The Exit Engine Podcast Episode 23: With a Little Help From Your Friends

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Greater than 50 gigabytes may slow when network is busy. See terms. Welcome to the Exit Engine Podcast, episode 23. Good afternoon, John.

Good afternoon, Joe.

We are, uh, it's Christmas time.

It is the holiday season. You're right.

When this, um, again, Christmas time, Hanukkah time— Hanukkah and Christmas fall on the same day this year. So that's interesting around my house, um, because we've got, uh, you know, people of both persuasions.

Yeah, I saw that. I thought, usually— isn't usually— isn't Hanukkah usually earlier than Christmas?

Yeah, it tends to be earlier, but this year it's going to be, uh, the first day of Hanukkah is, uh, the 25th. So my son, who gets to partake in both of these events, I, yeah, it's basically Christmas for 8 days in a row, including Christmas Day. So it's gonna be, yeah, it's gonna be a wild rumpus begin. That's what we always used to say.

I love it.

You know, speaking of wild rumpuses, one of the things that we were— we've been thinking about is that, you know, This song keeps playing over and over my head, and that is, you get by with a little help from your friends.

I like that.

You know, and I was thinking about how so many people we come across, you know, obviously work with Exio, um, our company Exio Advisors, um, but there's so many people who decide not to work with us, right? And it's cool. Like, again, we're not for everybody. It's, uh, you know, any consulting company, any kind of, uh, any company that's doing this kind of advisory work, right? It's a personality fit. There's all kinds of things that have to kind of line up, right?

Yeah.

But one of the things that I realized was that, you know, there are a lot of people out there that just aren't— don't really know that they can ask for help and that there's all kinds of help out there to get through the exit planning, obviously through selling your company, through valuation, through doing projects to actually help increase the value of your company, right? All this stuff, the marketing, sales, All the things that we go through in the Total Exit Value System— operations, finance, right? There are individual people that can help with all of these things. So what I thought we'd do today would just talk to people about how to actually choose an advisory partner for the different things that you need to do, because we all need help occasionally.

Yeah. And there's things that you frankly shouldn't do yourself, right? Just like— and people always use these analogies, but You're not conducting brain surgery on yourself. You're not doing your eye exam yourself. You're going to a doctor every year to let them know, or they're going to tell you how your cholesterol is because they have all these special tests. And just like that, you need certain specific advisors when you're selling your company.

No question about it. And again, whether you're selling it now, whether you want to sell in 5 years or 10 years from now, or wherever you are in the process. And again, it may just be about Hey, I, I need to get some growth capital. I need, maybe I wanna make an acquisition, right? Exio, our company Exio works with people in all those situations, right? But the, the most important thing is that, you know, I, I, you bring up the doctor example and we use this all the time, right? But I gotta tell you, I know plenty of men, okay, who actually don't go to the doctor.

Like, yeah, it's crazy.

There is something that happens along, and I think that we've noticed it too, not only along gender lines, But now, uh, because of where we are in life or whatever, and because a lot of the people that we're working with actually are younger than us now, um, that we're seeing it actually happen along, uh, you know, along generational lines where the younger kids seem to be willing to ask for help more than the older guys.

Yeah, exactly. They, they, they're very comfortable with knowing and, and asking for assistance and knowing what they don't know. Whereas, again, I don't want to be stereotypical, but I've had the experience of talking to people throughout at Exio and through other, at other ventures and other jobs is we had people that just like, I know how to do this. I don't know how to do this. And I knew that they knew it didn't know how to do the specific task that they were talking about. So it is generational.

There's no question. So no matter where you are in that, OK, if you are a baby boomer generation and you're not asking for help and whatever that thing is, then, then you definitely want to pay attention to this episode. If you are, again, any— if you are in the younger generation or whatever and you're used to asking for help, still listen to this episode because we'll give you specifics to, to what we're going to do is go into the detailed process of, of, of interviewing and hiring somebody right today so that you understand what questions to ask. So that again, there are— look, there are, there are untoward actors out there. Let's, let's start with that. Okay. And I think one of the big fears that people have about hiring consultants is that they're afraid somehow they're gonna be taken for, you know, be taken for a ride, right?

Yeah.

I think that the reality is, is that some, that some of that's true. So there are people out there and you have to be careful, right?

Yeah, exactly. You need to choose your advisory team wisely, right? You know, you need to look at what are the things you need to do, what are the things you need to accomplish. You're probably going to need a legal advisor, an accounting advisor, I had a discussion earlier today with an interesting insurance advisor who, depending on where you are in your company's life cycle, everyone needs insurance to mitigate risk. And those are just a couple of examples. Depending on what entity, you know, you might need legal or you may need a compliance advisor, right? Depending on what industry you're in. So you're gonna need some advisors.

And a lot of these people will be needed at certain times and not at others, right? So It's not like you're having everybody come and sit down at the table in one day, right, and do a thing and then move on. The reality is, is that some of these people— accountants, lawyers, tax advisors, right, you know, people, uh, you know, people who— there are people, many people who you will need on a specific occasion across a long period of time. In other words, There are people that you will need multiple times throughout this process.

Yeah, right.

But not necessarily all at once all the time, right? There's really only one person that you need, and this is again why we would— why, why we do what we do. But again, we're here to advise you whether you're using Exio or, or you come to Exit Engine and do things yourself or whatever that is. Either way is fine. But what you definitely need to start Is a— you need one person to be the central kind of like project manager.

Exactly correct.

Right. So the first thing is that you're gonna— when we, when we talk about who to, who to hire and how, who to look for, and we'll talk about how you hire this person, but the first thing is that you need a well-rounded team, okay? People who are providing expertise, people providing ex— uh, expertise perspective, and then people who are also going to be able to provide connections. Okay, because why? Because, well, you know, a broker, for example, okay, has a different skill set than an M&A advisor, right?

Yes.

A legal counsel will do different things than, than an M&A advisor would, right? So all of these people might connect to other people, and that's how one of the ways in which you're going to of measure how to choose these people.

Yeah. And, and sometimes, you know, when you bring in a legal advisor, good legal advisors will advise you on what they know and, and the things that they, that they know that they need to do. And if they don't know something, they, they can bring in someone in their network. If, again, if it's you have a specific thing or there's a, there's something that they don't feel comfortable. And anytime an advisor does that, my advice to you is Listen to them, right? When someone tells you that they don't know the— you've asked a question, they don't know the specific answer, and they'll go get it, or they'll go get someone who knows the answer, that's a good thing, right? Sometimes people can see dollar figures jumping in their head and be like, oh, I'm going to talk to somebody else. Be like, but no, like, if someone gets someone else on the phone to ask a specific question or to give their perspective, that's always a good thing. And that happens, right? You've been on the phone with people and they don't know the answer, they get someone else who knows the answer. You should view that as a positive thing because they're listening to you, your particular problem, and they're bringing in a sort of a personalized recommendation to you based on your situation.

Exactly right. And the reality is, look, it's a matter of getting a recommendation from someone you trust, right? And so the trust chain starts with the first person you know, and that chain, then the next link in the chain is the next person they know. And of course, obviously, over time, sometimes you're going to go through someone's kind of like, you know, network chain, you know, pretty good. You could find one key kind of advisor that could potentially bring you everything that you needed. That's what we do at Exio, right? One of our key things to provide is, is to be able to provide, you know, all the things that you would need when you need them just in time, right? So that you don't have— what you don't want is people hanging around not doing it, paying people to not do things.

Right.

But what you, what you do need is access to those people when you need access to them. And so you need to be on, somehow be on their radar screen or, or have whatever, you know, communication in place so that when you need them, you can grab them. But so the, the, obviously when you're assembling your team, and I, I keep going back to the, you know, Anchorman, the movie Anchorman with the whole like, you know, news team assemble. And like all the people kind of come and they hear the, the call, right? And then all these people are gonna flock to you and all that stuff, which would be great if that's how it worked. Unfortunately, it's, uh, it's not that simple.

Correct.

Um, however, LinkedIn is a great, uh, place to start, obviously. Um, you can feel free, obviously, to send us an email at info@myexitengine.com at any point if you want advice on, on, on who to check. And of course, look, we, we hope that you'll, you'll consider us, and we're not gonna lie, right? I mean, But we are— we also know we're not right for everybody. So what we can do is we're happy to make a recommendation. We've got lots of people we know. Um, we know everybody in this business. We're able to basically turn, turn you on to somebody. But let's just talk quickly about who should be on your team. Okay?

Sure.

So, Jon, take us through what's the team look like in a general kind of way. Let's just take the situation as a traditional— we're going to— I'm, I am 2 years away from wanting to make an exit. I own a company that is in the, let's say, I own a, whatever, let's make it easy. I own a technology company that does, you know, provides managed services to people, you know, technology-wise. And I've got, I'm a single owner, and I've got, and I'm worth about $5 million in revenue, right?

Yeah.

So, I want to make, I come to you, Jon, I want to make an exit. And the next 2 years, um, what, what do you tell me on the phone the first time I talk to you?

Yeah, I mean, one of the first things you want to talk to is someone to talk about finances, right? To talk about your, your personal finances as they interact with the business, right? Because you and the business are 2 different things, right? You may have 80% or, you know, 85%. I've seen stats up to 80% of your net worth in the business. But they're 2 separate things, and they will continue to be 2 separate things, and even more so after you sell your business.

Right.

So what the financial planner is going to do is they're going to look out for your interests and the, the way to, again, maximize the amount of money you get from your, from your business when you sell it, as well as, um, ways to, uh, to minimize taxes, right? Sometimes that financial planner can bring in a tax person But that's another person you need to talk to, is a tax person, right? The financial planner is going to worry about the finances and how to maximize the way you get your initial down payment as well as the follow-up payments. But then a tax advisor is going to say, oh, you should collect this at certain periods. And I can tell you from my dealings with people, we had a couple of drastic changes to the language in our agreements because of a tax advisor came in. and advised our client on something, and it became a— or sorry, it became a huge thing on the other side of the deal. So obviously a legal counsel, right? So financial planner, tax advisor, legal counsel is going to make sure that you don't do anything really dumb. And then a coach, right? Some type of business mentor or coach. And sometimes these people are the first people you call, right? Even before you call the financial planner. You can talk to a mentor or coach because they've gone through— they've likely gone through this before, and they like— they have a— definitely have a different perspective than you, right? Sometimes when you're selling your company, your eye is on the— is on the dollar figures at the end. And what the business coach can do is sort of slow you down and have you think about things that, while you may think are important, are actually critical before you get to the deal. So there's milestones along the way of a deal. Sometimes you have your eyes on the prize at the end, but those milestones along the way are just as important. And in my experience, a mentor, a coach, someone you really respect that you can bounce questions off of and really can tell you when you're either being full of baloney or you're not looking at something the way you should be looking at something. Is, uh, is invaluable in this, in this, uh, area.

No question about it. Look, I think that you're right. I mean, we would— our advice, you know, is almost always, again, is the first person you need to actually bring onto your team. And again, that may not be the first person you talk to, that's 2 different things. But the first person you want, you, you need someone to head up the team. Okay?

Yes.

And, and, and, and our advice is very strongly this way: it should not be you.

Okay, correct.

And here's why. Unless you have done this, you know, 100 times, and I don't know why— if you have, then I don't know why you're listening to us. So my assumption is that there are not people out there who have done this a lot. Um, and that exactly is the reason why, A, you want to hire somebody to help you, because the people who are— you're going to try to sell to, they do this every day. They do it every single day. They are dealing with Giant, huge, giant piles of money. Okay, they have this money, it's sitting there. Their job is to get it spent. Okay, they are very, very, very good at two things. One is knowing what it is they want. Okay, and getting a deal on it.

Yeah.

Okay, and getting them getting a deal is not necessarily good for you, the seller. Right? So. Obviously, they have things they want. They have very specific criteria about stuff. They're only gonna talk to you if they believe on first pass that your company fits into that criteria. By the way, I'm talking mostly, I'm gonna use private equity firms as the large example here in terms of buyers, just so you know, 'cause it's an easy thing to do, but doesn't necessarily mean, but it is true for any investor or anybody who's gonna potentially buy your company strategic. financial, whatever, um, is that it's going to require— they, they, they are coming in having done this before. Okay?

Yes.

And so, you are already at a disadvantage. Okay? Just deal-wise, you're at a disadvantage. Not saying that anybody's trying to take advantage or whatever, but here's where the problem comes in. When you think you're doing this yourself and you come to the table, even if you've got the documentation and the things that you know you need, When people— when, when they— when you're sitting at the, uh, you know, on a conference call, okay, with a potential buyer, and the potential buyer asks you questions that you don't know the answer to, that is a problem. It is immediately a problem and, and is starting a process that we call the undoing, okay? The undoing of the deal has already begun because you have not been able to answer a question. Okay. And again, sometimes it's like, let me get you the answer to that question. That's perfectly fine. I don't have it in front of me. I can get that for you. I can call somebody. Can you call somebody to get it? Like, right? Or, or, or are you in a position where you start to go, uh-oh, I didn't know you were going to ask me that, right?

Right.

And now, now I'm going, I don't really want to give you that, right? You are— this is now the undoing. And what's happened here is that this deal will not move forward There is— if it does move forward, it will be fraught with all kinds of other problems. Trust me, it's already dead. Okay, so, right, if you can't come prepared to that initial phone call and know exactly what that person is going— on the other end is going to ask you and, and already have it together, you are not going to sell your company.

Yeah, and, and I've been on these, you know, Joe's— Joe's— I've been on these calls with Joe I've been on these calls independently, and it all depends on the type of questions. Oftentimes these buyers ask really random, weird questions, but sometimes they'll ask you questions like, how many products do you have? And that was the undoing of one of our clients, of one of my clients back in the day, of when they said, when they asked that question and the client hemmed and hawed, right? So what was your revenue in quarter 3 of 2023. Okay, I don't know that right off the top of my head, but how many products do you have? You should be able to say 3, 4, 2, 1 right off the bat. So, you know, hemming and hawing on those types of fundamental questions is going to cause and will cause, has caused the undoing to start.

Um, and that's why, and again, that's, this is the point, right? How can you avoid the undoing? Well, the first thing you can do is hire an advisor to be the person who will, who has done this before, who can help Sherpa your company and you through this process, right? And that, and then, and bringing in the individual specialists that need to, need to come in and to do all the things that need to do to prepare your business for, to, A, to increase its salability and value, and then to be able to prepare the business for actual sale. And then of course, bringing the buyer itself is an entirely other kind of potentially specialty. Okay.

Exactly.

So now, right, the, uh, the understanding is that you want to first hire somebody who can be the person who is going to prepare you for everything and your company for everything you need to know. Um, Exeo Advisors, this is our specialty, right? Bringing in people And we will be able to— we know the process, we know what to look for, we will examine the books, we will look at everything we do. Now, not saying that the person you have to hire has to be an M&A advisor or has to be someone like us that has all the stuff, but what you do need is one person to be in charge of this. And I cannot tell you how important this is. It's the second most important thing to your business.

Okay.

In terms of selling your business, the first is Your removal and your ability to be able to be removed from the business is number one. And number two, to me, and this is what we tell everybody, is the number two thing is that you have one person who is the point person who is in charge of this move, this transition, and it shouldn't be you. It can be you if you're not running the business, and if you're out of the business and whatever, then it can, it can be you. It can be. You can learn how to do this. However, I think that you're going to need an outside person with outside perspective and outside experience to be able to be the person who takes this ball and moves it from one end of the field to the other for you.

Yeah, because just like you— let's say that in the scenario that Joe just mentioned is you've removed yourself from the business. Perfect. And you're doing— you sell whatever you sell. You sell services, you sell products. You're Probably not an expert in deals. And if you are, yeah, you can work, you know, you can work on, on the deal, but you're going to bring in these advisors anyway. The benefit of having a quarterback or someone at the center of the, of the wheel bringing in the different advisors when it's necessary is that's what they're doing, right? That's what they do all the time. They don't do this part-time. They don't do this with 30% of the time. This is what they're doing. This is what we do. Each and every day when we're dealing with our clients is we are used to looking at a deal, bringing in the right people at the right times, asking the right questions, and avoiding problems, and getting to a deal that makes sense for you, the client. Oftentimes, if you're doing these things, you'll let things slip. When someone is— when someone is tasked with working on your behalf to get this deal done, In a way that makes sense for you. And that last part is really important. The objective isn't getting the deal done. The objective is getting a deal done that makes sense for you and your business. So that's why it's so important to bring in someone like Joe, someone like me, someone like Exeo Advisors to be that quarterback who can gather all the people and bring in the right people at the right times to ask the right questions.

No question. You're going to need, you're going to need third-party— let's see, here's one thing that people don't know, right? You need to hire a third-party independent accountant to verify the books when they're ready.

Absolutely.

Right? That's just like one thing that, that we come across all the time where people are like, wait, what? Well, I'll have my accountant do it. No, no, no, you need a completely independent third-party accounting firm Preferably a forensic accounting firm that's got that, that specialty that can basically give you a certification of your books that a private equity firm will accept as certified. Right? Is it rule? No. Is it a law? It is not. Okay? But I can tell you this, that if you've got certified books, you're gonna have a much better chance of getting through due diligence than if you don't.

And if, right, and if you have a third party that, that is working, again, working not on my behalf, working on behalf of the deal, so to speak, or the buyer, it's, they're gonna They're going in and they're looking at all these things. We're going through this with one of our clients right now, is we're having the books prepared, and shortly thereafter we need to send them to a third party for verification. And it's just, it's good business practice to have that as a matter of course.

That's exactly right. So you need, let's say, look at the team. How's the org structure look so far? So what you've got, what you've decided is to say, okay, I'm gonna get myself a Quarterback, I'm going to get. I'm going to hire and quick and get this out of the way. Okay, brokers and advisors are not the same thing. Okay, there are people that call themselves brokers, and the in their mind believe that their job is to broker the deal. It is to take the seller ready to go, find a buyer ready to go, and put them together. Broker the deal. Most brokers will provide some level of advice, obviously, in terms of preparing the business. Most brokers, however, will— what they will not do is they themselves do anything to actually help you prepare the business except to talk to you. Okay, now that said, there will be— we're going to get letters all over the place from brokers. I understand that there are plenty of brokers out there who call themselves brokers but are actually advisors, and I'm not talking about you. You're advisors. You may use the broker moniker or whatever. And this is where it gets confusing for people because the industry itself, okay, is not regulated in any meaningful way, right? What is the difference between an investment bank, an M&A advisor, and an M&A or an intermediate or broker or intermediary? Okay. So those are the first 3 levels of things you have to kind of disambiguate. Okay, so the investment bank, okay, is a is is one kind of company that can handle very very large companies and help them basically set themselves up for exit success. Okay, and they will do it at a very high rate. They will take equity. There's a whole giant thing that investment banks will do. They're not normally right for most kind of like. smaller mid-market businesses.

Yeah, and you, and you won't even get on their radar screen, right? These are the people who— when I— my first job out of college, I, I worked a lot with investment banks. I worked with one that's Bank Boston Robertson Stevens. I worked with other ones I won't name, um, but, but these, these companies are looking for high technology north of $50 million in revenue, and they're looking to IPO companies. So, so we work with these investment banks on all sorts of projects to get to prepare companies for sale. And they'll often take 7 or 8% of the deal and they'll allocate the shares out. And it's a whole process to work with the SEC. That's sort of above the level of typically the clients that we're working with.

That's exactly right. So the investment bankers are kind of that high level, and it's really about mostly about IPO and stuff like that, not just selling a business. Okay, that's the one. On the other end, okay, you've got the brokers. Okay. And on the other end, the brokers are, again, like I said, most of the time a broker is someone who is just taking a business that is prepared and ready to sell and finding a buyer and bringing the two together and then managing the transaction.

Okay.

Right. Yeah.

Sorry. They're, they're like, in, again, there's always exceptions, but in that, in that other side of the case, like investment banker over here, business broker who's found a deal and put together, literally matchmade, right? Put a, put a buyer together with the seller. And they're, to your point, to Joe's point, they are almost— they're not working on behalf of either the buyer or the seller. They're working on behalf of the transaction in some cases. Most— some of the times they're working on behalf of the seller, but in reality, what their goal is— and they are really working on the seller, I should say— but they are— their whole goal is to get that transaction closed. And they will, they will do everything in their power to get that transaction closed because they're paid for successful deals.

That's right. And it's, by the way, in most cases, it's the only way they get paid.

Exactly correct.

So, so again, so that's the— and then, so that, then again, that changes the nature of what they do, right? You're not paying them on a regular basis, you're paying them at the end. And the, and, and, and the idea is that, you know, like a closer to a real estate, you know, broker, right? The work that you've done, you're going to get paid with a commission from the sale, which is essentially what, what the, what the, what the, what the, uh, you know, what the fee is, uh, you know, from a, from a business broker.

Okay. Yeah.

Most business brokers tend to work with lower-end businesses, meaning that we can divide the market into 3 areas. Okay. We can divide it into Main Street businesses, which are basically businesses that are, that have revenue, generally have revenue about of under $1 million. Okay. You can cross over from a Main Street business to a mid-market business if you have success. Okay, but most businesses in the United States right now fall into this lower category, right? I have a business, I'm a consultant, and so I have my own business and I go out and I make money because I charge for my time and blah blah blah. I own a candy store the way that John used to, John's parents' family used to, and then that candy store is in my house at the bottom of my house and I sell candy and that's what I do. And, and that's my, you know, and I never make more than a million dollars a year. Okay. The mid-market now becomes small and medium enterprises, right? That would basically value between about $5 million in revenue, north of $1 million, but $5 million to about $100 million. It's a very large, you know, very large category. Then you've got this higher-end market, the large business market. These are the people who are, you know, these are the large, giant, large corporations with thousands of employees, and most of them are already public companies. But if they— but, but the crossover would be to go from a very $100 million, uh, mid-market company, it's a crossover with IPO, gets you into that larger, you know, larger, uh, bucket. And, and that's when you're in investment bank territory and stuff like that. Okay. So the, the, the middle market is what you— most of our people listening are. Okay. And understanding that basically that in the mid-market you have you have some of the issues that they have in the larger market, meaning there's certain expertise and certain things could be happening. You could be making— have an organization, okay, that you could require a bunch of different people to be able to come in and kind of, you know, make this company, you know, get it to a place where you needed to get it to. If you were a small business, a Main Street business and the whole thing, there may not— you may not even have these issues, right? Your books are a lot simpler. Everything is just a little bit less complicated. And so, you might get away with being able to just hire a broker to get it done, okay? Depending on what state your book's in and things like that. So, what we want to concentrate on right now is, let's concentrate on this middle spot, John, because again, that's where Exio plays. And I think that's where most of our audience is. So, within this middle market, okay, the investment banker's no good, the broker thing might be a little bit too risky, you know, or you might not get the service you want. Although, you may like the way that they charge, which is to basically do nothing but take a, basically a fee, sometimes 8%, sometimes up as high as 10% of, of the, of the transaction total. Okay. What we do, and most advisors in the advisor spot in this middle market do this, we are a combination. Okay. We will take you through the whole process. We will bring in all the people we need to bring in to be able to get you from, to move your company from this value to this value. All right. And then, and then we will also do, help you through due diligence and do all the things we need to do, and then also help you bring the buyer to the table. Okay. That is a, that is a very full-service situation, right? So the thing about the advisor part is that the advisors have a very good idea, right? Us advisors have a good idea of the entire process. We know who to call when. We know what should be brought in. We know how to do the things that you need to do to be able to maximize the value, to increase the salability, all those things. In our minds, this is why we chose to be in this business, is that that's the best place to be. That's the kind of person you want to hire, whether that's one guy or a team or whatever it is. What you really want is, again, is an advisor who can who can help shepherd you, a Sherpa, a guide, someone you can trust that take you all the way through the process and then allow them to bring in the people that they need to bring in as, as you go.

Right. Yeah. And, and these, these are examples of— there's other people here, like a lot of the, a lot of the advisors we've talked about here are in the context of like a transaction, right? A specific transaction that you have on the table. There's all sorts of other advisors and people, the specialists we bring in when We get brought in on the earlier side of a deal or earlier in the process, right? It could be growth consultants, it could be sales and marketing people, it could be, you know, a compliance person. It could be something where—

HR.

Say it again.

Yeah, HR is another area people don't think about, right? Because you might actually uncover, you know, there might be HR things that get uncovered as you go through the Yeah.

And like, you know, when you're, when you're trying to build a team, right, one of the things that Joe and we talked about earlier in the podcast is, is removing yourself from the business. Oftentimes what you need to do is you need to elevate people and you need to hire a true management team. And that's earlier in the process, right? That's preparing your business for sale. And that's sort of our— Exio's area of expertise is we're certainly, we certainly brought people through to the transaction, but we're oftentimes helping you Earlier in the process to prepare your business for sale. And we're bringing in the right people at the right time to grow your business, sort of fix your books, make sure you're compliant for a year, make sure you have a track record of success. Because when, when these people get involved in their M&A, the financial planner and the legal counsel, they're going to be reacting oftentimes to a deal or an offer that you've received. But the buyer wants to see a track record of things you've done. They don't want to see all these things that were done in September of 2024, and now you're selling the company in September— in December of 2024, early 2025. They want to see a track record of revenue growth and things that have happened over the course of time. And that's where— that's Exio's sweet spot, is helping people prepare the business for sale, hiring a management team, improving revenue, improving margins, those types of things.

So it's a very good— another good spot to start, in my opinion. Is with— was by finding an M&A attorney. Okay. Because again, they're— they tend to be good negotiators. Obviously, that's always a good thing. They're, they're gonna help you obviously with any of the legal components of this stuff, which— of which there are many. But then also, they're— they tend to be pretty decent, like, quarterbacks. They may not be the best project manager, right? Meaning that, you know, keeping you on stuff, but they'll have people on their staff who will be. So, yes. You know, they're gonna have a paralegal or someone like that who they're gonna assign to you or whatever. But the idea is that, again, That's, that's another really good person. Your CPA, okay, is not an— is, is not a bad option either. Okay? However, your CPA needs to be able to have the time to do this and to help you through this, and you're gonna have to pay them more than you're paying them now, probably. Okay? So, and again, there will be a— you need a CPA that would be willing to, and not all are, that would be willing to share their work and have that work certified and all that stuff by somebody else and all that.

stuff.

Okay. So, but I think that your legal, your legal counsel, an M&A advisor like us, or a, or your CPA are probably your top 3 choices in terms of finding someone to manage, help you manage the process.

Right?

So, John, what are the things that when you're gonna hire, whoever you're gonna hire, what are some of the things that you're gonna want to look for? What are the qualities in these people, in an advisor that you look for?

Yeah, what I look for is they stay, they stay in their lane to a degree, right? They, they— your tax advisor is not giving you legal advice. Your legal advisor is not giving you tax advice. Your financial planner is not giving you tax advice unless they're bringing in someone special. So what, what a lot of times what you're looking for is, you know, or what you think you're looking for is other people to do some work for you, which a lot of times they're doing this, they're doing the specialty work. However, you need to either— you need to have a quarterback and you need to be involved in this process so that you're making the business decisions. A lot of the time when you're doing these things, it's— there's a sort of gray area in between. You can go left or go right. You can get advice from your advisors, but ultimately you can't delegate the decision to them. You can delegate the expertise to them and you can get advice from each of them because oftentimes the financial planner and the tax person Believe it or not, or the CPA and the legal person are at odds because from a legal perspective, it's good to go with choice A, but from a tax perspective, it's good to go to choice B. And so, you know, you can't have your cake and eat it too in a lot of cases. So if you get a windfall of money, just as an example, and you're paid, you're going to have to pay taxes on it. That's just the way that it operates in this country. I wish no one had to pay taxes, but we all have to pay taxes. So it's good to, you know, to interview people that make sure that they stay in their lane and they're not giving you all sorts of broad, random advice on things that they're not experts on.

That's it. That's an excellent point. Because again, when you're engaged with people, that's the kind of thing that can happen. And you want to make sure that, again, that you've got, you know, they're going to substantiate, right, and back up their decisions and things like, or the things that they're advising and things like that too. And frankly, any consultant worth their salt is gonna say, look, I'm not gonna advise you on that. Let me get somebody else who's an expert.

Okay?

So, but I think, again, from a quality standpoint, what are you looking for in whoever this quarterback is, whoever this advisor is? Okay? And the first thing, obviously, is that you want someone who understands your industry, right? And again, I say understand it, and the reason that I say understand it and not necessarily be a specialist within it is because, um, I, I hate to break it to everybody, but business is business. And the reality is that there may be some— every business has its own idiosyncrasies, no question about it. Every industry has its own idiosyncrasies, no question about it, right? Um, recent example and the whole thing is that sometimes accounting methods can be different From industry to industry. Standard accounting practice, right, can be different. That's a real easy example. However, the process of selling your business and going through what you have to go through to examine what you have to do, the questions you have to ask yourself, the way you have to get your business together and the whole thing to make it a presentable option for a buyer is the same. So what we do is that we always have subject matter experts, uh, on hand, uh, and as part of the team. However, we are not a firm ourselves that specializes in any individual area right now. That means that there are some areas that we'll never work in because some people— there are some industries that are just very, very specific. But the reality is most of them aren't. And so—

Correct.

What you want is expertise somewhere on the team subject matter expertise, uh, you know, to make sure that people can understand the business. But you are the subject matter expert on the team, you see, right? You are the person who understands the industry. You are the person who understands your market. You are the people who understand your customers and your products and what you offer the world. So that's— that is your expertise. What you're bringing in is people who have expertise in preparing businesses for sale, right?

And will help you avoid the pitfalls that have come up across the deals that they've worked on. So the collective wisdom of all your advisors, right, with the combination of you knowing your business and your industry, along with the collective experience of all the advisors and the deals that have— that they've done and the scars and the problems they've had, the failed deals that they haven't gone through That is what you're paying for when you're bringing these advisors, is to help you avoid those mistakes, mitigate those risks, and get the deal done that makes sense for you.

Right. And you want to hire people who have done this before, obviously, and have a good track record of it, right? You want to ask them about their track record. You don't— you know, we can talk about close rate and stuff like that. There's going to be a lot of brokers and a lot of people out there who talk about close rate. Okay? The close rate is not a good metric to judge anything by. Okay, and here's why. Close rates are manipulated numbers that could also be false and have— and that you, as the, as the buyer of the service, will have no way to substantiate.

Right, because, you know, just as an example, right, the numbers— so they're choosing their clients that they're working with and they're saying, oh, oftentimes— and we do this, right, we turn down business because it's not right for us for any number of reasons, right? It's The business, we get into the business and we get in and it's, the business is not doing great. It's not, you know, it's been, it's not really a business. It's a lifestyle business. The owner won't separate themselves from the business. And therefore, we don't have really a saleable product. So that's an example of something that's not in the denominator, if you will, the lower, the bottom number in a fraction, so that they're not counting that when these success rates, right? So So they're turning down a lot of business. And so that numerator, the ones that they do choose and the one that you close, is artificially high, as Joe mentioned. So you can use— you can look at that number, but don't put too much value in it because it doesn't tell the whole picture.

Right. Look, like any other thing that you purchase anywhere in the world, right, whether it's, you know, from Amazon or Or out, you know, or a restaurant or anything, right? The best way to get advice about who to choose from is to ask people who have already worked with them. It's that simple, right? Being able to say, hey, look, whenever you talk to me, can you give me a couple of references I can call or whatever? You know, that's, that, that's a great way to do it because the reality is what you really want to know first of all is that, A, is this person going to take advantage of me in any way, shape, or form considering that I don't know what I'm doing? So that's the first thing people are concerned about, right? The second thing is then, as a matter of, I think, is understanding that the advice I'm going to get, even if it's not untoward, is still correct and accurate and right, and I can trust this person to help me make decisions. That you can only know by asking people that, you know, that have happened, that they've worked with in the past, right? But some of the other things you want to see too is you want to know how good are they communicating what it is exactly that they do? Right? Are they a good cultural fit with your organization? Right? Bringing them in and having other people potentially meet with them or whatever, or talk with them. Right? These are the kinds of things that you want to be able to do. And you basically want to ask for case studies. Ask for examples of what they've done and how they did it. Ask to talk to the people they've worked for. Right? And then ask them— here's one question I love asking consultants. And again, as a consultant, I've gotten this question, which is where I've gotten the answer. Is there— how do you approach problem solving and collaboration? All right, what this is, this is something that almost never gets asked because we're too concerned about what the results are going to be. And what we're asking consultants to do all the time is prove to me that you can get me the result I want. And most of the time, the consultant's answer is going to be, my ability to get results is going to be highly dependent not only on what I do, but what also how you— on how you respond to me. And what you do on your end, right? And so the ability for someone to be, to be able to communicate well, to be able to, to, to run a tight project management situation in which we're, we are having meetings and there are notes and people are being given action items and this is what has to happen next and make, and then follow up to make sure that those people deliver the things they're supposed to deliver and things like that. That's all part of running a good project. Right, or running a good, you know, you know, kind of any kind of consulting project. So the, the thing that I like to ask them too is about, is about how when we come into a problem, right, what is your way of dealing with it? Because that's what's gonna happen, right? It's the adversity you go through when you're trying to do these things, these projects and the whole thing, which is where, where things fall apart. And so able to have someone who's good at problem solving but can show you how well they collaborate on these issues and stuff is, is going to be, I think, a key piece of success. I think it goes under— it goes under-asked before people get engaged with people. All right, so now, John, you've figured out, uh, who, who it is you want to hire, right? You've done some homework, you've done some things, you made some phone calls, you found this, this, uh, this company called Exio. They're great. Oh, the personality is awesome. They're really fun to work with. They've demonstrated how they're going to collaborate and how they're going to run the project and how I'm going to be treated. They're going to treat my staff well. Everything's going to be great. They're going to be quiet. They're going to stay in their lane. All the things that we said they were going to do. So the question is, on your end, as the As the seller now, how, how do we effectively engage these advisors? What do I need to do to make sure that I'm doing— that I have an effective relationship with them?

Yeah, you're taking their advice, right? You're listening to them. You're— when you're asking their questions and they're telling you to do things, that you're actually doing them. So when your attorney tells you they need to do something, or your accountant needs some certain bit of information, or your financial planner needs this information, you get it to them. You get it to them and you're relying on their advice to go to, to, um, to, you know, you're relying on their advice to listen to them, to actually implement what they're telling you to do. If, as an example, that came up with something in the past is they're telling you to recognize your revenue in a different way, that the, the CPA, okay, you need to do that. If your legal person says, well, you need to hire, have more insurance, uh, because you're doing it, you're not sufficiently insured against X, Y, or Z. You need to do those things. So hire the advisors is one thing. Hire the right advisors and interview them. Don't just hire the first one that's referred to you too. That's another good thing. But listen to what they say and implement the advice that they give you.

That's right. I mean, the reality is this is why you're paying them. If you don't listen to what they say, then you are basically— then why are you paying them? Okay. And however you're paying them, whether it's, you know, you're actually paying them a fee or the per month, per hour, per transaction, whatever you're doing, right? Why do this at all if you're not going to listen to the advice that you're being given? So that's the first thing. I think the second thing, John, for me is that one of the things that I like and what we ask people to do all the time is we want to set expectations up front about what's going to happen and how it's going to work, right? Because we can have lots of different ways of doing this. I could have a completely different kind of project management style than you do or whatever. And so The first thing that I want to do now, first of all, your advisor should do this right in your first initial meeting, or at least in the proposal stage or wherever you are during your discussions before you even hire them. You should have an idea of what's going to happen and how it's going to go. Okay, so there are things clearly that we don't know that will pop up along the way. And again, all we can do is, is, is describe how we would manage those issues, communicate them. Right? Being able to understand that this is, you know, what we'd like to do is raise concerns early and often, okay? And be able to, so that we can get them on the table so that everybody, the right people can be, can address them in the right way. But we want to, we want to know what the roles are, who's going to do what, right? Who's, who's, what role, what responsibility does each, each member of the team have, including the people on your team? What are, what are the deliverables? Meaning—

Yeah.

What exactly is this consultant going to provide exactly?

And the objective, right? If you think of it from— if you're, if you're a project management person, right, what— and you're used to doing with project management— what is the objective of what this person's doing, right? Oftentimes in project management, you're, you're all working to one objective. We're, we're doing a new website and with, with these 4 capabilities, and it's very easy to measure those 4 capabilities. Well, it should be easily— it should be very easy to measure what that person is doing if You're hiring a CPA to help you with your deal. Well, you're hiring them to specifically— and you've given them an objective— to minimize taxes on this transaction so I pay the minimum amount of transactions, minimum amount of tax in this transaction. If that's the objective, then you tell that to the CPA and they will formulate the deal that they, that they will do. Now again, it might be in conflict with some of the other things that are, that are in the deal, but that's a business decision. that you have to make. The legal person comes up with something that's not tax advantageous, well, you got to have people weigh in on those things. And then you have to make the decision as the person that's at the center of this who's going to be most affected by this deal. You have to make the decision whether to go with tax advantage versus whatever it happens to be on the other side, legal.

That's it. Because, and that's, look, that's a really good point because the reality is, again, there's nothing that's there. There isn't one way to skin this cat, right? And the reality is, is that your ability to be able to define very early on to whoever's consulting you is what you are trying to achieve, right? What do you know? Maybe, maybe you say, I don't know what, what are the options? Okay, that's fine. And we can come in and we can tell you the options, and we can say that this is— these are the things that people usually do, and here's how they go. And we may even say we don't know how it's going to go yet because we have to— there's work that has to be done first. But your goals, what is it that you want? Right? As the seller, what are you angling for? What, what does success look like to you, right? John always asks a really good question when we get into with a new client, and, and he says it like this: what is— what does success look like? We're here, we are, we are finished. You're sitting here and the transaction is done, right? And we're all sitting around and the, you know, the champagne's been open and whatever. We're standing around here and the whole thing, and What what has happened that's made you so happy?

It's one of my favorite questions.

It's a great question. It's so good because again, it really puts people in the moment, right? You're like, this isn't just about getting something done. The broker is just going to want to get it done. Broker just wants to get it done. Okay, he says you want to do this. I'm just going to get it done, but I'm not going to, but I'm not going to be. Um, you know, I, I, the, but the experience of getting it done with me as a broker is going to be different than the experience of getting it done, you know, with, with John and Joe as an example. Okay, because we are consultants, we are communications people, we are people that have, that have the ability to be able to look at the situations and understand what is prescribed as a, as a, as a remedy.

Right.

Maybe there's 4 options. But we're able then to present those options to you in a way in which you can understand so that you can make the best decision for your business, right? But the idea is that we can't do any of this stuff until we know exactly what it is that you want. Now, we might, we, we might be the people that tell you you can't have it. That happens a lot, right? But then the next question is, okay, well, what can I have, right? So there, because there's always something. Right, because the reality is just to be able to understand what it is. Where do you want to go? Let's set the expectations up front.

Yeah, and what— so, and, and as Joe alluded to, we're not going to tell you something that we can't achieve. We are not in the business of, of promising something and then not delivering. So oftentimes we are— can be the bearer of bad news. You're not going to get $7 million for your business, Paula.

Sorry.

Or you're not going to get $7 million for your business in the next 6 months. We can get you $7 million if you're willing to wait 2 and a half, 3, 2, 2 years in order so we can do X, Y, and Z to help you get that. Um, but, but we're in the business oftentimes of saying, of saying what we cannot do because we don't want to be, um, you know, we're not snake oil salesmen. We're not going to tell you something that's not realistic.

That's exactly right. And again, it's a really good judge of, of people is to, is to be monitoring for that stuff, right? Anybody who tells you, hey, don't worry about it, or anybody who says there's no, you know, this is a cakewalk, or that all I got to do is X, Y, and Z and I'm going to bring this stuff— and a lot of these conversations happen to you obviously before you sign a contract, right? And, and so the reality is what you want to be able to do is to say, hey, look, have you done this before? Have you been successful? But the thing that you really want to learn from people, from, from the, you know, from the Uh, you know, from the references and stuff that you get is what was it really like to work with these people on a daily basis? And what you want to hear is, oh my God, the communication that she get— they uncovered so many options for me. They were really good at presenting the information so that I understood it. They were, you know, they was— they were transparent. Okay. They— when they saw a problem, they raised it up. They told me that there was a problem. When I, when I told them I didn't know what to do about it, they came back to me with 4 different solutions that, that might work. That's, that's what you want to hear, right? Because that's what a good consultant is going to do, right? And, and again, they're going to tell you bad news too, like John mentioned. But the reality is, is that working with these guys, working with a good— having a good working relationship with a person who can be the quarterback of this large, you know, this kind of extended team. is going to be really, really important to make sure they communicate.

Agreed. Agreed 100%.

All right. Well, look, the reality is that you've got some— you've got a lot of options out there. Okay? So, know that when you're out and you're starting to consider this notion of starting— or sorry, of selling your business, that the first thing you need to look for is some help. The best place to start for that help, frankly, That we believe is a place like ExitEngine, myexitengine.com to be exact, where you're going to get a lot of information, learn about the process, learn about our Total Exit Value System, which is the way in which we actually work through people. You become a member of ExitEngine, MyExitEngine, and you can actually learn how to do this stuff and do it for yourself, uh, if that's the way, the route you want to go. We'll help you find another advisor if you want. There's all kinds of ways to be able to use ExitEngine to be able to find in this At the beginning of the hunt. Okay. Yeah. So happy to help you guys do that. Yep. Good.

Yeah. And one of the other ways that, you know, definitely go to myXengine. Also, in addition to that, check out what we've been doing on LinkedIn and specifically with these podcasts, because we've been doing them for quite some time. We've covered an enormously wide range of topics. And a lot of people have come back to us and given us feedback that said, hey, you know, the nuggets you talked about on these podcasts really helped me with X, Y, or Z, or You brought an interesting perspective during this podcast. So, so check us out at LinkedIn, um, linkedin.com. You can check for Jo Stapleton. You can search for John Kniff. Um, again, we are featured in— we have little snippets that we pull out of these podcasts that are, that are very interesting oftentimes and very topical for if you're looking to sell your business. So please check us out there too.

Absolutely. And again, guys, the idea here is that, you know, if you're thinking about doing this, You've got some people that you might want to look at. You've had some people approach you, maybe, whatever. Just, again, just take your time, okay? And make sure that, A, that you're looking out for your own best interest, but also listen to these guys, okay? You know, one of the things that we should just mention as we leave here is that one of the things that's likely to happen is that someone— you're going to ask someone for evaluation, okay? And that's a lot of times the way that it starts. What's the value of my company? That's the first thing that you're gonna wonder. Okay? Be very, very, very, very careful at this stage. Okay? The reality is, is that value is something that can be changed. It can be manipulated, right? There's lots of ways to be able to actually affect the value, much of which we teach is something that, that are, are things that actually may already be there if you know what to look for. But the word of caution that we'll leave you with is Don't hire anybody who, just because they tell you that the value of the company is something that you want to hear, okay? It's not necessarily the best way to go. It does not guarantee success. What you want is someone who's good at listening, someone who's good at communicating, and someone who has been through the wringer and knows the things to look for. Those are the— those are my final thoughts on the, on the, on the whole thing. We really appreciate you, uh, you joining us today. Again, I'm Joe. That was John. You can find us at myexitengine.com. You can email us directly at info@myexitengine.com at any point. You can find us on LinkedIn. Please go comment on YouTube. You can find us on Buzzsprout. You can find this podcast obviously anywhere you found it or on any, on any channel if you're listening to it on the web. You can go to Apple Music. You can find it everywhere. It's everywhere. Anyway, thanks again for listening. Really appreciate it. Uh, hope everybody, by the time this airs, it'll probably be after Christmas, but thank— I hope everybody had a great holiday. Um, and we're really looking forward, and I hope everybody is looking forward to a great 2025. Um, and if you're looking to sell your business, you can go come send us an email. We're happy to talk with anybody, info@myexitengine.com. Appreciate your time, John. Have a great day.

Thanks, Joe.