How to Build a Sellable Business (Wealth, Freedom, and Exit Planning)

Hey everybody, welcome back to the High Voltage Business Builders podcast. Um, you may not know this, but this is the first recording of 2025. So for those of you who are into the new year, welcome. Um, hopefully you'll have many happy returns this year. I'm super excited and bullish myself, and hopefully the guest we have today feels the same way. Joe, um, and from Chicago, hopefully you're doing great today, sir.

Doing very well, yes, thank you. Happy New Year.

So you are in the investment space, you're in the business space, you're talking talking to people about being their own CFO, if I'm not mistaken. Can you enlighten me on some of that?

Yeah, so I run Arlington Wealth Management. I'm the founder of that company, 25 years now. And we work with business owners on coordinating their personal wealth planning with the business strategy to make sure that, you know, it's all moving in the right direction and it works for the business owner. And what they want to achieve in life.

Yeah, I think it's good to have this conversation because so many people in the business world, they focus very tactically on things in terms of what it is to make money or what it is to generate the services or deliver the results. And many times they simply don't focus on the business fundamentals. Is that similar in your experience?

Very much so. You know, most, most business owners are, you know, head down and really focused on the day-to-day and running the business and You know, we try to have them look at the business on a high level and, and, you know, understand that there's a lot more to it than just where they're going to make their next sale and, and, and what's going to happen this week, this month.

So are you working predominantly with people who are new to the business growth or already in the wealth management, wealth preservation side of the house, or where do you kind of focus in on?

Yeah, most of our clients have been running a business, in some cases for decades. Right. And they're, you know, they're, they're getting more towards the end of their career. And, you know, we try to get them to think about not just running the business, but understanding the value of their business and how to improve that value and how it works for their, their personal freedom. That ultimately, that's why most of our clients started their own businesses. They value freedom above everything else. And, you know, they want freedom outside of just running a business as well in their personal life.

What are some of the commonalities that those people end up facing? So, if somebody's on here and they're listening and they're maybe a few years into their business, maybe 3, 5 years into their business and they're listening, that's probably closer to where you're going to help those people individually. It doesn't sound like you help a lot of people right at the very beginning. It sounds like you help them within. So, I'm just kind of defining the scope of the person that's most appropriate for this conversation.

Yeah.

What are a couple of things you see consistently across the board that somebody should know if they're, if they're that person listening to this?

Well, I think that in a lot of cases, you really have to look at the business from the eyes of outside of the business owner. The business owners tend to look at certain metrics in their business that aren't necessarily what somebody on the outside would look at. So if you're thinking about eventually transitioning, whether it's an inside transition to employees or management or it's outside where you're going to sell to a third party or to private equity or something like that, you have to really look at the business, how they would look at it and improve the metrics that are important to the buyers.

Yeah. So if you're in the mode of the idea or concept you're saying of selling the business, what we call building the end in mind or our Platinum Principle is how we define it by our, by our language. which is building the business with the intent of selling it, which sounds like you're very similar to that. And almost everybody wants to sell their business, though, don't they, in the end, even if they don't initially want to do it now?

Yeah. I mean, it's eventually it's going to transition, right? One way or another, you're going to transition out of the business. So even if you're earlier in your career, it makes sense to know how business value is, is, is, is calculated.

Yeah.

And, and focus on those metrics because that will oftentimes also improve Your income and the things that are important to you. It could also help you, you know, not the business not be as dependent on you as a lot of times it is for a founding business owner. And that's that's very important if you know you want to have a a good work-life balance. Those are the types of things that a buyer is going to look at. They don't they're not going to buy a business that's all about you. So. You know, a lot of times that goes hand in hand with what somebody wants with their personal life and also helps improve their business value.

Yeah. Yeah. We look at the same thing as a buyer of businesses. I mean, when we're going into LOIs and looking at the due diligence of the financial, the records, et cetera, you know, operational independence is one of the things we're looking at. How much does the business depend upon the individual operator running it? And in one case, we had a very cool company that was based on a social media presence that had built up into a blog and a channel and a product set. And as we got through the, you know, letter of intent, which is basically to determine whether or not we want to actually agree to buy the business, so much of it relied on the individual, so much of it relied on their personality, so much of it relied on the community and tribe they built, which is super cool. However, they just hadn't transitioned themselves out of the major role of the kind of influencer and lead person, if you will, that was required to make that business run. People were buying the individual and not the business. They weren't buying the brand.

Yeah, that's exactly right. And, you know, that intellectual property is all inside the business owner's head and therefore it's not transferable, right? And so, it's important.

You see that in a lot of smaller and home-based businesses and you see it in a lot of individual and service trade businesses too where the practitioner has kind of built up an HVAC or an electrical or some other kind of company and they named it after themselves. And then, they get to the point where they try to buy it and you go to buy it. And I had a guy come to me with his website and he's like, this really cool website, cool business, cool opportunity. And it was hisname.com. And I'm like, well, how am I going to like change this business out of yourname.com with all the SEO and other opportunities? And just as a buyer, it just didn't make any sense.

Yeah. And so that's why, you know, 3 to 5 years before, like an endgame for a business owner, really want to start thinking about those things. And maybe that's just a simple, you know, change the name to your initials or something else, right? Where it's not just Where a new buyer isn't going to, you know, feel like they're behind the 8-ball on that. Yeah.

So we're into 2025. Hopefully it was a good year. Was it a good year, 2024, for you?

2024 was a great year. Yeah.

What made it great?

Well, I think, you know, the economy was very strong in 2024. And, you know, when I look at the wealth of business owners in general, whether it's the wealth inside their business, I think it's improved. Valuations are up. You know, there's a lot of money that's going into private businesses. I think that's a good thing. And then outside of their business, the wealth that they have, whether it's financial or real estate, you know, everything was doing very well. And I think that that helped with the outlook from business owners and their confidence going into '25.

Feel it's changing much this year so far? Still feeling bullish?

I think going into the year, we have to be bullish. You know, I think that we're a little bit further along in the economy now. And, you know, at some point we're going to hit a little bit of a road bump, right? A speed bump. So when that comes, I think it's still a little too early to tell.

Yeah. Now, I know we can't talk about investment advice, but if you were to summarize something, where would you want people to focus on in maybe the first quarter? What would you want them to think about?

Yeah, I would think about really that's very difficult because it depends where you are, right, in your, in your life and your stage. Right. But, you know, if you've increased your wealth quite a bit over the last couple of years, as many people have, I think starting to think a little bit more about wealth preservation probably will make sense. That doesn't mean that you can't continue to build wealth, but also having kind of a dual approach and, you know, having a wealth preservation part of your strategy, whether it's investments, Or if it's within preserving the wealth in your private business, I think that that's going to be more important as we get further into this economic cycle.

Yeah, especially for business owners and really taking advantage of what, you know, legal loopholes they can legally to navigate some of that. I mean, there's only 76,000 pages of IRS tax codes I read earlier.

Right.

So, which, I mean, AI can help you disseminate some of that pretty quick, but I would definitely advise a good tax professional. Or even a tax accountant and attorney, which I think a lot of small business owners, as I find out, don't do so much outsourcing in that area. Are you finding that as well? I mean, they don't do as much specific focused financial management and they do too much of it on their own.

They either do too much of it on their own or they're, they're using what I would refer to as siloed advice where they may have a financial advisor but only deals with their finances. And they may have an accountant that only deals with their, you know, their taxes. Attorneys kind of are, you know, dealing inside the legal world. I think having a team, a proactive planning team where that crosses over these professional silos and can collaborate, bring synergies to business owners' wealth management and personal planning that improves their outcomes. Yeah. And the taxes are— taxes are a big part of that, right? So.

Well, sure. Yeah. Playing the game is, you know, dodging any issues, let's just say, and creating opportunities even if you don't know they exist. That's why you got to get good tax advice is always important, especially when it comes to wealth management. But, you know what, Joe, is this something that you fell into? Is this something that you grew up as a little boy saying you wanted to do, or is this something that came along the way? Like, how did you get into it?

Yeah, no, not necessarily. You know, so I, you know, studied finance and economics in college and really didn't know what I was going to do with that coming out. So I started working as a broker on, you know, for some of the big banking firms for my first, you know, say decade or so in the career and really found that, that, you know, that was very much of a sales culture and that didn't resonate very well with me. So I spent a lot of time developing just my own approach to investments. So really cut my teeth on the investment side of, of wealth management and, you know, started this company, Arlington Wealth Management, 25 years ago now in the year 2000. And as my clients got wealthier, I realized investments weren't the only thing that they needed. They, they needed a lot of advanced planning. So, you know, we've talked about tax Tax mitigation, and then that's a big part of all of our clients', uh, you know, wealth management plans, uh, wealth transfer and estate planning, you know, is a big part of what they want to achieve of taking care of their heirs. Uh, asset protection is huge, you know, particularly amongst the business owner community because, you know, they have the target on their back. Um, so all of those things, charitable planning, you know, are all part of what we help business owners with, and we weave that into the business strategy too, of understanding, you know, how attractive their business is, how ready it is to transition, how ready they are to transition. Those are all big components of, of a successful transition of a business, an eventual transition.

Did you grow up in an entrepreneurial family? Did you grow up in a business-oriented family?

I did not. My father was Blue collar, you know, blue collar worker, steel worker. And so, yeah, it was just something that I, you know, naturally as I started my own business, I felt like I had a, you know, I had a little bit more empathy and understanding with what business owners are going through, founding business owners particularly. And, and that helps me be able to understand their unique needs. And be able to provide them the type of proactive advice that I think that they need.

Now, are you a lead practitioner, kind of an I lead, you follow kind of guy?

Yeah. Yeah, I'm, I'm a lead practitioner. You know, we have a small team at Arlington Wealth Management of 5 people, and we do a lot of collaboration with other professional advisors. So accountants, Attorneys. We work in a what we call a virtual family office environment. So anything that we can't, that isn't our direct core competency, we have access to specialists in, you know, tax mitigation, wealth, wealth transfer planning, business advisory, where we could bring into relationships. So client doesn't have to go out and find all You know, high-level advisors in these different areas.

Yeah. And is there a specific— I'm sure the size, not too large, anything's too large, but usually too small. Is there a business that, you know, it's too small you won't work with just yet in terms of criteria, or is it kind of like definable by the conversation?

Our sweet spot is, say, $1 to $25 million in revenue. And mostly, you know, we're in that $2 to $10 million is more typical.

Are you into more, you know, anything Wealth Without Wall Street related in terms of investment strategies? Are you predominantly into, you know, the S&P and other traditional stocks and investment strategies?

Well, our investment management approach is a little bit unique. Since we started out as asset managers, we developed our own strategies. So we have 7 or 8 strategies that we manage all in our firm. We don't outsource any of that to third-party managers. And there is a focus on wealth preservation in the sense that we built models to help us identify market trends and potential turning points. So when we see things going in the wrong direction, we'll be able to move to the sidelines. And the objective there is to try to preserve our clients' wealth through bear markets or nasty economic recessions.

Yeah. Yeah. Well, hopefully we don't have any of that. I'm actually pretty excited. I mean, I know there's change coming. You can— I think everybody can kind of feel it on the air, if you know what I mean. There's some kind of change coming. Do you feel that too, or is that just, you know, me?

I think very much so. Yeah. And we talked a little bit about it earlier. The longer we get into this, you know, whether you look at it from a stock market run or just an economic run, I think that we run the risk of, it rolling over and developing into some sort of downturn. You know, we're not seeing anything like that in our indicators right now other than maybe just some very, very early signs, but those could last for even up to a couple of years before they matter.

Yeah, yeah, exactly. Well, at any time we have this kind of shift in geopolitical stuff every 4 years, there's always some opportunity for volatility. There's making money on the way up and the way down depending upon Where you're at, right?

Exactly. And we'll get more insight into what the tax, you know, the tax law is going to be. You know, we were expecting a big change there, but now with the election result, you know, maybe there's going to be more of the same moving forward. And that would be a relief, I think, to a lot of, a lot of business owners.

Yeah, I'm optimistic that some of the stuff they're going to cut is, you know, removing the waste that gives business owners an opportunity to grow and expand our services and have a little more capital back. to move on. And since we're in the physical product business, I would always encourage anything we can build in America. I'm happy for that. So, you know, I hope to see some really good things coming up in the year myself, which just leads to more opportunity for people like you to help us keep more of what we make and deploy it faster into the economy.

Yeah, I think there will be more opportunity. There might be a little transition along the way though. And, you know, that's where some of the volatility could hit. And just have to be aware of that and prepared for it and not go into it with your eyes closed.

Speaking of volatility, do you play around in the crypto market at all?

So crypto is one of the asset classes that we look at, just like many other asset classes. And last year, for the first time, we did make some investments in that area.

And Bitcoin worked out pretty well for you. Yeah, a lot of people rode that one up. I was hesitant. To do anything with it last year because I I got into it early at the $600 round, and then when it went to 19, I was like, well, it can't possibly go any farther. I should have just like left it and forgot and just not touched it, right? Shoulda woulda coulda. That's not a very good investment strategy. Yeah, well, it's easy to mess it up. That's for sure, especially in that world. You know, I listened to too many people going, oh, this is nothing. It's going to turn into nothing, and I should have just said, ah, well, you know, let it let it go. Let's see where it is. It's not you know not that risky for me. I should have played it a little bit longer game. We're short-sighted sometimes, aren't we?

Very much so. You know, I think it's natural tendency to, you know, when you have a big gain that you want to not give it back.

Well, yeah, there's that latent fear in something as high risk and volatility in the markets like crypto that goes up one day 40% and down 50% the next day. Since it's so volatile, you just, You wonder, it's not for everybody.

No, it's very volatile. And I think a lot of, you know, I think younger people gravitate towards it a lot more than some of the older clients do. So yeah, we'll see how it plays out from here. But now it's what, you know, $100,000 or so?

Yeah, $96,000 I think this morning is what I saw earlier, $93,666. So it's still holding pretty strong at that, which should be interesting. A little more difficult to get into now. Unless you're gonna, yeah, maybe want to wait on that one. But that's not financial advice, just conversation in case anybody's listening. All disclaimers apply.

All right. Past performance is no guarantee of future results.

There it is. Yeah, it's on record, folks. Sorry. You know, just looking forward here, and I appreciate this is good conversation. Is there anything I didn't ask you about? Anything you wanted to cover? Something you wanted to give out?

You know, I think There's a couple of points. One is for business owners, again, in particular, of designing a personal action plan that thinks about some of these, you know, non-operating issues for your business that we've talked about of, you know, what does the endgame potentially look like? What is an ideal endgame for you?

Yeah.

And start to put that into your business planning The sooner the better, because it is going to improve the value of your business. It's going to improve your life. It'll improve your income most times as well. So even if an endgame isn't like the first thing you're thinking about, good business, you know, exit planning is good business strategy because things can happen in life. And yeah.

Very well said. Joe, where should they check you out at if they want to go speak with you more about this?

Oh, there's a couple of places. One is our company website, arlington-wealth.com. And also, my book, Exit by Design, is a book that me and my daughter published about a year ago. And you could go to exitbydesignbook.com and you could get an e-version there. Just download it and you could connect with me on either of those websites.

Yeah, well, that's fantastic. We'll put that in the show notes, of course, exitbydesignbook.com. And your daughter, is she in the business with you?

She is in the business with me, yes.

Very cool. How long has she been involved in that?

She's been involved for, I think, about eight years now.

Excellent. Is that fun having her around?

It's a lot of fun, and then it's you know I think a lot of a lot of owners would love to be able to you know have a a child in the business and transition it to them, and you know we'll see if that ends up working out here or not. But more than likely, that's the direction.

That's your big hairy audacious goal for your exit strategy is to kind of move it all as an inheritance.

Yeah, I think so, and I think she'll need help with some other you know generation second generation. Advisors to carry, you know, carry this firm to the next level eventually. But I have no plans of retiring. So yeah, maybe 10 years from now I might have a different outlook on that.

Yeah. Or maybe next year. You just never know. That's the final thing.

You're right.

You may be like, okay, that's it. We're going to Cabo and I've had enough of Chicago. It's a little too cold.

Well, I'm actually going to be going there next week.

So you're going to Cabo next week?

Yeah.

Whoa. I totally pulled that one out of my butt. I had no idea you were doing that.

Hey, when you, when you, when you live in Chicago, you have to have, you know, Plan B during the winter.

Chicago to Cabo was kind of my thought process was like, if I wanted to, how far away would I want to go to get warmth and sun? And at this point, it's not Florida, right? Right. I would keep moving further south. Well, enjoy your trip, my friend. I hope it's a great one.

Thank you, Neal.

All right, guys, as you've heard, go out, plan. We don't want to run our business on gut feel. We want to understand the numbers and the finances. We understand the business and practicality. Also want to understand, as Joe said, Who's possibly going to buy your business and what they might need to know about it? And if at all possible, put yourself in their shoes and think about the things you need to do to build your business into a very, you know, smart asset that gives the opportunity for somebody else to take that over and run with it. And so if you need to start transitioning your name out of it, it's probably a good time to do that now. If you are building in wealth strategies, of course, you want to learn how to keep more of what you make. So you definitely want to talk about that. And you always want to remember, as we say on this show, that your opportunity begins at the end of your excuses. So get out there and do something. Imperfect, and something perfect will happen along the way. As always, like, share, comment, and engage on these posts so we can help beat big tech. And share this with somebody who needs to hear this message today. We'll catch you guys on the next episode.