Preparing to Sell a Business - Interview with Linda Ruffenach

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Welcome to the Plentiful Wealth Podcast with certified financial planner Jeb Jarrell. If you're a young professional looking for answers to financial questions and information on related topics, you've found the right podcast. Let's join Jeb to learn more about how you can maximize your return on life.

Hey everybody, this is Jeb Giro with the Plentiful Wealth Podcast. I am so excited this week to be joined by Linda Riffenack of Executuity. Linda is a sepa. She's a certified exit Planning Advisor. Before that she was the CEO of a Fortune 200, Fortune 150 company.

I don't know, it was probably somewhere in that large.

It was a large company, very large company. She's had a wonderful career. She's still doing amazing work helping business owners transition their businesses to the next generation and helping them make sure that they maximize their value along the way. So with that, thanks for joining me today.

Thank you so much for having me. I always enjoy spending time with you.

It's always fun because I run into you in the most random places and it's always great conversations. So today we're going to talk about business planning. We're going to talk about exit planning and how owners can transition to the next generation while retaining or capturing as much value as possible. You've got a great, great experience in doing that. So I'm start off and say kind of introduce yourself, kind of give me your background.

If you don't care, oh, no problem. So once again, as Jeb shared is I have a company called Execuity and a couple years ago I add value advisors to it to better describe some of the things that I do and my team does, which is we work with business owners helping them accelerate the value of their business. And that could be done through helping them create a transition plan. Not necessarily out of the business, but transitioning to that next phase within their business. It could be from a growth and sales standpoint. It could be helping them build scalability within their business. But a lot of it is geared towards that eventual transition that every business owner is going to make. You know, none of us like to think about it, but the reality is all of us are going to leave our business one day and you can either do it on your terms or someone else's terms. So that's a lot of where I focus my energy. I spent 19 years with a local company here in Louisville, which actually was an international. We had international operations. We started out as a 15 person marketing agency, grew to 3,000 as a 3,000 employee BPO. And, and we had locations, we had 11 locations in four different countries. And I had the honor and the privilege of running operations most of that time. Does short sent as CFO and was the CEO the last few years that I was there. And you know, I was granted a lot of gifts during that period of time from an experience standpoint. So when I left I felt like it was my responsibility to use those gifts and those, those experiences to help other business owners and leaders, help them transition from stage to stage in their business. I know what it's like to be a CEO and it's damn lonely.

Yeah, that makes so much sense. And I think it's interesting that you say you grew the company, you were part of it when it grew from 200x in headcount. Because when you're talking about transitions, that's such a big deal because the culture of a 15 person company is so different from a 3,000 person company. And even try to keep that culture that you started out with as you grow and how do you make new employees feel like they're a part of that culture? So that's a big deal that you had that experience that you can now bring to your clients.

And it's interesting you bring up the culture piece because one of the things that we actually did a pretty good job of not there were ups and downs across the 19 years, as you can imagine, but we built and it goes back to the CEO who started the business. It was very much a culture of, we used to call it the can do culture, which is, you know, we service clients, we worked above and beyond to take care of our clients. But we also made sure that team members had a lot of fun along the way and that carried out through much of our time they were there. There was a period of time we actually, our employees would wear a T shirt that says, do you love your job? I do. Ask me about it. And so, you know, a lot of times when you're going to scale your business, it is how do you protect the culture and the environment and your values and that kind of stuff as you start to scale, because that's a tough thing to do and to remain connected to employees.

So to that end, for business owners that are transitioning, say they're transitioning out, is it possible to protect the values that they built into the business in the first place?

I think so. So one of the things when I'm talking to business owners, you know, a lot of times a lot of the focus and a lot of talk is on what's the value of the business and how much money are you going to get out of the business. And frankly, if you get the hands of the wrong broker, that's all they talk about, right? But the reality is selling your business is a very emotional thing for anybody. Whether you're the founder, whether you're the current owner or partial owner, or that it's part of a family owned business. Those are really traumatic. But it's an emotional thing and you've got to think through what are the things that you, that, you know, you got to be thinking about the money part, how does that impact me personally and financially. But it also leans back into your values and you know, it could be your family values that kind of play into it. And it's really asking yourself the tough questions ahead of time before you go put things on the market of what would I do? If so I'll give you an example. One of the clients I had, she had the opportunity. It was a great opportunity. We did a great job helping her accelerate the value. She ended up selling it for, for almost 75% more than where we started. But one of the big questions we spent a lot of time on is she was really adamant about protecting her company and protecting the culture and the employees. She did not want somebody coming in and just basically acquiring her technology and her clients, you know, and she was adamant about it. But we really spent a lot of time running scenarios like I'd add a zero to the price, like if I had another zero to the prices, I change your position, does that change your position? And we got to the point where it was like there was a number that would change her position a little bit. And, and so I was like, you really need to think about that. Not that I felt like that was going to really happen for her, but at the same time, as a business owner, you're going to get that, that selling your business. First of all, most people have never done it, will only do it once, right? And you've got all of this anxiety around making the wrong decision and probably the most, the biggest financial decision you'll ever make of your life. You've got experts around you telling you what to do, but you don't understand the language, you don't understand what they're talking about. Good brokers will stop and break it down for you, but many of them don't. So you're overwhelmed. And so trying to keep that vein of what's important to me is a really tough thing for a business owner to do. And one of the things I always recommend is just sit down and write down the things that are important to you and keep that list at hand. And what's that box that you want to draw around here? And let's pull that list out. As you go through each stage, one of the things is first step is when you start to get people in that are really interested. It's a great way to narrow the list down. Don't want them, don't want them, don't want them. Now you may have a investment banker saying, no, don't take them off the list, don't take them off the list. And sometimes they're right because you want them on the list just to get a competitive bid out there. But when it comes to getting the offers in, you know, going back and asking yourself those questions or those things that you had up front that said, you know, these are what's important. This is what's important to me. And being able to refer back to it because in the moment you're going to have so many things coming at you that it's really hard to stop and pain pause unless you get something to refer back to.

I think it's really cool. I like that the idea of using what's important to you is your North Star, that you can always look up reorient and then move on. So you kind of mentioned business brokers there for a second. And I know I'm jumping around a lot, but how do you find a good business broker? And the flip side of that is what are some red flags for someone you shouldn't work with?

Well, first of all, there's different type of people out there that can sell your business. There's business brokers, there's M and A advisors and kind of in that is investment bankers. And it really depends on the size of your company, of who you're going to go to. There are business brokers that are all about selling the mom and pop operations. They're the ones that just there's nothing wrong with them, by the way. There's some great guys in town and some great people I know that are business brokers. But they get in, they do their valuation, they get your information and you put it out and list it almost like a real estate broker would. And then there's others. You kind of go up to the next level, which is digging deeper in the business, trying to understand who your strategic buyer might be and actually targeting the marketing to those strategic buyers. And depending on the business you're in or the niche that you have there can be industry experts that are part of that industry. I'll give you an example is that I'm working with a retail center and especially marketplace. And what we've done is we found person in that marketplace who handles a lot of the transactions and that are very familiar with the.

They know the players, they run.

Exactly. And so what they've been able to do is help us narrow down the list. And in that case I'm actually doing a little bit of helping on the brokering because we've got a very targeted list, we've got a very targeted story to tell. But then you start going up a little bit more. And you know, when you get into bigger size deals, when you're getting up above, you know, you know, getting close to that 5 million dollar 2 to 5 million dollar EBITDA, then you go into probably getting into an M and a visor or something like that. And then when you get bigger than that, you're usually going with an investment banker. And a lot of times once you.

Get above the 5 million EBITDA or.

Yeah, usually when you get above the 5. Well, it depends. Investment bankers, a lot of them won't touc unless they're 25, 50 million dollars and every investment banker MA and you can slap a label on whatever you are. Investment bankers are kind of that higher end. They're the ones that are going to get some of the bigger players involved and have the relationships with the bigger players that can help you and they're going to garner you a much bigger price. Now the one example I mentioned earlier, we ended up taking it to an investment banker, but that was because this investment banker was a small, smaller deal for him, but he specialized in software as a service and technology. And that's really what accelerated the value of her business was we got it in the right hands of the right broker who understood the industry. And frankly, we were looking at it one way and then when he showed us another way, it was like, dang, it's worth a lot more than what we thought.

It's amazing how when you have the right advisor, whether that's value advisor, whether it's a bright broker, I'm sure there are plenty of business owners out there that say, you know, I can do this myself, I don't want to pay a fee. But then you say, actually I got one of these clients, you know, 75% more on the full value of their business. You're like, oh, that's a really big number.

I always laugh and say, you know, my Fees aren't cheap and mine are fixed fees. I will take contingency, I will take fees on the back end, particularly if we do take it tomorrow market. But for the most part you're paying me a flat fee or a monthly fee and I guarantee pretty much that you're gonna get at least a ten times roi, if not a hundred to a thousand times ROI on what you spend with me.

It's hard to find that anywhere else. And I deal with investments every eight. I wish I could find that all the time. So that makes so much sense. So let's talk about your process. When you know you have a new prospect that comes in or a new client and they say, hey, you know, I'm thinking about selling in five years. What does that process look like from your end?

Well, the first thing is there's about a six week to eight week due diligence period that I do and out of that comes a high level estimation of value and then also an assessment on your business. So I'll do a series of one on ones with you, maybe we include some of your senior leadership, depending on who you want to get involved. I'll dig deep into your financials and look at what's going on there. I'll look at your marketing, the market, just kind of doing an overall assessment, kind of getting in your business and everything surrounding your business. So I get a good idea of it and then I sit down with you as the business owner and I will go through everything that I found both good and bad. And part of it is one of the tools I use is called value builder. And so I will have you do a value builder assessment. And It's a short 15 minute kind of assessment to do. And it gives me an idea of where your bigger opportunities are from, influence the value of your business. And we sit down, we go over it and we figure out what you want to do from there.

I think that sounds fantastic. And I'll be honest, I think that sounds like something that most business owners should probably do fairly regularly, whether they're looking at selling or not. That triggering a man saying, hey, what is my business worth? How do I strategically build that value? Because like you said at the very beginning, everyone's going to exit one day.

50% of businesses transition unexpectedly every year.

That's a little terrifying.

It is the business owners and that, well, it's 50% over a lifetime, I guess is. But when you look at it, you've got death, you got disability, you got disagreement, you got disaster, and you got divorce. All of those things no one plans on, no one wants them to happen. But as a business owner, there's a lot of things you should and could do up front to plan for those scenarios so that you are prepared for when those things come up and so that you're able to do it under your terms because those things happen. And a lot of people experience this, you know, in 2020 is, were never prepared for what we all dealt with and lost their businesses because they didn't have plans. I'll give you a quick example is there's one gentleman I knew that he suddenly got sick. It was before it had became, you know, widely spread or talked about. He immediately became incapacitated. And one simple thing he didn't do is he was the only signatory for his accounts on the bank and his wife couldn't even sign for them. And there was no one in the business that could sign for them. He was, you know, in intensive care for like three weeks. And the business almost went down because he couldn't pay his vendors, he couldn't pay his employees, employees, all that kind of stuff.

Courts were shut down. You couldn't be appointed. That's incredibly tough. And that makes sense. And it doesn't have to be, you know, getting Covid. It can be you're in a car wreck or anything that can put you into that same sort of situation. So it makes so much sense to be prepared. And if you maximize the value of your business, then it's going to be better for your family or better for you, better for everyone involved.

Well, you know, from being a financial planner, what a divorce can do to some of that. And you know, if you own a business and you're, even if your, your spouse is not part of that business, when and if you, you're. You're challenged with that, they can take half your business unless you've protected it through your operating agreement. And you've made it very clear within your operating agreement what happens when. If you get divorced, particularly if you have a partner, if you have a partner in your business right now, you better go back and look at your operating agreement, make sure that if your spouse or your partner gets divorced, what happens to those shares unless you want to be in business with their spouse.

That is such a valuable point. I mean, honestly, if you're listening, that is worth the listen right there. That's fantastic.

And we never want to think about disagreeing with our partners, but the reality is it does. I can't tell you how many people, and I experienced it once Again, there was nothing negative. It wasn't a bad anything. It just. We had different priorities and chose to dissolve our partnership. Fortunately for us, we did it very amicably. But there's a lot of times it's not very amicable and there's a lot of emotions attached to it.

And it's much better to get that worked out ahead of time because you don't want to try to dissolve things when you're already upset. If you can already have it prearranged so that, okay, we're going to take our toys and go home, it's a lot better that way. That makes sense. So after that initial six week onboarding process, what comes next?

So we'll work together to put together a strategic plan. And there's different models that I use. Some of it could just be pure coaching, which is we put the strategic plan together, we'll meet every two weeks, then we'll go through where you are on that and we'll come with up, up with specific things that you need to get done over the next couple of months. And it can, some of the work that I do can fall right into any traction plan or what is it? Eos, EOS system, that kind of thing. I don't do eos. I'm not certified in eos. But the, the things that we identify can very easily drop into. There is your rocks.

They play well together.

Exactly. And what I'm doing is with the business owner, a lot of times is just asking them the tough questions, how do you, you know about, did you get this done? Why didn't you get this done? Or thinking strategically about challenges they may have in their business, or pushing them forward on the things that I know they don't want to do, but they really need to do. And creating that cadence of accountability because as a CEO, it's really easy to duck and hide from yourself, you know.

Because you don't have anyone to hold you accountable.

Exactly. And so a lot of times the role I'm playing is I'm being that accountable advisor to you, which is saying, okay, we said you really want to get here, right. We said we're going to take these four things to get you there. You've not done any of them. And so what are we going to do to move forward or is this no longer a priority? I don't solve the problems for you. I ask you the questions so that you can solve them yourself. And that is, I believe, one of the differentiators that I have. Because when I had advisors come into My business, I either had a cookie cutter approach, which I had to follow their process, or had others that came in and wanted to take over what I was doing and basically kind of, here, let me show you. Or they didn't really show me, they did. And it frustrated the daylights out of me. And so my process really is. You have all the answers. You know what the answers are. If someone just needs to help get them out of you, I love that.

And I use that same process with my clients. I actually was working with some budgeting earlier today with a couple clients, and I'm all about self solicitation because I think when clients have ownership of a process, whatever that looks like, they're so much more likely to follow through with it. Whereas, just like you said, if I give you the answer, then what do you have invested in? Like, it's his answer, whatever. I don't know if it's actually the best answer. But where, when people say, oh, yeah, this is the course of action, I think I need to go down, that's when they really follow through. That makes a big difference.

Yeah, they get a sense of ownership for it. You know, I, I used to be the type of person that told you to do it my way. Here's my way, go do it. Just get it done. Trust me. But, you know, as moving from leading a company in the last few years, I realized that didn't work. But in particularly working with other business owners, they've gotten where they have gotten because they're really good at what they do and they know their business, they know their industry. They've gone through tough situations to get to where they are. Who am I to come in and tell them how to do their business versus maybe just ask them some questions or introducing them to other tools and, and let them choose whether that's the right tool for them or not.

So what is the. Are there one or two problems you see over and over that business owners are making or problems that they're running into?

Well, first one is financials.

As a former cfo, I thought you might say that.

Well, it's not even just former cfo. So the company I was with was founded by XGE executives. So they grew up in a world of discipline, of numbers. And so therefore I grew up in a world of discipline numbers. And you know, I had a lot of. And I could go on for a while about some of the challenges we have, but we were maniacal about our numbers. It still amazes me where companies that maybe even they've got, you know, maybe they're 30 million dollar company and they don't know where and how they make money. They know they make money because the bottom line is there. And they know that at the end of the year their accountant shows them how they need to add more expenses to get their taxes down. But they still have money in the bank or whatever. They feel good about it, but they've not dug into where and how they're making their money. I have one example where one of my clients had a pretty sizable business, very successful business person, had two lines of business investing all their energy in one line of business that when we peeled back the covers was costing them a million dollars a year versus the other side was basically printing cash. Like I had never seen margins like this in my life, which was. And it was sort of like, I don't know, the owner was like, yeah, I didn't realize that. I'm like, yeah, okay, so what happened as a result, over the last couple of years, the businesses shifted. They doubled the size of their business, but focused on the right products and services versus this other one that was basically sucking the life out of the business and all the money out of the business.

It's amazing how you do that because you look at the revenue, but then you also focus on the right things. All of a sudden the multiple expands and then the value of the business does so much better. So that's a very cool thing. It makes sense. I've seen that, I mean both personal finances and in business that like I said, as long as people are making money, they don't worry about it. They don't worry about what are my costs, what is my actual margin. They just say I'm good to go, not going to overthink it.

One of the other things is, and one of the biggest opportunities I found in a lot of business is the opportunity for identifying recurring revenue. And recurring revenue is different than reoccurring revenue. Reoccurring means I come back and buy from you, but I don't really have a commitment to buy from you. Recurring revenue is, I have more of a commitment to come back subscription or something like that. Exactly like that. And if you're able to implement a recurring revenue model within your business that automatically accelerates your value, it's probably one of the biggest influencers that you can have on your value of your business.

That makes sense. If you're buying for cash flow and you can say 25%, 50% or more of my revenue is it's going to transfer. It's not Based on the relationship, it's based on the value that they're getting out of it. Do you see that that subscription model or that recurring revenue is more available for certain industries versus others?

Actually, no. There's several different models out there and I don't have the list off the top of my head, but if anybody listening sends me an email, I'll be more than happy to send them the list of the different models. Every business can find a recurring revenue model. You just have to be a little creative and you got to think about it. And sometimes it takes a little more work than you want to. Doesn't mean you have to implement it. But there's ways to create recurring revenue models. In most businesses, it's really when you got to be looking at products and services in your business and even taking your services and turning them into products that recur over and over again. Even in my business, one of the things that I'm working towards right now is how do I create a passive income stream out of this, including how do I create a recurring revenue model out of what I do? And part of that comes from content. So it's creating content and training and things like that that can be repeatable, reusable, and I don't necessarily have to be the one doing it either.

Yeah, that makes sense. So just as a side note, where are you at with that? Are you going to be teaching courses? Is this. What does that look like?

Well, I'll get back to you on that.

How are you making more Linda's.

You know, it's funny, that's a piece that, you know, this is a quandary a lot of business people go through, and myself included is I'm trying to decide how I want to scale her if I do. You know, I have this conversation with someone earlier today, which is, you know, I ran a hundred million dollar business. I've checked that box, right? I've done that. I don't need to prove my worth to anybody. And yes, I would like to be in a position where I could sell my company one day. But there's also something to be said for not having to deal with a bunch of employees, not having to deal with a lot of different things, and the buck stops with me completely. But I am. I'm in the process of looking for a good financial analyst to help me with some of that work and a couple other things. So we'll see where that goes.

Have you ever read Small Giants?

I think you gave. You told me about that book and I haven't Read it yet.

So that speaks exactly what you're talking about. That decision. Do I want to stay? Do I want to be the very best, top of class in. In the size that I'm at, or do I want to. Do I want to scale? And like you said it. It really is a decision because you don't want to get stuck in that awkward middle. I think that's hard because your margins get compressed. If you're not really trying to scale or if you're not saying, you know, not small, but, like reasonably sized, I mean, you just kind of flounder. So that makes sense that you're looking at that.

I say business. I mean, I see businesses out there with a heck of a lot more revenue than I have, making a lot less money than I make. And so I'm like, do I really want to go there? This isn't bad, you know, and the consulting business, when it's just you, the margins are pretty darn good, you know, and so it's a quandary that I'm going through just like everybody else. And I have a coach just like my business owners do, because it's hard to coach yourself, and it's hard to do things for yourself. And. And so I used to be resistant to coaches. I was like, who's telling me what to do? I know what I'm doing. But I tell you what, when I leaned in to having a coach, it's made the biggest difference for me.

So how did you find a coach? Is it a coach that is specific to your industry, or are they a general business coach?

Well, I've had both. So I had one that was very. Just a general business coach that I had for about six months. And she really helped me lean into who I was and what I'm doing and really stay focused and kind of help me overcome some of those confidence things that we all have. Our, you know, our little voices get in our way. Right. The current coach I'm working with is focused. Is really works a lot with consultants and advisors and helping them grow their business and challenge them for the marketing aspect. And I'll tell you, last week, it was really funny. He called me out and he goes, what are you afraid of? Like, why aren't you moving? What are you afraid of? I'm like, don't ask me that question. Really, what are you afraid of? And, you know, it's really funny. I didn't know how to answer that question, but just being asked that, it pushed me a little harder to go, what am I afraid of? And what does that. What does that. How does that change the way I approach the next step in my business?

I know what I'm afraid of. I'm afraid of failure. That's my absolute. Well, failures, mediocrity. Those are my absolute two biggest fears. That's a side note. We won't. Don't need to go past that.

You know, ironically, my fears of success.

Interesting.

I'm a fear of that. I'm afraid of big success. I've failed before. I get back up and I'll get it over again. I mean, I've just. I've had things in my life, and that's like, you know what? I can figure this out. I'm not. I don't feel like. I feel like we'll always find a way. But that success piece in some cases intimidates me.

What is success for you?

I think success for me. Well, let me go back. The success of. I think that putting myself out there on a broader platform. And, you know, like, even when I. So for those of you that don't know, I published a book on bourbon, and even when I took that out there, it probably could have blown up into something more, but I wanted to protect my privacy a little bit more. And it was really hard for me to put myself completely out there. On the flip side, as I'm looking at what I'm doing now, ideally, what I want to be able to do is do a lot more speaking engagements, do workshops and things like that. And there's part of me that's afraid of that. It's afraid of being out there on that public stage because, you know, social media isn't very kind anymore. They can be really tough.

So what I'm hearing is it's partially a fear of success, but it's also a fear of rejection.

Yeah, you're right.

That's probably the bigger thing because I understand that. I think it goes back. For me, my fear of failure is that if people see me as a failure, they'll reject me. So it's funny, I think a lot of things kind of tend back towards that.

That's a really good point. And I think, you know, every business owner faces that. And it could be rejection come from different places. Meaning, did I let down my employees? Did I let down my family? Did I let down all the people around me? And what does that mean? And it's one of the things that I've had to learn to do is just get the voices out of my head and just keep pushing forward.

Do you ever have Imposter syndrome. I know, we all do. I feel like that's the most common thing that I think it's been voiced more over the last few years where people are like, oh, yeah, of course.

I have that, but I will tell you that. And I have days of it. Used to be it was a little more. But, you know, when you find your purpose and you find your passion, a lot of that imposter syndrome goes away. And not that I don't still have it. There's certain places do and places where I feel like I'm going back and I'm a teenager again walking into a room and I don't know anybody right with the mean girls. But the. The thing is, I have found, particularly in the last year, as I've discovered and leaned into the gifts, frankly, that I've been given. And it is my duty and my responsibility to use those gifts. And the more I lean into that and my faith and the fact that I was put on this earth to do what I'm doing, some of that imposter syndrome starts to go away.

You know, I like that. I've actually never really heard that answer for how to deal with it before, but I think that's a fantastic answer. You know, one of my favorite verses is Jeremiah 29:11. Know the plans that I have for you. And so if you know what those planes are, if you know what you're here to do, then you're okay, you're good to go. That's interesting.

When you also have a responsibility, right? That's the other piece that I found in my faith is I have a responsibility. I've been given these gifts and I need to use them. I need to use them for good.

It's a stewardship thing.

Yeah, exactly. And if I don't, then I'm dishonoring myself and others and, you know, a higher being. And even if you're not religious, it still is. You're here for some reason. It doesn't have to be. You may not believe it's God put you here for some reason, but you are here for some reason and you've been given circumstances and experiences that should lead you hopefully down the path of what you've been put here for.

Yeah, I totally, totally agree. So I'm going to jump back for a second because you mentioned that you do work with a coach. What are the other members of the team that you think a business owner should have around, whether that's a business coach, strategy coach, Maybe it's a really good accountant, just kind of what does your perfect team look like, whether you're looking to sell or not?

Well, I think it depends on the size of your business and what kind of business you have within, in or out of your business. And I'm not saying this because it's you, but I believe everybody needs a good financial advisor. You need to have an established banking relationship somewhere. And even if you're a small business, small business, you may be just starting out. Go find a smaller bank, a community bank, or a regional bank and open up an account. You may only have a hundred bucks in that account, but open an account and start to establish a relationship. Because Covid was. I tried not to use that word. I tried staying away from the C word, but I used the C word. But during that period of time, what people ended up when it came to the PPE and all that stuff, the only way you got front of the line was you had an existing account. Plus, I find that regional banks will spend time with you, helping you grow your business, helping you think about your business. So that's the, you know, financial advisor, your banker. I think a good. If you're not comfortable with finances, a good bookkeeper and a good accountant, and making sure that it's an accountant and your accountants can grow. You can change accountants over time. You may start with a small accountant, a single person firm, and as your business grows, they may grow, you may grow beyond with that. And it's okay to change firms, by the way. Just because you had them for 10 years doesn't mean you have to stay with them. Because as your business gets more complicated, your accounting and your finances get more complicated and it may be time to move to a bigger firm. I think once you get to a certain point. Well, let me back up. I think if you've got a good business with a good name and everything, trademark attorney is really important.

Something that most people probably don't think about.

They don't think about. And I was. And the way I learned it was with my other business where, you know, whiskey, chicks and bourbon badass was trademarks that I didn't want anybody else getting a hold of. And so I went down that path, learned a heck of a lot about that. My husband's probably more of an expert on that than me. I just kind of like you deal with it. I don't want to deal with it. But a good trademark attorney and then a good business attorney at the very least. And some of this stuff you can get through tools like Legalshield and other things like that. Where you can go out, but you need to draft up the agreements early in your business. You need to. And I think also having a good support group of other business owners is really important. And find that either through networking or organizations or getting in a mastermind group or there's Vistage groups out there, that kind of thing. Even when you're small and even because there's a lot in the startup community, there's some groups that you can get into, but connect yourself with others. Not necessarily in the same business you're in, but others that have gone through some of the stuff that you've gone through and sometimes can hold you accountable, more so than even an advisor can sometimes.

Would you recommend finding a mastermind group of your peers or people who are slightly ahead of you?

I think a variety is always good, and I actually think that it's good to have them outside your industry because one, you want to be able to be transparent. Right. If you get somebody sitting around the table that does what you do and. And you're competing with them, that becomes a little uncomfortable sometimes because you can't let out that, oh, my God, I just lost my biggest client or that I screwed up this financial analysis that.

You know, or the flip side for me is I found a really great marketing tactic and I don't want them to copy it or whatever that looks like. I mean, there are a lot of different ways why you wouldn't want to, you know, show your hand.

Yeah. I think you also can recognize what you're good at, what you're not good at. You know, fortunately for me, I know finances, so I do my own. I do a lot of my own. Right. I have a good accountant that I lean into, but I do a lot of the other stuff. Marketing, I thought I could do it myself, but no, marketing, I'm leaning into. I'm actually just working with somebody right now to recreate my whole marketing strategy.

So that's interesting because I think you do a great job of the content marketing that you're talking about earlier. You put a lot out there. You've written books, you have podcasts. You do all, you know, you speak a lot. And being able to create that seems like that's such a great core of your marketing that you can leverage.

It's also a time suck.

We're recording my podcast right now. I know all about it.

There's things in it that I love and there's things that I want to continue to do, but at the same time, it's leaning into if I want to as you said, that small become that small giant. I really need to start leaning into others to do things that I can do, but I shouldn't do.

It's not the highest and best use of your time.

Yeah. Gina Wickman. And I know it's reused from a lot of different other consultants out there, but one of the things he has in his list of things that he lives by is he doesn't do work that he can pay somebody else $25 an hour to do.

That makes sense.

It.

You can. You can outsource it. You can be happy. And if it's reposting on social media or if it's writing up, I'll put it this way. I don't write my own show notes for my podcast. Have someone else do that, because it's a lot easier to do that. He's better at it than I am, and he's a lot more efficient at it than I am.

Just like today, I had to prepare some analysis for a client, and I actually was proud of myself because I would have sat down and done it myself. And like, with, wait a minute, I got a really good VA and she's excellent. And I'm like, I picked up the phone, I was like, can you do this? She goes, sure, no problem. And she'll have it turned around by tomorrow morning. And I didn't have to do it. Versus rushing and trying to do it and probably making mistakes on it.

That's a win. That's a very big win. So I'm kind of thinking, again, I'm jumping around a little bit, but if someone is looking to sell in the next couple years, what are the things they need to be doing? So do they need to go ahead and really lean into that value creation and start delegating more? Is.

I think the very first thing is they gotta know what their business is worth.

Okay.

Okay. Because here's the thing. Whatever circle you run in, somebody around, you sold their business, and they sold it for. Wow, he sold his business for $5 million. I'm a lot smarter than him. And not only that, but I see how he runs his business. And that business really does not impress me. My business is a lot better. But what you don't know is that he's an industry that has the higher multiple. He also has. He may not be running the business very well, but he's got loyal customers that have been with him for seven years. And he's got a recurring revenue model that helps lean in. That might be interesting. And he's in a He's in a space that other people are really interested in or he found a strategic buyer who is more about. He's a perfect fit to fill out their portfolio. But your business, which may be better ran and may be pulling off more profit, may be worth less than his because there's so many factors that go into it. And don't assume a lot of people think if I have a five million dollar revenue business, that it's a five million dollar valuation, five million dollar business or $10 million business, or $20 million.

May be worth nothing if that value doesn't transfer. Right.

Or exactly. Or here's the biggest problem most business maker business owners make. Everything is dependent upon them and all the client. You know, a lot of business owners take pride in the fact that they own. They know every customer by name. That customer can call me, they can reach out to me. I touch base with them every single week and I make sure everything's done. And that's a point of pride for a lot of business owners. That doesn't work for buyers because you're not gonna be there. And if you're the key that's holding everything together, guess what? Your business isn't worth anything.

I think that's probably a really scary realization for so many people because, well, kind of a side note, you know, baby boomers are getting into their mid to late 60s, early 70s. Are you seeing an acceleration in exits due to that?

Here's what I'm seeing is yes, there are a lot of them trying to go out there and sell it, but they didn't take time to prepare for it. And they're of the age that I want to be out in the next year or two or the next couple years. And you're looking at going, I don't know. There are many people out there, unfortunately, and sadly enough that are just walking away from their business and they're just walking away and shutting the doors. And the economy, the impact that has on the economy is so huge because these smaller businesses employ so many people. And when these smaller businesses start to fold up because they can't find anybody to transition to, well, those jobs go away as well. Particularly when you're talking about the trades. The trades is probably one of the biggest areas where if you're a business owner and you're in the trades, and I know hiring people are really difficult right now, but invest in training and keeping them on board and getting them vested in your business, a lot of business owners think that they could do it the way they did it. For the last 30 years, I can get by with paying you a little bit versus if you want somebody to stay, make your business worth more, invest in them so that they stay around, so that when you're ready to go, your business is worth something.

That makes a lot of sense. So it almost sounds like. It sounds like it's a good time to keep buying a business if you're looking to start picking things up.

It can be. It can be a good time, but it depends. There's a reason why people are buying those businesses.

Oh, you know.

You know, there's. There's reasons why people aren't. It's, you know, it's funny, I was just listening to an analyst report a couple days ago which was talking about, you know, in the market, it's the balance between the buyer and the seller. Seller. You know, for the last 18 to 24 months, it's been a seller's market. Just like real estate, it's been a seller's market. It's starting to weigh a little bit more to the buyer market and probably will level out a little bit. There was some discussion on the impact of inflation and all that kind of stuff, but it does have buyers thinking about how secure is that cash flow? Can I keep this business going the way that I did, the way it was being done previously? So it'll be interesting to see what happens over the next year or so with inflation. But the predictions are it kind of maintains a little bit. Maintains a balance, but I think that also depends on industry, too.

Yeah, I'm thinking about, you know, interest rates are going up, cost of capital is going up, discount rates are going up. So do you think that will impact valuation numbers?

Possibly. I mean, here's the reality, and I've not been doing this long enough. When I started to get into it was when things started getting really good. Right. When there's tons of cash and tons of money out there. So I don't have the experience on what it's like when it's down. But if you're a good positive cash flow business, that my return on capital is there. Those are the deals that people are going to fight for.

People will buy cash flow no matter what the numbers look like.

And, you know, that's the other thing we talk about, finances. A lot of business owners don't understand cash flow. They don't know how to manage it. They don't know how. And actually, if you're starting a business, that's probably the first thing you need to learn is how to manage your Cash flow because a lot of businesses will go under because they, even if.

They'Re making money, their cash flow doesn't work, align with their inflows, aren't aligned with their outflows. If you're net 30 or net 60 versus you have to pay. Yeah, no, it makes sense. So if a new business owner wanted to be educated, they just want to start learning, okay, where do I learn about cash flow? Where do I learn about a P and L, all that? Where would they go?

That's a great question. There is a website out there and I'm probably going to get it wrong but I want to say it's accounting cfo. Really good free website that really goes into the basics of finance.

Very cool.

Really good. And you know the goal for me over time is to be able to get those that out there for people to go to but not quite ready yet. So yeah, come back and ask me that in a year.

Well, you know, as a show note, you know, whenever she gets that other I'll update the show notes, they'll be there. So that's really cool actually. Super excited to see what you end.

Up doing with that.

I think that'll be fun. So kind of wrapping up, getting closer to the end. But I kind of want to talk about, you know, once a business owner is sold, how do they handle that transition process? Because I know and there's a couple different ways you can answer this, but thinking about the business owner that sells and walks away, obviously a lot of their identity is wrapped up in that business or at least that's my experience. And so it's how does that transition look like? Or if a business owner sells but then they stick around for a year or two is an earn out.

There's all different. There's no one size fits all. First of all, it's important to note three out of four business owners profoundly regret selling their business one year later.

That's terrifying.

Well, and the goal a part of with SEPA and some of the stuff that the organization we both belong to is to figure out how do you change those statistics? There's two reasons why three out of four aren't happy afterwards. One, they didn't get the price they wanted and that's because they maybe did not get a realistic view of what their price was and or they didn't get a chance to work through that and understand how they can increase the value and get that money out of it. The second thing is they didn't have any plans afterwards. They didn't know what they were going to do. Do you know, you can't go from running a business and being involved in it 40, 50, 60 hours a week and going to do nothing. And so you have to make the decision for yourself. What does that next chapter look like? It's one of the reasons why I don't use the word exit planning a lot. I use transition planning because it's transitioning of your business, it's transition of you, and it's transitioning to that next chapter. It doesn't necessarily mean that it's a finality, but it is. I'm transitioning to the next chapter of my life and could be a better chapter than the first, right?

Yep.

So you got to really mindfully think about that. When it comes to what that transition looks like is you. It really kind of goes into the deal structure that comes into play. You get to decide whether you want to stay or not. It can be part of the deal you negotiate. Maybe I only want to stay and I'll be an advisor. Maybe I want to stay because I want to keep moving, working in the business. I see a lot of, and I've had this conversation with a couple people is the intent of staying in the business sounds like a good idea at the time. And when I left the company I was with for 20 years, you know, I had the opportunity to stay a little longer, figure out how to transition, and I stayed for an extra three months. Probably were the most miserable three months of my life.

Did you find that it was odd because you were went from being the.

Boss to as lame duck as a lame duck. And also they were starting to implement changes that went against what I wanted to do and how I did it. And you go back to that, that feeling rejected. That rejection starts to come in. So, you know, once again, for you as an individual, and it varies, it really comes down to what you want. And have you thought through the ripple effects of the decision that you want, have and that you make? And I'll share with you on one last note. Best advice I ever gotten in my career, the very best, and it happened when I was transitioning out of my previous role is in life. You can choose to take passengers or hostages, and passengers are a lot more fun to travel with. So as you're making these decisions about your business, make sure that you've got the people around you that want to be on board with you and that you're not just dragging them along the way.

I think that's absolutely wonderful advice. And honestly, I don't think I can follow up with that on anything else. So I just want to thank you for joining me today because I really enjoyed the conversation. It's always fun.

Thank you. I really always enjoy spending time with you and everyone.

That was Linda Rufenac. And let me actually ask one more question. Sorry. If someone wanted to find you, where can they find you?

So you can reach me on LinkedIn, it's Lindarufenac. R u f f. My email is Linda e x e c u I-t y.com and that's the same for my website. And seriously, feel free to reach out to me. I will always spend 45 minutes with any business owner learning about their business and seeing if I can help.

Thank you so much.

Thank you.

Friends. We hope you enjoyed this episode. If you'd like to learn more, visit jeb's website@plentifulwealth.com you can follow us on Facebook, LinkedIn, Instagram, and YouTube. Before we go, we'd like to encourage you to subscribe to the Plentiful wealth podcast. Remember, money is only a tool, so let Jeb Jarrell help you to maximize your return on life.

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