My guest today is Chris Hutchinson, a Partner in Ernst & Young's Transaction Advisory Services Group. Chris has over 15 years of experience advising clients on M&A, financings, valuation projects, and due diligence mandates, with a specific focus on private lower-middle-market businesses. Chris and his team have completed an untold number of Quality of Earnings ("QofE") mandates spanning countless industries, including software, technology, business services, distribution, and retail, among others. Chris and I discuss what a QofE is, why it's necessary, and common trends and themes that buyers should look out for. We also discuss the working capital adjustment: What it is, why it's necessary, and common pitfalls for both buyers and sellers to avoid. Please enjoy!

Among the myriad variables that must be carefully considered when acquiring a business is the question of how the acquisition is going to be financed. In today's episode, I will provide you with an overview of the specific lessons that I learned when financing my own acquisition in 2014. I begin by discussing the critical importance of the link between capital structure and strategy, and then discuss more specific lessons learned in raising the debt required to finance the acquisition.  Please enjoy!

Though Aaron Ross wears many hats, he is perhaps best known for co-authoring the global best seller Predictable Revenue, often referred to as “The Sales Bible of Silicon Valley,” which details an outbound prospecting system that’s created more than $1 billion across Salesforce.com and other companies. Most recently, Aaron published From Impossible to Inevitable, a book co-written alongside Jason Lemkin (serial tech entrepreneur, venture capitalist, and founder of SaaStr.com, the world’s #1 resource for SaaS entrepreneurs), which is a "hypergrowth playbook" based on the successes of companies like Twilio, HubSpot, Marketo, and Salesforce.com. In addition to being a sales advisor, board member, and highly sought after public speaker, Aaron also authors his own substack page, Fresh Air, where he focuses on the personal aspects of being a senior executive, including how to best manage anxiety, exhaustion, and stress, all of which are par for the course for substantially all entrepreneurs and CEOs.

The role of spouse to an entrepreneur or CEO is not an easy one, as they are directly impacted by the emotional high and lows that are typical of the journey: They act as a source of consolation during the bad times, keep us grounded during the good times, and in many cases play a large (though often unnoticed and under-appreciated) role in our ultimate successes and failures. In spite of the importance of the role that spouses play however, the role of a spouse or partner in the entrepreneurial journey is a very under-discussed topic, at least within the literature that I'm aware of. In today's episode, I attempt to shine a light on the role that spouses play in the entrepreneurial journey from the perspective of both the spouse and the entrepreneur: I do this by discussing my own experiences, as well as presenting the results of two anonymous surveys, one of which was sent to a group of entrepreneurs and CEOs, and one of which was sent to their spouses.  If you're an entrepreneur or CEO, I encourage you to please share this episode with your spouse!

My guest today is Bob Pritchett, and I’m really excited to be sharing this episode with you. Bob first came on my radar when I read his book titled “Fire Someone Today”, which was published in 2006. Right before I purchased my first software company, one of my investors and mentors purchased the book for me as a gift, and promised me that, in spite of the fact that I had likely never heard of the book, it was full of countless gems for entrepreneurs and CEOs running SMBs. And he was right: Fire Someone today remains one of my favorite all-time business books, partially because of how it was written: Usefulness, practicality, and tactical/actionable advice take the place of the theory and anecdotes that unfortunately populate many other business books that often feel like they were written inside of an ivory tower. Bob is not just an author: He’s also a Founder, lifetime entrepreneur and CEO: Bob founded Logos Research Systems (later Logos Bible Software and now Faithlife) in 1992, and acted as its CEO for 30 years, until recently assuming the role of Executive Chairman. During Bob's tenure, Faithlife has grown both organically and inorganically from two employees to over 500, with the company now serving thousands of customers across 170 countries worldwide. Bob was a also recipient of E& Y's Entrepreneur of the Year Award in 2005. In our conversation today, we discuss how one falls into the bible software business, the merits and risks of pursuing an entrepreneurial venture with a partner, why many business partnerships fail, how much you should actually listen to your customers, what functions to inhouse versus outsource, and the practices and routines that he’s implemented to help him sustain 30 years as an entrepreneur. Enjoy!

The Working Capital Adjustment is part of substantially every M&A transaction, yet it is the calculation (and concept) with which most business owners remain largely unfamiliar. Without a proper understanding of what the working capital adjustment is, why it's necessary, and ways in which it can be manipulated, business owners risk leaving a lot of money on the table when dealing with a more sophisticated and experienced counterpart (even AFTER the sale of their business is already complete).  If you don't like the idea of having to wire money back to your buyer after they've wired you the money to purchase your company, then this episode is for you.  

The podcast delves into hiring practices with Randy Street from GHSmart. Topics include evaluating people & teams, CEO succession challenges, personality tests in hiring, leadership traits, compensation impact, and strategies for enhancing management team effectiveness.

In today's episode, I discuss the signs that prospective acquirors should look out for when attempting to uncover how much “technical debt” any given target company may possess within their code base. Though substantially every software company has some amount of technical debt, those that are weighed down by an asymmetric burden of it tend to ship code less frequently, struggle to keep pace with competitors, regularly miss release targets, and are generally much more expensive and capital intensive to operate and grow. In this way, what start out as technical problems quickly accumulate to become significant business problems. Thus, prospective acquirors would be well served to thoroughly diligence the amount of technical debt possessed by any given target company, and proceed very carefully (or perhaps not proceed at all) with those companies who seem to possess much more than their fair share of it. We break our analysis down into high risk, medium risk, and low risk signs. Enjoy!

Verne Harnish quite literally wrote the book (or, in his case, books), on being an entrepreneur and CEO running a small to medium sized business. Verne is the founder of the world-renowned Entrepreneurs’ Organization ("EO"), a global network of entrepreneurs and CEOs that boasts over 16,000 members worldwide. For the past 15 years, Verne has chaired EO’s premiere CEO program, the “Birthing of Giants” held at MIT, a program in which he still teaches today. Verne is also the Founder and CEO of Scaling Up, a global executive education and coaching company with over 200 partners on six continents. Verne may be best known for being the author of multiple global bestselling books including Mastering the Rockefeller Habits; The Greatest Business Decisions of All Time (for which Jim Collins wrote the foreword); Scaling Up (Rockefeller Habits 2.0) (which has been translated into 23 languages and has won eight major international book awards including the prestigious International Book Award for Best General Business book); and his latest book, Scaling Up Compensation. In our chat today we cover a wide range of topics starting with compensation, and then moving to hiring, managing one’s self, and a bit of a mixed bag at the end. We also conclude with the 3-5 books that Verne would put on his Mount Rushmore of business books, so if you’re a reader, be sure to stay tuned for that one.

Throughout recent history, there has been substantial growth in the number of companies who have decided to implement formal “operating systems” to govern certain strategic and operational decisions within their businesses. Though there are many operating systems in existence today, two of the most widely used systems are EOS (based on the book Traction, by Gino Wickman) and The Rockefeller Habits (based on the books Mastering the Rockefeller Habits and Scaling Up, both by Verne Harnish). I implemented an operating system (EOS) in my own company beginning in 2015, and we continued to operate under its various principles and structures until successfully selling the company in late 2020. Though a formal operating system likely isn’t appropriate for all companies and all circumstances, we benefited tremendously from our own implementation. Based on that first-hand experience, in today's audio blog I share a number of FAQs that I often receive from other CEOs related to the implementation of a formal operating system within a SMB.