Navigating Business Exits: Transition Strategies with Julie Keyes

Welcome everyone to another episode of Mastermind Mastery. This is the podcast for you if you are wanting to create or already running peer groups. It's what we call PACs, Peer Advisory Councils. They might be known as mastermind groups, CEO peer groups, all the same. But this is the podcast if you want to run better PACs, that you want to be better at being a moderator, you want to up your game, learn advanced techniques, hear from myself as well as guests, what works, new concepts, trends, techniques. Also learn content, things you could take back to your meetings, different ways to do different things to solve problems that we all have when we're running groups. It will increase your retention, reduce your attrition, get you more members, make you more money. This is the podcast for you. I'm Tina Corner Stolz. The host. I've been doing this since 2005. I built a territory of 10+ groups, sold for a multiple, started Ellis Council, Leader Exchange Council, in 2012. We are a licensing model. We are the leading educator in the peer advisory council space. We have the podcast. I have a licensing program with certification. I've written 2 books. So today, when you hear this episode, each and every week it's a new podcast where we dive deep into a topic for 15, 20 minutes. One week it's me doing a deep dive on all the experience and insights from not only today with our entire licensed partner community or the past, um, what I've learned along the way, but we also have guests that are out there doing groups today that share their insights and new concepts. Well, hello everyone and welcome to another episode of Mastermind Mastery. I'm your host Tina Corner Stolz, and I have a guest today that I am excited for you guys to hear her, Julie Keys. So welcome, Julie.

Thanks, Tina.

Yeah. And Julie has a podcast as well, and we're going to get into that later. But the reason Julie is here and why you all should continue listening is because she's going to talk about a topic that should be near and dear to your heart, that should be brought up in your peer group meetings with your members. And if it's not, you're doing a disservice. And that topic is I'm gonna throw it to Julie now as a cliffhanger.

Sure. Yeah, so we, we're talking about exit planning, and, um, most business owners don't like— no exit, right?

No.

And I want to hear about it. Yeah. And, and so right out of the gate, I'm just going to say that exit is just a form of transition.

Yes.

And so I think if we could do a reframe and talk about transition planning, it's a softer land And it's more open. It's not ambiguous, it's just open. Like, exit is a form of transition. Buying out a partner is a form of transition. Taking on a new partner, buying another business, selling part of your business, whatever, right? Those are all forms of transition, and business owners need to be prepared for any and all of those, including exit. And if those kinds of things are coming up in the peer group, then yeah, let's talk about what I can do to help with you know, how to get that conversation started. Yes.

So let's first start, because I don't want to skip this step because we could easily dive in. Is, first of all, will you tell our listeners today kind of where you're located, a little bit about what you— and what you do? And that'll kind of set the stage because I want them to know that you're a credible source on this topic.

So for sure. So I've been an entrepreneur, um, almost all of my adult life and didn't have the best exit experience about 12 years ago, but I learned a lot from it and then started consulting for business owners to try to help them achieve a better outcome and just have a more fulfilling life after exit. And like I said, I wasn't going to use exit, didn't I? So we're going to go back to that word transition anyway. So I transitioned into consulting and then from there became a certified exit planner in '15, and that's kind of been my foot forward ever since then. I mean, I still work with owners on growing and improving their companies you know, thinking about what the next act is going to look like in the future and then helping them map out what the future is actually going to look like and what the options might be while we're working on the business. So it's kind of a two-pronged approach. And so that's what I do. I'm on the leadership council for the Exit Planning Institute and a faculty member there. So I teach a lot of advisors as well. And in addition to working with business owners. And it's really good work. It's my, my next act that I've been working on now for 9 years. And yes, I don't see myself not doing it for a while. I mean, I think I'm going to be doing this for a while. Excellent.

Well, there are so many privately held business owners out there. Yeah. And of course, there are many statistics about the transition of wealth of a business that's getting ready to happen over the next 5 to 10 years or less. Right? And it's happening now. So all of you out there that have groups up and running, and if you're not having the conversation with your member, your client, about what is their plan and what are they thinking about, we all know, and Julie's going to— I'm going to tee her up for this about what happens. Like, what do you see that really happens when owners don't pay attention to this? Then suddenly they're like, I think I now want to sell, I want to transition because I'm burnt out, you know?

Right. Yeah. I think that there's a common misconception among business owners who are thinking about exiting or transitioning out of their business that when they feel like they're ready, that that's the right time. And usually the answer is that it's not the right time. Just because you feel like you're ready doesn't mean your business is actually transferable. And it does not mean that you've actually done the work that you need to do to de-risk yourself. And, and, you know, the statistics are that more than half of businesses will suffer from what we call the 5 Ds. And the 5 Ds are death, divorce, disagreement, disability, and disaster. Disaster can take many forms. Sometimes it's a cyber attack, sometimes it's a pandemic, sometimes it's a natural disaster. You just never know.

Right.

And if you're not ready for those kinds of things, then that can really derail a successful transition.

And yeah, and part of the, the point is, is that typically the majority of their wealth is tied up in the business.

Correct.

Right. And so this goes back to you all listening, running groups, is that here it is, they're thinking about their retirement at some point in time, but their wealth is tied up in the business. So when they last minute decide I want to do the injustice they do that Julia would love for you to talk about is they're not getting the highest number they could get because they didn't plan for it. They left it on the table. Right.

Right. Well, they've had it up to here, right? For whatever reason. Like when you think about the boomers, they've been through a lot. They just go back through the last 25 years of history and think about all the things that business owners have had to weather. We don't need to go through the whole chronology, but there's a lot of stuff, right? And many of them have just— they just don't want to deal with it anymore. Many of them have to stay because they learned that their business is actually not worth what they need it to be worth. And they don't discover what the business is worth and what they need actually to be able to retire and maintain their lifestyle until they've had it up to here. And so the trick is to plan and to plan early and have the right people that are on your team and know what they're doing, right? Because there's really no single advisor that ever has all the answers. We need a team to collaborate. So we need the financial advisor, we need a CPA, we need a good attorney both for estate planning as well as mergers and acquisitions. Those are the core people. And it's always a good idea if you can to have a good consultant that actually understands the process of exit planning so they can quarterback the whole thing. Right. And then you as the facilitator of the group, you've got a unique relationship with those business owners because you've been working with them and they trust you and they know you and they're gonna ask you for recommendations. I'm thinking about getting this thing started. Something happened, right? My partner and I aren't getting along, or my wife wants me to just be done, or whatever the conversation is. There's a myriad of them, right? And then they're coming to you because you're a trusted advisor for them. And so it's a good idea to have relationships like that if you don't already, um, in your arsenal that you can, you know, make connections to for your clients.

Absolutely. And along these lines with what you said, I wanna unpack this a little bit and go back one, which is how would you recommend kind of opening up dialogue around this? With owners. So hypothetically, let's say it's in a meeting, in kind of a group meeting with other CEOs around the table. And what could maybe the facilitator do to sort of start them really voicing and understanding there's a long process here?

It's a very long process. Um, there's a couple of questions that they could ask. Um, here's a question that maybe would get them to be thinking about the business side of it, because there's a business side of readiness and then there's the owner side readiness. And those are the two main distinctions when it comes to exit planning. On the business side, they could ask a question like, if you had the opportunity to buy your business, would you buy it? And if the answer is no, why? Why would you not buy it? And be honest with yourself. You don't have to give your answers to anybody but yourself, right? Right. If the answer is yes, then why would you want to buy your business, right? All right. And then on the, um, on the owner readiness side, say for instance you just closed on the sale and you're getting up the next morning, you're putting your feet on the floor, and you're asking yourself, now what am I going to do? How do you answer that question? Today. Now what?

Because there's some crazy statistic about that. Like, when an owner sells, 80-some-odd percent are unhappy after they sell because they hadn't figured out the answer to that question you just asked.

Profoundly regret the decision to sell. That's one of the main reasons, because they had no next act plan. Like, what am I going to do with the rest of my life? I think that that last quarter of the life that we have in our 60s, 70s, 80s, whatever, that's the best, right? We're taking all of the best knowledge that we've acquired and wisdom that we've acquired and knowing what the right way to do things and can take and use that in some other way. And what is that way, right? Is it, do I start another business? Do I invest in other companies? Do I mentor? Do I consult? Do I do none of those things? Do I You know, spend a lot of time volunteering, traveling, you know, watching the grandkids, playing golf, fishing, all of the above. And if that's the case, then what does that look like? What kind of order? Because we've been living in order for a long time, and having disorder is going to, um, probably drive you right back to the office. The people who fail retirement, right? So not having a plan is one reason why there's that profound regret. Another reason is because they didn't have good advice when they were going through the transition. They didn't have good advisors to help them with orchestrating the best structure and not leaving money on the table and not creating great risk after the fact. Because we, you know, they've been through all of these years of all of this high risk that they've been managing, right? And, and the last thing that we want for them is to have risk that they have to carry after the fact. And maybe that means that they decide they don't want to be carrying a note for a buyer. Maybe they will, but maybe that's a small part of the structure and not the biggest part. Maybe there's no earnout. I don't know. But knowing what those non-negotiables are ahead of time so that they know what they want and don't want if a deal did come across the table, that's a really, really good way to figure out, like, okay, Because we all can kind of say, well, we know that we don't want— ding, ding, ding. Right. Those things. Right. But when it comes to identifying what we really do want, that can be really tough. So sometimes you got to go through the back door.

Yes.

Identify what you don't want first. Yeah. Yeah.

And two things about what you said, Julie, to kind of underscore a little bit is I remember that literally one one of a group that I was running, one of the members, we were talking a little bit about this and it's been a few years ago. And the member goes, oh, I know exactly what I'm going to do after I sell. I'm going to rent an RV and my wife and I, we're going to go around the country and we're going to go see all these places. And one of the members said, have you talked to your wife about that? He goes, no. You're like, oh, okay. So he goes, oh no, she's going to be fine. It's like, oh no, no, no, no. So the action item was before the next meeting, You go have this conversation with her and you come back and tell your group what she says. And of course, you can imagine. So he goes and has it. It's going to go one of two ways. So it went the way he did not think, which she said, no way am I doing that. I will fly and meet you, but I am not traveling around in an RV. I would have said the same thing. Right? And so he needed a whole new plan. Right. And so the point is the plan is not I'm going to play golf and then I'm going to do this. I might do that. The plan has to be very detailed. That's a long term and cover all aspects of your personal life. Right.

And the people that are in it, obviously, all of the stakeholders that are in it, whether they're in the business or not in the business.

Yeah.

The people that you want to spend time with are stakeholders. Right.

Yes.

And, and you absolutely do have to have this conversation with your significant other because you're going to have your separate lives and you're going to have your joint things that you do together. And what are they? And how often, you know, are we going to participate in these things? And, and, and are you okay with me if I decide to, you know, take on board seats? Because if that's the case, then I might have to do some traveling. And if I do some traveling, are you going to come with me? Are you going to stay back? I mean, right, we got to think about all that stuff. Yeah. And there are many CEOs out there who are candidates for being board members. But that's a big role. That's a tall charge. And they need to understand that it's not fluff, right? I mean, especially if they've had their own board, they know what kind of work goes into that. But it can be really fulfilling.

Yeah. And then number 2 is, you know, there's always these owners that go, I'm not worried about it. I can sell the company on my own. It's like buying a house on their own. Right. Not real. So I know you have stories. So I just would like for you to take a minute and go, why? What is it? Obviously they should not do that. So why should they not do that? So as you all that are running your groups out there, right, you hear your members say this. No, right. And why do they need people like Julie there's a reason people like Julie exist.

So yeah, well, I could— I can get them to the point where they can decide who they want to represent them, but I wouldn't necessarily sell the business if it were going external.

Yes.

And, and sometimes you don't need a dealmaker. Say for instance, you've got a competitive company that's approached you. You really like them. Your values align. You know, it seems like it could be a good strategic fit. But you definitely don't want to represent yourself. And do you, do you need somebody to come in that you're going to pay a big commission to? Probably don't. I mean, if you're really set on selling to that company, but you still got to have somebody negotiate for you. So you got to have an attorney regardless of whether you got a deal maker or not. So just bring in a really good M&A attorney that can negotiate for you, go to bat for you, um, and put the deal together that way. And don't do that later. I mean, don't— like, this is what happens, okay? The buyers and the sellers think that they can figure it out together. It's very emotional, which can be really, really— yeah, it could get really messy. But they're trying to save money and they don't want to pay the advisors. And so that's really to the buyer's advantage, not the seller's advantage. And so when they've got, like, say, for instance, they've got a letter of intent, that's when they get the attorney involved. It's like, no, no, no. Don't wait till the LOI. Do it well in advance. Do it even before you have like a candidate that you might want to approach. And if you decide to get a dealmaker to help you sell the business, whether it's a business broker or an intermediary or investment banker, depending on the size of your business, the earlier that you establish that relationship, even before you put the business, you know, on the market as they say, the better, right? Because when opportunity comes along, and if they don't know you, they're not going to be able to pick up the phone and call you, right? If something happens, right? So conversely, if something happens unexpectedly, you've already got that relationship set up, and so you're not behind in, um, interviewing people, picking up the phone. And yeah, exactly, you've already got somebody, um, they already know about your business and they're ready to, to take it and run. So Yeah, that's my advice.

Excellent. And how often, you know, there's this piece of don't leave value on the table. And then this is— I equate this to, okay, it's time to sell the house. Is it worth it for me to redo the bathroom because I'm going to get more money for it or not? Or do I redo the bathroom or replace the kitchen cabinets? So from a business standpoint, right, first question, is how long? So in advance, I'm an owner, right? And so when do I start thinking about this?

Gosh, 5 years. Give yourself 5 years at least, maybe longer. You know, if, if this is a family business and you want to carry on your legacy and you know that you've got kids in the business that you want to transition the business to, And they need to be brought up and taught to lead. And you need to put a delegation plan together. You know, the rule of thumb on most of these family business centers is 10 years in a situation like that, because it takes that long to groom the next successor. Not always, right? Maybe there's someone that's been in a leadership role that, you know, you're all ready to pass the baton to, who's maybe your COO, and maybe they're a family member, maybe they're not. Just because they're a family member doesn't mean they need to work in the business. And doesn't mean that they need to lead the business. So more stories on that if we, you know, had the time, I'd tell you. But yeah, give yourself time. And we don't want to leave money on the table. And how is it that we could leave money on the table? Well, not knowing exactly what the business is worth, for one thing. Understanding the market and the timing of the market, which really is, is more in the camp of a dealmaker to help you to figure that out. Because there is timing, right? There's timing with, you know, economic cycles and, and things like that. So you just want to kind of have that tapped into and make sure that you've got good advice on that end. And then you want to have good tax planning. So you really need to have a good CPA and a good financial advisor who can work together to help you figure out what kind of structures are definitely not in your best interest and what kind of structures could be. Like, here are maybe some of the options that you might want to think about. And if you chose this particular path, then these are the strategies that would go along with that, that could save you lots of extra dollars to the IRS, right? No one wants to pay more than they have to. Um, and then as well as like, you know, just the structure in and of itself. Like, if you're selling internally, are you going to carry any paper? And if you are, you know, how long do you want to carry? At what point do they start paying you back? You know, all of that is just— it's so much depends. But those are all— are some of the things, right, that that can jeopardize the best outcome for the owner or conversely make it like the best outcome ever because you got one shot really, usually, not always, but usually you got one shot at doing it right and you don't want to DIY on something like this.

No, no, thank you. Yeah. And that kind of brings into one of the last questions we always ask is what one piece of advice would you give our listeners that are running groups that might help them whether it's to have this conversation inside the group with an owner or just anything in general that might help them help the business owner?

I think just understanding what the process itself is. You don't have to become an exit planner because you've already got a role, but kind of understanding a little bit about the process and then, and then just asking questions and getting the conversation going because that's how it starts. That's how business owners start thinking about it in their head before they actually start implementing. And, and using the, the expertise of the advisors that they already have on their team is one really great way for them to get things started. And so, you know, you could just have a conversation with them about how comfortable do you, do you feel, you know, about the team that you currently have on, you know, that's, that's advising you in your business? How comfortable are you with them? And if you, if you felt like you had a gap on the team, where would the gap be? You know, are you, are you thinking that your CPA firm doesn't really have the expertise? Maybe there's somebody in the group that could make a really good recommendation and so on. And so that could really get the ball rolling, and then, then those conversations could get things going even further.

Excellent. Yeah, and that's helpful. And that brings to mind, um, that what I hope one of the key things that is being taken away from this conversation is to just have the conversation and open up for dialogue.

Yeah.

And particularly any of you, I know that if you have run, you know, been running groups for a while and you had a member sell, you can always have them come back and talk about their experience with the group. And that, that is really, really great learning. Or just even any business owner can be helpful with that as well. So, Julie, how can our audience get in contact with you if they wanted to?

Yeah, they can go to my website poisedforexit.com. I'm sorry, yeah, well, I still have that website actually. That's my, that's my podcast website poisedforexit.com. Keystrategies.com is my consulting website, or you can find me on LinkedIn at Julie Keyes, K-E-Y-E-S. But I would listen to the podcast and educate yourself a little bit on the process of exit planning through listening to some of those episodes, and then feel free to share that as a resource to the members of your groups. It's free. The shows are short. We put the shows together to accommodate business owners because their lives are busy. It's not a 3-hour show, it's 23 minutes. So it's a commute or a dog walk. Excellent.

And we'll have a link to your podcast in the show notes for everybody because definitely recommend that. That's a great place to start.

Great.

Yeah. And definitely go to your website because I know you have resources there and other thoughts for people.

Lots of them. Yeah.

Yeah. So thank you. So, Julie, thanks for joining, talking about a topic that of the entire time I've been doing Mastermind Mastery Podcast, we have not talked about, and it's long overdue. And I'm happy to be here sharing your wisdom with everyone. So thank you. So, Julie, absolutely. And so to all of you out there, biggest takeaway that, you know, have the conversation with your, your owners and your groups and get a little bit educated if you're not. Because there's a lot of money that can be left on the table if it's not done correctly and you don't want that.

One quick suggestion too is if there's anyone out there who has a group that would just like to have someone do a 20-minute guest spot, I'm happy to do that. So just ping me. Happy to have the conversation with you, for you, for your group to get the ball rolling. So let me know. I wouldn't charge for that.

Excellent. That's a great offer. So thank you so much for doing that.

You bet.

All right, everyone, until next time, go make it happen.

Thanks, everybody.

Thank you everyone for listening to another episode of Mastermind Mastery. And to get access to today's episodes, not only the show notes but any tools and resources, encourage you to— not only will you find them in the episode show notes, but also you you can go to the website www.lxcounsel.com, so lx counsel.com, and you will find a plethora of articles and content and tools and resources and worksheets and things like that that can be helpful to you in creating and running successful PACs. I want to leave you with one that we end and teach to do in every single meeting, and that is the very last thing is to ask, what is your takeaway from today's episode? I encourage you to give that thought. Take advantage of the time you just invested in listening to the episode, and what can you do to move one step closer to the vision that you have and the goals that you're trying to achieve with your groups? So again, take a step back. What's your key takeaways? What can you actually act on? And I leave this with one note. And those of you that have read my book, Your Seat at the Table, you know that I ended the book with a story about my mentor. He always, when he met people, had a pebble in his pocket that he passed to them when there was knowledge shared. And so I ask you today to think about that pebble concept and to pass what you learn you learned today on to someone else, which could be your members, or take it internally to yourself and act on it. So now go do something with those takeaways.