How Was I Supposed To Know That?
How Was I Supposed to Know That? is a business podcast hosted by Bernard A. Williams that helps entrepreneurs and business leaders avoid costly mistakes by learning from experienced professionals. Each episode explores legal, financial, operational, and growth-related topics through candid conversations, practical advice, and real-world lessons that every business owner wishes they had known sooner.
How Was I Supposed To Know That?
The Quiet Work That Maximizes Your Exit Value
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Ready to sell your business without leaving money on the table or inviting a post-closing headache? We break down due diligence in plain English and show how early preparation turns chaos into clarity, protects your price, and shortens the path to a clean exit. With partner and M&A attorney John Thielen from Company Counsel, we dig into what buyers actually look for, how documents get reviewed, and why the right systems can raise your valuation.
We start by defining due diligence beyond buzzwords: the structured exchange of financials, contracts, leases, corporate records, and proof your operations work without you. John explains how letters of intent set the stage, why LOIs are mostly nonbinding but still shape exclusivity and expectations, and how diligence windows typically run 30 to 45 days. We explore deal mechanics like purchase price adjustments tied to findings, escrow holdbacks, and the hidden friction of third-party consents such as landlord approvals and contract assignments.
From there, we map a prep plan owners can follow months or even years in advance. Build a central repository for everything: formation documents, cap tables, tax returns, client and vendor contracts, employment and contractor agreements, IP assignments, SOPs, and HR policies. Document how work gets done, from onboarding to delivery to invoicing, so buyers see a transferable machine rather than a founder-dependent practice. We also tackle the myth that skipping diligence saves time. In reality, poor prep invites delays, lower offers, and expensive litigation later.
Whether you are eyeing an exit in two years or two months, this playbook helps you organize, disclose, and negotiate with confidence. If you want to pressure-test your readiness, set up a legal audit and get your checklist moving now. Subscribe for more owner-first conversations, share this with a founder who’s thinking about selling, and leave a review to tell us what part of the exit process worries you most.
Welcome And Episode Focus
SPEAKER_01Hello and welcome to How is I supposed to know that? This is a podcast designed to give entrepreneurs a space to talk about the joys and pains of growing, running, and scaling a small business. I and today I'm very privileged to have with us uh someone on my very own team from Company Council, my my partner and colleague, John Thielen. Uh welcome, John. Thank you, very much. Good to be here. Uh great
John’s Role And M&A Background
SPEAKER_01to have you here. And we are going to be talking about the MA stage of business. Uh the that part of business ownership where you've decided to sell and you're you're you're ready to exit, and uh and you've got a uh a buyer at the table, uh, and they start talking about due diligence. Uh and you've never heard of due diligence before. So uh so so you're you you've hit an obstacle. Uh so prior to any of our listeners getting to that point, we want to demystify due diligence and talk a little bit about how to prepare. So, John, I want to thank you for being here. Why don't we get started by sharing a little bit about you and uh and and and what do you do at company counsel?
SPEAKER_00Yeah, sure, great. So um again, I'm John Thielen. I am a partner with company council. So Bernard and I are are partners and uh been with Company Council since its inception, which was uh coming up on our 10th year anniversary. So my role as a partner and attorney at Company Council is uh I oversee a lot of the work product that goes out. I deal with a lot of the client uh relationships. I help to develop a lot of new business for the firm. Um, but I definitely have a specialty as it relates to to MA. So uh really like to work with our clients that are looking to sell their business or the flip side of that, we have a lot of clients who who are looking to you know to buy that are entrepreneurs that are looking to do something different. So uh that's a big part of my practice and um what we're talking about today, and and that's a big focus of mine. So uh yeah, I love love being with company council, love the culture, and excited to be here and and uh provide some more information today.
SPEAKER_01Okay, well, check is already the mail, but but but thank you. Um so uh see you mentioned that you love MA mergers and acquisitions, uh, and uh and I happen to know that that's one of the things that uh that that really does seem to have to drive you. Uh but I'm wondering if you can maybe elaborate on that. What's the what is it about MA and about representing clients to that process that that
Why Exits Matter To Owners
SPEAKER_01really makes you feel passionate?
SPEAKER_00Sure. So I think the biggest thing is especially sell side transactions, is you know, it's it's an a business owner's baby, right? They've been they've been building the business a lot of times for 30, 40 years, um, sometimes even longer if it's a a family business. So they, you know, they they really have gotten value from that business for their whole lifetimes. It's it's their life's work, and they want to make sure that everything is being taken care of to pass that business on and exit successfully, whatever that looks like. So that could be, you know, it could be selling to a longtime employee, it could be to pass it along to their children, could be to to sell to an outside third party, or it could just be to to retire and and get some sort of payout and and ride off into the sunset. So I I think it's um it's it's great to see that, you know, dealing with a seller who's really built up their life's work and is ready to sell and and wants to just make sure that it's it's done the right way, that they get the value that they're they're looking for, and that uh you know it's it's gonna be handled properly going forward. So those are those are really valuable clients that we get to work with.
SPEAKER_01So it it sounds like you know, I'm visiting people writing off into the sunset and that that happy ending, that
When Deals Go Sideways
SPEAKER_01that happy exit. Yeah. Um does it always go that way? Or uh it's kind of the leading question. Well, I knew that it doesn't, but it does not.
SPEAKER_00Yeah, it definitely doesn't always go that way. Um we we try to get involved early on as attorneys to to increase the likelihood that it does go that way, but the reality is things can can always happen and things can fall apart. And there's a lot of pitfalls that both depending on if you're buyer or seller, that that you should watch out for and that that are common. That again, there's things that can be done from a legal perspective and working with an attorney or attorney early on to minimize that risk. But the reality is, you know, things can go south and it can it can be costly if if you don't do things the right way. So that's one of the reasons it's it's really important to have your ducks in a row early on. Um start thinking about your sale years before it's gonna happen. I mean, the best time to really think about it is is now because there's there's certain things you can do to to put those ducks in a row and and um prepare your documentation and and think about those things before before you're ready to sell. And um, again, that can really mitigate that risk of of things going south.
SPEAKER_01So uh so I want to unpack that a little bit. Yeah. Um first of all, what's the worst that can happen? I mean, I mean you're you're talking about preparing years in advance, which a lot of people might might think sounds unreasonable. You know, how can you possibly know years in advance, what offers you have available or what opportunities there could be. Right. And uh and and anyway, uh so the deal doesn't close. You know, what uh uh the big deal you move on, right? Uh what what's what's the big deal?
Defining Due Diligence
SPEAKER_00Yeah, it's it's a fair question. So a lot of times the the worst that can happen is it's it's worse than the deal doesn't close, right? What the really the worst case scenarios that we see are uh maybe a deal does close, but then something comes up post-closing, that's that's a big issue for the buyer or the seller, right? So we do have a lot of deals that a letter of intent is signed and if you know the parties are on the same page and some of the documents get put in place, but then things fall apart, you know, towards towards the end or or during during the due diligence process. And most of the times when that happens, it's it's not a huge deal. You know, sometimes there's a maybe a deposit that's non-refundable, or um, you know, some some other some other things that that could happen at that stage, but really the the worst case scenarios are everything's been been going well, and then something happens post-closing. So uh something something could happen post-closing, and then the seller who sold the business and they thought they were done with it are pulled back into the business because of a lawsuit that comes up years down the rock years down the line because they didn't disclose something during due diligence, or there was a misrepresentation or or something of that nature. So those are kind of the the lingering issues that can that can be the big ones that um sellers especially really want to avoid.
SPEAKER_01Um so there can be issues that linger after the sale that wind up causing legal and financial consequences to the seller. Right. Um now isn't that what the agreements form? Isn't that what the lawyer is supposed to do when they write the agreement? Aren't they supposed to insulate the seller from any lingering consequences?
SPEAKER_00It's definitely a big part of it, sure. And and that's a a reason why both sides should should have counsel, buyer and seller should both have independent counsel to help them, you know, review the documents, make sure their best interests are protected. But the reality is that you know attorneys are assisting with the legal documents for the most part. They're they're they're drafting the documents, they're reviewing the documents, they're they're pointing out things that the their client might not be aware of, but there's still things that that the business owner themselves is going to have to do and that they might not that they might know that you know their attorney might not know or others might not know. So that's why it's really important to have those conversations
How Diligence Shapes Price
SPEAKER_00with the attorney. You know, the client needs to be transparent so that the attorney can properly advise them. And um that's why it's it's really important to have kind of a custom agreement, and that kind of goes into that that sale agreement. Why it's so important is because the all the customizations that go into that are um ultimately to to protect the the party, right?
SPEAKER_01So um so there's certainly a rule for that sales agreement, and you want to pay attention to the agreement. Yeah. Um uh what I'd like to focus on today uh is the the period that precedes the agreement. Uh the due diligence period. Yeah. So uh so let's start with definitions. Um due diligence. I mean, people use it they can throw the term around, but I'm not sure there's really a universal definition of or is w how do you think that's I don't think there is.
SPEAKER_00I mean, typically what it refers to is the the time, the period of time where the buyer and seller are exchanging documents, right? So um a lot of times that's early on before a letter of intent is signed. Sometimes documents are exchanged after a letter of intent is signed while that purchase agreement's being drafted, or or even sometimes after the purchase agreement is is signed. But it it's basically the process of exchanging documents um and and really turning over your your the the insides of your of your business to the other parties so that they can they can inspect it and see what they're getting themselves into. So that could be reviewing you know formation and governance documents for the for the business. It could be reviewing contracts, uh leases, client agreements, uh things of that nature that are ultimately gonna be transferred probably from the seller to the to the buyer. Those are things that that happen during due diligence. Um financials certainly are a big part of it. So buyers gonna want to see sellers' financials, they're gonna want to see tax returns to make sure that what they think they're buying is is what they're actually buying. So all of that is is kind of encompassed in in due diligence and and both sides really have a role in due diligence. I mean, from the from the seller side, again, you want to make sure you've got your ducks
Can You Skip Diligence
SPEAKER_00in a row so that you're providing you know the best side of your business, but also not hiding anything when you provide it to the buyer. And then from the buy side, you want to make sure that you're reviewing everything thoroughly with counsel to really understand what you're buying, and and those sorts of things can affect the purchase price ultimately.
SPEAKER_01So um tell me more about that. How does due diligence impact the purchase price?
SPEAKER_00So depending on the way the the letter of intent is drafted and the the purchase agreement is drafted, there can be adjustments to the purchase price based on what comes out during due diligence, for example. So most commonly there will be there's an initial offer, right? The parties will will come together often through a business broker or um or or organically, but uh there's gonna be an asking price for the business, and then there's there's gonna be that that offer price. And usually the the parties have an agreement on price when by the time a letter of intent is signed. But usually there's gonna be some contingencies in there that if certain things come out during due diligence or are revealed in the financials, uh that that that purchase price could be subject to to adjustment at that party's discretion. So, for example, if if the buyer only has a limited view of of the financials and then they find out during due diligence that you know that the seller hasn't paid their taxes in 10 years, right? Um, they're probably not gonna want to pay this the same price that they they had offered initially for that business. They're gonna want to make sure those taxes are either paid off prior to closing or that you know the purchase price is adjusted accordingly. So so it can it can sometimes have an effect in that way.
unknownOkay.
SPEAKER_01Uh so um so the seller's got their role in due diligence.
Preparing Years In Advance
SPEAKER_01Uh they uh they're the ones providing information. Uh the buyer has their role in due diligence or the ones asking for the information and processing all of it to make sure that the deal is that fair.
SPEAKER_00That's that's fair. Yep. And then attorneys obviously have a role, and sometimes accountants have a role and financial advisors. So there's there's other professionals that are that are typically involved as well. Yeah.
SPEAKER_01Uh it it so if if if I'm new to this process and I'm hearing all this for the first time, uh, I'm listening to you describe this, and I'm just seeing dollar signs, uh right. All these everybody's got an accountant, everybody's got uh an attorney and other professionals and all these document exchanges. I mean, can't you just skip it? Like, can you like couldn't there just be a waiver of due diligence and everybody just move on? Like why the Laura evolved and and drag things out and make things more expensive and time consumer.
SPEAKER_00Yeah, I suppose there could be if if both parties agree. I mean, usually that's gonna all the time. Right, right. It's it's typically gonna cost them, you know, we we like to say that it's it's gonna cost them more in the long run if if that happens, right? So certainly attorneys cost money, uh other professionals cost money, but um, again, if if you do it the right way and hire the right professionals and and and everything's done correctly, then it it it in theory, you should be paying that money up front to those professionals. And then again, that that not only gives you peace of mind, but hopefully saves you that money in the long run. Where it can be costly is we do see individuals that are that'll deal directly without involving those other professionals and they'll skip due diligence or glaze over parts of the process, right? And again, that's where there's an increased likelihood that something's gonna go wrong in the future, and that's when you're looking at litigation, and litigation can can be very costly and time consuming, and and you're gonna have to probably hire an attorney at that point anyway. So um that's why
What To Document And Organize
SPEAKER_00again it is an investment to involve those those professionals, but I think it's uh it's really valuable and and especially if if it's your business again that you've been been running and and building for years, you wanna um you want to pay a little bit of money to make sure it's done right. I also think there's yeah, one thing I'll add is I I I think there's sometimes a misconception that attorneys can you know make the process more costly and time consuming, but kind of for the reasons I mentioned, they they could save save you money in the long run. And then um, you know, I have seen it where one of the parties doesn't have an attorney, and and that can sometimes slow things down because you know, not to blame them, but they're not familiar with the process, right? They don't they don't do this all the time. So if if attorneys are involved in both sides, it it can actually help make things go a lot smoother and and quicker a lot of times.
SPEAKER_01So let's let's say that I've been running my I'm I'm a business owner, I've been running my company for for for decades. Uh I know it inside and out. Uh I know that I don't have any uh I pay my taxes, I don't have any debt, uh, I know I don't have any lawsuits or liabilities. Um for someone like me with a squeaky clean record. I mean can I maybe bypass due diligence or uh you know, get get get an easy pass through through through the process?
SPEAKER_00Yeah, you could you could get closer to an easy pass, but you still gotta you still gotta go through it. So yeah, having having you know an owner that is familiar with all those things and stays up to date with records and filings and everything is is is great. And it makes the process go a lot smoother. And um, and those are the ones that are are probably gonna get a better value for their business because they don't have to to go back later and clean things up and um discover and scramble at the last minute. So that's why it's really important again to start thinking about it early
When To Call An Attorney
SPEAKER_00on. So while you're running your business, make sure you're filing your reports, make sure you're doing the taxes, make sure you you document everything and and keep a database of those documents, right? That's that's another issue, is people don't know where where documents are located. So um that that can cause a lot of scrambling during the due diligence period if if if you're not sure where documents are and you have to go obtain a copy from the county or or the city or or whatever the case may be. So it's always a good idea during due diligence, but but even better before to have a central central repository of of documents and and have it broken out into folders.
SPEAKER_01So let's talk more about that before due diligence spirit. Um obviously the title of this this episode today is preparing for due diligence, yeah, which suggests that there is something that that that maybe can and should be done uh prior to due diligence started. Um earlier in the conversation you referenced uh started to plan years in events. Uh if I'm that same business owner uh who knows that his stuff is freaky clean and you know doesn't have any liabilities that he's aware of, yeah. Um what should I be uh doing now to prepare for sale years now?
SPEAKER_00Sure. So doing kind of a legal audit of of your legal documents and and contracts is is important. So, and and that's where an attorney can can obviously help you think through what those documents are that you should be looking for, but making sure that you've got your formation documents and that they're they're up to date for the business, right? A lot of times we talk to business owners who are looking to sell, and it's like some you know blurry faxed version of their certificate of an incorporation from the 80s, and uh, and then we got to get a new copy. And and those aren't big deals, but um, but it's it's things like that where if you can make sure you've got those documents in place now, um your contracts again, making sure like you have contracts for for every client you're dealing with and all your employees, and that they're um they're they're up to date, like reviewing those things on an annual basis is is really important. I think even beyond the the legal side of it is is also just documenting processes,
LOI To Closing Timeline
SPEAKER_00right? So uh a good rule of thumb is prioritize the processes that you use kind of the most often in your business, and that if once you leave the business, once you're no longer the owner, that you could hand over and that person would be able to follow that process and the new owner can can can step right in and it's a seamless transition, right? I think a lot of times, especially where it's one owner who's owned the business for a long time, they know how to do everything. And and you know that that can be that can be great, but the issue is then no one else knows how to do what they're doing. And if it's if it's not documented, then when you ultimately go to sell, that's when again, issues can arise because the new owner is not going to be able to do things that they were always done. So that's another thing you can do is just document processes, um, keep them in that central repository, make sure it's staff's aware of them and and where to access them, those those types of things.
SPEAKER_01And these are things that would be requested during due diligence, the the those processes and those those SOPs.
SPEAKER_00They they could be, yes. Yeah. Certainly contracts will be will be um accessed during due diligence. And then, yeah, internal processes, um, you know, onboarding employees, offboarding employees, things of that nature, you would, you would typically want to see during due diligence. And a lot of times people don't have those things documented, right? So if you can document those important processes and make sure they're accessible and and followed by everyone in the organization, then then that's going to save a lot of headache down the line.
SPEAKER_01So um so obviously we all know that you're a business attorney, you talked about your focus on on MA. Um, at what point in the life cycle, if I'm thinking about MA, if I'm thinking about an uh an exit maybe two or three years from now, at what point should I pick up the phone and give you a call? And I know you're gonna say sooner or rather than later. But uh but
Complexity And Deal Timing
SPEAKER_01I want you to defend it. And I want you to be specific about um about what you would actually be doing. Uh if if I'm trying to sell three years from now, is there really anything for us to be talking about now? Or is it more heads up about what's gonna happen down the route?
SPEAKER_00Yeah, it could be a little bit of both. So I think that the second you start to to think about selling is a good time to reach out to an attorney and kind of do that that legal audit of sorts, right? So we've got checklists that we use at company council. We we have strategy sessions with clients all the time to to go through those types of issues. So that's something you can you can do at any stage. You don't have to be necessarily ready to sell or months away from selling. You can you could just be running your business and determine it's a good time for a for a legal audit. And that's that's gonna be a really valuable exercise now. Um, more specifically than that, typically when if again, if you're the seller, um when you're when you're thinking about listing the the business for sale would be a good time to to engage an attorney. So the attorney's typically not gonna be the one that actually lists the business for sale and finds the buyer. That's usually uh, again, something a business broker might do or you might do organically. But uh that's really the stage where you want to start having that conversation about okay, what's the next step in the process?
Wins, War Stories, Lessons
SPEAKER_00And and usually that is a letter of intent of sorts to um to to get that in place. So I think that's really kind of that that crucial moment of of when to really engage an attorney seriously.
SPEAKER_01So uh sooner rather than later, but but no later than the letter of intent stage.
SPEAKER_00Correct.
SPEAKER_01Yep. Uh and how long is the what happens during the letter of intent stage and and what and how long does that stage typically last?
SPEAKER_00It can vary. Uh the letter of intent stage, typically what it is is one of the sides will present the other. Typically the buyer will present the seller with a letter of intent to purchase, right? And that'll contain some of the high-level terms regarding the proposed purchase. So purchase price, how that how that's gonna be paid, um, what the anticipated closing date might be, maybe certain reps and warranties are in that that letter of intent. Um, so that's usually gonna come from buyer to seller. Sometimes seller ideally will want to review that with their attorney, make sure it's it's it's good to go, that they're comfortable signing. Sometimes there's some negotiation back and forth, but ultimately it's gonna get to a point where where that's signed, and then the parties are are are bound to an extent. Um, letters of intent can they're they're typically non-binding, or most of the terms are non-binding until a formal agreement is reached. But um, but that's kind of when you start to have more of an exclusivity between the parties. And uh again, that that that timeline could vary, but I would say by the time usually when a letter of intent is is presented to the time it's ultimately signed, maybe two two weeks to a month, depending on again, you would hopefully the parties have had a conversation at that point already about about the purchase price, because if they're far apart in the purchase price, then obviously the deal could either fall apart or or it's gonna take a little bit longer to get that signed.
Parting Advice And Contact
SPEAKER_01And um so once the the LOI is signed, uh what happens next?
SPEAKER_00Yeah, so that's when you're gonna turn your attention to to do start to do some due diligence, right? So some might have already been conducted, financials to an extent might have already been produced to kind of get an idea on the purchase price, but due diligence is gonna start um and a formal purchase agreement is is really gonna be the binding document, right? So that's gonna be something where one of the side's attorneys will take the lead on drafting like the formal purchase or sale agreement. And um, again, due diligence is is gonna be happening a lot of time simultaneously with that. So it's usually a letter of intent, due diligence, and and formal purchase agreement, and then typically due diligence is is usually 30 to 45 days, um, can be sometimes be shorter, um sometimes a little bit longer, but usually that's kind of what that due diligence period looks like. And then once due diligence is done, parties agree to sign. There's there's usually a closing date, and then at closing, which could be in person or it could be virtual, um, that's when monies are going to be exchanged, assets are actually gonna be transferred, a bill of sale of sorts is gonna be signed. Um, and that's that's kind of the closing of the transaction.
SPEAKER_01So the the due diligence period that you referenced, um, you said minimum 30 days. Um typically that, maybe a little longer. Uh the the size of the transaction matter, does the complexity of the of the deal matter?
SPEAKER_00It it could. Um a lot of times it's it's not always necessarily the the purchase price that affects the complexity of the deal. It it could be other things, right? It could be if there's multiple owners involved or employees, or again, if if contracts need to be assigned over and there's certain deadlines on on that, or uh there's contingencies around a lease agreement and you need a landlord's approval, right? Those are things that can that can cause it to be a little bit more complex or take a little bit more time. But you know, a lot of times we see the deals that are a few hundred thousand dollars the same amount of time that you know the deals that are five million dollars. So the the the size of the deal doesn't necessarily um affect the the timeline.
SPEAKER_01So as you look back over your your career as an M ⁇ A attorney, uh someone who's really led sellers through this process over and over and over again, um what's that what memories stand out for you in terms of um you know either great experiences uh that that you got to share uh with with the client or or maybe some some things that that that you learned uh as a result a result of what you saw. Anything stand out?
SPEAKER_00Yeah, definitely. So like I said, we've we've really helped a lot of um a lot of sellers who have have owned their business for for a long time. So we've we've had some really valuable ones that um service-based businesses, right, local service-based businesses that have built up a great reputation in the the the Philadelphia community and the mainline community. And um, you know, we've walked them through that process and and they're you know, they're stressed because it's it's again, it's it's their baby. They they want to make sure it's done the right way and and it's in the the right hands. But you know, when that process is done and closing happens, and um, you know, we it's it's just such a great feeling all around. And and to see the joy in their face that you know they're they're getting paid for something that they they built over the last, you know, however many decades is is a really rewarding feeling. So those stand out, the you know, kind of the family-based businesses that have um reputations in in the area, those are those are really, really great ones for us. Um and then the flip side is yeah, we've we've seen some that we've dealt with that have have turned into litigation, unfortunately. So um, and there's there's always things that could be be done differently, but um, but some of those horror stories that I I kind of mentioned of a worst-case scenario where the deal's done and maybe things go go well, but then something comes up after the fact, right? Whether it's a a tax liability or some sort of lawsuit that that pops up and and the parties are both involved in it. Um, unfortunately, that that does happen and and we've seen a few of those. And again, we do our best to mitigate that risk on the front end, but um, but we can also help on on the um you know the back end of it to to litigate on behalf of our clients. So we have seen a few of those as well, but for the most part, they uh you know they they do go well.
SPEAKER_01So any parting words of wisdom for all the entrepreneurs out there listening to this right now?
SPEAKER_00Uh yeah, reach out to us. Yeah, I mean, think about um think about what it would be like to not, you know, not be the one that's that's in your business. I think especially the one that's for the ones that are one owner businesses where they've done everything, you wanna you really want to think through what what is what's my ideal exit look like, first of all, right? Who who is that selling to? Um, I I think you always want to think about your your kind of ideal exit. But also on top of that, um, yeah, reach out to an attorney to to have that discussion so that you can get a little bit of peace of mind. And um, you know, I think there's there's some information on the podcast about how to reach out to us. But my email is is jthielen at companycouncil.law. That's uh J T H I E L E N at Company Council, uh C-O-U-N-S-E-L dot L A W. Um, we also have a 484-325-5660 number that um goes to our office, and you can set up, you know, set up a meeting with with me or one of the other attorneys on our team that way. But um, but yeah, those are some some things I would I would recommend before uh before getting too far down the line with it.
SPEAKER_01Uh well this has been a great conversation, John. I I I it's always a pleasure to speak to you. Uh but I think um I think you really helped some people today uh because you're information.
SPEAKER_00That's great. Yeah, I appreciate you having me on. Thank you.