Intentional Growth

We’ve got a seriously wise man on the show this week. Not only did he sell his business for way more than the original offer, he then strategically mapped out the framework for his second half and he is having a blast doing it! Rob’s goal for his life after business was to go into another venture, but despite feeling restless while working for the company he sold to, he only took the plunge once he had identified an opportunity that met the five strict criteria he’d devised. He is a great example of how good planning can set you up to succeed in a life after business, which of course is exactly why we’re here! How was the business valued when Rob first bought it? His investor used a multiple on the company’s net income and arrived at a figure. It was then agreed that whatever percentage of the figure Rob was able to pay would ultimately equal the share of the business he would receive. Rob eventually ended up hitting 100% and took full control of the business. How did he grow the business? The business was strictly grown out of profits. After the initial investor was out of the equation, there was no external financing. What was the key decision that made his first business a success? They hired a management consultant that forced them to really get a hold of their metrics. In his words: “that was the most transformational thing as CEO – it had the greatest impact”. The increased accountability for all staff made results improve immediately. One of my favorite things that Rob said was that the metrics and data got him and his employees all working in the same direction. The data became the measuring tool instead of Rob.  He was able to move to the same side of the table as his employees instead of being the bad guy “telling” his employees what they needed to do. The data became the “hero” or “enemy”. They had real time information that measured how they were doing and allowed them to work as a team to march in the direction that was universally visible to everyone. What was the triggering event that lead Rob to sell? A larger competitor reached out to Rob and asked him if he was willing to sell.  In Rob’s mind it wasn’t for sale, but he did provide the bidder with some rudimentary information to help with the process. He turned down two offers but remained in communication and set a price that would work, as well as some conditions. Rob stipulated that it must be a cash purchase and that the deal had to be concluded in the two months before year end. Miraculously the buyer agreed to the higher price and to all of the conditions. Why was the deal able to close so fast? A deal of that nature was only made possible because of the data dashboards and excellent book keeping Rob had put in place.  Rob was able to provide all the information that the buyer wanted, and much more, almost immediately.  The confidence that they buyer had in Rob and his operations eliminated any hidden surprises that may have popped up to derail the deal. The advantages of a strategic buyer vs. a financial buyer: In Rob’s experience a strategic buyer is easier to deal with. Due diligence is less rigorous and the price they pay is likely to be higher because they have the know how in the marketplace to make a return on the dollar they pay. He’d been receiving enquiries from private equity firms long before the sale but didn’t give them the time of day. Although he wasn’t particularly interested when the strategic buyer first came to the table, he was at least interested enough to volunteer information. What was it like being an employee after he sold? In Rob’s words: “I never considered myself an entrepreneur until I stopped running the show”. He suddenly realized he wasn’t happy without the decision-making ability. He knew he had to get out but his Dad advised him to not start another venture just because he was frustrated with his current one: there had to be a robust plan for the next step. What was his next step? Over time he developed a list of 5 things his next venture had to be in order to make his next step fulfilling: He had to stick to what he knew (i.e. marketplace) It needed to be tech or software focused It had to produce recurring revenue It had to have the potential to scale beyond the US He wanted to solve a problem that he’d dealt with personally What was the venture? An analytics business called Grow.com which he was inspired to create when he got deep into the analytics at his previous firm. He was very passionate about data and tech and wanted to help other owner’s get access to the types of information he had.  He saw that off-the-shelf software tended to be either very low level or aimed at massive corporates, so he set about exploiting the gap in the market. Wise words for the road: [clickToTweet tweet=”“Every entrepreneur should go through the experience [of a sale]… it’s a very rewarding time.”” quote=”“Every entrepreneur should go through the experience [of a sale]… it’s a very rewarding time.”” theme=”style2″] [clickToTweet tweet=”“When people can see the score, performance naturally increases.”” quote=”“When people can see the score, performance naturally increases.”” theme=”style2″] Contact Rob Head to grow.com Rob Nelson Founder & CEO 415-614-4474

I run a podcast that is meant to help business owners have a successful exit that keeps their needs, post-exit, in mind. When I met Lisa Schiffman, I was amazed by the type of work she and her business partners are focused on doing for women in business — particularly because this is a male-dominated industry and the stats these ladies are putting out regarding the improvements they’re making across the board are impressive. Lisa and others at Ernst and Young are running a program called “Winning Women” which offers financial support and backing for female entrepreneurs who wish to grow both financially and professionally with their business, whether that means market research, product innovation or another aspect of the business that they wish to grow. They did a study on the program for their 10-year anniversary because they wanted to celebrate the successes they’ve had and spread the word about the wonderful work Winning Women is doing in the business world. The Ripple Effect We all know the saying about fishing, which is roughly this: gives someone a fish and they eat for one day; teach someone to fish, and they’ll eat for a lifetime. Well, this organization is teaching female entrepreneurs how to fish — and these ladies are reeling in the big fish! Winning Women recently had a study done of the impact of their business for their 10th anniversary. The results of that study showed that 83% of Winning Women say they benefited from the advice and mentorship of their peers available to them in this program. A common issue in the business world for female entrepreneurs is finding an appropriate role model or mentor; Winning Women has 430 entrepreneurs in 50 countries around the world available to be a mentor. This is a huge well of ability and knowledge that is unmatched anywhere else in the industry. On top of that, almost every woman in the program (96% of them!) has said that she feels a unique responsibility to support other women. They do this by hiring or advancing women within their business (90%), being a role model (94%), mentoring women outside of the organization (90%) or even opening a new business with other Winning Women in the program (21%). That is remarkable networking and the best pay-it-forward model I have seen in a mentorship program. Are There Real (Financial) Results? If the mentorship aspect isn’t compelling enough, stats relating directly to the health and success of the businesses themselves were positively impacted as well. For example, Winning Women increased their headcounts by 166% in the last 10 years and also grew their return on average compound annual growth rate (CCAGR) by 35%. Transactions done by these women have improved, as well. Looking into this year alone, 53% say they are planning to undertake a strategic transaction (43% of them for the first time!) through alliance (47%), merger (18%), acquisition (16%) or an IPO (5%). For those seeking external financing for these transactions (53%) in the next twelve months, 51% are still thinking about doing traditional bank loans while 16% say angel investors, 11% say venture capitalists and 2% say private equity. Winning Women looks to improve industry knowledge in this financing area for these women so that they can be more competitive in the market and garner greater success. Direct from their website, here are some other fun stats to know: Individual participants average 20% revenue growth annually; in the second year of participation, however, their companies have been known to grow up to 50%. Winners also report increases in entrepreneurial confidence, growth goals, networks and media visibility, to name a few. How Can I Become a Winning Woman? You need to be a female-founded company with 51% ownership being female. You need to have revenue of two million dollars for two years running (in North America). Then you go through an evaluation about accomplishments to date, done by a panel, and then about your prospects and goals for the future. They ask you to prove you are an ongoing concern with lots of opportunity ahead, a solid business model behind you and knowledge of your market as well as how unique your product or idea is for that market. What Is Involved in Mentorship? Once you are accepted, Winning Women will train you on all aspects of business. Your mentor and yourself (or you and your mentee) will look over the business as a whole and discuss methods to improve it. Conversations regarding capital and where to find it, improvements on the business model itself, finding other or better ways to improve efficiencies and even start discussions about gradually pulling yourself out of the business by hiring a good operational manager who will allow you to focus more on business expansion rather than the day-to-day operations. Through mentorship, Winning Women helps you figure out your social and online presence so you can build a strong brand for yourself and establish your industry expertise to make you more of a contender in your market. Mentors have been carefully selected and have a wealth of knowledge to share with you that has been hard-won over the years and improved upon by the multitudes of women who have gainfully used this program to improve their business model. My own experience with these women was remarkable. I saw a group of women who were dedicated to improving each other, building trust, and trying to give before they took. The feeling of validation these women achieved by being accepted into the Winning Women group was palpable; and that feeling was perpetuated by each woman boosting up the other and building unique networks that accelerated growth for these businesses at a level that was previously unattainable. If you want to be part of a group of women for women in business, check out EY’s Winning Women group here.

We’ve had some excellent discussions about the many benefits that an ESOP can bring, so we thought it was time to go in-depth with someone about their own ESOP exit journey. Having built up her own highly successful SEO business, Nina Hale has now begun her second half and is in a life after business where she has some great balance and passion in her new ventures. Her story is a great example of how an ESOP can benefit a company every bit as much as it can benefit the seller. What was Nina’s motivation to go down the ESOP route? Nina felt she could dictate the terms of her exit far better with an ESOP than with a sale to an investment banker or rival. Right from the beginning of the business she was very keen to provide an environment for people to have a sustainable career, so an ESOP was the best way of preserving this culture after exit. It also gave Nina a vehicle to be philanthropic towards the workforce that helped make her company so successful. What made her get out? She hired a great managing director, Donna Robinson, who was keen to take on more responsibility. Nina then asked her if she one day wanted to run the company, which she did. She said “she was in for the long haul!” This was the beginning of the succession plan. How did she measure the value of the business? She hired a valuation firm who went through all the usual procedures. Then once Nina hit “her number”, she decided that anything above that should be used to reward the loyalty of her employees. Nina was comfortable with the fact that an ESOP can only ever offer a financial valuation, i.e. a valuation based strictly on her own company numbers. The strategic valuation, where a market competitor may pay a higher sum based on factors such as synergies, future growth and market share, is not part of an ESOP valuation. What was the legal process? Very cordial and stress-free for the most part, because Nina was able to hire the team for both the buying and selling side of the transaction. It felt like a project rather than a a negotiation. What are Nina’s current terms? A promissory note, where Nina wrote a loan to the company which the company is paying back to her at a specific interest rate. Because one of the loans was unsecured, a warrant was set up so she would be able to buy a certain amount of stock at a good price. The company has to buy that stock from her a year after the loans are paid off. This keeps her motivated to make sure the company is doing well. Nina’s explanation of retention stock: Retention stock is part of stock appreciation rights. It encourages long-term loyalty, i.e. a 7-year agreement that doesn’t pay anything for the first two, but then 20% each year thereafter. She wishes she’d have done more of this with the employees. Wise words for the road: “If you don’t have an exit strategy, you don’t have a strategy.” “Really understand what your goal is and be true to yourself. Don’t hang on when you need to bring in somebody more professional than you. Sell too soon.” Contact Nina: Visit ninahale.com  

Valuations, Gross Sale Price and Net Proceeds… What Really Matters? I had a great conversation with Scott Miller in this episode and we tackle some of the most important concerns every business owner have has when transitioning their company, how does gross dollar amount turn into net proceeds in the bank? AND how long does it take to get it and what do I have to do to get it? Scott is a serial entrepreneur as well as a CPA. He knows what it’s like to be on every side of the fence. Just how can you protect those net proceeds from all the clever tricks a buyer and their attorney might pull? Keep listening for the answers, or if you’re pushed for time, read on below for the show summary…. What is the difference between valuation and net proceeds? The first question to ask, post-valuation and at the beginning of the negotiation after the buyer tries to wow you with the gross sale amount, is “what are the terms?” The figure given as a valuation and the offer that is in the Letter of Intent will be subject to many things, i.e. earn-outs, seller financing, management agreements. The best way to approach this is to get the baseline figure agreed upon WHILE knowing the EXACT net proceeds dollar amount you are trying to get. Then know where you have leverage with the buyer and know as much information you can gather about why they would want to buy you so you have the upper hand any time there is a negotiation. THEN if you have to give and take KNOW what you are giving up as part of the process just in case whatever you agreed upon doesn’t follow through. Who prepares the documentation for the transaction? Typically the attorney for the buyer sits in the driver seat of the transaction and drafts up the purchase agreement and sends it to the seller’s attorney. So therefore, documents tend to be drafted with all kinds of intricate caveats to provide a cushion for the buyer. For example: if it is in the buyer’s best interest to have an asset sale with the classifications of revenue a specific way to help them recapture the expenses and depreciate the purchase in a certain way, they will do that. REGARDLESS of what it means to you and your net proceeds. A few simple reclassification moves might make the buyer a ton more money but it could mean the difference between capital gains and ordinarily income for you (or 30% +/- in taxes!). How do you guard against getting burned in negotiations with a buyer? In Scott’s words: “Professionals who are well-versed in the world of transactions are really worth their weight in gold. They’re able to distance themselves from the emotion that business owners have typically invested in their company. If things are said during the negotiations to the owner. it’s like calling your kid ugly” Asset sale vs. stock sale A stock sale is typically favored by the seller because the stock will all be taxed as capital gain, so the buyer is assuming any liabilities going forwards. In most cases a buyer will prefer an asset sale because they get to allocate the purchase price to assets that typically promise the highest return on capital. For the seller, many of the items they’re selling are ultimately taxable as ordinary income.  What should a seller do to make sure they do well from an earnout? They should attach the earnout to something that’s easily verified, i.e. sales. It’s very easy for the buyer to take it down the road of profitability, but there is a so much more that can be massaged when it comes to profit numbers. A proper exit planner rather than just a standard company attorney will be able to iron these things out. How will an ESOP affect the net proceeds for a business owner? When most companies sell it will be an asset sale. By statute an ESOP is only permitted when acquiring stock. In an ESOP a seller is going to be subject to capital gain. The owner is in control of the process i.e. how much sold, when it gets sold. For the buyer the tax benefits are unbelievable … a 100% S-corp ESOP is income tax free. They pay no state or federal income taxes. Corporations tend to be passed through entities to avoid taxes, so normally their shareholders take the hit. but if the only shareholder is the ESOP trust then the trust pays no income taxes. It means that all debt is repaid with pre-tax dollars. Wise words for the road: “Transitioning is a journey. The informed business owner understands it’s going to take some time and some very good strategic planning to have a successful outcome.” [clickToTweet tweet=”“If you don’t know the game, the buyer wins”” quote=”“If you don’t know the game, the buyer wins””] Contact Scott Enterprise Services Inc: 262 646 6490 smiller@esi-enterprise.com Scott D. Miller, CPA/ABV, PFS, CVA Scott D. Miller, CPA/ABV, CVA, is President and founder of Enterprise Services, Inc., a firm that provides financial consulting services to business, specializing in business valuations and ESOPs.  Mr. Miller is widely acknowledged as a leading authority on ESOP valuations for closely-held companies, having served over 600 employee owned companies.  He previously served as Vice President of Finance and Trustee of a large ESOP company, is often published in major professional journals and authors seminars for professional organizations and industry groups.  He has authored several books including: “ESOPs Savvy Strategy for Tax Management, Succession and Continuity” (AICPA, 2012); “Buyouts” (John Wiley & Sons, 2013); “Navigating Mergers and Acquisitions Guidance for Small and Medium Sized Organizations” (AICPA, 2013).  He currently serves on the AICPA Forensics and Valuation Services Executive Committee, the Board of Directors for the Wisconsin Institute of CPAs, the ESOP Association Board of Governors, and the Board of the Exit Planning Institute.  His undergraduate degree is from Kenyon College and he holds an MBA from Cornell University Johnson Graduate School of Management.

We continue the theme of ‘halftime’ in people’s lives by speaking to Lloyd Reeb, an eminent author and speaker who coaches and mentors for the Halftime Institute. Lloyd shared with us some great advice about how to use an existing business as a platform to do good for others and for yourself, and his own story will strike a chord with many people too. In his words: “I was pursuing the american dream without any sense as to where it was going to take me” In today’s episode, you will learn: What the most important question you need to answer as an Entrepreneur What it’s like to use your company as a platform to live the life you want The Post-it note exercise to a great management team How to find the right people to go on the Entrepreneurship journey with you The 3 steps to find the best path to a great life and business What was the moment when he realized his corporate life needed to change? At the age of 30 he travelled across Asia and ended up in Manilla to visit a friend who was a missionary. He spent most of the week in Manilla playing basketball with kids and talking to them about faith. After that he went to a 5-star resort in Malaysia and realized he had more fun with the kids in Manilla than he did in the sanitized surroundings in Malaysia. How did he start the process of change? He looked at his life in the same way as he would look at his businesses. In his words: “you wouldn’t build a business without metrics, but how many of us use metrics for our own life?” Then his mentor Bob Buford (author of Halftime: Moving From Success To Significance) empowered him further by saying: “You come into my office and give me these goals every year, but you’ve never told me where you want them to take you. Any time you’ve got free, work on the question ‘if your life was perfect; what would it look like?’” Lloyd’s advice for what you can do today as a family: Ask yourself three questions: Is there any limit of money you can spend on yourselves? If there is, what is it? What is in my kids’ best interest to inherit when I pass away? How can you find your ‘mission’? The first thing you should do is watch Lloyd’s TEDx Talk.  It is amazing and summarized everything you need to know Lloyd’s big point is for people to understand their mission in life before they make wholesale changes. It might be that their current company/workplace can help them do that or it may be that they have to move on. In his case he defined his mission as being a thought leader rather than an operator, so he relinquished his day-to-day management responsibilities and set about finding fields of work that had thought leadership at the forefront, hence how he became an author. He has also seen many examples of people using their companies creatively to make the kind of impact they want as part of their mission, i.e. a man who had a company that sold jumpsuits for prisoners created a sub-organization dedicated to preventing convicts from re-offending. What did Lloyd learn from the battle to change his identity? When you reinvent yourself, you’re going to go through a detox process. You’re addicted to the adrenaline of everyday business so it figures that it may take some time to adjust to a life without it. Understand there is a ‘head journey’ and a ‘heart journey’ in midlife renewal. The head journey is things like ‘what am I going to do with my time?’ The heart journey is the concept of allowing your heart to change, i.e what drives you, what makes you happy. Wise words for the road: “If life has two halves then the first half is about making a living and the second half is about making a life” “If you don’t decide how much is enough, you will never have the freedom to help anybody else” “[after retirement] You’re swimming up stream, not goofing around on the golf course. You want to be surrounding yourself with people who don’t think you’re crazy for doing that.” Book recommendation: Halftime for Couples Bio and Contact info for Lloyd: Lloyd Reeb is a successful real estate developer and owner of retirement housing who made a mid-life transition, looking for greater meaning, joy and impact in his second half.  To his surprise he discovered that he was not alone in this journey and that many talented leaders are longing for midlife renewal. Lloyd’s had the privilege of investing more than 15 years now helping leaders plan their second half. He helped launch the Halftime Institute, a global team that teach, coach and connect successful men and women in pursuit of significance. In Lloyd’s words, “When all you’ve done or own seems to matter less …and your heart craves more meaning, joy and balance…when something triggers in your mind that you’re entering your second half of life and you’re unsure what your calling is for the next season… you’re in Halftime.” Lloyd has taken the Halftime message around the world: speaking, teaching and coaching individuals through the journey. As a result, Lloyd understands the issues that surround your Halftime in a deep and practical way. Lloyd is the author of From Success to Significance: When the Pursuit of Success Isn’t Enough, which is a road map for this mid-life transition. His book The Second Half: Real stories, Real adventures, Real significance provides compelling evidence that your second half could be the most creative and productive season of your life. Lloyd and his wife, Linda, have written the latest book in the Halftime series titled Halftime for Couples. They live in Charlotte, North Carolina. They have three adult children. Lloyd.Reeb@halftime.org

Today we’re speaking to someone who truly understands a life beyond business. As CEO of the Halftime Institute, Dean Niewolny has been empowering people to find fulfillment in their lives outside of work. Dean has lived through his very own crisis too. Having spent 23 years in senior exec roles across Wall Street, he can remember staring out of the window one day and wondering what it all meant. That feeling of emptiness persuaded him to sign up to the Halftime Institute as a client, and it wasn’t long before he was given the opportunity to cross over to the other side and become a member of their senior management team. What a meaningful conversation we had – it’s well worth a listen – but if you’re pushed for time, read on for the summary of the show… What does the Halftime Institute stand for? Based on Bob Buford’s book, ‘Halftime: Moving From Success To Significance’, the institute offers guidance to people like Dean who find themselves at a crossroads in their career/life. As the title of the book says it is geared towards finding ‘significance’ rather than the endless pursuit of ‘success’. People find themselves working with The Halftime Institute after they experience what Neil called  “smoldering discontent”… They have achieved success in today’s terms but still feel like something is missing. They are on a search to find more meaning in life. What does ‘halftime’ mean? The concept of halftime started when Bob Buford woke up and had a “success panic”  in the middle of the night.  He had an epiphany that he was addicted to the kill and the thrill of the deal. He found himself asking, “What’s this all for? Is this it?” Halftime is not a time of crisis but a time to reflect.  It should be a catalyst for purpose, impact, and growth. Dean has seen the definition of what halftime means change significantly during his time in the business. When he started, it normally meant the literal halfway point in somebody’s life, i.e. at 40-65 they’d look to identify significance. Now he sees people begin the quest for significance ranging from their late 20s to their 80s. It also used to be very male dominated, but now the split is only 60/40 male to female. How do people reach the awakening? In the case of many business owners and highly successful business people, it’s a significant event like a death in the family or an illness. In Dean’s case it was the realization he was in a state of ‘smoldering discontent’. Can significance only be achieved outside of work? Not at all – this is a common myth that Dean is desperate to bust. The obvious thought in many people’s minds is to throw away their career and do something conventionally worthy like open a homeless shelter, but it is distinctly possible for people to use their existing platforms to find better fulfillment. According to Dean, 70% of people who complete Halftime programs actually stay where they’re at. They simply find ways to reach significance with what they already have. How do you find your significance? Dean tried to do it on his own and it was a disaster. He advises you to take a pause in life, ‘figure out your strengths, passions, gifts and what makes you sad, glad and mad.’ Dean says it’s essential to have someone walk you through the journey. There are also great benefits in doing it as part of a group because sharing the journey with somebody else at the same level is a great motivating factor. What are the main obstacles that prevent people from finding their significance 1.) Fear In many cases this is unfounded. Very rarely will people go through a program of change and be thrown into anything uncomfortable, but the fear of this often prevents people taking the plunge. 2.) Spouse The above can manifest itself in others close to you. The concept of challenging the status quo can provide insecurity in the family home. 3.) Identity crisis. At the point of thinking ‘there must be more to life than this’, there can be a conflict between who you want to be for yourself and who you think you need to be for those close to you.   Wise words for the road: “How can we use our 8-cylinder engine to do good instead of our 4-cylinder engine?” “People who have a lot of stuff are often the most unhappy” “Don’t leave what you’re doing until you’ve exhausted every idea you can think of that is associated with that” “It’s about identifying what you love to do and building margin in your life in order to go do that” Get in contact with Dean: Website: https://halftimeinstitute.org/hti-faculty/staff/  Email: dean.niewolny@halftime.org Bio: Dean Niewolny spent 23 years in executive roles with three of Wall Street’s largest financial firms, finishing his career in the financial sector as market manager for Wells Fargo Advisors in Chicago, where he oversaw a $100mm market. While in Chicago, he and his wife, Lisa, traveled many times to Africa and, seeing the abject needs of widows and orphans, made life changes that enabled them to get involved, such as helping to complete an orphan home and a Hospice home in Durbin, South Africa. In 2010, Dean traded his marketplace career for Halftime to help more people who, like him, wanted to expand their own “first half” success and skills into passion and purpose for meeting human needs and making a significant difference. Dean joined Halftime as managing director and in 2011 became chief executive officer. He speaks at events around the world, encouraging business leaders to channel first-half achievement into a second half defined by joy, impact and balance. Having grown up playing sports—eventually in college and semi-professional baseball—Dean still enjoys coaching youth sports, especially his son’s little league teams. He and Lisa have two children and live in Southlake, Texas. “The appetite for significance is at an all time high, yet most people have no idea where or how to identify their gifts and talent—and to connect to their passions. And that’s my love for Halftime. Nothing satisfies more than to help a man or woman say, ‘This is what God has for me to do.’”   — Dean Niewolny, Halftime Institute CEO

We’ve gone for a different take on this week’s episode by speaking to someone who’s never sold a business. What we like about Matt Shoup is his perspective. The way he has managed to get his business to a point where he can disengage from it whenever he wants is a great lesson for all of us. As well as the obvious of achieving a good work/life balance, presiding over a business that doesn’t need you is the ultimate goal in maximizing the sale value.  In Matt’s case it has also enabled him to be a proper family man, indulge his passion for jiu jitsu, and travel to Spain as and when he pleases. What got him into the trade? He started working as a painter as a college summer job, but back then had no idea that it would lead to him founding the multi-million dollar painting firm he owns today. It sure was a bumpy road that got him there. Having graduated from college he worked in a bank and in his words ‘lived the American Dream’, i.e. big house, big car and started a family. Unfortunately he over-extended himself to make it happen, so when he was suddenly made redundant, he had $20,000 of debt to worry about. Before he’d even called his wife to tell her he got in touch with a couple of old painter contacts and then proceeded to throw himself into the painting business full time. He did $500,000 revenue in year one, and now, 15 years later, his company is consistently doing $2 – $2.5 million every year. What made him change his priorities? He thought to himself one day, “what is life going to look like if I keep up at this pace?”. He felt that he’d miss family time if his company was going to continue to grow. He also realised that the growth was actually hitting his profits, having fallen into the classic trap of chasing revenue rather than profit. He noticed that as they were expanding to other markets/areas, they were losing market share in their original core market, so he reined in the growth and returned to the company’s natural niche. How did he delegate? Once he felt the business was solid after the re-alignment of the growth plan, he made a list of everything he did on a daily basis and then gradually crossed out more and more of his tasks. He realised he was being a control freak and ‘gave people the responsibility they should have had from the get go’. Then he kept going on vacations. Small at first, but even just a few days away helped focus the workforce in his absence. Before he knew it he was able to go on eight-week vacations without it adversely affecting the company. How did he cope with letting go? He remembers a moment where his senior management basically threw him out of a meeting and said they’d be able to get more done without him there. He had mixed feelings of pride that he’d achieved the goal of having his company run without him, but he also struggled with the notion that he wasn’t needed any more. Jiu jitzu suddenly became his salvation. He started to draw analogies with jiu jitzu and the judgment he needed to run a successful business, and that, along with regular travel to Spain, helped fill the void. Wise words for the road: “I feel that I end up being more effective, efficient and profitable when I put business last in terms of priority, rather than focusing on it all the time.” “It does not matter about what you think about your company; it’s what your customers and community say about you that will build your brand.” “Own your worst and show people what you do to make it right.” Matt’s books: Become an Award Winning Company Plant Your Flag

Pamela Dennis is the author of one of 2016’s best books on exit planning, so we’re super-excited to get her on the podcast.  She has her own exit story to tell us about and then was able to package what she learned into a book that is practical and easy to read. Pamela has been there and done it with her own business, and not just any business, a professionals services firm.  Many say that this is the most challenging industry to get top dollar for.  Firms are valued at 1 or 2 times earnings because more often than not the firm revolves around the owner and their intellectual property… therefore there isn’t much to transfer or sell.   However, not only did Pamela engineer the perfect exit, she managed to achieve what for many business owners is the impossible.  She used their intellectual property to license and monetize their professional services business. And what’s more, she has the most exceptional ability to put it into words  – there are just so many great metaphors and easy-to-remember nuggets from this interview! Some stats to start us off: 75% of small business owners have their retirement equity tied up in the business. 25-27% small business owners sell for the true value of their business, 20% just close the business all together. The number of small-medium business owners that are going to turn 70 in the next 10-15 years is going to grow 600% in 10 years and 900% in the next 15-20 years. Companies that spend 6 months or less selling their business only get 50-70% of the value on average. Why do only 13.6% small business owners have an exit plan? Because they’re too busy. Because they think it can be delayed. It scares them because they don’t know what they’re going to do afterwards. How Pamela’s exit plan was aided from the very beginning: Pamela had a very clear vision of what she wanted.  She said that her husband tells her that planning is in her DNA.  That’s not the same for all of us!  However, Pamela gives some great advise on how to put your thoughts to paper. On one side of paper Pamela mapped out the absolute fundamentals of the business: “What it will be, what it won’t be, the kind of work we want to do, the kind of work we don’t want to do, the clients we want, the clients we don’t want.” This was the framework that helped the business build value year on year. It gave her a clear direction on where she was in relation to her vision for her future. How was the business value built? Because a professional services business doesn’t have hard assets, higher multiples on pre-tax income is always a challenge. The value Pamela and her firm got came from their track record of hitting double-digit growth targets every year, by hiring partners who wanted an equity position in a growing business, AND more importantly their ability to package their services into protected intellectual property (i.e. licensing out patented training programs), What was the compensation structure for the partners? Partners would get paid on a percentage of ownership, how much revenue they drove in the year. BUT the more interesting and more important thing they did was tie the executive compensation to how much intellectual property they had created and what the projected revenue was in the next two years. This was how to get people to stop working on the now and look at the future. Pamela’s advise here is critical. Her experience was that if you don’t build a structure like this everyone in a firm will always look at non-billable hours as time wasted.  However the non-billable hours that were spent on the intellectual property building were the exact thing that made their firm worth the top dollar! “You need bifocals. First to look at what’s right in front of you, i.e. this year’s goals. Second you’ve got to have distance vision i.e. where does my operating plan take me 5 years from now?” Why targeting a particular buyer is so important: A certain ‘type’ of buyer can completely change the narrative of your exit plan/financials. Pamela defined buyers into three categories: ‘Strategic’ buyers who are looking for synergies between the business for sale and the areas in which their current business intends to grow. ‘Financial’ buyers who intend to flip the business at a profit. ‘Ready-to-wear’ buyer effectively buying themselves their next job. Wise words for the road: [clickToTweet tweet=”“The secret of good exit planning is start early'” quote=”“The secret of good exit planning is start early and stay disciplined. Make sure what you do year on year is leading you on the same highway of that exit.”” theme=”style2″] [clickToTweet tweet=”Look what motivates you, not what activities you love to do… what is it that makes your heart sing?”” quote=”Look what motivates you, not what activities you love to do… what is it that makes your heart sing?”” theme=”style2″] [clickToTweet tweet=”“The test of a successful sale is, a year later, can you say ‘I’m happy?’”” quote=”“The test of a successful sale is, a year later, can you say ‘I’m happy?’””] [clickToTweet tweet=”I want to me happy a year later!” quote=”I want to me happy a year later!” theme=”style2″] How to contact Pamela: Website – www.pameladennisphd.com Email – pamela@dennisconsult.com Link to Exit Signs the book – HERE Pamela Dennis Bio: For 30 years, Dr. Pamela Dennis helped some of the world’s top leaders successfully lead their organizations—from global Fortune 100 companies such as GE, Merck, JP Morgan, GM, BHPbilliton, and Telstra to emerging companies and closely held partnerships in private and public sectors. She speaks to international and national organizations on leadership and change, with the emphasis on leading transitions. Pamela is affiliated with the Women’s Council of the Leeds School of Business, which supports developing women in leadership at the University of Colorado, and holds a PhD in Organization Development and Education from the University of Colorado. Pamela lives in Boulder, CO, and part time in San Diego, CA.

After long service as a United States Air Force officer, Todd transitioned to independent practice in family wealth services in 1992. He specializes in asset protection planning and complex tax planning for families that own middle-market companies. In particular, he focuses on tax mitigation for business dispositions. Todd collaborates with a wide range of professionals that touch business sales: exit planners, M&A advisors, accountants, attorneys, and investment professionals. Todd holds a law degree, an advanced legal degree in taxation, and a doctoral degree specializing in finance. Todd is a contributor to Forbes Magazine online; his column focuses on issues confronting families that own middle-market companies. In this episode, you’ll learn: How to play “nice” with the IRS When insurance may or may not be needed in estate planning Strategies on how to save up to 80% in taxes when you sell Conflicts to be aware of among advisors during a transaction What a ‘private letter ruling’ is Where an Exit Planner can help in your transaction Nothing like Uncle Sam taking half of your business proceeds when you sell… that’s why you sold your soul and worked your ass off for the last couple decades right?!?!? Good news folks, we’ve got someone on the show today who can show you how. As a partner at the Integrated Wealth Counsel, Todd Ganos is a specialist in tax planning who makes it his business to stay up-to-date with the constantly evolving tax regulations and legal precedents. If there is one episode of my show so far that fulfils the purpose of “bringing our listeners all the information I wish I would have had before we sold”, this is truly it. I know, based on some of the conversations I have had with Todd, that there were a few things we could have done to put more than 7 figures INTO our pockets had we had the right advisors and the right planning. Don’t worry this isn’t some boring tax code episode, Todd shares with us colorful stories about what is possible in the shell game of the tax code and what to look out for when hiring your advisors. Todd shares with us a lot more than the technical detail of tax planning and estate management. He really helped shed some light on the many conflicts of interest that play out among the different parties sitting around the table during a business sale, and how business owners can avoid being caught out by the wrong ‘advice’. An interesting fact to start us off: 70% of all wealth in the US is in the hands of first-generation business owners. Tax planning and succession management are therefore fundamental to the prosperity of a large section of America as a whole. “70% of all wealth in the US is in the hands of first-generation business owners.” General advice from Todd: When selling your business, make sure you use somebody who specializes in business sales, not somebody who spends their everyday working life advising clients on how to properly claim their travel expenses. So often a CPA or attorney is assigned to manage a sale who simply isn’t qualified to do it. Just because your CPA drafted your articles of incorporation doesn’t mean that they are capable of doing the biggest transition IN YOUR LIFE! It’s vitally important that there is someone in your camp who is up with the latest legal rulings and law changes, and who doesn’t have an ulterior motive during the sale (more on this later). Todd’s method for saving a family business money: In Todd’s words, “there is no cookie cutter solution”, but Todd shared with us a method that has been tested by 80+ favorable rulings from the IRS. A trust can be created where the assets are taxed in a different location to where they operate, i.e. for income tax purposes a family business is part of a trust registered in Nevada (where income tax is 0%). And when the time comes to sell, the business is sold as if it were a Nevada resident. While any business in this arrangement is still subject to federal tax, the savings can be significant. “there is no cookie cutter solution for transition planning” Todd on estate insurance for the business owner: Insurance (as in many whole life, variable, etc. polices) have their place in many estate plans and have most likely done the owner significant justice should they ever need to call upon the policy. However Todd has some insight on how a skilled practitioner in tax, estate, and transition planning should generally be able to design an estate in such a way that insurance isn’t necessary. Insurance makes sense for people who don’t have access to this type of skill set (or don’t know where to find them), but why not pay for a skilled planner instead of insurance? How to play “nice” with the IRS: Have you ever had anyone suggest you bring your plan to the IRS BEFORE you submit your strategy? My guess is a solid “Hell no!” for most of us business owners. The whole goal is to outsmart them isn’t it? Well maybe not… Todd brings the game of tax planning to a whole new level and a different playing field. His approach shows that coming in peace to the IRS is far better than have them find out something negative about your business when your sale or transition is done and the documents are filed. What would you do if the IRS came to you 5 years after the sale was complete and asked for another million dollars because they didn’t really jive with your strategy and wanted you to shore up what they thought you owed… would you be able to pony up? Even if you could, I can guarantee that you would be one upset individual. Where possible, Todd seeks agreement from the IRS in the form of a ‘private letter ruling’ long before the ultimate sale of a business. Once the IRS has agreed with the structure/tax behavior of a firm, they can never go back on it if it remains the same. Believe it or not, they are good on their word! As well as giving great peace of mind for when the time comes to sell, the ongoing dialogue this creates is very useful in building trust between the IRS and the company for sale. A story about the conflicts of interest that can exist during a business sale: Todd dealt with a CPA, during a deal, who was a tax partner in a major CPA firm who said to him: “Even though we might be retained by a business seller, we really don’t care about them because that business seller has one deal in their life. The reality of the situation is the buyer… they’re feeding us 10 deals a year. That’s where we get our revenue and that’s whose interest we really look after”. In another case, Todd came across a CPA acting on behalf of the seller, going against convention and re-categorizing $200,000 in cash to the buyer. When questioned the CPA said “I want to get business from the buyer in future so I’m doing them a favor”. How can a business owner avoid these conflicts of interest? By hiring an exit planner or M & A adviser whose responsibility is to advise on the WHOLE picture, not just one specific part of it. They are not the investment banker, CPA firm or law firm. Todd’s firm regularly works with exit planners – he has seen their worth firsthand. What is more important in a family business sale: tax structure or the human emotion? Even as a professional tax adviser, Todd is very realistic in the fact that we are all humans and have motivations and ideas that may or may not be rational. Having both strategies in place is preferable, but the conversations about company structure should come after the more ‘human’ conversations. It’s worth noting that there are certain professionals whose sole job is to handle the emotional side of any transition, succession plan, or sale. Wise words for the road “Once you’ve got your buyer identified, you’ve foregone a lot of the tax savings you’ll be able to do. You need to have your tax plan in place before you shop your business.” “You have to have all of this planning – the exit planning, the tax planning – ready for the out-of-the-blue offer you cannot turn down” “If you’re selling a house you don’t just let the buyer do the inspection only with their contractor. You do your own before – you find where all the leaky pipes are and you fix them so when the buyer does their inspection they see you’ve got a clean bill of health. The buyer feels real confident in what they are buying and you had a chance to fix what you needed to” Todd’s Contact information: Forbes Magazine Online column is: www.forbes.com/sites/toddganos Best way to reach Todd is: todd@integratedwealth.com Website: https://www.integratedwealth.com 

What an amazing conversation I was able to have with Andrew Warner; a man who certainly knows his way around business podcasts, having done over 1,300 interviews himself via his own platform on Mixergy. Andrew was MORE than generous because, even with a 2 week old at home, he spent an hour with me talking about his journey as an entrepreneur and what roads he has traveled to get to where he is today. Andrew gave us some great insight into how he quickly built up a multi-million company with his brother and proceeded to exit the business and the grind it came with, before eventually reigniting his entrepreneurial spirit to get where he is today. There is a lot we can all learn from the vivid and amusing account of where his mind was at during the different phases of his life after business. In this episode, you’ll learn: The ideal type of business that kicks out cash What 1300+ interviews will teach you The fine line between financial goals and burnout Why you should find a way to put yourself out in the public What Andrew’s definition of legacy is How did Andrew Warner start out in business? Andrew always knew he wanted to sell… whatever he did he wanted to hustle and be passionate about what he was involved in. He found home in a partnership with his brother, trying a few web-based businesses before eventually hitting the jackpot with an online greetings-card business. Once Andrew gained an understanding of affiliate marketing and advertising space for email newsletters, the growth of the company was exponential. Andrew had some straight forward goals… to put 1 million dollars in the bank. The way to do that was, in his words, ‘to put in pennies and shit out dollars’. What did he do to make the company grow? By embedding a code that enabled him to capture the data from his greetings-card customers, he was able to harvest a captive audience for his regular newsletters. In the newsletters he would sell advertising space. Then he added another great money-making tool to his greetings-card signup process, selling the right for other companies to be able to offer their services to the same user. At one point he said he was paying 10 cents for each occasion a user populated a form, but was receiving $1.50 every time somebody signed up. What was his goal? He wanted to get rich and have $1 million in the bank, and leave a company that would outlast him. It took him 2-3 years to reach his goal of one million dollars in the bank but then he struggled to figure out what was next. Because Andrew is one determined dude, he couldn’t help himself but to keep competitions and benchmarks with himself even while he was on his “sabbatical“. He eventually defined it as: “let’s see how far I can run”. How long did the business last? After only 5 years, and tens of millions in revenue, Andrew and his brother hung up the towel of their company Bradford & Reed. But in his mind he’d wanted the company to last for hundreds of years. On his website he declares his exit strategy as ‘death’ (he’s inspired by the likes Apple and McDonalds, i.e. companies who outlived their owners), so although his business reached the initial financial goal, he didn’t hit his ultimate goal of leaving a legacy. Why did he stop so soon? Andrew hit a wall that many of us entrepreneurs can relate to… he worked himself too hard to think creatively and felt himself become less determined and less ambitious. He just kept wanting more, wanting to ‘run further’. But just like Forest Gump, if you don’t know where or why you’re running then it’s hard to know when to stop! How did he cope with the transition? Andrew’s friend got him into an exclusive gym in Manhattan. Because of his self-consciousness he would never have gone to a gym otherwise, but this was enough for him to fully embrace the fitness culture. He also got in to roller blading and would set himself challenges like completing a circle of Central Park. He would think to himself: “if I can complete this then I could overcome my business problems”. It was these little victories that kept his mind straight after he left his business. What next? For a time he didn’t think about being an entrepreneur. He moved to LA, saw a guy on Venice Beach selling trinkets, half asleep, and saw the peace in his eyes which made him think that kind of lifestyle would be good for him. Then he went traveling around Europe a few months. On his return to LA he decided he wanted to “hustle from the start to the top”, so he bought a table, chairs and a $3,000 suit with the intention of setting up a drop-in business advice service on the beach. He didn’t ever go through with it but the idea itself propelled him forward in the direction that lead to Mixergy. Why didn’t Andrew set up the table on the beach? In his mind it felt artificial – he was never going to be a beach hustler without a plan. He felt insecure about who he was in that environment, and was given some amusingly ironic advice from another hustler in the area who said he was better off setting up shop on the internet, “because that’s where everyone is these days”. Where did Mixergy come from? After throwing away the idea of table advice on the beach, Andrew started organizing business meetups, using the same principles of virility as his greeting-card business. Inspired by the fact that each of his cards would be sent to an average of 5 people, he made it a policy that each event would have 5 hosts, the thinking being that each host would bring at least 5 guests with them to boost the event. Eventually, after shifting business models a bit, and combining the words Mixer and Energy, ‘Mixergy’ came about. It has evolved into one of the most extensive business interview sites around, with content from the biggest entrepreneurs on the planet. It is a huge online community with millions of followers who tune in to listen to Andrew interview eminent people from the world of business. Andrew has finally started living the life that he was meant to live… building a legacy that will transcend time and leave everyone wondering where the great business and content of Mixergy came from!   Wise words for the road: ‘Everyone should do something public facing’ “The people we admire make a meaningful contribution that outlives them” About Andrew Warner: I’m an internet, startup entrepreneur. When I graduated from college, I founded Bradford & Reed, a company that ran a collection of startups. Our biggest startups did online greeting cards. We were also known for launching Grab.com, an online game site that offered the chance at the world’s first billion dollar jackpot. After I sold the last big chunk of that startup, I took a looooong vacation. I spent my days mostly cycling and traveling. Now I run http://mixergy.com On Mixergy, I invite proven entrepreneurs to teach how they built their startups. The entrepreneurs who’ve helped me out by appearing on Mixergy include the founders of Wikipedia, Groupon, LivingSocial, LinkedIn, and over 600 others. Want to learn from them? Start here: http://mixergy.com/get-the-top-mixergy-interviews/ Specialties: Startups, entrepreneurship, education, running Mixergy Website and About Page Twitter LinkedIn