The Exit Engine Podcast Episode 32: Craig Keegan on Rollups

Welcome to the ExitEngine Podcast, episode 32. Good afternoon. Oh, it's afternoon. Good afternoon, John.

Good afternoon, Joe.

So, John, it's afternoon here in America, but we are lucky enough today to be joined by a very special guest from literally the other side of the world. We're going to talk to our friend Craig Keegan, who is an M&A expert. He runs a company called M&A Profits. He has a very, very interesting business where he talks, where he actually deals a lot with roll-ups. So, for those of you who don't know what roll-ups are, we're going to give you today, you're in luck because you're going to get to hear all about what roll-ups are. We're going to talk a little bit about M&A internationally. And also, we're gonna— and again, we're gonna talk to a really smart guy who's been doing this for a long time who can really give you some great advice. So, John, how are you? First of all, John, how are you today?

I'm doing great.

Excellent. We're having a great week here at ExitEngine. Very excited because in the next couple of weeks, we've got a bunch of different guests coming up on the ExitEngine Podcast. So this is really great. But so today, without any further to-do, allow me to introduce Mr. Craig Keegan. Craig is the owner and, you know, and founder of M&A Profits in Melbourne, Australia. And it's very early in the morning, but Craig has agreed to kindly join us from halfway around the world anyway. Good morning, Craig. Great to see you.

Good morning, Joe and John. How are you? Great to be here. Thank you so much.

So much. Thanks so much for joining us again. You know, time difference notwithstanding, really appreciate you being on. I gotta tell you, so we've been looking at your YouTube stuff and your website and obviously your LinkedIn presence and all that stuff, which has been something. But what really jumps out at us and the reason we wanted to have you on the call today was, you know, we hear a lot about roll-ups and lots of people, remember, our audience is sellers, you know, mostly. And so, what we want to talk about today is like, what's a roll-up? And how can I get myself in one of these? And because it feels like the thing about roll-ups is that what roll-ups essentially are, are individual companies being rolled up by a single buyer essentially into a holding company or into some kind of conglomerate. Is that how you'd explain it?

That is not how I would explain it, actually.

Great. Even better.

How I would explain it to people is Especially from your audience perspective where they're sellers, is how would you like to sell your business multiple times? How would you like to get paid for your business multiple times? That's how I would do the intro for what a roll-up is. What it's about is you being able to have your business, have a great— oh, exit. Nice. Nice logo in the background there because we're all about exits here. Have a great exit that is going to give you the life after you leave your, your business that you've spent years building up. But most importantly, how can you get paid for your business multiple times and sell it multiple times? That's what roll-ups are about. So we take a group of businesses with synergies, similar businesses. In my case at the moment, it might be a group of dental practices as an example. So you take 4 or 5 dental practices, and from that you add on some extras, maybe get 10. That'd be nice. And then you package those all up with the same backend, same— make the businesses function in a similar way, make them function efficiently with the right numbers. That's the whole key to it, is getting the right numbers. It's not the branding even, it's the numbers that are important. And then packaging those up and on-selling it to a private equity or a venture capitalist. Now, what happens there? So first one is, from your founder's perspective, is they have sold it to me as an example. Sale number 1. We then sell it to a PE or venture capitalist. Sale number 2. Now they've got a package of 10 to 15, but they have added their own 10 to 15 to that as well. So now we've got 20 to 30 of these dental practices all in one big package. Now, this venture capitalist, he's only got the money for 5 to 6 years from his investors. He's got to give that money back.

Yep.

He has to give that money back. So the only choice he's got is He's got to liquidify his assets, which are these 20 to 30 dental practices. And I'm just using dental practices as an example, by the way.

Sure.

So he then goes and finds a bigger fish because now he's got a great asset, a rare asset, a hard-to-find asset that's valuable where he's got 20 to 30 dental practices. And this is sought after because there's bigger VCs and PEs out there that want to buy something with their money that they've got to invest, and they've only got 5 to 6 years. So they come and buy this. Sale number 3. So how does this help the original person who owned the— that original small dental practice. Well, they didn't sell all of their business. They only sold 70% of their business.

Yep.

They vendor financed the other 30%. So I only bought 70% of the business. They still had 30%. When I sold it to the PE or the VC, I could only sell 70% of that business. This founder still had 30%, though that's been, um, diluted with all the other ones that we've rolled up as well. Now it's only worth 2%. They've got 2% of this bigger organization. When it's sold again, it's far more valuable. Therefore They go up, they get 2% of this valuable entity, and it's probably worth just as much as what they originally sold 70% for. It's a small—

it's a smaller piece of a bigger pie, right?

Right. Yes. More valuable pie. Right. Rarer.

So what's that? Good.

In that one, they've probably doubled their money. Their asset value anyway, right? So they might choose, okay, I'm out of here, Fred. See you later. Or I'm in for the long haul. And then when this gets sold a few years down the track, their 2% might be liquefied down to about 0.8%, 0.5% even. But it's again more valuable. But a 10% originally. Right.

Yeah, it's a— it's an incredible strategy. I mean, it really is. And I think again that, that the long— what I, what I love about it is that it is— it gives especially, especially practice and service businesses, right? Because in those particular businesses where you can replicate the, the process, right, where you can put everybody on the, on the same system. So the first thing it's doing, and this is why I love this, is because what John and I do, right, and what we kind of preach all the time is Exit planning is just good business planning. Okay, so when you're exit planning, right, you might be you might be ten years away from ever selling your business, right? But if you're starting exit planning early and often, then what you're doing is that that then some of the things that you can you can you can have you can set trajectory to things that you wouldn't normally be able to do, right? And one of the things that you can say is, hey, look, if I can if I can if I can get on a system with a bunch of other people. Right, where I still keep my practice. My practice is my practice, right? It's got the name on the thing. And but and why we're we are seeing this even in America with dental practices and you know and and and especially medical practices and things like that, right? That I have my own practice. I have my own shingle on the door. I am selling it. Everybody knows me in the neighborhood. I sponsor the kids' Little League shirts and all that stuff, right? But what I'm doing is essentially going into business with someone like Craig. Then what I'm doing is I'm getting this and I'm getting— the first thing I'm doing is I'm selling off literally most of my company. So I do not— this is— and you stop me if I'm saying something wrong, right, Craig? That I'm, I'm basically— I'm selling 70% or so of my equity, right? I'm holding, retaining that 30%, right? And then that 30% rolls up into the next thing, right? So whatever I own, that 30— now, like you said, it might be diluted in the next round. Okay, but that's okay because the percentage is decreasing, but the, the, but the, the real number, you know, the, the total value in, you know, in an exponential way, right? And so this, this, this, the first thing I'm doing is I, I'm, I'm getting my business healthier to begin with. So the very first thing I'm doing by getting onto your back, back office system, right, is I am already creating efficiency and operational efficiency And hopefully increasing profitability, right?

That is correct. Now, you've brought up 2 things there that I just want to focus in on. The first is the example that I just gave of me buying 70%. That is one strategy. But you also brought up the subject of it's still my company. Well, that may very well be true. You might even just bypass me. I might be the person that licenses and coordinates the packaging, right? But you still own the whole thing.

Yeah.

So that's another strategy. The second one was, and this is the most, this is really important and you just brought up the backend. Now, a consistent backend minimizing risk, to the next purchaser, the VC or the PE. That is just so important. Anything in business is about getting your numbers right and about minimizing risk. And if we can do that, that is going to make your business more valuable. And a lot of— you see it all the time, I know— people don't think about exiting Until, oh, one of the 5 Ds happens and then they've got to get out quickly, in which case their business, 80% of businesses just don't sell because they don't have their exit plan. And that's why you guys are just right on this and helping so many people.

And Craig, let me ask you a question about like the—

oh, go ahead.

Did you want to say something else?

No, no, no, you can't.

So, so in my background, we have— we used to buy businesses and we used to think of like things that were above the line and below the line, right? The, the below the line, the things can be shared and should be shared for economies of scale and above the line things shouldn't be shared. And it's probably different in real estate and different in some industries. But, but in general terms, what are the things that, that when you talk about the backend, just specifics for people, are we talking HR, finance? Just, just go into those a little bit.

Absolutely. Got a neat little diagram on that. It's, it's accounting, it's payroll, personnel, all the dirty things that people just don't want to do. And I don't want to do it. They're not good at it.

Right. I was gonna say, I want to put my hands in people's mouths, but I don't want to deal with accounting, right?

Yes, if you're going to take the dental one that far. Yes. Uh, so yes, accounting right the way through to building maintenance.

Payroll.

I think we did payroll. Anything that is not what your profession is, it's not what you do. Then you spoke about the top of the line. What in there Do what makes me special? It's not the accounting, I can assure you. It's not the payroll, I can assure you.

So what is that? Building maintenance?

Yeah, right. Yeah, that's it. That's it. Having a good alarm system. Uh, no, it's the— it might be the marketing. You might have a special twang on your marketing that makes you really special. It might be The, oh, your branding of some variety might be what makes you special.

Like what Joe was mentioning, you should still keep control of that. Yeah. And there's also, and then we always talk about the above-the-line things that you could also share, right? Like, like marketing spend or marketing tool or service, like the marketing itself and the advertising itself can be differentiated, right? That in, in one area, Joe, the, you know, Joe's dentist sponsors a Little League team, in another way you sponsor something else. So, but, but there's so much room for synergies once you have the back end aligned. You can even use systems and tools across different, different dental practices. As an example, um, there's no diff— there's no differentiating between the advertising company. The advertising itself will be different.

So there is an important thing that you have to keep in mind though. You've got to keep data separate.

Okay.

Because you don't, you don't want to mix your data from one business to another. Each business must perform on its own. The data structure should be the same so that when the VC and the PE, when you carve it out and you pass it on, they know what they're getting. They're getting this data structure. Yeah.

Yeah. It's like a branch office, right? You need, you need to have a branch office in one town, That's different than a branch office in another town to differentiate them. So you know the profitability of each of those offices.

That's right. And just from a branding perspective, I don't know that we fully covered that, but I'm just looking at the logo on the back there, the Exit Engine Podcast, and I'm thinking of just putting down a little bit on the bottom and M&A profits or business.

Yeah, right.

So I don't have to, I don't have to change your branding because your branding is great. All I have to do is, and I don't want to, I know you've spent years building this brand and getting it right and you've put your heart and soul in. I don't want to take that away. So all I'm gonna do is just bottom right corner down there, I'm gonna put an M&A Profits business or a member of the M&A Profits group.

Right. Or powered by advisors, which is why we'd have it on our Right, exactly.

Yeah, yeah, exactly. So I don't have to change your brand. I don't have to take anything away from you. You are not losing your business.

And your sale, like, so in this example, I'm gonna take this example a little further. Are the dentists, the owners of those practices, are they becoming employees of the new company? Or if you just talk a little bit about how that would work in the scenario that you laid out.

Sure. Nothing is simple in this world. There are always variations.

Sure.

So it depends on who you're talking to. Some people, they might want to sell 100% of their business. They're ready to go now and they just want out. So they might want to sell 100%, in which case they could very well become employees or they could become consultants, the founders. For even for a period of time. So there's a little variation on it. They, if they become, say, 70%, they will become a part of the group. Employees, no, but a part of the group, yes.

Okay.

Now that's for that first stage. As they move through to the next sale, I'm not within control of that. I can't control that. That depends on how the PE and the VC want to operate. There will be new negotiations there.

Understood.

What about— but to back it up a second, when you talk about I'm retaining equity, okay, so at some level, right, unless I'm exiting, to your point, I'm done with this, I want out, hire me as a dentist. on at the thing, and I'll work whatever for whatever they make, you know, a year to do that, right? Or I'll be a consultant to you to help you, right? But I am also getting a seat at the table, right? If, if I retain my equity that way, I'm also getting a seat at the table, at the larger table. Is that true in terms of being able to say, hey, look, here, input, or at least advice or whatever, advise kind of like on a On a board of directors type situation? Does that— is that the kind of thing that happens too?

Is that what you'd like, Joe? Would you like, like a seat at the table?

I think that's what I'm asking for. Yes, I would like to sit at the table and be able to say operationally, you know, I have a lot to, to— I have a lot to give in the dental practice space. I think I can— I've been doing it a long time, and I think I can contribute to the success of the, the larger organization.

I'm so happy to hear that, Jo, because we are always looking for quality people and people that can continue to contribute to that. So I'm really pleased that you want to do that, Jo. However, John, you just, you just want to do your day's work and go home, don't you?

I do.

And I'm so grateful for that, John. I really am, because we need people just to run and do the work. And that is fantastic. Yeah. So we can go either way here. This is not a dictatorship. This is not a, here, I'm the big brother and I'm gonna come in and we're gonna be doing this, this, and this.

I love that flexibility. I love that flexibility and the ability to, because, because again, every, so many things in business are not Black and white, and the ability to be flexible and to talk to individual business owners who can be idiosyncratic and can be you know stubborn and want the things that they want. The ability to be flexible in that way is just is great.

Don't get me wrong, John. I'm not being ingenuine there. I am totally serious about Joe.

Yeah.

If Joe feels that he has more to contribute, then. As this organization grows, there are new opportunities arising.

Sure.

And we really do need people to step up. And if Jo wants to step up and be part of that, there's a relief for me. I don't have to go and find someone.

I think it's mutually beneficial. Right. And I think that's what we're, you know, we're in business here. We talk, you know, we talk about, you know, synergy, right? And all these buzzwords and, and collaboration and partnership and blah, blah, blah, right? All this stuff. And a lot of these things are just like buzzwords. What one of the things that we, John and I found that was really important, and Craig, I think this is why you and I kind of hit it off, was that, was this, we are looking at these people like what they are, which is people, humans, like human beings, right? Who all are, are right. This isn't about a business, about numbers, about dollar signs. It can't be all about that. It's got to be about, again, and especially in the situation with what we're talking about here with this roll-up strategy that kind of keeps going, right, and keeps going to the bigger fish, right? The ability to be able to drive that, right, from, from with an experienced person on the team or a bunch of experienced people on the team, right, just keeps making that business better and better and better. And then the ability for those— that person, me, or John, whoever's in that cycle, to be able to exit at the next one or the next one or the next one. There's always an off-ramp, right? We're talking about—

Yeah.

We're an exit engine, right? I mean, that's what we're, we're looking for, where that place is. How do I get, you know, what's gonna— and what I also love about you is that you're saying, look, you get to, you, to some degree, okay, if you've got a, if you've got a healthy, valuable, saleable business, You get to dictate some of the terms for yourself. That's got to be the whole point of doing this, right?

It is. But I want to go back to you wanting to contribute more, John. Yeah, I gather if you're that sort of a personality, you've built a good team around you as well, right? A bit of a pat on the back there for you, John. And you might want to take some of that team with you because they've obviously got a good mindset as well. So your office manager, as an example, your office manager might want to step up as well and be a group training officer or something like that.

Right.

So there are other opportunities there for your staff.

And we talk about that when we talk about mergers and acquisitions and being acquired. So many people get concerned when they talk about an acquisition and we Our opinion, when you're talking to your employees, especially if it's a privately traded, privately held company, you don't have to worry about disclosure, is let the people know about those opportunities within the bigger company, right? When you're at a small office, you only can be the branch manager or the office manager. When you're part of a larger organization, Craig, to your point, they can become a training manager or the HR person or a bigger, another role in a bigger entity when there's gonna be more things to do in a bigger entity. So it's a big selling pitch to the employees of your company when you're selling as well.

Yeah, I wouldn't want to force being an HR manager on anyone though, so we'll skip that.

Fair point, fair point.

When it comes down to, you know, the actual execution of this stuff, talk to me about the— we talked about in general that, you know, it's accounting, right? It's CRM, stuff, right? It could be, right, anything that had to do with customer management, right? Obviously, when you're talking about a medical practice, you've got a lot— there's a lot of software and things like that that help, you know, efficiencies and stuff like that. What is the way in which you cut? Because at the beginning of these things, Craig, you are the one kind of guiding this, right? So, in other words, you are the one who is taking, you know, Company X, Company Y, Company A, Company D, right? And And picking them off the street, so to speak, and kind of putting them together, right? What is the way— how do you start that process? And kind of what is the— what are the things that you're using as criteria to judge what's a good one versus maybe not a great one or whatever?

I'm gonna start with your last sentence, actually. Good ones and bad ones. Yes, there are good businesses, there are bad businesses out there. Now, what you don't want— you don't want to be taking on a bad business. The reason for that is a bad business is a bad business. It's going to drag you down. It's going to— time is our most valuable thing here. You notice that I've been talking 3 to 5 years in this conversation. We don't want to be stretching that out 7, 8, 9 years to bring a business back together. So you buy the business or you work with the businesses that have the numbers that fit your buy box, that fit your avatar, whatever the word that you want to use.

Right.

If they don't, well, I'm sorry, they're just not suitable. You do not want to be forcing them into your business. It will corrupt and spoil the rest of the group. Okay, so we've got the bad ones, then you've got the ones that do fit. Excellent. Now, what are the numbers there? That depends on you as well. Now, Adam Coffey has a 30-20-10 rule, which is quite impressive. Adam Coffey is an M&A specialist who's done billions in exits. Yeah, he's quite amazing. And here's the 30-20-10 rule, but let's leave that. That's a whole bigger discussion. Let's go back to the bad ones as well because we know that 80% of businesses don't sell. They don't sell because they don't have the right numbers. They're not attractive. They're, to use the term, your baby is ugly. You've got to take that and make it more attractive to the buyers, make it more attractive to the market. That requires a better business person. The reason it is there is because of the business person that's in charge of that business. And that may be— and I'm sick of dentists. Let's move on to HVACs. They're really popular, by the way. HVAC business.

Oh, it's here too.

Yep. Yep.

Yeah.

Let's let's move our analogy onto HVACs for a fraction of time. So the owner of that was probably a plumber, probably an electrician. He didn't go off to uni and become an MBA and all this and get these business qualifications. His belly is very light. He she done their very best. Hacia is Atherton is going to hate me if I say. Just he, H.C. Ratherton, is an exceptional HVAC M&A person here in Australia. So I've just got to be aware of that.

Of course.

So they're not a business person. Therefore, they've done the very best they can. What— so what do they normally do? They normally go out and they get a consultant. Well, the consultant doesn't have skin in the game.

Right.

That's the issue. They're an employee. They're paid to do this stuff, but they don't have heart and skin in the game.

Right.

So the numbers still probably aren't the best and they don't have the exposure to many other HVAC organizations. They haven't got their buy box sorted out. So what we need to do is we need to take that business And this is not a charity. It's pay for play, I'm afraid. Right. So let's put them into a factory which gets their numbers right. And that factory will be looking at the accounting, the HR, the payroll, the IT, the legal, purchasing, property, all that sort of stuff. And we will work with them get their numbers right so that they do look good. They— a lot of these HVAC companies, they might have their personal car on the company books.

Of course.

They might have their phone, their wife's phone on the company books.

Sure.

And they might even have had their trip, their last holiday on the company books as an exploratory or educational That's not good. That's making their numbers look bad. You can have a business that is tuned for tax or you can have a business that is tuned to sell.

2 different things.

2 different things. And if you make the choice on the tuned for tax, it's gonna take you a couple of years to get it right, to tune it for sale.

Right.

Yep. Sorry.

You got to go through those. You have to go through those cycles, right? I mean, that's the thing. It takes—

there's time.

It's just, you can't, you can't, you know, Rome wasn't built in a day. You can't, you can't engineer these things. You have to go through months and months and months of process change or whatever you're doing, right, to be able to actually see the numbers move in any kind of material way or whatever. Or, or a lot of what we do too is, and what we've found Is a big deal for people. You know, we were kind of surprised by it. Is that? But to your point, most people are most. I don't know how we can qualify it. I think that many people are not business who are in business are not business people. They are people with a passion, right? People with a skill. People fall into businesses backwards every day, right? Sometimes they've gotten good at it because they've got help. You got a good accountant, you got somebody who's watched over you. My dad always told me to do X, Y, and Z with money, whatever it is. And so maybe you've done those things relatively well. When you get into a point where you get to this other level, right, where you say, like you said, you're tuned for tax or you're tuned for sale, they're not the same thing. Your ability to be able to grow, though, change those numbers or change the profitability to make it healthy is a Relative, most of the time, is a long-term process. However, there are things, right, that good accountants know that when they walk into a company, they can look and go, if you just recharacterize this stuff or move this over here, your EBITDA just went up 20%, right? Or as an example, or stuff like that. So being able to have experts come in no matter where you are and look at this stuff, right, at a point like this, is incredibly valuable and important, even if you decide you don't go to the sale.

You're right. Let me help you out there. You were hesitating to say most people go into business. Let's just say virtually everyone. Okay, let's just cover up that one.

Yes, you're right. It's true. Yes.

Now let's talk about that EBITDA side of things. We've just— I don't mean to turn this from a greenfield presentation into a specific one, but we've just been through COVID.

Right. We—

you guys have just changed the world by changing presidents. So yeah, okay, I'm Australian. Again, I hope this isn't too politically incorrect, but that's just scary in itself, and the repercussions are Spreading across the world. Yes.

Chaos and uncertainty are not good for business, right?

That's right. When was the last— and prices have gone up. I was recently over in the US and I was horrified at how expensive everything was, whereas I was there 5 years ago just before COVID and things were damn cheap. Now it's just so expensive and they're gonna get more expensive for you guys. Right. But when was the last time people put their prices up?

Yeah, right, exactly. That's what we said the other day.

Yeah, they've been absorbing it, absorbing it, absorbing it, but they haven't been putting their prices up. I was on a session with— I mentioned Adam Coffey earlier. I was on a session with him a few weeks back and he asked me that same question. I love the computer industry these days. So what do you do? I just hopped on straight away, put all my prices up 25% straight away. How would that affect my EBITDA? Right. Yeah. Now let me ask you about this HVAC business. Now, if I go and give a quote to this developer, And I add an extra dollar onto that quote. Am I going to lose the business?

No.

Okay. If I add $5 on, am I going to lose the business? This is a $15,000 quote. No. Am I going to lose the business?

No.

Why don't I add $100 on and be done with it? Hey, how does that affect my EBITDA now that I've done that? For all of my products.

Times 4 or 5 or 6, right? Or whatever. That's what people don't realize.

Yeah. So are you going to lose the business if you put your prices up? That is exactly what you're talking about. Someone walking in the door and looking at it and saying, okay, how can I change these numbers straight away? Well, there is a quick way of changing the numbers straight off the bat. Put your prices up. Everybody else is doing it.

That's it. Why not? Exactly. Why not you? And then things like, you know, one of the big things that we see too is customer concentration, right? And not only the concentration, but the profitability by customer, right? So we've got a tool where you can basically categorize all your customer stuff. all your customers and your product stuff, and you're going to categorize them into 4, you know, into a quadrant, right? Based on the 80/20 rule, right? 20% of your customers generate 80% of your business. It's almost exactly true in almost every single case.

And it's actually even more concentrated than that. And one of the things that they suggest doing with that quadrant that is, you're not making any money on is exactly what you just said, Craig, is Let's raise these prices because either you have one of two outcomes in that scenario. Either the bad customer and the unprofitable customer starts paying you more money, good outcome, or they leave and go with somebody else, another good outcome, because you're not making money on them anyways.

Exactly right.

Right.

And in fact, in fact, not having these people, customers, directly contributes to your raise in your profitability.

So let's go into that 80% that you said, 80% of your revenue is made by 20% of your business.

Yes.

Let's go back to that. Let's drill further down into that 20% of the customers. Would it be fair to say that 80% of that income is being produced by 5% of your customers?

20, another 20%, you mean? Basically, basically it, right, right. Yeah. Yeah. I mean, I, it's probably pretty accurate. Yes.

That is not where you want to be.

Right.

If you see that, you know, you've got danger.

That's exactly right.

Yep.

It's the concentration is too great and you can't, I mean, look, sometimes it's top line. I, I, I had a, I sold a company, okay, that where the customer concentration was No one had ever sold a company with a concentration that was this bad, right? We we got away with it, and the reason that we did was because the customers we had were big. They were big names, okay? And so, even though my digital agency marketing agency was at was at basically at like ninety percent customer concentration, that two of our clients were contributing ninety percent of our revenue. If Caldwell Banker got a cold. Or sneezed, Kinesis got the cold, right? So we were in a situation where— now, the reason we got away with it was because it was the 2 big clients we had were Coldwell Banker Real Estate Corporation, the international, the global brand, and Comcast, right? One of the largest cable companies, and now, you know, a major media conglomerate and the whole thing, right? So getting access to those 2 clients was one of the big things that the people that were buying us wanted to have, right? That was a very unique situation. Most people—

You deserve to be sold.

Totally, right?

Uh, you didn't deserve to be in business. You needed to be purchased.

We were—

that was exactly— yeah, you say it like that. That's exactly what we thought. That's exactly right. It was like, we don't deserve to have this company anymore. We need to be able to have— because we've gotten away with it, you know what I mean? It was just because we had hidden it, timing, all kinds of stuff. But at the end of the day, I think what's important for our listeners and the whole thing to think about here is there are things that you, you don't know what you don't know, right? Like, in other words, the— there are things in your business under the waterline that you are not going to be aware of that directly relate to how well you can sell this business, what the valuation can be, and what your options are. Because as John and I always talk about, it's about having options at this level, right? Give the— you mean I can decide if I want to keep my names on the— my company name on the HVAC trucks? Yes.

If— Yes.

If I have a healthy, sustainable, viable, you know, sellable business.

Right?

So do these other things. Make the investment in your back office and in getting someone to do that stuff with you or whatever, or joining it, you know, coming, bringing it together with another, you know, group of people or whatever, because that's only going to make you more valuable, right? It's, it's just the, the abilities that most people just don't realize. They're so head down doing what they have to do every day to get the next dollar in that they have forgot that, that they've missed the big picture. Has that been in your experience?

Absolutely. And with those trucks as an example, if you go into someone and you say, oh, I'm gonna come in here and I'm gonna buy your business and I'm gonna change the name, they're gonna say, don't forget to shut the door on your way out the door because that is something personal. It's their grandfather's name and he started the business Blah blah blah, whatever, and it's passionate to them. So as you said with the trucks just there, you don't have to change the name. You can just put a M&A Profits Group logo down the bottom, member of the M&A Profits Group down the bottom. Now when they start seeing Joe Blow, Harry, Fred, and they've all got these an M&A Profits Group member down the bottom and they see all these different trucks lying around or driving around the place, they're probably going to come to you and say, I think it's time to change the name. I don't think I need to have my name on the truck at this stage. It's the same old story. You can't tell anybody anything. Right, right. They won't believe it.

They got to see it themselves.

They do always believe what's in their own head and what comes out their own mouth.

Right. And what we like to say is we let— we sometimes let other people have our way. And, and the our way is, in that example, is let them come to the conclusion that we've had all along, and then they can say it and it can be their idea.

That's right.

Exactly right. But it's funny how we get into these situations where, you know, again, I think we come across people that are either, you know, kind of like 3 categories. The people, I know every single thing there is to know and you can't tell me anything about this at all, right? That's the first group. The second group is, I know absolutely nothing about any of this. Please, oh my God, please help me. And by the way, I can't even, I can't even believe I still have a business, right? That's the second group. And then the third group is like somewhere in the middle, which is like most people.

Totally.

It's like, I understand that, I understand what business is, and I understand basic things about how I run a business and those things that happen. And I've got a really good accounting staff, and I've got, you know, some salesperson, and I've got, you know, some help right around me that's there, that's with me every day, right? The ability for people then therefore to stop and step back and go, wait, there's more? Right. See, I think there's a myopia. Like, when you, when you run a business, you, you start to look like this. And what we always talk about is that one of the big things you got to change is you're changing— you have to, you have to change into an exit mindset, right? Which is what we call— you got to manage the business from this other level, right? Is that what you guys— is that what you preach?

People grow, they can only do what they are aware of, what they know.

Right.

So they can grow a $100,000 business just by sheer work. They can work hard and they can produce a $100,000 business. They can then stretch it to a million-dollar business because like you, they've got a Joe, they've got a good office manager and they've surrounded themselves by good staff, and that could stretch it to $1 million. But then it's at each of those levels, and the $10 million and the $100 million, you've got to have a change of mindset. And frankly, the person doing the job now isn't going to get to that mindset.

Right.

They're just not. They're not gonna get to the mindset where they can stretch to the next level. That's right. So they're better to sell and accept that. Joe knows exactly.

Yeah, Joe knows exactly what I'm gonna say. What got you here will not get you there. And it's a famous, it's a famous quote from Marshall Goldsmith. And I come back to it. I've used it for the last 20 years and it's so true. And it goes back to what Joe was saying is at a certain point you're the CEO and you're selling the product and service. to your customers. And then at another point, you're running the business and you're supervising the people selling the stuff. And then at a third point, at that $10 million in sales, you're the one that should be looking at your product, your company as a product to sell, right? You can't be involved in the day-to-day meetings and you shouldn't be. You should be looking at your company that you're selling as the thing that you're selling, not the underlying service that your business does.

Correct. So, John, what's stopping people from getting to that stage?

I think a lot of it is sort of getting out of their own way and knowing their limitations, right? So that—

Ego.

Yeah, ego and feeling comfort, right? It's like when you're shooting baskets with your right hand, like I'm a righty and I play basketball with my right hand. I'm very comfortable shooting free throws right-handed. So I'm very comfortable. And what that means is I'm very comfortable selling the service at my business or running the restaurant. When I switch to my left hand, that becomes thinking about the business from a different perspective, is geographic expansion and things that I don't want to focus on. So people tend to focus on the things that they feel comfortable doing, and most people don't feel comfortable about going out and marketing their business for sale.

You don't even have to market your business for sale. You have to market your business and that's it really. You have to be, because I think we've learned today, it's, there's different alternatives to sale. You don't have to sell.

Very true.

You can be a part of the future, but you're not gonna be in that top role as part of the future. You've gotta find something that you can fit in. Place that is comfortable for you, that you can use your right hand for.

But you just— you just— but you nailed it with the ego, right? I mean, that's exactly what the problem is. The problem is that for me to not be the top dog, to not feel like the boss or whatever, to not be thinking I'm losing control, I'm losing— you know, I'm not gonna— I don't know where this is gonna go. So some people are just control freaks, right? And they need to have, you know, uh, you know, tacit control over everything. You've got— I used to be one of those people, which is why I know. And the ability for me to actually, honestly, I know it's funny, but I mean, the reality is that I'm only here today because of my ability. I learned my ability to be able to learn how to give things up, right? To give up control. But the point is, is that you're right. I mean, I think that there's an ego here and it's the ego death that we have to create, right? So in a way, it's like we have to get people to just to see that, look, it's okay. First of all, you have options and you don't even know what the first 4 options are, let alone, right, like the 6 other ones.

And that's the point that's so important, Craig, is like what you just said is you do have options. It's not all or nothing. It's not sell your business and be gone and be away from it. It's you can sell your business, Take a different role. If you want to take a step back, if you've been doing this for 25 years, if your fingers have been in mouths for 25 years, maybe you don't want to do that anymore. Or if you've been on HVAC appointments for doing the same thing for 25 years, you can take a different role and be a consultant or be a part-time employee or whatever it happens to be. There are so many options to sell your business and still be part of that next entity.

And still affect stuff, right? And still be in a major kind of like way affecting The stuff based— but again, people don't know. They don't— they're not good at self-assessing. Okay, that's the first thing, right? So they're not great at recognizing their own, uh, their own weaknesses. Okay, um, we, we know that also there's a very—

this—

we have seen a very distinct, um, line at gender. Okay, so in other words, Men are far more egoic and therefore potentially much harder to kind of like, they're harder nuts to crack in terms of their ability to be able to kind of accept help, right? Women, on the other hand, are used to, have been, you know, have modeled growing up asking for help and doing that stuff. And so they're much more comfortable asking for things and admitting that they don't know something.

Right?

For men, it becomes something that's like, it's a, it's an, it's, it's, it, it's a reinforcement of the ego itself. It's like, if I'm, if I'm not the boss of this thing, then who am I?

Right? And an example that I like to use— sorry, go, John.

No, go ahead, Craig. Sorry, go ahead.

An example I like to use is with this roll-up concept. Do you know a guy called Jeff Bezos? Yes. Just happens to be Amazon. Now he only owns 12% of Amazon, right? Because he's built and built and rolled up and rolled up and his percentage has diluted, right? Doesn't— just because your percentage has diluted, he's been able to find a role with each of the roll-ups that he's done. His role just happens to on top, but he's been able to find a role and he's moved with every roll-up. He's moved into a new position.

That's true.

So you can find a position, you can find a role as this moves forward.

One of the things that we found was really helpful too is that we try to also, is trying to get founders into, out of the CEO, what they were, the head of, you know, the CEO role, whatever they're calling themselves. and into a board, like a, like board of, like a, the, you know, the chairman of the board, right? And to be able to get them— have lots of times what we're doing is that we're establishing a board for the first time. So what doing this does, a couple of things. The first is that it gets the owner, the founder out of the way in terms of the day-to-day operations, right? The idea is to say, look, step back. We're going to— you're not going to be a CEO. You're now going to be chairman of the board of directors. Okay, and you're going to create— actually create a board of directors. And the reason you're going to— or you can call it a board of directors, you can go to an advisory board. In America, we can, you know, with an LLC, whatever, you don't have to have those official things, but you can have these people in place that help you guide the business, right? And because in order to guide the business from $1 million to $5 million to $10 million to $100 million, you're going to need more and more of these people to help you.

Right?

Being able to, being able to recognize in yourself the fact that I can look, I can still be in charge. I can still be the top guy, right? We're, but we're gonna change what I do every day, right? From being the chief muckety-muck customer guy to being an, the, the, you know, to being the chairman of the board who still gets to go talk to customers.

Right?

You can still do that. But what we don't want anymore is we don't want you being the one who signs the deal with everybody. Because if you're that, how are you gonna do that when you're— when you eventually sell and things like that, right? So, um, but anyway, that is— that, that's one of the things that we're seeing is actually being very effective because people like the sound of being chairman of the board, right?

But that only worked for you, Joe. That didn't work for John. Because John was happy doing—

Right. John wanted to be—

His profession.

Right.

And he loved that. But you, you had just a little bit more ambition and you wanted more. So that works for you.

Right.

You can only have one chairman of the board.

Right.

But I did want to mention something else about today's world and what we're doing right here, right now, is we're on a video conference. And we're across oceans here, right? These days we have an amazing thing called fractional employees, fractional CFOs, fractional CEOs, people that you can cherry-pick from around the world that can bring a different perspective to your business, a different view to your business that you never would have had. And you don't have to pay them full time. You just pay them for doing the job that they're doing for the time that they're doing it. Right. That is a useful tool that we've never had access to before, but we do now. Start using it.

Let me ask you a question, Craig. What's the— when you're talking to entrepreneurs about acquiring their business or becoming part of your business, to be more specific, is What's the biggest challenge or biggest thing you have to overcome? And I don't want to use the word convince, but to let them know that there's all sorts of options for them in the new paradigm. So what is that one or two things that typically comes up in those conversations?

I don't think you're going to like my answer. The biggest one is, I want to sell now. Right. Well, roll-ups are not about selling now. It's about planning and for the future, doing the groundwork now and doing future. So this is the answer that I'm gonna give you, John. I don't want to sell now. So I've got one that does want to sell now and I've got another one that doesn't want to sell now. Therefore, they're not in the right mindset.

Right.

They haven't even thought of their exit strategy yet. They're just not there yet. So how do you— the task is to take someone that might have only bought the business 5 years ago and they haven't thought of exiting. They're in their early 40s. They've finally got their own business. Right.

They think that's the top.

Right. They do. So it's, you guys are the answer to my biggest problem, and that is exit. They've got to get it in their head. That's the biggest problem is exit. They're not thinking about exit. They're just thinking about paying it off. They're thinking about how are they going to pay next month's bill? How? Sure. I've only just bought this thing.

Yeah.

So The— there's 2 solutions to this. One is you guys, the Exit Engine, and that is where you can change their mindset, put a plan in place for them to exit, and feel free just to deliver them on a platter for me as well, by the way. So I'll give you my details.

Yes.

The second one is to grow the Founder, the owner of the business. And that isn't going to happen today. It's not gonna happen tomorrow. It's gonna happen over 6 months, 12 months. It's stay in contact, be there for them, let them know what's happening. Right. Yeah. Yeah.

No, that's—

Does that answer your question, John?

No. Yeah, it does because, well, it comes up in our industry, in our business too. It's, You know, we have people that, we have clients of ours that want to sell in, they only want to sell in 5 years. And then we have people come to us and say, we want to sell in 5 minutes. And the one in 5 years, great, we can do that. The one in 5 minutes, well, the price that we could sell your business for in 5 minutes isn't going to be something you'd want to take. And they quickly, you know, they quickly change their mind and they tend to listen to us to say, well, if we do this over the course of the next 6 months and that over the course of the next year, And this, by diversifying our supplier base, it's all part of the, in service of selling the business in 1 year after you've done these 3 discrete things.

And it's funny because, so the exit engine, and again, shameless self-promotion alert, but the exit engine process is timeline-based, right? So it's based on 2 major factors. One is what's your What is your, what we call a total exit value score right now? Your initial one, right? Most people end up in like about— most people at the beginning are about a 30, 35. That's— we rarely see people that are above 35 to begin. You need an 80 if you really think you're gonna sell this thing. Okay? And that's just a, again, it's just a metric that helps you judge this over time, right? And what we're saying, it's not your valuation per se, the value of your company, but is your sellability.

Yes.

And the ability to be able to say, okay, I fixed these things. I am a healthy, profitable company that should be sold to somebody. But the thing about what we haven't discussed yet, and we should, is when you build this business or when you are doing the work of exit planning, meaning that you are building the business to a place where it is the most healthy, the most stable, the most sellable that it can be. Okay, when you do that, you create options of buyers, right? Because one of the options— only one of the options is now at this point is a roll-up, right? And your roll-up— and the roll-up isn't right for everybody. That's the other thing we haven't said today, right?

Really, it is. Really, really, it is.

It is self-promotion. Gotcha. So anybody can do a roll-up on anything. What we know is that there are certain kinds of businesses that are going to be better at that than others, right? That doesn't mean you're not a strategic buyer target. Okay. But again, getting into the roll-up and the roll-up and the roll-up and getting into, you know, where I get the, the, you know, piece of the next one, a piece of the next one or whatever is a, you know, is again, isn't, doesn't work for everyone because it's a bet. It's a matter of what kind of company you are and things like that. That's obviously a factor. But that said, I think that the big picture thing here is to know that you do this process, whether you're going to work with Craig because you think there's a roll-up strategy, or do this process because you think you're going to work with Joe and John because you think that there's a long-term viable exit to a strategic buyer or a private equity firm down the road or whatever. It's the same process. Right? We're doing the same work.

It is.

It's all the same. All you want is options at the end, right? And you build—

Joe and John might say at the end, when you get to— when those numbers are right, Joe and John might say, hey, I'm going to call Craig because I know Craig's interested in this right now, and he might be the best, the best option for you. We've got you in a position Right. That you are attractive now, but your baby is ugly.

Yes. Ugly.

Right.

And Craig, yeah, well, I just want to ask, you know, what are other things that you've learned in your rolling up companies or things we haven't talked about yet today that you want to impart to the listeners about roll-ups that are either really important or something we haven't covered in enough depth during today.

Oh, thank you, John. Jo just said— used a word there a few moments ago, options.

Right.

Nothing is simple. There are options out there, and an option might be the way to go. So on this ugly baby, you might say, okay, I do want that. I might put a bit of work into that. I'll throw it into the factory, get the numbers right. But what I might do is I might sign up an option with that founder, that business owner and say, okay, if over the next 4 or 5 years you get your numbers right, I would like the option to take you on board.

Great.

Now that's good for them. They get a little money in their pocket right now, hip pocket right now because I'm taking the risk. So I'll throw some money in the hip pocket, but I've then got them in the factory. I've got a little bit more control over how the business is being run to get their numbers right. And then I know I've got this one coming through and he'll be ready when I need him.

I like it.

Right.

I like it.

So there's another strategy. None of this is simple. There are, no pun intended, options out there. There are many ways to do this. So if you, you asked about what are the biggest problems, the biggest problems, John, is that the people out there are unaware of the different options, the different ways of getting things done here. They think, oh, I've got to sell, I've got to lose control. Well, no, there are a whole variety of ways. Joe wanted to become the CEO. John wanted to become the person with the drills in his hand. There's a place out there. There is a way of doing it for everyone. So let's just start thinking about the exit engine right now. What is your method? What is your number, your exit number right now? And how do we improve that exit number? Right.

That's an excellent point. It's a great, great place to end. Craig, this has been great. Really, really great. You're a great guest.

You are.

You're an incredibly knowledgeable person. And it's not just because you like us. It's— you are honestly—

Is that a requirement?

No, you didn't even know it was a requirement, did you? But no, and in all seriousness, honestly, it was a great discussion today. Really appreciate you coming on the podcast, and hopefully we can do this again at some point because you've got a lot of information to impart here. Your positivity, your entire attitude, I think, is really great for our audience to hear because, you know, we do know that in America, and I think I'm sure it's probably true in much of the rest of the world when it comes to business, that We are concerned, like we, we do, we are control freaks, right, of our own businesses. We are, we all are to some degree, right?

Yeah.

We are concerned about making— mostly we're concerned about making mistakes, right? And so, and because you hear horror stories, you hear the good stories, my buddy sold his company for $40 million and whatever, and now he's got a yacht, right? That's great. But you hear just as many of things where things got taken advantage of or people didn't pan out or I hired a guy and he didn't do it right, you know, whatever, right? And so the ability to be able to have conversations with people like Craig, have a conversation with Joe or John, have a conversation with any of the number of people who do this out in the world, and there's thousands of them, okay? But have the conversation, ask questions. What's my situation like? What can I do differently? What would you recommend in this case? Because the thing is, Craig, just like you, we are very, very open to talking with anybody who wants to talk about this stuff, right? Because this is the way that we're going to change hearts and minds, right, Craig? I mean, because that's really what this is. It's an idea that what we're trying to do here is make sure people are aware that they can do more with their business than what they are currently doing. And it— and with— there's— there's, like you said, there's an option for almost everybody out there. And we've just talked about today about roll-ups. We've talked about selling the company, selling equity and things like that. You know, a lot of what exiting is too is also things like passing, you know, succession, passing it on to your, you know, to your— to your oldest child, right? Uh, passing it on to your—

Well, doesn't it? Right.

Exactly. And then not everything is, you know, everything is fraught with its own, you know, issues and foibles. But at the end of the day, there are options. And if people will just pick up the phone and have a conversation, they'd get a lot— they'd have a lot more idea about what those options are.

Can I just say one last thing, please?

Please.

Get yourself a damn coach. Get on the line to the exit engine. Uh, Jo and John, get yourself a coach. You can't do this by yourself because you are where you are because of what you know and what you've done in the past. These guys know what they're doing. Just get on the line and get an appointment and get yourself a coach. This is not going to be a quick thing. It's going to be something that takes time. And you need to be on board.

That's fantastic. Great, great. We will leave it there. Craig Keegan from M&A Profits, thank you so much again for joining us today. I really appreciate it. Um, uh, you can, uh, Craig, real quick, give us a— give us the rundown of where people can, can, uh, can find you.

Uh, the guys will have this all at the end of this, I'm sure, but mnaprofits.com is a good start. And look me up on LinkedIn. I'm really good on LinkedIn. If you look me up on Instagram, you'll be most disappointed. So go to LinkedIn, everybody, please. That's good. All right.

So we'll say LinkedIn is the one if you want the good view of Craig, you see LinkedIn. If you want to see, you know, Craig's exposed, you know, exposure or whatever, then Instagram is the place to go. But let's not, let's leave it there for right now.

I've sent my first Instagram message, and I don't know if it got through because I don't know if, one, whether I sent it, and two, whether the person responded because I don't know how to read it.

That's so funny. The, the, uh, yeah, look, there, there are— there, everybody is good at something, and then we all have our, you know, the things that we are, and knowing that is half the battle, right? That's important. Craig, again, thank you so much for joining us today. John, great session today. Thank you so much again for all this. It was great to have Craig on. It was awesome to see you as well, and we will catch up with you very soon. Thank you everybody for being here today. Remember to follow us on LinkedIn, okay? We can be found at LinkedIn, ExitEngine, @ExitEngine. You can find us on YouTube. You can find us on Twitter. You can find us on Instagram. You can find us on TikTok as of a couple of days ago. We're now, we've, we're now do, we're now there on TikTok. We have got the whole thing covered. We are there. We're accessible. Listen to the podcast, subscribe and like. And please, please, please, if there is a business owner that you love, you will share this podcast with them. And you will share if you are in Australia, or you will share Craig's Uh, you know, info with them as well. Please let them talk to somebody. Tell them how important this is. They can be, they can be more than what they're doing now.

There are options.

Thanks everybody for joining us.

That's right.

Have a great one.