Intentional Growth

On this week’s podcast we tell the incredible story of Conrad Braun, a man who not only managed to turn a business around from technical bankruptcy to profitability in a matter of years, but who also managed to follow most of the golden rules when he exited the business. He did all this despite having no experience of running, buying, or selling a business. In fact he only became involved in the business because he sold them an IT system. Hear how this accidental business owner managed to save the company by pleading in person with his major creditors to not cash the checks his company had just sent them, how he faced down the banks and persuaded them to extend the credit line of a technically bankrupt business, and why his battles with heart disease motivated him in his exit strategy. How to streamline a business and sell it: the moral of the story, with Conrad Braun Conrad Braun’s story really is a shining example of how to run a business from beginning to end, through good times and bad. Firstly out of survival and then out of motivation to grow something profitable, Conrad wanted to grow a business that was worth something to his banks, his vendors, and ultimately to he and his family. Transparency is king: By implementing the right systems of reporting, he effectively became ‘bankable’. From bankable to profitable and profitable to valuable, the path Conrad took is one to take note of. Go the extra mile with personal relationships: By getting on a plane and visiting his four biggest creditors to persuade them to not deposit the checks his company had already sent out, Conrad literally did go the extra mile. Once he’d averted the crisis, the rapport that he had built up ensured he was trusted in future. Define what it is that makes your company successful: It often isn’t just about volume of sales. In Conrad’s case, it was the expenses relative to volume that proved to be key. Remember who has the poker hand between you and the bank: In Conrad’s words: “When you’re a small businessman, if you owe them $100,000 you’re in trouble, if you owe them a million, they’re in trouble!” “Banks sell borrowed money. If you can show them that their debt to equity is improving, they will keep giving you money. Just give them a plan that shows them you’re going to pay them back” How did he value the company? He gathered a consensus from other companies who shared the same vendors. He then met with both likely and unlikely buyers and asked the question, “if I was geographically contiguous to you, how would you value my business?” He concluded that it was worth a lot more than the average multiple the industry was giving companies like his. What motivated him to sell? His struggles with heart disease motivated him to use the company as a means to protect his family in the future. How long did he spend planning the exit? 3 years. He went through a hypothetical sale with a prospective buyer who knew they wouldn’t be able to complete the deal, just to prepare the company for the real thing. What were the most important factors in the sale? He was more keen that people didn’t lose their jobs than he was to maximize the value of the company, so he built into the deal a stay-pay package which used 10% of the purchase price to distribute among his key employees after the sale. What did he do afterwards? Suddenly he had $2 million dollars, but he didn’t know what to do with the money. He joked that he got through 10 bucket lists, but not even this could prevent the boredom. He ended up working for the buyer he’d originally sold to. The division he ran became the most profitable division of the whole group. Wise words for the road: “If you’re successful in business, there’s an intersection – the intersection between ability and opportunity. But finding the right opportunity is sometimes rare.” Contact Information: Phone – (612) 387-0211 Email – conrad.j.braun@gmail.com

Exiting a family business can be very challenging – just what are the rules of engagement? How formal or informal should it be? How much should be based on good faith and trust? Our guest this week, Kurt Theriault, managed to navigate through all of the moral dilemmas and come to an arrangement to buy out his father’s share of his business, only for the Great Recession to throw a huge wrench in the deal. There was eventually a happy ending, when a surprise offer came in that allowed them both to exit the business. In one sense this is a cautionary tale about what can happen if you avoid tough conversations with your relatives and don’t value your business properly, in another sense it serves as a shining example of what can be achieved once you get your exit planning right. How to sell a family business and how not to sell a family business: the moral of the story, with Kurt Theriault In this week’s episode Kurt discusses the ups and the downs of exiting a family business, and how learning from the mistakes of negotiating with his father helped streamline the business to a point where it attracted a surprise takeover. See below for some of the highlights of the conversation: Use multiple sources to value your business: Kurt regrets only using one opinion. This process is especially important when dealing with family members inside the same business, i.e. if more than one party agrees on a valuation based on a wide range of factors, it is more likely to stand up to the rigors of negotiation and solidifying a deal. Put a value on your intellectual property: However many clients you may have, the real long-term value in the business is the unique nature of what you do. Clients can disappear overnight, especially when someone exits a business, so if it is possible to monetize the concepts that underpin your day-to-day business, then you should. Create an advisory board: This was a core building block for Kurt. Involving impartial 3rd parties in the valuation/streamlining of a business can be invaluable during the exit process. Hire senior employees with their own client base before exit: It’s vital to assure potential buyers that the business has a sustainable and profitable future after the owner leaves the business. This is a surefire way of doing just that. Understand the value of business support groups: This helped define Kurt’s entire future. It helped with his exit and it gave him his next venture. How did he value the company? He used one external source to name a price. What motivated him to sell? The value of the offer and the realization via his peer group that he could do fulfilling work outside of his current business. What did he do afterwards? He was offered an opportunity to be a partner in a peer group/support business for SEOs and business owners. Wise words for the road: “Business peer groups are vital. Everybody’s got blindspots that they can’t see… if you’ve got 12 or 13 people living in your shoes as an entrepreneur, they’ll help you” “The hard part of being an entrepreneur is: where do you go to get your ideas?” “Everyone should spend more time saying: what do I really want out of the business?” Kurt’s peer group business: www.alliedexecutives.com  Contact Kurt: ktheriaul@alliedexecutives.com 952-484-0166  

In this week’s episode of Life After Business we hear from the speaker, author, entrepreneur, and current owner of The Value Builder System: John Warrillow. John shares his story and the lessons he learned after building and selling multiple businesses as well as the inner workings of his pioneering value builder system. John wanted to fill the role of “Robin Hood” for business owners in a sea of “mercenaries” (buyers) by helping them maximize the value of their company and helping them to level the playing field. If you’re pushed for time, don’t worry – you can still benefit from some of John’s advice below: Understand the key drivers of a company’s value: Like anything in life, a company value can be dissected into separate parts and analyzed individually, i.e. revenue, growth potential etc. Understanding what a financial buyer looks for when they buy a company puts you on the same page and takes away the advantage that the buyer has. You can focus on the key drivers and eliminate the reasons a buyer would discount the price of your company. What are the 8 drivers? Be mindful of a business that is too dependent on you personally: However good your numbers may look; what are the chances of the buyer being able to achieve the same profits once you’re gone? Have an intermediary to run the business exit planning process for you: Use someone who specializes in exit planning AND the merger and acquisition process. Even if you’re confident in your business skills, because exiting your business is most likely a one-time event, an intermediate usually pays from themselves. They do if for a living, therefore, they have many experiences to pull from that could save you TONS of money. Worst case scenario, they help eliminate (or minimize) your emotion from the deal, which is usually the top deal killer. Use a specific ‘deal lawyer’: However good your own legal team may have been during your incorporation and the current day-to-day operations of your company, getting an M&A deal over the goal line is a significantly different skill set. Also keep in mind that your current lawyer may want to keep you as a client. How does this affect their motives and would they be 100% all-in during the sale of your business to a third party when they are potentially working themselves out of a job? Be wary of low-price offers that leave you with equity: It’s easy to be seduced by a big company offering to acquire you and promising that you will generate vast increases of wealth in future revenue. Can they really back those claims up? What markets or services will they be tapping in to that you haven’t already?  What did he do after the sale? When John sold his research company to a big public conglomerate, he convened everyone in the boardroom with the buyer and tried to spell out the benefits to the employees, i.e. opportunities for career progression at a bigger company. He continued to run the business as its own division and became an employee of the wider group for about a year. He eventually developed The Value Builder System: a statistically proven way of improving the value of a company by up to 71%. In his research study of over 20,000+ businesses, companies that achieve a Value Builder Score of of 80+ (out of a possible 100) go on to sell at a 71% premium compared to the average-scoring business of 59. What does a successful exit from your business look like? A business owner that exits their business and gets a fair market value or premium over the market value. The seller has something else fulfilling to do with their time in life after business. Wise words for the road: “One of the great benefits of being an entrepreneur is being able to step off the hamster wheel. The skill set of being able to identify a unique gap in the marketplace, being able to assemble a team to address the gap, raise money, sell the product… that is a timeless set of skills. Technical skills will age, but not the core skills of entrepreneurship.” “Do it sooner than you think is natural…. when you’re desperate to get out, you’ll get prayed on.” John Warrillow show links  Books Built to Sell Automatic Customer Website Twitter – @JohnWarrillow  

After a breakup, it might seem like a good idea to jump right into another relationship.  There’s a hole to be filled and you have so much to give. But is it a good idea? Maybe. Does it feel good? Usually. Do you usually end up regretting it? Most likely, yes. Many of us have gone through some form of rebound relationship—it’s an easy trap! You know the one…you wake up one day and realize you are officially over the first relationship and don’t really want to be in the one you are in now—it was just a placeholder.  Whoops. Usually, there is some emotional fallout, maybe even financial, hopefully none of which is irreversible. The biggest challenge is swallowing your pride, ripping off the Band-Aid, and moving on. Unfortunately, a business rebound can have much bigger consequences… Starting a business just because you used to have one is not a good reason to embark on a new venture. There are plenty of people that become serial entrepreneurs. To become a successful serial entrepreneur, future businesses must accomplish a specific financial or industry need, the expected returns are very clear, and the relationship with the business has very clear boundaries.  How do you know if you are in a business rebound? You feel the need to have a quick response to, “What do you do?” You essentially bought another “job.”  You need to work 60 hours a week to keep the company going. At the base level, your company is just “something to do” to distract yourself from boredom. There’s a complete lack of passion. There’s no bounce-out-of-bed that you used to have when you started your first business. You have no exit plan and aren’t thinking of ways for the business to thrive without you at the helm. You started or bought your company just to be around other people. You wanted to keep the title of CEO, President, or Founder. How did you get here? It is estimated that 75% of business owners are unhappy that they sold the business at the 12-month mark post-sale. There can be a huge sense of loss owners face after they leave their business. A second business is another chance to identify with something. To create the sense of purpose that you need to be happy. The risk of not knowing what you want… If you go into a business not knowing what you want, you’re going to have a bad time. You will become aimless without a destination and your expectations will never be met. Partially, because you had no expectations or goals to begin with. A business should be born because passion, skillsets, and energy meet where there is a need and market for a solution. In our interview, Kristy describes her rebound story with her second company Kristy and her husband sold a large manufacturing and energy retrofitting company in their mid-20s. They experienced something that many 25-year-olds don’t get to, a large influx of cash. “It was like winning the lottery” There are many challenges that come with easy money, especially at such a young age. They decided to start an investment management firm and a real estate company because that is what all their friends were doing. Kristy describes their euphoria as the “Midas Touch.”  They felt like they couldn’t lose. Kristy explains many challenges they had in the seven years of owning their investment firm. The company was sucking their cash dry and there was no end in sight. Kristy and her husband both dealt with the realization that it was over in much different ways. Kristy saw it for what it was “a rebound business” from their first one. She took it as a challenge to find out who she really was and search for something that would give her purpose. Find out more about how Kristy and Phil moved on and into their current success after a roller coaster of a couple decades filled with many highs and lows.

There is a small (minuscule, really) fraction of entrepreneurs that build their company with the end in mind. Then there is everyone else. The problem is no one tells you about the financial and emotional ramification the lack of planning has on your satisfaction and happiness in a life after business. Think about all the things that could potentially impact your decision to maintain ownership of your business. A triggering event can come from anywhere at any time. Are you ready for it? Of course, there are the typical business environment factors that lead the triggering point, competition, decreasing margins, employee issues, growth problems, financial struggles, etc. Even more common are the wide variety of personal tragedies that can trigger the want or need to sell a business: divorce, death, disability, family conflicts, child issues, being burnt out, or one of the worst—boredom. One of the most unexpected, and most welcome, triggering events is an offer you just can’t refuse. If you are like most entrepreneurs you are thinking to yourself, “I am good at chaos, I can handle the situation as it arises.” You are probably right. You are most likely very good at handling the unknown as it is thrown at you. That is how you have succeeded in the past, no?   So what’s the point? There are many more factors to selling than to get the best price. The challenge of transitioning out of a business is that it is not just a technical process but an emotional journey as well. Owners that do not focus on who they are and what makes them happy prior to selling their business have a significant chance of being unhappy after the exit of their business. If you are too busy doing there is no time to reflect. With no time to reflect on what you want from your company and why the chances of unintended consequences are huge. Once the sale is complete and you are fully transitioned out of your business there is no way to redo any of your actions. You will have a long time to ponder what you wish you had done differently. Wouldn’t it be great to leave with a huge smile on your face because you were in control of the process, dictated the outcome, and excited for what was next to come? How and when do you decide to sell you business? Will it be a result of some external factor or will it be of your own choosing—guided by the plan you have put in place.

This episode’s purpose is to tee up the future of the Life After Business podcast and give you an understanding of why I am so passionate about business exit planning. I believe transitioning into a life after business is an extremely complicated emotional and intellectual journey. Very few entrepreneurs get a trial run, let alone a second chance, to sell their business. The lack of information out there leaves the business owner alone to figure out what they want, who can help them, and how to achieve it. When my Dad and I sold our company in early 2014 we did not have the guidance or awareness of the process I wish we had. We felt very alone and out of place. We could run a hell of a business but we had no idea how to even start with selling or transitioning it. We experienced many bumps and bruises along the way, both financially and emotionally. I want to bring you, the listener, as much information as I possibly can, the information I wish we would have had, so you can avoid what we experienced and increase your chances of a successful exit. What is a successful exit? I believe a successful business exit is one where the owner walks away happy. It is a smooth and comfortable transition into a life after business that is full of passion, purpose, and community. I believe the true definition of success is happiness. The best definition of happiness if have seen comes from Shawn Achor’s book: The Happiness Advantage. He defines happiness as “the joy you feel moving toward your potential.”  Therefore, redirecting your passion, energy, talent, and drive into new ventures is critical for a successful exit. You can’t just focus on the tactical part of selling the business—keeping the advisors in check, finding buyers, due diligence, making sure the buyer doesn’t screw you, all the while running the business. This abandons the introspective questions that need to be addressed. Your real wishes and desires as a business owner need to be brought to the forefront of the conversation. Bo Burlingham in his book, Finish Big, says that the business owners that walked away happy with the outcome knew who they were, what they wanted from the business, and why. What are you going to do in the next stage of your life? Who are you as a person without your company? How can you negotiate or make critical decisions about the sale of your company if you don’t know these answers? Chasing the highest dollar amount or shortest sale cycle can leave unintended consequences. The questions of when you want to sell, to whom, what your number is, what will happen to your employees, and whether you want to stay on for the transition, should be answered based on what you want out of the whole process and not just based on the highest dollar amount. Once you know who you are, what you want from LIFE, and why, it is much easier to back into the tactical steps to get you there.  You now have a plan to guide you and your advisors through the process. This podcast is to share my experiences and positively impact the conversation surrounding  exit planning. The more information that is out there, the better off we, as entrepreneurs, will be.