at a figure that is much higher than that valuation that you've calculated for them?
 
Matt: The answer to that is probably yes and no. The business owner can list or can ask whatever price they think the business will cost it to for a sales transaction, much like a house. 
 

Jeff: OK.
 
Matt: The issue is if you have a strategic or a financial buyer, there are certain things called synergies. If a competitor wants to buy another competitor, there may be economy, the scale, where the two businesses combined can make more money than the two business separate. So that's your financial or your synergistic buyers. 
 
In those types of situations, yes, absolutely. There would be a situation where the business could sell for higher than the calculated value. In other situations where it would be a top lieutenant in the company that's buying out the majority shareholder, there could other factors or indicators that bring that value down. 
 
Say, for example, a dentist practice. If a dentist has the key relationships with his or her patients, that really does restrict the value in "handing the baton over." Any type of service industry has that risk of when you sell your business, the customers, patients, clients will not automatically transfer over to the new owner. So that is your risk in selling for less than what the value has arrived at.
 

Jeff: Joining me again today is Matt Turpin, if you're just kind of listening over someone's shoulder. He's a CPA and CVA, certified mergers and acquisition adviser at Carr, Riggs & Ingram, LLC. Joining us for the second time, today on "Deal Talk." My name is Jeff Allen. 
 
Matt, why is there such a gap between what I had estimated the value of my company to be and the number that you calculated? Where do most of those differences lie?
 
Matt: Jeff, most of the differences lie between the, it's what's called discounts. It could be a discount for lack of marketability, which, if you're a member-managed, or traditionally what we've known as a smaller business, you've got discounts for lack of marketability. This is not a business that can be bought and sold on a publicly traded market much like the NASDAQ or the New York Stock Exchange.
 
So you have a discount for lack of marketability, which can range anywhere from below 20% up into the high 30s, maybe even 40%. If you go along RS regulations in determining fair market value, that would reduce the value of the company. You also have a discount for lack of control. If you're selling less than a majority shareholder position or ownership position, which would be 50% or less, then there's a discount that needs to be applied because the buyer does not have control of the cash.
 
The biggest reason why there will be a gap between perceived value and what we could call actual value, which would be the value that's derived from a business valuation engagement, is going to be the capitalization rate. A capitalization rate is going to be the inverse of a multiple. A lot of people are very familiar with the multiple. 
 
Let's say if I have a company that's grossing a million dollars a year in revenue, I want to use a multiple of three to sell the business, I would put just a wild guess in the air saying that the business is worth $3 million. Capitalization rates build up to an actual indicator on what to take, the quality of earnings, which is going to be your income after true business expenses. 
 
There are a lot of situations where you get higher than industry average officer compensation. And you may be paying family members through the business that don't actually work day-to-day in the business. Those are normalizing adjustments to arrive at a quality of earnings from the business operations. You apply that number to a capitalization rate. And that capitalization rate is going to be built up at different risk factors. For example, somebody was going to spend a million dollars either putting it into a CD or some safe investment vehicle, it's a much lower risk than going out and buying an operating business. 
 
So you have different risk factors that's going to be just the general risk of buying the equity of a stock. You've got the general risk of buying a small company and you've got the specific company risk, meaning the company that a potential buyer is looking at for the subject company, and when I say subject company, I mean the business that an individual is looking at buying. 
 
Or if an individual selling their business, what is the risk associated with selling that business? Are there key employees that really produce a lot of the income or create a lot of the customer loyalty, that if those key employees were not there it would seriously affect the revenue of the company?
 
When you look at these factors that create the gap between a business owner's perceived value, a lot of times you talk to a business owner and they've already got an idea in their head of what the value of the business is, whether that's through talking to competitors, or talking with peers in the industry for multiples, or reading industry periodicals that tell you this is what the business should be worth. There are no two businesses that are alike.
 
That can go either in the positive or the negative for the business owner. If I'm a business owner, and actually, Jeff, this is what got me into business valuation, is I had a client that was very profitable, had a very well-oiled machine in his business. And he was offered, I can't remember the exact number … let's say three times his revenue as a multiple to sell his business. 
 
My first question was why not five as a multiple, why not six? Who made the rule that it's got to be three, particularly in this kind of business because he didn't have to work the business. It was just a residual cash flow to this individual. 
 
So when you talk about multiples and how much of my business work based upon a multiple there may be two businesses in the same industry, whether they're competitors or not, it doesn't matter in this example. But one business may be worth two and three times as much as the other one because there may be systems in place, you may have a better management team. You may have a better financial structure. You may have better financial margins. You may have, whether it's longer contracts, the options are limitless of why one business in the same industry values differently than another business in the same industry.

I tell potential clients this almost every meeting. If you are a business owner that is relying upon your business for your retirement, if you had a retirement account with one of the large financial institutions, you would get a monthly if not an annual statement that shows the value of your retirement plan.

Jeff: I'll cut you off there because you've thrown... I'm putting myself in the place of a business owner who doesn't have a CFO or an accountant who can really help them understand the weight of what you're talking about, because there's a lot of the terminology here and some things that I think a lot of people probably may not have a very strong understanding of. 
 
But really, who is the person, who is the professional that I would talk to who would be able to help me, or help my accountant, or CFO, or whoever? Actually assign the multiple that we believe would provide us with an accurate valuation for how much our business could be worth if in fact we have designs on selling this or becoming involved in maybe an M&A deal of some kind in the next three to five years?
 
Matt: Jeff, I'm a little bit biased, but it would be best to use an individual that has a designation in business valuation.
 

Jeff: OK.
 
Matt: Because they're going to have industry data across the board. Not just a few industries but data across the board that not only do you arrive at a value independently but we also have access to databases of what we call a sanity check. 
 
If I arrive at a value, just an example, of a dental practice and come up with $2 million as a value, based upon cash flow and earnings, I have access to a database that says either I'm on base or I am way out of my league based upon transactions that have happened in the past.
 
Again, no two companies are alike, but that's what we call a sanity check, like a rule of thumb that says, "This is my valuation. It is well within an industry norm based upon the transaction that'll happen." Or if the company is strong enough, whether that would be your management team's financial history earnings, then can this company require a higher sales price because they're stronger than the industry or stronger than actual transactions that have taken place?
 

Jeff: What have you found to be probably the most common range of multiples that might suggest that a company has performed well and is selling at or better than market value?
 
Matt: Jeff, you're going to see capitalization. It's going to be anywhere from 20% to maybe even 50%. The lower the capitalization rate the higher the price. In terms of multiple, a capitalization rate of 20% would mean a multiple of five. That's how many times it could fit into a hundred. 
 
A capitalization rate of 20 equals a multiple of five. A capitalization rate of 50 equals the multiple of two. So it's going to depend on the business itself. Largely it does depend on the industry, because that's the track record that an industry specialist is going to go off of.
 
Matt: Anywhere from 20 to 50, which is going to be a multiple of two to five.
 

Jeff: OK. Have you ever seen anything higher than that?
 
Matt: Oh yeah. In certain industries you may have a multiple of 10. 
 

Jeff: OK. And that's a nice pay day right there.
 
Matt: Yes. It really is a nice pay day. There's a lot of factors that built up into that, but most of the factors are built around risk. What is the risk of purchasing that company?
 

Jeff: Matt, I'm going to take a short break, but when we get back what I'd like to do is I'd like to start to get into over the part of the conversation where we start to talk about the types of things that we might be able to do to, kind of, get that valuation moving in a better direction to kind of close that gap between what we assumed our business might have been worth and what a professional such as yourself is telling us our business is actually worth based on his calculations and going through.
 
I'm going to continue my conversation with Matt Turpin on valuations and how you can now close the gap or start thinking about ways to close that gap between what your expectations for your company's value was and what it could be 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 can listen to "Deal Talk" on Stitcher, Libsyn and iTunes. And we also have a fourth channel for you, morganandwestfield.com. That is the only place where you can listen to the show and get the complete show notes to go along with it. So of course you could read along with every word that you hear us talking about here on "Deal Talk" while you're on the morganandwestfield.com website. 
 
Or simply take and print hat PDF out, copy it to your machine, save it for later. You can come back later for easy reference. In that way you've got it all in writing. Some people think it's easier to take that writing with them depending on where they want to go or if they want to share certain key parts of our conversation with a friend or a colleague. 
 
Once again, that site is morganandwestfield.com for not only the podcast but the complete show notes. My name is Jeff Allen, joined once again today by Mr. Matt Turpin, and he's really an expert in the area of M&A but specifically having him on today to talk about valuations. 
 
We want to aspire, I think, really Matt, to reach a valuation that we're pleased with and one that would stand up during the sale of our business. So how do we start to bridge that gap and get from where we are, reality, to where we want to be, which is what we might consider ideal later on?
 
Matt: That's a great question, Jeff, and a question that we address quite often. Typically I suggest that business owners have a five-year plan to sell. Don't just decide that next year you're going to sell. Because there will be that shock of what the perceived value is and the price that the business could actually demand on the market. 
 
Of course this list is not all inclusive, but we've all heard the term “cash is king.” And that is true when it comes to most business valuations. You want to have the highest quality of earnings as possible that your business can earn. When Is say quality of earnings, meaning income minus your actual business expenses. If you've got a business that doesn't really require you to travel yet you've got some travel in there, of course that reduces your earnings. 
 
Taking a three-year, forward-looking approach on cutting expenses that can be cut without jeopardizing revenue and showing the highest earnings as possible. Of course, that's going to be the hardest thing to do but the easiest way to increase value. You could adjust officer compensation to industry standards. You can put a management team in place so that customers are not dependent upon one or two key employees. You can broaden your vendor base if that's applicable to your business. You can broaden your customer base. 
 
Nobody wants to buy a business that relies on one or two vendors, or one or two customers. Again, that goes all into the risk of buying the company. If I can cover it with an umbrella, the main objective in growing the business value would be to reduce the areas of risk in your business. Of course, that cannot be eliminated 100%, but reducing those risks of a potential buyer is going to be increasing the value of your business.
 

Jeff: I'm sure that you've probably gotten questions like this before. We're all human and some of us have some questions that quite frankly you might roll your eyes at from time-to-time after a while, Matt, someone in your position. 
 
When you have a chance to advise a company about maybe on plans that they have about moving forward with a sale or preparing their company for a sale and things have not been going well admittedly. The proof is in the numbers. And things have been tough the last couple of quarters, the last few quarters, and you've got someone, a CEO and his team have put in a lot of long hours into their business. 
 
Doesn't sweat equity account for something? When it comes to you going out and looking at this company and providing a comprehensive valuation. Is there any possibility that there's some kind of value that you can assign to effort? I don't know how else to put it.
 
Matt: That is a very popular item.
 

Jeff: I thought so.
 
Matt: When you talk about sweat equity, if that's what equity has generated, cash flow, yes, of course. But you're measuring the cash flow, you're not measuring the sweat equity, because that's when equity has turned into cash flow. If you look at sweat equity alone, somebody putting in long hours and is not producing any results, then there's no other answer than, no, the sweat equity does not generate value. But if that's what equity turns into, relationships, potential contacts, let's say a deeper vendor base, a wider potential customer base, another product, then, yes, that's when equity could be of value, and it could be of value to a specific buyer.
 
There is no flat line answer. No. Sweat equity does not generate and give value because sweat equity can’t generate value.
 

Jeff: I've got just a couple of moments left here, Matt, in the program today. What is wrong with the ideology that I can improve the value of my company by strictly going out and just working harder to generate greater revenue? If I go out and I increase my revenue by 25%-35%, doesn't that take and translate to something similar in terms of value later on?
 
Matt: It can. It depends on how much you've had to spend to generate that increase. If you've had to spend more on advertising, if you had to spend more in commissions. If the bottom line, so to say, is not increased, then there could be a situation where you're just spinning your wheels. If it does create a greater economy of scale, where an increase in revenue decreases the overall percentage of expenses or a certain expense classification, then absolutely it can help.
 

Jeff: Matt Turpin, I appreciate your time on the program today. No doubt there are business owners in your neighborhood, those listening to this program right now who might want to get in touch with you to talk about their particular situation, how can they reach you?

Typically I suggest that business owners have a five-year plan to sell. Don't just decide that next year you're going to sell. Because there will be that shock of what the perceived value is and the price that the business could actually demand on the market.

Matt: Sure. They can reach me through my email, which is mturpin@cricpa.com. They can reach me at 850-337-3241. They can also go to our website, cricpa.com, Carr, Riggs & Ingram. There are a number of ways. You can also find me through the National Association of Certified Valuation Analysts. I'm in their database there.
 

Jeff: And that means that you're pretty good, and we appreciate you, Matt, for making time for us in your schedule before you head on out for the day. It's been a pleasure, and we look forward to having you again on our program at some point in the future. Thank you.
 
Matt: Thank you, Jeff. I always enjoy talking with you.
 

Jeff: That's Matt Turpin, CPA, CVA and a certified mergers and acquisition adviser at Carr, Riggs & Ingram, LLC. 
 
Let us know how we're doing on "Deal Talk," won't you? We would 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. Again, 888-693-7834. 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

  • Sellers need to be cognizant of the fact that acquisitions can be very messy to the employees.
  • When looking to sell your business, it’s important to bring in a third party to have them look at the company as if they had never heard of you before and ask a lot of questions that you might take for granted.
  • Buyers need to be sensitive to the fact that if they take up all of the owner’s time, the business is going to start deteriorating.
  • Approaching your customers early on as part of the preparation for a future sale will allow you to gauge their potential reaction.

Read Full Interview

Jeff: What does a perspective buyer you haven't even met already know about your business? How much should you know about them? If you've ever wanted to be a fly on the wall at an M&A firm to know how buyers and sellers can do a deal or ruin one, 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.

Whether or not you are kind of making motions toward selling your company or divesting part of it, we do want to go ahead and bring you some of the wisdom and thoughts of a gentleman who has been in the trenches. He has been involved in a number of different M&A activities in the past, and he's going to be able to share some of his viewpoints and perspectives from both sides working with sell side and buy side, kind of from that 30,000-foot level. 

And we'll also kind of try to zoom in on some specifics with Ed Murphy, former Senior Vice President of Strategic Transactions at SAIC, and now enjoying retired life in America's finest city of San Diego. Ed Murphy, nice to have you. Welcome to "Deal Talk," sir.

Ed: Thank you, Jeff. Nice to be here.

It's a sensitive process, but we focus a lot on integration. And it's not easy. It's hard to get it right, because you don't know everything that the seller knows.

Jeff: It's nice to have you, and I really do appreciate your taking time out from some of your hobbies to talk to us, because we have found on the program and in the past that a lot of really interesting observations, perspectives if you will, and thoughts on M&A, and the kinds of thoughts and input that can help business owners right now maybe prepare themselves for selling their company at some point are of particular value because you've been doing this for many years.

So what I'd like to do is kind of start by having you tell us a little bit about yourself, where you've been and just exactly what kind of experience you've had in this area.

Ed: Sure, Jeff. I was with SAIC for about 30 years. I had two jobs before that. But SAIC was an employee-owned company. I was there probably from about 150 million up to when I left there around 10 billion. And it started out as employee-owned. By the time I left it was a public company. And the last 20 years of my time there I did mergers and acquisitions and headed up a department in the last many years.

So I kind of saw a lot. We did small deals, we did deals with smallest, half a million to a million bucks. And we did deals in the hundreds of millions of dollars. And I've done deals, managing the deal directly with the principal. And I've dealt with JP Morgan and Goldman Sachs, so sort of all over the map. I have seen a lot but I have not seen it all, Jeff.



Jeff: That's fair enough, and I appreciate that. From a business owner's standpoint, they think that they have really kind of done everything that they need to do in order to get their company ready for sale. Maybe they need to leave quickly, maybe they've got another 10 years on their horizon to be able to make certain improvements. And we're hoping by some of the information you're able to share with us that it will speak to those folks who down the line know that they're going to be offering their company at some point and try to get the best value for their company that they possibly can. 

From your perspective involved in past M&A deals, when a buyer approaches a seller with an interest in his or her company, it could be on a bus, it could be in a meeting, or it could be through an intermediary, what kind of research typically have those buyers already done on the company that they're interested in acquiring?

Ed: It's a very good question, but I'd probably spin it around and say that your owner should probably find the answers for themselves. But ways of doing that would be if somebody does approach them they should go into what I say is a set of general questions which you want to weave into a conversation, because the last thing you want is if they think they're being interviewed they'll be more guarded in their answers. 

But if you can make it conversational, start out with, "How did you hear about us? What is it about us that attracted your interest? How much do you know about us? Why would we be a good strategic fit for your company?" And try to get those into a conversation before they ask you those questions so you understand and can kind of frame up, "Well, they seem to know a whole lot about us." 

And sometimes the answer would be pablum. It's like that's sort of very motherhood-y stuff. So it may come off as they're giving you an answer that has no substance. In which case they probably know nothing about your company. So I think that's important to kind of go through that early. 

And I think the other filter, the other set of qualifying questions you'd want to ask is, again, conversationally, so they don't feel like they're being interviewed. But what kind of deals have you done, how many, what's your process, who's your deal champion along the way, and who actually makes the approval? Is it a board who will see it at the very last minute and have no context? Or is it the CEO who's been working with you the whole way? 

So I think those are the things that you probably want to find out. And that'll answer the question, how much research have they done. If they're very crisp in their answers and in describing their process, it sounds like, well, they've done this a lot. You should probably get a pretty good confidence. If it's very weak, you need to start out thinking if you're going to waste your time with them.

And I will tell you, when I talk about acquisitions, people think they're sexy, they think they're cool, everyone wants to be involved in one. But I kind of describe an acquisition as, frankly, it's a process of involuntarily employing a large number of people somewhere where they had not chosen to work. And then asking them, ‘Hey, we're going to change all the policies. We're going to change our processes. And we want you to be comfortable with all this.'

Jeff: Ed, how important is it to know as a business who is interested in selling his company or her company to know what it is that you want, to know what it is that you're expecting not just to get out of the deal but why you want to sell your company in the first place? Because I think that a lot of people make these quick knee-jerk decisions. 

"You know, I'm not interested in doing this anymore. I want to sell my company. I'm going to go contact a broker tomorrow." But I think sometimes those knee-jerk decisions end up being kind of irresponsible. So how important is it that someone take the time to really give selling their business that they worked so hard to build a lot of thought?

Ed: In a perfect world, which not many people reside in, but maybe your listeners will by listening to what you just asked. In a perfect world, if you're going to sell, you have already established... Even if you don't want to sell now you at least put the framework in place so that if someone does approach you out of the blue you can immediately put it in context and say, "I'm not interested in selling right now, but hey, come back and talk in three years." Or, “I'm all ears but I'm not committed to selling.” And even if you are desperate to sell of course you would never say that but you of course still say I'm all ears. 

But I think when you've made a decision that at some point selling is probably the exit strategy. I'm not going to give it to my children or other family members or whatever. I don't have partners who will carry on. The best thing to do is do that homework well in advance. And the way I think about it is you probably want to look at your own company. Sometimes it's hard to do, so you may want to bring in a third party or even just a friend maybe. 

But bringing somebody in and have them look at the company as if they had never heard of you before, and they're going to ask a lot of questions that you take for granted. So I can run through a few examples if that would be helpful.



Jeff: That would be helpful. Thank you.

Ed: For example, if you're looking at selling your company down the road you probably want to start doing what I call a ‘restatement process’ right away. Because if I come in and look at your company, the first thing I'm probably going to ask you is give me a couple of years of financial statement. That's sort of a typical starting point. 

And so I'll look at them and I'll say, "This guy doesn't turn his receivables very quickly and he seems to have a lot inventory, he's not running a very efficient business."

And what's really happening is you're just tax managing. You're telling your customers don't pay me quickly year end, or make sure you put the bills out late. And so you're doing tax management. 

That will not be apparent to an unsophisticated buyer and it might not even be apparent if they're only looking at year-end financials to a reasonably sophisticated buyer. Although if they're done a lot of deals they'll probably get there. 

So you sort of want a build what I call the restatement process. One would be a cash in accrual if you have tax issues going on. So we do your financials. I'm not saying literally we do them, but just sort of have a little checklist of things that you would adjust. 

Another big one is of course compensation of employee owners. Do you pay yourself a lot in a C-corp to avoid double taxation? Did you transition from a C-corp to an S-corp? Is there any risk of built-in gains taxes? Do you have family members on the payroll? Do you have a rental company that you own that rents furniture in the office. All stuff that's fine, but for a buyer they will look at that and go, "We've got a lot to unwind here." 

My preparatory step would be do the work for them and develop a series of things that if you're buying your own company you'd say, "We need to address these things or we need to develop summary statements." And that'll help the buyer get to a valuation quickly. Plus, understand that you know your business.



Jeff: Edwin, you were working M&A. Did you ever get in the middle of a situation where maybe the buyer asked the seller to provide some statements, documentations, records, whatever the case may be, and the seller was unwilling or very, very reluctant to do that?

Ed: If there was complete reluctance to the process, that would usually be troubling. I can only think of one deal where we frankly just walked away, and this is a peculiar one. But we actually had a person we thought was... And this is not what we usually run into. We thought there's somebody who is so key to the business, he was a single point of failure that we said we need a key man insurance on you, which is also not something we would typically do.

And so of course to get that you had to get a physical. And this person refused. He said, "I'm not going to do a physical for a key man." It could've been just a principle thing, but frankly we said, "Well, maybe he's got some health issues, or maybe there's something he doesn't want a family member to find out." And that killed the deal for us.

So that was quite unusual. I would say that typically people will withhold information for competitive reasons, but eventually at some point in the process they're going to give it to you. And if they're holding something back that's important to you when I say me, as a buyer, that can be a deal-killer. I am very comfortable with not doing a deal because you don't want to assume the best in transactions. You have to assume the fact in front of your face.



Jeff: Ed Murphy is a former Senior Vice President of Strategic Transactions at SAIC, now enjoying retired life. My name is Jeff Allen. You're listening to "Deal Talk," and we're happy to have you back with us. What about those business owners who really are well meaning but they're so mired in just the day-to-day operations. And they've got a sale pending, or at least there's certainly things in process but they're not able to answer to these requests for information. 

Then typically who did you work with if you weren't able to work well with the owner because of a number of different reasons? Maybe they're just not able to provide you with everything that you needed. Typically where would you go in that company in the sell side to get what you needed?

Ed: The deals we looked at they very often did have investment bankers involved. So they would sort of manage the process. So there was a little bit of a governor there. I think that's a good thing and a bad thing. It certainly makes the process probably more efficient. And the bankers generally have a lot of experience, so they would sort of know, they would anticipate what you need in a lot of cases. 

The downside of course is the process gets sanitized quite a bit. And a lot of times we want to look at the counter party in the eye and say, "How do you feel about something?" Just watch the body language frankly. That becomes important. 

If we couldn't get the CEO or the principal, we'd generally be talking to their senior staff like the CFO, or it could be the key line manager if we're trying to get information on customers, contracts and stuff like that. But in the smaller companies you really do need to get the principal. And that's why I would say if you are not able to give the time, then you're probably not ready to sell. Or if you haven't figured out who's going to be managing the process for you.

I did encourage sellers to try to make the complement of their staff available to us for discussions. But sometimes sellers are not willing to do that. They're like, "You're only talking to me because I don't want anyone to know this is going on." But they became single points of failure. 

Your point is spot on. We had to be sensitive to the fact that if we took up all their time, their business is going to start deteriorating. So they're paying too much attention to us and not the customers. So we try to be sensitive to that. And I'd say at the end of the day, if we took up too much of their time and the business deteriorated and we did the deal, we're the ones who suffered, not the seller, so we have to really keep an eye on that.



Jeff: One of the things we've talked about on our program. In fact we've talked about it on a couple of other programs, shows that we've done prior to this one, is we've talked about the actual process that one goes through in the sale of a business and the transaction process could probably, actually, if we talked about it in its entirety, take us a couple of two or three hours here on the program too to really go into detail about it. So we won't necessarily do that here.

But I do want to go into a little bit, I want to talk to you about those types of things that you've seen that have derailed deals that have actually caused them to not go through when maybe you thought that everything was working smoothly. And I'm sure that you've got a story or two on that. 

But I also too wanted to talk to you a little bit about that transition process, kind of that period that things come to a close and you've got one ownership group taking over, the other one is exiting. What happens at that point? And we'll go into that a little bit with you. 

I'll be back with Ed Murphy, former Senior Vice President of Strategic Transactions at SAIC, when "Deal Talk" resumes in just a moment.

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: If you have any questions about any of the topics you've heard us discuss on "Deal Talk," all you have to do is ask. And I'm talking about anything that we've discussed on this show prior to this particular edition of "Deal Talk" or even about this particular subject we're discussing with Ed Murphy today. 

Simply call our Ask Deal Talk info line 24 hours a day, 7 days a week, 888-693-7834 extension is 350. Follow the 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." Ask Deal Talk at 888-693-7834 extension 350. 

This is Jeff Allen. My guest is Ed Murphy from San Diego, retired Ed Murphy that is, and he is the former Senior Vice President of Strategic Transactions for SAIC. And, Ed, we appreciate of course your being available once again to join us here on "Deal Talk," and I'm glad you are able to make time in your schedule to join us today for this discussion.

We're having, I think, an interesting talk that really is one that a lot of business owners can learn from. And particularly right now what I'd like to do is talk about those types of issues that come up, preventable types of situations that sometimes present themselves during the transaction process. When everything seems to go smoothly. All of a sudden something turns up and the seller or I should say the buyer, that is, sees something that raises a red flag and can really throw the deal completely off-track, and perhaps nicks the thing altogether.

What did you experience with SAIC and some of the deals that you were participant in that did come up that you thought, "If one thing had changed, or been different, or they've been more tentative to this we wouldn't have lost this deal." 

Ed: I think it can be a myriad of things. But something that comes to mind, I remember one in particular, the seller had actually done what I thought was a pretty good job of preparing themselves for the process, but it was sort of in the vacuum of who is the buyer. 

And so he had I think prepared his employees for this, which is always a very touchy topic for some buyers and some sellers. But the thing that hung him up is that he had a particular subcontract that was... He was just subcontracted to a very large company. And so he has a very stable revenue source. And he's providing a service that his customer appreciated what he's doing.

So it looked like it was a key part of his business, and as I said it was not an immaterial piece of revenue. Well, when he came to us and we had discussions and negotiations, got the valuation, we're in due diligence, we said we need to talk to some of your customers. And he goes, "I'd like to handle that first round and let them know who's buying us."
 
It turned out that that major customer of his felt that we were a competitor. And so suddenly the customer said, "I'm not going to assign that contract." And this person had not done the homework on, number one, can I assign contracts without customer consent, and will it go by operation of law or do I need specific assignment permission. 

And secondly he had advantages. There are certain buyers who would be unattractive to you as a customer of mine. And so that actually blew up the deal because the revenue was too material. And frankly once he realized he knew the deal was going to go blow. So he had to go down a different path. 

And your listeners will say, "That wouldn't happen to me." No, it'll be something else. So I think it's again a key thing that you kind of look at your own business and say what could go wrong, not how well is this going to go. And I had other ones where frankly the then employee revolts against the owner once they found out they're going to sell. Not literally revolt but the employees felt like they were being ignored in the process and then suddenly they heard there was a deal going on and they were pretty upset. And you as a buyer want to step in and start trying to integrate a large, unhappy employee base into yours. And so we had a deal that actually blew up over… Frankly, he couldn't sell the company. Employees basically controlled the process in a peculiar way because he had not been, what I would say is open with his employees. And again, that's sensitive. Some owners will not do that early on, and I understand that, but you do run that risk. In both cases those deals kind of blow up.

And I will tell you, when I talk about acquisitions, people think they're sexy, they think they're cool, everyone wants to be involved in one. But I kind of describe an acquisition as frankly it's a process of involuntarily employing a large number of people somewhere where they had not chosen to work. And then asking them, "Hey, we're going to change all the policies. We're going to change our processes. And we want you to be comfortable with all this." 

So acquisitions can be very messy to the largest number of people that are affected by it. Sellers should be cognizant of that. But it's still tough to decide when they're going to open the kimono on that.



Jeff: I was going to say the key really is knowing when to I guess lift that veil of confidentiality with your team. They're going to be certain folks that you're going to want to bring on and let them know about what is going on, obviously, key seconds and thirds, key leadership on your management team. They're going to have to be brought in on all of this.

But going back to that thing you talked about with regard to contracts and working with contractors and clients that rely on you to perform certain types of services and so forth. And then they decide, "No, I'm not going to continue with you because I don't approve of your buyer." 

What do you do? How can you effectively reach out to these people to key customers that you do work with to let them know about this potential transaction so that they don't bail. Is that just kind of one of those judgment calls that you have to make, or is it just one of those types of facts of life? Yeah, you lose some business here and it could have an impact on whether or not the deal goes down or not.

Ed: Sure. And there's always some risk. As a buyer you always have to price in something going wrong. I don't think you can always assume everything will go perfect. That would be naive. But I think when you're looking at the customer set and you're preparing for sale, you have to decide at what point are you even thinking of saying, "I'm thinking of selling my company." 

Because if you come in too late, I think you may be in a process where you've always done through pricing, due diligence, you've shown a lot to this other party and then your customer blows it up. Unless you know your customer well, that's kind of a risk that I wouldn't suggest you take. 

But if you early on just sort of do a soft sale, and it's just something I'm thinking of down the road, sort of part of the preparation for sale that we talked about earlier. If you think it might be coming down the road, you might just say one of these days this might come up. And I want to make sure that you customers are comfortable with this. So I just wanted to let you know early. And see if they have any kind of reactions.

Generally, a lot of the customers are not going to really care. They'll say, "Is so and so still going to be working with me? Is your key guy going to still be working with me?" Those are the things that they're worried about. So you can address it, but I think if you put it off too long it is a risk of being a trigger for a blow up.

And for a buyer, at least for us, that was the key thing. Let's face it, what is a business but its customer? So for us we said we need to understand that these customers are going to be sticking around and we need to get highly comfortable with that if we're going to proceed.



Jeff: And I know that as a retired guy, you didn't necessarily retire from a business that you owned, a privately held company that you personally controlled the whole show on it. But you've been through so many deals. We talked about this a number of times already during our conversation. 

And now that we're kind of winding down our discussion here on this edition of "Deal Talk," it's actually kind of a good time I think to talk about one last thing that I wanted to kind of bring up with you and that is integration, or the transition from one ownership group to another, or from one owner to another. 

And in this particular case, talking about what happens at that point when you've got owner A who's had this company for 25-30 years, walking away, the deal is essentially done or about to be done, and owner B is taking over. And you've got kind of that window, I guess, where you've got that mixture of one guy leaving, one guy coming in, and business that kind of needs to be done between the two so that you can have a seamless a transition as possible. 

What has been your experience with regard to that integration period when the two sides come together, the deal's just about done or has completed, and that company needs to go on to continue to succeed and continue to perform?

Ed: I'll try to gear it more towards smaller deals. But on larger deals where there's an anti-trust review period you have at least 30 days generally between the time you sign a deal and you close it. So you can work a lot of the issues then. The risk to the buyer of course is you pretty much own it unless something huge happens you can't walk away from the deal. You don't control it but you're committed to buying. 

But in most deals where it's a sign and close deal where you sign the documents and that day you own it, it's important to do preparatory work leading up to that closing. And again, there is not a common interest here in most cases. The buyer wants to know as much as they can about the employees, about their mindset. They need to compare benefits, they need to figure out how the transition's going to work. That they engaged in generally happy workforce, which, again, in most acquisitions is not the case. You have people freaking out.

When you think about acquisitions, If I'm the principal on our side and I'm buying you, and you're the principal on your side, you and I may have a common interest of getting something done. But the employees often are feeling like, "Hey, what do I tell my family when I go home? Do I still have a job? Am I going to get fired? Is my pay going to get cut?" All their issues and I'll choose what's the strategic fit here? How much is the owner going to get? They don't care about that. They want to know what's going to happen to them. 

So there's huge integration risk to a buyer. Again, this is more in a services business where people are not interchangeable, they're very critical to the business. But there's a big integration risk there, and so we used to overlap integration and due diligence so that as we learned about the business we would start teeing up issues about how we're going to compare benefits and match them. Are we going to require anyone to relocate, which generally was not the case. And with customers, are we going to make sure that the key people stay in place? Are we not going to lose anyone to make sure that the customer sees this as fairly seamless.

And the seller is generally saying, "I don't want you to know anything because if you find out a bad fact you're going to try to unwind the deal and renegotiate it." There is a tension there and I think the best way to resolve it is to just say to be a fair buyer and try to give comfort, but at the same time say, "This is what I need to know to make sure that I can take care of your employees who will become mine, and your customers who will become mine.”

It's a sensitive process, but we focus a lot on integration. And it's not easy. It's hard to get it right, because you don't know everything that the seller knows.



Jeff: And I do appreciate very much your taking the time out of your schedule and of your retired life to talk to us a little bit about your observations to give us some key insight into what it is like there during the process, buyer and seller coming together, some things we need to be mindful of. And again, I want to thank you so much for joining us on "Deal Talk" today.

Ed: OK, sure thing. Thanks, Jeff.

And that's why I would say if you are not able to give the time, then you're probably not ready to sell.
Jeff: Ed Murphy has been my guest. He's the former Senior Vice President of Strategic Transactions at SAIC. And again, we thank him very much for joining us. We hope that you enjoyed the discussion. You can find us and all "Deal Talk" podcasts on a host of channels for your convenience, including morganandwestfield.com, 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. My name is Jeff Allen, thanks again for tuning in, 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.

Resources (All references mentioned in the show)

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

  • 2 Main Reasons Why Being Sale-Ready is Important: (1) “Life happens.” If something happens and your business is “leaderless,” your company’s value dissipates every day. (2) Businesses that are sale-ready are generally more efficient and make more money without the owner “killing himself” doing it.
  • How Can You Make Your Business Sale-Ready? (1) Develop a culture in which all employees know your goals. Talk about your goals. Develop your business strategy as a team. If everybody in the company is aware of the business goals, they will work to achieve those goals. However, they have to believe that you care about them. (2) Being sale-ready has many metrics.  You have to start tracking metrics and create processes. (3) Give buyers confidence in the future.  To do that, you have to have the systems, the processes and the people in place. (4) Invest in intangibles that add value to your business.  The true intangibles in your company will be your management team.
  • Can You Make Your Business Sale-Ready with Less Effort?  Yes, but remember these tips: (1) You have to be realistic.  Making a business sale-ready is a process that takes time. (2) You need to consult some advisers who can help you through the process. (3) Start answering questions on a buyer’s due diligence list.  It’s a huge list but it will help you understand some of the issues that your company is facing, and you can work on fixing them.

Read Full Interview

Jeff: Whether you're selling your business a year from now or 30 years from now, my guest says you need to start getting your business sell-ready right now. If you'd like to know why, 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.

Getting your business sell-ready, what does it entail, why is it important? We have somebody here who's going to tell us all about those things. If you're looking at building value in your companies, this is the show that you're going to want to listen to. So pay close attention, because joining me right now is Mr. Marc Borrelli. He's group chair, business coach and trusted adviser with Vistage Worldwide, and is a renowned consultant and speaker in his own right with over 30 years of strategic and business banking experience. Marc Borrelli, welcome to "Deal Talk," sir, thank you so much for joining us.

Marc: Thanks very much, Jeff. I appreciate it. 

Get a good management team. It may cost you more money than you spend right now but it will pay multiple dividends and grow your business much more.

Jeff: Let's talk a little bit about your background, Marc. You've got a tremendous depth of M&A experience, and we talked about the business banking experience and really working in the corporate space chiefly. Tell us a little bit about your background and kind of where you're at now with Vistage.

Marc: Yeah, sure. I started on my career I guess unofficially 30 plus years ago when we sold our family business in South Africa. Made a lot of mistakes, and I decided I should learn how to do this right. So went and got an MBA and a law degree. And then went to start work in London where I worked for a small bank that no longer exists, that many. But in that time I sold premier football clubs and a lot of industrial companies, service companies, oil and gas. 

I then came to the States and worked for Holiday Inn Worldwide, head of strategic planning, Europe, Middle East, Africa, and Asia Pacific. And I did hotel deals all over Asia and then Australia. A lot in China and Australia itself. I then went to Equifax where I ran their international M&A for a number of years doing deals in Latin America, Europe and Asia. And what I realized at Equifax, the example I give to many potential clients and Vistage members, and actual clients is … you have a small business, you maybe have 15 people in your head office and a bunch, it'd be 300 employees. And I would come in, and I'd have 20 people in my due diligence team, and we could tear your company apart. You weren’t even be ready for this. And so what I learned was going back to this, being sell-ready so that when the due diligence team comes through it is easy. That became the key. 

And so the transition was, I came out of the corporate world realizing that. I started my own firm to focus on that, and found that while I focused on many clients who came to an investment banking firm, they said I want to sell, I don't want to get sell-ready. And so that’s why I migrated into Vistage, to get that message across and help people build their company so they're also ready.


Jeff: Let's go ahead and let's start by asking Marc Borrelli, then, the $64,000 question. It's not the only one but it's the first question we have today. Why should a business owner get his or her business sell-ready whether or not they even have plans to sell their company anytime soon?

Marc: I think there are three reasons, actually. The first one is life happens. I speak to a lot of owners. They don't intend to sell. They have some fixed date out in the future, five years from now it's going to happen. Nobody knows what tomorrow brings. Tomorrow you could die, you could get divorced. I've had clients who get divorced and in a fight destroy the business. 

Or even worse for your business, not for you but for your business, is you become seriously disabled, like Christopher Reeve. And all of a sudden you're in a hospital unable to function. Your family's focused on you. Your business is leaderless. And the value of it dissipates every day you lie in that hospital bed. And you haven't got a management team that can run it. And you don't have enough disability insurance to maintain your lifestyle. You don't know what tomorrow will bring. You also don't know that, you may have some date in the future where you want to exit. But let's say 2002 you had said, "I plan to sell my business in 2008." Well, great luck, because in 2008 you couldn't give the business away. We don't know. So that's why it's always best to be ready. Secondly, following on from that, businesses that are sell-ready, I would say very similarly they're more efficient, they make more money, and the owner doesn't kill himself doing it. And that's a great way to be.


Jeff: Boy, I'll tell you, it really does sound like a tremendous luxury even for those of us who are kind of self-employed and do our own things here, in our studios here in Southern California, and the host not withstanding, of course. It really does sound like if you could somehow, someway have that second person in charge who knows every bit about the business as much as you do that so many of the worries that you might have now might be able to drift away slowly but surely, that you don't have to have those concerns should something happen to you.

We're going to talk about some of the details behind getting sell-ready, Marc, but how important is part of that getting sell-ready process? How much importance do you place on finding that second person in charge or getting that second person in charge, that manager, for example, that seems to have so much promise, ready and up to speed with everything that's going on with your company? So that if something by god does happen that you've got someone you can rely on.

Marc: I think it's crucial, but I don't like to think of it as one person. I see it as a whole thing if it happens across the organization. And in that aspect what I look at is, first we'll start out with the leadership team. And the analysis I always give there is think of a Seal Team, which is a very common thing. And the thing I love about this analogy, and I've used it with a lot of people. A Seal Team are given a mission. Their mission is to accomplish X. And then they develop the strategy. And because they develop it as a team they all know it. If you'll ask each one individually what is the strategy, they will give you the same answer. There's no confusion.

They also know exactly who's going to do what. And they know if somebody goes down how they're going to cover for that. And finally they know at what point the mission is no longer attainable and they need a new mission. And I find that most entrepreneurs on in that state they don't have a strategy, which is one of the sell-ready things. But even if they do they tell their management what it is and so you don't get this unanimity across the management. Everybody gives you a slightly different version and they don't quite know what everybody's covering and where the gaps are.

And so if you get your management team involved where they're producing and they're developing it, and all they know is what the end goal is then you don't have to worry as much. Because if you have a good management team they will accomplish it. And following from that is all the employees. 

One of the great things private equity has done is they help most employees figure out what they do that makes money for the company. And if each person knows what they're doing that makes money for the company, then they're more likely to be able to do that efficiently. And combining a few other thoughts is can you get them to make the decisions where they have the information and not dictate everything from above?

There was a great book by a guy called David Marquet called “Turn the Ship Around,” and he says, "Move the decision making to where the information is. Stop giving orders. Let people come to you with questions but let them make decisions.” And I think that's a culture that if your employees have it then you don't have to do as much. And they know what the goal is, and you tell them what the goal is, and everybody works for the goal. But it does require one last thing. They have to believe you care about them.

The more you can show systems that track things, you show how you measure things, how you correct the changes in the market, and how your team is all working as a team, that just gives them [buyers] confidence and the value goes up. And people want companies like that.

Jeff: That's so important, and I think it's something that we forget about. Marc, today in this day and age, as busy as people are, so many people, and we've said this again and again in the program, not only work on their business but they work in their business. And because of that they spend so much time quite literally in their office or out in the field. 

We're all in our little silos and we forget that the people down the hall or maybe on the floor down below, if we're running a manufacturing facility. Each one of those individuals, according to what you're saying, possesses a value. And that value in fact can contribute to the overall value of the organization. And it is incumbent upon us as leaders of our companies who are interested in the value of our companies to utilize the value of our employees and understand what it is they do, what it is they do well, and how they can contribute. 

I think it's really, really important, very key indeed. Marc Borrelli is that man on the other side there. Group chair, business coach and trusted adviser of Vistage Worldwide. We told you he has 30 years of strategic and business banking experience. You're listening to "Deal Talk," my name is Jeff Allen. 

Marc, I'm kind of interested to know. We talk about the importance of getting sell-ready and so that, OK, I'm not even really ready to sell my business, so I'm looking for other good reasons to sell my company. And you touched on it a little bit. I was wondering maybe you can kind of elaborate just a little bit just how much getting sell-ready and all the preparations that I make for that, even though I don't have any plans to give up my company yet. How much getting sell-ready might actually improve the value of my company right now, very, very quickly indeed, that could take my company into another atmosphere where value is concerned and do it in a relatively short course?

Marc: You know I think it does add a lot of value to the company. Because if I go back to the concept that your employees and your management team knows what your goals are, they will help you realize them, and you don't have to work so hard. So the chance of you hitting them, if you've got a 30-person employee base and management team. You have 30 people all paddling the same way as you are. You're going to get there quicker. I think the other thing is that sell-ready has many metrics and you start to track metrics, you start to have processes. You become a learning organization, and all those things help. 

And the other thing about being sell-ready, the key of it is to give buyers confidence in the future, because they don't know what the future is. So when you tell them I'm going to make $10 million next year, or $5 million. And the year after I'm going to double it. They want to look at something that tells them, "Yeah, there's a good chance you're going to do that." And the way they get that confidence is the systems, the processes and the people. Because we don't know. The future is unknown, and so we're trying to get rid of the uncertainty. And the more you can show systems that track things, you show how you measure things, how you correct the changes in the market, and how your team is all working as a team, that just gives them confidence and the value goes up. And people want companies like that.

I talk a lot about selling businesses is like dating at 50. Unfortunately, not every company is going to find a date. There are a lot that'll just never get sold because nobody really wants them.


Jeff: And he says that with all fondness, sincerity and a smile in his heart. And I can see right now that ... this is a guy right now, probably if he needed a date, he wouldn't have a problem getting one at all. Marc, I'm going to ask you to stay right there because when we come back what I'd like to do is I'd like to talk to you about the actual steps to kind of get sell-ready. And you talk about getting sell-ready with less effort. Marc Borrelli is joining me. He is in the Atlanta, Georgia, area, I think, aren't you Marc?

Marc: Yes, that's right.

Selling businesses is like dating at 50. Unfortunately, not every company is going to find a date. There are a lot that'll just never get sold because nobody really wants them.

Jeff: 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 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.


If you have any questions about any of the topics you've heard us discuss on “Deal Talk” all you need to do is pick up the phone. Ask Deal Talk is our info line, again, open 24/7. And you can call it at 888-693-7834 extension 350, again, 888-693-7834 extension 350. 

Follow the instructions to leave your question. We'll reach out then to one of our guest experts, one of those experts might be even Marc Borrelli down the line, who knows? We can feature your question and their response on a future edition of "Deal Talk." Ask Deal Talk at 888-693-7834 extension 350. Ask Deal Talk and morganandwestfield.com. My name is Jeff Allen, with my guest today, Marc Borrelli in Atlanta, with 30 years of business banking experience in the M&A space, and trusted and well-renowned speaker and business coach, and now with Vistage International.


Jeff: Marc, you have some very interesting points to make on your website and you provided me with some very interesting information that you share with your own clients. And what I'd like to do now is talk a little bit about the steps that business owners can take to help them get their businesses sell-ready with less effort. I think that's what all business owners want to hear because they're so busy trying to figure out ways to make money and to just get their jobs done. And to make sure that everybody is productive in finding ways to grow their companies. But what are some of those first few steps that we can take to get our business sell-ready with less effort?

Marc: I think first of all you got to be realistic. It's a process and it takes time. And a lot of people want to do it in a couple of months, and you just can't, and that will kill you. So to do it with less effort you got to lay out a time period, and I usually say it takes three years. 

Secondly, you do need to use some other advisers. They will help you through it. And I think the first place to start for everybody is a buyer’s due diligence list. And if you've never seen one, they're huge, and most of the people I show one to look at me in total disbelief and go, "Nobody would ever ask us all those questions." And my answer is yes, they will. And not only will they ask you, whatever you say will go into the reps and warranties and sale and purchase agreements, so you better know. 

What I found when I do this with clients, and this is just the starting point. But once they completed that buyer’s due diligence list, either saying something's not appropriate or they've pulled the information, we've analyzed it, and presented it the way it should be. They've learned so much about their business that they suddenly start to understand some of the issues that they businesses face and where they have to fix them. 

And I think this comes out as my experience in 30 years has been that successful entrepreneurs all have one common characteristic, they're great salesmen. If you can't sell, you don't have revenue, you don't have a business. So they could all sell. Which means they know their customers and they know their products. They don't always know how they perform financially. They'll know if they make a profit or if there's money in the bank. But true financial performance and metrics they don't know.

Legal is a total mess and HR is the worst thing. I've had a couple of cases were their wives have been the head of HR and they've said, "We don't let our husbands anywhere near the employees because they'll just upset them." You start from that, where they know one part of the business and the rest they don't worry about because they don't feel they need to, they're driving the engine. But it's the backend where there's a lot of stuff you need to pay attention to and fix up.

I think it's a process. You start with a buyer’s due diligence list, you work through that. And that'll identify the things you need to work on as you go through the next few years. And then it's like getting fit in a gym. The first stage is to get fit for the heart, but once you get there, you just maintain it. And so once you've set yourself as sell-ready, you’ve just going to maintain it without a lot of effort going forward.


Jeff: And there you go. That kind of makes it easier, like you said, moving forward and allows you to just simply at that point really focus on what's most important. Those are your customers, your employees and your business as a whole. Marc, one thing I remember reading in your materials that you provided were kind enough to do so to help both of us prepare really for this conversation. You talk about gearing our businesses to suit others. And when you think about it, it makes a lot of sense. Although it's funny, we don't ever hear it verbalized quite that way. Why is it important to gear our businesses, something that we're so close to, something that we're so intimate with and so much a part of us, to suit other people down the line?

Marc: Well, I think it's for the very reasons you said, we're so close to it and we're so in it, and it suits us. I give two analogies, one it's just like selling your house. And in your house you've got this big, comfy, La-Z-Boy in front of the 60-inch TV, and maybe you've got a mini fridge next to it. And that is how you like to spend your weekends, and it's perfect for you. And it never bothers anybody. But when you come in to sell it the realtor just about has cardiac arrest looking at that and says, "We've got to get this house fixed up so that it'll appeal to the market.”

And when you're selling outside of yourself you got to appeal to everybody. You can't just exclude people. So that's why I said we have to get ready for others. We're trying to create it so that it has more appeal. And in that the next issue that comes out is the owner usually, if there's a strategy he has it and it's in his mind, he knows what his advantages are in his mind, but this is a great wealth of information that all exists between his ears. And we need to extract that out from there and get it out so the people can appreciate it. 

Going back to my dating analogy, as I tell people, when you sell a business, all the buyers get a teaser, what we call a teaser, and it's like an online dating profile. It's a short piece, got some financial, some information. And financials are like the picture, they stop the person from throwing it away. But what does the rest of it say? What is the strategy? What is the sustainable competitive advantage the company has in its marketplace, what is the management team? 

And if you can put that down, that's like having a great online profile that excites people where they don't just look at the picture and say, "I want to meet this person." They say, "I want to spend time with this person." So the buyer looks at it and says, "I want this company. I'm falling in love with this company. I want it in my portfolio because it's the best thing I've ever seen." And if you can't talk about that in your business and you just say, "Well, we sell widgets and we make a good profit." It's interesting but it's not captivating. And you have to captivate people.


Jeff: Marc, I know that you personally advise business owners and have done so all over the country and all over the world in your travels. But are there other individuals that we might be able to call upon, particular individuals maybe for third-party organizations or maybe they're business advisers themselves that you can point to who can give us the feedback that we need? 

I'm not looking for names but I'm actually looking for the types of business professionals that a business owner can call upon to help him do exactly that, essentially get him or her get their business sell-ready. But also kind of take them a bit off to the side and say, "Look, this is what you need to do. You're not doing this. This business is not appealing to this set of people over here. And these are the folks who are going to be most interested in buying your company." Who should those individuals be that you look to for that kind of advice?

Marc: I think it's hard to say exactly, but a couple of people I would talk to is, I would talk to an M&A lawyer. I know lawyers aren't the people you'd look to but they can point out some gaps you may have in your legal systems. I would talk to your accountant and say, let's look at the financials and qualitative earnings on the business if you're not having audited. How much comfort do we have in this? Are we going the right way? And then maybe some HR professionals to say how efficient is this team. 

One of the things I always remember somebody telling me years ago, if you cannot be replaced you cannot leave your job. So if you want to sell it and you can't be replaced because you do everything, you can't sell the business. A truly sell-ready business, the owner should be able to step away for three months. And I'll check in and come back and find everything is running smoothly. And then it doesn't matter if you sell it or not. It just runs and you make your money.

So I would say look at those three people, they're not going to do the coordinated work that somebody might do. Some investment bankers will do it but not all. But if you get them as a team and work with them they may be able to help you.


Jeff: I want to come back and address an idea that you just talked about a second ago. You touched on it. The buyers, they'll walk away from something if they're not confident about it or if there's something that turns them off. Some of these things are probably, maybe factors that can be measured, others that can't be as easily measured, certainly with statistics or with any kind of measuring instrument per se, Marc. But price aside, what are some reasons that a buyer might walk away from the table and say, "No, no deal"?

Marc: I think it's a couple of things. I think first of all is lack of information. When they start to do their due diligence, if they can't find all the information they want they get more concerned, because things they can't find the answers to just have big questions. Secondly is the management team. Can they trust them? Because if the owner were, in the worst possible case, to drop dead the day after closing, who's going to run this business? 

And finally, it's how easy or hard is the owner to work with. When I ran Equifax's M&A, if I was working with an owner who was difficult, or they didn't have all the information... As I used to say to people, I go to the board and I present a deal, and I'm going to put my career on the line saying we should do it or not. If you make my life hard or you're difficult to work with, or I don't have confidence the deal is good I'll pass. Because there are so many other deals out there. And I'm not willing to put my career on the line because you don't have good information. 

There are a lot of things that'll scare them away. But lack of information that I can get to and justify why you're telling me what you have is what you have will drive a lot of people away very quickly. Or buyers will just keep changing their mind and are difficult to work with.


Jeff: Marc, you've got your own trusted adviser in the room there with you. It sounds like he might be kind of hungry there.

Marc: I apologize for that.

When you're selling outside of yourself, you got to appeal to everybody. You can't just exclude people. So that's why I said we have to get ready for others. We're trying to create it, so that it has more appeal.

Jeff: No, that's OK. There are companions, and their family members, and they're just an active participant here in the program. How important, Marc, are the intangibles? Again, I just mentioned a short time ago about the things that you can't really plainly measure. They may not be things that you can plainly see. But intangibles in a business, how critical are they and are there intangibles that can actually build a buyer's confidence in a company that can actually help to kind of seal that deal?

Marc: I think the intangibles, there are two things. One, there are assets which buyers don't always realize they have. The best analogy I can give to that is years ago I was working with a company that was looking at buying Playboy, not that they were interested in anything Playboy did. Except if you can remember '80s Playboy had like 40 channels on your cable box. They just wanted those channels. They didn't care about anything else, they wanted access. 

Sometimes buyers had these assets they don't appreciate and that has value. But that's not a true intangible. I think the true intangibles buyers have, again, is that management team. Can they resolve the issues? Can they lead the company? Can they see what's happening in the market and adjust this strategy, adjust their tactics to maximize the value? That is the greatest intangible.

If I meet a management team and they all give me the same strategy. And when I talk to them they know what they're doing, they have great pride in the company, they can tell you why their company is superior to any of their competitors. They understand their market. Boy, that just speaks volumes. That is a company I'm really excited in. 


Jeff: Marcus, we're winding down the program now. Sixty seconds, can you give us some final thoughts and things that we can take away from our conversation today, or maybe things we didn't talk about at all that you'd like to go ahead and leave with our business owner audience today?

Marc: Yeah, I think I would definitely start getting your business ready regardless of what you plan to do because you don't know how long it'll take. I would use advisers in an M&A deal. It is time-consuming, it would distract you. What you should try and do is run your business as much as possible. Because until the contract's signed and the money's in your bank account, the deal's not done. And many owners go through the process and find out at the end it fell apart and they haven't looked to their business for three months, and the numbers have suffered. 

And finally, get a good management team. It may cost you more money than you spend right now but it will pay multiple dividends and grow your business much more.


Jeff: Oh, can you imagine. Absolutely, Marc. Great words of advice. There are no doubt, our folks who might be interested in contacting you to potentially work with you, at least bend your ear a little bit and get your tips, your guidance, your advice, hear what it is that you have to say to help them get their business on the right track. If they're interested in sitting down with you or chatting with you by phone, how can they reach you?

Marc: Phone, you can reach me on 404-368-9894. Again, that's 404-368-9894. Email, I'm afraid it's marc@marcborrelli.com, but that's Marc with a C. And Borrelli is B-O-R-R-E-L-L-I. I apologize for the name, but it's my father who gave it to me and I can't change it.


Jeff: Marc, there's no need to apologize whatsoever. We appreciate having the opportunity to speak with you today. This was a great conversation. And I hope that if you're willing, that we can have you back on the program again sometime in the near future.

Marc: Sure, I'd love that, Jeff.


Jeff: That's Marc Borrelli. He is a seasoned business expert with over 30 years of business banking experience, and now Vistage Group chair. 

We hope that you enjoyed this conversation as much as I did. Why don't you tell a friend about "Deal Talk"? We would appreciate that. In addition to morganandwestfield.com, you can find us over on iTunes, Stitcher and Libsyn. And don't forget, the morganandwestfield.com site you can find the complete transcript of this program. So you can always go back to those notes and you can print them out, you can save them onto your computer, and go back for reference purposes, and see exactly what it is that Marc said that really kind of tuned you into the importance of getting your business sell-ready.

"Deal Talk" has been brought to you by Morgan & Westfield, the nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. My name is Jeff Allen. Thanks so much for listening. 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

  • Selling a business is a journey.  As you go through the steps of selling your company, you will get to appreciate your business’s value more.  This helps you to effectively show the buyers the true value of your company.  So, when brokers tell you that your business is not sellable, don’t believe them. You  know that your business has a value. You just need to find the right buyer.
  • As a seller, you should not list your business at a price higher than what you can negotiate with potential buyers just to be able to pay about $10,000-$15,000 commission to some brokerage firms.
  • Keeping accurate, professional records, aside from running the business well, is key in preparing your business for sale.
  • Morgan & Westfield prepares a comprehensive business portfolio that provides prospective buyers a complete overview of the business including detailed financial records. This business portfolio, according to Matt Wakelin, has “made so much difference” in showing potential buyers the true value of his company and eventually successfully selling his business.

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Jeff: If you're thinking about selling your business and you'd really like to know how a fellow business owner sold his business in his own words, 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.

As part of our ongoing series of shows where we get a chance to talk with the business owners themselves who have sold their companies and lived to tell about it. On this edition we're talking with Matt Wakelin, former owner of Treasure Chest Foods, LLC, a home delivery service of high quality meats and seafood on the East Coast. Matt Wakelin, welcome to "Deal Talk," sir, it's good to have you.

 Matt: Thanks, Jeff. It's good to be here. 

I was absolutely happy with that price. The other brokers wanted me to list a good chunk higher than what I wanted to negotiate. I would say don't list a price higher to negotiate, don't list a price higher to pay that $10,000-$15,000 plus commission to some brokerage firm. Set it out at a good price and then stay firm on your price, because the business is worth it. And that worked for me.

Jeff: We appreciate you taking time out of your now retired life, Matt, to tell us a little bit about your experience in having sold your company. Real briefly, just to kind of set the stage, tell us a little bit about Treasure Chest Foods, LLC. We know that you're a home delivery service, delivered high quality meats and seafood. Any other information you could provide at this point? Tell us, for example, how long you were in business, how long you did this.

Matt: I got into this business in 1985 and I started my own business doing this in 1988. I've been doing this business for 31 years, and it's been a really good business, very profitable and a lot of freedom and a lot of work too. I decided to move back to upstate New York and sell my business.


Jeff: Did you sell your business because you wanted to head back home and just retire, or you've done everything that you felt that you could do with the company? And give us some insight as to the decision process that you had in deciding to sell your company.

Matt: Well, I actually moved back to New York before I had the business sold and I was driving back and forth like 600 miles each way about once a month to run the business, because I didn't want to let it die and I was trying to sell it. And it took me a while until I found a way to get it sold quickly.


Jeff: Your business is actually located precisely where then, Matt?

Matt: The home base Toledo, Ohio. It's actually located in Maumee, which is a suburb of Toledo and I serviced about an 80-mile radius surrounding Toledo, Ohio.


Jeff: Was the decision to finally sell your company, Treasure Chest Foods, something that you had to wrestle with? Or were you pretty much ready to sell and you were committed, and you just woke up one day and said, "Nope, I'm ready. Let's go ahead and let's do it."

Matt: No, I was definitely ready to sell and I definitely knew that I was going to sell it if I could, and I wasn't even sure I could.


Jeff: Tell us, had you had any businesses before then that you had any previous experience selling?

Matt: No, not at all, just this one.


Jeff: And any idea at all, once you kind of started thinking and you got through maybe the initial should I or should I not do this. Once you got through this did you have any idea about how you were going to start the process or where you were going to begin?

Matt: I started with just putting it on Craigslist, and I didn't really think of listing with a broker right away. And then I finally decided to start looking into ways to sell it to get some help.


Jeff: When you were getting help initially, who did you call, who did you talk to? Relatives, friends, other business owners, just kind of fill us in on that on your mind-set.

Matt: Word of mouth, people I know. And then I found a business broker three years ago who wanted to list it with like a $15,000 minimum commission, and I actually signed up with them and I got very little responses. And that was for a year. And then another year I signed up with another broker who wanted $1,500 down to advertise. And there's another broker, a big name company who wanted $2,800 to list my business. And I went with the guy who's worth $1,500. He was local in Toledo, and I was listed for a year and we got very few responses. And I was beginning to think after two years I just wasn't going to be able to sell it.


Jeff: This went on for how long? You had kind of bounced back and forth between a couple of companies.
Matt: Two years, two brokers, not much response. And actually the second broker by the end of the first year told me that he didn't even want to re-list with me. He didn't think it was really sellable and suggested I just leave it, go, or sell the customer list to my competitors, and get rid of the truck and stuff. And I get an email from him. He wouldn't even relist the second year with me.


Jeff: Really? 
Matt: Yeah.


Jeff: So he just kind of wanted to wash his hands of the whole thing and he suggested you do the same.
Matt: Yeah, he did. I was surprised. I just wanted to give it another year. I spent $1,500 to advertise it and got very little responses.


Jeff: And during this time, of course, you had to, obviously, you're continuing to run your business and continuing to be profitable. Did that kind of harden your resolve? Or were you at any point at that stage kind of thinking, "Maybe he's right."

Matt: I didn't believe he was right, and I knew that my business had value and it was worth something to somebody, and it was just a matter of finding who. So at that point I went on the internet and I started Googling for more business brokers and I found Morgan & Westfield. And I contacted the company. I had a good talk with them, and all the things that I had come to believe with the last two brokers, he kept telling me, "No, that's not true. You can do this. Try this. We've got a great marketing plan."

And he was very encouraging, and so I decided to give it a try. First I got a few responses, and what occurred was that with the other brokers, with the $10,000 or $15,000 in commission, I had my business marked up for that. And they both advised I mark it up another $10,000-$15,000. If someone came along, didn't make an offer on it, and I could come down on the price to put the deal together.

After a couple of months I decided, you know what, I dropped it down to the lowest price I would take. My bottom line and that's the price I put in and I wasn't going to budge. And I knew selling at that price, full price, what I advertised, and I got my money. But as soon as I dropped that price I start getting responses. Morgan & Westfield put it on, like, 11 different websites nationally and that was the first time. I was going to respond left and right and eight months later I had two buyers at the same time that wanted the business.


Jeff: So it sounds to me that the company, Morgan & Westfield, had a real immersive kind of a plan for reaching out online through a number of different sources and that may have been part of the difference maker there. Tell me again, just to reiterate, Matt, how long was it before you first started receiving some responses after they had begun that marketing campaign for you?

Matt: Within the first couple of months I had two or three responses. And I had it listed at a pretty higher price someone was willing to take. And once I just brought it down to my bottom line, which I'd be totally be happy with selling for, I started to get six to eight responses a month.

And what was nice, too, is that Morgan & Westfield offered me a business portfolio. He charged me just $500 for a 35-page portfolio. And I have one from the other business brokers. I go, "Why can't I use this one?" And they say, "Ours had this and that.” And so I paid the $500, I got this business portfolio. So when I got responses I was able to email this complete overview of my business with pictures and exact figures and stuff, very professional. That was huge. That just made so much difference. It was so worth the money to have that done.


Jeff: And the other companies didn't offer you anything like that?

Matt: Well, they offered a business portfolio, but the ones that I got that were included were nothing compared to what Morgan & Westfield offered me. In the first several pages of the business portfolio was teaching people how to buy a business. That was totally awesome. So someone would get an email and they'd get a step-by-step process in how to buy a business. That was so good because people need to be educated in how to buy a business. Most people out there had never bought a business before.

Well, they [other business brokers] offered a business portfolio, but the ones that I got that were included were nothing compared to what Morgan & Westfield offered me… very professional. That was huge. That just made so much difference. It was so worth the money to have that done.

Jeff: And so it obviously made their approach to buying or to proceeding with Morgan & Westfield easier on the buy side. And then it really did kind of create some added value, I guess, for them and coming to you and approaching you about your company. So really, the portfolio was great on both sides of the deal. 

Tell me a little bit then, Matt, how long did it take from the time that you began working with Morgan & Westfield to sell your company at the beginning of that sales process to the end when you finally were able to close the deal?

Matt: It would be about eight or nine months. And I ended up with a buyer who really wanted it. Basically, in my delivery service I would offer, like, he could ride a day with me on the route. And I had one guy I met with who wanted to ride with me, and another guy met with me and he did ride with me. And the second guy wanted to ride with me now and I told the first guy that if you want to give me a non-refundable deposit, $10,000, I won't have the second guy ride on the route, it's yours. I'm not going to play you against each other. 

And the guy rode with me on the route and gave me $10,000 non-refundable, done deal. And that was it. The business at that point was pretty much sold. And then we just waited until I could run him through the route again, and I got the rest of the money. And that was it, it just went really smooth.


Jeff: That was huge. It sounds like it went really, really well for you and it just kind of eclipsed your expectations maybe in particular, Matt, after the experiences that you had with the other people who tried to help you sell your company but weren't successful in doing so. 

I'd like to take just a second to kind of go back to the beginning of the process when you were thinking about selling and you were doing everything that you felt that you needed to do in order to get your business ready. Kind of take us through that process, Matt, when you knew that you had to do certain things to get your company ready sell. What did you in fact have to do and who did you involve in the process of getting ready and getting all your financials and everything snugged down?

Matt: Initially, it was like taking some pictures, giving him an idea on what the product line was. Then with the other two brokers it was just kind of piecemeal, like different things being pieced together, and I would type up this thing and that thing about the profit, about the history. And when I got that 35-page portfolio from Morgan & Westfield then I was really able to quantify everything in a nice flow. And there were so many different wonderful questions down there to answer about my business so people would really understand what my business was about.

By just going through that step-by-step in such a professional way I was able to really make clear what my business was all about. And I came up with a way to present my business when I met in person with someone so they could see what was going on. And it was more than just showing them my tax returns. I ended up copying my bank statements so they could see the deposits. I ended up copying checks from my sales so they could see the sales. When someone sits down with me I can prove to them what my business is doing in black and white. And so when I did get a couple of buyers I can show them that, they knew right away that what I was saying is true is I could prove it to them.


Jeff: Were you given kind of a checklist of things that needed to be done on your end by Morgan & Westfield, Matt? In order to make sure that your business was as ready as it had to be from a financial and legal perspective, if you would, kind of a to-do list of things that you had to put together for them? And were they helpful in helping you get those items together?

Matt: Absolutely. There's a complete list of all kinds of information on my business, things I never thought to tell people, like, I would assume that people knew about my business, but they really didn't. Because without this question they won't even know what questions to ask. So I have the questions for them before they even came up with the questions themselves.


Jeff: That's really important. Matt, so far so good. I really enjoyed talking to you in this first segment about kind of the experience that you had with the two companies that wasn’t so good. And then of course you found Morgan & Westfield and started working through them a little bit to help you get your business ready for sale. We're going to continue our conversation with you here in just a moment. We're going to hear more about the process.

And then also, too, I'd like to kind of hear a little bit about what you're doing post-sale of your business, just to kind of hear how you're kind of transitioning into your new retired life, Matt. I know that you've got a lot of other things that you have planned for yourself and no doubt your family as well. You're listening to a business seller, former business owner talk about having sold his business in his own words, how that process went within the experience that he had, and you're going to hear more of that discussion with Matt Wakelin. He is the former owner of Treasure Chest Foods, LLC. My name is Jeff Allen, we'll be back 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 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.

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Jeff: My name is Jeff Allen, I'm visiting with Matt Wakelin. He is the former owner of Treasure Chest Foods. We're talking about his experience having sold his business, and he, of course, is off enjoying life but doing some other things, and we're going to get to that here in just a minute. Matt, before we do talk about what you're doing now after Treasure Chest Foods, I wanted to go back and just kind of finish our discussion a little bit. 

In the sales process, oftentimes we talk to business owners who go through the process in the various stages of selling their business and oftentimes there are periods where their stress might begin to mount a little bit because there are a number of things to do, and questions to answer, and things to get ready in order to help them prepare and sell their business finally once and for all. 

Was there any of that that you went through, any stress, any periods of anxiety where you were wondering if you were doing the right thing, or just some periods during the process where you felt like you needed some additional help in order to maybe run your business or something? Kind of tell us in your own words if you went through any of that.

Matt: Well, the times where I wasn't getting any responses and then of course when the one broker told me that he didn't think my business was sellable and I was beginning to think I was never going to sell. I was just going to either keep driving back and forth from New York to Ohio or just give it up and lose any value of the business. That's the most difficult part.

And also I dig through responses. A lot of the perspective buyers, they were just kind of … they weren't really that interested. And some of the reasons they decided to not buy weren't good reasons, but I couldn't really communicate with them how my business really was. They got in their mind how it was and they made choices that I didn't think were accurate.

A lot of the prospective buyers … they weren't really that interested. Some of the reasons they decided to not buy weren't good reasons, but I couldn't really communicate with them how my business really was. They got in their mind how it was and they made choices that I didn't think were accurate.

Jeff: Right.

Matt: It was easy for me to prepare my business. So once I got mine set up, like what questions and things like that, which help with the business portfolio that I have.


Jeff: Is there anything that you think that you might have done differently or next time when you sell your next company, and we'll get into that here in a minute, that you might do differently in order to either help with the process and better prepare you and your mind-set or your team, anything else at all that you think that you would do differently?

Matt: I would say better record keeping. I think a business that was set up on QuickBooks that was very visual and professionally done. QuickBooks is a great idea I think. I ended up working with just the paperwork stuff but something really exact or you could really see everything the business is doing is what I'd do differently.


Jeff: Kind of at a glance, and it's tight, and kind of cohesive from page to page, quarter to quarter, year to year, very, very good. And as you know, Quicken is probably one of the most relied upon software programs there is, accounting programs there is, for many businesses today and very popular indeed. If a business owner came to you, Matt, now that you've sold your company, came to you asking for advice about selling their business, what would you tell them based on your experience?

Matt: Other than the record keeping, I would definitely refer them to Morgan & Westfield. I just paid a $150 marketing fee and $500 for the portfolio. I didn't end up shelling out $10,000-$15,000 in commission to a brokerage company. That was definitely the way to go. And your marketing plan was so effective.


Jeff: And you got a price that obviously you are happy with, correct?

Matt: Yeah, I was absolutely happy with that price. The other brokers wanted me to list a good chunk higher than what I wanted to negotiate. I would say don't list a price higher to negotiate, don't list a price higher to pay that $10,000-$15,000 plus commission to some brokerage firm. Set it out at a good price and then stay firm on your price, because the business is worth it. And that worked for me.


Jeff: Matt, it sounds like overall a pretty positive experience in having sold your company, and in using Morgan & Westfield to help you do that. Did you know, when you started to think about selling your company, what was it that you wanted to do afterward? Did you have any plans that you had made at that point?

Matt: Well, my social life is in upstate New York, and I have reason to be here. I have a couple of my buddies here in upstate New York that used to go door-to-door with high quality meats and seafood, and now they're in the residential solar business. And I got back here and took some time off and I decided I wanted to do the solar business. 

It's also a door-to-door business and I like it, knocking on doors, meeting people, being outside. That's what I'm going to do right now. I can run it part-time and it could be a good semi-retirement business where I can make some good money and maximize my skills and abilities with in-home sales.


Jeff: You know, it's really interesting, isn't it, that there are some industries out there that still thrive on those knocking on door types of methods that most of us kind of feel have gone by the wayside over the years? But that old process of foot to the pavement and walking along through neighborhoods knocking on doors, that's still very effective for some kinds of businesses, and solar is the one that really comes to mind as much today as any other.

What is it that attracted you to the solar industry? Do you think it was mostly for the opportunity to work with friends there closer to home and do something like that? Or is it maybe also to the possibility that solar energy does in fact provide that sustainable energy resource that so many people have been talking about is not being such a future reality but something that could really benefit people today?

Matt: Yeah, definitely helping the environment. But I also like the idea of, I still like being self-employed, because I can come and go as I please, and work at my own pace, and get my own car, and I can drive around, and I can look for homes that qualify for solar, get out and knock on their door. In a way it's similar to like building the meat business, just out there looking for customers. And when you find a qualified customer it can be a real easy sell and everything makes sense to them.


Jeff: Matt, we've had a chance on this program to talk to authors and business advisers who have made part of their careers to counsel business owners about their exit strategies and succession plans when it comes to thinking about leaving their business and selling their companies somewhere down the line. What would you suggest to those people who may not really be thinking about the end game, I mean, what it's going to be like once they leave their business? Is there any advice that you can give to people who may not necessarily have any plans right now for that day when they do in fact sell their companies?

Matt: I would say just keep good records and just keep running the business well, and do something to increase the business at least a little bit instead of let it die. So just keep putting the effort in. And it's nice to just ask around, and you don't have to necessarily tell people you're thinking about selling your business, but you can ask people what they think about your business and have they ever thought of owning one, and talk positively to people by word of mouth about it and you might come up with someone who's interested in it or knows somebody that knows somebody. But I think the record keeping is really key so you can show somebody the value of your business.


Jeff: With that thought and going out on that positive note, I want to thank you so much for participating here on "Deal Talk" today. It was really nice to chat with you, and nice to hear about how things are going on with you now after having sold your business, Treasure Chest Foods. And thank you once again for joining us today. We appreciate it.

Matt: All right, Jeff, thanks for having me.


Jeff: That's Matt Wakelin. He is the former owner of Treasure Chest Foods, and now he's doing other things after having sold his business successfully. And we would once again like to thank him for joining us on this program. 

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My name is Jeff Allen. I appreciate you joining us once again on "Deal Talk," brought to you by Morgan & Westfield, a nationwide leader in business sales and appraisals. Learn more at morganandwestfield.com. Until next time, Jeff Allen, thanks so much for listening. We'll talk to you again soon.

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