South Florida M&A Advisors Podcast

EP #15: The Four-Advisor Blueprint for a Clean, Profitable Exit

• Russell Cohen • Season 1 • Episode 15

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Selling a company isn’t a decision you make on a Monday and close by Friday—it’s a campaign that starts years earlier, with the right team and a clear plan. We unpack a practical, four-advisor framework that helps owners protect hard-won value: a seasoned M&A advisor to run the process, a CPA or fractional CFO to make your numbers PE-ready, an M&A attorney who speaks the language of deals, and a wealth advisor who designs a tax-smart path from illiquid to liquid.

We dive into the realities of private equity diligence and why GAAP alignment, revenue recognition, and a clean quality of earnings matter more than glossy pitch decks. You’ll hear where owners get tripped up—Q4 income games to save taxes, cash off the books, sloppy working-capital management—and how a fractional CFO can model normalized working capital so your LOI, QoE, and final true-up align. We also get candid about legal strategy: why a generalist can slow a deal to a crawl, and how a true M&A attorney can shorten the path to close while protecting you on reps, warranties, escrows, and earnouts.

On the back end of the transaction, we explore wealth strategy with an eye toward today’s markets: capital gains exposure, deferral tools like a deferred sales trust, diversification beyond the traditional 60/40, and building a resilient portfolio that matches your new risk profile. Along the way, we talk mindset—bringing in a battle-tested coach, embracing humility, and letting experts lead—so the process is demanding but not derailing. If you’re aiming for a life-changing exit, this conversation gives you the roadmap, the warnings, and the confidence to start early and finish strong.

Enjoyed the show? Subscribe, share it with a fellow owner, and leave a quick review with your biggest exit question—your note could shape a future episode.

SPEAKER_00:

Yeah, it does sir.

SPEAKER_01:

Welcome to the South Florida MA Advisors Podcast, your trusted MA team. Here's your host, Russell Cohen.

SPEAKER_02:

Hello, hello, everyone, and welcome back to another episode of the South Florida MA Advisors. Jeremy Wolf here, alongside your host, Russell Cohen. Russell, always good to see you, my man. Yeah, Jeremy, it's great to see you too. It's been a while, so here let's do it. Yes, yeah. So okay, I want to I want to start this off. I want to paint a nice, pretty picture for you to kind of outline the topic for today. So I'm only 45, but let's fast forward, let's say 20 years from now, right? Retirement age, 65, maybe a little a little later nowadays. I'm 65. I spent the last 35 years of my life building my empire, right? My business is my baby. We've talked about this before. But now it's time for me to sail off into the golden age of retirement. Right? But what am I gonna do with the business? Time to sell. We need an exit strategy, do we not, Russell?

SPEAKER_00:

No doubt.

SPEAKER_02:

All right. So there are basically four components to the exit strategy, right? Things you need to think about. First, right, we need the MA advisor. We're gonna need a good accountant involved, we're gonna need an attorney, and we're gonna need a wealth advisor, right? Four prongs. So I want to get into that in this episode. I want to unpack each of those and give our listeners some some tips and tricks around how they can structure this so that they can maximize the potential of this deal. So start start with the MA advisor. This is what you do. When it comes to selling a business, why is it so important to have a strong team starting with an MA advisor and just not go at it alone?

SPEAKER_00:

You know, you just built your business over 30, 40 years, and this is one of your largest assets outside of your home. Uh, your business is uh not a liquid asset outside, you know. So this is now the time to start preparing the business for sale. You just can't wake up one morning and say, hey, it's time to sell. You got to plan, especially these larger MA deals, you really got to plan years in advance to get the business in preparation. And getting your deal team is is vital. Obviously, uh, you know, if you want to start with the MA advisor, you know, basically a couple couple years out, so they can come in and uh like a person like myself will come in and point out the holes in the business, and so you can plug up those holes. Because with with when you're dealing with private equity groups, they are working off gap accounting, generally, uh accepted accounting principles, and every business that I'm dealing with is not on gap. So there's going to be inconsistencies, and that they're not expecting you to be on gap accounting, but you your your books and records better be as close as possible, as clean and revenue recognition, all different types of accounting that that you're not aware of. Uh the seller has probably has ignored over the years. So when you're dealing with these professional buyers, they're running on gap accounting and you're not. So I come in, uh, you know, look at from a legal, I can, you know, ask questions about a legal, all different angles to really point the holes in the business so they can plug it up. So a couple of years later, when I come in and do sell the business, uh, you know, we're not walking into a firestorm, into a quality of earnings with these large accounting firms. So it's important to link up to a uh MA advisor, uh, get the know and trust. That's very important, know and trust. Uh making sure that they're out for your best interest to drive the highest possible price within the marketplace will allow. And and they, you know, I'm I'm gonna be your best friend for a year. You know, you're gonna talk to me daily, weekly, as often as you want, uh, in person, on Zoom, on the phone, texting, uh, you know, uh, so yeah, so you're gonna get to know me really, really well. And that's important. Uh, you're probably gonna talk to me more than you talk to your wife. Yeah, first of the year. So, yeah, so the MA advisor coming in early is very important because uh that buy side has a weld engine machine team that knows what to look for. And if you're not prepared, you're you're gonna get eaten alive in that in that process that you're gonna go through. So, very important to bring in that MA advisor early.

SPEAKER_02:

How should I be looking at finding the right MA advisor, right? If you're thankfully, I know you. So if I have to sell a business, I'm I'm just gonna go right to you. But let's say I don't know any MA advisors, there's none in my networking circles or what have you. I I need to go out there. Like, what are some things to look for when searching for an advisor? Um, and then once you find one, are there any signs that you might be working with the wrong one and that they're not a good fit for you?

SPEAKER_00:

I mean, listen, you got to decide if you want someone local that can show up in person when you're when you're hitting that wall in the deal, uh, you want to have that face-to-face interaction. Or are you gonna hire uh MA advisor that's in another state and it's gonna be 100% Zoom? You know what I mean? And they're never gonna show up at any of the meetings. So that's your decision. Also, you know, you might have a specialty type business, so you might want an advisor that has experience in the particular industry. Probably not absolutely necessary. Um, but you know, sometimes sellers feel comfortable, you know, if a MA advisor has a vertical uh, you know, like if you sell veterines for a living, then then yeah, maybe it's better off to hire an MA advisor that sells veterinary practices, you know. So um, you know, at the end of the day, it's feeling comfortable with the person you're talking to, trusting them, the integrity. Or if you're if you're just hiring an advisor to just get you the highest possible price and and and fight the battle for you, you know, every every seller is different. Uh a lot of sellers run on high integrity, and some sellers don't have that high integrity. Uh, they're, you know, they're you know, and those are the type of assignments I don't want. I want high quality people uh that that really want to be on the other side of ownership. Uh, very important uh that we have uh strong integrity in the deal, and that they're gonna tell me everything up front. I I need to know about what's going on in the business.

SPEAKER_02:

Yeah, I mean, you're you're the point man through this process, right? Am I thinking about this properly? Because I think people out there, everybody knows what a broker, like a real estate broker, does in terms of showing a property, right? You you you gotta go out there and promote the property, but you also in many cases are kind of the point man on the deal and you're bringing in different people. Is is that very similar to what you do on the business broker end, or are there any are there any uh things that lie outside that parallel, right? Like things that you do that are unique specifically to business broker.

SPEAKER_00:

Yeah, the MA advisor it's totally different than if you're selling a smaller business. It the language is different, the process of finding a buyer. We have to make investments of$30,000 to$50,000 into subscriptions to find those private equity groups, strategic buyers. Um, it and it's very much the the deal process, the structured transaction process of having these private equity groups bid against each other and try to drive the best possible price for the seller. And then getting into the deal, uh, very um, you know, like I said, high-powered attorneys, accounting firms that are doing the quality earnings. Every stone will be unturned, okay? And and basically they're trying to cover their rear end uh because they could be sued. So we have a very anal accounting and a legal process, uh, crazy uh nonstop diligence list that will really uh a seller will go through one deal and say, one time is enough. Trust me, I will tell you, it is a very invasive process, okay? And it's not fun. Uh, but if you can get to the finish line, it's a very rewarding uh for the seller. Uh life-changing money, generational money sometimes. Uh, you could change generations for you for your family. Uh, and most important, you know, after you do your transition a couple of years, you're free. You know, you're you take the handcuffed off. Yeah, exactly. You're gonna go travel with your wife, go see the grandkids, not have to worry about you know being handcuffed to the business 24-7, thinking about the business. That's the miracles that we're doing. We're giving your life back, and and we're we're gonna take that asset that you have that's on the balance sheet and make it liquid so you can give it to the financial advisor to grow for you.

SPEAKER_02:

All right, so most businesses that are at the stage where they're getting ready to sell, I would say all of them, right? They have they have a CPA, they have an accountant. Are you finding when you're brought into a deal, are you bringing in your own team, like an outside CPA that can give a second look at it? Or or I mean obviously it's sure it's different for every business, but generally speaking, or if if a business has a CPA that they're working with, is that who you deal with? Or what's your typical approach?

SPEAKER_00:

Um so the CPA, depending on the level of involvement with the seller, sometimes the CPAs decide not to be involved on a on a day-to-day basis in the transaction. Um, and the reason why is they're they're you know, they might be just preparing the tax return, uh, they might be doing other services for the seller. So what we do is we bring in a fractional CFO, uh, and this fractional CFO, which we're hoping to get on an interview in the future, uh, will go through your QuickBooks, we'll go through your PLs and get a private equity ready as close to gap accounting as possible. And and they will they will, you know, this a fractional CFO will tell you where the missing links and the financials that they're gonna find in a quality earnings that could really uh make it a challenge. Um and and most important, this in these MA transactions uh in these deals, you're including working capital. So a CPA does not want to do the networking capital analysis. That's why we're bringing a uh fractional CFO to do that networking capital analysis so you know early on as we're bringing the business to market, not to market, but out there to the private equity groups, how much money that you typically need to leave behind when you get to the finish line. And that's an important number. If you don't uh understand the networking capital requirement, that could be a major stumbling block in getting to the closing table because the networking capital will be in the LOI, it will be part of the quality earnings, it'll be part of the agreement, the contract, and there will be a truth there'll be a networking capital analysis done uh during the quality of earnings and at the end of the deal, and then a true up. So the fractional CFO will get that all put together so we could all understand it. And and and the goal of the fractional CFO is to, from an accounting standpoint, once we get into that quality of earnings, uh he or she is working with me to handle the high-powered accounting firm that's involved with this quality earnings, uh, so we can answer questions. So the fractional CFO is right there with me, and and and they're we're teaming up together to get you through this quality of earnings, which is a very daunting task.

SPEAKER_02:

That makes a lot of sense because whoever is kind of in-house doing your books, right? They're seeing things through their lens. It makes sense to have kind of an outside party come by and take an objective look at the whole situation. Are there instances though where you have like smaller deals where they just they just have their in-house guy do it and it's not that complicated? I'd imagine there is there.

SPEAKER_00:

Yeah, if you have an in-house controller, and and a lot of times the in-house uh controller knows about the sale because that's to get them involved. And if they're capable, uh then yeah, we'll work directly with them. And uh as long as they can do the networking capital analysis and and they can support their work. And um, you know, with sometimes they do get critiques, so you got to be careful of you know what's what's involved in that. Uh, but yeah, it's very important. So every every seller has a different scenario uh that comes into play, and we'll we will adjust based on what the seller wants to do. And sometimes sellers don't want to spend the money on a fractional CFO. Uh they they you know they want to keep it to their accountant or other control. Yep, every deal is different, and that's what every deal is different, nothing is exactly the same. Yeah.

SPEAKER_02:

What what are some of the biggest or the most common financial mistakes that you see owners make before a sale? Are there things that owners do that are uh that jump out at you right now that say like this is a big no-no?

SPEAKER_00:

Oh, yeah. Um, especially in construction, a lot of times sellers don't want to pay taxes, they're trying to avoid the tax bill. So a lot of a lot of companies will uh stop depositing checks uh in November and December and push off the checks and pay down all the expenses, uh, and so it just throws off the numbers. Um, I'm I'm dealing with a company right now that that's doing that, and the the numbers look distorted. I've on a three-year trail, it looks very distorted. And um, yeah, I mean we're we're getting offers on it, but the same questions keep coming up all the time. So do not do that. You know, that's why if you prepare for sale in advance, you know, three or four years in advance, you can get off that, you know, delay delay your sales until next year. Uh, because like I said, it's you it's hard for a uh buyer to get a real understanding of your numbers if if you're playing that type of game, you know.

SPEAKER_02:

Yeah, no, another something I talked to to Dustin about um on his podcast was in regards to businesses that are cash heavy and and and not reporting cash to avoid taxes, right? How that that's detrimental to the like people don't think about that as they're going through the business. They're not looking at 10, 20 years down the road when they're selling, but all that adds up on the books and it devalues your company.

SPEAKER_00:

Yeah, I mean, when you when smaller businesses do see more of more of that when we're dealing in MA, um, you really can't throw the cash into the quality of earnings that they don't want to hear about it. Yeah, yeah. Um that's yeah, a lot of at this level, everything's really legit. Um, and you know, when I did that large roofing deal a couple years back, the the seller got rebates from the contractors, uh from the suppliers. So um, so if you if you're buying you know millions of dollars worth of supplies from a roofing supplier, they would give them rebates. And I was like, well, you know, is that a legitimate ad back? And in the quality of earnings, they did take back the supplier rebate because the going forward, they were gonna get the same rebate, but the the private equity group is gonna put it on the books where where the rebates sometimes never never hit the books with with the the seller, you know. So um, so yeah, so supplier rebates can be counted towards the quality of earnings for the final EBITDA, you know. So there you go. There's a perfect example. But in smaller businesses, um cash businesses, you know, the owner plays around, no doubt.

SPEAKER_02:

Yeah, so important to be super organized and document all this stuff, like like getting the habit from when like speaking to all those out there that are actually just just now starting a business or looking to start a business in the future. These are things that aren't necessarily on your radar when you're starting off, but it can get so difficult down the road to deal some of these issues downstream when when if you just develop the habits when you start off of keeping everything organized and putting systems in place and taking the time.

SPEAKER_00:

Get your books, put money into your accounting, make sure. And obviously, as businesses grow, sometimes you grow out of your accounting person, your CPA, and you need better higher quality. You know, there's different levels of accounting people. So sometimes you grow out of the person that you hired the first time, and you got to get to the next level.

SPEAKER_02:

You don't want to get to the point where you need to hire a forensic accountant to clean up the mess.

SPEAKER_00:

Yes, it's gonna get really no doubt about it. You know, but so just be aware that you know, if you if you're growing your company, um, don't be afraid to change. Don't be uh people sometimes are afraid to change their CPAs. So I don't understand why. Um you get comfortable, you get caught in your ways, you're getting bad relationships, you don't want to one of the weird things about business owners can't change their CPA. Never understood why I've changed accounting people all the time, you know.

SPEAKER_02:

You know, I mean I've done probably because it's it's one of those subjects that's so close to home, right? It's the lifeblood of the business, it's the financials, it's the money, it's so personal. And the thought of trying to find somebody new and go through that process of building the relationship with that person and getting comfortable with them is a lot deeper than you know, something that's more surface level.

SPEAKER_00:

Yes, people don't want to have that conversation, probably. I'm not firing it. That's probably it.

SPEAKER_02:

I mean, the same the same is true for like for for wealth advisors, wealth management people as well, right? Like once someone's managing all your wealth for a while, like they know you, they know your goals. It's like yeah, it's takes time to build that relationship. Uh, I do want to get to the wealth advisor. I also want to um like when it comes to the attorney. So, as a business owner, let's say I have a good a good attorney that I trust that I work with, like a civil attorney, a little you know, business attorney, whatever it is. Um, are you also just like the fractional CPA? Are you bringing in, I'd imagine, a attorney that specializes in these deals, especially for the larger ones? But like, what about the smaller, like a business, you know, few million dollar deal? Are you bringing in a specific attorney for that? Or if I have my own, can I use that attorney? What's the best course of action?

SPEAKER_00:

Yeah, and in these MA deals, you this is really specialized. Just understand on the other side, the buyer is hiring in a high-powered MA attorney that really knows the space. You need to have, I'm not telling you to go out and hire some someone equal, but get someone who knows MA transactions, the nuances, because they're the if you don't get the right person, they're gonna start fighting this MA attorney, and it and guess who gets to pay the bill? You're gonna their deal won't close you, and you're just gonna have a monster bill. And let me put it this way I'm gonna make it really simple. If you have a heart problem, you don't go to a podiatrist for the heart problem. So think about it. When you're selling your business, okay, and and you have one of the you're selling your largest asset, probably one of the biggest windfills of money in your life. Hire a specialized MA attorney that knows the business, okay? Because they speak the language, they understand it, they've been through it before, they everything that's coming from the buy side attorney, okay, they know what's right and what's wrong, and they know what they can they can battle and what they can't battle. So it's very important to get a specialized MA attorney. If you are hiring, uh I I had another roofing deal where they hired an attorney that that really should have never been their attorney, and and the deal just took went on forever. It took a year to close. It really should have never gone that and it it was extremely frustrating. When when we when we had the$100 million roofer, we got the MA attorney, it it went incredibly well, it went incredibly smooth. Um, and and because it was a voluminous of information and contracts and disclosure statements, but but yeah, it is so important to get the right, like once again, to get the right team that knows what they're doing. You don't get a divorce attorney, don't get a state attorney, get an MA attorney so they know this is what they do, and you're gonna feel a lot better about it. Uh, I'm telling you right now.

SPEAKER_02:

So, this is why it's so important in my mind to have somebody like yourself, right? The point man for this deal, somebody that I can go to build a relationship with, and then I don't have to worry about all these external things. You could tell me, hey, Jeremy, this is the guy you need to use, the attorney. This is the fractional CPA we're gonna bring in. These are great people. I've worked with them before, they have a great track record of success. Give me the peace of mind, right? I don't, as a business owner, I don't need to be out there having conversations and interviewing specific attorneys, specific uh fractional CPI. That's that's what you're there for, right, man?

SPEAKER_00:

Yeah. I mean, we've you know, we are battle tested, we're in the trenches on these deals, and we know how to get it to the to the closing table. So just follow us, listen to us. You know, you're paying us. So just you know, I you know, I want to work for my for my commission. So, you know, a lot of sellers just want to do the deal, you know, they they just want to take over the deal. That's their that's their you know, they have control. So, but you know, yeah, utilize your MA advisor on every angle, and and doesn't say you have to take my advice, but I'll give you my advice. You know, you make the decision. You've made millions of decisions over the course of a career. Um, so yeah, get the right team, get the right team together. That's very important to success.

SPEAKER_02:

Now, if I've reached a point where I'm selling a business for millions of dollars, chances are I have a team, wealth management team that that I'm working with, or at least an advice financial advisor that's that's been with me for a while. When it comes to the wealth advisor component to an MA deal, are you is that something I would think that I'd be good with the person I have in that in that situation to try to, or are you also bringing in people to your team to look at things through a different lens to try to uh leverage the sale in some positive way that could be outside the scope of the person that I'm already working with?

SPEAKER_00:

Yeah, I mean, listen, a lot of a lot of sellers have their financial advisors there and they're very happy. If we get a situation where they're kind of open-minded, then then I do have, you know, uh, you know, Morgan Stanley, uh Goldman Sachs, uh JP Morgan type people, uh, all you know, all the top firms that are that would love to, you know, strategize and tax plan. Um, a lot of sellers are concerned about the tax consequences at the end of a sale because capital gains is 20%. And there's a couple of points for the Obama healthcare um tax, you know, there's an additional tax. So you can be running, you know, 20, 23% on the sale of a business. So there's tax strategies where you can defer the defer the capital gains. Um, it's called a deferred sales trust. And I I like bringing it up because sometimes sellers say, I can't close on the deal because my taxes are too high. Well, if I could, you know, if I can get you all the money at the closing table and defer the tax and you can invest all that down payment money into an investment vehicle, then you know it could be worthwhile for you. So having tax strategies is important. Um, so we have people that uh that I refer that handle the the uh deferred sales trust, it's called. Uh, but if if you don't want to do that, you know, we can make references to many different financial advisors that would love to earn your business. Uh and and obviously it's a large sum of money. So, you know, make sure, especially in what's going on in the world today. I think unfortunately, uh things are evolving very, you know, you know, a hundred-year cycle coming to a close. We have a lot of unusual things happening in this in the you know, you got gold prices at all times high, silver prices all-time high, and you got the stock market all-time high. So you got a lot of things that are, you know, bubbles. You got a real estate market that's bubbles. Uh, so you got a lot of uh de-dollarization going on in the world right now. So you you better be aware that you know what was going on in the past 50 to 70 years, that was the norm, is now changing. Uh, I know this is kind of getting off track, uh, but this will probably age really well. Um, so uh, you know, I'm I'm I'm not a hundred percent certain I would want my money sitting in US bonds or the stock market right now. So you gotta, you know, you you know diversify, baby. Diversify if and I'll bring this something up. I think Stanley, uh um Morgan Stanley just changed the 6040 portfolio from 60 stocks, 40% bonds to 60 2020, which is now 20% gold. So that's a major gift of because every financial advisor is saying 6040, it is now 60 2020. And I think that's a a major red flag that's going on right now, in my opinion, that that we are heading into major headwinds uh as a as a country. Uh, hate to say it, um just tell me what I think and what I know and what I've studied. Um, so I think you a lot of business owners have to think alternative differently compared to what they've been thinking all their life right now. So that's that's why you have to have open-minded on who's your financial advisor, uh, because you don't want to be the exit liquidity of someone else's sale.

SPEAKER_02:

Yeah. All good stuff. So you're you're you're raising awareness, you're you're making me uh you're shining a light on some of these topics for me, and I appreciate the insights. Now I could uh I could leave this podcast and go diversify my my portfolio even further. Thank you, Russell. Yeah, yeah. Yeah, no problem. I want to send you a bill. What what do we miss here? So we got we got the MA advisor, um, we have the CPA, the attorney, wealth advisor. Are there any other components, any other outside parties to to the team, to the deal? Anything, any other final thoughts that you want to add?

SPEAKER_00:

Uh a lot of times uh business owners have business coaches along the way. Uh right. I mean, uh you got to this level maybe because you're a smart business person, but maybe there was a coach involved, and that coach has been with you every step of the way uh to help you grow. So have have the coach involved with the team, uh, just another smart person. Usually these coaches have been very successful business owners and and and you know, gray hair and been doing it for you know 35, 40 years in their 60s and 70s, you know. Uh, you know, they say wisdom doesn't begin until you're 35, and you're not an expert until you have about like like 35,000 hours in a career. So you know, surround yourself with people that have a lot of hours, and and I I think you'll get the right advice.

SPEAKER_02:

Yeah, the the gray is uh the the gray coming through are signs of wisdom.

SPEAKER_00:

Wisdom I noticed that over the time frame we've been doing this podcast is the gray coming in.

SPEAKER_02:

Yeah, the the the for me the wisdom lies in the fact that I I the more I the older I get, the more I realize how little I know about everything, right? Like I know what I know and I don't know what I don't know, and I'm very humble when it comes to that. And many times a lot of the things that I think I know, I'm actually wrong on. So I'm like really, really open-minded. I'm always interested to hear other others' perspectives because who knows, I could be wrong. That's right. Yeah, well, my daily dose of wisdom.

SPEAKER_00:

Can't know it all, but you pick a few topics where you want to know all.

SPEAKER_02:

If you're really good at that, yeah, yeah, I know that. All right, cool. Well, let's let's leave it at that. This was really insightful. Uh, everyone, thanks so much for tuning in. Uh, if you found this content useful, please don't forget to like, subscribe. Uh, if you've had your own uh foray into the sale of a business, like let us know some insights in the comments. Was there anything that we missed, anything that you'd like us to address, let us know about it, and we will pick it up on the next episode. Again, everyone, thanks for tuning in, and we will catch you all next time on the next episode of the South Florida M ⁇ A Advisors Podcast. Take care, have a great day. Thank you.

unknown:

All right.

SPEAKER_01:

Thanks for listening to the South Florida MA Advisors Podcast. For more information, visit South FloridaMA.com or contact 954 646 7651.