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How to Sell Your Business: Jeffrey Cullen on Exit Planning and Increasing Business Value · It's Time for Success: The Business Insights Podcast

• Sharon: [00:00:05] Welcome to It's Time for Success, the Business Insight podcast. I'm your host, Sharon de Koning. I love business, I love working with businesses. I love learning about business. Hence the creation of this particular podcast. At this podcast, we get to interview other people and so they can share their wisdom and their insights with you, our listeners, and me as well. I get to learn a lot. This particular podcast is also sponsored by my company, It's Time Promotions, wherein I also get to work with businesses much like yourselves at it's Time Promotions. We pride ourselves with doing majority of our work in-house. So we do embroidery, we do screen printing, we do engraving, we do all the print for the signs, right up to fleet graphics, full wraps on your vehicles. We have three locations here in Alberta. If you have a company and you think that you can use our services, I would really appreciate the opportunity. If so, just kindly reach out to my team itpromo.ca. Tell them you heard about us on this podcast and receive some special pricing. Thank you everyone. Sharon: [00:01:05] If you've been following us, you know we're all about helping entrepreneurs learn, grow, and thrive through real, honest conversations. We've had some incredible guests lately and today is no different. Today's topic is the grand finale. What are you going to do with your business when you're done with it? When? When are you going to call it quits? I'm joined by Jeffrey Cullen, Jeff, and is accredited senior business broker and a certified exit planning advisor. We'll be discussing the process, the timeline, and the key actions you need to take before you decide to sell in order to avoid the pitfalls and fatal mistakes that derail deals and destroy your values of your business. Jeff, welcome to the show. Jeffery: [00:01:39] Well, thanks, Sharon, and thanks so much for having me. I'm excited to be here. Sharon: [00:01:43] We love to learn. So let's just, before we jump into some of these questions, just tell us a bit about yourself. Jeffery: [00:01:48] Sure. So I I've been in business for quite a few years. Originally a mechanical engineer. I practice as an engineer for a number of years as a technical person, and then started making my way up the management ladder, project management, department management, which led me to the realization that despite what they tell you in engineering, school engineers don't know everything. So that led me to go back to school, did my MBA here at the University of Alberta part time. And then that launched me into the wonderful world of management consulting, where I ran my own firm and worked through organizations like the Business Development Bank, and then joined some partnerships. I did that for about 20 years. One of my specializations became transition and exit work, internal family transitions, and some third-party-sale. And then after Covid took a little bit of time, was instructing business school at the J.R. School of Business. Still, I'm a sessional lecturer in organizational behaviour and management theory and joined the Sunbelt Business Broker Edmonton office in January of '23. So I'm starting my fourth year now, full time as a business broker and still doing a little bit of work around helping again, companies, you know, get ready to sell. But yeah, my primary job that keeps me busy is a full-time business broker with broker. Sharon: [00:03:02] So do you know what I didn't know that you can, like, go to a person like yourself to sell your business. And why would a person go to you instead of just listing it on marketplace? Like what's the value of doing a business broker? Tell me. Jeffery: [00:03:14] Yeah, a great question. Well, the first the first thing is confidentiality. So we operate a process that that maintains confidentiality as our primary number one thing. And I can never get past people who sell their business with realtors where they actually put a, they'll put a picture of the business and the name of the business on a website. Jeffery: [00:03:34] Why confidentiality is so important is you don't want anybody to know that you're selling your business until you basically have a done deal, and you want to be able to control that information at all times. You don't want your clients to know because as soon as a lot of clients get wind of, oh, you might be selling the business, particularly if you've had a long standing relationship. They're gonna head for the door. Employees. Which, again, you know, in today's world, a lot of the value of your business is in your team. So again, employees like everybody else, they don't like uncertainty. So you don't want them to know until you're ready. Vendors, right. And then the other thing is you don't want a bunch of solicitation by people who are going to show up on your doorstep, potential buyers and, you know, waste a lot of your time. So confidentiality, control of the process, that's number one. And number two is as we'll talk a little bit about today, the process of selling a business is actually much more complicated than people actually believe. And we've seen a lot of people, you know, leave money on the table or get into bad deals or almost as importantly, waste a lot of their time. So sometimes people will come to us and say, look, I had a buyer, you know, we were in negotiations and this dragged on for months and months and months. Jeffery: [00:04:44] And at the end of the day, I found out that the person didn't have any money or they couldn't make the deal happen or, you know, and I've wasted a lot of time and effort. So again, when you're working with a broker, you know, a big part of our job is going to be to manage that process and work with buyers that we have identified as. First of all, non-disclosure agreements are always put in place and we don't necessarily vet them, but but they have to go through a process. So we're, you know, we're going to be looking at people who a have the financial wherewithal to actually make an offer on a particular size business and that have a little bit of skill before we put them in front of a seller. You know, we've, we've worked with them already. And, and, you know, we know that they, they're, they're a viable person, right, right. Tire kickers, dreamers, you know, these are all terms we use for people. Again, we're going to waste your time. And then finally, on the back end during the process, you know, we know how to work with lenders and banks and financial advisors and lawyers again, to get the deal done. So we really take the deal right from start to finish. And, and that's where we add a lot of value. Sharon: [00:05:44] Okay. Okay. I do like, because I've seen it where there's businesses for sale and it's through a local realtor. And I'm not going to say any names at one recently. And it was for sale. And guess what? The building's empty. Jeffery: [00:05:56] Yeah. Sharon: [00:05:57] Right. It's unfortunate. It's like, I don't know what went down there or whatever. I don't know the details, but I don't know. So if you think about, yeah, I would be devastated if I lost my, my, especially because I believe my team, well, I know my team. They run my business better than I do. But it would be devastating for my customers. Probably don't even know all, all that. Right. So I'd hate to lose them if that's the case because they're running it anyways. Jeffery: [00:06:21] Yeah. Sharon: [00:06:21] Okay. So do you actually do the, the valuation of it or how does that work? Jeffery: [00:06:25] Yeah. So again, great question. So people ask us all the time, I can't speak for every other brokerage. So the first thing I'll say is that we do valuation. It's not actually the term we use. Valuation is very specific. We're not certified business valuators some some brokers may be many are not. We do something called either a broker's opinion of value or a most probable selling price. So at Sunbelt, we're all members of the International Business Brokers Association, and so we use that methodology. And what I like to say is there's a lot of values that can be put on a business, but they are for different purposes. So sometimes the CBV will value it for maybe insurance or it could be for divorce proceedings, or it could be for use in a unanimous shareholders agreement. Right. And that's maybe more like a fair market value, which is often defined as, you know, the theoretical value. If you had perfect willing buyer and the perfect willing seller, what we do is more akin to a realtor coming into your actual house and, you know, poking around and saying, okay, you know, average house in this neighborhood's worth, let's say half $1 million. But I see that your basement is finished and you've put in, you know, Italian tile and you got a wine bar. And that's in real big demand right now. And therefore your particular property, I think we should actually list at either higher than the average or lower based on how it actually is operating. So that's the difference. And we only price the business for the purposes of actually selling it. So if someone comes to us and say, you know, I want an evaluation for any other reason, that's just not what we're going to do. They have to have committed to selling it before we do our work to put a price on it. Sharon: [00:08:00] So your price would differ, say, if I went to my accountant and they said, Sharon, your value of your business would be approximately whatever. And if I went to somebody who does, I don't know, the consultant for like, and help me get my business ready for sale. And she comes up with a dollar amount. Both those dollar amounts could differ from what you come up with. Jeffery: [00:08:20] That's yeah, absolutely. For sure. And, and again, one of the reasons too is and we can talk a little bit about, you know, we use about ten different methods to, to, to come up with the price. But at the end of the day, we always do a cross check because at the end of the day, what we say is if the business can't be financed, it can't be sold. Right. So again, the value of the business today might be different six months from now based on where the market's at, interest rates. Right? Because, you know, we're working with a buyer and lenders and we know kind of how the deal has to be structured. And so if it can't be financed, it doesn't matter what, what number you put on it, you know, it can't like the deal can't be transacted. So we'll start by finding a market value and then we'll do that cross check and say, okay, can we actually find and structure a deal that a buyer is going to be able to get the financing that they need around that number? And then we might apply some sometimes people are looking at in terms of price, but there's a lot that goes into the value of a business. Are you getting cash up front? Is it going to be partially cash up front with what we call a vendor take back or seller financing? Is there opportunity for an earnout? Right. So again, every deal is different. And how you create that value we do on a deal-by-deal basis. So that's why sometimes people will come to us and they'll say, well, just throw me a number. And our answer is always and throw you a number, but it 100% will be wrong. And you know, the number I'm going to give you is going to be conservative and you won't be happy. So we would rather have someone commit they are willing to sell, ready to sell, committed to sell, and then we'll deal with the number because it is the reality of the market. Sharon: [00:09:53] Okay. So have you ever had people come to you and their business is just not sellable? Jeffery: [00:09:57] Yeah, that does happen quite often. I guess our what we would say is typically we reject, you know, busy broker will reject about nine out of ten businesses because they're not either they're not sellable or they're going to be so hard to sell that, you know, it's just not cost-effective for us to do it. Sharon: [00:10:14] Right. Jeffery: [00:10:15] Yeah. That is and again, you know, like I said to you in our little pre discussion, we're often the, the, the, the bearer of bad news right now. Sharon: [00:10:24] You work at something forever. And could you imagine going and asking and it's like, sorry, it's not sellable. You have to close your doors. Yeah, yeah. Jeffery: [00:10:31] Or liquidate, you know, I mean. Sharon: [00:10:33] Right. Jeffery: [00:10:33] Yeah. That's always an option. But yeah, no, it is, it is unfortunately the reality for a lot of owners that because of the way they're operating or maybe circumstances beyond their control, the business is just not sellable. Sharon: [00:10:47] Right? And sometimes it could be. Is it because so obviously the obvious is there if it's not sellable is because the I always call it the bottom number, because I'm not great at looking at all the numbers in between, but the bottom number is not where it's supposed to be, I guess, but also is another thing. Like things are changing, things are transitioning so fast. Is that another factor? Could it be or what would be another factor? Jeffery: [00:11:08] Well, there's a number of factors. So sometimes the timeline, you know, we'll occasionally have people call and they'll be like, I need sell my business. You know, my lease is up in six months and we will have to tell them that six months is just not a realistic timeline. Actually, six months is sometimes people phone and they're like, at the end of the month, my lease is up and I need to be out of here and I need to sell my business. And we're like, it does not, it's not like a house, right? The process is so much longer. Now, you know, you could put on for a fire sale, but at that point, what do you need for us? You know, just you can just do liquidation of the assets and. Sharon: [00:11:42] Right. I guess that's right. Put it on the marketplace we talked about before or whatever the case is, your close. Yeah. Okay. Gotcha. So we talked about the price tag a little bit and how to calculate what it's worth or what it's not worth, I guess. So let's talk about the flip side of that positive. Jeffery: [00:11:57] What makes a business valuable. Excellent. Okay. So probably the factors that we take a look at and we'll do so the way we do it, right? Like we'll often we'll use market comparables and we will find, and again, this is sometimes where an accountant will flip a number to their, to their client and say, you know, you take earnings times this number and that's what it should be worth. Well, we start from that premise and say that that multiple and again, they change all the time. That might be the mean, right? The average. But we need to look at a number of factors that are going to move the value up and down on that normal distribution. And so some of the key factors are the history of the revenue. So sometimes people will come to us and we'll be looking at, you know, so generally we use about five years of past performance. And sometimes people will say, well, you know, ten years ago we were doing great. And unfortunately, buyers and banks don't look at ten years, they look at about maximum of five years. Jeffery: [00:12:54] And so if you are on a downslope, if the last couple of years have been revenue's just been decreasing, that's going to drop the value because again, a buyer's going to look at that. And often people will have a narrative of, well, you know, we got tired. And if the new buyer comes in and puts energy into it, you know, they'll turn it around. Okay, that may be attractive to a buyer, but they're not going to pay for effort that they're going to have to put in, right. They're going to be like, okay, I'll offer you less because I may believe it's savable, but I'm going to have to put the equity into, into turning it around. Sharon: [00:13:25] Right. Jeffery: [00:13:25] Businesses that are not profitable. Again, another issue, right? If you've not been profitable for a period of time, again, it's not that it's not sellable, but business value is often based on, especially smaller businesses, if I buy this business, what am I going to be able to put in my pocket at the end of the day? Right. And the first question will be... Sharon: [00:13:45] Sorry, can I interrupt you? When you say smaller businesses, people, that word is a range, sometimes 20 employees plus, what do you consider a small business? Jeffery: [00:13:54] That's a really good question. So on a revenue basis, anything under $1 million we would consider to be small. Yeah. So that would be and again, we, you know, we're main street brokers, so we'll sell a coffee shop or a flower shop or. Right. That's a 3 or $400,000 in revenue. But obviously that's, I think you alluded to this before, that's typically somebody buying themselves a job, right? An owner-operator coming in to replace the existing owner-operator. And in that case, that question of, hey, what am I going to be able to put in my pocket at the end of the day is really fundamental because they're maybe they're quitting their job and they want to buy this shop. And they're like, you know, I need to be able to pay myself and have a little bit of money left over, you know, for my trouble. Right. So, okay, if when we analyze the business, that number is really low or in some cases negative, again, that's going to be a real challenge to that kind of buyer. Sharon: [00:14:49] Okay. Jeffery: [00:14:50] Couple other factors that are super critical customer concentration. So again, this always comes up and we'll often see a business and we understand how this happens, right? Over time you have that one big customer or client that you have a really great relationship with. And it kind of insidiously happens, you know, they might be at 10% or 15%. And then as that relationship grows, they keep giving you more and more work and you think, hey, like, you know, I don't why would I go find a bunch of other customers? This person, you know, this client is feeding me. Jeffery: [00:15:21] When it comes to putting it on the market, though, the first thing the buyer looks at, obviously, is the risk inherent in anything more than 10% of revenue to one client. And sometimes we'll see businesses that have 20%, 30%, 40%. That first question is, well, what happens if that customer goes away? Right now, buyers will sellers will tell us, listen, they've been doing business with us for 25 years and we have a handshake. And no, we don't have a contract. But, you know, I'm sure they're going to stick around. Well, often that relationship is with the owner, not the business, right? And even if that may be true, again, you have to look at it from the perspective of a potential buyer and their lenders, because they're all about risk aversion. And they're like, if you don't have a contract, how do we know that the, you know, maybe that maybe that client's just been waiting to try somebody new, but because they've had this great relationship, they've been hanging on with you because you're friends, but the minute you walk out the door, I don't know, this new, this new owner. So why do I, you know, I'm at least going to go shop around and see if I can get a better deal, right? There's no there's none of that loyalty. So that's really a big one. Sharon: [00:16:26] Yep. Makes sense. Jeffery: [00:16:27] Owner dependance. And I think we're going to talk about this. You talk about the ghost owner. Yeah. So this is again where this timeline of working with someone like a value accelerator, like Lissa Daub that you had on a previous episode. If you've got time to work with someone like that and systematize the business. When I was doing succession work, we'd often say, look, if I have two businesses that are essentially very similar, and we'd say, let's, let's use a hamburger, you know, store or shop or restaurant, right? If I'm a buyer and I can buy a McDonald's franchise where everything is, is recorded and processed and hand me the manual versus Joe's Burger Shop, even when I'm looking at the financials, they might be doing the exact same revenue and the same profitability, but everything is in Joe's head. It's written down on little pieces of paper, and as soon as he disappears, he or she leaves the business. What am I left with? I'm not going to know all of those inherent tricks. And even though Joe may be willing to stick around for a time, it's just not the same, right? Right. If you can demonstrate as an owner, I have systems, I have processes I've delegated to the appropriate people. I have I have a strong team. And we used to say, could you leave your business for six weeks and come back and what would happen? And I remember being in a seminar and one of the person put up his hand and goes, six weeks. If I leave for six hours, you know, I might as well just not come back. So that is not a salable business where you're going to be able to extract the value because in essence, you are the business and the buyer is going to immediately look at that and go, this is just too much risk, right? Sharon: [00:17:59] Yeah, yeah. Get it. Check. Got it. Okay. Jeffery: [00:18:02] I would say the other thing, any other single point of failure like that. So again, vendors is another point of weakness where you say, okay, we only have this one vendor. Again, what happens if that vendor relationship goes sideways or even the number one, you know, I'm a big Star Trek fan. So sometimes people say, well, this is my, my number one employee, right? And they know everything. Well, again, as a buyer, I'm like, that's a little bit better. But really I've just moved the problem down one level. Okay. But what if they leave? Right? So when we talk about really has to be turned into a mature business where it's not dependent on any one key employee, be the owner or the right hand person, because again, you haven't really solved the problem. So you want to have that anybody could come in here and let's say 80% of the business is always going to be those subtleties that the owner will stick around and help transition. But if 80% of it is pretty much on autopilot and it's like, here's the here's the manual, just do this and it will continue that, that is a real value builder as opposed to any form of it's in your head. It's on scraps of paper. What does that give me? Right? Sharon: [00:19:11] Back in the day, my mom had called me, I'm from Manitoba originally, okay. My mom had called me and she told me that she has breast cancer or not breast cancer, she had lung cancer. And I'm like, oh my goodness, I'm two provinces over. Jeffery: [00:19:23] Right. Sharon: [00:19:24] I remember thinking and her surgery was scheduled for, I don't know, I forget it was how far away was, but it was in our busy season. It was in November when her surgery was scheduled, and I can't remember how the time frame between the two, but I remember thinking, there's no way, there's no way I can go out there and be with her. Like, I was devastated. But then I was listening to a book and they were talking about a business coach. So I reached out to a business coach back then. That was quite a few years ago now. Jeffery: [00:19:47] Okay. Sharon: [00:19:47] And he helped me systemize everything. And my team is remarkable. There was probably a few hiccups. I did have my laptop with me, so I was able to jump on once in a while just to kind of fix things when I needed to fix things. But he opened up my mind, opened my eyes to how important systemizing is, and we've embraced that now for almost ten years. And what a difference that makes. Because sometimes, even if it's not an exit strategy, shit happens. Like sometimes, right? Like you, you could end up in, I don't know, sick and you're in the hospital for a week or you could I don't know what the case is, but some stuff happens. So your business has to run without you. I just think it has to. And I didn't know that until I got that dreaded phone call. Jeffery: [00:20:27] Yeah. So in the exit planning world, they they talk about these five D's, right? Death, disease, divorce, disagreement and disenchantment. And again, to your point, people often think about exit planning when they're ready to sell the business. Whereas the reality is, first of all, 50% of businesses end unexpectedly because of these five factors. And disagreement is often there'll be partnerships, and then you just find that that relationship falls apart. And even if you have a unanimous shareholders agreement, people get into conflict and the value of the business gets eroded. And then disenchantment is sometimes people just get tired. They start to lose the passion that they had for the business, and they carry on way too long. So the reality is, the sooner you start preparing the business to be sellable or to be inoculated against one of these, we call them adverse events, there's double benefit. Number one, there's going to be more value when an exit does happen. And then the business is just running better today. Right. So I think you can attest. Sharon: [00:21:28] To like today anyways, if it's running better, like, right, it's just better for the exit strategy or better business owner, better leader for your team. You're a better person for the community is just better if you know those things to watch for. Jeffery: [00:21:39] Better chance to grow, better chance to take on new challenges. And let's face it, a lot of people get burned out because as you describe, they are the entire business, right? And every decision has to go through them. And, and that just becomes that's a real grind, right? That's and I don't know too many owners. What's that? Yeah. And we see that all the time, right? People will say, and I saw it as a consultant. Often entrepreneurs will maybe they're dissatisfied being an employee and they think I can do this better. And oftentimes they're right, right. So they'll launch into whatever they're, let's say, let's use a plumber as an example, right? A really good plumber. They have some great ideas about how to do this better. They'll start their own company, and for the first couple of years, they're hands-on. It's going great. Then as it starts to grow, they become less and less a plumber and more and more... Sharon: [00:22:28] bookkeeper? Jeffery: [00:22:28] A Bookkeeper, manager, marketer. Sharon: [00:22:32] Yeah. Jeffery: [00:22:33] And then they wake up that day and they're kind of trapped in the business, right? They're like, because they haven't done what we're talking about. And it's a bit of a double edged sword because they might be making really good money. So it's hard to walk away from. But at the same time, all that pressure, all that focus on them begins to, to grind them down. And ultimately they'll hit that plateau. And we see it all the time when we will graph, you know, revenue, there's a growth. And then either they mature it and it hits that second growth or it kind of flattens out. And then they're just running on adrenaline. And then eventually when they run out of steam, boy. And that's unfortunately, if they call us then and say, I want to put my business on the market, and it's in that downturn, that's not that's really not the time that. Sharon: [00:23:17] That's. Jeffery: [00:23:17] You know. Sharon: [00:23:18] Say I'm want to thinking about selling my business in, say, ten years, 15 years, whatever, whatever, say ten, 15 years. What does that look like? What should I be doing? Jeffery: [00:23:27] So 10 to 15 years. Is it a family business, by the way? Or just is okay. So we often say 3 to 5 years for non-family, 8 to 10 years for family business. And anybody who deals with family business can attest that there's additional layers of, of complexity, right? Relationships are, are much more. Well, if you think about it, right, there's like three levels, three layers of relationship in a family business we're family members, we're, we're business owners, and then we're working in the business as, let's say, you know, whatever our, our functional roles are, right? Generally 3 to 5 years for a non-family business. But ten years is not a bad number either, right? So what you should start doing is a couple of things. And the power thing about exit planning and the exit planning method out of Exit Planning Institute is they really look at it like a three-legged stool or three streams, right? So there's your there's the personal exit. Who am I going to be the day after I sell my business? Right. What do I want to, you know, what do I want to do with my post-ownership life? Right? Maybe it's start a new business, maybe it's retire. Jeffery: [00:24:29] But, you know, there's a lot of people that find retiring to be if they're not prepared for it. Right. So there's a lot of work to be done to prepare oneself. How am I going to, you know, what's going to be my purpose? 25 years as a business owner, and then the next day after you've sold it and we make a lot of jokes about that, you go home and, and, you know, I've seen some meme cartoons, you know, with, with the spouse who's like, get me a coffee and like, excuse me, who are you? Yeah. Well, I'm, you know, I'm the CEO. No, that was yesterday. Now you're, you're not the CEO anymore. Right. And then the other one is the, the hobby thing. So people will be like, oh, I'm, you know, it's going to be great. I'm gonna golf or I'm gonna do, you know, whatever the activity is. And what they find is that because they've been so busy in their business for all these years? Golfing was kind of a treat, right? They didn't get to do it that often. And when they did, or camping or, you know, whatever. Sharon: [00:25:20] It is, whatever. Yeah. Jeffery: [00:25:21] All of a sudden they find themselves in that first month, they golf 30 times and it's great. And then by the second month and then three months in, they realize that now that it's a thing that they can do every day, it's lost some of that appeal. Right. So preparing themselves on a personal level and their family, you know, how's our relationship going to change? What are we going to do? All of that? The other stream is sort of the personal finance estate side of things. And again, preparing themselves, working with a financial planner, talking about their working with their accountant and looking at corporate tax and personal tax. And do we want to use a family trust? And like, there's so many strategies that they should be looking at. And the sooner you start putting those things in place, the better off you're going to be. Because again, of those five D's or right, you're going to run out of time. The third stream, that is the business. And we've already talked a little bit about this. How do I position the business to be the most salable, to get the most value out of it? So it's like process and systemizing, building a team, right? I worked with many owners and the way I would draw it, I would, we would demonstrate for them the traditional org chart, right? So draw the org chart. Jeffery: [00:26:28] We said, well, this is a traditional org chart. Here's you at the top. And then there's sort of this pyramid. And they would go yeah that's great. And then I would take a second piece of paper and I say, you don't have this. What you have is this here's you at the top and here's this line of people way at the bottom. And then there's this huge chasm between those, right? So as soon as you're gone. So we need to fill that, that pyramid, right? Diversifying the market, diversifying, you know, de-risking the business. How many vendors do you have? Do you have contracts? Do you have key relationships that are in place? Are your employees? Do they have employment contracts? Do you have key, key person insurance? Anything you can do to de-risk the business, diversify it. And again, 3 to 5 years is not an unreasonable timeline. If you start ten years out and the business does better, hey, that's an extra five years of top of class performance, more money in your pocket. And if something comes up unexpectedly, the business is not caught ill prepared. Right? Sharon: [00:27:26] Does anybody ever reach out to you say, you know, I'm contemplating putting this business out to sale. Put it on your back burner. But just in case you have something cross your field, is that even a thing? Jeffery: [00:27:34] Occasionally people will do that. Yes. Yes. Sharon: [00:27:38] Just wondering. You talked about the post-retirement. I'm really nervous about that. I can't even be home on a Sunday and not know what to do. Like I don't like, I don't clean, I don't cook, like I don't enjoy that stuff. And I honestly don't know what to do. And sometimes I just sit there in my pajamas because I don't know what to do without work. Like it's, it's my, it's who I am. Jeffery: [00:27:58] Yeah. Not that that's pretty common for entrepreneurs, right? You, we're cut from a different cloth. And Because sometimes I, I, it's funny to talk to people who are not entrepreneurs and they, they desperately look for that retirement, usually because they don't like what they're doing. But for most entrepreneurs, I think even if the business becomes a grind, deep down, you're still somebody that... once that, that kind of negative side of it is removed. I think those instincts come back and it's like, well, now I'm bored, so what am I going to do? I'm going to start another business. Sharon: [00:28:29] And yeah, so I would start something. I know I would because I don't know what I don't know, I don't know how to downshift. And so I did another podcast with somebody and they said, you have to be able to find your, your thing. So like, yes, I like work. And yes, I enjoy what I do. And I love my team and I love my customers. Like, I am not just saying this because I'm on a podcast, it's a true story, but there's got to be other things I love to do too. I just don't know what that is yet. So I got to find those. So that's part of it. So I have to find those. And it's not golf. Jeffery: [00:28:56] Well, you know, a lot of people either want to be they want to invest in another business or they can they become mentors or... Sharon: [00:29:02] There's other things, yes. Jeffery: [00:29:03] There's all sorts of stuff. Yeah. There's like for everybody, it's a different thing, right? Sharon: [00:29:07] Yeah. Jeffery: [00:29:07] Yeah for sure. Sharon: [00:29:08] Okay. Talking about paperwork. Jeffery: [00:29:11] So again, this is a very interesting phenomenon. Again, typically when it's short time, people will come to us and we've seen like all kinds of like, I don't really have an accountant or my accountant is somebody I've worked with for 35 years, and I've kind of been afraid to let them go. We talked a little bit about fractional CFOs. Sometimes historically, they might have pretty good accounting in terms of what an accountant will generally do for CRA. But when you probe and you're like, okay, well, we used to always joke about the big bucket of revenue and the big bucket of costs and say, well, you do a whole bunch of different things, like, do you know which products are more profitable than others? Your margins? And a lot of owners are like, I have no idea what you're talking about. Right? So, and again, if it's a smaller business and a buyer is just going to come in and buy themselves your job, it's probably not as critical. But if it's a larger business and you're dealing with more sophisticated buyers, they're going to want to understand all of those factors and they're going to pull your stuff apart if you can't do it. And so the more sophisticated you're working with a good bookkeeper, a good accountant, there's obviously the tax side of things, but maybe bringing in someone either in-house or fractional, that can help you really understand the mechanics of the business and can then provide to a buyer those answers, right? Here's a breakdown of our customers. These, you know, these are loss leaders. This is our high profit margins. We sell this product even though it's got our lower margin. But we know it's, it's again, like it's kind of table stakes. We have to sell this so we don't have it. The market goes away. Jeffery: [00:30:43] All of those things. Well, then a buyer is going to know, okay, you really understand at a deep level the mechanics of your business. And now I'm going to have a lot more confidence. Again, if it's a higher value business to come in and buy it and say, I can replicate this, you can give me answers as to why you do the things you do? Jeffery: [00:31:02] As a buyer, that goes, I don't ask my accountant. I don't ask my accountant. Now, when we do valuation or that most probable selling price, part of what we do is we'll work with the accountant and try to answer some of those questions as best we can. Jeffery: [00:31:17] But we're kind of limited. We'll never know as much as as the owner if they're working with that kind of professional to really understand what makes that business tick financially. Right. Sharon: [00:31:27] I didn't know, I didn't used to know that. And now I do. Like I know because we have different categories. So we do like say embroidery in-house. We do silkscreening in-house. So we have to bring in the apparel to decorate all this stuff. We do vinyl signage, vehicle wraps, all that kind of stuff. So every even down to print. So like every category is different and it has different margins. And so it's all categorized. If you ask me today, I could tell you which is our highest profit margin, a percentage of sales for each of those. That's, but I didn't know it was a thing and how important it is, but it's so important and it can be done on an Excel sheet. Jeffery: [00:32:04] Yeah. No, absolutely. Well, I once did a rescue with a client that was in some serious trouble with their bank. This was before I was a broker. I was a consultant and they had a particular product line. They were manufacturing. And the CEO who was the dad was convinced that all they had to do was get more volume, more volume, more volume, because he had this machine that he really loved. And and then the CFO was his wife. And she kept saying, I know we're losing money somewhere, but I don't know where. And when we did analysis, what we found is they were actually the way they were running this particular machine. They were losing like $0.25 on the dollar. So the answer was not more of that. It was actually, you gotta, you know, either figure out a way to make this profitable or shut it down. Sharon: [00:32:49] Right. Jeffery: [00:32:49] And after we looked at that, we we did manage to get them out of trouble. We got a recovery plan in place. I was sitting with her and she said, and it dawned on her. She's like, oh my God. And what had saved them over the years is there was other things that had had huge margins that were basically masking the loss. But it occurred to her, if we had known that we were losing $0.20 or $0.25, how much more profit would we have made over the last 3 to 5 years on all that volume? Jeffery: [00:33:14] How much did we erode that was just hidden. Right. So it can make a huge difference in understanding your numbers and having clean books. Sharon: [00:33:22] And I can't remember what it's called, but the corporation papers that you file every year, like it's important that those are updated by your lawyer. What are those called? Jeffery: [00:33:34] Yeah. Your what the hell is it called? Sharon: [00:33:36] Like your. Yeah, your whatever the accountant you have to. They just, I don't and I don't even know why that's important. It tells you like I'm 100% shareholder and it's updated yearly and I pay them God amount to stamp it. I don't understand it, but it's supposed to be really important that that's updated every year. Jeffery: [00:33:50] Yes. It's called the annual return, isn't it? Sharon: [00:33:53] I think so, yeah. Jeffery: [00:33:55] Yeah, I know my my lawyer sends me a $250 bill every year and I'm like, great. Sharon: [00:34:01] Yeah. But it's important that it's done. And I didn't even know like literally first and I thought, why does that really matter? But it does matter, I guess. Jeffery: [00:34:07] So it does. And that comes into due diligence. So the way a business sale works, we talk about this a little bit is there's a number of steps, right? So once we actually have a buyer, a buyer will put in an offer. And it's usually conditional on a number of factors. And it's pretty open ended. It usually be like a 30 to 90 day due diligence period where their accountant, their lender, often their lawyer starts to ask a bunch of questions and anything that that will come up, something like that. Oh, you haven't filed this for a number of years, or you have GST owing or there was a lawsuit five years ago that was never really fully resolved. Or there's some, you know, claim against the company. So all of that is going to come out. And so again, clean books is one thing, But clearing out that closet of skeletons is also super, super important. And I know people sometimes think they can hide stuff. Believe me, when the lawyers and the accountant and the banks get into it, you're not going to hide anything. Sharon: [00:35:05] Not gonna hide anything. So that falls into like, clean paper. You use the word clean paper. So like, I go out for supper and it's times paying for it because I can I stop and buy a box of beer for my husband. It's time paying for it because it can't. It can, you know, so like I have a lot of gray areas in and I hope the CRA isn't listening to me, but I do, I do, I have it and I think all entrepreneurs do. How does that affect the bottom number? Jeffery: [00:35:30] That's a really good question, Sharon. So the first thing we always tell people is like, as brokers, we're not we're not accountants, we're not lawyers, and we're not auditors. We are entrepreneurs for the most part. So we understand that businesses operate that way. And honestly, I think CRA, I mean, unless it's egregious or you do something to make them angry, you know, I think there's some leeway there. Sharon: [00:35:51] Okay. Jeffery: [00:35:51] What we do with that, though, is it's called normalizing. So when we get financials from a seller, the first thing we do is we will analyze that in depth. And we're looking for all those kind of, of one offs or, or particular ways of people doing things. And again, we always sort of joke and say we're not here to judge. But what we want to do is we want to represent the business almost like it's a prototype and say, so a lot of things you may have heard the term add backs. So we'll add back a bunch of stuff. So it might be like I had a client, you know, they spent $5,000 on a Christmas party for five employees. I'm like, man, must have been a pretty good party, right? The average owner, the next owner may not do that. So we put that $5,000 back to the bottom line and say it was a discretionary expenditure. That is not prototypical to running the business. And sometimes we'll adjust salaries. So sometimes people pay themselves no salary. It's all dividends. Jeffery: [00:36:49] We adjust for a fair market value or sometimes people themselves, they're doing really well and they're paying themselves a phenomenal salary. And we'll get we'll adjust that back down and say, okay, you know, you might hire the next person might hire general manager, they're going to pay them fair market value. You've been paying yourself 300 grand. Good on you. We'll adjust that back to like 100. Put the other 200 to the bottom line. And then that becomes part of the valuation. So we're looking at those kind of adjustments. The other thing would be sometimes there might be like a one time anomalous event. Like I just had one where their legal fees on average were about professional fees, accounting and legal, about $5,000 a year, all in one year. It hit 25,000 immediately phone and said, that's a bump what happened. You know, we got into a dispute with our franchisor and we had to hire a lawyer and 20,000 in legal fees. Okay, we put it back in as long as we can justify to a buyer or to a lender why we did that, it was an anomalous thing. So that's how we would adjust. And I guess in a way, clean the books to make it prototypical. Sharon: [00:37:49] Okay. Okay, so I don't know if this is the right podcast to ask this question and you can tell me pass EBITDA. What about that exactly? Do you do you guys work on EBITDA? Jeffery: [00:37:59] Yeah. Sharon: [00:38:00] So yeah, so. Jeffery: [00:38:01] Well, there's a lot of controversy about EBITDA amongst people who value businesses. I don't know, I know Charlie Munger, who was Warren Buffett's number one or number two guy, you know, totally hated EBITDA. The reality is a lot of lenders and banks do look at it and it's an accounting term. And ultimately, at the end of the day, it's intended to be, I guess, a sanitized number. So you can do apples to apples when evaluating or comparing one business to another, right? So it stands for earnings before interest, tax, depreciation and amortization. And the concept there is that first of all, amortization is a non-cash. It's a made up accounting term, right. Part of accrual accounting. So it shows as an expense but no real cash comes out of the business. Same thing with depreciation. So that typically gets added back taxes. Again, the tax regime may be different for a different owner. So again for analysis purposes you put corporate tax back onto the bottom line and say who knows. The next person may have a different tax strategy. Interest is the same way. A particular owner may have loans with TD Bank at a certain term and interest rate. Somebody else is going to restructure may have a different. So again, we would put it back where sometimes people say it's controversial is. You could argue that for some of those things, even though they are going to be legitimate costs somewhere, right? Someone is going to have to pay some kind of tax, right? So there's, there's a lot of, of like I said, there's two sides to that argument. We use it because a lot of the multiples are based on EBITDA. And so we'll often use that as a multiple. We'll use a multiple of revenue. And then we'll use a multiple of what we call seller's discretionary earnings, which is EBITDA plus salary for one owner. So it's kind of an industry accepted value even though everybody recognizes yeah, there's arguments to be made, you know, as to how much it's legitimate or not. Sharon: [00:39:56] It's so confusing because there's also like EBITDA times three based on industry or something. It's like how as entrepreneurs, we don't know this stuff. So anyways, whatever. So that's when you go to a broker and they will help you with that. Yeah. Anyways, okay, let's move on to ghost owners. Jeffery: [00:40:12] How do you make sure the business keeps running? Even if you're, if you aren't there. Sharon: [00:40:16] Say we get hit by that bus or I go out to Manitoba. We talked about systems. Is that is that what we're going to talk about? Is that do we touch on. Jeffery: [00:40:24] So it's systems and developing a strong team, right. So strong team and systems. So again, sometimes people have a really good team. Like I alluded to, I have these people I can count on. And then when you talk to them, they're kind of doing it by the seat of their pants. Well, that's better than no team, but it's not as good as a team that knows what they're doing and documentation and repeatable systems and a process. Because again, like I said, just because maybe they get hit by a bus, right? Maybe you're all in the same bus. So there's still risks there. So it's the combination of those two things together that really creates that value. And again, like the acid test is, hey, can you go away for an extended period of time? And like you were saying, yeah, maybe have your laptop and it's not that you're fully out of, if it's on a vacation, you have the luxury of still being reachable. But in other circumstances, like you're in a coma, you may not. Right. Jeffery: [00:41:20] So you, you almost want to be prepared for the worst case scenario where. Yeah. If I am actually totally incapacitated, I know the business is going to keep trucking along. And I guess the other element to that, which we haven't touched on, there's the knowing how to do stuff and then there's the relationships. So that's something else we look at. Are all the relationships with the owner, or are they multiple layers of relationships? Again, if the owner is out of it. Do the customers know? Well, I deal with the project manager or the chief salesperson, right? If it's all the owner, again, the buyer looks at that goes, well, as soon as you're gone. All those relationships are precarious at best. And I have to assume gone right. Sharon: [00:42:00] Right. Even I guess vice versa. Vendors, right. They yeah. Same thing to all those account numbers. You got to be able to have access. Where is all those account numbers listed? How do you get ahold of your customers? What's your database look like? Gotcha. Jeffery: [00:42:12] Yeah. All of that. Sharon: [00:42:13] Okay. All right. So in 2027, my goal, I don't know where I'm going yet. I'm going to go away for January, February and March. Jeffery: [00:42:21] Nice. Sharon: [00:42:21] I'm become a snowbird. Jeffery: [00:42:22] There you go. Sharon: [00:42:23] I think anyways, I got animals so I got to figure out how to do that, but I that's the 2027. That's what's going to happen. Jeffery: [00:42:28] Fantastic. Somewhere warm. Sounds like. Sharon: [00:42:30] Yes, yes. Okay. We're going to talk about timing. We did talk about me say ten years. You talked about 3 to 5 years At least. Jeffery: [00:42:38] To start planning. Yep. Sharon: [00:42:40] Start planning. But we also talked about pitfalls and fatal mistakes. So tell me a little bit about that. Jeffery: [00:42:44] So fatal mistakes just waiting too long. Right. Sharon: [00:42:48] So again when you get tired and you depreciate. Jeffery: [00:42:50] Yeah. Sharon: [00:42:51] So that's a fatal mistake is what you call that. Okay. Yeah. Jeffery: [00:42:54] So 12 to 18 months because people will actually ask, well, how long is it gonna take me to sell the business? And the answer is always, I have no idea. Right. But I can give you a reasonable average window. And it's typically 12 to 18 months from the time that the business is actually on the market. So finding a buyer takes time negotiating. And that's the one thing people need to know. All of the steps take much longer than people anticipate. It always gets pushed out. And the closer you get to the deal being done, the more the delays come. Because once a buyer gets their accountant involved, well, then they have a whole bunch of questions. And once the lender gets involved and people will work with their bank and their their first level bank contact is always very enthusiastic about how we're going to get this loan done, and we'll have this done in three weeks, and then it goes up to the next level. And then that person's like, oh, hang on a second, we have all these questions and then it goes to underwriting. And so it always gets pushed out further and further. So you have to be, if you wait till you're tired or like, I want to be out in six months. Sharon: [00:43:55] Or a fire sale or whatever you mentioned. Yeah, it's. Jeffery: [00:43:57] It's, it's not going to work. Right. And like I said, that's from okay, I've decided, I've worked with the broker, the brokers analyzed the business, and now they're ready to put on the market. Great. 12 to 18 months from there. Sharon: [00:44:11] From there. Jeffery: [00:44:11] On average, back it up to being ready 3 to 5 years at least further out the better, right. Sharon: [00:44:18] I even think like, as a, like, listen to these podcasts or, or reach out to somebody like Lisa to even know how to create a successful business. And I think things like that we don't think about like, yes, I know as an entrepreneur, your dream is to be able to go and do things at your time and reality. That is a no go for a long time, right? But there are these things. But even like she talked about subscription things and how that can increase the value, like I wouldn't like, I don't know what I can do in my industry for that, but there's so many different things that it's like, oh, you know, it makes you think and you can build a better business if you know how to exit it. Jeffery: [00:44:58] Well, that's become very, very popular in a lot of industries, right? Like a lot of people will put a great deal of value on the subscription based model. And so I know like even some accountants and lawyers have started to try to come up with, with models around that. So the best thing would be typically for a repeat class. So for instance, you take like a lot of accountants will do the year end stuff or like you said, that annual return, right. But some accountants now are going, look, I'm going to charge you, I don't know, $5,000 paid up front annually, and I'm going to provide all of these services kind of baked into that. And then they're trying to add some value. Like we'll do a quarterly, maybe I'll be a fractional CFO or will I that service, right. But the idea is that you're trying to get them to pay on a regular basis upfront or a bundle of services. Sharon: [00:45:48] Yeah. Yeah. Jeffery: [00:45:49] So for you, maybe you could look at, at packaging something for a client that if they have a fleet, for instance, you might say, look, you know what? We'll do all of your, rather than give you a quote every time we put a wrap on a vehicle, if you've got a plan, on average, you're doing, you know, six vehicles a year, we'll do it for X number of dollars. And then above that there'd be adding, right. But we want you to contract with us because sometimes it can be a prepaid cash flow, or sometimes it can just be an agreed upon contract. Like for three years, we're going to do all your vehicles for X number of dollars for six vehicles, right? A buyer looks at that and goes, hey, I know I at least have two, let's say more two more years of guaranteed revenue with this client. Now back to what we talked about. You need to understand your cost structure so that you know what you're charging them is actually going to make a profit. Sharon: [00:46:39] For you or not. Jeffery: [00:46:40] Yeah. There you go. Good stuff. Sharon: [00:46:43] And I do. All right. So yeah, there's definitely things like we talked about not with you. So I did an earlier podcast about being in business and on business. And that's one of those things that you'll be able to got to step out and work on your business to focus on that kind of stuff, but at least you're able to focus and you know what to focus on. If, if those are, if you knew what to focus on. So sometimes in business, we just hit the ground running. We hope we make a dollar. At the end of the day, we hope we can make payroll. And we hope, you know, whatever the case is. So this is at least something to focus on and it'll help you build a successful business if you can know what those strategies are. Jeffery: [00:47:15] Absolutely. For sure. Sharon: [00:47:17] Okay. Let's talk about the handoff. How to leave your business so the community stays strong. Jeffery: [00:47:22] Yeah. Good question. So again, that's going to be somewhat contingent on how transferable to businesses. Typically, we require our sellers to commit to staying for a reasonable transition period. Sometimes people. What's that? Sharon: [00:47:36] What's a reasonable transition period? Jeffery: [00:47:38] Depends on how complicated the business is. Usually it's a minimum of. We'll ask them to commit to three months. And typically what we find is that that first month there's a lot of hand-holding. And then the second month, well, maybe it's coming in a couple times a week. And then usually we'll ask for an extended period of. Can I, can I reach out by phone and email? Sharon: [00:47:56] Right. Jeffery: [00:47:57] Sometimes if the business is more complicated, they may want the previous owner to stay on for a period of time and maybe in a key role. Again, it depends on the kind of buyer, right? We just did one. The buyers was not knowledgeable in that industry, but he's an investor and the seller is staying on for two years sort of as a general manager, but now can focus on stuff that they like to do the doing. And they've now we've removed all of the I don't have to hire people anymore. I don't have to deal with the bank and all of that. Sharon: [00:48:27] Yep. Gotcha. Jeffery: [00:48:28] The new buyer is going to do all of that. So again, being prepared to do the handoff, the more prepared again, if I can hand somebody the manual and 80% of it is in the book and say, look, this is time-tested. We know it works. We sort of jokingly tell our sellers, do not change anything in the business. Run it exactly the way the previous owner's been running it. Very pedantically. We like to joke, if, you know, if the new owner puts a pencil behind her ear, you take that same pencil, you put it behind your ear for a year, you do exactly what they did. And we'll sometimes see sellers come in and they're like, they want to change stuff right away. And it's like, do not do that. Sharon: [00:49:05] Because even like, my team has been here for so long, if you just come in and I want them to succeed, I'd want them to stay. This is their livelihood they've built. It's time. So like I would, I just that would be if I was to ever hand it off. I'd be so worried about my team. And if they come in and start changing things, that's not going to jive right off the get go. Not that they're closed minded. That's not it. But not on day one. Give them some time and some function. And you know, like, I don't know. Jeffery: [00:49:33] The other thing Sharon would be in terms of customers and staff and vendors, when we're working with a buyer, usually we will facilitate some pretty good meetings. And I think as a seller, you want to try. Now, there's never a guarantee because sometimes people can be wearing a bit of a mask, but the more you can sort of get a sense of, of alignment of values. Jeffery: [00:49:54] And then again, facilitate those, those transfers to say, I'm going to be, we're going to have a friendly transfer of power where as the seller, I'm going to feel comfortable when I'm ready to share that with the key customers, introduce the new owner. I'm going to be sticking around for a while. Like things are not going to change. Same thing with how you roll it out to employees. And this becomes a bit of a, this can be a bit of a challenge because we will tell an owner, do not tell your employees until there's basically a done deal. Or if you do, it's got to be very carefully who you're telling. And sometimes I'll get into a situation where they feel quite, quite bad because they're in essence, they've built trust and now they're feeling like they're betraying their employees. Sharon: [00:50:39] I always say to them, like this, we're in this together, right? Like it's, we built it together. So I would just like, yeah, that would be hard for me to hide it. Jeffery: [00:50:46] So, you know, typically that's all based on like, there's no one way to do this. Again, depending on the size of the business, sometimes there are, you know, key players that you'll need to bring in a little bit earlier under, under non-disclosure. And then there's other people who don't necessarily need to know and may not even care. The further down they are in the organization, like, okay, well, same same day, different stuff, new boss, old boss doesn't matter. But those key people. But again, you, you want to bring them in at a time when they need to know because so many deals don't transact. So if you're constantly, hey, we got a new buyer. Everybody gets excited. Oh, it fell through. You don't want to have that whipsaw effect, right? Sharon: [00:51:24] And even the whole conversations around it, I don't have time for all that kind of stuff. So yeah, I get it. So solidified it. Yeah. Jeffery: [00:51:29] And I think the other thing is to, to just lean into it and at some point say, listen, I know I didn't tell you, maybe you feel we've had some erosion of trust here and just kind of own it and explain why I couldn't tell you was first of all, the broker told me not to tell anybody. So you can always blame it on us. Sharon: [00:51:45] Yeah. Love it. Yeah. Brilliant. Yes. Even the emotional we talked a little bit about it like so as entrepreneurs, we built like for me in particular, and I'm not, I'm not the only person out there, but I started It's Time without knowing anything. I didn't know how to thread the embroidery machine. I didn't know how to sew, so I didn't even know how to work that bobbin underneath it. I didn't know how to get the vinyl off the vinyl machine and onto a window. Like I literally knew nothing, nothing. And I started It's Time in Provost after my husband was headhunted there. I didn't even know anybody. We started it and I didn't have any family. I didn't have any friends. Absolutely nothing when we started it. So when I say it's my baby and I nourished it to where it is today, it literally is my baby. And sometimes as a business owner, unfortunately, when you're starting to build something, other things get neglected. In my case, it was my children. I used to say that they'd have to lick the bottom of the fridge to get food, because there's so many times I'd work late and there would be nothing in the fridge. Sharon: [00:52:44] And I'd be like, okay, here, shove your head in there and lick whatever sticky on the bottom. That's your supper. Because like, because it's like that. It is. I don't think I'm the only one. Like it's hard. It's hard being a business owner and a mother at the same time. So anyways, when now it goes to the time to like sell it, it's like it's your pride and joy. It's like watching a baby grow up and morph into something more and give back to the community and give back to your team. Like my goal is for my team to have be the highest paid employees in our industry. That's my goal because because of them, It's Time did survive and because of them, It's Time has morphed into three locations and where it is today. But anyway, so like to sell it, it's like letting your baby go off to wherever into the world. It's like fly. It's hard. Jeffery: [00:53:26] Yeah, it totally is. And I think that so most deals get scuttled because of emotion. And again, this is where going back to your first question, like, well, why would I use a broker so often? People will, if they try to do it themselves, they're not prepared for the roller coaster of emotion that they're going to go through both positive and negative. Right. And so like, due diligence is brutal because people are now asking a bunch of pretty intrusive questions about your business. And we have sellers who get very agitated and insulted and want to kill the deal. And then our job is to talk them off the ledge and say, this is just normal. This is why they want to look at that. This is what they're asking for. And so that went out of it, element of it. And then I've had buyers or sellers. I had one where they got an offer. It was above asking. They were excited. He turned to her and he said, what am I going to do with myself now? And she sort of said, don't worry about it. And they killed the deal the next day and we started having to fight with them about he didn't want to sell it anymore. So emotional preparation. So part of that 3 to 5 years is also that that that stool or that leg of the stool, you know, don't let this be a surprise. Jeffery: [00:54:35] Be prepared for what's going to be a grueling process. There's going to be emotional up and down where you. Am I doing the right thing? Because the statistic is that 75% of people who've sold a business, even if they get the price that they want, report dissatisfaction a year after they've sold. And for the most part. Sharon: [00:54:54] Because we're really strong on our core values and our ethics, we're not we're not pushy sales, we're not sales. Like, you know, the car salesman's out there. I always call them like, I'm terrified of like, I'm not that person. We're not that person. We're not those people. We'll come in and we'll help you with the best of our ability. But if you choose somebody else, that's okay too. And I'm okay with that. All we can do is focus on being the best that we can be in these four walls or whatever walls, how many walls we've got. So anyways, it's, it's something that, you know, just and then all of a sudden to hand it off to somebody with no core values or integrity, it would be horrible for me, but. Jeffery: [00:55:25] Well, that's a good point. So again, you know, this is where it all kind of ties together. If you are not selling under duress, right? If you've given yourself that time and often will say within the 3 to 5 years, so when the business is doing well and go through these cycles and it might be like, look, I'm, I want to be out in 3 to 5 years. So okay, well, so maybe we're three years out, but boy, you guys have been on a high. This might be the time to start the process, even though you're not 100% ready by the time it actually happens, you might be ready. But if you wait till you're ready or a little bit beyond like, because I'll phone people on Friday afternoon and they're like, solicit your thought about selling your business. Like I said, every damn day. Well, he's probably a little bit past the optimum, right? Like he's frustrated. He's tired. Right. And there's still a long road to go. So the more you can prepare yourself and it is going to be really great analogy. Like my kid, my oldest son's about to in September, he's moving to Halifax. Right. And we're preparing ourselves emotionally and we're excited for him to go. But at the same time, it's the same with the business. You're excited to see it go. You're going to have that dissonance, that regret, that that fear that those late night cold sweats. But if you've got the time to, to position the team, find a buyer, because often our sellers will be like, you know what? It's a good offer, but there's just some resonance there that's not there. And I don't think that they're going to be good for my people. Kill the deal. Don't sell it. Yep. Let's find somebody else. Right. Sharon: [00:56:53] Love it. Okay. So say for example, somebody listening to this podcast like, you know, I never thought about selling my business. Let's go by step one. They would do step two, they would do. And step three, tell us like point form, who do they reach out to first? Jeffery: [00:57:05] A great point. So I would say, and under the exit planning thing, first person you should probably talk to is your financial planner because. Sharon: [00:57:12] Financial planner. What if you don't know what it's worth and then he you can't give him a value or what. Jeffery: [00:57:16] Well, let's take a step back. Right. So the first question the financial planner usually is going to work on is what do you what kind of money do you need in retirement? Right? So there's this great analysis that they can help you with. We call it the three gap analysis and say, okay, let's say I need. They work with you and they're like, for the lifestyle you want to live. Again, everybody's different. So we joke, but I saw a little place in BC. I want to buy a racehorse. Okay. We're talking about different needs here, right? Whatever that number is. So they might say, you know what, conservatively you need, let's say $3 million in net worth. That's awesome. So then it might help you figure out, okay, you know, you got the house, the cottage, the boat, the car, the rrsps. Man, it's a million bucks. Okay, so there's a gap there, right? So you need $2 million out of this business that they can help you with. And working with somebody like Alisa to come in and say, okay, based on where it's at right now, how it's operating order of magnitude, it's worth a million. Sharon: [00:58:12] Right? Jeffery: [00:58:13] I still short $1 million, right? That's where you would then be incentivized to say, well, okay, I've got some runway. I've got that 3 to 5 years. What do I need to do to get it up to that number? I need that, that 2 million, 2 million plus. Well, now you have an incentive and a reason to do those things because again, let's be honest, most of us, we have inertia, right? We're busy. You're, you're you're enmeshed in the day to day, unless you have some impetus to start doing the hard work of systems and processes and team development, you might not do it, but now if you can attach it to that outcome, okay, so that would be that first step, reaching out to other advisors, your accountant, your, your tax people, right? Again, start understanding, hey, what are the implications? I'm thinking of maybe doing a sale or it might not be you might want to sell it to your employees. Now I'm talking against my own interests. Like we obviously. But selling a business is only one. Sharon: [00:59:11] Starting the employee ownership or something. It's a thing. Jeffery: [00:59:14] Yeah. Like, John, I know you talked to John Stevens, right? Yeah. So there's always those options. Do I want to sell it to my employees? Do I want to sell it to my family? Do I want to sell it to a third party? Right. The more you start looking at these options ahead of time and seeing what the the pros and cons are, the better. Are you going to be with an outcome and the more satisfied you'll be? I didn't do the wrong thing. I wasn't forced to sell it on a fire sale when it turns out my kids wanted it. Or worse yet, I've seen this a lot where you assume your kids are going to want it, and then when the rubber hits the road, they're like, what? Are you crazy? We we saw Dad and Mom working 90 hours a week. Jeffery: [00:59:49] We don't want any part of that. Right. So those conversations. Sharon: [00:59:53] Okay. Jeffery: [00:59:54] Maybe a year. I would say even three years out. Maybe reach out to a broker to have again, just a preliminary conversation. Hey, I am thinking of the sale option. What might that look like? What do I need to know? What's the process of working with a broker to put this business on the market? What are the pros? What are the cons? What do I need to know? Who should I work with? Again, you're not ready yet, but the more you can start to be ahead of the curve. And again, we recommend this is a very intimate relationship because a broker who's doing their job, they're going to take you through that valuation. They're going to work through that reality check. My lawyer said it was worth this. Great. Tell your lawyer to sell it. We're telling you the truth, right? Sharon: [01:00:37] Yeah, yeah. Okay. Jeffery: [01:00:38] So having that relationship and maybe going out and talking to a few different brokers, right. Is it a fit? Do we feel there's alignment? Are they listening to me? Do I think this person knows what they're doing? Because once you get we require an exclusive engagement because the time that we put in and the effort. And remember, we don't get paid other than a small upfront fee that we charge pretty small. We only get paid when it sells. So we have to be in that boat with you, right? Jeffery: [01:01:05] So it's a very close relationship of trust. So again, meet a couple brokers. Then when you're ready to go, that's when you would call me and say, look, Jeff, we're ready. We're ready to put a listing together. We'll put on the market, we'll sign the contract. We know it's going to take 3 to 4 months to get ready to put it on the market, and then 12 to 18 on average after that. But that fits our timeline, right? Sharon: [01:01:28] Okay. So we talked about Lissa as a name in here, but she's considered a business evaluator. So if they're listening around the world, that's who you would look up, know. Jeffery: [01:01:38] Value accelerator. Sharon: [01:01:39] Value accelerator. Jeffery: [01:01:41] Yeah. Or an exit planner. Sharon: [01:01:43] Okay. Okay. So that's because yeah, we're. Jeffery: [01:01:45] Yeah. Sharon: [01:01:45] We've been fortunate enough to hit 50 different countries. So so that's cool. Okay, so that makes sense. So go to the financial advisor, see what you want, what your dreams are when you retire. Okay. Jeffery: [01:01:56] Exactly. That's right. Sharon: [01:01:58] So sorry. One other question is you talked about your fee up front, and I'm sure they all vary. But what is an average percentage percentage of sales from a broker? Is it like, is it like 5% up to 25%? Like what's the average? Jeffery: [01:02:11] Yeah, people are pretty shocked. So yeah, because often their point of reference is, is their, their realtor or even a commercial realtor. Yeah. So without giving away what, you know, our fee because again, everything is negotiable, but I would say so we use a graded fee. So our fee is higher on the first million, a little bit lower on the second million. Again, that's pretty, pretty common. But I would say anywhere from 10% to 20%, 20% being a little bit on the high end. And again, we'll look at that every every deal because we're deal makers. Every, every listing is a deal, right? If we think, boy, this business can sell fast, it's well organized, we're not going to have to put that much work into it. We might be willing to be a little bit more flexible if it's going to be something where we think, man, this is going to be it is salable. But boy, it's going to take a lot of time and a lot of effort. Obviously, we're going to have a higher number on it because it's going to represent just more. Sharon: [01:03:05] More time. Jeffery: [01:03:06] But 10% to 20%, which sometimes people just fall out of their chair. But again, you have to understand how many hours we're going to spend to market the business to, to bring it to buyers. Like we have a network of buyers that have again, signed non-disclosure agreements. We have buyers that we know are looking for particular businesses. So we bring a lot. And then working through that back end process, which is where 80% of the work is. Okay. I have a I have an agreed upon offer. Now we're starting to do due diligence, and now we're talking with the bank and really have to push that thing through. That's where we put a lot of our effort into it. Sharon: [01:03:41] So I just know our listeners would be questioning that. I just know, because if I was listening, I'd be wondering the same thing. Okay. So one thing we didn't talk about is, so sometimes as a business owner, you don't know how to create systems, you don't know how to read those numbers. You don't know how to do all that kind of stuff. And it's not your job to tell them. But my. Just as a word out there, how I figured all this out is I reached out to a business coach and he helped me understanding those numbers. So there's different people out there that can help you with your numbers and understanding them better. I don't know if it's because an accountant, they look, I don't know, they look at the year end kind of thing. Even your bookkeeper is not that person. I don't think so. Sometimes you need some help. Am I incorrect? There? Maybe your bookkeeper can. I just don't know. Sometimes, like for the systems, those are hard. Like you have to document. This is my word of the wise. If you have to write it down or think about it really hard three times, make a system out of it. And it could be a simple recording of your screen. It could be a simple video, it could be like a Google doc. Whatever the case is, just make sure that you systemize it and put that into your tickle trunk for when you go meet Jeff. Because he's gonna want those. Okay. Jeffery: [01:04:48] Yeah. So, so I think a lot of owners are reluctant to use advisors, particularly in Canada, that's been more so than than in the US and I think in Alberta too. I think there's a it's that sort of spirit of of independence, but there's a lot of value to bringing in. I think more and more people are understanding different kind of advisors. So whether it be a business coach, sometimes that can be helping the owner just manage their own time. Or we talked a little bit about a fractional CFO that can be a really valuable advisor to bring in. It can be somebody who's a little bit more of a general consultant in terms of systems and processes. There's a whole bunch of programs out there. There's fractional sales executives. Again, sometimes bringing somebody in can help manage or organize the sales process. So again, it's sort of taking a look at bringing in somebody like Alisa. And so we have a network, for instance, here in Edmonton, the business advisor network, where we have financial planners, accountants, lawyers, some consultants, people in the brokerage and hope a bunch of other advisors. So you can definitely reach out to or even me and say, hey, look, I'm, I'm thinking that I need to figure out how to build a better team. And once you get into the ecosystem, then most advisors know a bunch of people that specialize in those different areas. And there's no real yeah, it's finding something you can trust. Sharon: [01:06:08] So if somebody's struggling with one of these areas that we talked about, they can reach out to saying, this is something I want to focus on. Yeah, exactly. Reach out and you can direct them accordingly. Because the way the World Wide Web works now is like Zoom meetings nonstop. You don't even have to be in the city. We can be out here in these rural towns and you can still get help. Jeffery: [01:06:25] Yeah, no. Good point. Absolutely. Sharon: [01:06:27] Okay. Before we do anything else that we forgot about, Jeff, that you want to add that we missed? Jeffery: [01:06:32] I don't think so. I know you were going to ask me for a couple of book recommendations. Sharon: [01:06:36] I think do that right away. That's very important. Jeffery: [01:06:39] Excellent. Sharon: [01:06:39] So let's do it. Jeffery: [01:06:41] So I only have one that I can physically show you. But I'll start with the other one. So there's a book called Finish Big by Bo Burlingham. I have the e-book version. I like that one because it really addresses a lot of the who am I going to be after I quit my business elements? Right. So it sort of talks a lot about that personal. How do you find value? How do you create value at a personal level? How do you interact with. How is your identity going to change the day after you basically sell the business and those relationships? So that's a good one. And then the other one, it's kind of fun. It's called Your Baby's Ugly by Justin Goodbread, who is a CPA out of the US. And it's maximized the value of your business or you'll have nothing to sell. So this is a really good systematic guide to understanding some of the things we've been talking about before. You'd even go to an advisor and say, okay, what are those things that I need to pay attention to? Right? What, what are the steps I'm starting from? Everything's in my head. I do it the way I've done it since it was a small business. And now I'm finding that the complexity is getting to be a little bit beyond me. Jeffery: [01:07:45] Maybe I've I've hit that plateau or I can. I can't take on any more as that. That center of the. All of the activity. How do I begin to build the team, build a process, build the capacity. So he addresses a lot of that in this book, kind of at that high level. And it's a really good place to start and then go out and find that advisor that can then help you implement. Okay, this is what I need to do. Can you help me actually do it and bring the tools and bring the, the templates and yeah. And then the other thing, the last thing I'll say about working with a good advisor, and there's a lot of people that do this. It's this idea of you can't do everything in one shot. It's a long term thing. And it's applying some of the strategies from like lean manufacturing, whatnot, 90 day sprints. So a good advisor is going to come in and say, look to get it to where it needs to be. There may be 50 things that we need to do. We can't do all 50 at once. We're going to identify a couple and we're going to have milestones every 30 days. Jeffery: [01:08:43] And yes, we'll help you come up with the roadmap. But then a really good adviser is going to help you with that accountability cycle of I'm going to check in with you, Sharon, every two weeks, and you're going to commit to having done a thing. And I'm going to be checking, did you do it or did somebody on your team do it? So again, it's it's about that building that cycle of moving forward because I think a lot of people, it becomes overwhelming. They do it really well for the first month, and then they begin to the world takes over and it gets busy. And this client and that client. And then six months in, they've done very little. So having someone that can help you get through that grind of, yeah, I know, but we're going to do this one thing, get that done, celebrate it. Then we can move on to the next step and boom, boom, boom, boom, and get get you to where you need to be can be very, very effective. And then you can phone them at 11, 3 in the morning and say, you know, I hate this. And they'll understand and go, yeah, I know, but we're going to do it anyways. So call me in the morning. Sharon: [01:09:39] We have to be comfortable being uncomfortable. And that's part of it. You have to be It uncomfortable going into there, but, right? So when I went to my business coach, he's in Calgary and we did a 90 day, I don't know what they call it. But anyway, so he gives me a booklet. So this is day one booklet and it was a bunch of questions. Do you have this in place. No or yes. No or yes no or yes. And the whole booklet was no. Like honest to God, maybe one thing was a yes with a question mark beside it. And then he says, okay, now you're going to focus on let's focus on one from this category because it's like financial to team to like, there's all different categories. So find one out of each of those. And that's what we're going to focus on that this quarter. So anyways, you fast forward and I'm going back home and he goes, okay, Sharon, you got to work on business, not in business. So I had this office, not this office, a different office, but I had an office and it was just full of junk like cardboard boxes and like, like stuff from the front of the store. Like it was, it was our hiding area. So we cleaned it out and that was now my office. So good. I'm going to work on my business all afternoon. So because I have a vinyl printer. So I went and made a whiteboard. I literally on coroplast, I made a whiteboard and a calendar. And then I got myself a new chair and it was like one of those blow up balls so I can tighten my core. So I blew all that up. But it was the right whatever. And then I had my pens laying on my table. It's like, oh, that's unfortunate. So I went across the street and got a pen holder and everything was beautiful. Like, I mean, my office was gorgeous. And then he says to me after would you do for on business? My desk, my office is nice because I did not know how to do the on business. Jeffery: [01:11:06] Sure. Sharon: [01:11:07] I did not know how. I did not know how to transition from being in my business by pumping out orders, making money, because that's what I feel is happening when I'm in business versus on business. Jeffery: [01:11:18] Well, and I think that's part of the the entrepreneur's trap, right? Is that because most entrepreneurs are cut from a certain independent cloth, and you begin to think that it's all on you to know how to do these things. And so, so for instance, I'm just going to plug you, I'm just launching a course on delegation. And I even say that in the course. And a delegation is a really important tool for owners to figure out how to. Once you've got the right people, how do you start handing those things off in a way that that your confidence is not going to swamp the person. And so there's. But what I say is that nobody comes into it naturally knowing how to do that, how to systematize or how to delegate or how to analyze their financials in a way that's beyond your accountant telling you. And we used to joke about this, the grand reveal three months after your year end, where you go in and you're like, I don't know if I made money or not. And then they go Ta Da. Look at that, right? Knowing how to do those things. Jeffery: [01:12:15] It's a skill, it's knowledge and it needs to be acquired. But I think a lot of entrepreneurs fall into this trap where because people count on them and they have to project this sort of vision or image of the person who's in control and knows everything, they hesitate to sort of admit, I guess, that they don't know it all. But once they start tapping into the right advisors, man it sure makes a difference, right? It's just getting past that, that reticence of am I going to be seen as weak, or was this I and I've you know, I've seen owners that run $10 million businesses on grit and, and street smarts and, and yet when you probe as a consultant, you're like, man, this is impressive. I like, I don't know how you've managed to do this without knowing these things, but once they do know them, boy, then it's, you know, then you're leveraging, you're amplifying that, that entrepreneurial skill and grit and, and just street smarts and taking it to a whole different level. Because now I know even more than I did. So there's, there's definitely value in doing that. Sharon: [01:13:16] It's even cool as an owner watching your team grow and embracing those, what would you call them? Like? I would call them tasks, but they're more than that because they're owning them. They're owning what they've been delegated to do and they're owning it. And now they're teaching our new staff. It's actually remarkable when you can actually stand back and watch them and watch them morph into being leaders. Jeffery: [01:13:37] Well, absolutely. And you know, how satisfying is it to to have somebody in your organization grow? And again, I mean, that's part of retention as well, because the better employees, the ones that you want to keep around, tend to want to be learning and growing and developing. And those are the ones that if you don't provide those opportunities, are going to get frustrated and leave and they might cross the street and start competitor and you don't want that. So yeah. So yeah, no Sharon: [01:14:05] Okay, so tell our listeners how they can get ahold of you because they may have some questions or even some contacts that you may have that they need. Jeffery: [01:14:12] So obviously LinkedIn, I know you're going to put the link to my LinkedIn profile. That's a really good place. Sunbelt Business Brokers. And then I'll give you my so my direct line is (780) 469-3535. So you can reach me through that line. You can reach me through the Sunbelt website. And then we have a system where you can ask for different people. You can reach me through LinkedIn. And I think I've given you my email address as well. So I can send me an email so I'm not hard to find. And like I say, part of it too is you may not be ready to sell. You may be at that point where you're thinking, I'm just getting into that process. I'm running a thing called breakfast with a broker every Thursday morning. You can book me. We'll just have a casual conversation. No, you know, no strings attached. And because we have this network now of advisors at different stages, again, I can be that first point of contact. We can have a conversation about what are you trying to accomplish. And I can connect you to people in that network as well. And make sure that you're getting that support you need. Because again, it benefits you as the owner. And then at the end of the day, when you're ready to put it on the market, it's going to be beneficial for, for, for me as well. Selling a business that is going to be desirable and valuable and easy to sell, and everybody's going to be happy. Sharon: [01:15:26] Yep. Team's going to be happy. Everybody's going to be happy community because it needs to state your business needs to keep going for your community. So. Okay. Alrighty. Well, thank you for that. If you enjoyed this episode, please subscribe and share it with your fellow entrepreneurs. Who needs to hear what Jeff had to say today. He is your man of connections and he is your dude. If you're ready to sell your business or ready to sell it in five years or ten years. So reach out to Jeff. If you have encountered any learning curves or have questions you'd like answered here on this podcast, please send us an email or make a comment on any of the platforms, because that way I can find somebody to interview that knows a lot more than I do and, and reach those questions for you. And if you have, I don't know if it's an experience or if you have an expertise and you would like to be on our podcast, please reach out to me as well, because I would love to interview you. If you have something for our listeners to embrace and learn from. Until next time. Keep building. Keep growing. Remember, It's Time for a Success. Thank you for joining us. And thank you, Jeff. Jeffery: [01:16:20] And thanks very much for having me, Sharon. And yeah, I look forward to connecting our continuing our connection. It's great to meet you.