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 Deal Gets Easier When The Owner Lets Go
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A business can look wildly successful on the outside and still be “not ready” the moment you try to sell. We sit down to unpack the uncomfortable gap between what owners think buyers will pay for and what the market actually rewards, especially when risk shows up during due diligence. If you care about getting the best outcome for your money, your people, and your legacy, this conversation is for you.
We get specific about deal structure in mergers and acquisitions, including why earnouts are so common, how buyers use them to protect against uncertainty, and why they can become a mess once the seller gives up control. We also talk through a popular private equity approach, the equity rollover, and how staying invested can create alignment and a real “second bite at the apple” when the next exit happens. Along the way, we zoom out from pure valuation and focus on the total package that determines what you actually take home.
Then we go to the root issue that quietly drives price cuts and tougher terms: owner dependency. If your top customers only trust you, or your team can’t operate without you, buyers see risk and will structure the deal accordingly. We share practical ways to reduce that risk by building leadership depth, documenting processes, cleaning up financial reporting, addressing customer concentration, and thinking like a buyer who asks, “How do you double this business in three years?” We also tackle the emotional side, including fear near closing and how a founder’s identity can derail a great deal at the last minute.
If you’re thinking about selling a company or planning an exit strategy, subscribe for more conversations on M&A readiness, deal terms, and building a business that can thrive without you. If this helps, share it with a founder friend and leave a review. What part of selling a business feels most intimidating right now?
Welcome And The Sell-Ready Myth
SPEAKER_01Welcome to How is Let's Post Note. This is a podcast dedicated to expanding real life, the highs, the lows, and the lessons learned along the way. My name is Bernard Williams. In addition to being the podcast host, I am the founder and managing partner of Company Council, where a small business law firm that works with growing companies that have a lot of legal needs and uh and the need for legal support to support those uh growing business needs. Uh we're gonna talk today about mergers and acquisitions and specifically uh the phenomena that I see all the time uh of someone who's running what looks like an awesome company and it's ready to sell and finds out when they put that business on the market that maybe they weren't quite as ready to sell as they thought they were. And uh here to help me to have that conversation today is is my friend Rob Warren uh from Strategic Exit Advisors. Well, welcome, Rob. How are you today?
SPEAKER_00I'm great, Brandon. Thank you very much for having me on. I appreciate it.
SPEAKER_01Uh so so why don't we start by by by giving our listeners a little bit of context? Can you tell us a little bit a little bit about what you do at Strategic Exit Advisors?
SPEAKER_00Yeah, no, absolutely. Um, so we work with really family and founder-owned businesses uh who have reached a point where the owners often are looking to retire. The next generation of ownership maybe isn't in the business. So they are uh looking for a liquidity event for the business. They're looking to monetize really what is a lifetime and sometimes several lifetimes for multi-generational businesses of really hard work in building something of value. Um, our job is to help make sure that that business ends up with the right buyer and with the best economics for our clients.
SPEAKER_01So, do you help to identify potential buyers? Is that part of the process?
SPEAKER_00Yeah, no, we absolutely do. And that's a big part of our process. And it's a collaborative process along with our clients. Um, the honest truth is nobody knows their industry better than them. Uh, no matter what any investment banker might tell you about how much they know about the industry, the clients know better than anybody else. So we really focus on the objectives of the owner. And most of our owners care about things like the people in the company, you know, what's gonna happen to them. There's a lot of uh there's a lot of people that ride the coattails of an owner, so to speak. You've got the employees, you've got they want to know their customers are taken care of, their vendors are taken care of. So it's all about finding the right party for the business and the next chapter of the business, um, somebody that's gonna respect and and preserve the culture that was created there, um, because that's what keeps the people. And they also want to know that their legacy lives on, in particular with owners who maybe put their family name in the company name. Um, they care about what people say about them, you know, five years, 10 years after the transaction. So we look for those buyers that value people, culture, and legacy. We also find that when we find that really good match and those buyers value those things, they they value them monetarily. So they're willing to pay for companies where they find really good people, strong cultures, um, where the legacy matters. That's that's the brand value of the business and in the market.
SPEAKER_01Yeah, it's you know, it's interesting. The did you did you describe it that way? Because typically what I what I'm involved in conversations about acquisitions and and and
Finding The Right Buyer Fit
SPEAKER_01and and selecting the right buyer, typically the conversation uh it's around valuation. Uh is the is the seller getting the uh the amount of money that they feel it's worth after investing a lifetime of blood, sweat, tears, money, effort, all the things. It's it's typically a financial conversation. So I find it fascinating that that that when you talk to your clients, it's it sounds like it's more about the values than than the dollar.
SPEAKER_00It is. I mean the the money matters, don't get me wrong. So the economics are very important. Um and sometimes we do have prospective clients that focus, they almost focus too much on just the valuation. Because the valuation matters, but how you get there matters more sometimes than the valuation itself. Um, if a deal has a lot of contingent consideration, say in the form of an earnout, so that's future performance of the business. Um, that's that those are all dollars that are are at risk. Um then if they don't get it, it it changes the valuation. So we really encourage our clients to focus when we're taking them through this process on the whole package. Um and it starts with achieving their objectives. And and oftentimes for our clients, a big part of those objectives have to do with these softer sides of a transaction. Um, they want to know their people. Cultural legacy is is respected and and and lives on.
SPEAKER_01Right. Now you mentioned earnouts, um, which are um very popular uh transaction features that I've seen a lot of our pictures. Uh would you would you mind just elaborating a little bit about what what an earnout is and and and how where earnouts fit into this conversation?
SPEAKER_00Yeah, no, absolutely. Um, so when when a buyer is looking at acquiring a business, they're evaluating it for risk. And and so this all has to do a lot with the the our overarching topic, Bernard, of preparation. Um buyers are looking at really what what is this business worth as a function of what are the future cash flows that this business is going to generate. And those cash flows can come from a lot of places. Obviously, it's the it's the the inherent growth of the business or the business that they're acquiring. It could also be that the buyer has products or services that they can sell to the customer base of the company they're acquiring, and they can get growth and cash flow that way. Uh, they can also sell products and services that the the company they're acquiring does to their the the buyer's customers. So there's a lot of ways they can look to generate future cash flow. And then ultimately, if they choose to sell it again, there's another form of cash flow. So what they're doing is they're looking at all these forms of future cash flow, but then they're looking at what are all the risks to that future cash flow. And so when those risks are things that scare them, it devalues the company, the more risk they identify, or more the more risk that they identify or perceive that they have identified. Um, and the way they try to mitigate some of these risks is in the form of what's called an earnout. And that means, hey, we'll buy your company, but we're only going to give you half of the money at the close. The other half is going to come in the form of payments based on the financial performance of the business going forward after we've bought
Earnouts And How Risk Gets Priced
SPEAKER_00it. Um, and I'm just using 50-50 as an example. That's not usually an acceptable uh ratio from our perspective. But it does it risk balances the transaction between the buyer and the seller. Um, the seller knows more about the company than the buyer, and the buyer's saying if everything you tell me is true and the business does what you're telling me to do, you're gonna get paid. But if it doesn't turn out to be true and it doesn't perform, you're not gonna get that money. Right.
SPEAKER_01Uh makes perfect sense. It sounds like it's fair for both sides, right?
SPEAKER_00Um it depends on the circumstances. So the the the problem with earnouts, the thing that we don't like about earnouts is when you sell a company, you give up control. So the buyer is going to be making the decisions going forward. So earnouts can become a real hornet's nest of disagreements over hiring and firing decisions, marketing spend, you you name it, products and services continuing or research and development happening for new products and services. When you give up control, you don't have control over the earnout. You you don't, and so you have to negotiate that as part of your documents, which I know you guys are very good at, helping to negotiate um those legal components of provisions within a purchase agreement. Um, so they're not a win-win. Um, we try to make sure that there is the potential for a win for our client by making sure that they're not capped, you know, that there's no sort of upper threshold of what they can get if the business really takes off. But they come with a whole lot of provisions and and control considerations that are can be difficult to negotiate and manage.
SPEAKER_01So um so let's say that an earnout can't be negotiated or that for whatever reason that's the that's that's off the table. Uh, what are some other maybe strategies or tactics that that that a buyer might employ to try to mitigate the the risk?
SPEAKER_00Well, one of the other um more popular ones, and and you'll find this a lot when private equity um is involved in a transaction. It may not be the direct buyer, but they may be acquiring a business that's an add-on to something they already own, uh, would be an equity rollover. So an equity rollover basically says we're going to buy your company, but you're going to take a portion of those proceeds and you're going to buy back in essentially, alongside us as the investor. So we will now be partners in the business. So you own a piece of the business going forward with the intention that when the private equity exits down the road, you'll get what we call the second bite at the apple, which is that 20% maybe that you rolled over into the transaction. You'll own potentially 20 or more percent if they use the leverage. Um, but you'll own a piece of the business and you can get a much higher valuation on that piece when the private equity group exits in let's say five years. That's a better way of getting the buyer and the seller aligned than an earnout. Earnouts are inherently um they create friction inherently.
SPEAKER_01Um whereas that literally puts them on the same on the same side. They're partners. They're partners.
SPEAKER_00Yeah, the other thing that rollover does, which um which we do like, is owners are dreading the day where they're telling their entire company that they sold. Um nobody no owner looks forward to that conversation. And when they make that announcement, if they if they can look at their employees straight in the eyes and say, I've taken on a partner in the business, I am still an owner. I'm no longer the majority owner, I'm not the sole owner, but I am still an owner in this business, and I still have an interest in the future. That that gives owners a lot of comfort um in having that conversation and being able to say that with with sincerity.
Equity Rollovers And Second-Bite Upside
SPEAKER_01Yeah, I I can imagine from the employee's perspective, it's it's a smoother transition, uh less upheaval, uh that that change management. Um still being horrid, but but but but a lot smoother, I would imagine, under the scenario.
SPEAKER_00It it is a lot smoother.
SPEAKER_01So so let's let's shift the the conversation back to to the seller. Uh I, you know, as I mentioned in the beginning of uh of the show, uh I work with a lot of people who decided they want to sell. Uh unfortunately they decide um let's say on very short notice. Um sometimes a scenario that uh they've they had a bad year, a rough year financially, a rough year um personally, whatever the case may be, and they just want out. Uh or maybe they decided that you know their friends have all retired and they're all out fishing and hiking and skiing, and and maybe they'd like to start doing something. Uh but unfortunately they haven't done the they haven't done very much to prepare it. Uh so um I mean is this something that you've come across in in in what you do?
SPEAKER_00Every time. Every time. Um it's it it's it's an incredibly common. And and we actually we have an assessment that we do to really assess the readiness of the business owner operationally, you know, from a reporting on the financial side of things, um, and from an emotional standpoint, you know, how ready is this owner um for a market-based process? And we give them a score, we give them some recommendations around if you don't go today, here's ways to improve. Um, very few owners are truly completely buttoned up when it's time to sell. Um, and a lot of times they they think they want to sell in five years and a life event happens. And and so oftentimes they don't control necessarily the timing of when they want to sell. But the preparation is is really key. Um, and there's a lot that they can do from a financial preparation from their own wealth strategy. Um, that's not work that we do, but that's that's work that others do. Uh, from the standpoint of the business, oftentimes what we find is that the lack of preparation is around the owner's codependent relationship with the business. So owners are sorry, go ahead.
SPEAKER_01Oh, so you are you their
The Hidden Cost Of Owner Dependency
SPEAKER_01identity is wrapped up in the business. Is that what you're talking about?
SPEAKER_00Absolutely. Absolutely. And the business is dependent on the owner because owners are happy. You'll usually find, hey, I've given up control of the financials, I've got a strong controller, I've even given up some of the operational stuff because I don't like you know being out in the shop all the time and and sort of doing that. The area where we find owners are really reluctant to let go is their top customers. So the the top customers are the ones that help them to build the business. And they love talking to customers and they love going out and selling. But when those customers call the owner as opposed to the customer service line or their rep at the company who's an employee of the business, that's a big danger sign for a buyer. Um, that means that the owner is critical to the business. And so that's when you end up with those risk points that we talked about, which impact the value of the company, they impact the structure. And they really beg for an earnout because they want to know that owner is going to stick around and make sure those customers keep calling and they're going to want to make sure that those revenues continue. So preparation is is really crucial. It's usually the owner not letting go that is the primary driver of a lack of preparation. Um, and owners oftentimes they can't see what they because they're in it every day. They can't see the things that somebody who's on the outside would see when they look into business.
SPEAKER_01Why do you think owners have such a hard time letting go? Particularly owners that want to sell.
SPEAKER_00Um, they are that that's the codependence thing, I think, that we we were talking about. When you talk to a business owner, especially when it's the founder, they they'll talk to you like the business is another one of their children. Um, they have invested their lives in it. Uh, they have spent so much time there, they've cared dearly about it, they've brought it back from the brink of death multiple times, usually, when they've owned it for a couple of decades. So they have this relationship with their business that is very, very um, very familial. Uh, it is also a source of their sense of identity and their sense of self-worth because they're really important at the business. And those feelings that they get, those endorphins that kick in as business owners, um, really have them tied to that. The difference between an owner and a parent is that as parents, we tend to be very clear-eyed about the fact that our number one job is to make sure that our children grow up to be independent and that they can they can continue not just to survive but thrive without us. Um, we don't see a lot of owners that recognize that, even though they may talk about their business as another child, they don't talk about the fact that I need to make sure that my business survives and thrives without me, that it's independent of me. There's just not that same that same dynamic.
SPEAKER_01That's an interesting analogy. So it's it's almost like the business is more of a pet than a child.
SPEAKER_00That might be right. Yeah, I think it is. I think it is their uh their empty nest uh child, you know, that's the one that they they can't let let go and and won't let out of the nest. Um, you know, we have two dogs and we just started beekeeping because you know our our our children are growing and graduating from college and moving on. So you always need something to take care of and to feel uh to feel like something is dependent upon you.
SPEAKER_01I I totally understand that. I get I get that. Yeah. That's interesting. So uh on those line, along those lines, do you find that most people who sell their companies have something lined up to do afterward? Or or um how do how do they handle that transition from from having that this this this thing that they're so wrapped up in to walking away?
SPEAKER_00So most of our clients, most so some of our clients want to stick around. Um, some of them want to continue to run the business, they want to stay active, they want to stay involved. And for many buyers, that's okay. Um, they're they're viewed as an asset to the business. What our clients are looking to do is to really take their chips off the table. Um, it's it's time to monetize this and put this into an asset for my retirement that is more secure. So when when the owner sticks around for a period of time, um, they don't think beyond that typically. Um and some owners that some some clients that we've worked with and we've sold, we've sold private equity. Private equity has partnered with those owners, they've maintained an ownership position, and they really wanted the private equity firm's help in growing and doing acquisitions and and scaling the business. So those work out well. Um, most of the other clients that we work with are selling to retire. And so some of them have better thought-out plans than others. Um, we do ask a lot of tough questions when we're talking to a prospective client about what's what's next. If the idea is to sell the business, maybe work in it a year or two, uh, and then retire, what's their plan? Because you can only play so much golf. Um, you know, some if somebody says, hey, I'm gonna play golf every day, that's a little bit of a red flag for us. Uh, if somebody has says, I'm on a couple of charitable boards that I want to get more active and involved in because I'm really believe I believe in these causes and there's more I want to do, that's that's a good plan. Some want to go into academia because they want to feel like they've they're valued. They want to feel like many years of hard work and wisdom can help the next generation. Um, so they want to go and to be college professor. So there's there's these pursuits that we can see people want to take that give us a level of comfort that they will continue to be fulfilled just in a different way. When they say they want to golf every day, it concerns us. Uh, when they say they want to, you know, buy a boat and sail around the globe with their spouse, and their spouse wants to spend all their time visiting their grandkids, you know, across
Fear Near Closing And Emotional Prep
SPEAKER_00the state, there's a there's a difference of sort of goals between the spouses. And you know that's going to ultimately result in conflict, and that's ultimately going to result in regret. And that's also going to create fear, fear when it comes to the transaction, which is something we deal with a lot.
SPEAKER_01That's interesting. So it it's interesting that it builds into the transaction itself. Very much so.
SPEAKER_00It's um it's uncanny how it how it does affect the transaction. And you you do see it, regardless of how much you have these conversations and how much you talk about it, the closer you get to the closing date, the more real this becomes to the owner. The more real this is becoming to the owner, the more their fear instincts start to kick in. And the more irrational, unreasonable they become. You know, after after the close, you know, that's always gone through the company. Um and and that's the reason they want to blow up a $15 million deal. Um that's fear. So it's just they're looking for reasons to not do the deal at that point because the fear is taking over. Um, and they're harder to manage through that piece of the transaction. Excuse me, sorry.
SPEAKER_01So uh what advice would you have for owners entering into that process, knowing that this is gonna happen? How do you or how should they prepare for that for that experience?
SPEAKER_00The biggest piece of advice from an emotional preparation um is and Denise Logan, who's an author of a book called The Seller's Journey, actually shared this with us because she does work with owners who are going through that emotional journey of selling. Ask the owner to make a list of 15 things they get from their business that aren't financial, have nothing to do with money. What are the benefits of owning a business that they get? Because it takes the first five would be pretty easy, but the last five, you have to really dig deep to get to things like I realized I'm not happy at home. And my business has always been my escape from a relationship at home that I'm not happy in. You know, there's some pretty dark places you can go with some of this stuff. And and so asking them to dig deep around what are the real things that you get from your business that if you sell it, you need to find a way to deal with them, replace them, whatever it might be. Um by doing that, you're you're thinking about all of those things that are gonna cause the fear to kick in because you don't have a plan in place for how to replace them.
SPEAKER_01Right. That's so that sounds like very important work. Yeah. I like that approach. Uh thank you. Now what and and again, in terms of preparation, we've been talking a lot about owner dependency, and we can see how owner dependency will uh either kill a deal or or decrease the value, or at least make that make the deal harder to close. Um how does an owner prepare to to to have the that's just less dependent on them?
Delegation, Reporting, And Real Leadership
SPEAKER_01How do you slowly move yourself away from the operations? So that owner dependency isn't such a hurdle to big accourt.
SPEAKER_00I think it's the hardest thing a business owner can do, um, candidly, because their sense of self-worth is typically tied to how important am I to this business? Um, what we encourage owners to do is to make sure they have a complete management team in place, make sure they have leadership development in place for that management team. You know, your owners are like, well, yeah, I've got a team, but they're really not leaders. We say, okay, so what are you doing to develop them? Like, how are you investing in your leaders to make sure that they are in a position to step up? Are you letting go? Because nobody's gonna step up and pull it out of your hands if you're holding on to it. Um, so are you letting these things go? So put a plan in place as an owner to say, I'm gonna give my team the tools, but I'm also going to get the reporting in place so that I can get a report that I can review daily, weekly, whatever that time frame might be. And I I can feel comfortable that the things that I are important to the business are happening without me having to intervene. And that way, when I'm getting that report, I feel like I'm doing my responsibility as an owner of the business to keep an eye on it. But I don't have to keep asking people what are they doing? How are they doing it? You know, what's what's going on, unless something seems like it's really off. Like resist that urge to insert yourself into everything. And owners will often put that plan in place and they will they will delegate and they will let go and they will realize their people are actually a lot better than they gave them credit for. Um, we've had owners who said, I didn't know I had any A players. And it turns out I got a bunch of them because I started to let go. And and then and empowered them to do the job and gave them the tools to do the job.
SPEAKER_01Um, yeah, that that that that's helpful. And it it's um and it's and as leaders, I it it's you know, we're we're responsible for results and we're responsible for um for for what the team produces on the on the whole. Uh and and I know speaking for myself, uh, I sometimes when I delegate things, I sometimes wonder if the people on my team wonder what I'm doing. Okay. I know that I'm busy, but I wonder if the team knows that I'm that I'm busy and what I'm doing.
SPEAKER_00I I I I do think there's something there's something to that. As an owner, you want people to see you being busy because you don't want people to, you know, you don't want the people that that work for you or that report to you, um, the people on your team to think that you're not pulling your weight as an owner. So you you have that tendency to always be busy and always be in the deep of it. But as leaders, as owners, at some point, part of our job becomes making sure that we're empowering everybody else to grow, like making sure that we're allowing everybody else to move up. That's that's part of the job. So it transitions from doing the work and being so super active with it and getting yourself um getting your people up to speed on what needs to be done, how it needs to be done, and letting go. And that's that is definitely part of that becomes a part of your job, I think.
SPEAKER_01Yeah. So it's it's development, it's leadership development, both of your own people, uh, but also of yourself as a leader, someone who can who could take a step back and and allow uh a friend of mine says uh she makes herself small so that others can could can become bigger.
SPEAKER_00Uh great great line.
SPEAKER_01Yeah.
SPEAKER_00Yeah, we use one of our fundamentals at our firm is um to to um to empower others um by asking for help. Asking for help with things is not necessarily a something uh if people think of it as a weakness if you're asking for help. But as leaders, asking people to help you with something is a way of empowering them to grow and and handing things off and letting them step up and learn. And when you don't do that, when you don't delegate, when you don't empower others, you're stomping their growth. But it keeps it makes you feel as as an owner, as a founder, it makes you feel important because all you have all this work that only you can do. That's it's a kiss of death if you go to sell the business.
SPEAKER_01Right. Yeah, and and it's and it's fascinating that the same things that are necessary to put yourself in a better position to sell the business are the things that'll help you to run a better business in the in the meantime.
SPEAKER_00Oh, absolutely. It it makes
Systems, Financials, And Buyer Due Diligence
SPEAKER_00the business run better. It uh it makes the business more fun. The the analogy we like to use is if somebody's ever sold a house, the day you put the house on the market is the day you will like your house the most. And that's because you go around the house and you, you know, the squeaky doors you've taken care of, you've you you know, you've repainted the rooms, you fix those moldings that were broken, you take care of all of the little details.
unknownRight.
SPEAKER_00And then you put your house on the market and you look at it and you say, gosh, this would have been a great house to live in for the last 20 years. Like, why didn't I do this stuff sooner? It's the same thing with your business. You you do these things to try to prepare to sell the business. If you had done these things a long time ago, your business would likely be growing faster, more profitable, and more fun. And maybe you wouldn't even want to sell it because you like it so much. Who knows? Um, but but but do those things early, always have your business ready for sale because at the end of the day, you don't always control that timing.
SPEAKER_01So uh and and we've spent a lot of time talking about owner dependency. Uh, apart from that, what are some other things that a business owner can focus on uh to um to position themselves for an easier position? More easy feeling.
SPEAKER_00Yeah, absolutely. Um a lot of it starts with the team. Um, so making sure that the team is really strong, making sure that you have the right systems and processes in place so that things are documented properly. Um, not only are processes documented, but people actually following the processes as they're documented is is really good. Uh having a strong sales and marketing process. Um, sometimes sales and marketing, well, sales in particular can come down to personality as opposed to process to the extent that you can create some process around that. Um, you're you're not gonna you're gonna make sure that the new business development's not always reliant upon a single person, you know, a single personality, if you will, because there is a process in place. So getting those things lined up, obviously making sure that you have your financial reporting buttoned up, making sure that your your finances are clean is going to be very important from evaluation and more so from a withstanding due diligence perspective. Uh, so having all of those things taken care of, looking at your customer base and looking at your client concentration issues. You know, if you have one customer that's 80% of your revenue, that's a problem. They might be a great customer, they might be your customers have been your customer forever, but you really want to try to make sure you're you're growing other aspects of the business. And I think one of the best things you can do as an owner to think through preparing, because every buyer is going to ask you this if you go to sell, how do you double this business in three years? And what are the what are the pinch points? What are the things that are going to slow you down from being able to do that? So, is there a market for what you're doing? Can you go out and address it quickly? And what breaks if you try to grow at that speed? What are the things that are going to break? And if you can think about your business from that perspective, that covers a lot of things. Um, and and those are the fundamental things that buyers are going to be looking for. Those are the things that they're going to look at and say, Yeah, this seems like there's a lot of risk work right here. Um, so I think those are the types of things that business owners really need to look at. Obviously, they need to look at contracts, make sure their agreements are current. You know, have they been looking at um, you know, increasing prices? When was when was the last time they did a price increase? Yeah, what happened there? Looking at employee turnover, um, looking at customer turnover. Employee turnover is big because buyers will always ask about it. They're gonna want to see, at least for five years, let's see the employee turnover. What they're looking for is are you underpaying your people? And do you have a bad culture? Because if people aren't happy and they're turning through the business, they leave because I want to usually the one the first thing is they don't like their manager, they don't like their boss. That's the number one reason people leave companies. And if you're underpaying people, it's too easy for other companies to take them. And so buyers look at that stuff in diligence. Um, so you should look at it before
Cautionary Stories And Timing Reality
SPEAKER_00that.
SPEAKER_01Yeah. This is helpful. I I mean you you've you've done so much with the server. You've been at an SEA for 20 years, isn't that right?
SPEAKER_00Yeah, go on. We're in our 20th year right now.
SPEAKER_01Wow, that's that's amazing. Um you might have stories. Do you have any stories of somebody who just got this completely wrong? Uh share.
SPEAKER_00Oh, we have a we have a lot of stories. Well, none of our clients have gotten this completely wrong. Um, but we do we do has we do have a lot an awful lot of stories. I mean, we we've seen some very sad stories. Um, so we've seen stories of of owners who have waited too long, they've waited until their window closed. Um they thought that they could get bigger and and and grow bigger and get more. Um, and they got sick. Um, sometimes they've lost a key salesperson, a lot of the business went um went away and they got into debt and then they got sick. And so there's a lot of a lot of really, really bad stories uh about that. I would say uh the success stories are the ones where, and we're seeing a lot of this right now, where business owners are being approached directly by buyers. Um, and that's the where you can't pick your timing um because that is often the first um first event that happens that gets the business owner into this sale mode. And we've helped a number of owners who have been approached by buyers get much better offers. We had one client who um was referred over to us by the wealth management firm. One buyer had approached them, they asked us to help represent them in negotiating a value and structure of a deal. And we thought the business should be worth um somewhere between eight and ten million dollars. Um and the the buyer that had approached them that the client considered to be friends, uh, said we can't get above four for the business. So we took them to market and we got them close to 12. Um and so there's a lot of that that is happening. Now that was a client that was pretty well prepared. It was a really nice business. They had a lot of things that are in in in a good state. Um I will tell you, it's very rare that we have a client who is able to sell and walk away. 20 years of doing this, I can only think of two. Because the owners, lower middle market. I mean, our clients are typically you know two to eight million of EVITA. So lower middle market businesses, um, the owners are involved, they're not absentee owners, they're not just shareholders, so they're in there every day, they're active with it, and so there's always going to be something to keep the owner on for a period of time. So sometimes it's just we want you to assign it to your employment agreement or an advisor agreement. Sometimes it's going to be we want you to roll equity so you're still an owner in the business. Sometimes it's going to be um we want to put an earnout on there because we're a little nervous about a couple of items, and we want to make sure that you're sticking around and you're making sure that this business continues to thrive after we buy it. So um, excuse me. So it can look at a lot of different ways from that perspective. We always tell owners, when do you want to be done done? They're talking about when they're talking about their timing. When do you want to truly be done? And if somebody says, Well, I want to be done in three years, we say, Well, you should probably get moving because it's a six to nine month process to sell a company the right way and plan on sticking around for two years. Maybe you won't have to, but you should you should build that into your timing because there's a good chance they're going to want you to stick around for some period of time. So if you want to be done, done in three years, you really need to be in market in about six months.
SPEAKER_01So, on that note, what's the best time for someone to call you
When To Call For Help
SPEAKER_01if they're starting to think about selling?
SPEAKER_00Right then. So when they're thinking about selling, they shouldn't be um concerned. I think a lot of people are hesitant to call people to do what we do. Uh they're afraid we're gonna try to pitch them, we're gonna try to, you know, hard sell them. Some some might. We won't. Excuse me. Um seek advice. Seek, seek, you know, ask questions, get to know somebody well before you're ready to do something, because they can give you a lot of pointers and guidance along the way. They can help you look at the business and identify those areas, those things on the house that you need to fix before you put it on the market. And some of those things take time, they don't happen overnight. So I would suggest you talk to you know, me or someone like me and or someone at my firm. Um, when you're thinking you might want to sell the business, that's a great time to get those introductions, make those phone calls, ask a lot of questions, get a lot of good counsel, and then figure out who you want to work with so that when you are ready, when it is time, there's been somebody helping guide you along the way a little bit. Um, somebody who's been giving you those pointers and helping you understand, maybe even picking the right window of time when the market's active. You know, when are things heating up? Somebody who does what we do is help in the market every day talking to buyers. And so if we're if we know we have a prospective client in a certain industry, we're gonna keep tabs on that industry and we'll be able to say, hey, it's it's a really good market right now. If you if you're ready. We can't tell you when you're ready, but we can tell you what what the market's like today. So sooner rather than later.
SPEAKER_01And what's the best way to reach you if somebody wanted to reach out?
SPEAKER_00Um, so go to our website. Um, we're all listed on our website. We've got our phone numbers on there, uh, we've got our email addresses are on there. So there's a contact us form on there. So feel free to use any of the above.
SPEAKER_01That's that's terrific. Uh this has been a really, really valuable conversation, and and I appreciate it. Uh in closing, um, thinking about your own business, strategic ex-devisor. Do you have any anything, uh, any initiatives coming up, any projects that you're excited about?
SPEAKER_00I've got a bunch of projects, but they're all confidential, unfortunately. Um, but the things that we are working on uh they really get us excited, and the things that uh are really driving driving our business right now is what I had talked about is buyers going direct to business owners. Um, that doesn't mean if you're a business owner and you have a buyer who's contacting you, your deal is far from done. That buyer candidly is not looking out for your best interests, and we're here as a resource. We're we're here as a resource to the community. If people want to call us, ask us to take a look at it if they got an offer for the business. Do you just want our opinion? We don't charge for that type of work. So seek some advice, some guidance. Don't hesitate to pick up the phone and call. We can help you figure things out.
SPEAKER_01That's terrific. Well, uh, thank you again. This has been great. I really appreciate you being here and sharing your insights. I hope you enjoyed it as much as I did. I'm sure the listeners get a lot of it. Uh thanks for an article. Thank you. Uh, and uh to everyone, this has been another episode. Apologize for push in the bed. Thanks, all.