M&A Murders & Accusations: The Good the Bad and The Ugly of Selling Your Business
M&A Murders & Accusations: The Good, the Bad, and The Ugly of Selling Your Business! We dig deep into what you MUST know when selling your business. Learn how to NOT kill the sale of your business. Rick J. Krebs, the mastermind M&A Advisor (Mergers & Acquisitions, not Murders and Accusations) and expert at selling businesses, has transformed the lives of countless business owners by helping them secure the right buyer at the right price. You have only one chance to sell your business and this podcast will provide the vital information you need to know.
Brace yourself for mind-blowing discussions with industry experts and business owners who have already sold their businesses.
M&A Murders & Accusations: The Good the Bad and The Ugly of Selling Your Business
LIVE CASE STUDIES: Answering the Buy or Build Question, Real Time, Real Answers
When business owners face the pivotal question of whether to sell or continue building their company, the answers are rarely straightforward. The Utah chapter of Exit Planners (EPI) takes you inside this crucial decision-making process through two compelling real-world case studies that illuminate the complexities of business transitions.
A rapidly growing software company valued at $31 million stands at the crossroads: cash out now or double down on growth? With 30% of revenue tied to a single customer and AI technological disruption looming, expert advisors weigh in on the strategic options. Witness how exit planning professionals evaluate customer concentration risk, technological changes, and personal readiness factors that influence these high-stakes decisions.
The conversation takes a fascinating turn when examining a family-owned cabinet business where six children work alongside their father-owners. When the brothers took simultaneous vacations and returned to chaos, they realized their dream of a smooth family transition might be in jeopardy. This case study reveals the emotional complexity of family business transfers and practical approaches to navigating these delicate situations.
Throughout both discussions, critical exit planning themes emerge: the necessity of personal financial planning before business decisions, the importance of assembling the right advisory team early, the value of structured 90-day improvement "sprints," and the nuanced trade-offs between maximizing value and achieving personal goals. Expert perspectives from wealth managers, CPAs, M&A advisors, and business coaches provide a multi-dimensional view of these challenges.
Whether you're years from exit or actively considering a transition, these real-world scenarios offer invaluable insights into the human and financial aspects of one of the most significant decisions a business owner will ever make. Subscribe now and join us next month as we explore how to handle letters of intent and negotiation strategies for better outcomes.
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DesignMySale.com
I'm excited, really excited, for this event. So, just waiting for the last couple people here to get seated and then we're going to go ahead and get started. So we're recording right, we're on. Okay, first I want to welcome everyone here, and this is the Utah chapter of Exit Planners, the EPI, which is the Exit Planning Institute. We're a national organization of exit planners and we started the Utah chapter because we didn't have anything here and we wanted to help people make better exits, and that's what this is all about.
Speaker 1:I'm really excited about this event. I've been wanting to do this for quite some time now. I think I've been thinking about it for about a year, and I wanted to do an event where we had business owners that are thinking about selling and I wanted them to sit up in front and tell us what they were going through. But what I learned was that business owners don't want people to know that they're thinking about selling, and it would reveal confidentiality, right, we would reveal that they're thinking about selling and it would reveal it confidentiality, right, we would reveal that they're thinking about selling. And so I was trying to figure out how to do it and what do we do, and so we came up with this idea where we're going to do case studies that are live and the business owners are not here, but they're right there on the camera and they're with us incognito. I think the two on this case study said Bill and Tad. I thought that was funny. I'm going to try and not call them by their real names, but anyway, everyone should have received the material that we have and we're going to go through it.
Speaker 1:But before we do, I have a couple of items of business that I wanted to go through. All right, we have two new chapter members and I'm going to have them introduce themselves next month or next month instead of this time. But the one thing I wanted to mention is next month we're going to do a meeting and that's going to be on August 21st. Anyone who's attending here provided their email. We'll make sure you get an invitation. But next month I'm excited also because that one we're going to do.
Speaker 1:It's called letters of intent what to do with them. All too often, business owners are getting unsolicited offers or getting you know. I'm on the phone with a group yesterday and they had a letter of intent and it looks pretty good, and what happens is they just freak out. They don't know what to do. When they panic, they lose money, and so we're going to go through a letter of intent. We have an AI tool that Josh built around letters of intent. We're going to talk about what that is and how to use the tool, but basically, what do you do with a letter of intent, how do you best handle it and how do you negotiate it? And we're going to do something with Cinderella. I'm not sure what that is yet, but something with Cinderella that's going to be fun. So that'll be August 21st a lunch meeting like this 1130 to 1.
Speaker 1:Other item of business I had before we get started, and that is a copy of this. This is being recorded and a copy of this will be given to to all the attendees, both virtual attendees and in-person attendees, and you can share that. But I've had multiple requests from people that could not make it today, that wanted a copy of this, and so you'll have that link where you can share that. So, without any more delay, we're going to go ahead and get started. So what I want to talk about is it's case number one, and this is the discovery gate. This is the first place where business owners are thinking about a transition and this business I'm going to read the summary for those people that didn't get the material. But we've had business owners fill out a questionnaire and what we're going to do is we're going to walk them through an exit plan business. So they're a fast-growing software company with three owners. They're evaluating whether to sell or to build. That's what we're going to talk about today Sell, build and other suggestions. Okay, key concerns to be addressed. The business is experiencing rapid growth and the owners are uncertain whether to sell now or to continue scaling in hopes of achieving a larger exit in the future. So for them, how do we get off the merry-go-round right? They're making good money, they're happy, they don't want to leave money on the table, but they're growing so fast they just don't know what to do. A single customer accounts for 30% of total revenues. The potential loss of this client poses significant risk. The technology landscape is evolving quickly, particularly with AI. The owners are in the process of acquiring another company to integrate much needed AI capabilities, but staying ahead of the technological change remains a major challenge for them. Okay, so we have two. Well, there's three owners, but the two main ones in there ages 61, 53, and 59. And if the owners have questions or we have questions for them, we'll do that through the chat. Matt, if that's okay, all right, good, thank you. Thanks to Matt Matt's, the guy that makes all this happen.
Speaker 1:Okay, I've got some things here that I wanted to go through. First. We're going to look at the reasons for not selling, and I got to go back to it here. I won't go through all the information, but I want to go through the build path. So, as business owners, the big question is do I build or do I sell? Do I keep it, build it a little longer, hold out or do? I sell it, and they wake up every day with that. It's just it's facing them and they're not sure what to do. So what I want to do is we're going to turn the camera out to everyone in the audience and we want to hear your ideas and input on this.
Speaker 1:This is a group of there's many SEPAs in here. There's some business owners, some business coaches, cpas. This is our group. This is the Utah chapter members and guests today. So we're going to give our suggestions and what I want to do is we can turn the camera to the audience and I'm going to walk around and when you have ideas, I'll hand you the mic, but please tell us who you are, because what I want to do is I want to share the member directory with all of the attendees. So if they want to reach out separately, if something that you say resonated, or they want to continue that discussion, they can do so, and that will be done offline, but your information will be shared contact information in the membership directory. Okay, so we're going to move the camera, then we're good. Okay, I'm back here now. We're trying to figure out the logistics of this, and it was not an easy thing to do.
Speaker 3:Use a copy electronically, I can send you an email if you don't have it.
Speaker 1:If you need a copy electronically. I can send you an email if you don't have it. Everyone should have received a copy of this. Okay, good, so the build path. If they're focusing on the building, what are the recommended action items? Okay, Patrick.
Speaker 4:So, patrick, you want us to state our name and all that. Okay, patrick McMillan with Amplio. Sorry, the questions regarding building. What's the recommended path? Obviously number one.
Speaker 4:Your customer concentration is an issue. When you look at range of values, you're going to fall very easily into that lower range because of that 30% high customer concentration. That not only is a risk to a buyer but it's a risk to you. And so first thing I would do is be really work on that. I know I read this last night but I can't remember the exact thing. But I remember you're working on a specific product. I think it's going to create $300,000 or $600,000 more revenue in the future. I would try to accelerate that work on that. But then also go to your existing customers and see if there's some expansion of revenue that you can do, some product offering expansion or something to try to get some of that low-hanging fruit. Also, ask for referrals from your existing customers. That would be the number one thing that I would do would be to work on that.
Speaker 4:Second thing is I believe it sounds like, if I remember correctly, you have a pretty robust key employee group Not the three of you, but your CFO and your COO, I believe it was, and some others. I would really start working on them and seeing who they can reach out to for a couple of things. Number one expand growth as far as other customers reduce that concentration. And number two, I would start asking them if they would be interested in potentially taking over the company. I would really kind of align yourself to say, hey, would an ESOP might be an option. So, but that's a discussion for maybe later on.
Speaker 1:All right, thank you, lisa.
Speaker 8:My name is Lisa Wandry. Definitely the customer concentration. That was the first thing that stood out. Not only does the one customer represent 30%, but the second customer is one tenth, so you've got to expand that customer base.
Speaker 8:A couple of things that I noted they rated themselves a four on our customer, vendor and employee agreements formalized in writing.
Speaker 8:So they've given themselves sixes and fives in a lot of areas.
Speaker 8:I noticed that four is the lowest that they've rated themselves anywhere, and I think that they're at a level of business you know, of running their business, that all of their customer, vendor and employee agreements need to be in writing, and that's going to be helpful in that sales process because you know the buyer is going to be asking for that. They're going to want to be reviewing that. And then, of course, the other thing that really stood out to me is they have done no personal financial plans within the past year. And if you are trying to make a decision of whether you want to grow or exit, if you don't know how much money you need to run the life that you want to have after the fact, then you're setting yourself up for a whole lot of stress and a whole lot of regret. You've got to make sure that whatever you get to keep at the end of the day is going to fund your lifestyle, because, as of yet, I've yet to meet a single person who wants to reduce their standard of living in retirement.
Speaker 9:Great.
Speaker 8:Thank you.
Speaker 1:Lisa. Thank you, patrick. Okay, what should they be aware of? What are other things that they need to be aware of if they're going to build? Okay, dave.
Speaker 10:One. Oh, david Gilliland. One of the things I would watch out for is they have rated really high a five for that. Their employees do well from this exit, and that's a. Anyway. It's a dangerous spot unless they have defined what that means. Do they mean the employees have greater opportunities for their growth, that they're going to be able to stick around because there's massive casualties in acquisitions? And so if, oh sorry you're saying to build, I apologize, but even in that same light it's the same answer. Define what great looks like for those employees and what you're going to try to build for them. Are we talking about financial well-being or are you talking about opportunities for growth? What is a win there? So that's one I would look at pretty closely.
Speaker 1:Okay, two more, and then we're going to go to the sell path. Go ahead.
Speaker 3:Josh Ho. I work with Rick selling businesses, but I came from a tech background and pretty deep in the AI world. We're going through a huge wave of technology becoming much, much easier to create, so to grow your business. I think one of the big things is what is your moat for a customer acquisition, your ability to stand out from the crowd and making sure that you're growing your moat, because it's going to be easier and easier for competitors to come into any industry if you're a SaaS business. So really focusing on how do we make our customers so elated that they're not looking anywhere else and any other customers that are interested, we are the only name that they know of Really standing out and being the number one market leader, for what you do is going to be far more valuable than it ever has been before. Who's the next one?
Speaker 7:Okay, yeah.
Speaker 13:Okay, mitch Bolin with Squire, if they plan on growing I mean, we're talking about they're already experiencing significant growth, right, and that's one reason why they're considering selling right now is because they've got this really upward trajectory trend right.
Speaker 13:Um, and so, if they want to grow it and and keep going, my, my first question is and I maybe it was in here and maybe it wasn't, but I I'm curious on their capability of continuing to grow. I've seen a lot of businesses grow themselves out of business and, um, I don't know what their capital needs are going to be in order to continue to grow. I don't know if, uh and what, what they're going to be able to provide that organically or internally. And so, really, I would want to know and look at what their strategy is to if they want to keep growing it. Can they keep growing it? And the other thing is, the first thing we talked about was customer concentration. I want to know where that growth is happening. Is it because of that 30% customer is just buying more from them, or is that trajectory on that concentration already going down because they're reaching out and getting more customers and getting a more diverse customer?
Speaker 1:base. Thank you. I'm running a process right now in a SaaS company and I had two buyers back out this week because of customer concentration Backed out of the deal completely. So it's a huge deal. Okay, go ahead. I'm Dinah.
Speaker 14:Monson. I noticed that the product that they have deals with medical practices and that industry, and my advice right now would really be seeking an in-depth thought about those companies, because I own several mental health and medical companies and right now we are having a huge dip and a hit because of Trump's legislation, because there's so much uncertainty and because of that, these products that we use, like EHR systems and SAS programs that help us, then we're not discontinuing our services now. So now it's a beautiful time because they're not seeing that dip yet. But as we're shifting, as our marketing is having to change to maintain, let alone grow, it's going to impact what we decide to keep and the systems that we continue to utilize.
Speaker 1:Thank you Okay one more and then we're going to shift gears and go to Sal Tom.
Speaker 15:Tom Hall with Carson Weld. The question I have on the growth side is that so many companies that we've worked with over the years have what we joke is a rolling five-year retirement, and so I would just push back on that and say grow for what and to what? Is there a number that you're targeting? Or we're going back to the comment earlier about having your personal financial plan put together. Do you know what your bogey is? What is it you have to hit so that you know, as you're approaching Dunn, that you can disconnect if that's what you want, but that also that there's clarity on what you're retiring to. In my years, one thing I've seen over and over is people that retired that were very excited about retiring but didn't have something clear to retire to, and it was a very difficult transition. So just having clarity around what done looks like and then what you're retiring to.
Speaker 1:Thank you, tom. Okay, now can we shift the camera back so we can show this? Okay, what done looks like. I wish my handwriting was better, but what do we do? Okay, so considering keeping it and running it. These are the main eight suggestions that we suggest, and yes, Maybe we don't need to talk about cybersecurity.
Speaker 5:Would you make sure?
Speaker 6:the cybersecurity house is in it with cyber security house If they're selling online if they're handling patient data, huge.
Speaker 1:So repeat that so we can hear with the mic.
Speaker 6:Hey, dustin Snyder, out2view Advisors, cyber security is really important in the deals that I've been seeing recently. There are carve-outs, there's setting aside large sums of money to make sure that sellers have their SOC 2 reporting, have everything buttoned up and secure and if they don't, by the time the deal is done like they're pulling that out of the enterprise value of the business. So making sure ducks are in a row with cybersecurity is huge.
Speaker 1:Thank you, hadn't thought about that one. Okay, so these are the nine suggestions that we're making. If they're thinking about keeping the business, these are the nine suggestions that we're making. If they're thinking about keeping the business, these are the nine things that we think they should be working on Now. We're going to shift gears and, if you'll put the camera to the audience, we're going to go to sell. What if they're selling? They're not going to keep it. They decide that they've got enough. They're going to go down a sell path.
Speaker 1:So we did evaluation. I don't remember what the number was. Anyone have the number in there 31 million. It's probably worth more now because it's gone up, but we're looking at 31 million. They've not done a personal financial plan. Lisa said we should do that and I think you should.
Speaker 1:I think determining the wealth gap is extremely important and they might think, well, 31 million is enough. Well, after you carve it out, you got taxes, you got everything else. Is it enough? Or like remember, at our meeting recently, we had a seller and his name was Don, and Don says his biggest mistake was he went with the wrong financial planner. 25% of his money went out the tube within a couple of months, right. So these things are very important to look at. You got to do a worst case scenario. So, if we're selling, what does he need to be working on right now? I'm going to put wealth gap up there because and we had it on that one, but I can't stress the wealth gap enough on how important it is. Okay, what does he need to do if he's selling? Who's up Tom? Question?
Speaker 15:About 31 million. It was 31 million. The question was, how much was the valuation? 31 um the. The first thing I'd be focusing on um once you've got a clear idea of what the wealth gap is, is that's going to be inherent in that wealth gap, is what is the tax burden? And and are there? Are there specific strategies? If you're on a glide path with a timeline, then that's going to limit what's available to you. But doing whatever you can to mitigate the tax impact, and so that would. I think someone had mentioned an ESOP earlier. There are a number of tax mitigation investment strategies. There are a number of different structuring tools depending on whether but I don't think this is a C corporation, Remember me right? Yeah, and so you know you've got the 1202, if that were an option. But just looking at the menu of options that are available to reduce that tax bill and to get right on that, Just a side comment on that.
Speaker 8:Both two of the three owners were talking about doing mission work and before a letter of intent is ever created, if the dollar value, like you said, you know it's enough for the wealth gap but maybe there's some additional potential for charitable, that has to happen prior to the letter of intent.
Speaker 1:Love that. Donor advisory fund is one Charitable remainder trust is another one right, but these things need to be handled before the sale and often, and some of them, before the letter of intent is even signed. Okay, other suggestions If he's selling, what does he need to do, patrick?
Speaker 4:So I'm going to go back on that.
Speaker 4:This is Patrick McMillan again I'm going to go back on that ESOP option. It sounds like you have a very strong internal team, key employees. They've been there for a long time. The size definitely fits. You're more than 2 million of EBITDA. You're more than 10 million in valuation. I would explore the ESOP opportunity because that's kind of really checks a bunch of the boxes as far as tax planning, as far as keeping the employees engaged and taken care of and as far as, hey, you can get more than just one bite of the apple on that. So that would be an option I would heavily explore.
Speaker 10:These thoughts actually tie to both sell or build, but going on that ESOP side, there would be a significant cost to get someone who could fulfill the product vision. More than likely losing one of those top individuals and one of their growth drivers will actually be in the partnership space in SaaS. So they have to be on a growth trajectory when they get to this sale and their team needs to be set up. You need to build the other leaders around If someone's going to buy your place unless they're going to buy it and strip everyone out and just take the tech and the customers from it and you want a team that's intact. They have to be leveled up. The buyers need to see a leadership team that can function without the owners fully, and so that's a key one for value. Great Thank you, john.
Speaker 9:My name's John Brooke. First place, I apologize. My mom always said that guests ought to keep their mouth shut and leave early, so I apologize for jumping in. But the lady back here struck a note and I just want to explain a project we're working on. It's in the Dallas area. It's a software. It's in the medical area. I ran the development team and now I'm the CFO for it, and we looked at buying several companies.
Speaker 1:Hold the mic up a little, john. I'm sorry, there you go.
Speaker 9:We looked at buying several companies to accelerate the acquisition of the software. With the numbers here, I mean, I wouldn't pay $31 million for it by a long shot, and what we decided was that anything under $10 million. Now, this is a highly specific thing, not a universal statement, but we'd just as soon spend the $8 million and develop the product, and there's very little patents in the software world that prevent people from doing things. And so I would question if the 31 million is really realistic, because if they came to me, I'd say, Okay, great, you're going to spend 31 million, you're going to get seven. Why don't you just want to just build it yourself? And I would look at this company as a startup.
Speaker 9:I think the ESOP is an excellent idea, but if you run through the values, the values are going to be down around 10 or 11 million, I think, from the numbers that I'm looking at here, which is a significant discount from the 31. Which is a significant discount from the, from the 31, but the numbers, just the numbers, would bother me with this. Now what would I do to fix it? Because you can't just complain. I think running an analytical projection for the next three to five years, that would be on their basic, taking their basic management decisions and just extrapolating that out numerically for the next three to five years would make sense. Then I think I would play with that. You guys look at me and say, well, the guy's not 30, so take this for what it's worth. But the ages of the guys worry me. And just for a point of reference, I'll be 74 next month, so it's not like I'm against old people.
Speaker 5:Well.
Speaker 9:I am. I don't like hanging out with them, to be honest, you know I'm tired of watching Lawrence Welk at night, you know they're I'm I'm tired of watching lawrence welk at night, you know, but I think that's. I think they got a core here and in. If you treat them as a development company, 30 concentration with one customer is not unusual, because they probably got a hold of that developed. It worked with the client customer to get a product, so that doesn't really bother me If I look at it as a development stage. If I look at it as gee, we're ready to give you the keys and turn it over. No, then it is.
Speaker 1:All right. What else they're selling? What are they going to need? Who's going to need? Okay, Josh.
Speaker 3:So, I have two ideas on that one, to talk about customer concentration. Like Rick said, we're dealing with some folks that are this is not uncommon to have a high customer concentration One way to flip it on its head. And hey, we're not actually going to sell the whole business, we're going to sell the relationship with this one customer. We're going to set up a, a we're going to, we're going to go to one of our competitors and say, hey, we want out, we have this great customer and we think you can do a great job. We're going to do an introduction. Maybe we just do a transfer of this one customer over to you.
Speaker 3:Um, sometimes we're working with some companies that have they have three customers, right, like, well, you can't really sell a business for three customers, but you can sell the relationship and you can say, hey, don't, don't look at me like a business, that's a money-making machine on its own, but look at this great, great relationship I have. How much would you pay for that? So if you kind of can split the thing, like flip the strategy on its head, there might be an opportunity to get around the customer concentration.
Speaker 1:Okay, we're going to flip the script here a little bit. They call them tops tired old people. He just called me and says I want to sell now. I'm running out of gas, I'm ready to get it on the market. What are the next steps? What do we do? Let me suck it out. Put your team together. So, if there's something that necessitates a sale right now, what are the next steps that he needs to?
Speaker 17:take Hi Marcus Johnson with Edward Jones. I think if it's at that point where I need to sell and there hasn't been a conversation on that wealth gap, it's maybe having a really transparent, frank conversation on okay, it doesn't matter what the wealth gap is, this is what we got, what does that rest of life look like? And create that vision based on this call it new information that I'm selling.
Speaker 1:Okay, what does the vision look like? Right, marcus is one of the. He's one of the chapter leaders. I didn't get a chance to introduce him, but he's one of the sponsors in chapter. On the chapter leadership Okay, what else? What's the next step? I mean, he's got to sell sponsors in chapter. Uh, on the chapter leadership. Okay, what else? What's the next step? I mean, he's got a cell. What does he need? Cpa okay, so I'm gonna put he needs a team cpa, the cpa that's been doing his books for 30 years, you think Maybe not.
Speaker 4:Okay, let's hear it. And of course you know I'm going to go this route. Patrick McMillan again. So the Q of E guy, get a sell side quality of earnings. It will open your eyes and help you look at it from a outside perspective and how they're going to view your financials.
Speaker 8:Lisa Laundrie, with Edward Jones. You've got to have the CPA, a financial advisor, your M&A attorney, whether it's an investment banker, all in that team and you got to have everybody working together, everybody being able to provide the information that everybody else needs. I mean like, for example, let's say you're the CPA and and you've got that. You know you were talking about the charitable earlier. Let's say, we look at a CRT, right, let's look at a charitable remainder trust, and we go ahead. We get the valuation from the valuation person. We go ahead and we get the CPA involved so they can get all of the charitable remainder formulas put together. You get the stock into the CRT Now, once you've gone through the sale now your financial advisor is going to be able to or once the sale of the shares happens inside the CRT, your financial advisor can then go ahead and create the investment plan for both you as the current beneficiary, as well as setting things up with the remainder beneficiary, based on the formulas from the CPA.
Speaker 8:And now you're getting a payment that you didn't have to pay the tax immediately upon the sale because it got into the CRT. You're being able to pull out your annual whatever and you're getting capital gains rates and whatever's happening, because you've got the stuff that the financial advisor is managing on the inside with the CPAs. You got to have everybody talking together.
Speaker 1:Thank you, lisa, and I just want to put in a little clarification. So we're giving broad advice in broad strokes. So I suggest that you talk to an expert about these things. Right, we're not. The purpose of this is not to be specific, but to give you good ideas and then to go to your advisor your financial advisor for the personal financial plan, an attorney, a tax attorney for a CRT or whatever it is. But go to the expert and it's going to take a team of experts, tom.
Speaker 15:Tom Holt, carson Holt, I would just say you need to figure out who your quarterback is going to be. So, as you're looking at assembling that team, who is it that's going to be the one that is directing traffic and it actually could be almost any of those providers, depending on if you're out of gas. You're not looking for the value acceleration, you're looking at risk mitigation, you're looking at organization, but who's organizing the steps of the process? And so that, as you're looking out at either the next month or months that are coming ahead, that you've got very clear marching orders for each person on the team and how they're going to coordinate and who is reporting to whom?
Speaker 1:That's great, great insight.
Speaker 10:And can I ask, without a mic, is out of gas, money or energy?
Speaker 12:Yes, yes, he just needs to sell, right?
Speaker 1:yeah, you know what? That's a really good point. Dave, um, dave's asking what type of gas are we talking about? Money, right, or like?
Speaker 10:or or does he even care?
Speaker 1:anymore. Yeah, or or energy, or what I see is health. I'll have a heart attack. I've got one right now and he's like, if I don't sell this business, my wife's going to kill me.
Speaker 10:We get those, but go ahead, elaborate, please uh, because his top two things were best price and then care for the team, and now he has an urgent moment or that's flipping that and putting speed of sale to the top, diminishing the other two. I'm just looking at the other option. Sometimes, look, talk to your advisor, but they may be able to talk you off a cliff a little bit and say there's a way for you to exit the business. Still keep your ownership, put a plan in place for that two to three years that it takes to organize it just perfectly. But you can be fully away, take care of your health, do whatever else is needed, depending on what the need was. And if it was a cash one, it was going to come out anyway, and so this doesn't do good either way.
Speaker 4:Patrick McMillan. Again, I want to kind of combine these two comments here with the caveat, first to say it's it may sound overwhelming right now because, yes, we're giving you a lot of general advice. First thing, regarding who's going to quarterback it. If you and correct, I mean especially a SEPA is very good, you know understanding the process and quarterbacking. If you hire a, an investment banker and sorry, not and or a business broker, typically they can act as the quarterback and so that way, and they've done this process multiple times, and so that can help guide you along, and they've done this process multiple times, and so that can help guide you along.
Speaker 4:Number two, regarding getting out of gas, out of energy and everything too, I would want to. There's a lot of. There's a comment called seller fatigue, which is where, oh my gosh, we're doing all of this. It's exhausting. Then that's where your team around you. We're not therapists, but a lot of times we play one on TV, although we don't want to. We can help you get across that.
Speaker 4:The conversation that I would want personally to have with you is what are your specific goals? And we can give you advice and ideas, but it's really ultimately going to be your decision and we can help you understand what the consequences are of each of those, to help you determine what the best path for you would be. For example, cash you know high value and taking care of your employees. There's a bunch of different ways you can accomplish that. When you sell, you can retain some ownership, for you know you can roll equity you can do you know different things earn outs, you know stuff to where you can say, okay, well, I can get more money later if I retain part of the ownership. So there's multiple ways to do that and that's what you know types of things that we can discuss as well. Thank you.
Speaker 12:Good afternoon. I think at this point. My name is Maxwell Walters. I work for a DVD. We're a lower middle market investment bank.
Speaker 12:The three things that I think you should kind of that are coming to my mind, based off of what Patrick said and a few other comments. One healthcare is blowing up right now from an acquisition perspective. There's a ton of money in the market buying things. I don't know enough about your technology, but I'm curious as to what it does and if it is not attractive to someone building a platform with a bunch of your clients already as a part of their portfolio. So your ability to be strategic in terms of bringing functionality to someone that's a bigger fish is maybe worth diving into. I think also, the more that I could learn about your technology, the more it would be an opportunity to look at that as a significant value driver. How much of it is protected? Is any of it protected? Is there IP involved or is it just really a software product that can be competed with pretty easily, but that kind of like? I said three things that combined them all into two, but thank you for sharing your story and giving us this opportunity to chat.
Speaker 1:All right. So they brought up investment banker and this company is large enough in our order would require an investment banker to help himself typically do transactions. What do you want to say, maxwell? Twenty five million and above, or?
Speaker 12:Yeah, I think it's like you're even revenue for different ways to look at it. Like north of five million revenue is an interesting point, so he asked the revenue bands.
Speaker 12:Our firm typically focuses on two to ten million EBITDA. We're in the lower middle market, but you have a $31 million valuation. That's the expected transaction, absolutely something that an investment banker and there's a few here in Utah that can absolutely service that. But to the point about quarterback, it's really all of these nights at the round table are necessary and they all play a strategic role in helping you land this plane. I think the biggest gap, having listened to the conversation today, is what do you want? Because 31 million is going to disappear, unfortunately way too quickly.
Speaker 1:Yep, it goes fast. Okay, I got time for one more comment and then we're going to vote. John, anyone, Anyone, have any other thoughts? Okay, let's turn the camera back. I got to put Maxwell. I put him on the end about an investment banker. Okay, so these are the. These are the nine things that we suggest, and I think the biggest one we have is you got to get your team going and I would suggest that you talk to at least two people, Every person. You talk to your attorney, your CPA, your investment banker. Just talk to two. Find the one that you feel like is going to do the best job and that you're going to work with. Now let's ask the business owners, Bill and Ted, if they have any final questions for us before we vote or any comment, anything that they have any input.
Speaker 7:I need to give a second.
Speaker 1:Okay, we'll give them just a minute here. I want to hear from them see if they have any other input. Rick, I have two?
Speaker 3:Yeah, how many people will join?
Speaker 1:in next month. Next month oh, for those that missed it next month is going to be about LOIs what to do when you get an LOI. We're going to dissect an LOI. We're going to look at what it should have, what it shouldn't have. We're going to introduce you to an AI tool that Josh built. So next month is going to be all about LOIs and Cinderella and what Cinderella is, I don't know yet, but it's going to all about LOIs and Cinderella and what Cinderella is. I don't know yet, but it's going to be about LOIs and Cinderella. Now he's a little nervous. Okay, no comments from the guys. Okay, I think we're good. Now I wanted to vote. Does he build or does he sell? Okay, how many people think that, based on what you've read here not the scenario where he's a tops and has to sell right now tired old people right what you have in the material how many people think that he should go ahead and exit and fly off into the sunset with this thirty million dollars and be okay?
Speaker 4:yes why not both? Why can't you do a partial sale and continue building?
Speaker 1:that's a really good one, and I don't know that my technology and pen are built for three. All right, we'll do three, because Patrick wants to do three. Okay, how many people think that he should just sell?
Speaker 4:and be okay. One, two, raise them up so I can see Be confident, be confident.
Speaker 1:I'm in the sell side. I'm going to say four, five, okay. Five people are saying that he should sell. Our hybrid option that Patrick talked about is sell a partial right, a carve out. How many people are liking that? One, two. We have five of those. That's interesting. We have a tie, okay, partial Okay. And how many people think that he should build A whole bunch? One, two, three, four, five, six, seven, eight, okay. So the consensus of the group is that he really ought to build it, keep it and build it, clean it up, work on customer concentration.
Speaker 12:Yes, maxwell, hold on, let me give you a mic Talk about it. But like there may be room for this group to become an acquirer and use what they've already have as the beginning of their own little platform and go after growth through acquisition to achieve a new enterprise value that's significantly higher and ultimately covers other exposure. Reduce their concentration, give them more, you know, pipeline. Interesting perspective, but I think that's why I ended up in the build, because maybe there's more here to grab onto.
Speaker 1:So that's interesting that you brought that up, because that's what he's been doing. It wasn't in the notes here, but he acquired a couple of businesses over the last couple of years.
Speaker 17:He's been in the acquisition mode, so that could be. Number four is acquire and then sell Marcus Johnson. Again with Edward Jones I see a huge opportunity for 90-day sprints looking at the lowest hanging fruit and just every 90 days reassessing should we build, should we sell? And of course we're doing a very surface level view of it, but just seems like there might be some low hanging fruit where we could increase that valuation pretty quickly.
Speaker 7:Okay.
Speaker 14:Yes.
Speaker 7:I have a chat on here from the attendees online One to sell, three to the partial and four to the bill. My time. So you got six, eight and twelve now okay, six on the partial six on the cell okay not adding six, I'm not giving you the total, okay.
Speaker 1:And then eight on the partial okay and 12 on the on the bill now number four we haven't, we can't vote on this. But this is what, um? They're talking about maximal markets where you acquire right, become an acquirer, diversify more, diversify your customer base and you have a better offering a couple years down the road.
Speaker 18:Brilliant, yeah, yeah, savannah I would also, even if you're deciding to build, what's wrong with getting your quarterback now? Start planning for your future a few years in ahead. Get your uh people in line. Get prepared for your sale three years before. If you're going to build it for three years, have that quarterback those people that are going to guide you to where you need to get to go, where you need to go for your sell. Even if you're going to build or sell, I think building that team now is a good priority.
Speaker 13:Yeah, Mitch, yeah. The only reason I didn't vote for sell, I mean based on, I think, the ownership makeup. It seems like an exit is something that they're going to want in the next I would say near future to want in the next, I would say near future, right, but it sounded like, just based on the voting, that it's like sell now, just like get out now, which I don't think is a good idea. But I do think everything they do moving forward should be with a mindset on selling at some point, right.
Speaker 5:Go ahead.
Speaker 19:Yeah, thank you Thank you, so I got here a little late. I don't know if I missed anything. I I'm curious. Your name oh yeah, I'm aaron larson, with elevate and exit um.
Speaker 1:So I I'm curious why they want to sell and if they, if there's a need for them to sell sooner than later so the the thing that was brought up to me was he's got this customer concentration issue and that's what keeps him up at night right. He's like my business is worth $30 million now. It could be worth $10 million tomorrow.
Speaker 19:So he's worried about that. One big customer falling out, that's the biggest thing right there.
Speaker 1:And the second thing is the fear of loss. What is that? Anyway, the fear of losing out f-o-l-o right and fomo, yeah, and. And he's just wondering well, gee, maybe I could build it to 60 million, put more effort into it in another, you know three or four years, I got 60 million instead of instead of 30. Those are the two main concerns he has.
Speaker 19:My one other question if that's okay is if he were to sell now, what would he do next?
Speaker 1:They want to do charity work for their church. They want to change their daily demo and what they're doing and just kind of step off the bus.
Speaker 19:Okay, can I ask yeah, go ahead. Just because I just wanted a little bit of clarification. So so my thoughts on that are if, if what's keeping up him up at night right now is is his customer concentration, that's also going to be what drops his valuation as well. And even if he loses that big customer, okay, like there's more, there's more clients out there, there's more people he can go get. If if you know that does happen, which you know that's not fun but if he wants to, if he wants a bigger valuation and that's and that's his worries, you know that's what's going to slash his valuation down ultimately when he goes off and sells it. But if he, if he just wants to get out, then I would say, just just do it.
Speaker 1:Thank you, that's really good input. Josh, did you have something?
Speaker 12:Yeah.
Speaker 3:Just to give more context to the hey, you know to sell or build. I think it comes down to how the customers think of you and your, your product and your relationship. If, if they think of you as a tax tech stack stack that's providing automation, that's a small moat. But if they think of you as like hey, you take care of a large part of my business and the value I get is way, way more than what I put in and you're indispensable, then you start okay, how do I build that? How do I get more people into that situation where they can't go without me? So I think that the strength of the relationship, customer relationship, is a huge factor on sell versus build. And if he's losing sleep on it, it might be the indication already.
Speaker 1:But yeah, I like that, thanks. So I I want to emphasize what marcus said 90 day sprints that's really the value acceleration methodology that teaches that. Epi scott snyder's gonna kill me for not bringing it up any sooner. Marcus had to bring it up, but but that's where you set a goal and for 90 days you hyper focus on that goal or goals it's usually one or two and then at the end of that time you reassess Okay, we're going to switch gears now. Great input everyone. Thank you. Can we put the camera back or no? Let's put it up here for a minute.
Speaker 7:We would yeah, I do have one question. Okay, one question, go ahead here. Why is owner so focused on sell?
Speaker 1:What issue in his life. Use this as 90 day sprint focus for him and his leadership team. Okay, so we'll see what he has.
Speaker 4:I don't know, I could.
Speaker 1:You guys are curious, right, I have to tell you the business owners I spoke to both of them this morning, or all of them today. They were so excited for this event. They were jazzed. I mean they were like, yeah, I'm so excited Because they live this every day and they wake up in the morning do I build, do I sell, what do I do? And to just have some help. They were really excited about it. Oh, hold on, the business owner just called me it looks like on my phone, so we'll see what we got. We're a little over time, but hold on, we got a live one. Hey, bill or Ted.
Speaker 5:Hey.
Speaker 1:Bill okay, okay, sounds good. I'll ask him that question. Okay, I was wrong. It's first time ever, but first time today. About third time today, the main thing that's keeping him up is he's worried about AI and what AI is going to do to reduce jobs or to change the industry. That's the main thing that's keeping him, not the customer concentration. It was that, but now AI is coming out.
Speaker 17:Marcus Johnson, I think to address all of those things that are keeping him up at night is what's going to derail a potential transaction and exit, and so finding in those 90-day sprints, finding out what maybe those solutions could be, would add a lot more fuel to maybe evaluation in an eventual exit, even if those are still issues. Addressing those ahead of time because that's going to be discovered in that discovery process.
Speaker 1:Thank you, Marcus. So he's saying hit it head on, spend 90 days to decide and at the end of that 90 days to make your decision on what you're going to do. Okay, one other thing, then we got to get to the next one.
Speaker 15:Just real quick. I would just really dig into AI and get some consultants and understand what the trajectory of your industry is, and is there a way you can leverage AI to accelerate your business, as opposed to having it be something that's a threat? I think most every industry is going to be significantly disrupted in ways that we're not anticipating with AI, and so to just to lean into it, use the energy of AI to move you forward, rather than be something that's that you're fearful of, and it still may be something that that motivates and said, hey, I'm going to get a higher valuation now than I will after these AI developments are made in the future, and so that may actually be something that points you to grow or to sell.
Speaker 1:All right, thank you. All right, One more but then we got to go. Okay, lisa's saying she can curse, hold on, we got to know who you are. Just tell us who you are, real quick Lisa.
Speaker 16:I'm Lisa Schneider, private wealth manager Raymond James.
Speaker 1:All right, that's Lisa. She's kind of shy, she loves microphones shy. But Okay, the next one. They've been waiting, patiently waiting. My timer went off 10 minutes ago, but we're going to get going. Okay, let me tell you about the next one. This is the prepare gate.
Speaker 1:When I spoke to this individual, he had made up his mind that he was going to sell. This is an internal sale and I want to spend. We're going to switch it up a little bit because he was dead set, as he and his brother and they have six kids between them working in the business, and so the kids are making a contribution. They feel like they can keep the business and step out and let the kids run the business, and it throws off enough cash flow that they're feeling like they can make a decent living doing that. So what changed was he went on a vacation and his brother went on a vacation same time. They hadn't done this in a while and their phones would not quit ringing. The kids were fighting So-and-so, didn't do their job.
Speaker 1:This is going on and he came back and he's like Rick, this isn't going to work. It's like we got to talk about selling. So we're going to talk about an internal sale first, but not spend most of our focus. We're going to run down the same path that we did with the last one and talk about a sale and what he needs to do to get ready. Okay, so on an internal sale. Let me go back here to the questions.
Speaker 4:But is this the one that had the recent development?
Speaker 1:That's the recent development. That is probably going to be an outside sale unless they can fix this Now. Internal sales are really hard because of the family dynamic. For instance, I have a business owner that says they want to do an internal sale. First thing I say is never be the bank Right. Can you picture Christmas and your son owes you $2 million and you're buying him Christmas presents and the feeling between the two of you and your son's not going to feel like coming to the party, You're not going to feel like feeding him right, and this is your son. This isn't some stranger. So the relationships are more they're what? Delicate, delicate. They're close to the heart, so they have to be handled differently. So anyway, let's look at what does he need to do on an internal sale? Key concerns on an internal sale yes, David.
Speaker 10:David Gilliland, I've done a lot of family internal sales stuff. The thing that is first is they need to start serving a vision that's beyond the family gathering place at work. They need to say what are we really about? What are we willing to sacrifice for? And any family member who can't get behind building the business to do that and impact it. Now's the time to help them find a new place to go and grow and spread their wings. If they don't do that, it's going to fall apart.
Speaker 1:Wow, how about that that maybe you need to get rid of some of the kids? Well, one help I was given.
Speaker 7:Here is yes the. Any sale, internal or external, is about six to eight years out oh okay, so they have some time.
Speaker 1:That's good to know. Thank you, unless the kids kill each other in the meantime. So one thing I want to bring up is, if you're thinking about selling, go on vacation, turn your phone off right To business owners. That's a great test. I hadn't thought about that before. 30 days, two weeks, go, turn your phone off and see what wrecks you have. When you come back, see if you have a business.
Speaker 16:Starting with vision really important and then breaking it down into actual roles and responsibilities and working on that internal organizational structure and the culture within. And that's probably going to require a very skilled outside consultant that knows how to navigate that in a family business setting.
Speaker 1:Lisa. Do you know anyone that does that? I do, okay, so reach out to Lisa.
Speaker 16:Clients.
Speaker 1:Okay, call you. She'll get you hooked up. Okay, lisa.
Speaker 8:Lisa Laundrie, edward Jones, along those lines. In my old CPA firm we used to have rule number one which was all kids are rotten and people would look at us and go but but? But I said no, not everybody's a mother, father, brother, sister, aunt, uncle, but we're all a kid and we all have that little selfish tendency. And rule number two is all documents are written because of rule number one. Right, we all have that thing. So we're just recognizing that we're all going to have that, those moments of, of selfishness, that those moments of but he's not doing what I want, you know, kind of a thing. And so all documents are are written because of rule number one. And then that's where that vision, that's where that internal structure, that's where that organizational chart, that's where the roles and responsibilities that's going to be. How does somebody get out if they change their mind? All of that has got to be put down.
Speaker 1:Thank you, Tom.
Speaker 15:Continuing on that theme, just piggybacking on those comments, I'm actually just thinking through. I've had a number of family in my own business and that you get emotions that are involved with family and you get relationships that predate the business oftentimes or that were separate from it. And so, just going back having an accountability chart so that you're it's very clear who does what and how you measure the success of a role. So if someone picked, if someone takes on a role that you have defined measurements and deliverables for that role, that that determines. A number determines whether they're successful or not, not how you feel about it, not whether someone else there feels good or they just got a promotion and why. But if you have a clear vision I love the EOS framework for that part or scaling up, or there's lots of different methods you can use to build a framework around your company that what you're doing is that you are building a very clear vision of where we are now, where we're going, how we're going to get there and then who are the people that are responsible for those roles.
Speaker 15:I think one of my favorite things when we first started off EOS was that they made us do an accountability chart and in our heads. We're already filling in the names of who those people are, but they made us stop and say what are the responsibilities, what are the roles that need to be filled, without regard to who the human being is? And so you define the role, you define what the pieces are and then at the end you start to see do we have the right people to go in the right seats for those roles? And then, on an ongoing basis, that there are quarterly conversations, that you're actually holding people accountable to, whatever those metrics they were that were set up, and so I think that that can help with the family dynamic of entitlement or infighting among siblings or cousins, where there's really clear expectations and you either met those or you didn't.
Speaker 1:Thank you, Tom, and text messages from everybody too.
Speaker 9:John, if this was our project, we'd ignore the kids, because the problem isn't with the kids, the problem is with the dads. That's where the first correction needs to be, because of what they tolerate, hold the mic a little closer, sorry.
Speaker 9:With a business, you're either selling it or you're buying it. If you come to me and offer to buy my business and I don't, I just bought it for that same price. But it's a single-cell organism. It functions the way that the owners want it to function. If I have problems in a personal relationship, it takes two people or more to solve it. We all gotta get on the same page. In a business we don't have that. It's a different dynamic and when we bring the family dynamic and treat it like a family in a business, you're going to have this stuff here.
Speaker 9:You listed the kids, the age. They're young. I don't know what their positions are. They're probably not grunts, I would imagine. And with successful parents, their kids often think they were born on third base and then spend the rest of their lives telling everybody they hit a triple. So I would start with parents and I would say let's define what we really want here and let's be brutally honest. Are those kids capable of doing it? Are the kids happy in doing it? The conflict between the kids, between the siblings and the cousins, might just simply be they're not happy there either.
Speaker 14:But anyway, that's where I would start. Great Thank you, great Thank you. Some of my business partners are family and when we chat we go into a different room and we're like I'm not your family member today, I'm your business partner and it has to be a very distinct separation. And each of those kids, if they decide that that kid actually wants it and they're not feeling pressured, they need to have their own trajectory and timeline of the things they're going to do to establish the skills that they personally need for that EOS role that they're taking on. And if they're not going to be the key person there but they want to be like an underling or an assistant, that's fine. But we still have to have the trajectory and we have to understand what their role really is going to be and how to develop them into the maturity they'll need.
Speaker 16:Love that Roles responsibility, accountability, accountability, all day long Um okay. I'm reading through again the sheet and I have a qualitative and a quantitative question. Rick, um or Rick, and the group. I don't know which owner, which brother filled this out, but I'm a little mystified, puzzling, why the owner couldn't remember the valuation of its company. It's a little bit of a red flag. So are we so?
Speaker 16:overwhelmed by family dynamics, that we don't know the value of our company. I find that curious and it just makes me wonder about the dynamics inside that an owner that's probably put blood, sweat and tears into this for a long time couldn't remember. And then I'm seeing some pretty rapid growth here. So 1.4 million valuation in 04 and estimated now to nine. It's really rapid. So there's a lot going on there under the hood Some really really fast growth. A couple of brothers who can't take a vacation because the wheels fall off the bus these guys need to shore up some things. These guys need to shore up some things and I'm going to go back to internal structure and getting into some real disciplined operational structuring of the organization. And that's probably their first couple or years' worth of 90-day sprints.
Speaker 14:Isn't that more than three years old, or is that only six? We don't have much sufficient. Ten years of clean finances, yep 90-day sprints.
Speaker 1:Yeah, they're at least 10 years old. Thank you, Lisa. So go ahead Then I've got some questions from that.
Speaker 8:The one question that I would say is, owners are only 45, and they're saying they have five to 10 years that they want to, you know, let the kids grow and mature and learn and all of that, and then they're going to step away. There's nothing in here about what they or at least that I can remember reading about what they're going to do, and so there's that part of me that says my brother and I would continue to oversee the finances from a 30,000 foot view For how long? And how long are the dads planning on being hands-on slash, hands-off slash, involved in the politics of running the company? And if they don't have the life plans in place, then I worry that from a family standpoint, the kids are going to get to the point where they're 35, 40, and dad is still there and present, and maybe I worry that they may not be able to let go.
Speaker 1:She's asking if they have an internal external CEO and I don't. I don't know the answer to that, lisa.
Speaker 16:Lisa Schneider here. They're operating right now at the 30 to 50,000 foot level on their finances and they need somebody down there with their hands on the wheel with their finances, talking to them every week, if not every day.
Speaker 1:Okay, their ages are 50 and 56.
Speaker 19:Aaron Larson.
Speaker 19:So I've still got a couple questions, but I I would say this if you've got six to eight years before you're gonna exit um, and and you want to pass it on to your kids, if that's something that that, as as of today, you want to do and the kids are excited about, then that gives you time to work with them and to train them up, make sure they understand everything and make sure there's a desire there.
Speaker 19:Like I think it's been said before, it's a lot easier to sell to a third party than to family. But with the timeline you have, I mean, that gives you time to make sure everything is working and things are good. The other thing is, you know last second, if the kids decide to back out and they're not super interested in that, or there is conflict and you just don't want the business to be a conflict in the family, it's really easy to well, not easy, but it's easier to go off and sell to a third party and then just split the proceeds however you want. If you want to, you know, give it to your kids or just leave it in the will or however that works, but that's that just makes a lot easier than than having them try to go and figure out how to split the business. It's just you do it with numbers and cash.
Speaker 1:So what, what Aaron brought up there's a really good, it's a really good point, and that is to the kids that really want it, and I, I think, I think it's important to ask them, right, do you want it? This is what we're thinking about. Do you ask them, and maybe they'd rather have the money? Okay, we've got somebody that has a question okay, a couple things.
Speaker 7:So, going back earlier, when we were talking about what's fair, somebody commented fair isn't always equal and equal isn't always fair. And then there was somebody that had raised their hand. Do you want to go ahead and make your comment now? Okay, let's see.
Speaker 11:Hey, how's it going.
Speaker 7:Good.
Speaker 11:Joe Walker with Edward Jones from Fort Worth Texas. Thanks for putting this on. This is really really cool. Uh, I was just reading through the uh, the case study and, uh, uh, like others have mentioned, the kids are young. Uh, it sounds like they the owners, you know either knew from experience or just had a good gut feeling that this was going to be a problem. So I'm just wondering, you know why? It sounds like they're throwing in the towel really really quick. And the one thing they haven't implemented in that the case study mentioned or at least I assume they haven't implemented is that non-family member manager that the kids are going to were to be reporting to, with that non-family member manager reporting to them. So I was just going to see what anybody thought about that, about them maybe hanging in there and making that implementation, unless they just know the kids aren't cut out for this.
Speaker 1:So a non-family member is manager. Is what Joe's talking about, right?
Speaker 11:Yeah, and that, and that was in the case study that they were, that that was part of their plan.
Speaker 1:Yeah, we need to define, I would say, a board of directors. Board of directors really helpful.
Speaker 5:What spouses?
Speaker 15:Yeah, it was. It said that the if they died it was going to be their spouses, and I was going to just challenge that.
Speaker 15:Are the spouses. Hold on, go ahead, tom. So one of the notes I had seen said that, in the event of the two of them dying, that their spouses would be the trustees. How would you determine who will run the business after you pass away? For now the trustees will run it wives, then kids and that just feels like a recipe for disaster.
Speaker 15:That, if you've, unless the wives are actively involved in the business, that that's going to be a huge step for them to get involved and then for them to be aligned on how to do that, and that, just knowing moms that they're going to each have clear loyalties for their own offspring that are, that are presumably the, the kids that are working in the business, and so, anyway, that's, I think the idea of having a non-family member, that's, that is, the one that's actually managing the company, sounds like a much smarter call than than having something where you're pulling the the, the spouses, in. Actually managing the company sounds like a much smarter call than having something where you're pulling the spouses in and the likelihood is that one or the other of them is going to die, not both of them. And so also, what does that look like? And what does the management look like if one of you is gone and the other one's trying to exit, so having some clarity around that as well.
Speaker 1:So I want to bring something up here, and that is because I sell companies and that's the angle I always take right, Whether they sell to their kids or whether they sell externally, these are going to be issues If I've got a company and I have six of their kids working in the business it's going to affect your valuation.
Speaker 1:It's going to affect valuation, I don't know that I can sell it. I'll be honest unless they have clearly defined roles, unless they know what they're doing, unless I'm absolutely certain they don't want it right, they're not going to quit, they're going to just leave after closing. But that's a huge concern if he's doing an outright sale. Is six their kids working in the business? That's's a lot. That would. I don't know. I could gut the business really if all of them just decided to leave and then they have leverage and power to hold on. Dustin, I think you'd raise your hand a while ago. Sorry, I'll come right back.
Speaker 6:So, believe it or not, I've actually been the non-family manager of a business that was doing about eight to $10 million in revenue and there were seven members of the same family working in this company and talk about awkward conversations. And you're the. You're the person that everybody, regardless of what your title is. You are going to become the human resources manager. Everybody's going to go to you to want to talk about their struggles and their anxieties. And he's doing this, she's doing that. So I lasted a year in that role. You couldn't have paid me enough to stay in that business because it was just so. It was an emotional mess.
Speaker 6:So, like the way I see it, is this business, the kids either need to learn how to work together or they need to get out completely. One of those things need to happen for this business to be successful, wow. And there needs to be. There needs to be some kind of committee that the you know, the, the two patriarchs can be on, but there needs to be like. Somebody needs to be doing a compensation study, like a third-party comp study. The kids can't be having their, their comp set by their parents. That needs to be third-party. So there's no arguments on on who's getting paid what it's all unbiased. There's no arguments on who's getting paid what it's all unbiased. There's no favoritism. Those are just a few thoughts. I could write a book on it, but this is a really delicate situation to have that many people that tight in age trying to all work together. Good luck.
Speaker 18:All right, Hold on. I was actually going to Savannah. Say one thing is Wow, Good luck deciding who wants to buy it. But you're selling as a like kind of to a third party kind of that setup. But it is sort of an internal sell. But separate it, separate it. The kids are deciding who wants to be the partner you're not deciding who's what ownership. It's the kids deciding who they want to work with yep, somebody over there yep, all right, this guy all right.
Speaker 1:He's been raising his hand for life. He's got a sore shoulder from holding it all. Sorry, john, go ahead yeah.
Speaker 5:John Spiesman with 1% Better Leader. Yeah, I was very much in disagreement with the gentleman over there that both the two owners need some help in setting clarity and expectations. They have six to eight years to really invest in both their leadership and in the development of these individuals in their company, Asking a 20 to 25 year old. What they want, I don't think, is the right path. You need to lay out the path and see if they're willing to follow, If they can develop and if they can demonstrate. Then you have the person you can have a conversation about ownership with. Right now, the problems need to be worked on through working on the business, and so they need some external help. But just one person in there trying to be a ringleader is a disaster, and so they need some external help. But just one person in there trying to be a ring leader is a disaster. I think they need. They need some, some assistance, some coaching the owners, as well as intensive development of the family members to see whether they can put rubber to the road.
Speaker 1:I love that Sounds like you've had some experience with that, john doing it Okay, hold on Sean.
Speaker 2:Sean Richards, Blue Sky Business Consulting. First a question, then a comment. Do I read this correctly? Are two of these children? Are they married to each other? Are those a son or a son or daughter-in-law, daughter, son-in or what's that? Because that's a whole nother layer of challenge here with this. If they're actually married to each other, does that? It just says married and I don't know if that means that they're each married. The others are single.
Speaker 1:I believe they're just married to outside married okay um well, you know what it is utah. Sometimes it's a little close well, they're the same age. So I thought, well, maybe they're hey, if we still get divorced, we're still brother and sister, so go ahead, true um I this is going to sound just a little bit dramatic, but I would.
Speaker 2:I would be tempted to fire all of the children and have them reapply and go through a process where, with this internal structure, we're saying this is what the position requires, these are the job qualifications, these are and I'm one that would encourage some kind of a strengths evaluation, skills evaluation, all of those kinds of things to determine where does this pair up? Because there's, as has been mentioned, there are ways to have them retain, to put it bluntly, the inheritance, the money, part of it, but not get involved in the business and mess that all up, because that's kind of what's happening. So I would be tempted to fire them and say let's have you reapply, let's put you in the right role. If it's anywhere in the company they may find that that's this is not, you're not qualified for this, you're not wanting to do this. So that's how I would approach it. Qualified for this, you're not wanting to do this. So that's how I would approach it.
Speaker 2:It sounds a bit traumatic, but that's uh, that we need to send that message to the kids. I liked the comment earlier, partly because it related to baseball and I love baseball, but sometimes someone's standing on third base. They did not hit the triple and they need these. These good kids need to be reminded of that, yeah okay, clarification.
Speaker 1:Man, I'm wearing out a pair of shoes today getting all the credit for all the steps.
Speaker 7:Okay, so on the kids, it is they are siblings and cousins and two of the employees are married to each other. So two of the employees are together, so husband and wife. So two of the employees are married to the kids. Is that what I mean?
Speaker 10:no, no, no. The employees, two of them are husband and wife, they have a son-in-law or daughter-in-law yeah, oh man, this is getting complex, okay, jerry's okay.
Speaker 10:So nepotism is actually a great way to run a business sometimes you just have to play it right. But it starts with a vision level that's different than what we're talking about. We're not talking about just for this family, the way they've set it up. Their purpose for their business isn't just revenue and profits. They have a very different purpose. So if we were doing the 90-day sprints, I'd take the first 90-day. I would take those two owners and their spouses who aren't in the business need to get clear about their purposes for their family, what they care about, because they've been trying to serve it through the business, which is fine. But they have to get super clear about that and they should do that sprint Because otherwise, otherwise, those two are going to have battles every time they try to implement any of these things. They're on the couch like this is just not a happy thing. So they have to get aligned, all four of them.
Speaker 10:Next 90 day sprint get really clear on how the business is going to serve those family purposes, which may have to do with people getting better and stronger outside of the business. Right that? Why is this holding so-and-so back? So they have a very clear conversation about that. And then the purpose of the business and how it serves. But we keep trying to give ideas of how we're going to pull the family out of this. Family's pretty integral in this. There's a way to plan it the other way, and I know very big businesses Mars candy bar, there's one for you that is a family owned business. Nepotism rules and you have to admit they've done pretty well Right and so you can do it. You just have to be intentional at a higher level and bring it down through.
Speaker 7:Gotcha, thank you. I'll build a team like that Okay, hold on. This will be quick. So Tony said do the kids or the wives of future trustees want the business as a legacy to grow it and the reputation, or do they want it for a lifestyle business? If lifestyle only then sell away from family or the differences in kids could run into the ground for the legacy.
Speaker 1:Okay, we'll see what the answer is. Okay, we had hands, mitch.
Speaker 13:That was very close to the comment I was going to make, but kind of a little bit different, but right on that same line. So it's a good segue. If the kids, if the parents didn't have this business, would the kids be like, all, gung-ho, let's start a uh, uh, this business. Um, they're doing, uh, cabinets, right, but should we, let's start a cabinet business? I don't think so. Right, I don't. I'm not getting that. That feel that that it really is more of just an emotional legacy, sort of thing. Like hey, uh, our dad or grandpa or whatever built this and we want to be a part of it. Um, but if they're not actually in it because they're passionate about it, then I I don't think it makes any sense to have them be a part of it.
Speaker 1:I had a couple in it.
Speaker 14:So we've talked a lot about the kid angle. Does anybody mind if I bring up two other thoughts on here? Okay, what it's about. So Lisa alluded to the point that that revenue changed dramatically from 2023 to 2024. And I want to know why. And I want to know what that projection, what caused that, and if that's sustainable, because in 2023, you'll see that it was, what was it?
Speaker 14:Yeah, it was like half a million, and then 2000 beta, and then 2024, it was more than double. So what caused that and is it maintainable? Um, so that's something I definitely want to explore. And the other thing that I want to explore, just because it's passion, is their industry. Now, their industry is cabinet making right, but the lumber prices has changed dramatically in 2024. Then Congress passed it so that the tariffs doubled at that point and it caused a 12% raise and increase on all of the wood, which impacts it. But with their market, they can pass that along to their people I mean their customers, right. However, with the new tariffs that are coming out, it's going to double that again and so they're expecting another 13% raise on the product for the customer. Granted that industry, they have to keep building cabinets right, but that is something that we would be remiss to not at least address when we're talking about the exit plan and the plan for the business and how they're going to address that, because that is a big impact on them and we have another hand here.
Speaker 19:Okay, you're on so just another thing to think about going back to the kids, um, and, and the comment, um that was mentioned online by tom or um anyway. But with this, with this business either being something as a legacy or lifestyle business or whatever you want to make it, do the kids just want to take the money Like? First of all, you need to know what your business is worth. So figuring out what the business is worth, that's important. And then talking to them about, hey, is this money going to be life-changing for you? Obviously not give it to them in one lump sum. I don't think that's important.
Speaker 19:And then and then talking to them about hey, is this money going to be life-changing for you? Obviously not give it to them in one, you know, lump sum. I don't think that's smart either. But but is that more worth it than having the kids run the business and have that be their career and have them be able to go and work in this business for me the next 30 years, if you're able to set it up Right? And there's all this talk about hey, can, can we set it up right? And and obviously there's a way to do it? Um, but, but obviously thinking about that as well is. Is giving the kids the money more worth it, or is having them in the business and having this be their their career in their life? Is that more worth it?
Speaker 7:so I think it's a big conversation to have okay okay all right so one of them is Teresa from the Zoom said add marriage counselors as part of the exit team. The owners are all in on the business, but how are they in actual partnership outside of the business for lasting retirement with their spouses? So and then the owner said our goal is to provide a place where kids can thrive. Some kids are interested in legacy. To answer the question on the income and the revenue, income went up after stabilizing from move into new building. Current income expected to remain steady, as is barring bad economy.
Speaker 1:Okay, we are just about out of time. Okay, do I have another hand? Just make sure John doesn't have his hand up anymore. I'm all nervous now. Okay, any other comments? We're at time now. Okay, we're going to vote. Do they keep it? Oh, can we put the camera up here? It's on both. It's on both. On both, okay.
Speaker 7:I'll switch it to the.
Speaker 1:Just, I'm running out of space. You notice that I'm going to have to micro. Okay, option one who votes that they sell to an outside person and just throw in the towel? Do we have any votes for that, tom? Okay, we have four.
Speaker 14:Okay.
Speaker 8:I think all of us were in agreement that the vision, the internal structure, the documents written, all of those things were going to have to happen either way. Anyway, so are we assuming that all of that has happened before we vote?
Speaker 10:are we six, eight years down the line, like they said?
Speaker 1:six, eight years down the line. Let's do that. Let's make the assumption six, eight years down the road, these things are done. That changes a big time right, because if they're done right, you won't have to sell to an outside person, do any sup okay. So let's say right now, let's just back it up and say right now, if they have to make a decision, what are they going to do?
Speaker 7:it's sell, hands for sell are you doing the three the same what? Four what options are you doing, so I?
Speaker 1:can. Number one is sell to an outside person. Take it to an outside sale Okay, I have four for that and online. How many do we have?
Speaker 7:I haven't lost it yet. I have to get all the options.
Speaker 1:Option number one sell to an outside person. I think that's probably the best option. Option number two is to either sell or keep it internally.
Speaker 15:We're giving a hybrid option as, internally, what's the hybrid?
Speaker 1:Okay, or a hybrid I'm going to call a carve-out.
Speaker 8:Yeah, of course, Hold on In order to make my recommendation. My question to the owners is do they have a desire and the ability, and do they believe that there's an ability for everybody involved to walk through all of this without blowing up the family? Okay, you can't even go of this without blowing up the family.
Speaker 4:Okay, you can even go on vacation without blowing up the family.
Speaker 1:Yeah, they can't go on vacation without blowing up the family. They got a lot of work.
Speaker 8:Do you do these things or no? Because if they're willing, I'd say stay in. If they're not willing, I'd say sell. Does that make you sell outside'd?
Speaker 1:say let me text him. Yeah, yes, oh, the answer is coming through.
Speaker 3:As we're waiting, I you should have all just received an email. We are expanding this chapter, these chapter events we're going to. We're going to have some more events down in Utah County. So if you guys are interested, we're going to have uh. This is every third thursday. We're going to have every first tuesday down there, most first tuesdays. We got four scheduled right now. August 5th, we're doing an introduction to exit planning at the silicon slopes uh facility. October 7th, november 4th, december 2nd. So keep an eye out. You'll get more emails, but if you have folks that are down there and don't want to drive up here, let them know and we would like to expand down that direction as well.
Speaker 1:Thank you, and we have Vicki here. She's been pretty quiet, but we have Vicki here from Utah Valley University who's going to be partnering with us on these events. So welcome Vicki. We're excited about that. She's trying to be low key and just avoid the limelight, right, and I just bring her right up. Okay, do we have an answer? Yes, Okay.
Speaker 7:The answer says at the moment, no. We would love to find a way to make that happen, I think keeping it together.
Speaker 1:What would happen?
Speaker 7:Helping the business build and grow and be a family business. Yes.
Speaker 14:Don't see a way of moving that family vision forward, but they would love to do so if they could find someone to facilitate it.
Speaker 7:That's a big question that I can't get an immediate answer to. I think so. I think so.
Speaker 1:The dream is to have it be what they want. They'd love to give it to their kids. That's their dream. The mars right. They want to be the mars family. They're just not sure about that. What that?
Speaker 7:and he says we like the idea of planning for nepotism.
Speaker 1:If we can figure that out okay, they want to be like the mars family. Okay, number one sell to the outside. Just think they should go ahead and sell. How?
Speaker 15:many hands.
Speaker 1:No, if they have to make a decision, they're deciding now to sell, to prepare to sell to an outside party. It's a decide gate. They don't want to do that. Well, it doesn't matter what they want. What do we think we're voting? Anybody think they should sell? I heard your comments earlier which is they probably couldn't.
Speaker 15:Yeah, depending on how many I don't know how many employees they they make up as management. So of of these individuals, the 21 to 25, how crucial are they in the business being able to function? So if they all blew each other up and you had to pull them out of the business, is the business still viable? Or if half of them? I mean you get awkward thanksgivings for a long time if half the people just got fired from the company and that kind of thing.
Speaker 15:So it sounds to me like it'd be really challenging the company and that kind of thing. So it sounds to me like it'd be really challenging to sell outside now as it is. But if I could see something where a year or two down the road, with a really carefully designed structure and accountability, that that would be possible. But it sounds like right now it would be a hot mess.
Speaker 1:Okay, so we have no votes for sell. Hold on. John has one comment. We're going to have to hurry though.
Speaker 9:I'll make it real. I'll make it real quick. Can we put a category up there of gee? I wouldn't take this as a client Because there's just they. Well, I'm old, so I got to. I don't have time for long answers. John's not a fit, because I think there's a big disconnect between what they want and what they expect and what they got. It doesn't take very many employees to make their revenue in a cabinet business. So what are we going to build on? How are we going to fix this? Where's the money going to come from? And you know, you got to sometimes look at things and just say, hey, there's no way, practically speaking, to solve this problem. And that's what I'm getting from reading the notes and the good comments that have been made here. It's just might not happen. Let's pass and move on.
Speaker 1:So if that's the case, that's self right. Okay, one more comment, then we get a vote and we're going to end. Go ahead.
Speaker 16:So respectful to John's opinion. He's been around a little longer than I have, but I've been through a few of these, so I'm a glass I'd climb a mountain with you, let's go. You, I'd climb a mountain with you, let's go. I'm a glass half full kind of person. This is family dynamics. Family dynamics can be worked on. There are some really skilled people in our world these days that know how to do this, probably some in this room and I also. If I were working as the wealth advisor with this family, I would start there and I would also really encourage bringing in either an outside or an inside probably an outside based on what Dustin shared CFO, so really getting somebody with hands on the wheel with the owners on financials projections. Maybe this is already happening, I just don't know it, but I think that numbers tell a story, as do family dynamics, and I think you can reasonably start with those two steps and make a lot of progress between now and Christmas and have a really nice Christmas together.
Speaker 1:Okay, thank you. Okay, sweet, all right, lisaisa.
Speaker 8:One more, and then we have to vote I, like the other, lisa, I'm a glass half full kind of person and I would say that the owner's response to my question tells me that they want it to happen. And if the other members of the family also want it to happen, it can happen. And yes, it might take help In fact it will take help, but it's, I believe it's absolutely possible to help this family get their dreams where they want to be, because they want to, and and I think that's starts the vision.
Speaker 1:Okay, all right. How many people, by raising hands, think that they should sell? Come on, john, you got to at least do it and say yeah for yours, yeah.
Speaker 9:I wonder if I just got back from Scotland.
Speaker 1:Oh, he just got back from Scotland climbing mountains with his grandkids, anyway they're. So hold on. So I have one, two sellers and online we have five. So we have seven people that think that they should sell. Okay. Who thinks that they should do an internal sale? Raise of hands. I have four, five, six, seven, nine, nine on the internal. That's 11. Seven, 12. Okay, who thinks that a partial sale or a carve-out right now makes sense? Any on the carve-out? Okay. Who suggested the carve-out? They need to at least vote. I got two fingers pointing okay. What options? Not that we like them. So john has the most followers. He had five online. Okay. So our vote is an internal sale to give it a shot, okay.
Speaker 1:Um, any other comments online before we close? All right, thank you everyone. Really appreciate your input, your time. This has been wonderful. I'd like to talk to the chapter members. If you'd like to stay after, we're going to do some more of these events. I love this event and we're going to do some more when you talk about that. So thanks again and have a great day. We'll see you next month. Lois and Cinderella Cinderella.
