The "Devil’s Kiss" Trap | Geoff Bruskin | Growing Money with Sean Trace

I sat down with Geoff Bruskin, founder of White Tiger Connections, to break down one of the most overlooked wealth-building tools available to business owners - mergers and acquisitions. Geoff specializes in M&A advisory, recruiting, and management consulting for professional services firms.

We get into what mergers and acquisitions actually mean in plain terms, why your business valuation can look completely different depending on whether a traditional buyer or private equity is at the table, and what EBITDA really is and why it matters more than your gross revenue when serious buyers are involved. Geoff also explains why the single most valuable thing a business owner can do, years before they even think about selling, is to remove themselves from day-to-day operations and build a company that runs without them.

If you found out you could sell your business today, do you think a buyer could run it without you, or are you still the business?

Transcript

SPEAKER_01 0:00

Not hiring a business broker. You wouldn't buy a house, at least most people wouldn't, without having a real estate agent. You shouldn't sell a business or buy a business without having a business broker's advisement. And there's a lot of bad business brokers. So find a good one. And I would say maybe even a bigger uh pitfall to avoid, Sean, is start talking to someone who has what's called exit planning uh experience. There's there's actually a certification for that. It's a CEPA C EPA certified exit planner. Um and so or a CEP. Um so so whether it's a CEP or it's a CPA who specializes in exit planning or a financial advisor who specializes in exit planning, I specialize in exit planning as well. That's some of the consulting that I do with my clients before they come to market and sell. If you know you might want to sell your business in two or four or even seven years, it's a good idea to at least have a conversation with someone who specializes in bringing businesses to market so that you can, to your earlier questions, start to do the things now that's gonna increase your valuation. And even more important than that valuation is gonna be how much of the cash value of that valuation you're able to get at closing, because big difference between getting 20% of a million dollars at closing versus 100% of a million or even 80% of a million. Otherwise, if you're only gonna get 20, why even sell your business? You could just take the 300,000 that you're pulling out of it. And that's what many businesses, unfortunately, are doing today, Sean, is they don't sell because the owners wait too long before repositioning their company in a way that a buyer is gonna want to buy it.

SPEAKER_02 1:42

Welcome back to the Growing Money with Sean Trace Podcast. This is a speed round. I've got an awesome guest with me today. Can you tell people what's your name and who you are and what you do and all that good stuff, man?

SPEAKER_01 1:52

Thanks for having me, Sean. My name is Jeff Bruskin. I am the founder of White Tiger Connections. We are an MA advisory recruiting and management consulting firm. We do MA recruiting consulting for the public accounting profession.

SPEAKER_02 2:07

Let's start off with the the obvious question that I have. What's MA, man? What does it mean in real life?

SPEAKER_01 2:13

So mergers and acquisitions. So if you are a business owner and you want to sell your company, you would be a seller on the acquisition side. If you are looking to buy a company, either as an individual, already as a business owner, or this buzzword private equity gets thrown out a lot, you could be a buyer on the acquisition side. And then you've got the M in MA, which is merger. And that's if you're already a business owner and you want to create a one plus one equals three situation with another company. That's awesome.

SPEAKER_02 2:46

Well, like let's say I own a small business. Like, what actually makes my business worth more money? What do I need to do to like make that business be something people want to buy or merge or acquire?

SPEAKER_01 2:57

So the best thing you can do as a business owner to create more value in your business is to remove yourself from the day-to-day operation. Um, when a buyer comes along and wants to buy your business, they want to buy the business, irrespective of your involvement in it. Now, most businesses will not, Sean, have an owner who can get completely removed from day-to-day operations before a sale, but you want to be spending less than 50%, ideally less than 20% of your time actively running the business and more working in a strategic capacity. So, whatever steps you have to do in order to create that bridge, bring on a senior manager or a general manager to run the business, implement more technology, standardize your procedures, whatever it might be, take those steps because then you will have a more valuable asset and you will get more of the cash value of that asset at the closing of the change of control, as opposed to there being a carry, a note that you're holding even after the change of control takes place, where there are conditional uh integration things that you actually have to help go smoothly in order for you to capture the complete value of your business.

SPEAKER_02 4:18

I love that. It's interesting too because it makes a lot of sense. But like when I was reading up what you post online, you mentioned businesses can be valued differently depending on the numbers you use. Like, why does that matter so much?

SPEAKER_01 4:31

So it depends on the profession as well. Um, a lot of professional services companies think accounting, which is largely what I do, but I get referrals from my accounting firm clients to their clients and construction and real estate and um other professional services, medical, uh manufacturing, um, technology, government. Um, so I work across the board for a lot of professional services companies. Sean will have um historically a multiple of gross revenue. So if your gross is a million, um, they would say, okay, we're gonna give you one to two and a half times gross revenue for your business. And you might get 30 to 100% of the cash value of that business up front. And then the remainder is gonna be paid to you with certain conditionalities over X number of periods of years and with Y contingencies on it. And that depends in a fair market context on again how involved the owner is in the day-to-day operations. Private equity, this buzzword, is the concept of outside capital coming in and buying your business and then installing a corporate team or rolling you up into a larger corporate thesis that they may have. And so I see this a lot happening right now in private equity buying public accounting firms, and they're also buying insurance firms, and they're also buying wealth management firms. And so their goal is to have these interconnected services so that they own the entire supply chain of delivery and then implement technology across the board. We see that with marketing companies, we see that with HR companies. It's super prevalent in professional services. It's also prevalent in supply chain. Think about owning the entire supply chain from source to source, including all of the logistics, air, sea, uh, land. Um, it's it's present in every industry. So, anyway, private equity, to answer your question, has come in and they value businesses not on the basis of gross revenue, but they value them based on what's called EBITDA, which is earnings before interest, taxes, depreciation, and amortization. It's a fancy way of saying the net, not the top line, but the bottom line. Now, if you're an owner and you're involved in day-to-day operations of your business, the bottom line is less your salary. So if you're pulling 250 as a fair market salary out of your business, you have to deduct that salary before you can come up with what the true net profit number is. And then they'll give you a multiple of four, five, six, seven, eight, nine, 10 to all the way to north of 20 in some spaces. And that largely depends on how much of a platform it is to be able to grow an expanded thesis.

SPEAKER_02 6:58

I love that. That's really interesting too, because you don't think about it. People think about businesses being sold and it just is like, oh, it's something quick and easy. But, you know, I I've heard about all different types. And like, you know, you hear about business owners that make mistakes. You know, what's one mistake business owners make that quietly costs them a lot of money later on?

SPEAKER_01 7:16

Not hiring a business broker. Um, you wouldn't buy a house, at least most people wouldn't, without having a real estate agent. You shouldn't sell a business or buy a business without having uh a business broker's advisement. And there's a lot of bad business brokers. Um, so find a good one. Um, and I would say maybe even a bigger uh uh pitfall to avoid, Sean, is start talking to someone who has what's called exit planning uh experience. There's there's actually a certification for that. It's a CEPA C E P A certified exit planner. Um and so or a CEP. Um so whether it's a CEP or it's a CPA who specializes in exit planning or a financial advisor who specializes in exit planning, I specialize in exit planning as well. That's some of the consulting that I do with my clients before they come to market and sell. If you know you might want to sell your business in two or four or even seven years, it's a good idea to at least have a conversation with someone who specializes in bringing businesses to market so that you can, to your earlier questions, start to do the things now that's gonna increase your valuation. And even more important than that valuation is gonna be how much of the cash value of that valuation you're able to get at closing, because big difference between getting 20% of a million dollars at closing versus 100% of a million or even 80% of a million. Otherwise, if you're only gonna get 20, why even sell your business? You could just take the 300,000 that you're pulling out of it. And that's what many businesses unfortunately are doing today, Sean, is they don't sell because the owners wait too long before repositioning their company in a way that a buyer is gonna want to buy it.

SPEAKER_02 8:53

Well, see, this is something that I was thinking about too, because a lot of them might be at the place where they're thinking, well, maybe I don't know if I could ever sell this. Like they they don't even see that that's an option for them. And so they don't make the right moves early on, you know. And I wanted to ask you this like if a person wanted to sell their business one day, what should they start doing right now, even if it's years away?

SPEAKER_01 9:15

So bring somebody in who can replace a lot of those day-to-day operational functions that the owner is doing. Again, general manager, manager, um, make yourself not indispensable to the business. And I know that's kind of like a mind bender for people who have them. I mean, chances most business owners, you know, regardless of the industry, if it's under a couple million bucks, you are the business. You have all the relationships, you know, all of the processes live in your head. Um, all of the vendor contracts, all of the clients, um, you, whatever staff you do use, they look to you as the singular source of culture and growth potential and loyalty, and they come to you for damage control situations. You are the business. If you were to disappear, right, there would be no way that the company could continue. That is the devil's kiss. You want to extract yourself from the business, even if instead of the 300,000 that you're currently taking on the million dollars, there's only 80,000 that you're taking on the million dollars, because then you can start to build up inside of that framework where maybe you get to a million five now and you're taking a quarter million again. That's a much more attractive situation for a buyer than you're taking 300 or 400 or 500 even out of the million dollar business that you run. And then you're gonna sell the thing to them. Well, what incentive do you have after you've sold it to transition all of these relationships and this essentially goodwill that you have over to the buyer? Well, no incentive if you're getting 100% or 80% or 60% of cash at closing. And that's why the buyer is gonna say, Well, I want to buy this, but I only want to pay you 10% of the value at closing, and the other 90% over nine years or whatever it might be. And so you can sell it, but you want to start thinking like a buyer now.

SPEAKER_02 11:09

I love that. Well, I want to ask you this too, because a lot of people don't. And they think sit there and they think, well, a lot I'll just sell it and myself and save money. Like, why can that backfire? You know, is it not something that you can do yourself?

SPEAKER_01 11:24

Um like I said, you know, if you you got hit by a car, would you take on the insurance company without a personal injury attorney? Um, you know, if if you have kidney stones, would you not go to uh uh a urinary expert? I mean, like you you don't you might anytime there's a a large asset, right? I mean, if you're opening your pool, right, sure, you don't need to pay the three or four hundred bucks, whatever it is, to get somebody that you could do it yourself. You could watch a couple of YouTube videos and figure it out. Anytime you're talking about something that's a key asset, be it physical health or you know, something that's a matter of safety, like your car, of course, you're gonna take that, unless you're you're actually a black thumb, you're gonna take that to um somebody who's uh a specialist. They know what they're doing because you don't want your your 18-year-old daughter getting in something that you've jury-rigged together and is the transmission gonna go or the brakes gonna go when she's on the highway. You know, you're talking about uh, you know, for most people, Sean, uh a seven-figure asset is actually their largest asset. It's just the largest asset that they've never really thought about as uh as a monetary asset. It's it's been their it's been their desk. It it hasn't been something that they could liquidate. Well, you can't. Um, and now more than ever, because of how voracious the demand is for operating companies. So that's where take the steps that you need to do right now. And then even after you take those steps, you still shouldn't sell it on your own. You should you should still work with someone who's gonna charge you a fair market representation fee and they know what they're doing so that you don't have to, you you can have the peace of mind and and and also uh you're you're gonna get more money and a better deal structure when the person is competent at the end of the day, anyway.

SPEAKER_02 13:09

Well, you know, for someone who doesn't own a business, what's a smart way for them to start building something that could turn into real wealth?

SPEAKER_01 13:15

You know, there is so I I don't think there's ever been a better time in human history to set yourself up for financial success. You know, the internet and YouTube, you can learn anything. Um, and now we have this incredible thing called AI where not only can you learn anything, but you can also implement agents, even irrespective of having human capital workers, you can implement agents to do things for you. That's even coming with robots, right? I mean, we're gonna have robots replacing trades industries within the next decade. It's wild. It's you know, no, so so you could you could make the argument, you know, from a pessimistic perspective, Sean, no one is safe. On the other hand, where my head goes with it is well, if if you have the the appetite and the gumption to think about how to use the resources that are available to you now, you you there's nothing that you can't build. And so, you know, what what do you do? I think you have to decide on something that you like. You have to, you know, it actually maybe I correct myself. I I'm not sure that I love accounting as an example. Um, I'm not an accountant, but but I I I understand it and I I like the personalities that are in the space. So you don't have to love the work um or or maybe the topic matter itself, but but what I do love is people. And I love teaching and I love I love fairness and I love um like refereeing situations. To me, it's like a big game. It's a game that's based on principle. I try to be very principled in the way that I deal with people. And so I've I've made it fun, but it's work, right? Everything is difficult. But but but pick something, pick, pick a domain that you have interest in and start to develop subject matter expertise and approach it from 360 degrees until you find the crack in the wall where you can start to work your way in and and find some way to provide value. Um and once you do that, you can use all of these broad sweeping resources that are available to you. Now, AI, remote work, um, offshore resources. Uh there's so much that you can, and you can do this while you're while you have a full-time job. I built my business while I had a full-time job until I created enough cash flow that I could go off on my own. It's that's that's never been possible before. It is now.

SPEAKER_02 15:27

And I want to ask you one last question. At the end of the day, what's the difference between people who build real wealth and people who just stay busy working?

SPEAKER_01 15:35

That's a great question. Um, I think the people who build real wealth are both tenacious enough to to get to to throw themselves into the weeds, Sean, to, to, to get something from zero to one, because you can't go from zero to one without breaking your back. You're you're gonna have to live in the weeds in order to do that. And then you've done that incredibly difficult work to get to one. And now your brain is trained to be a worker. You are a hard worker. But now you have to kind of stop everything you know and almost start over to go from one to 10, which is you now need to start thinking like an executive and not like an operator anymore. And that's where most business owners um fail, honestly, right? That's the process of going from 300 in in income at a million dollars of revenue to 250 in income at a million five in revenue. That's that now you have a salient asset that you can sell. And you're also having great quality of life at that point, right? And it could be 500 at a million five. I'm just giving examples. It depends on your business and how efficiently you can run it. But that takes a that's a major mindset shift from one to 10. The people who build real wealth keep challenging themselves to add zeros at the end of that 10. And every time you add a zero, and I'm seeing this because I work with some clients who have billions of dollars of net worth, um, they've they've been comfortable kind of kill the, you know, somebody once said in a poetic context, kill your darlings, right? So you you you make something you're really, you know, excited about. Well, now you got to make it better. And so don't get com, I think they don't get comfortable. They keep changing and and learning and they're willing to put themselves in uncomfortable situations. Um, and that's the sort of mindset and spirit that's required to build real wealth. That's awesome. Well, where can people go to find out more about you and what you do? Thanks, Sean. So uh the company is called White Tiger Connections. That's uh an ode to the martial arts background that I have. Um, it's whiteigerconnections.com. I do a lot on LinkedIn as well about mergers and acquisitions, consulting, and recruiting top talent in a fully remote capacity because that's how we do our recruiting. It's all fully remote, domestic in the States. And uh our website or my LinkedIn, Sean, is the best way to reach it.