The Exit Engine Podcast Episode 10: The Emotional Side of Exit Planning

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And now, get early access to our biggest sale of the year. Save 25% on the new Comfort Next Luxe for a limited time. Only at a Sleep Number store or sleepnumber.com. Welcome to my Exit Engine Podcast, episode 10. Hey, John.

Joe, how are you today?

Welcome to the Exit Engine Podcast. I'm Joe Stapleton. This is John Kniff. As always, we are coming to you. Live from wherever we are at the moment, but right now it's actually not live. But in any case, we are we are recording today, and today we got some exciting things to talk about because it's not going to be about the businessy business part today.

It's going to be about the emotional part, which is no, this is like this is the key, right? As you know, Joe, this is the this is. Business is one thing. You can fix a lot of your business, you can fix your P&L, you can fix your assets, you can mitigate risks. But this is the real tough stuff, right? This is the stuff where it's you, it's internal to your person and your brain and your body.

And I think it's unexpected, a lot of this. And I think that's one of the keys to things. So the reason we want to talk to you about The emotions, emotional side of this stuff is because people are not prepared for it. And it often gets in the way of actually deals being finalized. More often than not, deals are actually killed, not because the buyer is turned off, but because the seller is turned off or gets cold feet. And lots of times it's because they weren't expecting to feel these emotions. You know, we spend a lot of time in the business world trying to keep emotion out of it, um, and not make decisions. You know, we're told in business school or in, you know, coming up or whatever it is that, you know, to keep your emotions out of your business and blah blah blah and don't be making emotional decisions. But the reality is that we, all of us, are human beings who are constantly making decisions based on our emotions, whether we know it or not.

Well, yeah, and as an entrepreneur or a founder or a business owner, You realize that, you know, it's great to have a work-life balance, but the reality is, if you work from home, you know, I've heard that you don't really work at— what is it? You live at work as opposed to working from home. So, the balance is nice and you need to have a balance, but when you own a business, there's so much overlap between what you personally need and what your business needs that It gets muddled.

Absolutely. But it's, but it's the one thing too that we don't really talk about a lot. And I think that the thing is, is one of the things that we are all about here at ExitEngine is embracing this side of what happens because, and understanding it and preparing ourselves for it mentally because it will happen. Um, there's very, very few human beings alive that are going to avoid, uh, you know, much of the things that we're going to talk about today. Um, what we've seen over our years of doing this and helping other people sell their businesses is we've kind of come across kind of like a, you know, there's like 10 stages of grief.

Yeah.

All right. And you may not be expecting this because you're gonna think, no, no, this is a happy, happy thing I'm gonna do. This should be great. And we want it to be that way for you. And we will do everything we can to make sure that the positive emotions are the ones that remain as we go through this. And preparing yourself a little bit about these things and hearing some stories that we're going to talk about today. Hopefully, you're going to get an idea. A, you're going to be able to identify a little bit with some of these things and understand that you know wherever you are in your journey, you're going to be there's going to be an emotional component to that. And then the second thing is understanding that you preparing yourself for things that you're not expecting. You're going to be saying good. You know when you eventually exit, you're going to be saying goodbye to people. You're gonna be saying goodbye to a way of living, right? A lifestyle, a habit, you know, the way you drove to work every day. Like, all those things happen. And by the way, those things happen when you retire or change jobs or whatever, right? So it's not like only selling your business makes these things happen, but it is a major part of being a human being, and it is something that we have to make sure that we address. In totality. And at ExitEngine, we spend a lot of time on this, the emotional side of, A, being a leader, the emotional side of being a business owner and how that affects everybody around you, taking into account the feelings of others in terms of your employees, your senior management, your family, right? People that are going to be attached to this decision, which is a lot of people.

And as we've said before, and we'll continue to say, and it's very important, it's communication, right? A lot of people that are doing these transactions are not communicating to their employees and are keeping things so confidential. And yes, confidentiality is important, but in this, what you learn through ExitEngine is you have to keep your people involved and abreast of what's going on. Like, you don't want this to be a surprise to them when it does eventually happen because They're going to be affected probably even more than you because they might not be getting it. They might make— they're likely not going to be getting any money from the transaction. So, you know, if you want to be a good owner and you want to be a good person and a good colleague, yeah, you're getting money and you're going away. That person has to stay there, is likely going to stay there when the company is bought. So they're going to go through changes and you want to be upfront. You want to be honest as you possibly can. And communicate with these people throughout the whole process.

And, and, and above that, you're going to need these people to execute this, okay? So understand that there's nothing in here in, in, in exit planning that you do alone. Every single thing that you do, every decision you make around it, just like every decision you make around your business, affects somebody else— your clients, your customers, your employees, your family, whatever that is, right? So understanding this stuff and going through it and understanding that there will be a— there will be a— there is a grief process. And in fact, we have discovered what that grief process is, and we can actually teach you to be prepared for that grief process. So what we're gonna do today is— and John, we're gonna try to have a little fun with this, okay?

Yeah.

So I think what we'll do, I have some real quotes, real people who have exited their business. Okay. And so what I'm going to do is I'm going to read this quote. Okay. And we're going to try to guess, guess the stage of grief. What specific stage of grief it is. I'm going to go out of order. Okay. So we have a list of stages of grief we're going to— that we, that we see people go through. And there's about 10 different emotions that we find people going through. Um, there is an order to them often, but in this case, what we're going to do is just talk about these in general, but I think it'd probably be fun to get some real quotes in here. Okay. Are you ready?

Yeah.

All right, let's do it. And I'm gonna go— I'm gonna go totally out of order, but your job, you gotta guess. Guess the stage of grief. Okay, here we go.

Pressure.

All right, uh, after the papers were signed, I felt a profound sadness. It was like mourning the loss of a loved one, something that had been a huge part of my life, suddenly gone.

Hmm, okay.

Right.

All right. I'm guessing the stage, huh?

Yeah. See if you can guess.

Not denial, is it?

Nope. Not denial.

You gotta help me out.

All right. The key is the profound sadness. So this is depression. Okay. So, ah, yes.

Okay.

This is a very, very, an unbelievably common piece. Of the grieving process when you exit. Depression sounds like, I know, like there's chronic depression, right? There's people that can have depression as a chronic thing, but depression can kind of come and go. And one of the things that we see is very common after the sale of a transaction is depression. And by the way, we've actually seen depression happen before the sale happens as well. So depression is a very common thing to have happen. The ability to be able to have your life suddenly change in, like you, and that, as this person said, in a profound, profound sadness. The notion that my entire life and what I've been doing up until this point is now gone.

Well, like it's just having, you know, I, I, I grew up in a family business. All of a sudden I was outta the house and gone when this happened. My parents sold the business And, you know, when you, when you live at your work, like we, like my parents did, there was definitely depression when that, when that happened. And it was, it wasn't the chronic kind that you mentioned, but it was the, oh my gosh, I no longer have a life now that I've sold my business because the, the business is gone, the house is gone. And of course they made money from it, but man, that, that is a true sense of just—

Yeah.

Profound change in who you are as a person.

That's right. And I wanna, I wanna just be clear with people too. I, I know that everybody thinks that money is gonna make them happy and that that's all they need, but you got just to be totally honest and, and, and transparent, which is what we try to do here. Okay? I have not, I have not seen, I've not seen one person who's, who has sold their business who has not gone through some kind of withdrawal. at least withdrawal, if not, you know, straight out like depression for a period of time right after they sold the business. Unless the only people that I see it not happen to are people who do this on the regular. But for people who are the one time exiting their business, and again, this is a good way we're talking about exit people. Everybody we're talking about here pretty much exited Um, in, in the most positive way you can. Oh yeah, exactly.

You know, this isn't a transaction gone bad, just to be clear. This isn't, this isn't something where they're closing where they thought that they were selling something they didn't get. They wanted— they were going to get $7 million for the business, the buyer came in and gave me $4 million. No, no, this is, this is they wanted $7 million, they got $7 million, they exited the business, and their life changed so profoundly, and they had never thought about it before. that they had this profound sense of, what do I do now? And that manifests itself in uncertainty. And it caused just— it caused— I mean, I don't want to say existential crisis, but it's pretty darn close.

No, it's very— look, I will go out and say it's an existential crisis. And the fact is, is that what we also see, speaking of existential crisis, which I think is actually a really good segue because I used to— I actually In my one of my other lives, talk about this quite a bit because I have been there a couple of times, and it's you know some people call it a midlife crisis. It can actually be the thing that triggers you to sell the business in the first place. So how can I put this? So understand that from it, and this is a really good point that you hit on, John. I'm glad you hit on this. The existential crisis thing is a feeling of kind of of I no longer belong here. Like I don't know what I'm doing. You kind of lose the plot. Of your life. You suddenly become a little bit— feel like nothing feels great anymore. The wins that used to feel really good, you no longer get the same charge out of. You might start to find disinterest in your business life or in your personal relationships or things like that. And that can be, you know, that's— it's related to depression. It's related to, you know, some— maybe some denial and some stuff. But what it really— what Most psychologists will tell you is that what it comes down to is really a misalignment of your really of your of your emotional kind of your really your your nervous system and really where and where your kind of your your inner self really wants to be. So it sounds a little woo woo. So without getting into like major details on that, I want just want to make sure that if you are if you are one of those people that has a business. And you are feeling like I don't know what I'm doing anymore. I'm not getting anything out of this or whatever. Let's talk because I can we could help you with that. It's something that we know we have a lot of hands-on experience with, but understand that many times the the the exist the feeling of an existential crisis or midlife crisis can be triggered by the fact that it that there is something that is next for you. And what is happening here right now is not it. It's a stage of life situation more than it is, believe it or not, anything about like something wrong with you. Okay? So, again, we can talk and maybe we'll do an entire podcast just on this, but I think it's that important. But it will. But in any case, just know that this is something that happens and that depression can come as a result. This existential crisis feeling like, what do I do next? I've lost my identity. I don't know who— without this business or being the boss, I no longer know who I am. And so the idea is that we at ExitEngine have a solution for that, and that we have the ability to— we can bring people to bear for you. You can find them yourself, whatever, that can help you through this part. And we highly recommend that everybody in ExitEngine who is at the subscription level can have someone to talk to about this stuff. Because, uh, it's not, you know, whether it's therapy, you know, with a licensed therapist or a psychologist or a mentor or someone to talk about this stuff with, um, is really— having that person is really important as you go through this because it can feel lonely, it can feel isolating sometimes, um, and going through the process can feel like there's a million things that, uh, emotions that you're gonna go through. So we can talk about some more of them now. Good.

Yeah, and not only it feels lonely and it feels like it is lonely Right? It is isolationist.

Mm-hmm.

When you're doing this by yourself without any help, it's really lonely. And you're— you feel like you're out on an island, which is the best— which is one of the best parts about ExitEngine as a community is, yeah, you get to talk to Joe, you get to talk to me, but you get all the other people who are going through those similar things that you're going through. So you're not isolated, you're not lonely. Um, you're going through this and you have— I— you have people to bounce these ideas off of.

And all the way through. So understand that you're gonna have help from the, from the moment you start this all the way through the transition and afterwards as well. So we don't leave you just because you've sold the business and you're gone now. In fact, we want you to stick around and help other people. So being able to go through that transition successfully and help navigate and have some help navigating through there, and then at the end maybe even have a place to go. You know, maybe a lot— our plan for people is to be able to get them to be advisors ExitEngine to help other people go through their transition. So the support that you get out of this community and the whole thing is huge. And again, some of these we're gonna talk about are kind of negative emotions. They're not all negative. So let's talk about it. Let's talk about a positive one. I'll give you, I'll give you a tip. Okay, here's a, here's a positive one. I started to feel good about what was next. The sale had given me the freedom to explore new ventures and enjoy life in A different way.

Uh, for you, I started, um, that would be hope.

You got it, man. Nice. Well done, well done. Good job. 50%.

All right, let's keep going.

That was good. You're right, you're betting $500. Pretty good. All right, um, because these are hard because this is— this is— I'm also keep— sometimes they use the word in the description, so I'm trying to leave that out too. So, but great job on that. Um, so Looking for— the thing about hope is that there is something within this whole process that is incredibly hopeful all the way through if you keep the mentality right. And again, getting the support from the ExitEngine community is incredibly helpful, but hope is what allows the possibility, that allows the future to have possibility.

Yeah.

So there is a future always, as we are all, you know, time is moving through us, you know, as we go on. And what we're looking to do is to make the future as positive, as constructive, as satisfying, and as fulfilling as we possibly can. And that's kind of the whole point of this entire exercise of exit planning, right? We want you to set up from the beginning to feel hopeful about the possibilities. What are you going to do next? What's next in your life? Is it buying another business? Is it is it sitting on the beach that we always talk about drinking piña coladas with your with your traveling? Is it traveling with your with your wife? Is it ensuring that your kids can have the best education or that your maybe even your grandkids are are taken care of financially? Those things are all hopeful things. Want people to feel that way, and we want this process to be hopeful. All the way through, right, John?

Yeah, because again, you're, you're changing a large part of yourself. You're changing a large part of the way you make— the way you live your life. And where you're hopeful that, that the future will be better than the present, right? No matter what you choose to do, right? You've had a great run. You've, you've had a— you've built a business. You've sold it, and whatever you're going to do next, you're hopeful that that is, um, also equally as fulfilling. Maybe not in a financial way, but from a— from maybe a personal way or other ways that you're fulfilling, and you're hopeful about that future.

That's exactly right. And I think that the, um, through the process, right, we— there's hopeful. There's— we are— we are— we will— our mindset is a mindset of hope. And not hope like wishing. That's different, right? Hope, being hopeful and wishing are two different things. You're hopeful at the beginning because you want, you've got an idea. And again, our process at Exit Engine is to start from the end and work backwards. Okay. So the first thing that you'll do when you're in here, and if you've taken our Exit 101 course yet or not, you'll know, you would learn that basically the first thing we'd have you do is a visualization exercise about where you're going to be at the end of all this. Where are you at the end? I am sitting on a beach. I am drinking a piña colada under a palm tree. I am thousands of miles away, but I'm getting a check every week from my business. Whatever that thing is for you. Right. And any of those things are acceptable at this stage.

Yeah.

incredibly important to set the stage so that you can have, you have something to hope for, right? You can't have hope unless there's a specific objective at the end. Walking around being, well, I hope something happens, that's not really going to work, right? But you can, you can be more, more hopeful if you've got a plan in place that starts at, this is where I'm going to end up, and here's the roadmap, the steps I'm going to take all along the way to help me get there.

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

Cool.

All right. So here's a good— here's another one. When the first serious offer came in, I was stunned. It felt surreal that someone else would soon own the business I built from the ground up. Hmm.

That sounds like surprise to me.

Yeah, you're right. Surprise, shock, surprise.

Ah, shock.

Yeah.

You got it. Yeah. So shock, we find people shocked all over the place when it comes to doing this, don't we? So there is shock and surprise will pop up all over the M&A process. And what we're trying to do is in the process of exit planning is mitigate those surprises, right? It's one thing to be pleasantly surprised. When I got an offer, I thought it was going to be more than we hoped for. That's fantastic. But the reality—

yeah, again, but the reality is when you first start getting offers, you're gonna be, you know, it's like when you sell a house, when you sell one of your— a house, you invariably, if you've sold a house in a down market, you get a lowball offer and you're gonna get lowball offers when you put your business up for sale and you start getting You're like, what, what is that person thinking? Do they, do they have the wrong numbers? Did I send them the wrong information? Um, because they are oftentimes looking at it just from a cold, emotionless, uh, aspect, and they're just, they're trying to, they're trying to get a deal just like everyone else in the world.

That's exactly right. And you're going to be— the difference is you're going to be prepared for whatever they're going to throw at you. Because you've gone through this. So understand that essentially that you may get, uh, you know, people— and as John said, if this happens on the regular, you're gonna have people coming in here. You may have— if you're a successful business, you may have people calling you already, right? So you're gonna get potentially get a lot of phone calls. You're gonna get people— you're gonna get business brokers calling you. You're gonna get private equity firms maybe even directly calling you. Trying—

There's so many people you can get calls from.

Exactly. So many people, and they are out there looking for businesses like this. Now, they don't know the details about your business, okay? They know that you're in an industry. They may know you're an industry leader. They may have some, some basic Dun Bradstreet information about your total projected revenue or things like that. But the reality is they don't know you. They don't know your operations. They have no idea what the state of your business is. But what people will do is that in order to get you to talk to them, They will come and say that they can have a valuation of your company, and they will give you a you know what is a they will make you an offer in an email. This is not an offer you want to take. Okay, we do we have to say that out loud? This is not something that you want to follow up on. These are people that are they are they are phishing. They don't know what's happening, and the reality is is that if you're not we want you. guys to be the ones that are prepared even more than the buyers. Our job here is to make you so prepared for this that no matter what is thrown at you, your shock, your surprise will be minimized because you will be prepared. You will know— you, you will know your business inside and out. You will know the value of it. You will know why it is valued that way. And, and you will, you will have all the things in place that you know buyers will want. So that you can maximize that value. And finally, you will also have a very good plan in place and a comfort in your emotional state about what's going to happen. So you won't be panicking. You won't be— you won't have to be surprised by anything that goes on. That, by the way, and we'll say this out loud too, that doesn't mean that it will finally go the way you want it to. All the time. There's no guarantees, right? But what, what we, what we believe strongly will happen is if you're prepared for this, that there's very little shock and very little surprise that should come your way, right?

Exactly. And, and the, the point of getting, um, one of these offers, these shocking offers, surprising offers, is you will have all the, all the information necessary to, to combat that and go, and go back to them with, with a counteroffer. And, and you, you'll understand how wrong, as an example, many of these buyers are about your business when they either— they don't know enough about your business, they don't understand the industry. Um, and, and that's probably a buyer that, as Joe mentioned earlier, you're not going to go with, right? It's very rare that that happens. Um, that some— someone comes in off the street and doesn't understand your business. And also all the things you're doing to improve your business, There's no way you can really communicate that to somebody without going through and having a meeting with them and talking about the risks you've mitigated, the actions you've taken to— while you're crafting your exit plan to prepare your business for sale so that you get top dollar for your business. Now, again, as Jo said, this is no guarantee, but you can put yourself in a position to succeed. And this is putting yourself in a position to succeed by Creating an exit plan, improving your business, and making it so that your business is, is a, is a not a commodity, is a unique thing that you, that is, that will drive people to, to pay up for it.

That's exactly right. And that's a great way of putting it. What we're trying to do is to try to, even if you've got a commodity business in a commodity business, the business itself doesn't have to be a commodity, right? And what we're trying to do is to get you to improve that value. And again, one of the big things— this is why one of the big things that we talk about too is understanding what your inefficiencies are, because those inefficiencies are the thing that the buyer wants in order that they think that they can improve on. Okay, so understand— and we say this in just about every podcast, I feel like it's so important. Be understanding what your efficiencies are and being okay with some of them and actually promoting them is going to be a benefit for you in selling the company. Okay? So you don't want to fix everything unless you know that there's a way, a place for this company to go, to a direction for it to grow. Then you want to, you want to leave some, you want to not only leave an inefficiency or two, you want to point them out. And say, this is where you're going to grow the business because I didn't accomplish this and I wish I had, whatever. But now here we are and your opportunity is where I have not yet grown the business, right? So that's something that we can't stress enough is understanding those things and then being able to actually promote them is something that is something. And those are things that they can't know when they first call in, right?

Correct.

We're mitigating, we're trying to mitigate surprise. We're trying to mitigate shock. This entire process is about the mitigation of those emotions specifically. Right. Okay, so here we go. You ready for another one?

Yes, I am.

All right. They use the word in here, so I'm going to try to work around this. So give me a second. I felt strange thinking about my employees and how the sale would affect I worried if I was making the right decision for everyone involved.

I felt strange and worried.

Hmm. Strange and worried, but guilty. Yeah, there you go. Nice. Yes, you got it. That's it. Guilt. Oh God, the guilt. So, you know, we're trying to mitigate certain feelings. Okay. Shock is one of them. We're trying to mitigate the guilt. Okay. Guilt is, again, a very natural thing. And depending on the kind of person you are, you may experience more guilt than others about stuff, especially about what happens to your employees. Um, you know, some people have a hard time, a hard time, right? Some people have a hard time firing people. Um, we're going through something with a client like that right now, right, John? Um, basically who, uh, you know, could probably save their business if they fired half the staff. Right. But I can't. Oh, all right. Well, you know, right.

The deal, as you said, is it better to save the business or is it better to not deal with it? Right. Is, is, is inaction an appropriate step when your company is not doing well? No.

No, it never is. And the fact is that it's a, it's, but being in business, this is, this is what happens to people. It's, it, this is again, There's nothing about your business that isn't human, right? It's a business is humans. It's a bunch of humans doing things together, right, to make something happen. That's what a business is. So understand that you're there very, very well might feel bad about the fact that, you know, in order to execute my exit plan, I'm going to have to fire a couple of people that aren't pulling their weight. Very, very, very hard to do that. On top of that, you might be feeling like, you know what, when I finally exit, I'm going to be leaving behind all these people who grew up in this business. Um, if you're in a business for a long time, John, you know, you're going to have people that were there. If you had a business for 30 years, you could have the same person there the entire time. This is Bob. He started with me on day 2, you know, and here we are 30 years later, and I'm gonna be— I'm selling the company and Bob's out of a job.

Well, yeah, yeah. And that's That can be tough for Bob. The thing that we, that we're preaching and that we talk about all the time, which, which can alleviate some of this guilt, at least I'll speak for myself, it alleviates guilt for me, is communication. Right?

Right.

You need to communicate. That's why you don't spring an acquisition, or sorry, you don't spring that you're selling the company on people, you know, moments before It's either announced or it happens. And I know that there's all sorts of— like, there's a reason for that publicly traded companies, right? There's a reason that Nvidia doesn't talk about the companies that they buy and all these companies out there, because it's stock manipulation. We're talking about private companies. We're, you know, there's no, there's no options on the companies that we're selling. We are— that we're working with and our clients. Yes. Do you want it? Do you want it in the newspaper? Do you want it on Facebook that you're selling the company? Probably not. But you do want to involve your employees in these discussions and in this situation because that does help alleviate guilt because you're not guilty anymore. You've communicated to these people. And again, no one's guaranteed a job for life. If they're not pulling their weight, well, that's another set of problems. But it shouldn't relate to guilt that you're feeling. And we work on that, you know, throughout the process of this at ExVergence.

Yeah, no question. It's a— we spend a lot of time on it. I think that the— that this is a very real thing, that people are concerned about their employees.

Absolutely.

And that's a good thing. And it's a good thing. And, and our, our, our process includes many of the employees, or as many as you possibly can. And in fact, it requires you to be able to put together a team of people from inside your company to help plan and execute this, right?

Yeah, because, because the buyer, you know, the person, whatever company's gonna, you know, buying your company, They don't want to hear that on Tuesday the people that are going to be there with them after you leave, or if you're going to be there if you're, if you're going on a beach in Cabo, they want to know that, that the management team that you're leaving behind is going to be there running the company, knows what they're doing, and knows that things will be changing, right?

Change is happening. In fact, and they'd like them, they'd like them to be kind of happy about it if they could, right? I mean, so You know, you know, you suddenly are— you've acquired a company. Imagine what it's like to be a buyer and you acquire a company and everybody hates your guts the first day because they didn't know what was happening and their boss didn't tell them and they're going to blame you, right? Like, this is a terrible place for everybody to be.

Acquisitions are already hard enough. You don't need to complicate things. There's already going to be enough change to the extent that you can. And again, we will guide you on this is This is what you communicate. This is how you can communicate. And, and, and again, I'll speak for myself. It made me feel less guilty when this happened, uh, in my situation.

So. Right. And since— and, and we go back to our example with Bob, uh, you know, Bob is not gonna be surprised by this. Bob is gonna be— Bob is known, known, the known successor. Bob is the person that has been charged with You know, was stepping up and becoming, you know, whatever the, you know, the— is the linchpin, the success of the company moving forward as they— as the new company comes in and taps him to be the CEO, because that's the plan, right? Like, the plan is to have these people move up, and, and, and, and the plan is maybe hopefully not to have to fire people. And you're not— if you plan this well, you're not leaving Bob in the lurch because you're not springing a surprise on someone. Now, there are cases in which it could be a surprise. There are things that happen to owners, God forbid, like death and disability and things like that, that basically can leave people in a lurch. But if you planned for those things and you have a contingency for those things, nobody should feel bad about that either. So, I mean, the reality is, if God forbid, if part of your exit plan says, If I die, here's what happens. So Bob steps up, takes this, gets the corner office, you know, Julie becomes his number 2, you know, there's a, there's a plan in place and everybody's aware of what happens.

Yes.

So that if there's a— just like if there's a fire, if there's a fire, you have a fire drill in a building or in your house or at school or whatever you are to practice what you do in case something happens. Exit planning is exactly that. You're trying to have an answer for every possible contingency, especially the 5 Ds: divorce, death, disability, disagreement, uh, distress. And, uh, distress. Thank you. Those are the 5. Okay, so those are the 5 Ds of things, exits that will happen to you involuntarily. Okay, and so what you, what you want to be able to do is to— we're going to make sure that you have a plan that covers off on all 5 of those things at any given moment. And yet, at any given time, you can say, if I was to die tomorrow, this is what happens to the business. Okay?

Yep.

If I was to be, if I was to be in a tragic accident, this is what happens. If I, if my wife and I get divorced and she wins the business or half the business and the thing, we are made to sell it. by a court or whatever, this is what happens. There's never a time at which anything can happen that the rest of the company is not exactly prepared for. They may not like it, but maybe there's people are going to cry and they're going to be sad, and that's not, you know, whatever. But at least there's a plan for what happens. So much, guys, of this stuff is that companies suddenly go away because the owner goes away and If you are feeling— if you are the kind of person who feels guilt a lot, then one of the things that you're gonna wanna make sure that you do is you plan for all 5 of those Ds to make sure that the rest of your employees and the rest of your company are taken care of to the best of the ability of the business to do so. Yep.

All right, next one.

All right. Over time, I started to feel good that selling the business was the right decision. I began to see the opportunities that lay ahead. Hmm.

Over time.

So, uh, I'm coming to terms.

Acceptance?

Yes, acceptance. Yep, you got it exactly.

Got it.

So, right. So acceptance is a big— is, is usually the final, you know, one of the final stages. It's not actually our final stage. It's actually stage 8, uh, because there's some other things that happen after that. Hope is actually one of those, uh, after, after acceptance. But acceptance becomes the, okay, I've got this. Acceptance is a good— we like acceptance. Acceptance means that I understand where I am, I understand what has to happen moving forward so that we can reach this goal or protect ourselves or hedge our bets or mitigate, uh, you know, bad things happening. Um, and I'm— and acceptance are people— people who are in exit engine have accepted.

Yeah, they're right. They've, they've come to terms, to your point earlier, And they, they know that, that, that for them, and at that stage in their life, at that point, they're selling their business. They've, they've sold their business. They've come to terms with, um, with what's coming next. And, uh, and they've dealt with a lot of the things and a lot of the issues that they've— that we've talked about previously, um, and they're ready to move forward.

Absolutely. And I think that I would even say that I would back up the acceptance thing can happen again, just like some of these other things can happen at different points along the journey, right? And I think that one of the things that I've noticed about the people that come and become members of Exit Engine is that they have accepted a certain aspect of themselves and of their business that is probably the most important thing That kind of acceptance that they'll ever do. They've accepted the fact that their business isn't perfect. They've accepted the fact that they have some work to do to optimize their business to the life they want to have. They've accepted the fact that one day the business will go away or they will go away, one of the two, right?

Yep.

They've accepted all these things. And I think that what we find are the people that come to ExitEngine are people that have finally said, okay, I get it. Um, I understand how important this is and that this is probably the most important thing that I will ever do for my business. And I'm, I know that this sounds like, I don't like saying that because it makes it sound like we're, we're like all that in a bag of chips and everything that we do is perfect and it's not. But what I can tell you is that Business— sorry, about exit planning in this capacity is one of the most important things that you will ever decide to do for your business, hands down, because it is giving you— mostly because it's giving you a new metric, total exit value, by which to judge the business. Okay. And to be able to judge that at any given time.

Yeah.

So it's a formula. It's a calc— again. Yes, sir.

Yeah. And it's a good point about what you said earlier about acceptance can occur at very many different points.

Right.

It doesn't have to occur actually after you've signed. It shouldn't occur after you've signed the agreement. It can occur much earlier. And the first step is coming to ExitEngine, right? That's not acceptance. But along the journey of being as part of this community is you will get to acceptance, right? That, and that can come in week 2, in week 3, come in week 6. It can come and all sorts of different things can trigger that acceptance in your mind. It can be Accepting what you're going to do afterwards. It can be accepting that you've been able to improve your business doing a couple of— doing certain things, but you haven't done the things that you can either— you either can't accomplish by yourself or you're going to accomplish before you sell the business. So it's very important to understand that that acceptance doesn't occur for the same— doesn't occur at the same time for all people.

That's exactly right. And again, and you're gonna, you're gonna be— this is a roller coaster. It's gonna be, it's gonna be up and down, you know, thing, just like your business or your life is, right? This is no— it's no different because it is part and parcel of both those things. And I think that when you think about an exit plan is not just about the business, an exit plan is also about the rest of your life and your life outside the business. Um, that, that, that's the kind of thing where there's gonna be acceptance on all these levels that you're gonna make. Even one of the biggest things we see is the acceptance of, oh, okay, I'm gonna be— the acceptance of your spouse. You're gonna be home now all the time? What's that gonna look like? What's that gonna be like? I can tell you some stories about that from my own, you know, my, my, you know, my own thing. My, my, my, my dad started a company and because of that was home all the time. And my— I'll never forget my mother just going, just after, after a few months going, What is going on here? Would you please stop? Stop coming home. You're ruining everything. Like that's you know we've been doing it for years this other way, right? And now we've got to kind of change the way that we've done it. So lots of people have to make acceptance. You know exactly. Yeah. All right. So here's another one. Ready? I tried to negotiate staying on as a consultant, hoping would make letting go easier. I wanted to hold on to any part of the business I could.

That sounds like something I'm very familiar with—

bargaining.

Bargaining.

Bargaining. Yes, yes, bargaining. What is, uh, what, what is your view on the bargaining thing?

I, I mean, what's— there's so many different components of, of bargaining, right? It's, it's a way to hold on to a piece of the business. It's a way to, it's a way to not make the ultimate decision to sell, right? Because if you're still there or you're still involved in the business. You're still involved and you're still part of it. Whereas in the future state, in all likelihood, you're not going to be the one making, calling the shots, right? Yes, you can be involved, but bargaining is a way to sort of not make the full decision to sell your company.

Yeah, I agree. I think that the way that we see bargaining play out is is in that kind of desperation kind of thing, right? Where you're like, please don't, please don't, please don't let this happen. Or, or, you know, you're almost kind of bargaining with God or whatever, right? Um, and I think that the, the, the, what we see and what the more positive way of putting this is negotiation, right? So if you, and I think what, what, what negotiation is the ability to say, um, here's what I want. Here's what I'm willing to accept. And then wherever that wherever it lands in the middle is where you're gonna go, right? And so the ability to be able to negotiate comes out again of your preparation. If you're ready, if you have if you know exactly what your company is and where where its holes are and what's good about it and what's not, and you're and you're and you have a very good a realistic view of that, then there's going to be you know there's going to be very your negotiation room. becomes much larger, right? You know, running contrary to that is if you're— one of the D's is distress, and that stands for your business being in distress. If you're in a situation where you have to fire sale the company, bargaining becomes— negotiation becomes more closer to bargaining, right? You're looking for what can I get out of this and can I save anything out of this? And can I, you know, am I gonna be able to get outta this with anything?

That's— Can I—

That's bargaining.

One of the ones I've seen, can I retain the real estate, right? That people, people sell businesses.

Right.

This is a good example. People sell businesses and it has real estate attached to it, right? But they want to continue to own the real estate. So that becomes a, like a bargaining chip for that person. It's like, no, like the business requires a spot for the, or real estate for it to operate it. Don't, don't try to hold on to something And, and sort of cripple the business because you want to have a, uh, your skin— well, you want to have skin in the game. There's other ways to do it other than, than, than, than sort of crippling the business or making it so that the business is less desirable to this, to the buyer, um, so you hold on to a piece of it. It's not that—

that's not exactly right. And no, that's exactly— and there, but, and there are very legitimate and real ways of, of holding on to parts of the the business if that's what you want to do. Look, not everybody— if you can be honest with yourself and say, hey, look, I am not ready to retire, I am not ready to give this up completely, right? But what I know— but maybe what I know is that I know that I can't myself take this any further.

And all the time, right, with other bites, you know, the famous other bites at the apple, which is a reality. A lot of these, a A lot of these firms that come in here, they'll give you an earnout. They'll give you— there'll be incentive pay at the end. So it'll be money upfront.

But also, if you will be potentially consulting opportunities.

Consulting. If you're a salesperson, right?

If you're—

if you are— if you are the chief salesperson for your company and you're going to stay on for a period of time to do that and to help you realize the financial needs or your financial needs will be met. Once you get the earnouts, great, then that's, that's a legitimate thing that you want to put into the negotiations for the sale of your company. That's helping everybody, not holding something back like in the, in the real estate example that we gave before.

So no, exactly. And remember, so any— the difference between negotiation and bargaining is that bargaining is negative. Bargaining is when you're in a— is a psychological thing that you're doing to your brain that's trying to get you to hold on to some piece of something That really should probably be let go. Okay? Negotiation, on the other hand, is your ability. And again, the power seat you have when your business is well put together, you understand what the buyer wants, you're able to demonstrate those things, you're able to, you know, obviously to play up the good things, to downplay any negative stuff, or be able to at least show and show the buyer that you know what he wants or what they want.

Right.

And then your ability to be able to say, yes, what is— back to your plan, what is it that you want for yourself? I want you— the only thing I can— here, buy the business. I'm not staying on, but I want you to, under contract for perpetuity, to keep the name of the business John Kniff Associates, and you'll keep the business that— the name of that. And so it's on the trucks or whatever, you know, uh, you know, that would be a truck business, but you know what I mean. The idea would be that would be the name would stay and that, that's your negotiation point and you've earned that and you get to say that and you could even make that a deal breaker if you really wanted to, right? So the idea is that there's negotiation and there's bargaining and bargaining is bad and negotiation is good and we want to be able to come from a place where we have the, you know, as much bargaining power as— or sorry, as negotiation power as possible. There you go. All right, cool. Let's see. What do we? Oh, here we go. This is this is the one. This is the one. All right, here we go. I I found myself getting upset at the smallest issues during negotiations. It was hard to accept that I was no longer in complete control.

I'm, I'm, I'm mad. I'm getting mad right now.

Yep. You're angry. Exactly right. You're angry.

Oh, angry.

Yeah. Angry. Yeah.

Yeah.

You get ang— and, and that anger, that frustration, resentment, all that stuff kind of comes out. Okay. And especially if you're in a situation where you're, where you are watching your, where, where you're in distress or you're watching yourself have to exit for a reason other than your, you know, the, the best possible.

You mean I can't get everything I want?

Right. It's going to be very difficult for anybody to get everything they want. But more importantly, I think what happens to people during the process is, look, let's talk about control, because I think that's really what this stems from, the perceived lack of control or the fact that the control of this thing that I own, that is my asset, that is going away. And we see it That we see that rear its ugly head in many ways. The first is kind of in order. The first time we see the anger pop up is at the beginning when they're told that the company isn't worth what they think it is.

Yep.

That's right. That's the first time people get angry right there. And what we see a lot of with people is that they have over— in their minds, they have overvalued their business from the beginning. And when people like us walk in there and we do, you know, Again, at ExitEngine and at Exio, all the things that we do are around— will be third-party, right? The valuations that we perform as part of what we're doing are done by a third party on purpose, an independent third party. That makes it right. That means that no one side has decided, and it should be easy to agree on the valuation. Easier. Okay. But what happens is that people are people think that their value of the company is worth more. We did a post the other day talking about your nostalgia and the fact that, you know, you're— the fact that you're nostalgic for your business and the whole thing doesn't raise the value of it.

And when you look through those rosy-colored glasses and you don't look at the things that could be improved, or you glossed over the things that can be improved, Um, and you said, oh, that's not that important. Well, when a third party looks at it, either in, as Joe mentioned, in valuation or due diligence, they see everything. They're looking through those, those clear glasses that Joe has on right now of, of here's what— here are the issues with this, with this business. Um, and that can make a seller angry when those things are pointed out to them.

That's exactly right. And I think that the— again, So our job and your job when you as we go through you know exit planning is to you know to mitigate let's mitigate the anger. Okay, we want to we want to reduce the anger. How do we reduce the anger? We reduce the anger by reducing surprises. Okay, we we we make a commitment and a mindset to basically to learn and grow through this, and that and that that preparation again is going to reduce anger. So when you come in and you say the first thing you do is Accept the fact, just by coming to Exit Engine, you've accepted the fact that you need some help. That alone is the most most important step that you will ever take, because now you what you can do is say, all right, to avoid being anger angry, to avoid being depressed later, to avoid feeling guilty, to avoid the bargaining in favor of negotiation, to avoid to avoid shock and and surprise. The answer is. Preparation and communication. Those 2 things are, are everything. So to be able to say, I know what the circumstances are, I know what all the possibilities could be, and I prepared for every single one of them, that reduces anger. There will be no anger at the table because you will know. There'll be no anger anywhere because you know that you, you have your hands around this firmly grasping the situation.

And, and you will, you will understand, and you will already have looked at in, in In most of the cases, many of the cases, you will know what the flaws are. As Joe mentioned before, you don't want— you, you're gonna— your business is gonna have inefficiencies. And when you acknowledge those things and acknowledge that some— that your business is inefficient in one or two ways and you need a buyer to take you to that next level, whatever that buyer can bring, whether it's cash or consulting or relationships or whatever it happens to be, You're not going to be angry about that. You're going to say, Joe, you're right. That is an issue with the business. And that's why I'm looking to sell because of X, Y, or Z.

Exactly. And again, we should point out, just because you reminded me of it, you said it, we're not sitting here talking about selling your business. Like, that's one of the exit things, right? And we hope that's the one that you get to pursue. But understand that exit planning is about being prepared for every eventuality, not just the one that you want, right? So keeping in mind that again, the way to— by planning this stuff, your, your, even your anger over, you know, you know, something happening in the industry that affects, negatively impacts your business, right? That kind of anger can be mitigated just because you're like, well, guess what? I prepared for that. I took a step to know that that happens because I could see some writing on the wall and know that it was possible that Congress was going to do something that was going to negatively impact our industry and blah, blah. And here we are. And now I see it coming. And now I'm going to exit. I'm going to pull the trigger on this and get out of it now because I'm going to start losing money if this thing comes in. Right. So even anger around the things that will happen to the business that are out of your control. control tends to be mitigated when you've got a plan for what happens. If you, you, you, you're not going to be upset that you burned in a fire if you learned the fire exits and you knew what to do when the alarm went off. And that's the— that's a good point.

Very good point.

All right, we've got— there are 2 more, so I'm gonna do this one. Ready? I spent hours reminiscing about the early days, the milestones, and the people who had been part of the journey. It was a bittersweet trip down memory lane.

Hmm.

I need help.

Looking back. Reflection. Yeah. Reflection. So reflection and nostalgia, those kind of two things get like inter inter inter interwoven. Yep. So it's one thing. Reflection is a common thing, and that's we're we're actually asking you at some point. When you do exit planning to reflect. And, and you— we're going to ask you to reflect on your, on your business and, and the decisions you made and the trajectory the business has taken up to now and where you want it to head in the future. But we're also going to ask you to reflect a lot on yourself. And that's something that is, again, harder for most people to do, right? Um, what, what we're teaching here is that Your ability to self-examine, right? Analyze yourself as much as your business in terms of the way that you and the business are interacting. What's going to be missing when you pull yourself away? What's gonna be addition by subtraction when you pull yourself away, right? There are lots of reasons why during this process reflection is necessary. What we don't— what we want to avoid is the kind of reflection that makes you— what we're— what we want to avoid is seller's remorse.

Exactly, right? Yes.

So getting to a place where you finally have exited in the whole thing and can feel good about what you have done is what we want, right? That's the goal. And that's why we spend so much time thinking about the future and how we want to feel at the end and where we want to be, because The reflection, right? Looking back on stuff, we want— what you want to ultimately do is reflect on the entire process looking back and go, wow, I nailed that.

Yeah. And what you don't want to do, to Joe's point, the, you know, when you're reflecting, is you don't want to have seller's remorse and you don't want to think of something after you sold your business that you need, right? Be it financial, be it personal, whatever it happens to be. You don't want to be in that position after you've sold the business, which is why preparation is key. ExitEngine gives you time to think about those things that you'll need after you sell your company so that there isn't seller's remorse. You've contemplated what you need in retirement from a, again, from a business personal standpoint. And there aren't surprises that you're like, oh my gosh, if I get my— if I only get a third of my earnout, I'm not going to be able to, to live the life I want to live. Well, that, that's, that's what you think of in, in, uh, during the exit, exit.

And, and, and even things like tax planning and stuff like that. What am I going to do with this money? And how's the capital gains? What am I going to do? Where is this money going to get put? And how am I going to invest it? And all that stuff, all those things. are taking place all at the same time. Right. And so being able to, again, like I said, reflecting back, you want, you just want to, the idea is don't leave anything on the table you don't have to leave on the table. Yeah.

And you're always, yeah, you're always going to learn, right? We don't want to, we don't want to suggest that, you know, you're going to get everything right. You know, you want to, we want to get, we want to mitigate risk. We want to get as much as we possibly can right. But you don't want to miss a giant rock or a giant boulder, as I've said in past lives. is there can be small pebbles, right? You miss a pebble, you miss a rock, okay. You don't want to miss a giant boulder that you think of after the fact, which is why, again, throughout the course we do exercises, we think about that, we talk amongst ourselves, and we avoid those things.

That's it. That's exactly right. And we know— and you know what to look for. I think that one of the biggest things that we can teach you here is We use this iceberg analogy all the time because it's really true. It's like, yeah, I can see exit, 10% of the iceberg above the water. I can think that's the only thing, but what I don't know is what's lurking underneath. And so teaching you what to look for or what to try to uncover is part of what you'll get at ExitEngine because you are put in a place to reflect On what it is that you've done, what is working right, what is not working well, what are the things that need to be improved or written down or put in a special folder or, you know, or better organized or whatever it is, or so that I can improve and again increase my TEV, my total exit value. That's the kind of idea behind the whole thing. So again, there's good reflection, right? And then there's taking reflection to another level, which is like, uh, you know, you can use reflection to, to feel satisfied, or you can use reflection to feel bad about it. We want the good kind, right? We want you to look back and say, yeah, there's some challenges, that was hard, uh, but I'm glad I did it, and here I am, a better person for it. All right, last one. Here you go. Ready? This to me is— I, I love this one. This is the kind of— this is my favorite one. I'm going to give it away by saying this, but With the sale behind me, I felt a renewed sense of purpose. I was excited about the future and the new adventures it would bring.

Rebirth, renewal.

Yeah, renewal. Exactly. Yeah, we do renewal. So this notion that what we do see is that people are when they get through the other side, they are a completely different person, especially when it's gone well. Okay, because it was it is a difficult thing. It is something that sometimes took years. On top of the fact that they would be building a business for 30 years, you know, in addition to that. But the people who are— the people who come out of this are happy, you know, that have planned for this and have— and feel— the most important thing is that you just mentioned it before, John, is feeling like you did a good job, right? As good a job as you could have done under the circumstances. That's what we're trying to preach here.

Absolutely. Um, because yeah, right, when you're in, you know, when you've, when you've sold a business and you're doing something new, whatever it happens to be, it's, it's the, it's that hope that we talked about before. It's, it's the realization of hope, really, right? The, the renewal that whatever you can, that you can do whatever you want to do because of what you've accomplished throughout that 10, 15, 25, 30 years of your life, and you're, you're moving forward with whatever you want to do.

And that, whether that's buying another company or being a consultant to this one, you know, whatever, or completely retiring, or again, whatever it is, what we're trying to— what we can't— trying to get across, in case you haven't missed it, is that we are— it is all about preparation and the ability to be able to take your business, examine it thoroughly, Understand it inside out. Know what can be changed. Know what can't be. Setting a timeline and a team to be able to take care of and get these changes made to increase this value, and then measuring the business as you go forward to that number. What is my total exit value? What am I trying to? What am I? What what is the thing that I'm trying to accomplish at the very end? Right? Where do I want to be? Work backwards from there and plan everything. And then, and then the, the, the bumps, the hurdles that you will run into doing that will feel less if you had no plan at all. Right?

Absolutely. And right, exactly. Yeah, I couldn't have said it better myself. Exactly.

Yeah, I think it's— I think that what— so I think that's, again, this is the— these are the 10, these are the 10 steps. And just so if everybody wants to have them in order, we'll have them up on screen, but denial, guilt, depression, reflection, acceptance, hope, and renewal. Okay, those are the 10 things. And again, they're not necessarily in order. What we're trying to do with exit planning is to mitigate the bad feelings, increase the good feelings. That's all part of everything you'll find here at Exit Engine as well. So John, do we think that we do a good job on talking about this emotional stuff?

I think we did a very good job. It's a tough topic with a lot of business owners because business owners oftentimes want to work on the financials of the business and the operations and the process and the people. And this is tougher, right? These are emotions. These are dealing with things that are inherent to everybody, but it can be exacerbated during these types of times. difficult, uh, during these different difficult situations in your life.

That's right. And keep in mind, it's not only your emotions either, right? So part of the thing you have to figure out is that there are, um, the emotions of your staff, the emotions of your family, right? The emotions potentially of your clients or whatever that you've known for a long time, whatever. All these people are going to have a reaction to what you're doing. And I think that the best thing— that's why we, we always preach an idea of being kind of open And honest about what you're doing and putting it in a context for everyone to— so that they can process it the right way. If you come out and say, I'm going to sell the business tomorrow, right, you're, you're asking for trouble. You're asking for people to be upset. You're asking for people to go and draw conclusions and go off and be upset and cry and be horrified and surprised and shocked and whatever, right? Yep.

The surprise is funny. The word, the word surprise, like, I think of the word surprise versus the word preparation that we've talked about a number of times. It's like, look, like, yeah, I don't— who likes surprises lately, especially with regard to business? No one really likes— no one likes surprises. If you're a kid, sure, a surprise birthday party. But when you get— with the opposite of surprises, what I think of it in this context is preparation, right? Prepare, prepare, prepare. It's better to have a plan and not need it than need it and not have it.

So— That's exactly right. That's the, that's the bottom line right there. So we'll leave it there today, guys. Thanks much for listening. Remember to please go ahead and subscribe to this if you like this. This comes out every week. We talk about topics that have to do with exit planning and M&A and all things that have to do with helping you optimize your business destiny. Please check out myexitengine.com if you haven't yet already. You can find information about us and our community. And everything that we can do to help you do a better job at exit planning and getting to the place that you want to be. Thanks again for joining us, really appreciate it. And John, we will talk to you next week, man.

Thanks, John.

We'll see ya. All right, have a great one.

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