Constructing an Empire Piece by Piece: Asset Building for Big Exits

summary

In this episode, Jonathan Fodera and Jason Sisneros discuss the essential steps for business owners to prepare their businesses for sale. They explore the importance of understanding the assets needed to sell a business for top dollar, the significance of having a meticulous exit plan, and the role of small businesses in the economy. The conversation emphasizes the need for financial clarity, a strong management team, and the importance of knowing one's 'why' in business. They also offer guidance for business owners seeking help in building their businesses and preparing for a successful exit.

takeaways

• Business owners often lack a manual for running their businesses.
• Building assets is crucial for selling a business successfully.
• Understanding the 'why' behind your business is essential.
• Financial clarity is key to making informed business decisions.
• A strong management team is necessary for a business to be sellable.
• Small businesses play a vital role in the economy.
• Exit planning should be meticulous and tailored to individual needs.
• Business assessments can help identify areas for improvement.
• The relationship with customers is a critical asset.
• Reaching out for help is important for business owners

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Transcript

Jonathan Fodera (00:00)
Hey everybody and welcome to this episode of the Integrated Entrepreneur. I have my good friend Jason Cisneros on and today is the third part of this series where we discussed part one, what mistakes business owners are making and it makes their business unable to sell. Step two or part two, we went over what is the mindset you need to actually approach fixing your business and now Jason is going to take us through step three.

what assets you have to build to be able to sell your business for top dollar. So Jason, thank you for coming on and doing this Really appreciate you.

Jason Sisneros (00:33)
Anytime, I always enjoy hanging out with you. had a great conversation last time. So it's good getting to spend time with me and my wife down in Charleston too. It was great to see you. I always like to tell the story. How we met was him, donating to a child rescue, And as you heard from my wife, who's also on that rescue team.

Jonathan Fodera (00:41)
I was blessed.

Yeah.

Jason Sisneros (00:51)
The money that you guys put forward into that was genuinely appreciated. So thank you for

Jonathan Fodera (00:57)
Thank you for doing it, man. I think the majority of people are just waking up to that whole awful segment of society.

Jason Sisneros (01:04)
that's what we do in small business. we're an anomaly. if you're a small business owner or a midsize business, whatever size business owner you are, you're automatically attach yourself to a very small amount of humanity throughout history that are called merchants, And merchants throughout any society are the ones that are the

moving machinery behind any functioning, whether it's large or small or village or city or empire. Merchants are always at the core of that and the healthier merchant environment that exists, the better the countries are. We don't talk about it a lot, but that's who's watching. that that's who we hang out with. people who are merchants.

Jonathan Fodera (01:43)
Yeah.

Jason Sisneros (01:48)
That's our history, that's our lineage, that's our heritage.

Jonathan Fodera (01:51)
It's amazing how many of us, including myself, don't always get it right, right off the jump Cause when you open up your business, they don't give you the handbook and say, Hey, Jason, thanks for starting your corporation or your limited liability company. Here's your manual on how you need to run it to be able to sell it. We never get that. I didn't get mine in the mail.

Jason Sisneros (02:10)
the two most important things being a parent and owning a business, zero instruction manuals, zero intellectual tests, zero hardest things to do. The easiest things to screw up. we're not only messing up, messing our kids' lives up, but we're messing our financial lives up. There's no

Jonathan Fodera (02:13)
Yes.

Yep. And the hardest things to do.

by far.

Yeah.

Jason Sisneros (02:34)
there was no real manual on how to run a business. So, you know, had to write one for myself. I couldn't find it. And by the way, they wouldn't take me at Harvard or Yale or any of the other places. By the way, thank God, because a lot of those people, those graduates of those Wharton school business, all the big ones, they're my clients now. you know, something to be said.

Jonathan Fodera (02:38)
Yeah, it's true.

There you go.

Yeah, me either, by the way.

Yep. right.

Jason Sisneros (02:58)
Something to be said about being a street merchant.

Jonathan Fodera (03:02)
Experience matters. things that I mentioned on prior shows having SOPs for everything. Because if you can't replicate what you're doing, you're never gonna grow in scale. And if you can't replicate it

how are you going to bring on people? Every time you bring people on, you have to take time away from running your business to training and onboard. So SOPs is a very basic one. But what are some of these other assets that you have found that companies need to build out Because I think a lot of people that are gonna be listening to this want some form of a checklist.

they will be able to take our assessment, the Build to Exit assessment. Here, it's gonna be linked to this show and it's linked to the prior three parts. So guys, if you're listening and you wanna see how far along you are in the process, please take the test, and see how well you score out. However, I'll tell you, I have a pretty established business. I wasn't happy with my score, I got an 83 which is good, it's not great.

It's not what I would have expected being in the game for, this is my fourth year in business with this company, but I've been an entrepreneur for the last 12 years. So let's go through some of those assets.

Jason Sisneros (04:06)
the idea of an asset, it's a little bit different way to look at things.

So if you're going to build assets, you got to look at, use the example of, know, I like watches, So they make this watch. It's called a Patek Philippe grand master chime. Great watch. $31 million. Got a lot of moving parts and pieces, they only made seven of them and six of them sold.

before the watch was ever even done. Took five, six years to build these things out. had all the experts Each moving part had a purpose to it, They call them complications in, in watchmaking, In horological terms. each one of those, was built by a specialist And

that specialist then linked it and handed off that baton to the next person. And so as a business owner, what we get told is because we've somehow been able to string together This ability to be able to bring in enough money, And so we call ourselves business owners.

I'm going to come back to answering your question, the first concept of the wisest business owner is to realize everybody exits. It's our tagline at built to exit That means that whether failure or exiting or

transferring handing it to your kids. we don't take it with us. when you understand what you want to to hand off you start to look at it in terms of an asset. I want to hand that asset to somebody else in such a way that they're going to want to purchase it or handing it to my family. It's going to help them accelerate into their own life.

So I have found there's about 80 assets that need to be built and sequentially linked to each other, depending on two things. Number one, where is the business owner today and where are they going? here's one of the things that people out there get completely wrong is

Everybody's end game is the same. it's not. It's as unique as the eight billion people that are on this earth. But most business owners aren't taught. Hey, why are you building this asset? Why are you building your watch? Is it to sell it for $31 million? Is it to sell it before it gets sold? Do you need a specialist in each part? Do you need all 80 working pieces or do you only need 12 of them to be able to get to a $5 million sale? Are you trying to get to a $7 million sale? Why do you need $7 million?

Why do you need five million dollars? Could you do it with two? That's where a lot of the business owners don't start in the right place. What assets do I have? Where am I? Which is the assessment that you talked about It used to be 50,000 bucks to be able to get that assessment. Now it's free. We use that for our million dollar upside clients for years and now it's free.

to do the assessment tells you kind of where you are. Now, the next conversation would be with Jonathan or somebody on the team to say, here's where I actually want to go. And then you've established a Delta, right? Here's the start. Here's the finish. Now we can figure out how many of those assets do we need to string together to be able to reach your exit? So important that those things are understood.

Jonathan Fodera (07:07)
to get there.

Jason Sisneros (07:13)
Now we can have a really intellectual conversation to say, okay, you want to put $3 million in the bank because that'll pay off X amount of debt, $2 million in the bank spinning off 10%. That's $200,000 that I never have to get up and walk out the door with. I have a car that's paid off, a house that's paid off. Now we've got something that's emotionally attached. It's not just going to work tomorrow because that's the way that it works.

That is not professional. That is not an architect thinking 90 % of businesses don't see their 10th birthday because of that kind of thinking. There's no forethought. There's no. Strategie to it. Right. I don't know if that's even a word, strategic. We'll make it but the assets to your point, I told you I'd come back to it. The assets are in four areas.

Jonathan Fodera (07:51)
not, we'll make it one. Yeah.

Jason Sisneros (07:59)
if you're going to build something that somebody else wants to acquire, here's what they're going to care about, whether they're a first time business buyer, whether they're amongst this group of people who are now all of a sudden acquisition experts because they read a book or went through a course or right, or they're professional buyers. here's, if you're watching this, the

Jonathan Fodera (08:16)
There's a lot of those.

Jason Sisneros (08:21)
what I did, I made the mistake. Number one, I had what's called an involuntary exit three times in a row. Bam, bam, bam. Involuntary exit means means I failed. All three of those businesses failed in succession to each other. Well, then I came back, I figured out a few things and then I was like, I'm going to sell this business. And I ran into somebody who knew what they were doing and I didn't know what I was doing. And so that person dictated to me how much money I was going to get.

when I was going to get it, how much longer I needed to work with that company and, all of the aspects I was not in any control, none. So I got paid probably half of what it was worth and it took me three years to get final payment on the thing. So that's a dictated exit. Now the third type, which is what you and I specialize in is called a custom tailored exit. And it, it's everything this, this jacket, it's everything that the title says.

Custom tailored to who? has to be custom tailored to you or else who else are going to fit? There's only one you, doing whatever it is that you do. So your exit is going to be custom tailored to say, what, where do you want to go? And then we break that back down.

And we say, okay, what are the assets in these four areas? Number one, if somebody is going to buy your business, the most sophisticated buyers on the planet or somebody called a private equity firm, most private equity firms know exactly what they're doing. They're hyper professional. That's why they've got the best returns

because they know what they're doing and they know how to invest in good assets. that's what you should prepare for the best, most educated buyer, because it unlocks the door for you to be able to be in control of how much money and the timing for everybody in that stack up to the very smartest buyer And the four areas you need to build assets. Number one is relationship to your customer because

they're buying the future, you're selling the past. And so you've got to have an, a rock solid relationship with your customer, which is a series of about 12 different assets that you build, referral programs, customer service systems. Do you have subscription products that you can put out with your customers? Do you have one time? How concentrated is your, your customer base

is 70 % of your business tied up with two customers. Now we have to diversify. There's all kinds of things that you do, but in that area, the relationship to customer has, a good 40 assets that can be built out to the most sophisticated level. But most only need about 12 because most businesses are trying to sell between five and 30 million. very few are trying to go for the hundred million,

the point is, is that you're trying to sell somewhere, let's say five even, 5 million to 30 million. You don't need all of those assets, but you do need the assets that are necessary to be well-built and crystal clear so that they're repetitive.

when somebody comes in and buys the business. that's one. So your relationship to your customer, number two, financial clarity, your gap approved books, Being on accrual. A lot of companies they're on cash accounting. They don't understand why accrual doesn't matter. All you gotta do is go to the, to, to the Dow and see if any of those, are they on cash accounting? No, they're not. That means my business needs to be on accrual.

so you get your, books in place if you remember this kind of concept when you're talking about your finances is your business speaks.

numbers. It's its language. if you go to China, you want to speak Chinese or have an interpreter, That's the problem with most of us as business owners. If we have interpreters that don't actually understand the language of business. So they're bad interpreters. They give us bad tax advice. They're not really doing anything except for, you know, preparing a report for the government, trying to tell them that you've done this bad as you possibly can. There's not usefulness in those numbers.

Jonathan Fodera (11:57)
Yeah.

Jason Sisneros (12:12)
Now, when you get your books ready and you're prepared and you understand finances and they're clear, this is how your business speaks to you. Do I do more of that? Do I do less of that? Do I fire this person? Do I hire this person? It's speaking to you. And when you understand that language it tells you, is it, better to invest in you or to buy somebody that's your competitor or somebody down the road?

You always want the answer to be, should buy me financial clarity and having those books in line is, the second piece. Now, the third piece is a management team. If, as long as it's necessary for you to be involved in your business, you don't have anything to sell. Stop end of story,

The only thing you can do is rent out your time to somebody that may want to buy your business for some reason. But, at the end of the day, until you build a management team that does not require your presence you really do not have an asset to sell. You have a job to give to somebody else. but it's really important that you build systems processes and a management team.

so that it can operate without you. And what that demonstrates is to a private equity firm who may have their own management team is to say, all I gotta do is replace your management team with my management team. All I have to do is plug and play, right? So these are the assets that you focus on. the fourth piece, which is really, really important where you need to have professional help, somebody like me or Jonathan to help you is a meticulous exit plan.

This is a meticulous exit plan that ties together those three aspects. How many of the assets need to be built? How do they need to be linked together? Isn't an 18 month build out? Is it a 36 month build out? Can we get this done in six months or less? it takes a meticulous exit plan so that we understand fully

where we are on the asset side, where we are on the, sale side, and then the assets needed to be able to bridge that gap to your expectation and your assets, SOPs, really great example of what an asset is. It's just a repetitive behavior, how they all link together. Where is that stored? It's like the formula to Coca-Cola, It's locked up for a reason because sequentially putting these things together.

created a multi billion, dollar business called Coca-Cola. Do you think you should have a formula for your business? And that's all an asset is. It's the formula. Why does this shit work? it's in a lock box, right? now I give it to somebody and you go, here's the formula and you're going to make $250,000. You're going to make a million. You're going to make 5 million. You're going to make 10 million. I'm just

Jonathan Fodera (14:30)
Yeah.

Jason Sisneros (14:43)
getting out of the game, I'm going to take mine off the table and you're, you're going to keep doing, doing what you do. Right. So does that answer the question in a really, really long way?

Jonathan Fodera (14:49)
100%.

It actually answered it

in the perfect way, right? Because let's talk about the first thing you said, what is the why, right? You have to find out the why before you find out everything else. But why does the why matter? Because what we're doing is hard. It's not easy. There's no, there's the only easy day was yesterday, right? When you're in business, it's always a battle. So if you don't have the why, you can't get through the process. And then a couple of the other things like when we sat down and spoke, one of the first thing I said is I have no desire to sell my business. I enjoy what I do. I love what I do.

Jason Sisneros (15:02)
Amen.

Jonathan Fodera (15:22)
But you know what, you are right. I should build it so if I don't want to come in one day or two days or two months, it doesn't make a difference. And that was a light bulb moment for me because, I know what I'm capable of. I know what the business is capable of. But the two are not intertwined right now. And if I can make those two mesh perfectly,

I have a much more valuable asset. Plus, I'll probably have a much, I don't want to say much different lifestyle because my lifestyle is pretty awesome right now. However, maybe some more options would open up for me if that. And that stuff matters, right? Think about the person. Like for me, family is everything. So I know I work 60, 70 hours a week. If I can reduce that, my main goal is to reduce that down to let's say a manageable 40 or 50.

Jason Sisneros (15:57)
Yeah.

Jonathan Fodera (16:07)
Well, if I can do that in the next three, four months, how much better does that make my life? Because those extra hours, they're going to be spent with my kids. don't think you could ever put a price tag on that.

Jason Sisneros (16:17)
There's a lot of lies we tell each other, or, you know, not tell each other, but we tell ourselves most importantly, as business owners is someday it's going to get better. It's one of the biggest lies brother. Like unless you plan for it to be better, if you plan for it to be different though. so there's the lies that we tell each other or tell ourselves. And then there's the lie that we tell ourselves to justify how

Jonathan Fodera (16:23)
Mm-hmm.

Yeah.

Yeah.

Jason Sisneros (16:39)
much time we're actually dedicating to this thing called an asset and, how much the people around us suffer by our absence. And, and we, we tell ourselves these sweet little lies that I'm doing this for my family. Well, if you were, you'd do it correctly, right? If you were, you do it in a place where, because you and I, and I know this because we've hung out enough together. We think we're invincible, but what happens if we, if, for some reason we get hit by a bus,

Jonathan Fodera (17:03)
Yeah, no kidding.

Jason Sisneros (17:07)
What happens tomorrow when you and I are extricated out of our kids' and our wives' lives? What happens? You know, how do they take care of themselves? What kind of tax liability are we leaving them in? What kind of responsibilities are we leaving by? we have to take care of that stuff and we don't do it. We're just like, tomorrow's gonna be like it was yesterday.

and we lie to ourselves, and we end up not being good stewards of our family.

Jonathan Fodera (17:35)
Yeah. Or what we do is we take minor wins and say, improvements is on the way or it's getting better. And it really didn't improve.

Jason Sisneros (17:42)
Or the fact that you're in business.

Yeah. And the fact that you're in business today, like, you know, I get this a lot. Well, Jason, you know, I see all these people on Instagram and you know, they're flying jets and they're lit. You know, yes, I know a lot of them and yes, I, call me to help them make their payments a lot. but, but at the end of the day, most businesses, if you think about the failure rate, this is not a judgment call. This is not me being a jerk. It's simple mathematics.

If 90 % of companies are not going to see their 10th birthday, how many of the businesses that exist right now are simply walking dead businesses? They just haven't run out of cash yet, right? They just haven't run into the, the, the end result of the decisions they're making today. We know that if 10 % of companies are going to, are going to succeed long-term, those are the assets that I want to model. That's the journey that I want to go.

That's the blueprint. That's the map. And that's what I figured out in my life was how to stack enough of those together to where my exit in 2019 was very custom tailored to me. I controlled every aspect of the, of the deal from when I got paid, how much I got paid, what my multiples were, uh, what, what they needed for me. If there was any time I wanted to get paid and walk away end of sentence. And I controlled that, that transaction because of what I know.

And how, how I was able to stack that together, you know, you you know what I've done with my time. I rescue kids. do domestic violence. We do like, do a bunch of cool stuff and now we're building out B2X because, built to exit because there's a lot of businesses that need our help right now. And that's why we exist. That's why you and I partnered up and Jethro and Jeff and you know, all the other people that are on the team. why we partnered up is so that we could help our small and mid-size cause we both are, are.

recipients of a system of small and midsize companies being handed down and the opportunity brought forward for thousands and thousands of years to land on on UNI's pocket and choice deal. Cause I know, I know you don't come from the right bloodline and I know I don't come from the right bloodline. And if it wasn't for this thing called business, we would be screwed. We'd be working for somebody else or in prison or

you know, having to beg the government for our money. Thank God for small businesses.

Jonathan Fodera (20:04)
Yep,

It's the only way to have control. It's only way to have control and freedom. I truly believe that. And when you help a business owner, you're not just helping them, right? You're helping their employees, their family, their employees' families, and the community they serve. And that is why we do what we do.

Jason Sisneros (20:07)
Amen.

Yep. So true. Amen.

the community, the tax base,

know, the making sure that no, you know, that these, these, these giant multinational corporations don't take over the world. Like we're, we're so necessary right now. I wish people would understand that we're small and midsize companies. The one that got called non-essential, during, know, during that, that BS, global attempted takeover that, that that was a big shot at us going.

That's decentralized finance. That's decentralized finance means decentralized choice-making. Decentralized choice-making means that you can't consolidate power in the pockets or the decision-making of too few. We are so necessary that we're waking up to that. And that's really why the impetus behind Built to Exit, make sure everybody stays free financially.

Jonathan Fodera (21:07)
Absolutely.

Because think about what's happening. Take a company like BlackRock, not to go off topic. How much do they own? Think about that. How much do they control? The vast majority of people, if you ask them who BlackRock is, they have no idea. But Larry Fink is probably one of the top five most powerful people on the planet. Why? Because he has 10 trillion under management. There's only two countries.

Jason Sisneros (21:13)
Yeah, it's right on top.

Jonathan Fodera (21:34)
Okay, the US and China that have more in GDP, right? And people don't understand that. So the only way to combat that, the only way to fight that, the only way to continue to have freedom is to support small businesses because they are the ones that make up the majority of the GDP. And what's going to happen is so many business owners are not aware that they are one or two things away from going out of business. It could be a change in technology.

It could be a costly mistake. could be not being set up properly. Right? So every single business on this planet or definitely in our country, everyone needs a little bit of help. Everyone needs a little bit of guidance. So what would you say to those people that are listening that need a little bit of help and a little bit of guidance?

Jason Sisneros (22:17)
Yeah. Reach out, you know, reach out. It's a built to exit.biz. you know, reach out through, through Jonathan, he and I are partnered up in multiple ways at this point in time. So doing business with him, you're doing business with me, you're doing business with me, you're doing business with him. We're helping people get money. We're helping them get the right kind of money. We're helping them, you know, structure those assets out. We do a lot of the pre-planning. we can help you get your business prepared to, be bought.

we can help you go back to the drawing board to make sure that you're starting to build out your asset, to be acquired someday. Even if you don't want to today, we can do all of that. Just reach out, through built to exit.biz, do the assessment. you know, those are, those are the easiest things I got Jason Cisneros.com. You've got your website. We just reach out to one of us and you're going to get some help pretty easy to get hold of. don't hide.

Jonathan Fodera (23:05)
We're pretty easy to get a hold of. Yeah, pretty easy to find.

We're not hiding anywhere. All right, awesome, man. Well, hey, brother, I appreciate this so much. I know this is gonna help a ton of people. And guys, listen, please, please take us up on it. That assessment is absolutely free. It's gonna be on the bottom of this and the other two episodes that we went and discussed some of the problems that entrepreneurs are facing.

Jason Sisneros (23:12)
Yep, that's right.

Jonathan Fodera (23:30)
how to have the right mindset to fix them. And now we discussed what assets need to be and how you can have your own custom tailored exit. So Jason, thank you so much.

Jason Sisneros (23:41)
Love you, brother.

Jonathan Fodera (23:41)
Love you too.