The Exit Engine Podcast Episode 20: Post_Thanksgiving Reflections

Welcome to the Exit Engine Podcast, episode 20. Morning, John.

Good morning, Joe. How are you?

I'm doing great, man. It's, uh, when you're— when whoever's listening to this podcast is listening to it when it first comes out, it will be after Thanksgiving. Well, that's right, smack dab in the middle of the holidays, man.

So they will be feasting on leftover turkey, and in my case, leftover lamb. Um, so yeah.

Okay, is that what you guys do? You do lamb instead of turkey?

No, we do both. I just, I dislike turkey. Um, I don't think— I think I don't really like gravy that much, and I, and I— well, I do like cranberry sauce. I just find turkey dry. Yep. So we are doing— my wife has a fantastic lamb recipe, and so we are doing— I just picked it up yesterday, uh, a leg of lamb that is probably this big. I like lamb shoulder too. Not to get— we're not going to do the lamb podcast.

We will do an entire episode on lamb though.

But, but, but the lamb— but the leg of lamb roast that we, that we cook on low for 3 hours starts early Thursday morning. So yeah, Delicious. I'd highly recommend it over turkey. If you can get turkey right, go ahead, knock yourself out. I can't. You're a better person than me. It's hard.

Yeah, so it's hard and it's not that great. And that's not that great anyway. But yeah, you're right. But the lamb thing, would you do that lamb thing at Easter too, or just— or you don't do that?

I do. Yeah, we, we— I, I have lamb as much as I possibly can. I'm actually also going to pick up a little bit of ham too because we've got some more people coming. We're not going to do like a honey baked ham or anything. Um, but we're gonna do some Iberico ham from this place, uh, a couple towns away. So nice.

So this is a, you know, again, this, this, the preparation of for the holidays and all this stuff is, is reminding me of a lot of obviously what happens when, uh, you're about to sell your business.

Absolutely right. You have to just, just like we're talking, like, you know, I've had to go out and prepare and we, we got some, we got some vino and we got some, some a couple of beers and we got food. And I don't know what we're— I don't know what we're doing for— for— I think people are bringing over sides. But yes, we've had to tell people that you're— oh, you know, uh, Andrew and Tara, you got to bring over some dessert. And Mark and Carrie, you got to bring over wine. And, and, and, and getting everything ready so that at, you know, 3 o'clock or whatever time you have an evening on Thursday, we got all the stuff ready so people can eat.

So, uh, did you start planning this, uh, on, on Wednesday morning? Before Thanksgiving?

Oh, you even imagine my— first of all, my wife would murder me. Um, I got, I got a text message instructing me yesterday to get, uh, uh, some, some things and to remind me of things because she knew I hadn't done it yet. But we started this planning probably just after Halloween, to be honest with you.

Right, so not the, not the day before you were gonna pull it off, right?

Gosh, no.

Yeah, you know, it's funny because I think we talk a lot about the planning of stuff, and the reality is, is that, you know, you wouldn't— nobody in their right mind, right, especially anybody who has a wife, is going to start thinking about their Thanksgiving meal the day before, right?

Yeah.

But why is it that so many people think they're going to sell their business tomorrow? They come to us and say, hey, I want to sell my company tomorrow. Um, and can you make that happen? And, and so many times we have to say, not really.

Well, it's like, it's like the time that we, we, we did actually have a problem with our turkey. I can't remember the circumstances, but we ended up having to go to the local, whatever it was, ShopRite here on the Wednesday morning before Thanksgiving to get a turkey. Oh my word. It was a total mess. Now we had all the other sides and all those other things, but something fell through with the trick. I don't know if the— whatever, but, but we had to go. It was, Joe, it was a mess. Like, there were lines, there were, there were cars parking lot, like just, just a total madhouse.

And, um, so maybe people— so maybe people actually do wait to the last minute.

Well, I think a lot of people do, but I think a lot of people— because, A, I think people are stressed. I think the holidays brings about, like, you know People have different situations. They're seeing family members, they're seeing the uncle they don't like, and the, the, and politics just happened. I don't know if that's going to be a good, a good thing, but some people just get stressed and they just like to put it off.

Um, boy, that sounds really familiar. I mean, this is— it's, it, it's funny how we were thinking about the fact that the, that the holidays and what we have to do to go through the holidays and all that stuff, and whether that's Thanksgiving or Christmas or Hanukkah or whatever, you know, or Ramadan or whatever, you know, holiday you celebrate or whatever. You know, we spend a lot of time kind of thinking about those things, but yet there's still a lot of short-term thinking that goes on. And the same thing is exactly true when you're trying to sell your business, right? When you're planning your exit strategy, we, just like when you're planning a giant holiday dinner, You're not going to start planning your exit the day before you want to leave, right?

Or yeah, and if you do, it will turn into a mess, right?

Yeah, maybe you can, right?

Okay, you, you will, you know, you'll botch the turkey, you'll botch something else because you're, you're trying to do too many things and it's— you're trying to squeeze 36 hours into 4 and, uh, it just doesn't work that way.

There's so much stuff. And, and when you look at all the areas of your business that you have to examine and the things that, you know, that we preach You know, in the Total Exit Value System about the 10 areas of your business that you need, that need to be examined during this time. Those things can't really all be done overnight, right? Yeah.

And the projects that you're launching or the things you'll uncover, right? We always talk about, you know, we're helping you ask the right questions, right? Ask the right questions of the people on your team, and then they can go or you can go and find those answers. But oftentimes, those answers aren't, oh, it's— there's a drawer where you open it and the answer's there. It's, oh, we have to examine this and make a business decision and then implement it, right? Like, as an example, to switch a supplier. Imagine trying to contact a supplier this afternoon and say, hey, I want to switch my— I want to get a quote from you in the next 2 days before the holiday about buying something from you. Like, very likely you're not going to get something before on Wednesday afternoon that is actually usable.

Right. And, but, but how many times have you on that, you know, whatever, on that Wednesday before Thanksgiving or Thanksgiving morning, whatever, walked, looked in and realized, oh my God, I'm about to make mashed potatoes and I have no butter. Right? So here's a great example of, I, I didn't do my homework. I didn't go through and look at everything. I made an assumption. Okay, maybe I forgot about it. Either way, I made the wrong assumption, right? Either way, doesn't matter because now here you are about right with doing due diligence and something major has, like, the, like, missing butter has been uncovered in your business, right? So now you're sitting in a situation where you're like, you've waited too long, you didn't do the work, right? You didn't follow the system, you didn't look at every single aspect of things because you thought it was fine or would be easy, or I've got such a great business here that this isn't going to be a problem. Right? Or whatever you think was gonna happen. I've got a, you know, the buyer's there, we've gotten everything going, everything's great, and here I am sitting ready to go, ready to close, ready to make, make a, a S-ton of money. Okay?

Yep.

And it's gonna blow up in my face because I forgot the butter, right? Or in this case, I forgot the fact that, you know, whatever, I've got, um, I had a lawsuit, I had something pending I had a huge—

yeah, my huge supplier was just acquired. This actually happened.

Exactly right. A client lost— I lost a client yesterday, right? Or something like that, right? So now you're in a situation where if you had done the homework and done the things and followed the program, right, you wouldn't be in this situation. If you had, you know, at home, if you had, you know, the Saturday before, like my wife always tells me to do, gone examined the refrigerator and seen and made sure and the whole thing and written everything down 12 times, you wouldn't have forgotten the butter. We wouldn't be here on Thursday morning without butter and no supermarket to go to or whatever. Luckily, I think they're, they're open on Thursday morning, but still, the bottom line is, right, it's about preparation.

Yes.

Right. And it's about starting the process early.

Right.

And it's about getting in and understanding the things that you are, that you don't know. First, right?

Yeah, because you're always going to uncover something that you don't know when you look at— when you do a thorough examination of your business. I mean, think about it. When you walk outside and you look at your gutters— I was doing this a couple days ago— you walk outside and, and you don't think anything's wrong with your gutters, or there's, there's no blockage. And then before a storm, you go outside and you look and you start examining, like, oh my gosh, there's no water coming from there. There's a huge leaf thing. There's a huge— that'll be a problem during a storm. So you clear those things out. That's just what you're doing in your business. You're trying to find the blockages, the issues, the problems. Because when you go in and if you do want to sell, the person that's buying the business from you doesn't want to buy a problem, doesn't certainly want to buy your problem, has enough problems to deal with in their business and in the future that's uncertain that they don't want to inherit a problem that you could have fixed.

No question about it. And I think that could kill a deal right there. Right. And we've seen deals fall apart for So the reality is, is that, you know, and this is worth mentioning because the reality is, I don't know, I don't think that people really understand how delicate, right, a situ— the situation of selling your business actually is. Like, it's one of the most fragile— a deal to sell your business can be and often is one of the most fragile situations that you will encounter.

Yeah.

And what I mean is, the likelihood of that deal falling apart at some point, the whole thing is so high, right? It's actually startling. I mean, we've seen numbers, 50%, 60% minimum of deals fall through during due diligence. So, I mean, that means made the offer, gotten in there, have an LOI, which is called a letter of intent. We've said we're going to do this. We've made this thing and all we gotta do now is, you know, go through the financials with a fine-tooth comb and see the thing and get us all the information you can and let us really examine under the hood of the business and all that stuff. And if you're at that point before you start asking, if you are the person who is being asked questions of, and A, questions you've never heard of before, heard before, or, uh, or worse, questions that you don't know the answers to. During this process.

Yeah. And having been in that, that exact situation with people about insurance and about those specific things about lawsuits and about— I know that when I was talking to the person on the phone, you hear that when you ask the question that they've never pondered. You hear that silence that's— are you still there?

Yeah, right. Hello? Hello?

Is this thing on? And you hear the mouse or the wheel turn in their head and they say, oh yeah, we did have a slip and fall 2 weeks or 6 months ago that's not resolved. Great. Well, we're 7 days before closing. Right.

When were you going to tell us that?

Or we're 7 days before closing. When are you going to resolve it? Because I got to tell you something, there's no way that we are buying your company without that being resolved. So hang up the phone with me and get it resolved.

By the way, by the way, just on that example, um, the, the people who are suing you find out you're about to sell the company and the whole thing, uh, that's not gonna be good for the new owner or for you. Yeah, right.

So yeah, another one's a lease, like, right? Everyone thinks like, everyone thinks, oh, our landlord will be totally cool with a lease, with you taking over our lease. Okay, if you say so. But like, let's get a letter. Let's— on page 17. And when I know their lease better than they know their lease, which was another example of this happening where I went in and said, well, have you, have you notified your, your landlord that, that you're selling your company? Be like, no. Like, well, you have to according to, you know, Section 17 of your lease. Like, what? And, and so, yeah, so it's all about preparation. It's about checking those boxes. About— it's as Joe's wife has mentioned to Joe, check the refrigerator on Saturday. Don't forget. So we don't— so, so that, so that the butter is in the refrigerator, the leases are checked off in the due diligence process. And everything is buttoned up so that when you do get something that's sort of out of left field, like a storm, like, right? That also happens. That also happened to us one time.

Or the oven breaking or the refrigerator. We had the sink go one year. We had the oven go one year, right?

Happened 2 weeks ago when I was in Chicago. So, but the storm, we had a storm that blanketed the area specifically where we were buying the company. And, um, it was a mess. It delayed everything. It actually did delay the closing. And, and that's something, man, you can plan for a lot, but you can't plan for weather. I get it. You understand that when Katrina hits or something like that hits, but plan for everything else.

Get everything else wrapped up.

So if that does happen, that's the thing you can focus on, because dealing with landlords at the last minute, especially around the holidays, is a mess.

And look, I, I think that you bring up a good point, which is to say, look, it's, it's— you can't predict the weather. Okay, you don't know necessarily that the weather is gonna come or when it's gonna come or how big it's gonna be or whatever, but you do have an idea that it could come, right? And so the preparation for this stuff, right, is really what it's all about. It's about trying to understand all the different areas. What are the buyers going to want? This— what's this particular buyer going to want or care about, right? What is the— what are the the things that are going to matter to them? And what are the— and then on top of that, what are the things that just buyers just regularly require, right? That, that are where we're going to say that, that would be a ridiculous point for me to buy this business with the situation like this, right?

Yeah.

And if I had known that this is the situation before, I wouldn't have even gotten this far with it. And so the ability for people to be able to, to step back and understand that there are investigate— there are things that you don't know about your business. Some of them are good, right?

Yeah.

Some of them are good. We tell people all the time, it's like, wow, it's amazing what your value could be if you realize that you could pull these couple of levers, right?

Yeah.

So people are always upset when we tell them what their valuation is. Almost always, right? It's almost always like a negative event for them, which is why we show them at the same time what their value can be. Because the reality is that Understanding, doing the examinations, learning what it is that you don't know, uncovering the latent and hidden value, being able to— and by the way, uncovering latent problems that could blow up in your face. Do you know that we're seeing right now a record amount of post-deal lawsuits?

Crazy. I mean, I'm not surprised. I didn't know that, but it's interesting.

So the industry now seeing an uptick, and I can— we can find the numbers for you, but an uptick now in post- Closing, meaning the deal has been done and done, the parties have walked away with a thing, and seeing a major uptick in lawsuits coming from buyers, or either way, by the way, buyers or sellers after the deal's done, right? Saying that's either something that wasn't done right, something they weren't aware of, all kinds of things that are going on right now. So, you know, I think that again, that the, what you, that's bad enough to go through a situation and get, get so close to something and then have it not happen, not materialize, like not having a closing happen. But there's something even worse, right? About the fact that, um, you know, you could go through all this, have a, a relatively successful close or whatever, and then be unhappy afterwards to the point at which you think there was maybe some kind of liability or wrongdoing on purpose. By the other party. Yeah.

I mean, one recent example of this for me personally is we, we sold a piece of property and, uh, it's just, it, the, the person put the, the property back on the market right away. They closed on a Friday.

Right.

Put the market, put the property back on the market Monday. So I called my attorney and I was like, what, what, what, what do we, do we have to worry about this? Like, oh no, they just don't want to move there. I'm like, Okay, that's weird. And, and this happens, you know, it happens a lot in, in, in business deals. And anecdotally, from, from us, it happened to us.

Yep.

When I was working on a deal a long time ago, is they made a representation that the company we were buying made a representation that was not true. And it— we knew it was not— well, we actually— sorry, we didn't know it was not true. We found out later it was not true, and it was a fundamental way that their technology worked. And they misrepresented it to us. And it was like, wait a second, like, hold on. Like, this is, this is not the way that we start off a business relationship. And this was like a year later. It's like, what?

Yeah. You know, I think what happens is that I think sellers get nervous, right? And I think it's human nature in a lot of ways, right? We all, we, we're avoidant, you know, and, you know, when things aren't good or they're hard or they're out of our comfort zone, you know, you know, our, our, our skillset or however we look at it, uh, it can be difficult to, you know, it's hard to examine the things and ask yourself hard questions.

Hmm.

Right. But the only reason we're recommending that you do this and, and, and, and that you go through this kind of hard, you know, look at your own business is because that's what the buyer's gonna do. Right. So, yeah.

And, and, yeah. And that's exactly what due diligence is, right, Joe? Like when they're going through due diligence, they're gonna ask you questions and it's gonna, they're gonna ask you 7 different ways about your customer list and about your revenue, about your expenses. Um, and now sometimes they'll find something, and, and by definition, no one's gonna increase the price after due diligence. Like, that just doesn't happen. But what, what they can get comfortable with is like the price that they offered to pay. Be like, oh, as an example, one positive thing that happens during due diligence— let's say that they're going through and they're checking your customer list and they find that someone's 25% of your business. Okay, great, 25% of your business. But imagine the share of wallet that you're getting from that company that they determine is the company could buy another $3 million worth of product from you because they're buying from other suppliers. Now that's something that they uncover during due diligence. That's a positive, right? They say, hey, we only have a small, a small percentage of this company's purchases in this area. We could very easily Get a larger share of wallet when they're buying widgets or whatever you're selling.

All true, all true. But here's the problem for the seller: the buyer's not going to tell them. It's a—

yes, right.

So they're not going to tell you that. They're going to say— they're going to completely— they're going to go, oh my God, look at the deal we're getting at the price that we're offering. Okay, and so that's what they want. They want a deal. They want to buy the company for as little money as they can. They're probably going to have a— it's probably going to be some kind of weird combination of cash and debt and maybe some kind of rollback to the owner or whatever. There's probably going to be some kind of earnout situation for the owner in which they have to hit certain milestones over time in order to collect all the money.

Yep.

There are all these things. You know, that potentially are there. The, but the issue is that if you are at a point at which a buyer sees that and you don't know that, you're not going to get the benefit of the doubt from the buyer. You're not going to get the guy coming and telling you, go, hey, by the way, we found out that you're actually, your company's worth way more than you said it was. Yeah.

Well, that's what I'm going to say. I guess my point in saying, in really that story is, and you just mentioned it, Joe, is you need to know those things, right? You need to know those things so that when the buyer finds it out, and they think you don't know or whatever, you know how much, you know that you could potentially get more business. And that's one of those assets that's sort of uncovered, like, hey, in our top 10 of our customers, 4 of them have the potential to go from 6% to 13%.

Right.

If we capture this larger share of wallet. So like those types of things, you need to know your business in and out. You need to know your customer base in and out, your costs, your expenses, and your profit. Like nobody else does it so that when you're asked a question, you know it cold.

And I think, look, the lesson of all this, right? Okay. Is, and we'll move on to some other things, but I think the point that we're trying to get across is, and again, whether you hire, you know, we do not shamelessly plug ourselves on this thing, whatever. Obviously we think we have a way of doing it. We think we do it well. But at the same time, no matter who you go with and whatever advice you get or whatever help you get when you're thinking about selling your business, and by the way, You should get some help. Okay? Like, not it's not us or whatever. Find a broker. Find someone you trust. Ask around. Right? Do some due diligence yourself on who might be able to help you best. Right? But the bottom line is this: whoever you get needs to be a making you ask yourself some questions. Okay? A B let's make sure that the the what's happening is that you are examining your business to the point at which you've never there are there are financial there are tricks. Models, accounting things, you know, analysis tools, things like that, and the whole thing that I know that we bring to the table. And I'm sure that lots of other brokers and, you know, and advisors will too, to show you things that you can't possibly even know, right? So this isn't a criticism of the way you've run your business, right? Let's be very clear. Nobody's, nobody's coming in here, especially on our side. We're on your team, right? We're not here to criticize you or show you up or make you see that you didn't know stuff about your own business. We're here to get you to understand that you need to know that, and you need to do that due diligence and ask yourself some questions that you wouldn't have normally asked on a regular basis, right? You're not going to ask— you might be aware that one of your customers is 67 or 70% of your business. Okay, you're probably aware of that. Okay, but what you may not be aware of is what their market is, what the market share they're buying is, and how much more money they could actually spend with you, right?

Yeah.

To just carry this through example through. So the idea is that— and you would never think, no business owner would think to look at that unless there was some— they had some reason to do so, right? So the bottom line here is, guys, Let's get our egos out of the way. Okay, let's not— we're not here— nobody's here to get on someone or criticize. Yeah, I'll tell you that the worst thing for your ego would be is sitting there at the table and having some buyer tell you, right, that they're not going to buy your company anymore, or they're going to buy your company at less money because of something they uncovered that you could have known had you actually just looked.

Very true.

Yeah. Okay, so the bottom line here is that, you know, again, like you're planning for the holidays, The health, the financial performance, and the financial health of your company, the whole thing, deserve a hard look by you, by your financial partners, by your CFO, by your accountants, by advisors like us, by your broker, whatever. Okay? So that you are— you all have a very, very, very good picture of what's going to happen, and that you're not— those questions will come up from the buyer and you'll have answers already.

Yep.

Right? We don't want that stuff coming up and going, well, let me go look for the answer. No, no, no. You should be in a situation where everything is documented, written down, the whole thing. And if there's a question, I'll refer you to page 17 of the document that explains this is what this situation is, right? Not, hmm, let me— that's a good question. I wonder what that— right? Nothing shows a lack of confidence and, you know, and a lack of not knowing what you're doing than someone— than, than an owner who's sitting there going, yeah, I don't really know. Why, uh, there's 25% is one, one customer, right? Have, have help beforehand, prep beforehand, and know what you're doing and know what you're getting into so that you can have all these things answered and you can have a, you know, head everything off at the pass as you possibly can, right?

Yeah. Where are we going next?

So let's talk about the theme, your market position and competitive advantage. Okay, so where, where are you in the market and all that stuff? The question is like, what do you— what's the What's the theme of the— right, is it a holiday wonderland? What are you doing? Is it, is it, uh, you know, grandma's secret cookie recipe? What's the thing that makes your holiday your holiday?

Right, right, right. What is, what is the, the side? What is the unique side or the unique dish? Is it, is it, is it your pecan pie? Is it your stuffing that's cooked in duck fat? Is it—

In John's case, it's the, it's the fact that you go to John's house for Thanksgiving and yeah, there'll be some turkey there, but boy, Check out this leg of lamb.

There you go.

That's like the Kniff House specialty.

Exactly. So that what you have to identify is what is the lamb in your business? Is it, is it your marketing prowess? Is it your operational efficiency? Is it your ability to keep your costs low and your suppliers diverse? There's all sorts of things that's going to make— that could— that will make your business that you're highlighting when you're talking to buyers That is the secret sauce of your business. A patent. There's so many, there's so many of them. I don't know, Joe, if you, if you have others to add.

Yeah, those are great. Those are, those are great ideas. I think the idea is to think about, again, what makes your business unique, right? What's your, what, what, what has been the thing that you have noticed over the years that you, that from a competitive standpoint, you do better, decidedly better than your competition? Yeah, right.

Customer service. It can be all those things.

Customer service. It could be the fact that you've got a marketing machine and marketing engine that you've built or whatever that does a really good job bringing you warm leads, right? It could be that you have, again, you found operational efficiencies through technology or things like that that you're using that make a huge difference in the speed at which you can deliver your product or service. And that would potentially make your profitability higher. Again, anything that's well organized, anything. And then the other thing is the ability to scale, right? So potentially one of a competitive advantage for you as a business when you go to sell compared to other people would be your preparation and ability for the next owner to scale it quickly. So keep in mind, when we're talking about the market position and competitive advantage and all that stuff, it's not just about how you perform today, right now. in the marketplace in which you do business, but potentially also how you compete in the marketplace that is the sale of your business.

Yes.

Right? So keep in mind that basically, again, we take what, you know, boy, you know, Grandma's got this pumpkin pie, it's going to knock your socks off, right?

That's awesome.

We want to highlight that. We want to talk about Grandma's pumpkin pie and how, what a great, you know, what a great addition it will be to this trend, you know, to this thing you're acquiring. If you're acquiring a Thanksgiving meal, you're going to want to have this pumpkin pie as the highlight, right?

Yeah.

But we also want to look for things that aren't necessarily as directly, you know, understandable or viewable, you know, would be in view, things that might be hidden that might actually turn into other competitive advantages if you again pull them, tease them out, right? And so that's again what this preparation is all about.

Yeah, I have a quick story, if you don't mind. We have— we had a situation where we were buying a technology company, and the integration was the big challenge in integrating this new technology into one aspect of our business. And I had invested a lot of money, the company's money, I should say, in building out this API, this application programming interface. Anyways, long story short, I don't want to get into technology, but I assured our CEO that we would be able to integrate this new technology via this API very quickly, and thankfully I was right. But that's an example of sort of a hidden ability to say, oh, the integration will be smooth and quick because we invested internally in this technology that we weren't— we didn't know what was going to happen in the future, but we did know we'd have to integrate with something. So We shifted money, we shifted budgets, went through a whole process and, and, and had that capability so that when the right company came along, we were assuredly, we were assured of being able to integrate quickly with them.

Absolutely. And, and again, that's, that, those are the things that you can plan and you can plan ahead if you're taking those steps, right? You know, it's, it occurs to me that as a buy— as a, as a, as a buyer, that we, if I was, if I came across a seller who was like so uninterested in helping me, It'd be a huge turn-off, right? Like, if you start this process as if it's adversarial— and we see this, John. John, how many times a day do we see this adversarial nature of things?

It's, it's, it's, um, I mean, it's every day, unfortunately.

I know. And so I just don't understand what it is that— it's, again, a protective nature. It's, I'm going to get ripped off. It's blah blah blah. And I think that the reality is that what we've found is that we, we have— we do a good job, I think, of calming Buyers, the sorry, the sellers down as the as the process wears goes on, right? Because the idea is that they what they see is they start to see comfort. They start to see that everything's kind of like buttoned up. They start to see that things are taken care of. They start to see a process that that is going smoothly and feels good, right? And then the best part is being at the end when you're getting all these questions from the you know buyer and the whole thing, and you've got answers and everything is there and everybody's head nods. And everybody's getting along and having a good time. Because in a lot of these cases, guys, you're not, you're not just leaving the company.

Yeah.

And, and you have to work with these people. Yeah.

What I see is, what I see in our business specifically is there's, there's sort of waves, right? There's like a wave and a trough of, of sort of people getting, you know, their backup. Um, it starts with a negotiation at the beginning over price. It sort of calms down after they've agreed to a price. People are like, okay, okay, you know, we, we argued, we negotiated, We agreed to a price and we're moving forward. And the next kind of wave comes up during due diligence when the buyer is asking questions, the seller is answering those questions, and it can either get repetitive from the seller's standpoint or too inquisitive from the buyer standpoint, right? Or from the seller standpoint, it's like, why do they need to know that? Like, how many times have we heard on the phone, have we gotten a text message with, hey Joe, I got this question from the buyer. Why do they need to know this? And we have to get on the phone and talk to them, be like, look, like, Dan, they're buying this business from you. Like, there's that, you know, sometimes the questions are over the top, but sometimes the questions are, yeah, they want to know the customer base. They want to know what you've spent over the last— over the last 5 years. They want to know how much the raw materials cost and how you're getting it.

Right.

So, you know, from one perspective, it can be very intrusive. From the seller, because they're— you're obviously trying to run your business. But from the buyer, it's like, I need to ask these questions because, A, my boss is going to ask me about them, and B, it's critical to the value of the business.

Yeah, absolutely. And critical to how we move this forward and whether or not this is a good investment for me to make when I've got other investments potentially on the table. And so there you go. Your competition, your market position now changes from how am I positioning my company for sale inside this market as opposed to how I'm doing business selling my widgets, whatever, in the widget market. So again, the operational efficiency, the scalability, all that stuff is not only good for you selling your business, it's good for the— and the reason it's good for selling your business is because it's good for the new business owner who takes over, for them to be able to scale and move forward, right? So we don't need to be adversarial in it. We need to come together and look at this as a team. The onus is on the seller. Make no mistake, okay? The onus is on the seller for coming up with the goods, okay?

Yep.

It's just the way it works. And if you can be— then the more that you can do that, and the more prepared you can be, and the more time and effort and energy you spend getting prepared before you even worry about announcing your business for sale, okay? The more you're going to be— the more likely you are going to be to sell your business, period, the end. It's just the way that it works right now. If you're— that assumes that you're in a business someone wants to buy. Okay, so there are some assumptions we have to make at the beginning. It is— and it assumes, you know, generally, in general, that you're a relatively decent human being who doesn't offend everybody who walks up to talk to them. Right. So, yeah. We can make a couple of assumptions, but the reality is, is that most of this is all about being able to understand, you know, again, what, what, what the view of the buyer in the whole thing, and the onus is on the seller to make sure that they, that they come through. So, right, let's look at this. Your customer and supplier relationships, kind of like the guest list, you know, who have I invited to the table, right?

Yep.

Who are the other people who are gonna be in the room? Right? Who are my other partners and things like that? Because right at the holidays, it's obviously important. Who am I sitting next to? What are the place cards? You know, you got to worry about, you know, don't sit Uncle Dan next to Cousin Bob or whatever because they don't get along, right? Like, that's kind of like what you're dealing with when a buyer comes in, is looking around at your customers and your suppliers and that kind of stuff. These are people that this guy, this buyer, is going to get to know and work with.

Yeah, exactly. And right there, and they're getting to know them now. They're asking them questions. They're seeing how your team interacts, your people interact when they're doing that. All of those things are being observed and notes are being taken up about them. Certainly, they're looking at your finances and your customer list, but they're also looking at the subjective things like, how do Joe and John get along? How do these people interact? What's the What's the culture of the current company? Because yeah, that might change, but, you know, after the purchase, but real, you know, unless people are leaving, it tends to stay pretty similar unless, you know, unless you're going away and you're getting paid cash, which is, as we mentioned, is rare. There's usually an earnout and you're sticking around for a while.

So, and hopefully again, you're not the main person dealing with the suppliers and the customers. Right, as the owner, right? Because that's— That's another—

that's a red flag, right? We've talked about this a couple of times. It's like, if you are doing everything and you're the chief cook and bottle washer, and all the questions are, you know, you're not farming the questions out to people and getting expert advice from people on your team, then the buyer is going to inevitably come to the conclusion like, man, we're buying Joe out of this company and he does everything. Like, he doesn't sleep. Like, You don't want to answer emails at 3 o'clock in the morning or at, you know, 11 at night, depending on when your, your schedule is. Like, you know, it's that, that can be dangerous.

Yeah. And look, it's as dangerous to your Thanksgiving meal, your Christmas meal, or your Christmas holiday thing, right, too, right? If you were like, aren't— if you can't— if you, if you are expected or feel that you have to do, as a single person, have to do every single facet of the Thanksgiving meal without help, boy, That's going to be pretty stressful, man, right?

Yeah. I'm just— in our example we talked about earlier, I'm responsible for the lamb, my wife's responsible for the sides, our neighbor, our friend is bringing the turkey, right? It's a— it should be a collective thing. Like, yeah, you could be the one coordinating things, but you shouldn't be the one responsible for everything.

That's right. But just like the party thrives when you've got a bunch of people kind of contributing, you know, to it and whatever, and talk about, like you said, oh, I can't wait for You know, so someone in our family makes an incredible salad, and it sounds weird, but it's like, it's the something that people look forward to every year, right? This, the notion. And so again, that's like, great, you know, Cookie, you're gonna make the salad, right? That's awesome. And, and, and, and whatever, you know, cousin, you know, Sarah is gonna bring the, you know, bring the turkey and bring mashed potatoes, and so-and-so is gonna do— so the idea of everybody kind of coming in is, again, we can learn from this, right? Is that As the CEO or the owner of the company, you've got to make sure that you're the— you're not the one making all the meals, right? You should have people in there at least helping out and at least pitching in, and you're able to delegate these tasks. Now, the reality is, is that you should not have anything to do with the actual cooking of the meal, technically, right? What we really want you to be as the owner is sitting there in the kitchen kind of I, I don't know, some maybe like some kind of like old world Italian mother who just sits there. She can't— her arthritis is too bad to do the cooking anymore, right? But she sits there on the stool and she just barks orders to people, right? Right.

Like, where's the sauce?

Do the thing. Get this right.

Whatever. But what, what Nona's doing, right? What Grandma Nona's doing is she is— she's coaching everybody. Hey, Sharon, you might want to put a little more garlic in the gravy. Or, John, have you checked the lamb lately? Like, she knows the whole meal needs to come together. And she— and you as a CEO, you need to sort of coach those people just as you do remove impediments, right? As a job as a CEO is remove impediments so others can do their job.

Right.

And remove blockers, whether they're internal or external. That's how— that's when we talk to CEOs. That's what I— when I say that phrase to them, when we talk to CEOs about what they should be doing in their sales, they're shocked. They're like, really? We should be doing that? Like, yes, that's all you really should be doing. You don't need to be talking to suppliers. You should be meeting with people to sell your company, not to sell your product. And those sort of distinctions are very important when you're truly functioning as a CEO. Make the other people's jobs easier in your company so they can do their job.

No question about it. What about— how do you feel about Christmas and stuff? Do you ever, like, get, like— do you ever, like, feel, like, sad at Christmas?

What? Uh, but why?

No, I just want— I just wondered if you ever, like— like, the expectation of Christmas and the whole thing can be a very big thing. Right.

Yes.

And it's not about necessarily about gifts and stuff as you're an adult, whatever. Obviously as a kid it was, right?

You're like, oh my God.

I mean, I, you know, my, my youngest has a list the length of, you know, the, uh, you know, giraffe's neck, you know what I mean, in terms of, you know, things he's hoping to get, right?

Right.

And of course there's always this kind of like after-Christmas letdown. Now my youngest son is lucky because he's, uh, you know, he's half Jewish, so he gets to have Hanukkah And Christmas. And this year Hanukkah starts on Christmas Day.

Yeah.

So basically it's Christmas Day and 7 more days of presents directly after that. So the point is that it's about expectations, right? And I think this expectation thing reminds me of the value gap. So let's take the— follow the analogy through. My 6-year-old, 7-year-old, almost 7, uh, is going to— has a long list. He's expecting to get a bunch of things that he really wants for Christmas. And ultimately there is going to be things that, you know, don't— that, that, that, that, you know, that he just doesn't receive, right? Even with 7 more days of Hanukkah. Um, but the expectation that comes with that and that letdown that come— that can come around the holiday time and all that stuff of like— sometimes it's also the end of the year.

Yes.

It's like things like that up here in the north.

Yeah, the Northeast, the weather's going to be, you know, Cold and dark.

Yeah, exactly right. And the idea is that what you're, what you're, what you're doing is that the expectations of the holiday, okay, were off.

Yes.

Right. And so, and again, sometimes we do it to ourselves. Sometimes, you know, stuff happens to us and all that stuff, or it can have it, you can have a bad holiday experience, whatever, you know. But the idea is that what I'm thinking about is the way that that relates to the value gap, John. Right. And the fact is that my expectation of what I'm going to get versus what I do get Right. Needs to be managed. Yeah.

So, so, right. So that, you know, when you go to sell your business, if you think it's worth $6 million and you go through the process and someone gives you an offer for $2.5 or $3, it's like, well, wait a second. Like you had this expectation that you were going to get this amount of money for your, for your business and someone, the market, someone's just told you that it's not worth that. Um, and, and that can be a, that's a, that's a wake-up call. Right? That's the reality. The holiday is something in the future that's, oh, I'm going to get $6 million. Then you get an offer and it's like, wait a second, there's a clear gap between what you want and what you've—

What you're expecting, right? And what you get. Yeah. And so what do I tell my 7-year-old son the day after Christmas when he hasn't gotten every single thing he's wanted, right? You've got to say, you've got to tell him ahead of time, look, just know, Santa Claus, no Santa Claus, whatever. Chances are you're not going to get every single thing on this list, right? Like, you know this, know this now.

So surprised.

Don't be as surprised if, again, you don't. It would be too much to expect to get everything on this list. If somehow you do get everything on this list, gosh, won't we all jump for joy and be, and, and be so wonderfully surprised and so grateful? Right.

I'm almost— oh, I'm almost over not getting a bike when I was 11.

Right, exactly. It stings. It still sits there. I still remember the sitting there and not getting the thing. I've got a video of my sister. Uh, I got a video camera one year, so it must have been older, probably in college, and I turned this video camera on and I'm taping my sister And my sister is sad because she hasn't gotten some gift, really big gift that she really wanted to get. Right? And so I've taped this in this whole thing or whatever. And so I happen to know that she's actually hasn't gotten that gift yet, but that she was gonna get it. So I recorded her saying this, right?

That's great.

I took it to my parents or whatever, and my parents were like, oh my God. Of course their heart was breaking because it's like, oh, the thing, whole thing. And they immediately come and they bring out this gift. and the whole thing. And it turns out to be like the happiest Christmas she's ever had, right? But the funny thing about this is that, again, with that, the expectation of, I'm gonna get this, I'm gonna get— or I, or I hope, I hope, I hope, right? Which we know is not a strategy, right? Um, I hope I'm gonna get this, right? You can actually kind of affect that, right? My sister didn't really have any control over it, right? She lucked out.

Right.

But the, but the point is, is that You, as the owner of the business, have more control than you really know, right, about managing your own expectations, doing things. Can you wait longer? If you don't like the value of the company, where things are netting out, can you wait longer and do a couple of projects and actually raise the value of the company significantly, right? That's an option, right? Can you get some capital instead of selling the business right now, right?

Yep.

And to be able to do something big to make that to really raise the value of it and get to a place that you might actually be able to do in a relatively short period of time. So managing your expectations aren't just about, well, you know, I hope this goes well and I, I know I won't be sad when it's over. You will be. You're going to be sad when it's over. There's going to be a letdown whether it went well or not, right?

Right.

We just talked about how many people are so upset when it's over that they go back, they'll go out and sue everybody. Right? I mean, so the idea is that being able to manage your expectations is a huge part of the process. And I think you'd say, Jon, that this is something we manage kind of constantly through the engagement, right?

Yeah. Right. We have to manage, we have to realize that when you've negotiated on a price, you've gone through due diligence, it's very likely that the buyers are going to try and lower that price after whatever they find during due diligence. So we, you know, you need to make sure that you keep your eyes on the prize and say, hey, I'm going to sell my company, I'm going to do this afterwards, I'm comfortable with what I've set up. And if, if the buyer comes back and they lower the price lower than, than what you're willing to accept, you don't want to split the difference, right? We, we always, we always tell our people, our clients, not to split the difference. If you really feel And we don't want to blow up deals also. But if you're going to be unhappy before you've even gotten the money, and you know that from the jump and from when you've been told this, you know, after you've been negotiating and doing these things, don't do the deal.

Just don't.

It's like, look, don't do the deal because you're— if you're going to be unhappy, just don't do it because it's going to gnaw at your craw, for lack of a better term. And you're going to be, you're going to be pissed off and you're going to be bitter at everybody and you're going to get angry that you didn't get your whatever it was. So reassess. If you can accept the lower price, accept the lower price. If not, don't do the deal. No one's, no one's got a gun to your head. Thank the good Lord in this country, it's a free country and you can sell your business to who you want. And if they lower the price lower than what you're willing to accept, don't, don't, uh, don't accept it.

Right. But know, but know your options, you know what I mean? And know that you, when you're going into this and the whole thing, that you've got some— you probably do have some options. And we'll show, you know, in our methodology, we'll, we'll show you what you can do to raise the value of it and in what time frame. So you have to make it bulletproof.

Yeah, you can make— you know what we're doing in the TEV system and we're doing during our, during our consulting work is we are making your business bulletproof. We're making your business so that when someone comes back to you and says What about X or what about Y? And you'd say, well, yeah, those are issues, but either A, I can't control them and it's the weather like we talked about earlier, or B, it's, here's how I'm mitigating this risk. I'm doing it with insurance, with extra suppliers, and with a stronger and more resilient supply chain and customer base. There you go. That solves the issue.

Exactly right. And it doesn't have to ever be a problem, right? Because you've actually done the work and you know what the answers are. I like—

I love—

this is— this one's my favorite one though, because I, I don't know how you feel about leftovers.

Oh, huge fan.

Huge fan, right? Like huge. Like especially at the holidays.

And oh my God, it's almost better— the, the meal on Friday. Yes, almost better than the meal on Thursday.

No question about it. When you just— when you don't care anymore and just like piling stuff on top of it and heating up. I mean, look, It's the best. These holiday leftovers, John, this is my favorite one. You know this, marketable inefficiencies, inefficiencies, right?

Yeah, because Thursday, on Thursday, you're thinking, oh, we're gonna have all this food. And, and yeah, you eat your meal and it's, it's great. Hopefully everyone's Thanksgiving is wonderful. But that Friday afterwards, you see what's left in the, in the fridge. What did people take home? We have people taking some of their stuff home. What sandwich can I cobble together, right? While there's, while there's wonderful football on, um, uh, on that Friday afternoon, and what sandwich can I put together that's, that's leftovers and that's going to be delicious with a little heat and a little, you know, gravy or chutney? Yeah, I'm already hungry. Sorry.

Look at that. I know. So the holiday leftovers, right, are like, they're not— it's not just delicious, they're an opportunity and marketable inefficiencies Are that kind of opportunity, right? Yes.

Yes.

When you, when you identify those untapped areas of your business, that, right, that, that untapped areas of value that a buyer are, are gonna be able to take advantage of so that they can make money and they, and you point those things out, identify them beforehand, show them, make them part of your marketing to, you know, in terms of actually selling the business.

Yeah.

And you're gonna, this is like, this is huge to be able to do. Because, yeah.

So during exit planning, you will inevitably come up with more projects than you can do in the time that you probably want to sell the business. In other words, when you go through this process, when you go through that with us, specifically with us, I'll speak with our consulting clients. They go through and they identify 4, 6, 7 projects. Now, you can't have too many projects going at once because you can't focus on all those things. But inevitably, you'll have a project that you identify that you won't be able to do. And one of the reasons you won't be able to do it— let's say you can't borrow $1 million or you can't borrow $2 million, but if you could, you would do X. And you've written this down, or someone on your team's written it down, saying, hey, if, if this wasn't— if we had more money or we had more time, we'd be able to do this. Now that's something that when you provide to a buyer, they can look at one of two ways, right? One, they can look at it saying, oh, they didn't get this done. Smart buyers are going to look at that saying, yeah, they didn't get this done, but man, look, they laid a roadmap for us in the future. Like private equity firms, bigger buyers, you know, entities that are bigger than you often have access, different access to capital than you do. They just don't have the access to it.

Right.

Capital is one of those things that comes up all the time. Oh, we have a network of stores that we could pump your product in and sell it. Great. That's a marketable inefficiency that the buyer should look at as an opportunity. And you have to make sure you can point that out to them by saying, hey, here's a document I created. This is what I would do if I had unlimited money.

Right. Here's our plan. We would get to this, and I'm handing it over to you as part of the value of the business. I mean, that's the kind of thing that, again, and it's a delicious, tasty treat Right. That the, that the, that the buyers get to have after the deal is over. So the last one we have here is the—

this is the—

so business continuity. You know, do you ever have— have you ever been in a situation during Thanksgiving when, you know, or any kind of holiday when the power goes out?

Yes.

Right. Like the one of the worst things that could happen, right? Like you have all these people over or whatever, power's out. Right. So a good idea, especially in the Northeast when we've got— we have storms and things like that, to have some kind of like backup generator or whatever, right? Your business continuity plan, that's your backup generator, right?

Yes.

You know, if your power goes out during your holiday dinner, you know, you're going to save the day by being able to bring power back and the whole thing. Your continuity planning is exactly the same thing. It's helping your business run smoothly. You know, during these kind of disruptions or during these transitions, right? So that basically that nothing drops off from your business as you move. And that that could happen as you as you move from you know hands-on manager to you know more hands-off kind of you know owner you know you know you know you know CEO or it could be that you are turning into a situation where you are you know we're transitioning from the sale. Right. Because there's gonna be a big, as you were discussing before, a big deal in terms of transitioning from A to B.

Yes.

And being able to actually do that well is about continuity. It's about keeping the power on, keeping the lights on as you go through these transitions.

Yeah. I mean, so, yeah. Yeah. Go ahead, Jo.

Yeah. No, I was just gonna say, it feels like the holidays and, uh, and selling your business have a lot in common, actually.

Yeah. I mean, right. We, we've gone through a number of things that they have in common. It's, it's setting expectations, it's planning. Um, it's, it's, you know, one of my favorite ones when I was dealing, you know, with my kids is you get what you get and you don't get upset, right? You know, you gotta— you get what you get and you don't get upset because, you know, you need to plan, you need to think about what a buyer is going to want, and you need to prepare your business for, uh, for a sale. And you're not going to be there, right? That after the holidays are over, um, the, the, the— you're— the buyer is going to be— you're going to be gone, you're, you're taking off.

Or you're there and it's like a lot of people, man, holidays are over and boom, and they're off. They are off to Florida or off to the thing or whatever, or they off to the Caribbean and that's it. And I'm there for, you know, a while, then I come back. I think that's what Santa does actually. I think he goes to— right, doesn't he take a giant— some time off right there?

Yeah, exactly.

Look, I think bottom line here is that, uh, you know, first of all, we want to, uh, you know, like I said, this is going to probably— this will air after Thanksgiving but before Christmas. You will have a couple more episodes in here before Christmas happens, but The holidays are, and this time of year is a time for reflection. It's a time for looking at what I've done, and then it's also a time for looking towards the future in terms of what's next. And as we approach the end of the year, anybody out there who, as you think about selling your business and your ability to be able to have, you know, do the work to make sure it's ready to go, and as John said, to make it bulletproof, you know, and that's again getting some help Whether it's from us or anybody else, in terms of that preparation is going to be key. And it's going to make, just like it makes your Thanksgiving meal splendid, preparing yourself for the sale of your business adequately is going to make the sale just as splendid. Yeah.

And if this is the trigger, if this is the event, the podcast that you want to, you've identified that you want to sell your business, reach out to me, reach out to john@myexitengine.com or joe@myexitengine.com for conversation.

We don't—

we're not gonna— we're not gonna— there's no obligation. We understand that the holidays have a— makes you shift your mindset, makes you realize what's important. Oftentimes you're with your family, you're sometimes working, sometimes not working, um, and, and it can, it can be a time of reflection, as Joe mentioned. And if you are pondering selling your business, if you want to prepare your business for sale, Get in touch with us. Uh, follow us on LinkedIn. Follow us, um, uh, on all our social channels. Get in touch to find out more.

I couldn't have said it better myself. This has been the Exit Engine Podcast. I'm Joe. That was John. Uh, we guys will hope you guys had a great Thanksgiving, and, uh, obviously, uh, we will talk to you next week before Thanksgiving. But, uh, John, I hope you have a wonderful Thanksgiving with your, uh, with your wonderful lamb. And your ham, your ham and your lamb and your turkey.

Enjoy the, enjoy the family, enjoy the time to reflect. And, uh, yeah, football too.

Absolutely. Can't wait. The best, best part. All right, awesome. This has been the Exit Engine Podcast. Again, this is Joe Stapleton. That's John Kniff. We are the co-founders of Exit Engine. You can find us at myexitengine.com. Uh, send us an email, info@myexitengine.com. We answer everything. You got a question you want answered, you want, you don't know, Give us a shout. We answer everything. Come, come to us. We will give you the answers that you need. Uh, we are very good like that. Um, it's, uh, consider it our Christmas gift to you, uh, this year is to be able to help you in any way we can, make sure you are ready to sell that business, uh, and, and, uh, control your exit destiny. All right. Uh, John, thanks a lot, man. Have a great Thanksgiving.

Thanks, Joe. See ya.