The Exit Engine Podcast Episode 11: Closing the Value Gap

Best thing that's ever happened to you financially. Go.

Easy.

Sold my car on Carvana. Amazing offer. Really? I hit $200 on a scratcher. Did the scratcher come to your house and hand you a check?

No.

How many scratchers did you hit to get that? I hit a button on carvana.com once. Okay, that's fair. It's like the lottery, except you always win.

Not like the lottery at all, actually. Exactly.

Inexplicably good. Offers worth bragging about. Sell your car today on Carvana. Pickup fees may apply.

Welcome to the ExitEngine Podcast, episode 11. Good morning, John.

Joe, how are you today?

We're going to talk about something cool today, I think.

Yeah.

When you are, uh, when you are leaving a company to project, uh, your exit, one of the most important factors that you need to kind of figure out is what something will be called the value gap.

Yep.

And the value gap is basically that whatever that narrow, hopefully that narrow slit is between the value of the company in terms of the money that you will get put in your pocket when you exit and that which you need to live the rest of your life the way you want to, or to achieve the next goal, whatever that is, whether that's buying another company or creating generational wealth for your grandchildren or whatever that—

But buying the beach house you've always wanted, buying the mountain house you've always wanted. Yeah.

Right. Or maintaining your retirement, whatever. Okay. For the rest of your days or whatever, or trying to plan having money to invest, things like that, right? So, what we're going to talk about today is what we call Mind the Value Gap, because this is one of the things that we have to make sure that you keep an eye on. And as we go through any kind of exit planning, this is always going to be a place where we're actually going to— this is really the starting place, right, Jon?

Yeah. And I just realized that maybe you did this on purpose, but the Mind the Gap, like in London when you're on the metro, you know what? You're smoother than I am, man.

I just got that. So that's right. That's right. Well, I'm not sure everybody else will get that, but I mean, my mom is English, so I get that. I have that bent. But yes, mind the gap. Mind the gap is what the speakers say when they close the doors on the tube in London.

The tube.

Mind the gap when they close the thing. So we have a gap here that we need to mind, basically. And so the gap here, we hope Get to this point is very, very, very small, and hopefully nonexistent. The perfect situation is that there is no gap, that you have exactly what you need to be able to do the things that you want. Perhaps you are lucky enough to be in a position where you have way more than you'll ever need, and that money is going to be invested and passed on from generation to generation. Maybe you're going to be lucky enough to be able to pay for your grandkids' college or something like that in the future. Or build a trust or whatever it is that you can do. And we will talk much more about wealth planning and that kind of thing in future episodes. But know that, just know that ExitEngine is a perfect resource for that. We have, we have many advisory partners that we have partnered with that manage wealth, that are wealth managers, investment specialists, people that can help you plan out your retirement, all that stuff. So keep in mind that this is a Great place to come even when you're just starting that out. And even as it's just a separate kind of wealth planning exercise, that is whether it's part of your exit or not, is an important step to take, right?

Absolutely.

So what we're going to talk about today is we're going to talk about this thing called the value gap. And the understanding is, first of all, understand why This is important. Okay. So the first thing is that there's 3 things probably that the value gap kind of touches in terms of its importance to you, the business owner. Okay. The first thing is obviously it's about your financial security, right? So being able to know that you realized a lot of money potentially from a sale or from the exit of your company, and that can be a huge piece of your retirement plan, right?

Yeah.

Yeah.

And one of the things we've noticed in working with entrepreneurs is oftentimes—

I shouldn't say often—

sometimes they're not saving with the same frequency that a corporate accountant or a financial officer or an operations officer at a big public company or a bigger company is. Oftentimes they don't have a 401, they're not getting matched. So it's up to the— it's up to you, the owner, to fund this retirement. Oftentimes with a portion of the sale or all of the sale can go towards your retirement plan because you haven't put in money each week, each month, because you've been investing that back into the company. And this is your retirement plan, is selling the company.

Right. And of course we can talk about, and we will talk specifically with you, um, you know, within it when you're part of Exit Engine about how you manage this money and manage the thing for retirement, hopefully well before you're in an exit situation. Right. But understanding that, because you should be in a situation where you're, and I think most of our clients will be in a situation where you are probably bringing in a pretty decent income. Meaning that you've gotten to a level at which you're able to basically pay yourself pretty well. You've taken some of that money already and invested it sometimes. Maybe you've been able to bonus yourself over the years, whatever. So the hope is that you're not waiting until exit to start thinking about your retirement plan, because that's something obviously that could take a while. And you want to take advantage obviously of compound interest whenever you can. Right. And so, so the idea is that hopefully you started that before, but if not, to John's point, the idea is that you're going to have a lot of your net worth right now tied up regardless of anything. You're going to have a lot of your overall net worth tied up in the business. And in fact, for most people, our numbers show that it's about 90% of your net worth is tied up in the business. Okay. So in order to realize that net worth and to, and to, and to take that that money to be able to continue to invest in things like that over time and for generations to come, hopefully. Um, the, the, you know, this is, this is why, uh, understanding how you can realize this money, where it goes when you get it, how you're going to invest it, what's it going to be done, right? But the idea is that, um, you are— your financial security is obviously tied up in this. And, and, and, and And this is not a surprise to anybody, right? I mean, you've been dealing with this as an owner for years. You've had ups and downs and your income has risen and fallen, right, with the business and stuff. You went through the pandemic and you continued to pay people and maybe not taking a salary yourself because business fell off or something like that. Those kinds of situations have arisen. The idea though here is we should be in a place by the time you're ready to exit this that you're going to be able to close that gap. And make sure that you've got what you need to do the next thing. But you've got to start with the next thing, right? So you got to know what that thing is.

Yeah. And one thing—

Maybe lucky enough that— yeah, good.

You just wanted to add around financial security is one of the things that obviously you're used to paying taxes, right? Taxes are one of those things. It's death and taxes. But taxes is one of those items in selling your company that requires expertise. And and a lot of thought and planning need to go into selling the business, and you need an expert, right? You don't want to start conducting open heart surgery on yourself and all of a sudden become a tax expert because it can mean the difference between a a retirement that is that is funded totally and completely, and one that is not funded at all because you're getting whacked. by the government because you didn't set up your sale properly.

So, right, exactly right. And, you know, and look, this is, uh, you know, we're in a time right now where luckily, you know, reality is the capital gains, you know, situation, right? Because you're selling— this is an asset you're selling, and this is subject to capital gains tax in most cases. And things like that is, you know, it's a 25% tax. It's a lot of money, man. Um, and look, the good news is it hasn't moved very much. Recently. Um, the hope moving forward is that it stays like that. So, but the problem is, is that, you know, you can't— let's talk about things you can't control, right? So the tax planning obviously is imperative. The wealth planning in conjunction with the tax planning also is imperative.

Right, exactly.

So don't let this be your only, uh, time that you're just— that you're thinking about this while you listen to this podcast. Please act, um, because it again is in your best interest and And again, it goes along with TEV, right? Our total exit value has a direct impact on this gap and being able to improve the value of your company in a timeframe so that you can help close this gap is what we're here to discuss today, right? So understand that the financial security obviously is one big important thing about the value gap. The second thing is that your market readiness, right? So the idea is that if you're not meeting the— and this is, again, this is part of what ExitEngine is all about. If you're not meeting what are the basic requirements of most buyers and things like that, it means that you're gonna struggle to sell the company, right? And so basically, if you improve this value gap, however, okay, this actually makes your business more attractive and easier to sell.

Exactly. And this is exactly, as Joe mentioned, this is exactly what we do in exit planning, because exit planning is really business improvement, right? It's business improvement planning and business strategy planning. And the way that you're going to attract a buyer and the right buyer for your company is to make your business Like plug and play, and that that's that term might be overused, but but you don't want to make your business any more dependent on you than it already is. So to the extent that you can remove yourself from the business and make it so that you can, as they say, hand the keys over to the new owner and say, "You've got a you've got a business that cooks and goes along by itself." Yes, I'm involved in these. couple of things, but that's part of the market readiness is getting your company ready so that you can just turn over the keys. That's closing the value gap.

Exactly. And along with that, obviously, is then what comes as part and parcel of that market readiness is the overall health of the business. And the fact is that when you take these steps to close this value gap, obviously to increase the value of a company and close the gap of money that you'll need, you're improving your overall business performance and you're hopefully increasing the profitability and the stability and the overall trajectory of the value of your business. And so the reason we look at this value gap, we use in our methodology, we start with the value gap. Right? Because understanding what you'll need to live is a key, is the goal. And so, in order, you have to establish the goals and objectives before you can have a roadmap or a plan on how you get there. So, we start at the end. Where is it that you want to be? What do you be doing? What will you be doing it with? How often are you going to do it? What does your life post-exit look like? What are you doing and what do you need money for and how much money do you need? And that's the value gap, right? Yeah. So understand that basically there's some, here's some, just some quick, uh, statistics. Okay.

You ready?

Yep. First of all, let's, uh, the, the, the, first of all, there's a significant number of small business owners tend to do one, actually about 100%. of small business owners do this one thing, and they all do it. They all tend to overvalue their own business. Okay, so, um, basically, uh, sometimes it can be very, very, very off.

Yes.

So it's a huge—

and it's a huge problem, right? It's— you have to be realistic. And your expectations have to be realistic about what you own. And you are the one that knows the business the best. No one else knows the business like you know it. And, and the reason that the— that businesses don't sell— or sorry, the reason that people overestimate their businesses— they're, they're too close to it. They've built it. It's, it's their baby.

Right.

They've be— they've become attached to it, and they don't know the difference between themselves and the business, where they end and where the business begins.

That's exactly right. So understand that some people can be very, very off about this. And so we'll talk about this in a minute in terms of the steps to remedy this. But having a correct valuation of a company, an accurate valuation, is going to be obviously imperative. So one thing to notice here, and I said this is statistics, so this is a big deal. We should all be very, very uncomfortable with the fact, with this number. And I've said it before, it's been in our social media stuff. We talk about it all the time. It's at the beginning of our, of our free webinar. If you haven't done that yet, please check out the next one by going to myexitengine.com and seeing when our next webinar is. We do them once a month. They're free. And you're able to come in and learn all the things that you'll, you're gonna need to know in order to, to create a, you know, a good exit plan. But basically it's this number is that this is the heartbreaker. Okay? 80% of small businesses that are put up for sale do not sell. Okay? Just because you put a business on the market or say it's for sale does not mean it will sell. And it certainly does not mean by any means that it will sell on the terms or for the terms that you want, especially if you've overvalued it, which is very common. Okay. So these things are interrelated, that they talk to each other. And again, they all relate back to this value gap, right?

And yeah, and oftentimes, you know, what we've seen is they, you will get the number that you want initially from a buyer, right? You know, we've dealt with this, Joe, where someone says, I want $1 million for this business.

Right.

And, and then the buyer says, I'll pay you $1 million. And then they go through due diligence and they go through, they look at the business and they find out more information about the business. And this is one of the reasons why— there's a lot of reasons why, why business sales fail. But in due diligence, the company is really getting to know the business and getting to, as an example, figure out that 45% of the revenue or 60% of the revenue comes from 2 customers, as an example, or The contracts are month to month, or there's all sorts of risk that the buyer is taking with, yeah, if I understood the business to be worth $1 million and I would have paid you for it, but given that X, Y, and Z happens, you know, revenue concentration, no lack of contracts, lack of process, lack of—

Too close to the business, right?

That, that valuation will get knocked down sometimes by half. Sometimes by more than half. And so that's a major, major problem and a major contributing factor, I should say, to that 80% failure or 80% of the businesses do not sell.

No question about it. And so when we, again, this is why the value gap is a piece. Understanding the value gap is the first and most critical step in the entire process. Because you need to know how to get someplace. You can't have a map unless you know where you're headed, right? So the map requires 2 things. It requires a starting point and an end point. Otherwise, right, you're just whatever, you're just going. You don't need a map. You just go wherever. A roadmap, like exit planning is gonna provide for you, is gonna take you step by step and is gonna show you how to get from A But you gotta know where A is, right? Which is what's the existing state of my company and everything else. And you gotta know the end, endpoint. What's the value gap I'm trying to close so that I can get what it is that I need? And now I'm gonna see how much time and effort and everything else is gonna go into closing that gap. And I'm— and the plan is to try to get as close as I possibly can and work back and forth. So maybe you can say, hey, look, I can't get the business to where I want it to be to completely close my gap. Well, isn't that gonna change? Your retirement plans, right? Is that going to change what you do later? So, understanding how this can all interoperate, really what exit planning at the end of the day is all about.

Correct.

So, keep in mind, there are factors you can control, right? I.e., I can control how close I am to the business. I can control, you know, some of my costs and my operational things and stuff like that. And then there's some things that you can't control. So, For instance, what happens with an economic downturn?

I was just, I was just gonna say is one of the, one of the big things you can't control is A, the economy, and B, interest rates, which are, which are 2 things that are obviously very interrelated that you cannot affect at all. And you never know what's going to happen in 6 months, right? There's, there's, we have an election coming up soon. There, there, you know, there, who knows what's going to happen with that. But with the economy, It's inherently uncertain, and that can affect the valuation that people are willing to buy— not the valuation, the price that people are willing to buy for your business, given that many people think we're headed for a recession, even though we're obviously not in one now.

Right. And wherever that— and again, there's inflation, there is interest rates, there's industry regulation. There's, you know, changes in the industry and things like that. So there are all these factors that are out there that are always, that you're always kind of looking out for as the business owner, but they're no less important, obviously, in terms of valuating the business and understanding the value gap. So the idea is understanding that there is likely to be some kind of economic impact at some point. We want to make sure we plan for that. Okay? And we want to make sure we stay prepared. So, those are really the things. And by the way, the last piece of the puzzle here in terms of what's going on, what's very common, at least with the value gap amongst business owners, is most people just find themselves completely unprepared for what befalls them, including, by the way, retirement. And so, the sad thing here is that when you take into consideration that 80% of the Those businesses who go up for sale don't actually ever sell. What that really translates into is literally broken retirement plans, okay? Like destroyed retirement plans. So what you can't do and what we will not let you do, okay, is to go through your entire business without understanding what the impacts of selling the business will be and how you will make money. Now, you might be one of the lucky ones. You might be one of those 20%, okay, or less, that has everything put together and has done an overwhelmingly amazing job at increasing the value of your company, and that you have zero fear about selling the company. You know exactly what it's worth. You know exactly how much money you will make when you do it. Maybe, maybe the amount is so overwhelmingly large that it doesn't matter.

Yep.

And good for you. And if that— if you're one of those people, then we want you here too because we want you helping others.

Yeah.

Um, because that's incredible. But understand that unfortunately for most of you, this will not be the case. And the idea is that we can, we can do a better job with this. And if all of us are just paying attention and understand what it is that we don't know, right, and learn what it is we don't know and then know it and then execute on it, that we will be in a much better position to be able to retire Or to leave our business with, with the, with the, that gap as, as closed as possible. Yeah.

And as Jo mentioned earlier, we're going to go through a list here of some of the factors that can contribute to an increase in the value gap. There's some of these that we've mentioned previously, we're going to get into a little more detail, that you can control, right? There's some that you can control that are within your business that you can make the changes to, to to make you improve your business. And there's some factors external to your business that you cannot control. However, you can mitigate some of those risks with the choices you make about your, as an example, your financing operations, your ability to be nimble, to change, to changing customer demand, as an example. So just realize that The ones you can really affect are the ones you want to focus on because you can't, unless you're Jerome Powell, and no, you're not because he doesn't run a business, you can't change interest rates in this country. So the ones that you want to mark here when you go through this list is, can I, and we'll talk about them, can I make this change myself? Can I affect how this particular point that John and Jo are talking about?

Right.

Can I make that change in my company?

Right, exactly right. And then look, there are going to be some here that we're going to recommend that there might be ways to do it, but you still might not be able to do it. Okay, look, there's— we don't know exactly what you're— you're going to talk to us though when you come across something like that. I hope that you'll reach out and ask a question or whatever, which, by the way, good time to just say that we are always open for questions. If you want to comment on this podcast, we try to answer every single thing we can. You can send an email at any time to info@myexitengine.com, and someone will try to answer the question for you. Obviously, we hope that what you'll do is go to myexitengine.com and subscribe to ExitEngine at one of our various levels. And hopefully, if you pick the middle level, you're going to get access directly to us for coaching, direct coaching, and everything else. Just keep that stuff in mind as we go through this. But to John's point, look, the first thing we got to know is that there are, especially when you own a business for a long period of time, the longer you have the business and are operating the business, the more likely you are to come across a lot of these situations just because time is the kind of thing that brings these things on.

Yeah.

But the most important thing, we'll just knock this out of the way because we've just talked about it a little bit, these economic changes, right? So, as you're going through and trying to, over time, part of the exit planning process is that it never really ends. Okay? You are going to revisit this at least annually. This is the plan. Where are we this year? What has changed in the exterior world? Right? Are there, has there been an economic downturn or is inflation an issue or what, what, what is changing about the market that I'm in? Right? The idea is that basically, what I need to make sure that I do is understand what those changes are and on a regular basis, because I may need to adjust something, right? If I come in and suddenly the— I did an exit plan 3 years ago and it's pretty good, and I've been revising it, revisiting it every year, and so far so good. I've prepared for every situation, but now this year something's changed, right? This year I've got an inflation situation or a recession or something like that that's happening, and that's going to impact this total exit value number somehow, some way, and I need to be able to adjust for that. Now, it might be that in the case that it might be doing nothing, it might be like, I can't do anything about this. And so I'm seeing a drop in my value and I'm going to hope that the best I can do is is try to, you know, whatever, increase revenue, or maybe this is a temporary thing like COVID was or whatever that will eventually go away and everything will come back. So again, those economic changes are things that you can't control, but you can at least plan for. And to know, all you gotta— the key to this whole thing, Jon, I think, and you and I have talked about this a million times, is knowing what you don't know, right? Finding out what it is that you don't know is the key thing to all of this, right? You don't— you may not understand or be thinking about the fact that these economic changes are going to impact your long-term value because they're happening now and I'm 10 years away from retirement.

Yeah.

Guess what? This year could have a serious impact on your total overall value. And if you're not at least cognizant of it, aware of it, and make an informed decision, even if that informed decision is to ignore it for whatever reason, That's what we're trying to, that's what we're trying to like get across, right? Yeah.

And, uh, in addition to economic changes, I think we can move along to the next one is, is industry shifts, right? Is, is changes in technology, in regulatory changes, consumer preference changes. I think of, I think of the rise of Chipotle, uh, as like an example of like changing sort of preferences. And this has been the last couple years, but That's just an example. If you're in the restaurant business, if you're competing with them, or relying on outdated technology.

Yeah, I was gonna say, yeah, the technological shift either way, right?

Yeah, like if you are making— yeah, it will have a huge impact. And those are things that, yes, you can prepare for, but sometimes the changes happen outside and you realize that you're behind in your business because of a competitor's actions, Right? The industry changes, the consumer no longer wants to buy ice cream or whatever. Ice cream is a bad example, but—

Or some new company comes into your space with a different model, you know, that is basically more efficient or something like that, right? And starts to buy up market share, you know?

Yeah. And that is, that can negatively, that can drastically affect the value that your business can be expected to sell for. Because of the result of a competitor, of the technology that comes into the market.

That's right. Keep in mind, guys, that there's the market that you work in in terms of your customers and where you're creating your revenue and all that stuff. But then there is the market that your business is in when it's up for sale. Okay? And that market is just as competitive. So remember that you're in a situation where you want to stand out as the best possible option when there might be 3 or 4 options at the same time. Okay, maybe more. So keeping in mind that that's the, you know, that's, that's one of the things and, and that you want to make sure that you're showing not only that you've got much of the business buttoned up and that the value is good and that the efficiency, you know, and that everything is kind of tight, but you also remember, and we'll keep saying this on every podcast, you want to make sure that there isn't an inefficiency that can be exploited by the next person, right? Even if that's a competitive situation or a new product or growth in some particular market or whatever that you haven't done yet, but making sure that you're keeping those things highlighted so that the buyer knows how they're gonna— they can take the business and what they can do with it.

Yeah. Another one that's critical, or that can be a real problem when you're, when you're looking to sell your business, is a lack of growth. Like, you can have a profitable business and you can, um, you can grow, you can control expenses, but if you don't show that growth, then the buyers are going to wonder, oh, Joe's selling this business because he can't grow it anymore. And again, that can be a problem. Obviously, declining performance is a different problem, but, but you need to show that, that consistent revenue growth as well as As well as profit growth to show that if you're in a business that's— if the overall industry is declining, that's a problem. If your business is declining, the industry is growing, well, that's a problem. So a consistent lack of growth in all aspects of the business is key to making sure that the value gap does not increase.

That's exactly right. And I think that this is probably one of the most common things that we see is the lack of growth. So I've been— what happens to people is that they become a subject matter expert in something. They're able to start a consulting business or some kind of situation like that. They are, you know, they're in a specialty area. They're able to grow that business quickly, you know, at the beginning. Maybe they grow to a certain level, but then they find themselves leveling off. And because they're not expanding their business or going into other areas or whatever, they're experiencing stagnation, right? And that stagnation can keep you in income. Stagnation doesn't mean loss. So what happens is that people are paying themselves, they're paying themselves well, they got happy customers, they're doing their work on a daily basis. And they're making pretty decent money. But what happens is that— but what they don't realize is that the total exit value, the value of their company, is not increasing. And in fact, it could be, even as you're making money, could be the value, overall value of your business could be decreasing.

Correct.

Right? So this lack of growth— businesses are like sharks, okay? It's why you must keep moving. Sharks. They have to keep moving and swimming in order to survive. You can't— it would be great. And look, this isn't— it's not that you can't. So let's be clear. If you're happy making, you know, whatever money you're making out of your business as an independent consultant or whatever, and you're not interested in growing a business or having that stuff, then that's fine. This is not for you. Okay? It's just not. We're here to help people who understand that they want to grow. That they want to, right? They want to increase and decrease their value gap. They want to increase their, the money that they can make by exiting their business. They want to control their own business destiny. And that's what Exit Engine is for and what we're all about. But so, but there will be no business that's part of Exit Engine that should be experiencing any kind of stagnation, right?

Yeah.

Because it's one of the first things that we're going to talk about. In terms of the steps you take, you know, to increase your TEV or total exit value. All right. Operational efficiencies. Yep.

These ones are critical and it all depends on what type of business you are, but operations exist in every business. It could range from poor internal processes, poorly defined processes, high costs that haven't been dealt with, Poor inventory management. You've got too many widgets on the shelves, not enough in customers' baskets.

Right.

Reliance on outdated processes. It just reduces profitability and eventually the business's value. Right? You need to make sure that your operational efficiencies, you're handling them with a sort of continuous improvement. You have a way to to continuously improve the way you do your business and the way you serve your customers. And that translates into removing efficiencies from the operations of your business.

Removing inefficiencies, right. And so the idea that— yeah, right. But remember, and again, we'll go back, but not all of them. So this is where it becomes a, you know, this is an odd thing. This takes a lot of thought and probably some expert help to really disambiguate The good inefficiencies from the bad inefficiencies, right? So in other words, you want to obviously eliminate you from a cost basis, right? On a cost, not a cost accounting basis, but from a cost perspective, meaning how much does it cost? What's my overhead, right? Finding efficiencies that reduce your overhead, that make delivering your service faster, cheaper, better, or whatever, or result in some better situation from your customers or things like that. That's all good. That's the stuff we want to focus on. There are going to be some inefficiencies that you're not going to get to or you're not going to prioritize because they are harder or expensive or whatever. But you want to make note of those things, keep them on a list, keep them there. We want you to know every single inefficiency you have. And it's okay to have some, right?

Yeah.

Because we're going to use those as highlights to where the business can go next under new ownership.

Right. An example of that is, right, you have a machine that costs $2 million. It's not realistic for you to buy that new machine. But knowing that there is a new machine out there that is the best thing since sliced bread in your industry and knowing about it, That's something to point out.

In fact, John, it's actually the automatic bread slicer is the machine, as it turns out. So there you go.

The automatic bread slicer. That can be exactly— that can be the thing that you point out that Joe mentioned to the buyer. You need to know those things. And then it's like on your wish list, right? If I had $4 million, that's something I would buy. That's something that you can pass along to a potential buyer to say, if I had all this unlimited money, I'd do X. Y, Z, A, B, C. That's exactly right.

Yep, that's it. And just know what those things are. And as you, as with any plan, you'll say, I'm gonna, you know, you can only do as much as you can do at any given moment with the, you know, your staff you have or consultants or whatever you're bringing in or money you're spending. There are obviously, you know, at some point resources are going to be limited in some way, so you can't do everything at once. So you're gonna prioritize the things you're gonna take care of in priority order based on how much value they add to your company and how quickly. That's simple, right? And then one of those things is gonna be— and then the things you don't get to within the timeframe, hopefully they're the small ones, or maybe they're ones that are like, look, as John pointed out, this is a big deal. If you guys could afford it, if we could— if I thought we could afford that $2 million machine and have it and own it and do it, it would, it would, it would grow our business to a degree. I would do it. But I didn't get to it. Instead, I made these other changes and others, other inefficiencies and left this for you. So here you go, here's a gift. Here's the way you grow the business. You buy me and then you buy this machine and then you're done. So you've just made, you've just made the entire investment for, you know, on behalf of the, of the buyer and made it really simple, right?

And this next one I feel we talk about a lot and I talk about a lot, but it's So important because— and let's do it in the form of a question. Joe, would you buy a business— let's say, would you buy a restaurant where the owner was the only cook that knew all the recipes?

Uh, I would not. I would— unless I was buying that guy, no, I would not buy that restaurant.

And what that means is really you wouldn't want to buy a business that's so dependent on the own— the current owner that they would have to stick around in an unlimited way. So like, just one example would be if they're the chief cook at a restaurant. But there's all sorts of examples of businesses that are too dependent on their current owner. A buyer wants to be able to buy a business that's as plug-and-play as possible. As maybe they'll stick around, maybe a current owner will stick around for some period of time, but they want to be able to run that business Without the owner. That's the whole point. They're buying the business. They don't want the owner necessarily attached to that business forever.

That's exactly right. There's no question. I mean, look, and we're— you're going to hear this from us all the time. You already have. It's going to be a continuous thing. It's going to be one of the biggest goals for you. One of the biggest objectives for you is to be able to get out of the way, and that takes time. It's not something that happens overnight. Unless you're trying to sell the business tomorrow, you know, it will take some time to, over time, to remove yourself. You need to replace what it is that you're doing. You need to replace it obviously at a quality level that, you know, chances are, again, we'll go back to our subject matter, you know, example that most business owners are subject matter experts in something before they are business owners.

Yes.

And so your subject matter makes you happy. It might be, you're, it's good that you talk to the clients when you're running a business. And in terms of your clients and the value to your clients at the time, you being involved in the business is very valuable, right? Unfortunately, the opposite is true when it comes time to sell. And so you have to make plans and take steps away. Let's take, take steps in the opposite direction, you know, of the business.

Yes.

And, and to replace yourself with management that can do that and all that stuff, so that when the new owner is ready, or when you're ready to sell and the new owner comes in, the staff is there, it's ready, and you're just a matter of— I've already removed myself, I'm down to— I only work 2 hours a week, or whatever it is, right? That's the, that's the kind of like level that we're looking to get to.

Yeah. And, and oftentimes it won't be a one-to-one relationship, right? You won't, you won't pass all your responsibilities down to one person. You'll pass your responsibilities to a a few different people at the company because that's just the way it works, right? You'll pass some financial things to, to a finance person, operations things to an operations person, and your sales activities to a salesperson. But you're empowering those people on your team because that will make the business stronger and more saleable from a buyer's perspective.

Exactly right, Joe.

Poor financial management Is the next one on the list. And we have seen— I just— listen, I'll speak for myself. I have seen this blow up so many deals because people have a different sense of what they believe to be financial management versus what the buyer believes to be financial management. What do I mean by that specifically? Well, not having as an example your income statements run on a monthly basis, not having your costs allocated properly to multiple products. And I'm just going through one specific deal in my head, but those are the ones that— wait a second, what is the profitability of this product that we're buying? The company has 3 products. There's no cost attributed to the 3rd product. That is an example of when a buyer sees that information, They're gonna think a couple of things. One, they don't know what they're— they don't know the margins on their business, and they're not accurately representing what the business is, what the business is doing on a, on a daily, weekly, monthly basis. And disorganization is not a good feature you wanna broadcast to potential buyers.

No, we have seen this. And again, this will be the first thing that kills a deal, right? I mean, this is the first thing before they even have a chance to like even worry about like personalities or, or, you know, what your senior management team is like. They will look at, they will look at the numbers. And if you can't produce the documents or you produce documents that are incomplete, or you, or, or you otherwise basically can't, can't show financial, at least just the, the management of finances, forget about the numbers, are the ability just to produce the documents, right? Kills more deals than you can possibly imagine. And so being able to be organized and not just organized on the day that people are coming to look at records, but the real key to it is managing it properly all the way through, right, John?

Yeah. You manage it properly. You have a process for it, right? So you have, you have a tool.

A lot of time, a lot of people use QuickBooks, right?

Great system, great tool. And for financial records, and that's fine, you can download it, but you need to have a process for going over those financial records on a— sometimes on a weekly basis, sometimes on a monthly basis, at the very least, to say this is how we're doing. For seasonal purposes, a lot of businesses are seasonal in nature, a lot of businesses are cyclical, and, and they go through various cycles. And if, if something doesn't happen in February Well, X isn't going to happen in, you know, in June. So you really need to, A, know your numbers and also have them organized so that when you do get a buyer asking questions, that the person who's in charge of those financial statements and the business records, they can answer those statements. It's like the information's on the, you know, on the tip of their tongue and they know that, oh yes, profitability fell by a percentage point, but we know why because of X, Y, and Z. So you need to know that information and manage it properly and have it organized, as Joe mentioned.

That's exactly right. And so, and having it organized so that when, by the time you're ready to actually put the mar— the thing, you know, the business on the market, actively sell it, that everything there is, is done. And all you're doing is, you know, is allowing access to the records that already exist, right? That's the perfect situation.

And if you're not a finance person, I get it. We understand. There's all sorts of companies that come in and be auditors, right? We know people. We— the people— some people within the ExitEngine community are specifically here to do this. And that's their business. Their whole business is getting companies more organized onto tools, understanding tools. And not only that, the tool is one thing, but again, the process is even more important to say, Right. You know, Joe and I meet on a monthly basis to go over the finances of ExitEngine. That's a key thing that we do every month to make sure that we're staying on top of things. Joe understands what's happening from my perspective, and, and I understand what's happening from his perspective.

Exactly right. And that goes in that, and that folds into the communication of stuff that's going on within your company as well. That's a whole other, other level. But so, um, that's financial management. Very important. Correct. We talked a little bit about this before, but let's talk about competitive pressure because again, this is the kind of thing that is— this is one of those items that you're going to mark as out lots of times out of your control. Okay, but you need to be aware of it and understand it and see how— understand how it affects you and what you can try to do to counter it. Okay, which is competitive pressure. That means increased competition in some kind of area within your market, whether it's in your core business or in a or in some kind of, you know, offshoot, or if you're considering, you know, some kind of growth product or some kind of new entry of a product into a market, understanding that competitive set, who's there, what are they doing, any kind of information and intelligence you can get about what's going on is really important. But when you actively have a business and you have an exit plan and you're reviewing, you're doing your annual review of your exit plan, and suddenly last year you realize that there's a new competitor in your market, right? You've got to understand and take that into consideration. What's that doing to your market share? Oh no, our market share has dropped by 12% since this competitor came in. This is terrible. What are we going to do? How are we going to combat this? It's not just a moment in time for your business today. It's Obviously something that's a long-range thing because you're, because you're talking about, again, you're— this will impact your total exit value if you start to see a competitor comes in and your revenues start to decline and you have to do, uh, you know, make some kind of, uh— you may not be able to control the competitor, but you can control what you do, right?

Exactly correct. Is there— is you can't control, right? You can't control what the competitor does, but the result of You know, what you do to change your strategy or alter your— the way you approach the market is what you can control. Maybe you drop prices, maybe you shift into different geographies or different demographics to go after some, some, you know, an area that's underserved. The competitive pressure can make you do that, and it's critical for you to adjust those things and realize that Competition happens and you need to address it.

And look, sometimes this is what happens too. Sometimes the competitive pressure and/or the changes in markets, like these things that are out of your control that happen, legal, whatever, some kind of regulation, the government gets involved in something or whatever, those kinds of things that are outside of your control are often triggers people to start to consider selling the business.

Yes.

Okay, so one of the things we've got to be cognizant of, and what we're trying to kind of get across is our— one of our big messages here is that it is never too early to start exit planning. Okay, and the reason is because of things like this. Because what happens is that when you get to a point where there's a big rate— you've— let's just say that you've owned the business, John, for 20 years and you own some kind of manufacturing thing, okay? Doesn't matter, light manufacturing.

Yeah.

You're making an important piece of something that goes and gets turned, uh, you know, gets, uh, you know, becomes a part of a larger product. Uh, let's just say you own a— it's a biotech product, okay? So you make a piece out of metal or something like that, and it's a very specific thing that you do. You're the only one— one of the— you're the only one who does it right now, okay? And you started the company knowing this, and you've had this company for 10 years and it's been great. But now last year you just realized that a new person, a new competitor entered the market and started doing the same thing, only instead of doing it out of, uh, whatever material you're doing it in, the process you're doing it, they're doing it in a different way and they're able to charge less for the product and they're starting to cut into your business.

That is a big problem.

What if I've had this business for a while? This might be the thing that makes me go, I'm right, I'm done. I don't know if I have it in me to compete with this person and to go back through everything I have to do to rejigger this, to do something to compete. This guy's gonna wipe me out, whatever. That is obviously not a fun feeling. But you may have made enough money and have a value on that business that might be enough to cover your value gap. This is the kind of thing that basically is, and at least you're hoping it will, and I think that's the difference, right? So understanding now what that thing is before you find yourself in that situation is really key because what you do and how you go about that exit at that point could fundamentally change. And I think that if you, when people use these as triggers, that it's often too late, right? And so what are you gonna do in that situation, John? You've got this competitor, the whole thing. They're essentially kind of like, you can see that they could drive you outta business if you don't make some kind of radical change. So your options become, I have to make a radical change. How do I go about doing that? What do I change to? How do I do it? What are the things? Or maybe you go, hey, look, I'm gonna stay on this and I'm gonna show and demonstrate the value of my way over the competitor.

Yep.

But again, that might take a lot. You may— let's, and let's pretend you're at a point where you're like, no, I, I don't have it in me. But here's the good news. I know it can be done. A little bit of, uh, with a little bit of, uh, you know, intestinal fortitude and some, right, and some energy and some, uh, you know, and some financial investment. Well, that's great because that's exactly what the buyer is going to want, right?

Those are examples of the inefficiencies that Joe mentioned before, is that, hey, a competitive— a competitor comes into the market and offers a, a, a lower-cost product at the same value or This provides the same value. That can be a perfect trigger to discussion when you talk to a buyer to say, look, if I had more money to invest in a new machine to create this product or to modify my product, we could capture a huge percentage of this market. So that's an opportunity and an efficiency that buyer could look at in your company.

That's right. Unfortunately, what happens, I think most of the time is that these are the incidents that make people go, oh, time to sell a company. And they haven't done the work of maximizing And so now you're gonna find yourself in a position where you're behind the 8-ball. And now potentially what this turns into is if you don't understand the opportunity this is, this could turn into, quickly turn into a fire sale, right? And that's what we're trying to avoid here. Yes. So competitive pressure is a big thing.

Workforce issues.

Let's combine workforce and legal and compliance stuff together because that's kind of like they're similar.

Good idea.

Yeah, just in terms of— okay.

And this is if you have high employee turnover, um, or you lack— you can't hire skilled personnel. Um, poor management can be part of this. Um, that can— this can really affect a, uh, your— the valuation of your business and what you're able to— what you're able to sell your business for. You need a skilled, stable workforce, especially if you're exiting, right? If you're exiting right away, this buyer's coming into this company— think of it from their perspective. They're coming in, they might not know a lot about the business. They need to rely on the employees that are at the company now. Yeah, sure, they're going to hire some people and, and maybe get rid of some people, but what they're buying as part of the business is, is what they hope is a skilled and stable work force because that allows them to produce the product that the company sells.

And it's the bottom line for them too, right? I mean, at the end of the day, it's like one of the most important things that they're buying.

And most expensive things that they're paying, right?

Exactly right. So understand that that is really key. Obviously, your personnel is everything, right? And their ability to be able to do their job and do the job without a lot of oversight, again, also ties in. You can see it ties into your owner dependence, it ties into your competitive pressure, and it can tend into your market perception and into your operational efficiencies and everything. So all this, obviously, as you can see, is all— they're all related and all tied together.

Yeah, sorry, related to the regulatory things and the legal things is, you know, As a business owner, you're going to get sued, right? It's just the reality of doing business, unfortunately, in our country is you're going to have slip and falls. You're going to have problems with older— with customers that maybe no longer use your product. And it's just a fact of life. Those things will need to get speeded up and those lawsuits will need to get settled. If you have outstanding things, no buyer is going to buy a company with either something pending with the FDA or a pending lawsuit that has an unknown potential windfall or unknown penalty for it.

Outcome.

Yeah, outcome. Yeah, that's a better word for it, is you need— you're going to need to resolve those outstanding legal and compliance risks so that the buyer does not take those on when they buy the business.

That's exactly right. And so when you have issues of HR, that could be legal problems, right?

Yeah.

You've got someone who's, who's suing you for, you know, defamation or, or something that you did that was a bad HR practice or whatever. That again, that, it folds directly into your legal and your compliance issues and all that stuff too. So that's why I'm just kind of bundling those 2 together, but they're, they're workforce issues or HR problems, and then there's the legal compliance risks That are potentially outside your company or involve your company, you know, from an outside source. But either way, those things have to be figured out. You want to, you don't want to ignore them, meaning that you don't want to try to hide them either. There's nothing wrong with saying, hey, look, we faced a lawsuit five years ago. It was settled. It was fine. Whatever. There's no issue with that. But you know, disclosing those things that happen is something that's going to come up. It's going to be asked. And what you don't want to do is have someone find out that you're hiding something or lying about something because they won't trust you anymore. And that's a huge problem at that level. Your market perception. So what's happening with you out in the public? What's your reputation? Do you have any publicity? I mean, maybe that HR issue had resulted in a couple of negative articles about you. written in the newspaper.

Or a Glassdoor review, right? Like a review on a website that has, you know, either a product or an employee review, former employees. You know, there's all sorts of stuff on— Glassdoor is just one example, but there's all sorts of things that once you, once you have former employers or former employees, rather, they will— in this generation, they will write— in all generations, I should say— Will write reviews of what their, what their perception was, their experience with, with you as their boss. So that can be bad, right? Yeah, that can be good.

That's it, right? And so, and by the way, a good— just let's take the opposite tack, you know, a good market perception can actually increase the value, the value of your business just alone without anything else. If you are the— if you're considered the number one person in the space or your business is the number one you know, holds the market share, or if you know that you are blowing your clients, or your, sorry, your competitors out of the water and you're the, you know, what they call the 400-pound gorilla in the space, you know, that's going to, you know, potentially be an effective marketing tool for you in terms of selling the business. People like the— they want, you know, they want to associate themselves with winners.

Yeah.

And so, if you have the best reputation, that's going to help them grow easier and all that stuff. even after a sale. So again, the positives will be the positives, the negatives will be the negatives, but either way it matters and it plays a critical role in how your company's evaluated and therefore what your value gap is. Technological obsolescence. Why don't you roll with this one then?

I mean, this is if you're not keeping up with with technology to make— to ensure that you're competitive. And if you're using outdated technology, that will catch up to you. Right? It will either catch up to you in operational inefficiencies that we talked about, or it will come up— it will catch up to you when the buyer comes in and the buyer— let's say that the buyer knows a lot about the machines that you use. Or the software that you're using. And then the— I think back to when I was starting at a company and we're using a, you know, 10 years old version of Oracle for one of our databases. Well, the only reason I— we found that out is because I came in and checked things. The only reason that when buyers find this out, if they come in and they look and it's all old technology, they're not going to want to buy the company for what for a premium, and that's what you want to sell it for. You need to keep up with the latest technology, technological advancements, whether that's if AI is in your business, whether that's whatever it happens to be. You need to make sure that you're remaining competitive and that you're keeping up with— you don't have to be on the cutting edge. You need to be— you need to have Updated technology, right?

No question about it. And I think, again, it could be— and it's case by case— it could be a situation in which that becomes an inefficiency that the next people can exploit. It might be the only one. You know, there are people that change their businesses that start out as consulting businesses and then move— change their business model into something else that's more efficient, right? But— and that might be a course That someone, that a path rather, that that a buyer might take, right? As long as that was the only one, right? But what we're talking about here too is that when you look at the value of your company, right, you need to understand that the technology and the stuff that you're using there and things that have to be replaced or outmoded or that are outmoded or need to be updated or need to be replaced in total. whatever is going to potentially be an expense that there would have to be a good reason for the, you know, for the buyer to want to do. And frankly, the rest of the company would have to be in such good health that it would make sense for them to see that and say, okay, well, we'll take this because of the situation. But that's gonna be a very unique situation. So keep in mind that, again, in general, you wanna make sure that you're using as, you know, that You want to be as efficient as possible, and if technology helps you do that, then you want to make sure you're doing it. If there are ways— and you want to make sure that you've explored all the potential ways to do that in the future. And, and again, at the very least, just know that you're deciding not to change the technology. Okay? And if you're deciding consciously to not do it, then that's, that's okay because you're making a conscious choice. But please don't be in a position— what we don't want people to do is to be in a position where they don't understand that they should have done this, and therefore they're surprised now at the value of their company. Yep. And this last one, this sounds like it should be first, but I have it last for a reason. An unclear business model. Yeah.

And there's all sorts of— and I think I'm probably going to talk about one that's sort of different than what you're thinking, but I'm thinking of one company we worked with last year, I think it was, that had a business and they had, I think it was about $12 million in revenue and $10 million came from like a product that was dying and $2 million came from a product that was growing. Well, that's an unclear business model from a buyer's perspective because the $10 million business is valued essentially at nothing because it's really going away. And the $2 million business. So, so you think you have a $12 million business here and you're going to get a valuation on $12 million, wherein in reality you're going to get a valuation on the $2 million and some really small valuation on that $10 million because it's, it's a cigarette business, or it's a business—

It's going out of business.

It's a business that's going out of business and no buyer would want to buy that. And that's just one example. There's other things that, like, you can't scale the business. It's constrained geographically, or it's so nichey that people can't understand what it is, or it's so high-tech that people can't understand what it is. Remember, buyers are just like us, right? Buyers are the people that you're standing next to at your kid's soccer game. And if you can't explain your business to the person sitting next to you and standing next to you for— if you can't get that done in about 5 minutes while you're sitting, even less than 5 minutes at a soccer game, very likely the buyers aren't going to understand it either. Again, they're the buyers, are people at those soccer games with us.

So, right, absolutely. And that— and by the way, that's exactly why I put this here. So you would think that with your business plan and your startup and your— and when you got the business rolling that, that you would have a clear business model because you would be doing, performing a thing, right? Providing value to some— someone somehow. And in, in exchange for that value, they should be giving you money, right? And so when you're— when you are— when that's happening, generally speaking, that's essentially the way that you're doing that is your business model. That's, that's it, right? You can over time change business models. You can over time, right? We have a client who's going to move from a consulting thing to a SaaS product, right? I mean, it's a relatively, actually relatively easy move to make if you know how to do it. Yes. There are lots of permutations of this, but what can happen is you can start to cloud what you're doing. So the reason I put this last is because, yes, you should have a very clear business model in your business plan, right? And the initial money that you got, venture capital, startup money, your own money outta your own pocket, investors, whatever you did to start the business, that business model was probably pretty clear at that point, right? But changed over time, right? You might be in a competitive situation where you have to change it. You might have done something 5 years ago that, you know, that made you have to, you know, scale differently or look at the way you grew and decide to go in a different direction.

And the pandemic could have changed your business, right? That's changed so many businesses drastically and changed their business models, how they deliver products, that type of thing.

That's exactly right. So that's why I have it like last. So the number 12 is unclear business model. We want to make sure we understand what's happening. And if we are changing a business model, we need to give it plenty of time to be able to actually play out. What you don't want to do is change the business model and a week later try to sell the company, right? Yeah, that's the point. Yeah. And I'm probably not going to go over well.

Yeah. And this can be like, as Joe mentioned, a catch-all for a lot of the sort of unclear business model, unclear future, slash, slash a couple of other things that just create uncertainty for the buyer. The buyer does not want uncertainty when they're buying this business.

Right.

Um, when any— when they're buying any business, excuse me.

So, and the last— look, and guys, look, this is the bottom line. The last thing we want, right, is for you to be sitting at the table, okay? And the buyer says, uh, yeah, I know that you thought that this company, you know, and we all thought coming in here that this company was worth, you know, $10 million, but based on all the work we've done, the whole thing, we're now lowering, lowering our offer down to $6 million. Okay. What does that do to your value gap? That would— that's, that's the worst thing that can happen to you. Okay. Is to think that you're gonna get 10 and only get 6 when you've planned for 10. Right? So this is why this stuff is so important. Okay. It's, it's, it's, it's just that we've seen this stuff happen so many times to so many people. who have worked their fingers to the bone and, and done and, and sacrificed time with their families and everything else, all in the way of making— of trying to, to maximize the value of this company, only to have it all go away at the table. Okay, because this is what happens to about 60%, about 60% of businesses, guys.

Yeah, and imagine if, if that scenario that Joe just walked through, imagine if you're expecting 10, you, you get 6, and you've got $7 million in, in liabilities of the company. Well, that's a real problem, right? Like, right, that's a real problem because then you can't sell it. Then, then you have to go back to the drawing board and, and, uh, or you can sell it, but you'll be a million dollars in the hole.

So— Or, or, or, or, or, or, as common as that is, even more common is the fact that it's that, that gap. Again, we're talking about your value gap. So now your value gap's narrowed and is a difference of $4 million. Okay? That $4 million difference could be the difference between you living, you know, without, you know, any other income, you know, for, you know, for 20 years. You know what I mean? So, that $4 million invested is going in compound interest and the whole thing is the thing that's going to— if you just had that $4 million, it would be the thing that would keep you alive for the rest of your life, right? Smartly invested. But without it, right? You what are you gonna now you're gonna sell a company and what do you have to do? Go get a job. Yep. That would be right. That that would be terrible. So we're that's what we're trying to avoid here. So again, there are five things as we close this out that we're gonna need to do. Okay. The what are the answers to all these potential issues? Obviously, guys, it's how do we close the value gap? Say it with me. Exit planning. Yes, that's how we close the value gap. An accurate valuation. Get that, by the way, that accurate valuation is not going to come from us. It's not going to come from your brother. It's not going to come from the buyer. It's going to come from an independent third party, okay, who's going to look at your books, do the whole thing, and give you an evaluation. By the way, that valuation is something that you want right now. Yes. I need the benchmark where I'm starting my roadmap. Step 1, I am at currently, this is my total valuation. Where do I want it to be based on the— based on my value gap? I want this to be— so let's just make numbers. I'm $1 million now. I need $6 million. I need the company to be worth $6 million. Okay, yeah, by the way, guys, just to be clear, it is not solely based— in fact, it's almost never based on your total revenue. Okay, so when we talk about a $6 million company, we're talking generally about their revenue. Okay, that is not what the company is worth.

Correct.

Completely different things. Okay, we'll talk about why that is, but what we're not— normally speaking, your, your Value is not based on your revenue. It's actually based on something closer to your cash flow, your EBITDA, okay? And a multiple in terms of multiples of that. Okay? So we'll talk about that a little bit more later on, but right now understand that what we're talking about, when we talk about companies, we're talking about their— we tend to use their top line kind of revenue as the number. But keep in mind that that's not the value of the company. Okay? So the first thing you're going to do today, right now, is you're going to— when we can help you do this, find the right person to do it for you, you're going to get a third-party evaluation. And that valuation is going to basically determine where you are right now. And it's going to— then you're going to be able to do your— see what your value gap is. This is what I think I need to live. And then there's your difference, right? There's your gap. And so that gap is what you're going to manage to moving forward. Then you're gonna— yep.

Number 2 is your financial documentation, right? So we've talked, we talked about this. This is critical. Ensure all your financial records accurately reflect the business's performance. This is critical. Buyers want this. You want this. Everyone in the whole game wants this so that you can accurately know how on a month-to-month basis, week-to-week basis, that what your business is doing, how you're performing, and, uh, and how you can represent that accurately to a potential buyer.

That's right. And remember that the, the big metric that you're going to start to use to do this is what we call total exit value. And when you're a member of ExitEngine, you will learn exactly what that means and how to apply it. But right now, understand that that's what you're looking for. It's not about your top line, not even actually really about your bottom line. It's actually about total exit value, which is going to be a multiple, okay, of your— generally speaking, what your earnings before interest, taxes, depreciation, and amortization, EBITDA, okay? Business processes. The next thing is obviously, as we say to you just about every week, business processes and refining those processes and operations, reducing your Inefficiencies, right? Increasing your— the way you efficiently deliver things, costs, streamlining costs and things like that. And also then removing— working on a plan to remove yourself from the business.

Yep.

Those— that thing, those are all lumped together as one big thing that you're gonna do. Again, and exit planning is gonna help you do that, right?

Number 4. Yeah, market research. Understand the current market in which you operate, the conditions, what buyers are looking for. You know, we mentioned that— we actually didn't mention this specifically, but make sure that you stay abreast of the news, right? Go to Google and start a, uh, you know, uh, follow up— follow some companies in your industry, follow the bigger competitors in your industry to understand what's happening on a daily, weekly, monthly basis so you can speak intelligently about What's happening with the biggest competitors. And that's obvious to understand market conditions. But when you talk to buyers, they're gonna wanna know that you have your act together and you know what you're talking about, not only within your company, but within how you fit into the industry as a whole.

That's it. And remember that there's 2 kinds of market research, right? There's the market research you're doing from a competitive standpoint to see what you should price your— right, where are you gonna price, you know, what's your pricing model? Right? What where where are the clients and and who are they and who's got who and and who works with whom and all that stuff. That's that market research is important, and it's important to you on a regular basis. You know, obviously all the time. But there's also the other kind of market research we're talking about here is also the the this the research of the selling market for your company, right? And to know that who else Who's moved? Who's selling? Who's looking to get out? Right? Where are the potential buyers? Who are the potential buyers? Are there strategic buyers in your, in your, right, in your, in your industry that might be willing to buy you as opposed to private equity groups? Those things are going to be important to do. So under, as you go through this, it's, it's a different market, right?

Yeah.

It's not the same market. It's not the same. The people that are buying your product are not the people that generally that are buying your company. That's a whole different group of people that you need to keep tabs on and understand what's happening. And of course, ExitEngine will help you do that too, because we'll give you the tools you need to kind of keep your hands, uh, or keep tabs on what's happening in the market in which you'd be selling your company, right? Yep. And finally, John, the big one, professional advice.

I mean, this is— we mentioned this earlier with an independent related to an independent financial professional to provide evaluation. But there's all sorts of experts that are conveniently part of the exit engineering community that provide tax advice, that provide legal advice, that can provide regulatory advice. These are the people who— and, and people that, that sell companies and buy companies all the time, M&A professionals— is We are engaged, and our whole business revolves around helping people like you sell their business. We know what to expect. We know what's going to happen. We know the process, and and we can provide, and people in the exit community can can provide that expertise that you need. It's like just-in-time expertise when you need to when you need to ask a question about about taxes, when you need to ask a question about. a legal question, we have the people available in the community to do that. And it becomes so important, it becomes a timely thing too. It becomes something that's— that you need it when you need a tax problem. When you have a tax problem, you have a legal problem, you need that advice right away. And we have those people in our community.

That's exactly right. So the guys that— what we're talking about today is mining the value gap. Again, the value gap is that difference in the value of the company that you're selling it for and that which you need to do the next thing. That's the next chapter in your life, whether that's retirement or buying another company or moving on in some way. But the idea here, guys, is a very simple formula. What is my company worth right now? What is— how much money do I need to make the next move and to continue that move for as long as I want to do it? And then how do I create a plan to be able to move that number, that total exit value number from where it is now to where you would need it to be in order to live the way you want, right? To control your own destiny. So, the value gap is something that we'll talk about a lot here at ExitEngine. I hope you got some information out of this as well. Please keep in mind, guys, that we are always at your service. You can, once again, you can come to myexitengine.com. You can take a look at the content that we've got there. You can subscribe to our services. You can subscribe to the community and be a part of that at the level that makes sense for you. We will also— one of the things that we want you to do right away is to go to myexitengine.com and take the assessment.

Yes.

It's the most important thing that you can do because it's going to give you right away, give you some immediate value and some immediate potentially some answers to some questions that you may have right away. And then of course, you can talk to us about that assessment as well, and we'll help you figure out what it means for you and what you need to do moving forward. But in any case, come to My Exit. All that can be found at myexitengine.com. Please feel free to subscribe to this podcast. We'd love to have you do that. If you've got a question, we are going to start taking some questions on a regular basis, and we're going to start answering them on the pod.

Okay, John.

So that when we get those, we'll do a section on there. We'll take some listener feedback and some questions and stuff like that and get that out so that people— we can start kind of, you know, including you all in this, which is our, you know, kind of our model. So again, it's myexitengine.com. myexitengine.com. Thanks so much, John. Great talk about this. Very important piece of information that people need to know about the, the value gap. And we'll talk to you next week, man.

Thank you, Joe. Take care.

All right, have a great one, everybody.