The Exit Engine Podcast Episode 3: The Emotions of Exit

Welcome to the My Exit Engine Podcast, Episode 3. So, John, I think the thing is, is that I think we're not dreaming big enough and It's one thing to sit there and say, hey, I want to have a company, and that seems to be like the American dream, right? I want to have a company because I'm good at doing this and I can get this stuff out in e-commerce and we can do— you know, there's so many things that we can do, and starting a business is really easy.

Yes, it takes a filing with your state, uh, for the LLC, one, an operating agreement Yep, that's about it.

I think that's really it. And you can get that done. You can have someone do it for $159, or you can do it yourself for free. Um, so the dream has always been, I want to have a business. And what I'm saying is that we're not dreaming big enough. The reality is, is that what the dream should be is, I want to have a business that I can one day leverage and make millions of dollars, right? The business Correct. It may give you a good living. It's certainly better to be the boss and own the company than it is most of the time than it is to be an employee. So, in terms of accumulated wealth over years, yeah, you'll probably do pretty good. But remember, you got to live. You got to pay for the school and you got to pay for the kids and you got to pay for the house and you got to pay for the second house and you got to pay for the You know, the golf club or whatever the thing is that you like to do, which is great while you're owning this company. And if you're in that position, that's fantastic. Problem is, is that most people never make it past year 5.

Because it's— because running a business is hard work.

And people are potentially even too myopic about it.

What do you mean when you say myopic? What do you mean by that?

If I, if I don't have a beacon that I'm managing towards at the end, what the end is, then all I'm doing is basically I'm looking and I'm firefighting and I'm looking at the thing and I'm making decisions in the moment that may not be the best decisions ultimately for me towards the— at the end.

Fair enough.

Also, at any given moment, we're talking about life events. We're talking about, uh, uh, competition suddenly changes in your market. Your regular regulatory issues that will pop up, things that the economy, all these things are factors, right, that will affect your business. And if you're not in a place where at any given time you can say, if I had to exit today, could I exit and, you know, to on my, on the best terms that I could manage? That's, I think, ultimately kind of what we're, what we're all about and what we're trying to get.

Yeah. And we're trying, right? And one other thing, the way that, the way that I think about it, the way that I thought about it in, in a prior career is how much are you working in the business versus on the business? And what we're trying to do is we are, we acknowledge that, that some of, some of you out there need to work in your business.

That's fine.

And that, that is fine. You, you can sell real estate. You can be one of the, one of the salespeople. You can, you can maybe even do some production, production stuff. But what's of paramount importance is you must work on your business. And this is one of the things, preparing your company for sale and the things you need to do, uh, before you sell your company. That's an example of working on your business. Working on your business also too is looking at, looking at the overall profit, the overall revenue, the overall costs. The employees, all the things that come with running your business when you're not working on a specific task, on finance, on accounting, on closing the books. Sure, you have to close your books to run your business, but you also have to do succession planning and selling your business, uh, in order to make sure you stay on top of, uh, you know, those things that are important in order to sell your business.

That's right. And I think that we've come up with, to that end, We've identified really 5 kind of big things that people in general, business owners in general, never really think about when it comes to the exit. Okay. And they're really, they're not the things that you think. They're not intuitive, meaning that they— This comes from our experience in dealing with sellers who are in these situations. from being sellers ourselves and realizing these things. Um, but let's talk about them. I'm gonna— I'm just gonna name— I'm gonna name what they are, okay? And then we'll go back and we'll talk about them one by one, because this is gonna— this is gonna surprise people. Because on this list, you'll see nothing that has to do with financials, nothing that has to do very much to do with, with the, the business parts that— as we think about them, okay? Because— and we'll, and we'll explain why as we go through.

Yeah.

So, the 5 things business owners don't know when selling their business. Ready? Thing 1, okay, the emotional roller coaster that selling your business is. Okay, we'll talk about why that's important in a minute. Ah, emotions. I don't want to talk about emotions. Trust me, whether you talk about emotions or not, you have them. Okay?

Yep.

So, we will, and we'll talk about why that's important to manage that. The impact, number 2, thing 2, the impact on your overall identity as a human being. Wait, what? Are we getting all— John, are we getting all woo-woo here?

No. No, that, that is a critical thing that people forget about, and it's so important because it comes up in all deals.

All deals, right? And we'll talk about why. We're going to talk about what that means and the whole thing. Um, the family dynamics—

fun, fun topic.

Who gets to have the big office?

The oldest. No kidding.

Um, number— thing 4, loss of community.

Yeah, that's a— that's a— that's going to be an interesting one to discuss.

Absolutely. There's a lot of interesting things in here. That's a— wait, wait, loss of community, right? You give up your business, no one ever thinks about what happens the day after it's gone, right? Um, and then thing 5, What does my life after the sale look like?

I might have to take up golf.

You're gonna have to take up something because you're gonna have to fill your days, right? And of course, if everything goes well and you, you're one of those people who gets to sell a company earlier in life, um, then you gotta potentially have a lot of time to kill. So, all right, so those are the 5 things, right? So let's— we'll dive into those in particular. We'll take them— we'll go back in order. So let's talk about the first thing is we'll talk about the emotional roller coaster. Okay? There is a huge emotional component to selling your business and nobody ever talks about it. We talk about the financials. We talk about everything in the M&A space is always around the financials. It's part of the finance industry. It's reported on from purely a financial standpoint. But as we talked about in the last podcast, the transition of those, even these big, huge, multibillion-dollar deals and the whole thing can sometimes end up not being successful. And a lot of it can be tied to the emotional part.

Yeah. And the emotional part can be things like, I can't believe I have to listen to this person who's bought my company and doesn't know what they're doing. Right. Well, obviously, that's a thought that people have and people have had. But the thing is, it's no longer— after the sale, it's no longer your company, right? Yes, you have a component of it, you're a piece of it, but the entity, the person, the organization that's bought your company will make decisions different or differently than you make because they're a different entity. They have different goals. They have different objectives that they're using to run your business now.

Specifically in that point too, you know, the reason that things are different. So let's imagine a situation where, you know, an IT company, okay, it's, you know, doing $20 million a year or so. Let's say they've got $3 or $4 million in EBITDA, which is pretty good. We're in a situation where they sell that company. The single owner of that company, takes a, uh, has an equity, what we call an equity rollover, or potentially just takes, retains an equity position, if not the majority.

Okay. Yep.

Still is—

Let's call it 30% or whatever.

The numbers don't matter. And they've got a 3-year earnout, which is typical. Okay. So in other words, what they're saying is that you're going to stay, we're going to keep you on. The buyers say, we're going to keep you, the owner, on to help us in this transition. Okay. And essentially what you're going to do is because you've got client relationships and things like that, Hopefully, you don't have, you know, you're not the day-to-day person on that stuff. But the reality is that you're, let's say, you're in the position where you're trying to, you know, you have to stay on to help manage the transition. All right? And then, maybe part of your deal is that you get to retain that equity even after that transition is over, which would be a perfect situation, right? So, you're gonna get a big lump sum of cash, okay?

Yep.

Right? From the buyer. You're gonna, you're gonna have to stay on for 3 years and hit certain targets that you agreed on contractually. Maintaining a certain EBITDA would probably be a primary one, right?

Yeah, I mean, right, one of those, um, uh, retain— retention of clients, you know, in order, you know, if, if you retain over 90%, you get 90% of the earnout. If you return 85%, you get 80% of the earnout, potential earnout payment, whatever that happens to be.

Yeah, so the idea is that you're— so you're split 2 ways. You're gonna make some money over time Uh, you're probably, you're gonna get a big lump sum or a couple of different lump sums over that time. And then at, at, at some point you're going to maybe retain whatever, 30% of the company, and you're gonna get that and you're gonna have that until the company is resold again one day. Right. Okay.

Yeah. And that, and that can be part of like the, right, the private equity firm that, or who the entity that owns you describes this often as, oh, you'll get 2 bites at the apple, right? You'll get a bite when we pay you for the, the, the, the 70% of the company that we're buying. And then the second bite of the apple will be the 30% when we sell it in 5 years after we've scaled it, brought in business partners, done the things that the private equity firm promised that they do. And you get a second bite of the apple, more money for you when they sell the second time.

Exactly right. So it sounds like a pretty great place to be from a financial standpoint if you can arrange that kind of deal, right? However, what is not talked about, again, as we said, is the emotional roller coaster that we're on. Okay. The idea of, as John brought up, a great example, which is that, you know, now I'm in this earnout situation, but now, but I'm not the boss anymore, right? I'm a strategic, I'm an advisor of sorts. I have a seat at the table. I am helping the new owners get accustomed. I'm doing, I'm helping the transition and softening the, you know, whatever issues that clients might have with new ownership or whatever. We're making those things and I'm managing that. But through this entire process, and we're talking about from the time you say, I want to sell, to the time you completely earn out, we're talking about one of the big, potentially the biggest emotional roller coasters that you'll ever be on.

Right. Because the first time that the person who's not you is making a decision that you disagree with, What are the emotions that you're feeling? I mean, in that position, Joe, what are the emotions you'd feel if I was, if I was making decisions based on, you know, on your company or for your company and you weren't involved in the decision, or you gave advice and I went the opposite direction?

Right. And if I've been doing— if I'm the one and the sole one making the decisions for the last 30 years, right, that's gonna be really— it's gonna be really hard for me to take. So Preparing it. And let's— what's the— to answer your question, which was, how would I feel? What are the emotions I would feel? The whole thing. The first one I would feel was, A, these people don't know what they're doing. B, I've made a horrible mistake. C, what, you know, what have I done? Everybody, all the staff's gonna hate me or whatever, or this is, this is not going well, or any of those things, right? And all those things, I can tell you from experience, are very real, right? Yep.

The one that I remember very distinctly is when people would come to me and seeking an answer, and I'd have to say, let me get back to you, as opposed to, let me think about it and get back to you. Because I can think about it all I want when I'm running the company and get back to them in a day, an hour, 15 minutes, or right on the spot. But when you're not making the decision and you have to convince somebody, or you're, you're asking somebody else's opinion about what they're going to do, That can take longer. And you're not the ultimate decision maker. You're not the one making the decision. So people will start after you first sell the company, they'll come to you. But then immediately sort of after that, they start going to somebody else.

And they learn very quickly who the boss is, right?

Right. Thank you for being succinct. Exactly correct.

Yeah. And I think that's the— that's the— that's the— and so that's— that becomes— that can be a real trial for somebody who's been the boss for 30 years. Because you're talking about— you're not— it's not like you're just changing and going to a new place. The environment is probably probably exactly the same. You're still going into work every day and still doing all that stuff. But at the end of the day, you know, you're not actually the one in charge anymore. And so that can be a real, real trial. What are some of the other emotional, you know, situations that you've experienced?

Well, anger, right? You know, the, when you, when you're, when you're 30 years of experience, 25, 10, 5, whatever it happens to be, years of experience, When you feel that they're not, it's not being taken seriously or not being considered in a big decision, you know, firing a client or when a client fires you. When you, when you give your advice and it's not taken, you can feel anger.

No question about it. Yeah. I think some of the other things that there's a, there's a sense of loss, right? I think that we potentially, you know, depending on the situation, on exactly the situation, you know, maybe not in this in this situation that we're describing with an earnout, but certainly in a case where people are giving up the company immediately, um, you're gonna go through grief. I mean, it's like losing a friend. It's like losing an appendage, right? Something that you did. Yeah, good.

Yeah, and it sort of bleeds into the next one, um, with identity. But, but, you know, I don't know when we can get into that later, but you are You are one person with all sorts of different components of that personality. And that component of your personality is no longer gone. The owner of the company, you as the owner of the company, is no longer part of your personality. You are, as you said, a strategic advisor or whatever you've negotiated, whatever role you have in the new company is by definition not the same role that you had before you sold the company.

Yeah, and taking on the, you know, maybe, maybe in one of the best cases, the new role you're taking on is that, is that of a retiree, which is, which again is something that I, you know, talking to most retirees, is something that you, you know, you kind of have to prepare for because, because that, that, that, that there is a grieving of what once was and what used to be, even if it's a, even if you're celebrating Because you've exited on your own terms. The reality is, is that wait 3 days and see how it feels when you're not getting up and that routine's changed.

And so, so I think one of the lessons to learn from, you know, in this situation and how to deal with them is realize that things have changed, right? You have to come to the conclusion that once you got that check or once you got that, that closing document, that Things have changed, and things will continue to change over time. And to adjust to those changes is probably the most important part of how you're going to be A, happy, B, successful in the new situation.

And keeping yourself centered through the process, right? And so we talk about how do I, where, what's my North Star? And I think that the, in this case, if you have, if your eyes have been on the prize, which is your exit, okay? And you are part of what we teach, and, and you can— we can give you an individual class on this— is, is this mindfulness thing, which sounds crazy, but the reality is, is that it's, it's your ability to say, here's— no matter what happens, here's where I want to be. What happens and how I get there and the whole thing is less relevant, okay, than ha— than getting to the, the holy know, the spot you wanted to get, the promised land. Okay.

Yep.

But you've got to know what the promised land is in order to, in order to identify it and to get there and to not let the other stuff bother you. If you are, if you are, if you are already at, as my mom, my English mother would say, sixes and sevens, which is like, I'm stuck between 2 worlds, right? Like, I don't know. I want to be done with this, but I don't know what is next. And I don't know how I'm going to deal with the loss of it. Even if it's a positive, overall positive thing.

Yep.

So being able to actually teach yourself, as this part of what we'll teach as you go through this process of, of, of the transition of the sale, is to keep yourself mentally centered and, and focused on the big, on the big prize. Because there will be a lot of BS, there will be a lot of things that happen that make you feel bad or make you feel different than you did or whatever. But at the end of the day, all that really matters, OK, is that you, you're getting what it is that you wanted to get at the end. The means by which that happens turns out to be far less important than feeling good about the decision you're making.

Exactly, exactly. And I think we should, I think, I think we should move along to this, to the second one, because we're touching on that one. And the second one, just to remind people, is impact and identity. And we talked about this a little bit. I mentioned this a little bit about How much of your identity is wrapped up in the company is a critical thing because if it's too much, if you are the CEO and the owner first in your life, that can be a challenge when that changes. So making sure that you understand that your identity— yes, you are a CEO, but you're also whatever you happen to be. a partner, a father, a wife, a husband. There's so many other components of your personality that the owner of, of your company is just one, one part of that identity.

That's it. And of course, you know, especially I think this is very true for, from, for the male population because I think this is again is part and parcel of the way that, you know, in at least in America, the way that, the way that men are kind of socialized Uh-huh. Is that the only thing that we're about is the business, and we leave the child rearing to other people, and we re— and we leave, you know, a lot of that stuff. Now, there's more probably, you know, this is not 1960s. Obviously things have changed a great deal. I think that in general people are more involved in their home life. I think one of the things that people have, have desired, um, in the part— and in their— in the dream of business ownership is to have— is really is to have the— what they're supposed to give you is some freedom, right? To be able to do the rest of my life and to do the rest of my life well, right? And to not be the one-trick pony that is, I run a good business but I'm a terrible parent, I'm never around, I, you know, whatever. And I put all the onus, and I've grown up under the myth, the big myth, that if I provide From a financial standpoint, everything else will fall into place, which is obviously just not true at all, right? It's— yeah.

And a funny, a funny story about like identity, and it's not directly related to an entrepreneur, but it's a family member retired and they actually had to continue traveling because that was so ingrained in their brain and in their— the way that they interacted with the outside world. That they weren't going to their job and traveling around the world for their job anymore because they had retired, but they traveled for pleasure. And it was one of those— it was like a routine that they kept up post-retirement, which is similar to what entrepreneurs have to do, is you're all of a sudden one day not going to turn off that you're an entrepreneur or turn off that you're an owner. But like the transition period of being an owner to being whatever you happen to be is a tumultuous time. And, and you can lean on certain people, you can learn to lean on certain things. You don't have to necessarily stop all the things that you were doing when you're an owner. You have to realize that those things change, uh, you know. And picking—

and the process is understanding and identifying those things that turn me on. And I can keep, like, the traveling. like the, you know, being in front of crowds. I could go out and be a consultant and just talk and, and, and do what we're doing with Exit Engine. You can go off and just be— start your own YouTube channel and be an expert that way, if that's what you're into. The point is, part of the process is identifying who you are, what gets you going, and what you're going to be drawn to, or what— how— what you can create out of the next step in your life. What we're advocating here too overall is that, you know, we hope that you're not 75 years old when this happens to you for the first time, right? We want you to be, you know, 35 years old or 40 years old when you sell your first company. That would be the ideal situation, right? Because now you can do it. Now you got room to do it again, right? You can keep that identity that way by going on and turning it on to the next endeavor. There's lots of ways to do it. But don't expect it to come naturally because it almost, it just doesn't for most people.

Or instantly, right? Naturally or instantly. It's, it's, it's this, this is a process that you have to work on, um, that we've helped people work on in the past. And, um, and it's, it's, it's one of those things that it, it comes with, just like everything else in life, practice, practice, and more practice.

And the more you, the earlier you start in the process by identifying those things, and understanding that stuff about yourself, not only is that going to help you in your long-term goal of selling the company and what you do next, it's going to help you every day be a better human being and a better business owner.

Yeah.

And by the way, all of these things are. So the irony about what we're discussing today is that every single one of these 5 points is something that you can be practicing now that's not only going to help you have a better exit one day and be feel better about that whole thing, but it's actually going to make you better at practicing what you're doing, a practice that will make you better at what you're doing today.

Agreed. Agreed.

So embracing the opportunity for personal growth and reinvention, okay, is something that business owners should be— a lot of business owners are naturally good at that. You know, you and I are serial entrepreneurs. We are people that have started multiple companies. Some of them have gone well, some of them haven't. You know, together we have a very mixed bag of stuff.

Yeah.

But one of the things that we both have done and continue to do is embrace this kind of personal growth and the ability to reinvent ourselves as necessary. And that is a really key skill for any business owner to have at any point in the process, whether you're gonna exit next year or 10 years from now. Being able to do this, practice this stuff, is really key.

Yeah, and a word that was, that's unsaid in the phrase that Jo mentioned, but is implicit in it, is learning. And learning new things and growing. And growing was in the phrase, but one of the things that I've learned, that I've felt is important, is to learn when you're learning a new business, right? Be comfortable with what you don't know. Be comfortable with what you, what you don't know you want to do, and, and, and view this as an opportunity to reinvent yourself, right? To learn about a new business, to learn about a new area of the market, to learn about— I mean, one of the things I'm fascinated by right now is artificial intelligence and what it will mean in the future. Like, like, people always hear, you know, you hear the word artificial intelligence, it's going to be enormous in the next 5 to 10 years. And that's a potential reinvention for— just imagine how many entrepreneurs will use artificial intelligence in their new business.

Absolutely. And look, and that's an easy one. I mean, I think that the things that are harder for people tend to be the things that are internal, right? The ability to be able to say to themselves, hey, I know who I am, right, is like, that's like the most important phrase that a business owner can have because there, it's so easy to get distracted and to get with things. And if I got distracted by the AI craze right now, but it's not core to my business, right, the potential I'm taking my eye off the ball.

True.

And, uh, if I'm, if I'm, uh, but, but on the other hand, if I, if I meditate every morning you know, for 45 minutes and set myself up for a day and the whole thing, I'm going to be better at owning the business. I'm going to be better at being a husband. I mean, better at everything. So, the reality is, is that a lot of what we tend to teach, and again, it's not every single class, but we imbue everything with this kind of human element, which has been some of the thing that's, that's kind of been missing from the financial world, obviously, is to say that, look, this is about humans being.

Humans.

Humans being, right? Human beings, humans being. The notion that I exist as a human, we all have these kind of foibles, we have these individual little personality things, whatever, but all of us can, as John said, all of us can stand to learn more. All of us can stand to be able to understand how to reinvent ourselves and prepare ourselves for the eventuality of the exit. And if it's a positive thing as opposed to a negative thing, I'm going to get that much more out of it, right?

Sorry, I just had a cough there, Joe.

One of the things that goes on too, if you've ever been in a— and John, you grew up in a family business.

Oh, the family dynamics.

What's it like when you try to sell a family company?

Well, it's interesting. So in the family business, you— what I sold I'll speak for myself, is you find your level, right? If you're not the, you know, if you're not the owner, like I was not, I was a, I was a component of it. I was a family member. And we had 2 family businesses, one that we weren't really involved in and one that was literally in our house. It was in our basement. It was a candy store. And, um, and you find your level. You either work in the store, you work front of the house, back of the house. Uh, I did shipping with one of my sisters. My other sister worked in the store. And my mother ran the business. And my dad was officially the CEO, but my mother really ran the business. But you find your level and you find your dynamics. And when the business was sold, we were older, but we all had this, we all had this sense of we're not getting enough. Like we're not getting enough for the business when someone offered, when someone offered the amount of money for the business. But in reality, it was a lifestyle business, right? It was a business that was certainly successful. But it wasn't a truly profit-making entity. We used— my parents used the business to put us through college, and that was successful. It wasn't General Electric, right? We didn't have a quarterly mandate of—

Most of us aren't.

Yeah, right. And lifestyle businesses are fine. You can have a car, you can take family vacations, you can Write all certain things off, and it's perfectly legal to do that. Um, it's, you know, it's an example of, do you want this? Do you want this entrepreneurial lifestyle? But selling the business was— man, it was challenging because everyone had their opinions on what the business should go for. Um, and, and they were all different.

Everybody in the family?

Everyone in the family had it, and everyone thought that their input was valued, and it was valued. But in reality, my parents wanted to sell the business because they were older and they—

Tired.

Could have prepared the business better, frankly. But they were older and they wanted to be out. My mother wanted to be done. And ultimately, it led to a successful sale, thank goodness. But again, we learned from that experience that We didn't work on some of the things we should have been doing beforehand. We didn't prepare for the emotional changes, the differences, the— of the life post-sale. And, and this sale was, you know, May 1st or August 1st, it was ours. August 2nd, it was somebody else's. Right.

Um, is there anybody in the family that didn't want to sell?

Nope, everybody wanted to.

All right, so that's good. That, that's, that's the hard part because I think, right, one of the, one of the biggest things that we see Is, uh, I actually did a post on this the other day, uh, about the family, about, about, uh, the corner office, right? Who in the family, when you've got a family business and the whole thing, is going to get— who's going to get the corner office when the, the, let's just say the, the mother, the mother who's the CEO retires? Okay. Sometimes it's like clear, right? But if you've ever seen the show Succession, You'll know that it's not nearly that clear, right? In a lot of cases, a lot of people think they deserve, they're gonna get it. And so if you have, and you, if you don't have a succession plan in place, that person goes, that's the, the CEO dies, and suddenly there's a company to run. There's gonna be a lot of fighting potentially.

Well, there's a lot of fighting. There's a lot of, again, what we talked about earlier was emotion. There's a there's a lot of loss of identity. These all things sort of bleed together. But yes, the family dynamics brings in all sorts of grudges long ago, seemingly settled issues that rise up. Well, you did this when we were younger. You did this, or you got a car, or da da da da da. All these things come up, and fortunately it didn't come up in mine. But but in the in this in the other my other world. I've dealt with 2 sons and both run successful divisions of the company. And what happens? It almost sounds like Fox, right? It almost sounds like Fox News that I think Succession was based on. But they both think that they deserve that CEO title. It's not the case.

No, not everybody. And not everybody can have it. And of course, if you're not a united front when you come into and meet with the buyers about who's going to take over and how that's going to work, then you're not going to sell the company either, probably. Because nobody wants to get in the middle of that.

Nobody wants to get in the middle. And nobody— like, you know, one of the things we were talking about, uh, a day or so ago is, is buyers, right? Is, is, is taking a step back from this is— but imagine if you're buying a family business, Joe, right? You're buying a family business and you come in and you have 2 sisters and a brother, and clearly they're not on the same page when you talk to them for the first time. You're the buyer, you're coming into a family business And that's the situation. Well, do you really want, as the buyer, if you're the buyer, do you really want to buy that business when those things are unsettled or those things are unclear as to who's going to stay along, who's going to leave? They're arguing like they can't even put up a united front. And that happens all the time when we're counseling people is get your act together as a seller. Yes, you're going through these challenges, but you need to settle those financial family dynamics. You have to deal with them, but you need to settle those things before you get in front of a buyer, because don't air your dirty laundry in front of someone who you're trying to get to give you millions of dollars.

And another reason why you should be succession planning, which is part, only part of your exit strategy, by the way, should be done well in advance, not, not, not at the time. Now look, Things happen. Life events happen, okay? People die. People are in, you know, have health issues. I mean, you know, it's just— this is just a reality. And we don't want to— we're not wishing this on anybody, but this is what happens. And so if you're not prepared to have, uh, mom, uh, you know, uh, you know, leave the planet, um, then— and you're in— the entire company goes into disarray even though there's people, there's capable people there. You know, that, that's a— that's— that, that could have been not just— it seems like an emergency. Oh, well, how did I know that mom was gonna die? You didn't, and that's okay. But you still could have taken steps beforehand on the off chance that something like that happens and be prepared for it in the eventuality that it does, right?

Yeah.

And so the early— the idea of instituting succession planning in your exit planning early on as part of your overall business strategy that you look at on at least an annual basis gives you the chance to be prepared for something like that when it happens and then be able to make a successful transition for the company because you've already got that stuff ironed out.

Yeah. And if you think about what succession planning really is, it's, you know, some people can get daunted. It's sort of a daunting term, right? It can be scary. Succession planning. Really what that is, is communication, right? It's communication and it's writing things down and getting people to agree to them. Right. And sometimes you need to convince people. Sometimes you need to— sometimes you can dictate it. If you're the 100% owner of the company, you can dictate it. But really, succession planning, it's not all that hard. It's just putting your mind to it. It's communication and it's agreeing to what is written down in a communication plan, a future plan. Don't even call it succession planning if you don't want to or if it's too daunting to you. It's Communicating what will happen when you sell the company or when you retire or whatever happens.

And that you can put that information into the sim, into literally into the presentation of the company for sale so that it takes it right off the table. The decision is that when this person exits, the son will become X, Y, and Z. He's already been running the company. I'm saying son, doesn't have to be son. Don't send me letters. Um, obviously, if it's a woman, whatever, it can be any of that stuff. The sister can take over. This is what's going to happen, and this is the plan that we have in place. And so that takes the question off the table, and no one has to worry about it from a buyer standpoint.

And right, exactly. And a lot of times what we see in some— in the sims that we see is, you know, management's open to staying along, staying on for X period of time. Or CFO is son of the owner who can stay on during a transition period. And really what that's presenting to buyers are it's giving them options, right?

Right.

It's saying, you know, you might have to end up replacing the chief operating officer who is the daughter of the founder, is obviously, is very, maybe very capable, may want to stay on. But it's giving the buyer a more full picture That's not in the financials, right? It may not be appropriate for any of the documents or the formal presentation of the SIM, but it's something that the buyer wants to know. And as a seller, you want to tell them because, again, you don't want to— no one really likes surprises in business deals, especially large private equity firms that have to do a ton of due diligence. So the more information you can give them in the SIM about the company, And its potential future when you're gone, the better.

And we should say CIM is an acronym, CIM, and that stands for Confidential Information Memorandum, which is just simply a document that says this is the company for sale, presents the company as a formal marketing package that says this is the company, this is what they do, this is their— and attaches their financial information and all this stuff to get interested parties to be aware essentially that the Yeah.

And to just put a bow on it, is typically created in conjunction with a broker and executive management of the team to accurately and adequately represent what the company is from a financial, operational, and strategic standpoint.

Excellent. We'll obviously— there's links to that on our website as well at myexitengine.com. So check that stuff out as well. If you're not a member yet, by the way, subscribe to the community. You're gonna get a whole bunch of information like what we're talking about today and some very specific things, some worksheets, things like that that you can actually use, actually help plan this stuff. Yep.

And speaking of community, that's a good transition. As they say in the business, a good— what do they— what's the term?

Yeah, it's a segue.

Segue, thank you. Transition to Uh, segue to loss of community.

Yeah. So how do you say goodbye? Like when I remember this, we sold, we sold the digital marketing agency the, the next day. Uh, we, we still went to work because we were now employees of the new company. So it was But it only took about 3 months or so, I think, from the time that I got the last check to the time that I left. And the reason was is because we were just waiting, waiting, waiting to, you know, what we call to earn out, right? Um, they call it— they don't call it earning in, they call it earning out for a reason. Um, because I've never heard that.

That's a good one. I like that.

Yeah, yeah. I mean, if it was earning in, it would be all about getting you to stay. Where they're earning out is they want to use you as far as they can, and then, and then, you know, look, we're making a good salary at that thing. But we were working for somebody else at that point. That wasn't the, you know, that's, that was, it went the way it was supposed to. But again, for me, it was like, no, no, we're trying to get on to the next thing. But in any case, the, the notion that most people, when they sell a company, or it's like selling a house and waking up to the house you no longer own anymore. All your memories and stuff are tied to there, the people that are there, many of whom may have been with you for like a really long period of time. You You may have had an admin or someone like that who really is the person, you know, they say running the company, right? Who's actually, you know, and anyway, all this stuff kind of disappears. It may not disappear all at once. It might take some time. But ultimately, the idea of exiting somewhere is to leave it behind. And that can be a real challenge. And one of the keys that we found is, again, planning ahead of time. What is it? How are you going to replace this community in your life?

Yeah, what's going to take the place of the community that you've built at your company over the course of the time you've owned it, right? Maybe you socialize with people that you work with. Maybe you go, you have, you know, outings with them. Maybe you live next door to them. Maybe you live in the same community as them. How that's going to be different in the future than it was while you were owning the company. And what do you replace that with? Do you augment it with different things? Are you joining a country club? Are you going to move? What's going to replace the community you've built over time at the company?

That's right. And of course, building a sense of community outside of the business before You get to that point is also key, right? So our advice always, and we would advise this to anybody that we were sitting with, is to say, what are you doing outside of work right now? Right? You might be 10 years off from selling your business, whatever. What, what is your life like outside of this? And as you, as you, as you go through the journey, keeping in mind that building a life outside of work is going to be key for your, your mental health. And for your ability to be able to grieve this loss appropriately so that you can enjoy the rest of your time on the earth doing whatever it is you're doing. And so, you know, one of the key things we found was that if you start to build another community outside of work simultaneously, you'll be able to actually— you won't feel that loss as much.

Yeah, because again, We can't reiterate this enough, is that there will be a loss, uh, that you feel when you— of, again, yes, of running the company we've discussed, of the emotional toll, but the community, you can't discount how much that affects your life depending on how involved that is in your life, right? I, I know people who their entire identity, their entire community is, is was wrapped up in their company. And when that goes away, it can be jarring and it can be alarming if you don't have, as Jo mentioned, if you don't have a separate community that is in parallel and you're building up, be it a, you know, again, it could be fam— could be back into the family, it could be traveling, it could be back into your kids, it could be all these different things. You really want to identify what community will you be a part of in the future after the sale of your company is over. And frankly, your standing in that community is different.

There is a real thing that happens to people, and it can happen to you whether you own a business or not. It can happen to you if you own a business that's successful or not, in terms of, you know, relative terms. It can happen to you when you sell the business, and it's called an existential crisis. It's a kind of a— this kind of dark night of the soul that often happens to people. They call it a midlife crisis sometimes.

Yes.

But the reality is it doesn't really just happen at midlife. It can happen at any point. It can happen more than once. But what it really is is kind of like a— really designed to be like a wake-up call from the universe. All right, and we can talk about this in another, another subject. I actually talk about this on my, uh, on my TikTok channel a little bit too because it's something that happened to me personally, which is that you know, you kind of are— you go into like, uh, you can get yourself into a little bit of a rut and lose the plot of your life, right?

Okay.

Um, and that can be scary because especially if you were one of those people like I was that was like, you know, I already always knew what I was doing and I was always kind of on it and I was, you know, always kind of like looking at the next thing. And the reality was that I learned, uh, you know, after I exited that company Um, even though I thought I did it on my own terms, and as bad as the transition kind of was and everything else, the reality was I felt a tremendous sense of, what am I doing now? Um, thinking that I kind of knew, um, but then realizing that when I got there that I really didn't. And it really sent me into a tailspin. I mean, I'm just being honest with everybody. It was—

Yeah.

Really hard, dark night of the soul that took a really, really, really long-term time to get out of. And by the way, It affected all the next things I tried to do. And those next things, because of my mental state, were not as nearly as successful and did not go as well as the, as that, the one previous.

Right. Because, because you, you, you know, didn't know— I don't want to be critical, but you didn't adequately prepare for the differences in your life pre-sale versus post-sale.

That's it. You just think that it's going to be good. And then because you've made this money, because that's all you were focused on. But I had no idea about the other parts. No idea that this stuff— never occurred to me that I was going to feel, you know, like I, like I was grieving the loss of a friend, you know, or that loss of the community, or any of those things. And so take it from me, honestly, it took a really long time for me to rebound from that because I really had to understand what was going on. Um, but this is a real commonplace. You find many, especially— and by the way, it happens to men again tends to happen to men in my experience more than women. Not that it can't happen to women. I don't wish it on anyone. But as a, as a male, uh, you know, who was raised in a certain society at a certain time in history, your, uh, your, your belief system is tied to your success.

Yeah.

And if you are not, if you are unsuccessful, if you can't be successful that way, you feel a loss. Um, even if you are successful, you can feel like, wait a second, now it's over. What, what am I going to do now? How do I be successful now?

Yeah. And that's a good segue into the last one, which is life after the sale, right? It's, you know, again, you've dealt with, you've talked about the emotional components, you've talked, we talked about the community components of it. This is the reality of it, right? The sale has happened. What are you going to do? How are you going to adjust your life? You're probably not going to be working as much, right? Yes, you're going to be dedicated to the company if you're staying there and you own 30% of the company, but you're not going to be getting there at 7 in the morning. You're probably not going to be getting that phone call at 2 o'clock in the morning like I got when our Cisco server went offline and our comp— and our clients in Italy were going to be logging in in a couple of minutes and they didn't have access to the site. Um, which is exactly—

write a password down on a piece of paper, basically.

Yeah. And the funny— the quick segue— the funny part about that story is the guy that— the consultant we called in at 2 o'clock in the morning had come from a club, and I still remember like the, the slick tight jersey t-shirt he had on, and it looked like he was, he was part of the Jersey Shore, which again, I'm from New Jersey, so I can say that. But it was just funny, like at 2 in the morning when we— when I met him in the office To come in, you're probably not going to get that phone call, which is A, it's a good thing, but B, it's a difference. You're not the— the buck doesn't stop with you. Um, and what are you going to do? How are you going to sort of alter your identity to deal with the life after the sale?

But again, you can't— and by the way, you— it's like golf, right? You can't fix your swing on the course. Okay, so you can't be in the middle of A transition point of exiting and start to think about this stuff for the first time, right? That's the key.

All—

as you can see, all 5 of these things are completely interrelated and interoperable, right? And that's why there are these 5 things, because they are all things that people don't think about because we're so focused on the numbers, we're so focused on the business part of things or whatever, that we're not— once again, And by the way, this is just an epidemic with human beings anyway, which is that, you know, we are not focused on ourselves and our mental health and all that stuff. We take the rest of— we take that for granted, um, even though most of us have some pretty significant issues. But we are— but, but when it comes to the business, I sold it and therefore, look, yay, I did it. But now you got to go through the rest of your life, right? Hopefully you're selling— you're not 80 years old and selling this business and have, you know, whatever. But, you Even if at 80, you could have another 20 years on the planet. It seems like it's easy, guys. I know, I know it seems like, oh, I would give anything. There's so many of you guys that are out there watching this that are like, you're dying to have a business, and gosh, I wish I could have these problems. And yes, these are great problems to have in one way, but they don't— doesn't make them not problems, right?

Exactly right. Dealing with what's going to fill up your time You are all successful people. You are all used to working a lot and being involved in the business a great deal. This will be a problem. Trust us when we say, when you have newfound freedom, what— you're not going to sit around the house. What are you going to do, sit around the house and twiddle your thumbs and drive your husband, wife, partner crazy? No, it's not going to happen. That is a— as Joe mentioned, that is a problem you need to address, and you need to address it sooner rather than later because you don't want to do it. You don't want to have to have that first thought the day after you sell your company.

And look, the real reason why it's so important to be able to think about this not just early but also often, okay, is that the circumstances change, right? New things happen all the time. New stuff comes in, you know, just like your business is kind of— should be kind of a living, breathing kind of organism that's kind of adapting. and changing and moving as you go. You know, you need to be that as a human too, and as the leader of that business, to be able to understand that you exiting the business is a, is a key piece of selling the business. If you are on top of and you are managing the business on a daily basis, and you are in there and you are managing every client, and you're the only person that everybody wants to talk to, and all those things that are going on, you're not going to sell the company. You need to already be detached in order for the business to be attractive to begin with, right?

Yeah, and that gets back to something we referenced earlier, is that again, this part of it, life after the sale, again, think of it from the buyer's perspective. If you're buying something, you want to have your questions answered, you want to have things wrapped up Um, so that the business can be sold, right? So the business— so that what, what the person's buying or the entity is buying is a real viable business. You don't want to have yourself so involved in the business, it's tough to disentangle yourself from it. Have that— have those— have those— or answer those questions for the buyer before they even ask them.

That's exactly right. Everything— you have everything bundled up. So the point is, these 5 things Are, are again things that no one really ever will ever tell you about.

They won't—

it won't even be considered. These are the kinds of things that we just allow human beings to kind of go through and whatever, but it affects, it affects the, the, the way you optimize the business.

Exactly correct.

The, the, the biggest takeaway from this, guys, if you could take away one, one piece of this whole thing, is to understand that you are a human being and that you are a human being, meaning existing, and that part of these things are things that will happen to you. The people who make the most successful transitions are the people that know what they want to do next, are clear, and already have a new kind of bellwether, have a new beacon on the horizon for them to follow next, and that they have successfully wrapped up the things that the emotional entanglements that are there as part of the business. And it's not something that happens overnight. It's something that takes effort, just like everything else, to be able to actually plan and to kind of work around. But the people that do the best job selling the companies tend to be the people that are— that have community outside of work. They have, they have a good succession plan so that they're not going to get caught up in family issues and things like that. They have a— they have an idea of who they are and what they want to be next, right? And then they have— and then number, number 5 was, uh, sorry, the, uh, of the, uh, the, uh, the life after the sale.

Yep.

They know what they're gonna be and what they're gonna do next. And so getting all these things together and figuring this stuff out is a part and parcel of what ExitEngine can help you do. Um, if it's not from us, please find this, uh, please, please, please Get some help with this stuff. I don't care if it's a family member or a friend or a, uh, you know, or a shrink or whatever, but, but, but do, do this work because understanding who you are outside of work is going to be key to your success, um, once you, you, you sell the business.

And, and I agree with all that Joe just said, and I'll just emphasize something I said earlier is communicate, communicate, communicate, because All of these things involve other people. They certainly involve yourself. They involve you as the owner, but they also involve other people— employees, future owners, um, you know, everyone involved in the sale of the company. Communicate, communicate, over-communicate.

Absolutely, absolutely.

Great.

Well said. We'll end it on that. Um, guys, just please, if you have comments about this, you have stories you want to tell or want to share, whatever, you have questions you want to ask, you can drop all that stuff in the comments on that stuff. We can be— we can be reached. You can send an email to info@myexitengine.com at any point, um, and we will try to get your, uh, you know, your questions answered and that kind of thing. Um, new website is going to be up in the next, uh, little bit. It's going to be at myexitengine.com. Most important thing to know right now is on May 22nd, uh, it was— we are holding a, uh, an This is free for anybody who wants to attend. We're calling it Exit 101. This is your basic kind of gist on how I go about selling a company, all the things that are kind of involved, the steps and the procedures along the way. Very kind of basic information, but the kind of thing that's a great starting place. So you can join. Look out for that on May 22nd. We'll be sending a note out. All the stuff will be attached in here. In the comments, in the notes section of this podcast, right? John, anything else? Any closing remarks?

No, thank you, Joe. This was a great discussion. Thanks. Awesome.

All right, buddy. All right, we'll talk to everybody soon. Have a great time. Remember, okay, that we are here to help. And if it's not us that will help directly, we know a lot of people who can. So please, if you're having issues, if you're thinking about these things, if you don't know where to start, any of that stuff when it comes to selling your business, Think about ExitEngine and think about joining our community. And we'd be happy to help you do anything that you need to do in order to make the exit, optimize the exit you want to have on your own terms. All right, John, have a great day and we'll talk to you next week.

Thanks, Joe. See ya.