Selling a Business

Key Takeaways

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

Read Full Interview


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

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

Key Takeaways

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

Read Full Interview

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


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


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

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


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


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


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


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


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


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


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


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

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


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


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


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


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



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


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


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


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

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


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


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


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

Key Takeaways

  • In selling a business, getting advisers such as lawyers and accountants on board early on during the sale process is crucial to the success of the deal. 
  • Regardless of which side of the deal you are on, you must examine the agreements to check whether they have provisions that prevent the seller from taking those agreements and assigning them to the buyer. Check for provisions like this: ‘On the event of a change of control such as a sale of the business, the agreement cannot be assigned to any third party without the customer’s consent.’ 
  • Unlike in product-based businesses, service-based companies are selling relationships with customers and agreements, not hard assets. This makes it more difficult to put a value on service-based businesses. 
  • A term sheet or a letter of intent is a high-level document that outlines the understanding of the buyer and the seller regarding the purchase price, what assets are being purchased and whether the entire company is being sold. It is subject to due diligence and is not legally binding until agreements are “fully fleshed out.” 
  • Many times, sellers and even buyers are tempted to just use a form, an LOI or to enter it without incurring any outside adviser fees or expense. Dan Cotter considers this “a bad idea.” Sellers, according to Dan, need to understand that the LOI is not the final agreement. 
  • Dan Cotter’s advice to sellers to help them move successfully toward closing a deal: 
    • Learn to separate personal from the business side of selling your business. Selling a  business is like selling a house, in which the owner has created something from scratch and has built it into a successful organization. One thing to keep in mind: “The process can become very personal, and it is very difficult to separate that.”
    • Get some good advisers on board once you’ve contemplated selling your business. Reach out to an expert who can help you with valuation, brokering transactions and market knowledge. “If you are serious, having advisers in place and thinking that through is a very good idea.” 
    • In selling a service-based business, you need to understand the valuation methodologies that are available. This helps you get a good idea of the range of potential value for your organization.

Read Full Interview

Jeff: With real stories from real business owners and associated providers of third-party services, this is Done Deal.

Hi, my name is Jeff Allen, and Done Deal is brought to you by Morgan & Westfield. On this edition, we are going to change things up just a little bit. 

Instead of talking with a business owner about their experience selling their business, Dan Cotter is an attorney and partner at Butler Rubin Saltarelli & Boyd in Chicago. We're catching up with him following a successful sale involving one of his clients’ businesses to get a legal professional's perspective on the sale process and how it all worked out for his client, how it all came down, and what his involvement was. 

Dan, it's good to talk with you again. Welcome back to the program.

Dan: It's good to talk with you as well, Jeff, and thank you for having me on your program again. 

Jeff: Dan, you might remember when we visited the first time on Deal Talk, we had a completely different conversation. It was one involving cybercrime and cybercrime’s threats to valuations. For those people who’d like to go back and listen to that program, all you have to do is visit the Morgan & Westfield website — that's morganandwestfield.com and go to Deal Talk. You can look that show up once again with Dan Cotter on cybercrime’s threats to valuation. 

But this time, Dan, we've got you here on Done Deal talking about the follow-up, the post-interview following the sale of a business that you were involved with and your client. Now for legal purposes, we are not able to talk about too many specifics in this particular case. We can't talk about the owner themselves or their specific business necessarily, but we can speak about a number of generalities here, and that's what I would like to do with you, Dan. 

To start, give us an idea what kind of business this was, the kind of industry that it was involved in.

Dan: Sure. So this deal, this particular transaction was a sale of assets of a service industry provider. A company that had a number of contracts with customers that were retaining the seller for purposes of providing services to their organizations. 

Jeff: Now right off the bat, Dan, when we were talking about contracts, and depending on the type of business that you have, you could be dealing with a lot of contracts insofar as your vendors and suppliers are concerned, and of course your clients, your customers themselves. 

When you get involved in a sale where there are a number of contracts involved, whatever those contracts might be, is this something where you know you are going to have a tremendous amount of involvement in? Are there certain challenges and certain legal repercussions that could occur if someone such as yourself, a legal professional, is not involved in this sale of the business?

Dan: That is a great question, Jeff. Yes, there are a number of legal hurdles and potential obstacles. In many cases, sellers — and buyers for that matter — do not want to get advisers, whether it’s lawyers or accountants or deal brokers, involved early in the process. Especially in a deal and a transaction where it is a service industry that’s being bought or sold, it is really crucial, I think, to have lawyers and other advisers early on in the process.

The reason is this: With contracts and service contracts that a seller has — regardless of what side of the deal you are on — you need to take a look at those agreements and determine first and foremost whether or not those agreements have any provisions that would prevent the seller from taking those agreements and assigning them to the buyer. 

Oftentimes, what we'll find in service agreements and vendor contracts — and I’ve drafted many of them over the years on both sides — is that the customer wants entity XYZ or individual A to perform the services that are contemplated by that service agreement. And so they have provisions that say that, for example, on the event of a change of control such as a sale of the business, the agreement cannot be assigned to any third party without the customer's consent. 
 

My advice to all of my clients, whether it is an M&A or just another contractual matter, is that it's better to be proactive and have a lawyer that they trust to spend half an hour or a small amount of time to review a contract because if the contract is problematic and they sign it without spending that time, it’s much more costly in the back end to fix or address issues that have come up from a poorly drafted contract.


If you have those types of provisions in the agreements for services, that can present a challenge because unlike a retail store or a company that is selling with inventory, that's what the purchasers are buying. In the instance of a service industry seller, what’s being purchased and sold is in fact just those relationships and those agreements. So that is one of the items that I think is important for advisers, including lawyers, to be involved on the front end. 

In addition to that, I think one of the other challenges is that when it comes to having service agreements in place, it is very difficult or can be [difficult] to put a value on the business other than net revenue or net income for a couple of year period and try to figure out a multiple. Again, you are not buying computers, desks, offices, property plant, and equipment. So having the proper advisers in the front will save a lot of headaches for both the buyer and seller on the back end.

Jeff: And you talked about being involved in the early stages, Dan. When you got involved, was this one of those things where you could see, "This is going to take some time here. There's no way that we're going to be able to sell this company within 9 months, within 12 months, within 15 months” whatever the case may be? Were you brought in at such a stage where you knew that there is a lot of prep work in advance, that there was going to be a fairly long period before you knew that the deal could be consummated? 

Dan: In this case, I was brought in when the seller had already, I believe, indicated that they were interested in selling their business. I was brought in during the negotiation with the entity that eventually purchased the assets of the business. The letter of intent and the agreement was close to being final and hadn’t been fully realized. 

This transaction took, I think, 3 or 4 months from start to finish. Not an extensively long period of time, but the main hurdles even once the letter was entered into, the letter of intent, and the parties agreed on terms is based on due diligence and just a review of everything taking place. There were some adjustments to the eventual purchase price.

Jeff: We are going to talk about the letter of intent or the LOI here in just a couple of minutes, Dan. But what is the process once a seller accepts an offer? What happens from that point? And what role do you play at that stage?

Dan: Sure. Once a seller accepts an offer, that offer is typically memorialized in a variety of ways. It could just be by a simple letter. More and more these days, the prevalence of email as our main communication and a business transactional tool. It could be as simple as the buyer or the seller confirming the conversation that was taking place that would buy X assets for Y price and close on such and such a date. 

Then what typically happens is that you would see either a term sheet or a letter of intent. Both of them are just high-level documents that always reference that 1) they are not binding until agreements are fully fleshed out, and 2) they are subject to due diligence and other basic factors. 

Jeff: Did you actually help draft those documents, or are you at least a part of the process where you go through and you vet those documents, making sure that they are sound and that they are all legal?

Dan: In this transaction, I reviewed drafts that were put together by the buyer and provided input and recommendations for edits and for finalization. So I was involved in that process. 

It is really important once the parties have figured out what it is that they offer in acceptances, they’ve got a meeting of the minds, to really document well what those agreed-upon conditions are. In this case, the letter of intent was pretty well defined in terms of all the different moving pieces, price, and continued retention of the seller for a period of time. 

The first step is giving some kind of letter of intent or term sheet to finalize, memorialize, signed by the parties. Once that happens, it is off to due diligence and the process of negotiating the definitive agreements that, unfortunately, are full of legalese and a lot of boilerplate language but are all designed to protect both parties in the transaction as much as possible. 

Jeff: We are looking at the sale of a service-oriented business, not from the business owner's perspective but from an attorney's perspective. 

Dan Cotter is an attorney and partner at Butler Rubin Saltarelli & Boyd in Chicago. We are glad to have him with us in the program today, once again brought to you by Morgan & Westfield. 

Dan, what other parties were involved along with you as part of this deal to make sure that it went through as successful as possible for both parties?

Dan: On the seller side, in addition to myself as legal adviser, we had a broker involved and then we also had the CPA (certified public accountant) for the seller was involved. The reason for that is again there were questions that came up during the deal that come up during any deal in terms of assigning value to assets as part of the sale, tax consequences of the deal, and so on. On the seller side, those were the three groups of advisers that assisted the seller in this transaction. 

On the buyer side, they had their lawyers as well. I don’t know if they used other resources, but typically they would have somebody that has expertise in tax, so that’s typically the CPA that’s been doing the books and records and providing the tax filings for their organization.

Jeff: Now who did you communicate mostly with when you were going through the day-to-day? I know that there are different tasks and different responsibilities each day that you would take care of. Who did you find that most of your interaction was in this particular situation? 

Dan: In this particular situation, it was the principal, founder and owner, the seller. On a daily basis, we would interact, but I also dealt with the broker as well because again a lot of the questions and the kind of guidance and shepherding through the deal involved him interacting with the principal on a regular basis. But principally, my contact on a day-to-day basis is with the seller and owner of the company that was being sold. 
 

This document [LOI] is important for the seller to understand that it’s not the final agreement. It is not spelling out all terms and conditions. And the seller does not want to be locked into having to sell the business, if the buyer came back and said, "we offered you half a million dollars for your business but we've done due diligence and revised purchase price is $50,000," and there are no caveats in the letter of intent that the seller has the option to turn down a negative offer.


Jeff: I want to ask you two pieces of information that are really, really important. Some drafts and documentation that are critical to the sale of many businesses and you could probably say just about all businesses where there are attorneys such as yourself involved.

Let's talk about the letter of intent for a moment or what is also known as the LOI. This is obviously a very important document that is part of the sale process, and this is presented on the part of the buyer of a business. Let's talk a little bit about what kind of language that document has in it, and why that language is important that we need to make sure that we are very specific in it, and what your advice is for a seller who is presented with this document. They might be tempted to accept it very quickly, especially if it is their first business and they are anxious to cut a deal and move on.  

But let's just talk about it, why it’s so important, and what a seller needs to know before they accept a letter of intent. 

Dan: Sure. A number of reasons why the LOI or letter of intent is so important to the transaction. First and foremost, again, it sets forth the kind of high-level understanding of the parties about what the purchase price is, what assets are being purchased, or if the entire company is being sold. Is it a stock purchase agreement or unit sale, if it’s an LLC? Typically it will have some caveat language that says that the letter of intent is subject to due diligence period and that the price and other terms and conditions will be negotiated between the parties based on what comes up in due diligence. 

You know oftentimes as you mentioned, Jeff, sellers are tempted, and sometimes buyers as well, to just use a form, an LOI, or to enter it without incurring any outside adviser fees or expense. 

That is a bad idea, and I can give you an example of a situation from about 2 years ago. I was brought into a transaction where the letter of intent had already been signed. I asked for that as part of my process when I first interviewed, in this case, it was the buyer of a retail establishment and received a letter of intent. It was a very brief letter of intent but it had some very bizarre language in it. For example, it said that the buyer represented, warranted, and gave assurances that the financial statements of the seller were fully accurate. That’s problematic because if you are buying something, how can you be in the position to attest that the financial statements are accurate, right?

Jeff: Exactly.

Dan: That was one problem that was in this case, there was an earnest money deposit where the buyer immediately agreed to give the seller a sum of money for the deal. There was nothing about it being refundable. So there were other problems with it. 

So, again, this document is important for the seller to understand that it’s not the final agreement. It is not spelling out all terms and conditions. And the seller does not want to be locked into having to sell the business, if the buyer came back and said, "we offered you half a million dollars for your business but we've done due diligence and revised purchase price is $50,000," and there are no caveats in the letter of intent that the seller has the option to turn down a negative offer.

In addition, oftentimes what you see in a letter of intent is a period of exclusivity where the buyer has the only ability to interact with the seller for a period of time. It may be 3 months, it may 6 months, it may be 30 days. Again, the seller needs to understand what that means in terms of being able to shop the business, especially if they’ve put their business up for sale, and what that does to interacting.
My advice to all of my clients, whether it is an M&A or just another contractual matter, is that it's better to be proactive and have a lawyer that they trust to spend half an hour or a small amount of time to review a contract because if the contract is problematic and they sign it without spending that time, it’s much more costly in the back end to fix or address issues that have come up from a poorly drafted contract.

Jeff: Is that a relatively common mistake that you see, Dan Cotter, from time to time that you understand these stories whether they are presented to you in person by actual clients that you have taken on because they ended up accepting something that just is not just going to fly? Or there are just not the proper documentation to back up certain terms in the language in the contracts and so they end up coming to you after the fact, saying, "hey, there are some stuff that we need to clean up” or “there is something that just is not right."
 

I cannot tell you how many times I’ve had a friend or former internal executives, when I was in-house, or other folks inquire about what their ability is to move on to something else ... oftentimes when you ask them why they signed something without reviewing it or thinking about it, they will respond that they had no choice. But it is better to be proactive and penny-wise rather than pound-foolish.


Dan: That is often the case and that's understood. A lot of small and mid-sized business, even the large ones, they look at what the legal market is and the costs that are involved in it. Oftentimes, I think the legal profession is seen as being a profession that inserts hurdles and issues where none don't exist. But again, it will oftentimes. 

I've have had situations where business owners, they might be co-owners and partners in a deal, will come when they want an exit or sell or move on to something else, and oftentimes the documents that they have entered into did not really address how they can amicably separate their ways.

It happens in M&A as well, it happens with letters of intent, it happens with almost every type of contract there is. That is just natural. It occurs in many instances. It happens in employment, transactions, offer letters, non-competes, non-disclosure agreements. 

I cannot tell you how many times I’ve had a friend or former internal executives when I was in-house, or other folks inquire about what their ability is to move on to something else. And oftentimes when you ask them why they signed something without reviewing it or thinking about it, they will respond that they had no choice. But it is better to be proactive and penny wise rather than pound foolish. 

Jeff: Dan Cotter with Butler Rubin Saltarelli & Boyd, an attorney in Law in Chicago is with us. We are talking a little bit about, speaking in general terms about his involvement in helping business owners sell their companies and why it is so important to have an attorney involved in the process. Speaking about a business in general terms that he recently just completed the sale with Morgan & Westfield on a service-based business where there are a lot of contracts involved. Some terms that we often hear come up involving the sale of a business, Dan Cotter, reps and warranties. 

Now that sounds like a legalese, but when you get down to it, you get representations. We know what a warranty is, but tell us when you take and combine those two, reps and warranties. What is involved in that language? What does that mean to us as a business owner or to the buyer or seller of the business, and why is it important that we also have these examined by our attorneys before we move forward with any deal?

Dan: Sure and just so that we can use the definition that’s been tried and true, Black’s Dictionary defines a representation as “a presentation of fact either by words or by conduct made to induce someone to act, especially to enter into a contract.” 

Representations and warranties are really assurances by the seller that the purchasing party can rely on as factual. When we look at traditional asset purchase or stock purchase agreements or even other contracts that we may have in our lives, when we look at what representations and warranties are, again, there are assertions of fact that are intended to be true at present — that is the representation part of representations and warranties. 

Warranties kind of go to the future, and say that we are telling you, as the buyer, that with respect to these items, these things are true and will continue to be true. And what we often see in representations and warranties is things such as employment status, that if the company has employees that there’s no current complaints. There's usually reps and warranties about litigation and whether or not there is any material exposure. 

We have talked a lot about contracts today, Jeff, and so again one of the representations and warranties is that the schedule that’s part of that particular representation and warranty that states that all material contracts are attached to the agreement, or that the referenced and the buyer has had access to those contracts to review in their own case. 
 

Every transaction is a bit nuanced. Depending on who is drafting the original drafts of the purchase agreement, if it’s the buyer, then you can expect that the representations and warranties will be slanted more in favor of the buyer. That’s just who drafted determines what the provisions say.


And so it’s important again because a lot of language in various agreements is absolutely boilerplate. Every transaction is a bit nuanced. Depending on who is drafting the original drafts of the purchase agreement, if it’s the buyer, then you can expect that the representations and warranties will be slanted more in favor of the buyer. That’s just who drafted determines what the provisions say. 

So again, it is important that a lawyer review how these are drafted and to ensure that they are constrained and limited as much as possible. For example, oftentimes the draft from the buyer will make very clear statements that are just absolute. For example, seller represents and warrants that all contracts that the seller has entered into are attached as schedule 1.3 or whatever the schedule number may be. 

The problem is that oftentimes, especially in organizations where it is not just a very small group of employees that are knowledge-based. For example in this transaction, it was the principal, and she was the main person that was responsible for having knowledge. 

Oftentimes, what we as lawyers would do is put in qualifiers to make it clear that it is to the knowledge of seller, and the knowledge will be defined to be the particular, actual knowledge of a particular person or a control group of people. And so again what is trying to be done here is that while these are reps and warranties, our assurances and statements to the buyer that certain things are true. I want to make sure that when somebody makes those statements that they actually have knowledge. 

And so you can think of situations where, you know, if GE were being sold, for example, you would want to make sure that there are only certain people that might have that knowledge because literally receptionists in one of their branches in Hong Kong could have received a notice of a lawsuit that is material, and for whatever reason, that is still sitting on that reception desk in Hong Kong. So you want to make it actual knowledge.

Jeff: There is a kind of a colloquial expression that I have heard bantered around now and again, “once and done” and sometimes we use that expression, we take and twist it a little bit, we may call it “one and done.” But “once and done,” what does that mean when you are talking about a business sale or perhaps in your particular case in this particular deal, what does that mean to us and why is that important?

Dan: You know from a business perspective, the “once and done” is that all of the facts, all of the tire kicking, all of the request for information should be done all at once. And once that process is complete, then the contracts will be fully fleshed out, the definitive purchase agreement. 

The reason for that is that if you are doing this piecemeal and repeatedly coming back with a request to the seller for more information, is that 1) the price and terms may change. But to me, the importance of casting a wide net and getting as much information as possible like we do when we enter any personal transaction makes it much easier in terms of the time spent, the resources required by experts and your advisers to review contracts, to review final terms and to opine on things. 

If you have a transaction that is constantly shifting, that’s going to be costly and is also frustrating to both the seller and the buyer. And not an ideal way to approach.

Jeff: I would imagine so, particularly if you are a buyer, and you are interested in a business, and you really wanted to take and move things forward, and move things forward as quickly as you possibly can, and after all I think both sides want that very much. But it would seem that the buyer comes in at a slight disadvantage because the seller holds all the cards from the very beginning. 

You talk about casting a wide net, how does a buyer do that? What would you suggest, Dan? What is maybe a step or a couple of steps that they can take in order to ensure that they are able to, as you say, obtain as much information as they can and make sure that everything is out on the table, so to speak. What is a good tip or rule of thumb for a buyer to remember in order to take this “once and done” approach?

Dan: I think that the best first step is to, again, engage with advisers from the buyer's side and to develop or have advisers provide kind of a template, a due diligence checklist. 

I can give you a story many years ago: I just started at a client, and my first order of business was to put together a due diligence request to a seller and got the business folks’ input, sent it out to the potential seller, and that was my first week with this client. We sat down to dinner on a Friday afternoon with my family — my two young boys and my wife. We got an email and the subject line was "Ouch." So I opened that email, and the email was a long exchange between one of the partners of the seller and my client's CEO. The sellers were not happy with the fact that we had sent them a pretty expansive due diligence request that we’ve used in other deals that listed things by organizational documents, good standing of the company, human resources, IT, contracts, litigation, etc. 

And so I was told that I had to put that down to one page, and we did so. Then we visited the potential seller, and it was immediately apparent why they had balked at that request. 

My advice on both seller and buyer side is to put everything that you might want to know about the seller into the initial due diligence checklist and request. In the worst case, the responses to much of it would be not applicable, none, nothing responsive. 

But as you said, the buyer on the transactional side is always at a disadvantage because the seller knows the business. He knows where the issues are, he knows the blemishes that might exist on the business, and it’s not required as part of the transaction to fully disclose without being requested. At the same time, he should give enough information to make the deal. 

The buyer, if they are doing it right, should send a due diligence list and figure out whether it is going to be an electronic database and due diligence room or if it is going to be in person. Then start that process, in addition to documentation, includes interviews with the main management of the seller, includes perhaps interviews with major clients of the seller. But it is again cast in this broader net and being more thorough rather than the one-page due diligence list that I mentioned in a prior life is going to get as much information as possible.

The other benefit of having that approach is when the final definitive agreement is drafted with all the schedule showing various disclosures and reps and warranties. Again, the buyer may have recoursed on the line if it turns out that the seller, despite the assurances and despite the request from the buyer for a broad information, that the seller did not fully disclose everything that was relevant to the transaction that was requested. 

Jeff: Dan Cotter, this has been a great conversation we’ve had today. It has been very insightful, just as we are kind of winding things down a little on this particular discussion. 

Anything else that might pop into your mind when you are talking to a roomful of business owners or even those folks who may be looking for a business to purchase at one time or another, whether that is in the near term or in the distant future, at some point when they are ready. What kind of advice or just a couple of real key pieces of information could you leave us with today? Some takeaways as far as preparing properly or being ready to engage in a conversation with a business owner about his or her business for sale in order for things to move as swiftly and as successfully as possible toward a deal that is going to benefit both?

Dan: I think that from a seller's perspective, one is that the transaction itself is like selling a house. Oftentimes it is a business that the seller created from scratch and has built into something that is a fantastic organization. 

One thing to keep in mind is that the process can become very personal, and it is very difficult to separate that but I would advise that. 

Secondly, from the seller's perspective, when the seller is ready to contemplate selling and an exit strategy, it’s important to have good advisers in terms of valuation, in terms of the market for whatever line of business your organization is in. People that have a wealth of experience in brokering transactions, they understand where the market is for various lines. So I think it is important for a seller to reach out to somebody that is in that space and get some advice. 
 

On selling a service-based business: You’re not selling inventory, you’re not selling property plant and equipment, all you are selling are relationships and contracts and agreements you have in place with your customers. So you need to have a pretty good idea of the range of potential value that your organization presents.


As the deal starts, as we talked about already, I think for both sides, it is important to have those advisers involved in the discussions and negotiations as much as possible. Put into understanding that the business principles are going to hammer out a lot of details. And it is not cost-effective to have your full body of advisers in every meeting and in every conversation, but if you are serious, I think having advisers in place and thinking that through is a very good idea. 

Finally, if you are in the service industry, I think getting the sense of what valuation methodologies are opted for your business. You’re not selling inventory, you’re not selling property plant and equipment, all you are selling are relationships and contracts and agreements you have in place with your customers. So you need to have a pretty good idea of the range of potential value that your organization presents.

Jeff: Dan Cotter, we’ve run out of time on this edition of the program. I want to thank you again for your participation in the program today.

Dan: Well, thank you.

Jeff: Dan Cotter is an attorney and partner at Butler Rubin Saltarelli & Boyd in Chicago. Done Deal is brought to you by Morgan & Westfield. 

We try to bring you stories from real business owners and from those third-party organizations and representatives that they’re associated with to try to give you some insight as to how things went down with the sale of those businesses, some of the key challenges that were faced, how they were overcome, and what you should do in the future in order to work toward a successful deal on your part, whether you are the owner of a business now or looking to buy one in the future. 

We hope that you join us again on the future edition of Done Deal. My name is Jeff Allen. Until then. Thank you.

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

Have patience.
Diane Robbins’ Miracle Method franchise might have taken a year to be sold, but in the end, everything came together. Diane’s patience with the first buyer was a major factor that led to the deal’s success.

Be prepared.
Having been informed of what was required of her and what she needed to do during the sale process, Diane was able to prepare in advance. This preparedness hastened the sale process from the seller’s end.

Learn to manage your emotions.
Diane mentioned that she went through an “emotional rollercoaster” during the process of selling her business. This is common among business sellers, so keeping an objective view of the deal helps.

Be ready to train your successor.
A seller’s obligations to the business do not end once the deal is closed. Part of what ensures the long-term success of the business in the hands of the new owner is providing comprehensive training and allowing for an adequate transition period.

Read Full Interview

Jeff: No two business experiences are alike, even for franchisees. If you like hearing stories from real business owners like you who've recently sold their businesses and lived quite well to tell about it, 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.

Experience is the best teacher, even if it may be someone else's experience that you're learning from. That could be, again, particularly true when you are a business owner who may be interested in selling your business. On this edition of "Deal Talk," we're welcoming the former owner of a franchise business who's gone through the experience of selling their baby and has agreed to share their story right now with us. Her name is Diane Robbins, and she is now the former owner of the Miracle Method franchise in Ludlow, Massachusetts. Diane Robbins, welcome to "Deal Talk." 

Diane: Thank you, Jeff.

Jeff: Miracle Method, for those folks who may not be familiar with your company, provide a service that actually restores and refinishes surfaces, and that includes things like bathtubs, countertops, and things like that, is that correct?

Diane: That's very correct. We also do a lot of high-end colleges and big businesses.

Jeff: Really in the surface of making things that are old and worn-out look new again, and at a price that is maybe a little bit lower than what it might cost to have a contractor come in and just demolish everything and start over again with a brand-new countertop surface or a brand-new tub or something like that, is that right?

Diane: Correct. They save about 75% by going with our process.

Jeff: Which is huge, it's just significant. Miracle Method has been around for some time. We've had a chance to speak to other Miracle Method owners and former owners in the past who've shared their stories. But like I said, no two stories are absolutely 100% alike. And the reason we like to talk to business owners and former business owners like yourself, Diane, is to share your story. Tell us a little bit about why you decided to share a business that you had found quite a bit of success with.

Diane: We weren't going to retire. My husband and I were going to keep on going and maybe hire a manager. But a few years back, I ended up with some medical problems and my husband basically fired me because I was calling out too much. He acquired my part of the business problems, and it just got to be too much. He is not a high-tech person, and we felt that our franchise needed to go into the 21st century with iPads and other products going into the home. And we decided it was just time that we spend time away from a business.

Jeff: Understood. You were in a situation where, obviously, health at first was the main concern there that sparked all of this. But at the same time, you knew that it's in the company's best interest to move forward with respect to your particular location, in your part of the country, your franchise location, when you began to entertain this idea of selling your company and move forward with the idea of doing that, what did you do first?

Diane: We reached out to Miracle Method National in Colorado Springs and spoke to John Tubiolo, the franchise guru down there, and ask him about if they had any brokers that they dealt with versus us just putting something in a newspaper. And he did, and it was Morgan & Westfield.

He hooked us up, and I just felt that I was in the right direction. We answered their questions. They have a large questionnaire, and we answered all of their questions and did our contracts, etc. From there, he put it into the various magazines and small business ventures. And within four days, we had a prospective buyer. 

Jeff: Wow. That is a very, very short space of time, from the time that you got connected with the folks at Morgan & Westfield until the time that you actually had a prospective buyer in your sights interested in your franchise location there.

You and your husband then, did you share equally in the role as far as being involved in the process, or were you still at that time getting better with respect to your health and he was working the process?

Diane: No. I was the one who dealt with the whole process. He was working away. I did everything. The only thing he did was help me answer the technical questions that Morgan & Westfield had provided. That was basically it. He would ask here and there, but it was all me.

Jeff: How long did it take for the entire process to play out from the time that you contacted the folks at Miracle Method Corporate to the time that things closed for you and the sale was completed?
 

When you have a buyer at the beginning, it doesn't mean that within a couple of months you have a closing. That's the message I want to get out to prospective sellers, that it's just a patience and waiting game.


Diane: It took one year for this whole process with the same buyer, that was within four days. We went through an emotional roller coaster.

Jeff: Oh my goodness. We want to get to that a little bit here. I want to talk to you about that. Once the buyer presented themselves to you, it took one year after that or was it a matter of things speeding up after that process or after that point?

Diane: No. The gentleman was very enthusiastic and had the money, etc. And we would hear from him, and then for one month we would hear nothing and we think, "Oh my god. He's gone. We lost our prospective buyer.

Jeff: And that was a concern to you?

Diane: Very much so. And then we hear from him. He's as enthusiastic as he was a month ago. And then he had to go through the process of getting an SBA loan, which was a nightmare for him, a nightmare for us. It took many months. And even after he was approved, it was still a lot of little things that we had to provide information for him, etc. And I think in some parts, his lawyers were not good lawyers helping him along.

Jeff: I see. During the time then, when you were concerned about this and you'd hear from him. He sounded enthusiastic and then he got you up to date on his status. And then you wouldn't hear from him for a month or so. Were you at any point in time talking to additional prospective buyers to see if there might be somebody else out there who is willing to step forward and maybe come through without having you wait any longer?

Diane: During the whole process, we had four other prospective buyers, but we did nothing with them because we had faith in the gentleman who was pursuing this and thought that it would be disrespectful to start another process.

Jeff: Fair enough. Diane Robbins on the other end here of our conversation. My name is Jeff Allen. You're listening to "Deal Talk." Diane Robbins, now the former owner along with her husband, of the Miracle Method franchise in Ludlow, Massachusetts. We're talking a little bit with her today about her recent experience in selling her franchise location there. 

Would you say the most stressful part of the process, Diane, was just the waiting game, waiting for all of this to play out and wondering whether or not this was actually going to go through with this person?

Diane: Exactly. It was a mental nightmare, but it ended up to be a good ending.

Jeff: Very good. Really the ending is the most important part, right? It's how we finish the race that counts. Give me some sense of how much work was involved on your end in terms of getting your business ready to sell. Were you surprised at the amount of work that was required? Were you ready for it?

Diane: I think we were pretty well-prepared. Like I said, we had spoken to Miracle Method National and had been in contact with Morgan & Westfield throughout this process. And they let us through what was expected of us, and it really went fairly well on our end.

Jeff: You talk about a questionnaire that Morgan & Westfield provided you. What other types of things, what kind of role overall did Morgan & Westfield play in the process?

Diane: They basically got us started in the whole process. And once everything was going, they went into the background until he would call periodically to see if we wanted to update our information for other prospective buyers. And throughout that, I kept on saying “no” because we had this one buyer. And we just had the faith in the buyer that he was going to come through. And at the end, it almost didn't come through, and we were like, "Should we have updated everything and contacted other prospective buyers?" But in the end, it worked out.

Jeff: Did you ever have to meet with anyone at Morgan & Westfield face-to-face at a table during this process?

Diane: No.

Jeff: Was the fact that you didn't have to meet with them in person, did that still work out for you? Was it convenient for you being able to stay in touch by email and by phone?

Diane: Totally. I did not feel the need to go face-to-face with him. And I felt that I knew him pretty well just by him being so responsive to everything.

Jeff: Let's go ahead and move forward a little bit. And maybe we're fast forwarding a bit, but we're getting to the closing process. You had mentioned that there were some concerns that maybe things wouldn't go through. Was there a point at the end where you thought, "You know what, we've waited this whole time, and now there's a pretty good chance that this isn't going to happen.” Did that ever cross your mind?

Diane: Yes. There were dealings, negotiations with purchase price that he had agreed upon at first, and then he was skeptical about the price. So we negotiated price, and that was a very, very tough decision on our part. And so now that we were so long involved that we gave in because it was time to sell. We did the right thing.

Jeff: Did Morgan & Westfield play any role at the closing table and that process, helping you with those negotiations or working with that buyer in trying to get the deal done and get it consummated?

Diane: No. They were in the background at that point. And it was just between the buyer and us.

Jeff: I'm getting then one of the more stressful parts of it that you talked about was the waiting game. And you mentioned that that might have the most stressful part of all but then we get down to the negotiation. 

And everyone, Diane, I'm sure like you have bought cars, and many people have purchased homes and so we all know what it's like to go down... You get down to the end of the last few days or moments. You get down to the end of the wire. You've got that negotiation and you know that that's coming up and that's looming. Would you say that the negotiations were the most challenging aspect of selling your business or was there something else that caused you maybe some headaches, or you weren't exactly sure whether or not you would be able to get through it without some help?

Diane: No, I think it was the negotiations. But throughout the whole thing, I think you need patience. And that was our saving grace, that both of us were very patient. And we were not edgy with the prospective buyer and we just went along with what was going on. And to know that when you have a buyer at the beginning, it doesn't mean that within a couple of months you have a closing. That's the message I want to get out to prospective sellers that it's just a patience and waiting game.

Jeff: Boy, that is an outstanding piece of advice. I think another way to put it is never take it for granted that you've got a deal done until the signatures are on the bottom line. And you've got your money in your pocket and the buyer has the business in hand.

Diane, really important advice, I think the key here is never to take anything for granted until you've got those signatures not wet but dry on the bottom line of that contract. I'm speaking with Diane Robbins, now the satisfied former owner of the Miracle Method franchise in Ludlow, Massachusetts, helping to give us the opportunity to understand what it was like for her to sell her company after owning it for so long. 

She wants to share her experience with you so that you can be prepared for the eventuality, selling your own business whenever that may be, whether that's two years from now or 22 years from now. My name is Jeff Allen, and we'll be right back with my guest Diane Robbins here on "Deal Talk" when we come back 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 any of the topics you've heard us discuss here on "Deal Talk," all you have to do is ask. It's very simple to do. Simply call our Ask "Deal Talk" info line at 888-693-7834 extension 350. Follow the instructions, 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.

My name is Jeff Allen and you're listening to this edition of "Deal Talk" with special guest Diane Robbins, the former owner of Miracle Method franchise in Ludlow, Massachusetts. The Miracle Method franchise location there. Miracle Method, of course, now all over the country. Diane Robbins, I appreciate you joining us today on our program, really enjoying your insight and your first-person's perspective experience in selling your company, your Miracle Method location there in Massachusetts. 

I want to talk to you now a little bit at this time, Diane, about the emotional aspects of selling your business as it relates really to your employees, the team of people that you had working with you. Tell us about that. How large was the team, and how did you break it to them about your plans to sell?

Diane: There are eight employees, and one of them is our son who knew all along what was going on. He's very quiet and patient and non-verbal to anybody. So the whole year nobody knew what was going on. Two days before our sale, my husband told the employees that there was a new owner. Their mouths just dropped. And, of course, they were like, "Do we call you for problems? Can we do this, do that?" And Ray reassured them that the buyer was a very nice gentleman, and he was going to get this company going into the 21st century and just improve everything.

Jeff: How did the team take that when you tried to soothe their concerns a little bit about the transition? And once your husband talked to the team about this gentleman and what his plans were to help drive the accompany, its success into the future, what was the response? Did you feel that they had relaxed a bit and were feeling a little less stressed out about the situation? Just tell us, if you would.

Diane: No. They were all worried that they would not have jobs. And my husband reassured them that he had no plans on firing anybody, and everybody was going to be the team to start and prove themselves along the way and go forward.
 

There's no way that this gentleman would know the ins and outs of this business. It's not like walking into an office of some expertise that you knew about. This is just a different kind of business that you just don't walk in knowing anything about it.


Jeff: As far as you know, everybody's still there from what you understand?

Diane: Oh yes. They're all there. It's been three weeks and the transition's going smoothly. My husband is there along with our new buyer, giving him some instructions. And then he will go to Colorado for the main training.

Jeff: Very good. I think it's important to point out that this program will be heard probably months and then maybe even years if this transaction had all been completed. So I think it's important to point out at this time, Diane, that you and your husband agreed with the new owner of your Miracle Method franchise that you would stand by in order to help them or in fact spend a certain amount of time with them in the beginning to ensure a smooth a transition as possible, is that right?

Diane: That's right. There's no way that this gentleman would know the ins and outs of this business. It's not like walking into an office of some expertise that you knew about. This is just a different kind of business that you just don't walk in knowing anything about it.

Jeff: Did he have any kind of experience before with the Miracle Method process or doing something similar with another company?

Diane: We resurfaced his tub 12 years ago.

Jeff: Is that right?

Diane: Yes. And he loves his tub, and that's where he knew when he was looking for a business that this was the right direction, that it was a nice small business that he could get into that the product was reliable.

Jeff: Wow, no kidding?

Diane: Knew from firsthand that having his tub resurfaced himself from Miracle Method.

Jeff: I wish I would've led with that question, kicked off the program here with that question because I don't know if you remember the old commercials for the Remington shaver back in the ‘70s. Victor Kiam who bought himself a Remington shaver, he liked it so much he bought the company.

Diane: Exactly. That's what this man did.
 

I think buying this business was just as nerve-wracking [as selling it].


Jeff : That's a great story, and it's one that you can turn around, I'm sure, and start a conversation about. I think it's really heartwarming to hear that the employees have obviously continued. And that the new owner is really inter-directed and very convicted about making sure that he can lead the company and continue to lead it into the future. And upgrade the technology a bit, as you said, that you and your husband were a little bit uncomfortable with doing, but that he has made that commitment to help improve the business and to help make it even more profitable than it already is in terms of being able to look at other types of things that you've done in your life.

Selling your company, is there any comparing it to any other type of situation that you have been involved with in terms of whether it be the emotional roller coaster that you've been through or the amount of preparation that you had to do in order to get your company ready for sale?

Diane: I think buying this business was just as nerve-wracking.

Jeff: Really?

Diane: Because we knew nothing. I was a nurse for many, many years, and my husband was a meat manager at a grocery store, and also a special police officer in our town. There was nothing. We knew the old owners, and my company was folding. My husband had had enough of the food industry, and he had 35 years there, and so he basically retired from that business. And we just up and started and it was very nerve-wracking.

Jeff: Amazing. Really, you're talking about people. If you could find professions or occupations that were the opposite of one another, you hit it there. Police officer, nurse, and meat cutters, that's completely different from folks who can go in and resurface a countertop, if you will. It's an unbelievable comparison. It's a contrast is what it is. Now that everything is done, now the signatures have dried, you have your money, the new owner is working with the business. He's trying to get up to speed. And you've got the employees there. Everything's been done. They understand the new owner is in charge now. What's it like? How do you feel about the process being over and just share with us the feelings afterward?

Diane: I think I'm okay because I've been out of the business for two years. I know what's going on, but I'm not there. But my husband is having the "this was my baby and I'm leaving my baby." But he feels that it’s in good hands, and each week is getting better.

Jeff: What are you both going to do now, Diane Robbins? You and your husband, share with us any plans that maybe you're making post-business ownership?

Diane: I have lots of honey-do-lists here.

Jeff: And how active a role will you be playing in that?

Diane: I will be writing the honey-do-list. 

Jeff: True to form, Diane. Spoken like a loving spouse, and I have experience with it from the other side of the list, shall we say. You're going to have some fun, right? You've got some other things that you're going to be doing, right?

Diane: Of course. We're going to travel here and there. I have difficulty walking so I'm not going on the big tours of any sort, but locally and not airplanes. And I have two wonderful grandchildren that I can spend more time with. And I'm looking forward to that.
 

My advice to anybody is you have to have patience. This is not something that goes to market right off the bat and you're signing papers in a couple of months. It's just patience.


Jeff: Very good, let's, if you would, take just a second as we close our program with a couple of final questions with respect to any advice that you're able to give. If you had to do it all over again is there something that you would do differently that you might urge members of our listening audience to consider when it comes time to sell their business?

Diane: I think I would not do anything different. I had faith in the first prospective buyer. And my advice to anybody is you have to have patience. This is not something that goes to market right off the bat and you're signing papers in a couple of months. It's just patience.

Jeff: Patience is a virtue and it will be rewarded. And in terms of preparing your company for sale, to making sure that it is ready to go and that it is marketable to somebody else out there, so that you actually have people coming in and interested in what you're doing, sitting down with you saying seriously “yes”. Is there any anything at all that you might be able to say in terms of making sure that you're ready when it comes time?

Diane: You have to have profitability in the business itself and showing that... obviously, he knew what the company was about because he had his tub done. But we had to basically just put ourselves out there and do our thing because it is a good, small business.

Jeff: It sounds to me that you found, overall, the process while it was stressful and there was that emotional roller coaster, you were satisfied at the end and able to let your hair down at that point. And now that you're looking forward to new chapters I want to thank you so much for joining me on this program, sharing your perspective, all that you went through, and your plans for the future. Diane Robbins, thank you again.

Diane: Thank you very much, Jeff.

Jeff: That's Diane Robbins, the former owner along with her husband of the Miracle Method franchise in Ludlow, Massachusetts. I hope that you got a lot out of our discussion and enjoyed it along the way too.

Let us know how we're doing. I'd love to hear more from you, and we'd appreciate your comments. Just send those comments, compliments, criticisms, whatever 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

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

Read Full Interview

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


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

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

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

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

Mike: Thank you for having me.


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

Mike: That's right. 

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

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

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

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


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

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


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

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


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

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


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

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

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

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


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

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

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


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

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


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

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

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


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

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

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


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

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

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

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

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

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


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

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

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

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

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

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

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

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

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


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

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

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


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

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

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

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

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


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

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


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

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

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


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

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


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

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

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


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

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

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


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

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


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

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

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

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

Key Takeaways

  • 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.


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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.
 
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