The Exit Engine Podcast: Episode 1

Welcome to the My Exit Engine Podcast, Episode 1. Here we are, John.

Joe, good morning to you.

Good morning to you. This is exciting because this is, uh, today is the first day of the Exit Engine Podcast. This is like the culmination of, of months of like planning and thinking and, and stuff. And this is really, really exciting here to be with you, man.

I, I love it. I'm excited to get started. And, um, I'm looking forward to talking about, uh, ExitEngine and how we can help entrepreneurs, founders, and co-founders to, uh, plan and sell their business.

Absolutely. Awesome. So, um, let's talk a bit, a little bit about us first. So, um, Ladies and gentlemen, this is John Kniff. John, the, the maven of mergers, the, the— let's see, what else? The maven of mergers, the— I don't know, the—

I like to think of myself as I know enough to be dangerous.

There you go. That's it.

I've worked on mergers and acquisitions throughout my career. I've been in real estate for the last— for about 10 years. I personally worked on acquisitions at my prior company, my most recent company, a couple of successful ones, a couple of ones that we didn't buy that actually probably could be defined as successes because we didn't do them. We'll probably talk about that in the future, right? You need to find the right partner and the right plan.

Yeah.

You know, I'm excited to talk to Jo today, and I'll bring my experience to the table, and I look forward to some questions and some comments from, from you all.

Awesome. Very cool. I'm Jo Stapleton, similar background to John, been in kind of a serial entrepreneur, been through, had about 4 different companies in my, in my life, not including the bicycle shop I had when I was about 12 years old that I actually got in trouble for having because I charged the neighborhood kids $5 to fix their bikes. That was the beginning of my entrepreneurial spirit. I wish I had that bike shop today. That was the most fun I ever had. But yeah, a lot of different— been through the mergers and acquisitions process several times, as you have experienced. One of them was probably construed as positive. The rest of them probably were not successes. But that's why we're here, and that's what makes you and I uniquely qualified to talk about this stuff, because now we obviously, both of us are in the mergers and acquisitions field. We play mostly in the mid-market space. But one of the things that we realized when we got here was, what the heck is going on in this space? It's insane. So just a little background level set. So one of the things that we discovered really early on, and one of the reasons John and I connected on this stuff was, you know, Based on where we come from and where we've experienced, you know, at least I can speak for myself from a business standpoint, I've never seen anything like the mergers and acquisitions space, especially in the mid-market. It's like, it's like the Wild West. It's like we just got off a bus and you walked into some downtown someplace in like North Dakota with, and there's like a saloon and some people are coming out and they're dressed in tumbleweed. It's what, but that yet that this is the space. What is going on?

It's one of those things where there's so much money on one side looking to acquire quality businesses, and on the other side, while there are a lot of quality businesses out there and they run their businesses, the business owners are entrepreneurial and successful and are making money. Oftentimes what I've found is they don't— they're not thinking of themselves as a viable business for sale. they are working in the business as opposed to working on their business. And for a buyer, for someone looking to acquire that business, it's difficult for a buyer to justify buying a business like that if their financials aren't in order, if their customer lists aren't in order, if they don't have the right technology. So it's really hard when they have these professional people with millions and billions of dollars of capital, dry powder as they call it in the industry, And they can't find businesses to buy that are viable.

We've got, like you said, a serious lopsided situation where— so even at Gottesman, who is our M&A employer, we've got over 1,400 registered buyers. We've got companies that want to buy other companies or are actively looking every day. Most of them are private equity firms, and we can talk a little bit more specifically about private equity firms and what they are and kind of what they do down the road. But understand that there is billions of dollars sitting in funds right now that people want to use to be able to purchase businesses for investment reasons. They want to buy it to hold on to it for 20 years and retire. They want to buy it to merge with their existing organization for growth. They want to be able to purchase it for an investment of 3 to 5 years and then turn around, grow it a little bit, turn around and sell it for a profit, just like you would with real estate. So there's so many kind of permutations of what goes on here, yet there is a significant lack of businesses for sale. And it's not just a matter of them not being for sale, it's a matter of them being fundamentally solid businesses that would make a good investment.

Yeah, no, well said. Exactly correct. Um, and, and part of what we are doing with ExitEngine is we are going to walk through and discuss on this, uh, on this podcast what you can do to prepare your company for a successful exit? What are the things that you can do as the owner, as the founder, as the, the, the chief cook and bottle washer? Frankly, you're doing everything at the business. But oftentimes what Joe and I have found is they're not doing the things we're talking about on this podcast because they have all sorts of other things to do. They have to make sure that the bills are paid. They have to make sure that the rent is paid. They have to make sure that customers are happy. But also the things that they have to do to potentially prepare their business. And those things can be processes that you do monthly, weekly, quarterly. It sounds like extra work, and it is, but it's necessary when you get to the point where you want to sell your business.

And it may be actually— it may be the most important work. So, yeah, understanding that fires and squeaky wheels get the grease, and everybody's out around putting fires out and the whole thing. I know that you did that in your in your career and your jobs, especially when you're working for another company, you're basically, you know, a lot of your job is kind of like firefighting, right? What's the hot problem today that I got to deal with? Right. And of course, when you're the CEO or the owner of the company, that's just like an unstoppable barrage of issues, right?

An old CEO that I used to work for called it the whirlwind. And you can get wrapped up in the whirlwind with everything if you don't prioritize these things and get these things done. You will be forever trapped in the whirlwind.

That's right. And the reality is, is that when it comes to exit planning in particular, what most people don't realize is that an exit plan is part of your overall and even your initial business plan strategy, right? Because why? Because we want the exit, we want the goal of how I exit to be the first thing That I consider, right? Why? Because you need to, you wanna, if you're gonna operate your business and you're gonna move your business and you're the captain of the ship and you're moving and steering the business and keeping it on course and doing all that stuff, whether you're in the weeds or if you're just management or what, however you approach your business, the ability to be able to know where you're headed, right, is a major, major piece of business ownership. That most people, quite frankly, completely ignore. They're so concerned about what? They're concerned about today. Like you said, they're concerned about the, you know, the whirlwind that they're in, but they're also concerned about their income, right? They're concerned about making sure that their family gets fed, or, or maybe that their family go— their kids go to the best schools, or whatever those things are. So the cash and the kind of immediate, uh, you know, stuff that comes out of a business becomes the priority. Makes a lot of sense. It's just human nature. But if you know where you want to head at the end and work towards that, right, as opposed to— that becomes your beacon. It's your, like, your guiding light. Like, what do you want your— what do you want the end result to be, right? And not just, oh, I want to be a millionaire or whatever. Maybe that's fine, but what does it mean to be a millionaire? What is the thing that you want to do with your life after this? What is this thing taking you towards? Because that way, now you can drive the ship the right way.

And it's, and it's very much like managing a project, right? So this isn't a project with an objective, and the objective is to sell your company. Well, that's the overall objective, but there's all sorts of things that need to happen in service of that objective, right? You need to have appropriate financial statements. You need to understand Your customers. You need to be able to identify how your customers are paying you. Are they recurring revenue customers? Who is the right entity to buy your company? What type of investor? One of those private equity firms that Joe mentioned. Are you gonna stay on for some period of time? Are you gonna leave right away? Do you need to get to Hawaii that quickly? Are you going to the Cayman Islands next week? Or are you gonna stick around and be a consultant? So all these things can go into that, you know, project plan, and with this in service of the objective to sell your company.

And they can shift and change over time. And if you're paying attention to it, you'll be able to actually kind of shift and, you know, dodge and parry or whatever you have to do to right as things happen. And there's when you own a company. 20 or 30 years, a lot can happen, right, in that time, right? I mean, you're talking about an entire generation. I mean, your kids grow up. Um, you know, there's the— that's just an example of something that's easy to kind of see and, and, and, and watch time march on is by seeing your kids grow, right? The same thing with seeing your business grow. To be able to, to understand that what I want out of this business is X, whatever that is for you, But the idea that, that being able to be caught up and updated enough and squared away enough on at least on an annual basis, that if something should go wrong, you have the ability to be at that point to be able to shift and go, all right, now I got to get rid of the business now. But the good news is, if I have to get rid of the business now, since I've done my work, I'm going to get rid of the business in the best possible scenario that I can at this point in time under these circumstances.

Yeah, and to build on that, Joe, you're exactly right. It's one of those things where you want to have a plan. It's better to have a plan and not use it than need it and not have it, right? So if you have a plan, and even if it shifts, it changes over time, as Joe mentioned about, um, it's like your kids growing up. Yeah, they change, they grow, they go to school. You never know, you could wake up one morning and say, I want to sell my business, and to have that proactive plan and the efforts you've put in to have that plan on the shelf that you can take off and pull out of your Google Doc or pull out of your computer and say, all right, I've got these checkboxes done, I gotta do these 2 more, I gotta talk to my attorney and make sure my accountant is okay with this, and what's the best way to maximize my profits and maximize the, sorry, the sale from the profit of my business. Again, it's way better to have a plan and not need it than need one and not have it.

Absolutely. And remember, there's so many ways, potential exit strategies out there. It's like unique. It's like picking a tie, man. It's like, it's like whatever you're into, it's very specific to you and your world and where you are. And remember, it affects not just the business, but potentially affects the whole rest of your life as well. So, it affects your spouse, it affects your children potentially, it affects The future, even selling the business at that point affects the future and what you can do and where you are and what your family can do and all kinds of stuff too, right?

Joe, what was the stat that you mentioned about successful versus unsuccessful?

No, it's insane. So, I came across this the other day and I will put up in the notes, we'll put up where I got this so you can, we can check it and check my math on it. But essentially, so, 20, 20 to 30%, and I think that's generous, 20 to 30%, only 20 to 30% of all business owners, all business owners successfully, and we can determine, we can figure out what that actually means, successful, but, you know, successfully actually sell their, are able to sell their businesses, you know, at all, at all. That means that 70 to 80% of all businesses in the U.S., and this is worldwide, Okay. Will somehow not make it to that stage, or, or, and they'll— what will happen to them? They either die on the— completely die on the vine. They are— they go under, um, in most of them in the first 5 years. Um, they are, um, what else? Uh, oh, uh, people get sick, people die. Um, there's all kinds of things, unfortunately, that happen to human beings when the— even whether they own a business or not, and that's the kind of thing that can affect it. So The reality is, is that we're seeing a very, very small percentage, you know, of people, of businesses successfully transition to the next thing. I'll give you one other stat because this is something that comes up all the time too. So only 30% of— sorry, 70% of people who own single-owner businesses believed at some point that their progeny Children, their grandchildren, whatever, would succeed them in taking over the business. Only about 30% of them actually do. So that's a great example of what you were saying before about having a plan and then being able to actually shift based on where you are and what's happening, right? These life events happen. College comes up. Oh no, now I've got it. I need cash for this. Um, my wife wants to travel when we retire. I need to have, you know, X amount of money. So there's retirement planning involved, there's succession planning involved, there is, there are, there is growth plan involved. Every single thing that you do for your business actually revolves around time you leave, you know, is preparing you for leaving the business because that's ultimately the goal. Unless you're completely satisfied just working at a job that you happen to own, where you happen to own the company, because that's essentially what you're doing.

Yeah. One interesting story that I have from one of the acquisitions that I worked on was it was one of those businesses that made it to the second generation successfully. They grew the business. There were 6 siblings. 5 of them were involved in the business. And you can imagine that the third generation, like splitting up the business and having it succeed, go to the third generation. presented all sorts of problems because some of them were in the business, some of them were out of the business, some of them wanted to buy it, but the uncles of some of them didn't get along. And when you have that many people— I'm from a big family, I have 4 sisters, and I grew up in a family business— but this, this entity just— that's one of the reasons why businesses typically don't transition and make it to like the second generation success. The third generation is almost impossible. Because of it just gets too hairy. There's too many things that are outstanding with the business, and it just cannot survive. So it points to Joe's stat of that's why so few businesses are successfully sold.

And I'll give you the— there's one underpinning to all of this that I think really drives everything that we talk about here. We're talking about human beings. And the reality is, is that human beings do things that we don't understand. They do things for all kinds of reasons that are innate and, you know, come out of growing up and, you know, trauma, but all kinds of things that happen to human beings, right? I mean, it's just that's just the truth. And so when any individual human being is faced with choices, which you are every day. And as a business owner, you're potentially faced with tons of choices, or at least tons of decisions to make every day. And that doesn't preclude you from the decisions you have to make outside of the business about your life and about where you are and about who you're married to and what you want to do, you know, what you want out of your life and all that stuff. And look, the reality is most people kind of limit themselves, you know, and I think one of the things that I like about what we're putting together is that we're taking a decidedly human approach to this. Um, Exit Engine is going to all be about not just about, about the financial things, and in fact, it'll probably be less about the financial end of things and more about the human side of things in terms of how it is that you can position yourself for success. Um, understanding that we may get into a business for different reasons We may stay in the business for different reasons, and we all are going to get out of the business for different reasons, but that there is something here for everybody. And that if we can, if you can, as a human, work together with other humans to learn and grow, to be able to get advice from other human beings who know what they're doing, and we're not talking about us, by the way, we're talking about actual experts. People that are, you know, that obviously have spent a lot of time in certain areas of the business and can talk about stuff. So we'll be talking, obviously, you know, the, the idea is to, to be able to have access to those people, um, and, and really to be able to, uh, and have what I hope will be real meaningful, um, you know, uh, learning, actionable learning.

Yeah.

Things that you'll be able to take with you and immediately, you know, Right. Implement the next day. And that you're not trying to, as you say all the time, not trying to boil the ocean. Right. You're not trying to eat the whole elephant. You're trying to take one piece at a time and go and move through it. And exit planning is not something that's— if you haven't done it before, it's not going to come naturally to you. Right? No.

And one of the, you know, one of the things we're going to— one of the other— the future podcasts we're going to do in the very near future is like 10 things or 8 things. I think it's— I think it's 10 is what we settled on is 10 things that owners forget when they are selling their company. And, and, and they miss, they forget, they, they have a checklist and, and they've forgotten a couple of things. And they get to a point in the transaction, or they get into a point where they're talking to a buyer and they don't have the answer that a buyer expects. And given our experience, we know the questions that these buyers are going to ask of, of, of you, of the business owner. And they're going to expect answers. They're going to expect financial statement information. They're going to expect profit and EBITDA mentions. And okay, what are the differences between these things? And we'll get into that in the future podcast. But these things are critical and they're based on learnings from our experience of going through an acquisition. And when we ask the questions, when I ask the questions, I'll be specific, when I ask a question and the guy didn't know, The answer, well, that's a basic, you know, what do you mean you don't know what the margin is in your business? Like, that's a scary thing when you get an answer and you know you shouldn't, you get a question, you know you should know the answer and you just, you don't know it.

So when we give these, you know, a lot of what we do is these, you know, seminars and stuff like that, right? And so the big question, one of the biggest things that trips people up in these kind of 101 and these basic programs that we do is, When I ask the question is, do you know your EBITDA? And the confusion, the confusion on people's faces about what that is and why is it, you know, even forget about why it's important, what is it? So like, these are like basic things that aren't, you know, we gotta remember here, and this is a good time to level set. This is a no judgment zone. Okay? So understand that from a business standpoint, You know, the people that we that we're you know that we're talking to here are you know our business owners of just about every stripe. Okay, some are have MBAs, right? Most do not. Okay, some people have backgrounds in accounting. Most do not. Right? Some people are really good at marketing. Most are not. But these individual things, everybody has their strengths and everybody has their weaknesses. And not so I'm not not making fun of people when they don't know what EBITDA is. But what I am trying to point out is that most people, just because you're a business owner doesn't mean you're a business person. Does that make sense? And that's okay. Like, that's okay. Like, that's the majority of—

Yeah. So that, that's expected, right? You think about all the things in your life that you're good at and you're bad at, right? There might be a reason why you have someone mow your lawn, or there might be a reason why you like to do the gardening. You like to do those things. But you know what? I don't do my own taxes. I don't do my own eye surgery or brain surgery either. If I need to, you know, certain things I can do myself, certain things I don't want to do myself.

I have a hard time with the backwards mirror doing that. That's why I don't do it. But that's—

and left-handed, right-handed, you know, so hard to go.

But you're right, that's it. I mean, the idea is that— and that's again why we're creating this, right— is that we want a place that's a safe space for people to be. And by the way, I should point out, it's also a confidential and a not— and can be an anonymous space to play. And I want to point that out because That's a good point. A lot of what goes on here is, you know, can seem, feel competitive in nature. It can feel as if there are things, secrets, trade secrets, things like that that you don't give away, want to give away. Most people do not want to say out loud that they're thinking about selling their business, especially when they're not ready yet. Because again, a lot of what we're dealing with are people who are early, very early on in the process here. You're not even close to selling, right? We want you to be here when you're close to selling to help you figure out exactly what to do in the short term. But it'll be more effective if you join us at the beginning of your journey because we can— that's how we can really optimize the journey to the eventual end. But the bottom line is that understand that this is a place that's going to be safe. Where it's going to be confidential, where you're not going to be giving away things, you're not going to be getting yourself in trouble, you're not going to get your employees upset because you're talking about this stuff. And I think one of the ways to look at it, therefore, is to look at it as a learning experience that is imperative to the operation of your business in general. And the reason is, is that a healthy business at the end that someone wants to buy is probably a pretty darn good business. And right.

Yes, absolutely.

So, so guiding towards that end of what makes— what— how can I make this the best, most attractive business to sell makes you the most— makes you a healthy business in general.

I, I couldn't have said it better myself.

Right. So we hope that ExitEngine is going to be, uh, you know, that place. Um, and I think that, you know, whether you know what EBITDA is or not right now, don't worry, you will. You'll learn why it's important. You'll learn what it means. You'll learn how to monitor it on a regular basis. Don't worry, but know that it's okay that you don't know things, right? We don't know everything, and we will be the first people to admit that. We are nobody. Nobody nobody can be an expert in this unless you do this all the time. And I think one of the other things that happens in the marketplace that makes this so unbalanced is that. Most of the time, the buyers had experience. They've been doing this. They've gone through a bunch of different things. They're using other people's money to invest, so they're extra careful. The due diligence obviously is intense. They're trying to make sure they don't make a bad investment. Whereas the buyers— the seller side, you might only do this one time in your life. Most, right?

Exactly. And there's that information as as Joe mentioned, there's that information sort of disparity and experience disparity between the buyers that are buying these businesses and the sellers that are selling them. And they often have— the buyers, I mean— have repeatable processes and have forms and have due diligence checklists. And that's what ExitEngine is for, is doing to prepare the sellers to have to take that disparity and make it more even so that So that, so that you have the answers to those questions. You have the data that these buyers are going to ask you about at your fingertips, in your head, on a spreadsheet that you can just quickly rattle off to say, my EBITDA is this, here's what my compensation is, here's what you could take out of the business, here's a, here's the valuation that I want for the business. And you can base it on facts, not some pie-in-the-sky number.

Yeah.

Hey, if you have a, if you have a $3 million EBITDA business, and you want $30 million for the business, you better have a compelling reason that you're— that the buyer should buy you for a 10x valuation. $3 million EBITDA, $30 million valuation is a 10 multiple, as we say in the industry. And if you have that, that's fine. You can often— sometimes you can get that. But if you don't have the bullet points, the justification, the financial statements, and the margins to justify that, Buyers won't take you seriously, and they won't return your phone calls, and they won't engage you seriously in the business. So again, we're getting into this in future episodes, but you need to have a realistic expectation of your business, not one that you— not the business that you want, it's the business that you have.

But what's cool is that, again, earlier on in the process, okay, the worst place to be for any kind of situation is when you're in a fire sale. Okay? Obviously, that's a terrible position to be in. Nobody wants to be in that position. It happens probably more likely than anybody would like. But I think that's why, from my mind, I think I wish someone— now, look, I got lucky. All right? I had a couple of partners in one of the businesses that I sold. It was a digital marketing company. We built it up over about 8 years. It was right. The timing was just sweet. It was right. After the dot-com crash, the first dot-com crash in 2001, we built this thing up over the next 8 years. We came, we had people coming out of the woodwork wanting to buy us. We were a boutique agency that was incredibly profitable. We were doing great work. But it was also the— but I have to give a lot of the credit to just the time in history it was.

Yeah.

We were just, a lot of it was being in the right place at the right time. I wish someone had come to us earlier on and said, I know you're not ready to sell right now, but I want you to think about right now where it is you want to be after a sale happens. What is it that you— how does that look to you? How does it feel? What is it the thing— what's the thing that you're hoping will happen personally to yourself? How will—

if we're meeting a year after the transaction, And, and we're having a cup of coffee in a Starbucks and you're happy as a clam. Why are you happy as a clam?

Right.

Um, and, and, and I have the exact opposite experience of Joe. Is Joe had— Joe benefited from the timing of the sale of one of his businesses. I was in a situation where we, because we were arguing on selling the business and we were internally fighting, the private equity firms that were talking to each of the partners realized this and they were like, do we want to buy this business? And a couple of them actually still did, but we couldn't get our act together and convince them to get a good valuation because some of us wanted to leave and told the private equity firm that. Some of us wanted to stay and told the private equity firm that. So they kind of had their fingers like, hmm. And to Joe's point, if we had had that discussion early on about Okay, who's going to stay? What's the scenario in the future? It would've been so much better off for the buyers and the sellers because we would've gotten a better valuation, we would've gotten more money, and there would've been clarity on each side of the table to say, what's going to happen with this business post-close?

That's it. Look, when anybody's making an investment in anything, and many of us are investors in other ways, we're all trying to do our homework, right? We're all trying to do the due diligence to make sure that we're not throwing good money after bad or that we're not going to lose our shirts or whatever. And sometimes we still do, right? We've all been there too.

Yeah.

But the reality is, is that if you are doing— these buyers are going to do their homework and they are only going to look at businesses that were their top levels. I mean, we go through this every day with deal flow, right? Where we're basically trying— we are out there, John and I are out there every single day Looking for deals, and we are coming across or not coming across the deals, you know, the, the amount of deals that, that, that, you know, that are being at where we're being asked to find. That's the first thing. The second thing is we can tell from a glance, right, whether this company is going to sell or not at this point already. Right.

It's so true. So funny. I was just, I was just doing that with a couple companies, and, and we could look at like, oh, this one's, this one's going to go quickly. I better get my, my buyers in on it. As soon as possible.

Yep. But so many of them are, you know, are the opposite where you're like, these people are— you're nuts. Like, what is it that you think that you're selling here and why are you asking this price? And the fact is that you're not even gonna get phone calls on it. The reality is if you're listing your business for sale and you have an absurd asking price, that is where, like John mentioned before, like where you're like, you're 10x on something and it's a, you know, and it's a company that, where the industry never really does more than 4 or 5x. Right? And you don't have a compelling reason right out front as to why that is, you're just gonna— it's just gonna go away. Because no matter how much money there is in funds right now available, and I'll— I will look up the number, but it's something like $200 billion that's available right now in private equity, something total, right? That's it. This is the— I think it's just the United States too, but in any case. $200 billion sitting there waiting to be spent. And if, and if your thing looks out of line, I am willing to ignore it. That's how much, right, it matters. Because even though I've got this money to spend, I am not going to spend one dime on a company that I don't believe, as a buyer, I don't believe is going to solve my problem. If whether that's a merger with my existing company that's operating in the same space, or whether it's a portfolio company as a private investor where I'm trying to bring on and then do add-ons to it for growth. Whatever that is, the bottom line is that we can tell, and most buyers can tell within a second whether the company is going to be a viable investment or not. Yeah.

And it's very rare that you as a seller, you're going to be able to convince, and by convince, I mean sell, if you will, sell a savvy private equity firm on a business that doesn't make sense for them. You're overwhelmingly not going to be able to do that. Not even the best salespeople are able to do that. But what you are able to do is you are able to position your business to find the right buyer for your business in the future. And, and that's what ExitEngine is, uh, is going to do, is, is helping you position your business for sale. Do we know who's gonna buy it?

No.

But with the proper positioning, with the proper, um, items and the checklist that we can provide to you, These are the things that successful businesses have done in the past, and these are the things that buyers expect of businesses that they're going to buy. So that's the philosophy, one of the philosophies of ExitEngine.

Absolutely. And that's a great segue. So we talked a little bit earlier on about kind of the methodology behind ExitEngine, the kind of philosophy, and that this is like kind of a human-based approach, right? Which is something that we think is a little bit unique even in this space. The reality is most people are focused on easy wins like valuation. Valuation is a subject and a topic that's out there all the time. You can find valuation calculators. There are people talking about what makes a good valuation all over the place. That's an easy thing to do. Our approach to this is, again, is less about the— we'll teach you the calculation. That's easy. But what we also teach you is the thinking and the feeling that goes around that valuation. That is the thing that's going to, in your brain, stop— either stop you from moving forward or propel you from moving forward in the right direction. And what I mean is, and this is just, again, just this is one example. Valuation, if I believe my business is worth more than it actually is, That's a roadblock. That's a roadblock on my map to— on my journey to exit. That is a significant roadblock because as you just pointed out, buyers are savvy. They know what the valuation should be. They can look at the numbers and go, this is what it should be. This is what I'm paying for these kinds of companies in other places. Remember, especially in the PE world, you're not the only company they're buying. Even in your industry. So the reality is most of these people specialize in an industry, and so they're buying multiple companies over years that are just like you, right? Or purported to be just like you. The difference, I think, in what we can bring to the table, and I hope that what everybody will ultimately get out of this, is that they are— we're giving you a way of thinking about it. And it's a new way. It's a new way of thinking about it that is not waiting till the end to think about it. But planning and making it part and parcel of your strategic planning on at least on an annual basis. But that we're gonna give you tools that are gonna help you think about these things in terms of your human— your humanness, because there are always things— there are things that we all want, right? And we all want those things out of life. And many times when we own a business and you think about, again, you know, 33 million some odd small businesses in the United States, add another half a million or so larger businesses on top of that. So you've got, you're close to, you know, about, about 400 mil— 4 million or so. Yeah, sorry, about, about 36 million total businesses. That's just the United States, and that doesn't include obviously globally, which there's no reason why this can't reach globally as well. But that, that when we As a human being, being able to plan what you want out of it and using that as your goal. And then, then we work the numbers, right? Then we can adjust the growth. Now we can figure out, we can look at our competition and know this year we're seeing, or, or a better example is we can look at some kind of regulation that might be happening in our industry that might affect our business. And we can work around that. And keep our valuation where we want. There's going to be lots of things that we are going to be able to do, but the— I think the big difference is the focus on, on each of these individual companies that are within our community as a, um, as, as a group of not just companies but a group of human beings who happen to own companies, right, who need— who, who are, are looking to get something out of their lives that is not just Selling the business is an end to a means to an end, right? It should be.

Yep.

What is that end? And the other, I'll give you another sobering statistic, is about 60% of business owners have no idea what that end is. Yeah. And never did.

And defining that end, what you want out of life, as Joe mentioned, there's a lot of things. Some, again, some people want to move to the Caribbean. Some people want to hike in The, you know, hiking the Appalachians. Uh, some people want to retire to a beach, some people want to retire to the mountains. What are the— what is that?

They want to go buy another business.

They want to buy another business. That's— that a lot of the entrepreneurs that I know want to change businesses, want to stay in the game, so to speak, and sell one business and buy another business. Um, take a little break, but do that. So, um, that's— as Joe mentioned, it's, it's a different approach to preparing your business for sale, which in our experience works.

So it's proactive planning, it's maximizing value, right? And it's achieving the defining what is a successful transition when it occurs. And I'll go back to another example, you know, from my situation is that I benefited from, as you mentioned, our company, we sold sold this digital marketing company, we benefited at the time from, you know, from where the market was and what was going on. And we were, you know, a lot of other— we were purchased by a big consulting company that wanted to be able to offer the digital marketing stuff to its clients. That was basically what they were purchasing. So essentially what they really were buying was like the partners, right?

Yeah.

It was essentially buying the people because the people had the expertise. And then a couple of clients that they thought they might be able to weasel their way into, and the whole thing kind of through a backdoor as well, which is something that happens, and that's all good. So the deal was good. The transition from the deal into this merger, not so great. And when I look back at that experience, I don't look back at it with, you know, oh wow, I made a bunch of money. I look back at They killed our baby, and like, and it like it haunts me to this day. Like I wish it had gone better. I had a we had to spend three years earning out, which was fine. We had to hit certain projections or maintain certain projections, obviously, to get all the money, which we did. It was fine. We were a good you know thanks to one of my partners, an incredibly healthy bottom line focused business that was that was just. was really profitable, um, and we had no debt. We had— everything was just, just, just great because our CEO really did know what he was doing, which was helpful.

Yep.

But, but what we couldn't anticipate was the way the transition was going to go and the fact that within, within a year and a half, we had completely lost who we were, who our identity. We had been sucked up into this very large kind of vacuous machine that was a very large consulting company. and who didn't know, really know what we did or how to even sell it or anything like that. And suddenly we're sitting there looking around going, you know, we completely— it was this major identity crisis. It was like, who are we? How did we get here? And I don't think I want to be here anymore. That was what— that was the feeling. It was like, I don't think I want to— this is not what I wanted to do, you know. And I left as a result. I mean, as soon as I earned out, obviously. But I mean, that was But that was it. And, um, you know, some people stayed, you know, and, and made it work. You know, most of us left, um, at the, at the earnout because of the way— so that's again, but you, you have some kind of control over that if you want. As a, as an exiting business, you can determine contractually what it is you want to happen. And the more viable a business you are, the more desirable you are financially, Right. The more leverage you have.

And to emphasize what Joe's saying is the reason that it's so important to prepare these things and to think about them before they happen is if Joe wanted to stay at the company longer term, well, that's something that should be thought about when you're preparing the company for sale. And oftentimes, as it was in my, in my case, there were different people wanted to stay. I wanted to leave. People wanted to stay in the business. And that wasn't spelled out, which was why it was difficult and why, in a similar way, when this company bought my company, it was a little bit of chaos. I exited the company, other people stayed. And if that had been spelled out beforehand, the private equity firm would have been happier, our partners would have been happier, everyone would have been on the same page. And the integration and transition, in my case— and I don't want to speak for Joe, but It could have been planned better. It could have been, OK, let's prepare Joe for staying on. Let's give him a clearly defined role. Let's prepare John for staying on. Let's give him a clearly defined role. And what are they going to do in the new entity? Because the one thing that will change is when you get bought, you're joining a larger organization that has a culture, that has a philosophy, has a way to do business that will be, by definition, different There's no question about it.

And I think what a lot of this boils down to, you know, kind of sum up is, you know, as buyers, we are sorry, sellers or potential sellers, as business owners in general, before we're even thinking about selling, we don't know what we don't know. Right. And that's the biggest thing. And I see this, there's not an adversarial relationship. But at this, like we mentioned before, there's a very unbalanced situation right now where you've got all the money and the knowledge on one side, right? The money and the knowledge on one side. And then you've got the sellers on the other, and they don't know. They are uncomfortable. Sometimes they are literally delusional. You know, there's all those stripes in there. But the reality is, is that our— so our job and our life's mission, right, as of this moment, is that we're— we want to take these people and we want to try to get them and start to move them up here, right? Simple enough.

Exactly. Get that, get that information and that knowledge up to the same level so that you're on a level playing field. And because, again, you're selling your baby, you're selling your business, you're selling the thing that you've nurtured For years.

Your life's work. Yeah, your life's work.

And you don't want to at the end, oh, just throw it in and say, yes, that's fine, and settle for something. You definitely don't want to settle when doing this. You want to maximize— you need to, for you, your family, whoever, maximize the value that your business can provide to you.

That's exactly right. And we're going to give you all the tools and everything that you need to be able to do that. And by the way, we're going to do it in a really And a really, really fun, we hope fun, engaging—

Collegial.

Exactly. Collegial. That's a great word. Excellent.

Because, because, because just like Joe's experiences are different than my experiences and I bring certain things to the table, he brings certain things to the table. The group, yes, you'll learn from us. Okay, that's fine. You'll, you'll come. But I bet, and this is, this happens in all, in all these types of seminars I've been in. is you learn as much from us and the experts that we bring in as you do from the other participants, because they all have their own strengths. So it's the power of the community and the network that you'll learn from.

That's exactly right.

You have—

Exactly right.

Yeah, go ahead, Sergio.

No, I was gonna say, no, absolutely. And that's why also, look, even our— even the experts that we'll bring in are themselves small businesses, right? They're like— it's like they're not just a client, they're a member. The reality is, is that these people are— everybody that we'll have that you will meet, you know, at ExitEngine is going to be somebody who is a member of ExitEngine.

Correct.

And whether they're, you know, attorneys or CPAs or insurance people or lenders or wealth managers or anybody that you essentially— we will bring everybody we possibly can to bear for you. To be able to learn as much as you possibly can and understand that there are so many different permutations and so many different situations that a lot of it will be, you know, might be seen in general, but we'll always be able to get deeper with everybody individually too in one-on-ones and things like that. So we're trying to make a level that everybody can engage with on some level, whatever they're comfortable, however they're comfortable engaging. We can promise that we will keep it again collegiate. We promise we'll keep it, you know, we'll keep it fun, and we promise that we'll keep it confidential, which is again, we understand the importance of doing that, you know. And and so we don't need the good news about what we're doing here, John, is that we don't need to talk about industries as much as we need to talk about right as we need to talk about approach and things like that because we don't need to know what company you're in. Nobody else needs to know that you own a digital marketing company that's in a highly competitive space. You know, nobody needs to know that.

Right. The challenges that you as a business owner face are similar regardless of the industry. Yeah, the valuation that the private equity firm will pay is a little bit different, but the challenges and the things you can do to prepare are industry agnostic. You should do this no matter what industry you're in, and you can benefit no matter what industry you're in.

That's right. And, and so what we're— when we put cohorts together and groups and stuff like that together, which you'll, which you'll all see, you know, moving forward, is, um, if you're a part of this, is that you'll be part— you'll be put in a cohort that is more about where you are on the journey than where it is about, about industry or business type or anything like that, right?

And, and Joe, what— because I think we're bumping up against some time here.

Yeah, definitely.

What do we, you know, from the Exit Engine community, what do we want some folks to do after and after they engage with us?

Yeah, I think that the first thing is that, so like I said, there'll be multiple different ways to engage with us, and it'll be based on your comfort level and everything else. And obviously, we'll always extend, you know, invitations to stuff. There will be things, there will be seminars, there will be virtual and live and in-person, there will be, there will be this podcast, there will be all kinds of content and stuff out there. We've got an assessment And I think that's probably the first thing that's worth mentioning, Jon, right? Let's talk real quick before we end about the first way to engage with us and something that we're going to have everybody do in basically kind of as part of joining the community, which is, right, which is our assessment.

Yeah, and the assessment, you know, as Jo mentioned, the assessment is just to level set. It's to gather some basic information about your business, about you, about what you want, from your exit. And everyone will come in with that assessment, you know, either printed out or on your computer. And so we know who's in the room, who's engaging with us, what type of business you are, what the ballpark revenue is of the company, and what you want out of the sale of your business. And so again, it's gonna be a cohort, but there's There's gonna be specific things that each individual wants out of dealing with and engaging with ExitEngine. Financial information for some people, private equity, how do I stay in the business, how do I exit the business, those types of things are gonna be specific and individual to each business. So those are the types of things that the assessment will help us gather to say, oh, Sarah and Paula need XYZ and Dan needs this. And that will be either taken by you before you come in, or it'll be the first thing you do after you attend the second class.

And really, really important, again, just to reiterate, the reason that's so important is because it helps us understand what you need, right? And how you can— and helps yourself. We hope that the first thing the assessment gives you is a thought starter for yourself, right? Is to be able to say, oh, whoa, yeah, now that I've done this, I've seen this, I never occurred to me that this is where I am or this is what I have to do or whatever. So we're hoping it's a little bit kind of self-help, right?

Yep.

But then, but then it's also, it gives every— it gives us the ability to be able to point you and get you on the right track. There are people here that are gonna be, that are gonna be, I wanna sell my business next week. And there are gonna be people who are, who are gonna say, I'm just writing my business plan for my, you know, for my first business. All of those people are welcome here. There is value for all every single one of them. And by the way, there's a ton of value for the newbie to get from the person who was, who was 30 years down, down the journey and is about ready to go, right? I mean, that's, that's a kind of an invaluable place to be, you know, for especially when you're sort of starting out. Yeah.

And just like that example of someone in business in 30 years or someone just starting their business, there's also value in having different revenue levels in the, in the different EBITDA levels because you can learn something. A small technology firm with very little revenue can teach a very large established firm something about technology. And there's all sorts of knowledge sharing that occurs between these groups of people, between the people in the group based on, and based on the industry, based on the company that they've started and where they are in the lifecycle of their business.

Exactly right. So we're, uh, we're really thrilled about this. I'm— John, I'm so excited, man. Um, you know, I think that you're gonna find that hopefully everybody finds this to be really valuable, um, and useful. And again, we can— our, our whole— our mission here is to be able to help people, is to level that playing field. Okay, you'll meet, you'll meet other people like you, you'll meet buyers, you'll meet You know, you meet experts in the industry, you'll do all this stuff, and you're going to get not only through this podcast but through our events and through our online teaching and stuff like that, you're going to be able to get, you know, in a room with these people and be able to get advice and stuff like that that you probably wouldn't be able to get, you know, really any other way. And we're going to do it, you know, and it'll happen at a price point that you'll find, you know, we hope you'll find, you know, Valuable. We don't— we're not looking— well, again, what we're trying to do and our mission in life is to— is just to— is to make this happen. Um, coming into this business and seeing how imbalanced this was, there's just— it's hard. It's hard to sit by and do nothing. I mean, we have to help people. And I wish— again, I wish I had ExitEngine around when we were thinking about selling my first company.

Agreed 100%.

Yeah. Oh God.

Um, Well, everyone, I'll say my thank you first. Thank you for joining us. I appreciate it. I'm looking forward to working with future business sellers, and I know I'm looking forward to working with Joe on this exciting project.

Absolutely. And we will bring other people from ExitEngine in on occasion as well, right, John? And, you know, people that we have that are working with us that specialize in certain things. So I'm hopeful. I'm, again, same thing. I'm excited, hoping that we get you know, this is, uh, that we're gonna help a lot of people. And that's, that's what kind of what we feel like we're, we're on this, uh, on this planet to do right now. So, um, thanks everybody for, for listening to this first one. Uh, I promise they'll get better. Um, but I think that actually I'm pretty proud of the way we did this. I, you know, I'll have to go back and look later, but, but, uh, but happy with where we are and, uh, and can't wait to, to go on this journey with everybody. So thanks a lot.

Thanks, Joe.

John, we'll, uh, we'll talk to you next week.