Mergers and Acquisitions with Matt and Randy Crabtree

Welcome to Accountants LawPod, where accounting professionals and law firms converge, hosted by Linda Artesani, Sarah Prevost, and Steven Libhart.

Welcome back to the podcast, everyone. Hi, Steve. Hi, Linda. We have some guests today. Hi, good morning.

We do.

You guys ready for it?

We are.

We are so fortunate to have Randy Crabtree and his son, Matt Crabtree, here. I can't believe, like, I finally got to meet Matt very recently. So welcome to the two of you and feel free to self-introduce and tell us the magic of who you both are.

Great. All right. Happy to, happy to be here. Thrilled to be here. My name is Matt Crabtree. I'm Randy's son. I work in mergers and acquisitions through, through Breakaway Advising. Shout out to Breakaway Advising. I'm one of their franchisees working specifically with M&A advisory and preparation and exit planning and full-scale, you know, what to expect in an M&A deal and education and just making sure everyone knows what they're getting into and want to make it as streamlined and smooth as possible. And I know that my dad Randy has been in a few transactions already. So I'm speaking as the advisor, he's speaking as the one who's actually been in the trenches. So it's, it's gonna be an interesting dynamic for sure.

Randy, go for it.

My turn. All right.

Your turn.

So I'm Randy Crabtree. I, I'm old, as Matthew was just saying, I've been through a lot. I am a CPA, done different things in the profession, had a generalist firm for years. I started a specialist niche firm 20 years ago doing specialty tax and Officially, I really don't understand the right way to say this. I have to figure out. I keep saying I retired from that company about 6 weeks ago, but then everybody thinks I'm disappearing from the profession. So I think it's better to say I'm pivoting. I pivoted from the organization that I started and I'm concentrating more on creating a positive atmosphere within professional services. For the people within it, because when you do that, I think everything else falls in place.

Randy, I do feel like the fear is that you will go away because we all don't want you to. We love you so much that we can't have you go away. So that's the— that's great that you kind of repositioned yourself here for all of us.

It's our gain. I had a conversation with my trainer this morning, and she's like, you baby boomers, you just never, ever Stop working. Like, you don't quit. And I'm like, why would we? What are we supposed to do? She goes, well, play tennis. I said, I don't want to do any of that. I want to keep using my brain.

So I don't know what I would do.

No.

Yeah.

Yeah.

Well, that's one thing we got to work on then, because you have to have a passion outside of work.

I

won't retire. I mean, I work out of my RV most of the summer.

Yeah. Well, that's awesome. See, you already have that passion— traveling, getting out, being in nature. That's nice.

Yeah, yeah. Well, I am happy to start where it makes most sense. I feel like the big hot topic, and our listeners have asked this question, maybe we start with, with you, Matt, on the M&A wave. There's so much going on, not just in our profession, in general, in business. We hear it in the headlines all the time, we see it. And then I feel like moving over to Randy, your perspective of the good, the bad, changes, things that we should take away from. And this might just be a part 1, because I have a feeling it's going to be a really rich conversation. And I'm excited to dive right in. So Matt, if you want to kick us off with maybe some highlights of things that you— yeah, you see it best to start.

Yeah, yeah. So the M&A market kind of has been, for lack of a better word, crazy for the last 10 years, basically since 2016. From 2016 to 2020, it was gangbusters. You could put something on the market and it'd sell for at least an 8x, just pretty easily, honestly.

Mm-hmm.

And then COVID hit. And of course, that changes everything. And not only does it change what, you know, how your business works sometimes, and how much revenue you generate from this sort of thing, and how much, you know, you want to focus on this sort of margin enhancement, all that stuff, but the buyers are becoming a lot more keen into what they want to look for and what are the red flags that have come up from that and what are, you know, diligence has been— diligence is always a nightmare, as we know as people who have done due diligence. It's always a nightmare. But the last 5 or 6 years, it's really ratcheted up even more than that, where things do take longer, people are digging deeper. So that's just even more, more so now than ever, it, it pays off to be prepared and coming into it and not just flipping a switch and saying, oh, okay, I'll go to the market and we'll get what we get and whatever. The numbers are the numbers, you know, it's, it's the company, you know, we'll see what it is.

Hmm.

But the market now is, is, it's still crazy in the sense that there's, I saw the report, I think last, last week, it's $3.7 trillion of dry powder out there for private equity. They have to spend that or else they have to give that back. So that is driving all of these purchases. And I know private equity is an interesting topic when you talk about accounting, when you talk about lawyers, when you talk about anything really. Private equity tends to elicit a lot of emotions from a lot of different people— positive, negative, neutral, so be it. Not all private equity companies are created equal, that's for sure. And they do have mandates that they need to go out and buy these companies for for X amount and build it up for 3 to 5 years and sell it for X amount, usually a 3x return. And that's where that dry powder comes into place. That's what's driving all this stuff right now. And I know I'm going on a bit of a tangent with private equity already, but they need to spend this money or else they have to give it back to their investors. And nobody wants to do that. Nobody wants to basically just give— have money sit there for nothing. It needs to be in action.

Do

you think the due diligence part came out of like they didn't do their due diligence and they were just paying the money and then COVID hit, kind of slowed everything down. And now all of a sudden, they're like, oh, we probably should have paid a little bit more attention.

I would— yes, yes, I would say that that's a huge part of it. There was a— the competition specifically, there was a lot of people looking at not a lot of deals. So there was a shortage of good deals, but a lot of buyers. And there still is, there still is too much money chasing too few deals. So that's where you get that competitive aspect. And with that pre-COVID competitive aspect, a lot of it was sort of when you look at the real estate market too nowadays, which is another crazy thing. But a lot of people are foregoing inspections. That's kind of how it was. It was not— obviously they didn't forego the due diligence, but it was lighter. It was a lot more targeted, and it was a lot more, here's what I want to see, everything else besides that, you know, we'll just focus on what we want to see. And now it's, hey, give me access to every— you know, your margin dipped in 2021 to 2022 with this customer. What happened? It's like that specific detail. I think, I think they were a little bit too gung-ho with purchasing and getting in, you know, ahead of their skis a little bit. And now they're reeling it back a little bit to really focus on, is this— are we buying the right thing here? Are we buying what is laid out in front of us?

Does the impact of people working at home and not returning to the office after COVID play into this? I would think it would.

It does to an extent. It depends on the end— on the business too, because I've run into a lot of businesses that don't have an office. They never had an office. Even before COVID they were all remote.

Mm-hmm.

They, they, you know, hey, you know, we're a tech firm. We do, we do managed services, managed, managed service provider. We don't have an office. We do. It's, you know, 10 people that come in. So, it depends. It depends really on the, on the, the level of, of service that you're offering to your whatever customer that you serve and the business itself, the business model itself. Some do lend itself better for more in-person. In terms of just being more valuable and being more cohesive and having everyone that you know is there and you can monitor better, track better, and all that stuff, that does benefit it. The question that comes into play there specifically with the remote versus in-office is the culture. And the culture is a huge thing when you talk about M&A. The last thing a buyer— well, I should say the last thing a good buyer wants to do is upset the culture in any sort of way. Typically, when there's a good thing going, a buyer wants to keep that good thing going. If the employees are remote, they probably want to keep them remote if it's a good deal that they want to actually charge at. If they're in the office, they'll probably want to keep them in the office. So, it's the best buyers are status quo. That's for sure.

So, I'm thinking of the journey from the, like, well, like how Randy's gone through it. Like, you eventually You may or may not want to purchase or buy or sell, right?

Mm-hmm.

And so if you're going to be that individual who's, you know, not sure what you're going to do, but you know all this dialogue is happening, do you start to, have you seen this change where people are like, well, maybe I wanna be prepared for a purchase, so how do I reevaluate myself? Or is it the other way that they want, now they're like, okay, everyone else is doing it, maybe I should do it kind of attitude? What do you see in the market?

Yeah, I think it's— I personally, I think it's never too early to really prepare yourself for sale. I think it's a valuable company is a well-run company. There's no real secret sauce in terms of like, hey, in order to get your valuation this much, we need to cut this cost and hire this many people and fire this specific person. It really is just making sure that you've got a solid backing behind you. and a solid management team under you to really, you know, get that out there. But in terms of knowing the right time to sell, or knowing the right time to buy a company for that matter, and this is a bit of a cop-out, but I'm a big proponent of trusting your gut. Mm-hmm. And a lot of business owners, typically, if they get to this stage where they're ready to sell their business, and it's not a distressed deal, They got a good gut sense. And a lot of times, you'll know when it's time to sell. Typically, you know, you're, you're dreading going to work, you're not having fun with what you used to have fun with, you've got partner disputes going on, a lot of it is personal, you'd rather be spending your time elsewhere.

Yeah.

And when it comes to that, you don't really want to time the market, because you're, you're limiting yourself for what you want to be doing, your happiness, your, you know, your success story. And also that, you know, that eventually trickles down to your employees and they eventually feel that too. So really, when there is a personal reason to sell, that's the best time to sell.

Interesting.

Or at least talk about preparing and talk about going to market. I think, I think the best time to get yourself in order is probably about 5 years before you actually go to market. It's like that. It's like the saying, the best time to plant a tree is yesterday. The second best time is today. Yeah. So it's, it's, that's how I see it too.

Hmm.

Can I jump in on that for a second? Oh yeah.

Yeah.

Because when Matthew was just talking, and I know it says Matt there, but being that he's my child, he's always Matthew to me.

I hear you.

He's not just Matthew when he's in trouble.

No, no. That's Matthew Jack.

That's Matthew Jack.

Oh, I love your whole name.

It's a real middle name there.

Yeah. I know.

But I've— so I experienced what he was saying. I've done a few deals in the past. I've done maybe 3. I should probably know this. At least 3, maybe 4 deals in the past. But the last one was the TriMerit deal where, you know, I started that 20 years ago, the specialty tax firm. And it was around 7 years ago. No, we are 9 years ago now that we I started losing my passion for that profession and that's where I started thinking, okay, I need to get out of this. It was this, I went through this time where it was just like, this isn't fun for me anymore. But what I found is that it wasn't fun for me because I was in the wrong role within the profession, within that business. Mm-hmm. And when I started getting that team, Aligned into the right roles. So this is what Matthew was just saying. That changed everything for me. I stepped out of the managing partner role. Someone else took that over that was equipped for that. What I thought is I was just in the wrong spot. I mean, I was just in the wrong company. I didn't need to do this anymore. And it wasn't, it was, I was in the wrong role within the company. So what we did is people aligned into the correct roles. And when that happened, Then it was about a 3-year process. Then all of a sudden my passion just went through the roof and I loved what I was doing again. And it got to that point. But what made me think about that is that was 6 years ago and now I officially exited 6 weeks ago. And so we got this running really smooth the way it should be. People were in the right seats. People were doing the thing that they were passionate about. And that really not only just changed what I was doing within the company, but we were 10 times larger than we were 9 years ago when I thought I was getting ready to leave. So, it really added to the bottom line as well. So, I just thought I'd throw that in there because I didn't think it through that way, but that's what ended up happening is I was prepping to leave. And then decided not to leave because things started running smoother. And then 6 years after, then I did leave.

So when you leave, do you leave fully? Like, I'm done, I got my last paycheck and I never come back? Or do you leave and you stay on for 2 or 3 more years in a different capacity where you have no control? That's my issue with anything like that. Because Sarah and I've talked about it, not that we're not in that place. In fact, I think for us, our guts, we align so much with our gut that it's kind of like hearing you say that, I was like, oh good, that was exactly how we have a way of working and we enjoy what we do. We really enjoy working. So did you have to sit on like a long time?

So I'll give you what I did and I'll let Matt explain what maybe norm is. But for me, what it was when I decided that I needed to change my role from managing partner to something else, and that, like I said, it was a 3-year process really to figure out what that something else was. But the day I made that decision, I also said— here, I'll give you— this is what real life happened. They called me like a month later and said, hey, we're going to have the executive meeting at this location on these dates, the executive management team meeting. And I'm like, I'm not going. That's you guys now. I'm not part of this anymore. You are running the company. I'm not going to do this. So I just needed That clean cut from being in that role. I don't know if that's normal, but for me, that's what was— I thought was best. I trusted the people that were in that leadership role now, and I knew that they were— I hoped, and I really knew, but I didn't believe it for a couple years, that they were the ones, that they were equipped for it. But I had the trust that they were, and for me, that was— The way I did it. Now, I ended up staying on 9 years after giving up that leadership role. Now, people will still— I was still a leader. People will say that. I'm sure I was. I'm sure I had a— I know I was, but I just didn't look at myself as a leader anymore within the organization, even though everybody looked at me. So, so for me, that's probably different than most. I don't know if Matt, you know, you had an answer for how that works.

That's not typical.

That's what I thought.

Being on for 9 years, that's not typical. What is typical more often than not is for the owner to be on for a year or 2 transitionary period, just— and that's mainly just pulling the knowledge out of your head, getting the systems, getting the processes that you know how to do in other people's minds so that they know how to do it too. And just making sure the customer relationships transition over smoothly and the culture is still intact. So Typically, that does happen, although I've run into many deals where they were able to leave day one. And I was honestly surprised about it because I did not expect that they would be able to, not just the sense that it's, you know, they know a lot about this segment of the business and they basically run it. They get there at 5:00 AM, they leave at 9:00 PM, a little bit of an exaggeration, but not that much of an exaggeration. He was able to leave day one because we found the right buyer, and that's typically like that's the the sort of antidote for for worrying about control and which I get a whole totally get like the control aspect of it. That's that's the problem that that's the thing that owners fear losing, and and I I understand because you've grown this thing for x amount of years, and you've cultivated all these relationships and you're turning it over to somebody else. And you're thinking, well, let's hope that they can do as well as I did with not just doing the business but with the relationships. And that's a huge thing.

Well, we were at a conference and we got somebody's ear. And I know I won't say the name. But I know we sat with this person who had just sold because we've run into this a lot with the accounting firms. And these guys are in their 40s and they're very young, right? That they're They either built a software or they built an accounting firm, and then they get this amazing offer that they can't turn down. And now they're out of work, but they're in that gray area of hanging in to help and getting paid, but they can't do anything. And they watch things change and it kills them inside because now they're not— and they're like, I know they're doing it wrong and I can't— they don't listen to me. And I just sit back. Wasn't one of my Said he put a thing on his mirror every morning. He would recite it to, this is not my company anymore. Because it was cathartic for him because he was like, I can't deal with it. And then they can't go back. Like if they had an accounting firm, the part of the deal is they can't go start another accounting firm. So then there's that. So now they have to reinvent their whole way of life.

Or there's like a timeframe for some of them.

Correct.

It's like a visceral kind of reaction for some people I've seen.

I've seen others— That was an amazing conversation, Sarah, 'cause you and I were like on our, sitting on the edge of our seats listening to this person. And I was like, wow. Wow, I never— things I never thought of. But kind of to your point, Matt, is that talked about, like, you got to have your ducks in a row 5 years before. You got to start looking at those processes, and they should be all in place. If you know, it should have it anyway, no matter what, you're running a business, you should have it, treat it like a business, you do all those things.

I had a real similar experience.

That doesn't always happen.

Right? I had a similar experience. I had a real successful business here in Denver, as Linda and Sarah know, and right after 9/11, we had we had done our exit strategy every year. We revisited it every October. We got out of the business. We went somewhere. We talked about it. We changed it. We documented it. And when a buyer popped out, just out of out of the ether, if you will, with a really good offer, we were we were faced with this is our baby. Like you said, Matt, we grew this thing. It was very successful. Had great culture, and we decided to go ahead and sell. Now my my business partner. was one of the service providers in this business, and I was the managing partner in the business. And so, they kept him on, obviously, because he was part of the cash flow, if you will, one of the big producers. And they had me stay on for a year. But about 3 or 4 months into it, I said, you don't need me for a year. You're doing fine. And what really— the one thing I was really proud of is that we were prepared for it. It went so smooth. Literally, the transaction took 2 weeks. We signed the papers. And we were done.

Wow.

Yeah. I mean, we, we were prepared. And what really, the one thing I was really proud of when I left 3 or 4 months later was that the team stayed and they stayed on for several years. We had a good culture and they were there 5 years later. 90% of them were still there. We had a non-compete. We, you know, for a certain number of miles and a certain number of time, a certain amount of time, we had all of that in place. And I, to what you're saying, Randy, I kind of related to you. I felt lost for a while. I was like, well, now what am I going to do when I grow up? And here I am. I landed in the legal field. And, but I think part of that was the influence of our attorney too. I was really impressed with how it was all handled. I'm like, you know, I think I could be in accounting in this industry, but, you know, being prepared is the biggest thing in my mind's eye.

Yeah, I'm going to jump in again. Sorry, man, if you had something, but being prepared is important. I don't know if I was ever really fully prepared. That's one thing that, that I think you need to do. But TriMerit, our company, I think 2 years in, we started getting offers and we've been, it's 20 years now. 2 years in, we started getting offers, people. And partly, and this is probably a topic to talk about, we're a niche practice. It was a niche. And I think those are very valuable because they can tuck in somewhere else. It's a need someone else has. It is an expertise that you can market. But from literally 2 years in, we started having people reaching out and it was nonstop reaching out. I never took anything seriously, but that taught me that there was something of value there, that there was a market there. And before I made the decision that I'm just going to step down as the managing partner and stick around and then let the next generation take over leadership, I did talk to a few just because I wanted to see what the options were. And the thing that I saw immediately was I just don't want to put anybody in this organization into a Spot where they don't know for sure what the future is. And so that's why we just continued the, the just transition internal leadership. Now that was just the way I looked at it. Mm-hmm. But like Matt was saying, if you're prepared, if you have the things in place, if you get the right partner, if, if the culture is important to them, I think all that lines up. For me, I just, I just didn't, wasn't completely Convinced that that existed outside of what we were already building.

That's what I love about you, Randy, because you— I, I feel like I relate to this a lot. I like the practicality and the honesty of describing it because everyone has such a different journey through this process, whatever this is, like growing a business, starting a business. Matt, you said something— Matthew, I should say— you said something very similar to what I always hear from your dad, which is what I always say is trust your gut. And that's how we approach a lot of our firm owners. Is what is your gut telling you about what's wrong with your books or what you think should change, what should be fine-tuned? I do see that we see this a lot in legal, in the legal industry, a lot of movement. I am curious though where the market's going to go because they have adopted AI so much, they have made so many changes, and this market is quickly shifting in a lot of ways.

Very quickly.

And that landscape, I have no idea what this is going to look like. I'm not sure in your pipeline, what you've seen yourself, if this niche has been something you've seen quite a bit of, or what your thoughts are.

Yeah, I mean, the, the, I mean, just talking about AI, you mentioned AI, and that just made, that set off panic alarms in my head, uh, just in general. Yeah, but it's, it's, it's a bit of a Wild West with that because like you're, you're getting the, the barriers to entry for subpar work have been opened. And I just mean like Representation and like all that stuff. With all this AI going around everywhere, you're more likely to fall into the trap of, of underselling and doing things the wrong way. And that detracts value. That does detract value. And that, that, you know, talking about just the, the M&A world in general right now, like it's, it's, it is a bit of a Wild West when you talk about how is it going to impact the industry, how is it going to impact the niches, is it going to be, you know, I'm, I'm, I'm, I'm just as curious as you are, honestly.

So, I mean, because you said that there's a lot of money to be spent. And I'm like, well, what, what does that look like? It is— there is such a weird conundrum behind the stigmatism of like, oh, you sold out, you got out kind of attitude to— like, did— what was the due diligence? Did you make the right decision? How do you feel? on that side. So if they have all of this to spend, I'm wondering what this market's going to look like now that they've changed their due diligence.

Yeah, yeah. Well, and from what I've seen is, is there's a— private equity tends to shift what they like to invest in, kind of together almost. So right now, particularly what I've seen as like super hot industries are professional services. So be it accounting firms, lawyer firms, legal firms, anything like that. Where it's little overhead and a lot of high margin value and high value work that, that doesn't really— it's not going away. I know that AI and bookkeeping and accounting, like people are worried about that. It's not going away. The work's not going away. And the deals are not going away anytime soon. Another area that they've shifted to recently, that the market shifted to recently, is home services, residential home services. So think like HVAC repair. Okay. Oh, yeah. Anything that, that you would need on your house that you're not going to avoid, like delay getting done, because like you need your heater working, especially in the Chicago winters, like I'm going to spend the money to get it done. So any, any like private equity and the buyers in general are shifting towards the landscape where they want to— yes, they're digging a lot more in due diligence. But they want these kind of super valuable companies with basically 1% customer concentration, non-discretionary services, to that basically, that's what they're going for, because they know that that's working, that that's going to work. And all they— all that these little mom-and-pop HVAC shops that need is just a little bit more capital investment in them. And then they can go acquire more and more and more, because there's all these different regional players. So that's what private equity and buyers in general, and all these financial buyers in general are thinking in terms of how can I, you know, obviously they're digging in a lot in diligence, but how can I, how can I get the most bang for my buck now in this kind of uncertain market? Because it is volatile. There's a lot of things happening. And I think at any given time, interest rates just went up finally for the first time. Yeah. So that does change the, the M&A market kind of considerably. It's going to cost more to borrow money. What is that going to do to valuations? Typically lowers them. But hey, We'll just have to see how it plays out. It's a wild west, like I said.

That is

so

interesting.

It's the wild west for us with us implementing AI in our firm. And our belief is like, we want everybody to use it, think about what it could be used for. I don't want them to be chasing their tail with everybody else is doing it and we're not in that place. So Sarah and I have been like, here you go, use it, but use it wisely. Because you got to know what you're doing. You can't just— don't count that the answer's correct. Someday that will change. But it is crazy. I think it's fascinating. I'm so happy that I'm in this space right now. I find it exciting. But yeah, it's definitely going to make a change in everything that we do. I think it's pretty neat, though. And neat slash scary because I remember reading— Yeah. Watching the movie. 1984, is that what the name of it is? Space Odyssey?

Yeah.

I remember seeing that as a kid. Okay. Right, Randy? Remember that? And I remember going— Yes.

There's 1984 and then there's 2001: A Space Odyssey.

2001, sorry. 2001: A Space Odyssey.

With HAL. Oh yeah.

With HAL. Oh yeah. With HAL. Go back and watch that again. It's like, I remember thinking how absurd it was back when I watched it originally.

And now we have Waymo cars, you know?

Yeah, I mean,

it's reality.

Yeah.

Hey, I was just thinking when we're talking about all this,

yeah,

I probably should— not that this excuse my thinking, but disclose that I am an advisor to a PE company that's investing, that's trying to invest in accounting firms, and to a VC-backed company that's investing in small firms. So, so, wow. Probably something to know because I do have that. I don't want, I don't want that hidden. I, I am an advisor to 2 companies out there. So

that's fascinating how you— yeah. Yeah.

It's a, it's an interesting world. The, the PE company hasn't done a deal. I'm not sure that they will. I'm not going to disclose names or anything, but they're interested and it was just cool to hear what they're looking at and And that what they're, you know, we weren't talking about this specifically, but what they're seeing, the multiples in accounting is just like, they were just in shock at what the numbers are right now. And that's why I'm not sure they're doing a deal. And then the VC company is, like I said, investing in smaller firms, but, you know, taking a certain percentage. But what they're doing is kind of like we talked about in a different area, like Matthew just said with HVAC, they're getting into these young Firm owners that need some capital to be able to be competitive. And that's been really cool to see. They've done a handful of deals. And it's cool to see that each one of these, I've met the partners in each one. And they, they're like, just rave about what it's done for them. And they've all probably doubled in revenue in the year plus that they've done deals. So it's, it is, as Matthew said, Wild West, as Linda said, an exciting time. It's really just kind of cool to see what's happening. Specifically in professional services right now.

That is interesting. Well, I will say, I was telling Linda this over the weekend. I was talking to a future graduate. What does the landscape look like for this in our profession, but just kind of in business and finance in general? And just being given any opportunity, this poor girl begged. And then she eventually said, okay, no one's gonna hire me. So she volunteered to just come in and research how the work process works in a firm. Oh, wow. That's, that's genius of you. Because when you look at the generation that's coming up, and my son's in this generation, the lower tail of it, that's not the same work ethic, the kind of the one that's bridging this kind of middle section might have a different take on it. I think the perspective is different. But what do these opportunities look like? And now that we're talking about a landscape change, and we've got so much VC and private equity and M&As going on, what does it look like? And is it— it's not national, probably, it's gonna be a global market in a big way for some people. And we see this. So I'm not sure where this goes. And I don't know how this looks. But It's scary and kind of like a lot of question marks for me in my mind.

Well, that's the exciting part because there's— so people are— the scary part is change in general. Everybody— change freaks people out, and that's understandable. It's because it's the unknown. We like the known. We like where we are. I can see this. I know this. I know where I'm going. But I'm excited about what we don't know because what the opportunities are. You know, we went through a time in accounting and, you know, that's me specifically. Wow, I feel like I'm going on a tangent now, but I'm going to do it.

No, go for it.

We went through a time in accounting, you know, for the last handful of years where even a little before AI where, hey, we're just not getting people coming into the profession and this is scary and what are we going to do? Well, now we got AI that's coming in and AI is going to be able to take some of those roles or at least augment those roles and allow us to do something more exciting. But then it goes to the, well, then how do we train the next generation? Because if they're, if the compliance work is not going to be done, the data entry is not going to be done, how's that going to happen? This is the whole point of this. We have to think different. This is where I'm going.

Yeah, no.

Then we can go back on course.

Yeah.

We just have to think differently. And that's exciting to me. And for the, we've, I've had a lot of conversations recently on how we do this. And this is M&A obviously comes in because you got to have the right people. You have to train them up. You have to understand that you can do whatever deals come in, but also AI is going to, you know, give us the ability to do more things within a firm. So, but how do we get the people to the right spot with that? And there has to be just a different training model, whatever that is. Nobody's completely solved it. But somebody today, I was having a conversation and he said, hey, the airline industry has done this for years. You know, we just have the virtual simulation where they're out there and they're learning on that. We just need to do something like that. This is the way we're going to do it. And then we're going to throw these monkey wrenches in that they're doing some virtual training for bookkeeping, but then we throw something at them they didn't expect and we see how they And they see how their cognitive thinking is on this. And that just be it. Our internships may just be more of that and not just sitting and watching someone else, but doing that. All right, this is a complete tangent, but I, yeah.

No, but this is important. Yeah.

Let's go back to 1994. What did QuickBooks Desktop do to all of us?

Yeah, well, the first thing it does—

It was a magical thing and we got our CDs every couple weeks and updated our— our files. And we were like, oh my God, it's putting us out of business. And but what exactly— it started that staircase stepping procedure, if you will, of interfacing with our clients even more in a different

way. Yes.

And that's where we're at again.

Yeah.

You know,

oh, I know.

In some aspects. Yeah, for sure.

I agree. I'll continue down this tangent. And then we can course correct back. But Steve, that's a great point that You know, we've had that. Then we had, you know, self-preparing tax programs came out and everybody was going to get rid of their accountant because they can do their taxes themselves. Oh, boy. You know, just to skip forward even further, then blockchain came out and no one's ever going to need an audit again. We survived that. We figured it out. We advanced from that. So change, we talked about how change is scary and change, but change can be exciting because look where we've gotten. For these things that we're going to kill this profession, the accounting profession forever.

It's scary, but it's fun.

Yeah. All right.

I think that you, you kind of go into the part that is a question mark too for our future and what this looks like as we build to like an M&A moment, right? Where, how do we take this younger generation who are not given any opportunities in a similar way? And fit them in. To your point, Randy, we have to adopt ourselves as firm owners a new way of training, a new way of accelerating. And we're learning and questioning it and looking at it and trying to adopt it ourselves. But what we don't have is practical use, right? Because that's not what you're getting in a college education at times. You're not getting the practical, like what is actually happening. And that was the interesting moment in my conversation with this young person. I was like, wow, that, that's kind of insightful. But we're also greeting a different group of people, right? They're going to come into this market. They're, they're used to being instantaneous and things like that, where we all kind of grew into pieces of that in evolution. Right. So I'm curious what the culture is going to look like. It looks like right now for us, I— you touched on something that I feel like is true. Linda and I thought, well, what happens, you know, if we were to ever think about something, what happens to our people? How do you evolve this? We're not in that space in our minds right now. But that did come up in thinking about these stories we've been hearing from others. So I don't know how you keep this and how you enrich it with this ever-changing market and then add in the right— I don't know.

That's where, that's where Matt comes in out there getting people ready. For a potential transaction. So yeah, hand it over to him.

Well, I think, I think now more than ever, and what, you know, a lot of things that will quell worries and quell fears with business owners is finding the right buyer. And I know that's easier said than done. That's why I would highly, highly, highly recommend anybody that's going to sell their business, find an M&A advisor to help you out. It's worth the money. It's worth the fee. They'll do a great job. But finding the right buyer, I'm a huge proponent that the right buyer is at times, if not always, more important than the price. The price is the price, you know, you'll get offered. I've run into this a few times. One of my more recent deals, the highest value was not the one we accepted. And if we did accept the highest offer, I don't think it would have closed. It was a—

Oh.

The buyer of this specific company did— it was a private equity company that closed maybe 9 or 10 similar types of deals, like exact fit to what my client was. And this was also the one that I told you that I was surprised that the owner was able to leave day one. It's because we found this buyer that knew the playbook, knew the diligence playbook that they were going through, knew what they wanted to see, knew what they didn't want to see. And diligence went honestly pretty smooth up until the last like 2 weeks, but that's always the case. Yeah, the last 2 weeks are never fun. But, but finding that right buyer saves the deal. And if we, if we did go with the other one, you only, you really only get one shot at getting a really good deal. Obviously, there are some exceptions to that. But typically, if you're going to market, you got one chance at it. Because if you go to market again, people are going to start asking. It's like a house again, I relate it back to real estate. If the house is on the market for a while, you say, that's true. What's going on with that house? That's weird. Yeah, off the market. Now it's back on. Same thing with businesses. So finding that right buyer is probably the biggest thing you could possibly do.

That is fascinating. I mean, every time you talk about these things, I'm like, that's like a house. The last 2 weeks are the most, yeah, like horrible moments.

Oh yeah.

Do I get it or not? What's going on, man? Yeah, it's— this is fascinating. So I guess from From your standpoint, in the deals that you've done, if there was like the tips, like if you were to highlight a couple of tips just to kind of understand what— if you're in preparation, or if you're in a deal, or what that spidey sense thing that you're saying, what are some good tips for us to think about as a profession? Because in professional services, you're capturing a lot there.

Yeah, yeah,

yeah,

yeah. Well, if you're trying to, you know, prepare for sell, I separate these into what I call the 4 Ts of preparing yourself to sell. Okay. So, it's time being the owner's time. What are you spending your time on, owner? Do you like doing that? What would you rather be doing? It's talent, which is related to time. It's who's underneath you, who's running the day-to-day, who's running the sales team, Who's the front-facing customer person and so forth? There's traction is the third T. How's your business doing? Is it doing well? Are you going to market based off of historical performance or go-forward growth projections? Like what are you basing it off of? What are you expecting to get? And then last T, probably the most important one, is transparency. And that means a couple things. It means not only does it mean, you know, hey, Whatever you would like to do, don't hide anything. That's like the worst thing you could possibly do as a seller is hiding something. They're going to find it. And you shouldn't even— just don't do it. It opens up a can of worms, legal can of worms. Just don't do it. Whatever you want to know if you are buying a company, you have to disclose if you are selling a company. But also transparency is organized— is how organized are you? Can you pull documents at a moment's notice? Are your financials clean and ready and crisp and You know, if I ask you for the last 3 years of your P&L, can you give it to me within 10 minutes? Like, that's the, that's the transparency aspect of it. It's how prepared are you in terms of the actual documents? Do you have the minutes from your meetings? Do you have your articles of incorporation ready? And all of that is, you know, all that's going to be housed in the data room when the deal eventually happens. Having it ready before saves a lot of time.

Fascinating. Yeah, yeah. No, this is good. And then I, of course, Randy, we're gonna have to have you back because I want to talk about the things that you've been like at ZeroCon. What you talked about was the time. And Matthew just said time. And I think it's important to understand like what you've been through, the culture, the deals, and your highlights from your perspective, like I don't want to keep you hostage. I'd love to keep you for another hour if I could, but—

Well, I can come back and tell you all the things I did wrong in every deal that I did.

So—

We could do a part 2.

Yeah.

Yeah. Yeah.

If only Matthew had started this much earlier in his life, like when he was like 5, then it would have—

I would think about how many clients I'd have by now. It'd be great. I should have done that. What am I thinking? Just like I should have gotten real estate when I was 3 years old.

I love it. I love it. Oh man. Well, yeah, so we, I mean, definitely this is, I don't even know if we've gotten to all of our questions. We're probably like digesting what you're saying. Yes, absolutely.

It's all things that we've thought about and talked about, you know, with other people and just listening and learning as we go. But it's an important thing for us to know because we work with a lot of law firms and they go through this too. A process. They change, they shift, they have a fight. This one goes this way.

There's a lot of that in this industry.

Yeah. Yeah. And the M&A lawyers are— was one of the— I think was maybe last year or the year before, was one of the most increased type of law. So it's that there too. So yeah, it's very interesting. It's a whole different animal.

Yeah.

That does bring me to a couple additional tips. One is find a good M&A lawyer. Like, if you're going through a deal, a normal generalist lawyer will do the job, but an M&A lawyer is really helpful and will help navigate due diligence, you know, really well. Okay. And I would also say probably look into getting a quality of earnings report before you go to market. And for those who don't know what a quality of earnings report is, it essentially just checks how true your earnings are, how real your earnings are and, and not, you know, adjustments to EBITDA and all that stuff too, and revenue recognition adjustments and all that. Highly, highly recommend this, especially when you start getting above that $10 million of revenue, $5 to $10 million of revenue. Highly recommend getting a quality of earnings report done. You can find lower cost options around there too. I think they, they typically can go as high as $75,000 to $100,000, but there are those that do them for, for less. Some like 10 grand I've seen. So highly recommend that. Just get a third party to do some financial work and able to show that in a good light.

Well, I'm happy you— and you know the people.

Yeah, that's what I'm gonna say, Matthew. It's like the advisor, I feel like, is the first part, like you said. And these other— it's like having a team. We always talk about this. You're a business owner. Sure, you might have taken some accounting courses. You have tax You have a CFO probably helping you, you have a wealth management, you have a team. And that's what we want to be is a part of the team and our services that we offer. And similar to you, what you're saying is, you need that advisor first, if you're gonna— what does the landscape look like or even endeavor? I feel like in the legal profession, sometimes we just hear about the deals after the fact. I'm like, what is the equity transition happening? Mm-hmm. What are we doing? Like, it's It's a shortfall to them, and I just wish that there would be more thought into it in a different way. So yeah, it's this has been amazing. I'm so grateful.

Yes, we appreciate you guys coming. This is wonderful.

Thank you.

Now part two will come for sure. I'm Sarah will blast you and stamping it on you, Randy.

Horror stories.

I'm in. All right.

Awesome. I love it. Well, thank you both for your time, and really this has been wonderful. I can't say enough. So thank you.

No, thank you. Thanks for having us. This was great. Love talking with you all.

Definitely. Bye-bye everyone.

Bye.

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