Latest / The Inspired Stories Podcast / Kirk Michie on Valuation, EBITDA, and the Trajectory Founders Need to Reach the Exit They Truly Deserve

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Kirk Michie on Valuation, EBITDA, and the Trajectory Founders Need to Reach the Exit They Truly Deserve · The Inspired Stories Podcast

0:04
Welcome to another edition of the Inspired Stories podcast,
0:08
where leaders share their experiences so we can learn from
0:11
their successes and be inspired by how they've overcome
0:14
adversity. As you listen today, let one
0:17
idea shape what you do next. My name is Anthony Kotaspodi and
0:21
today's guest is Kirk Mitchie, Founder and Managing Partner of
0:25
Candor Advisors, A boutique transaction advisory and
0:29
investment banking firm based in Carlsbad, CA.
0:33
Candor Advisors helps founders of private companies plan and
0:37
execute life changing events like selling their businesses,
0:41
raising growth capital or mapping out a long term
0:44
succession plan. Their team pairs deep deal
0:48
expertise with a unique pre diligence process and a national
0:52
network of specialists, all designed to secure the best
0:56
terms and preserve the legacy of the entrepreneur.
0:59
Across a career that spans more than three decades, Kirk has
1:03
been involved in more than 60 M and a deals as a buyer, seller
1:08
or advisor. He's raised more than $1 billion
1:11
of capital and since founding Candor Advisors in 2020, has
1:15
guided founders to more than $1 billion of successful exits.
1:20
He holds FINRA Series 724 and 79 licenses and he is a sought
1:26
after speaker and writer on the art of exits and value creation
1:30
for owner LED companies. But before we get into all that
1:34
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All right, back to our guest today, the founder of Kander
2:33
Advisors, Kirk Mitchie. Thanks for making the time to
2:36
Share your story today. Thanks for having me on,
2:38
Anthony. So Kirk, let's go back early
2:41
days. You started out at Merrill
2:43
Lynch, is a private private client advisor for high net
2:47
worth families. This was back in the 80s.
2:50
You've worked for a lot of other large companies along the way,
2:53
including AB Bernstein. I'm curious to hear how this
2:56
early work laid the foundation for the M&A advisory work that
3:01
you would later move into. Yeah, it's a great question
3:05
because I've actually thought about a little bit, you know,
3:09
when you when you've been doing what, what you know, kind of
3:11
hanging around corporate finance, the investment markets
3:14
for like decades. And I'm frequently with much
3:19
younger people earlier in their career.
3:22
You know, I try and give a sense of, you know, like how I got
3:25
here. And frankly, like Steve Jobs
3:28
used to say, it's always obvious looking back, but only obvious
3:34
looking back because I started out, you know, I came from
3:38
middle class family and I wanted to move up and, and, and so I
3:44
persuaded my parents to let me go to USC.
3:48
We couldn't really afford it. And so, you know, I took out
3:52
student loans and they moved some money around and I could
3:55
only go there for two years. But they were the two formative
3:58
years. They were the, you know, two
3:59
final years. And in my first semester, I had
4:03
an intro to finance class and all of a sudden, like things
4:09
became obvious to me. I was a business major.
4:11
And then all of a sudden I became a finance major because
4:14
ratios and percentages and compounding just happened
4:19
naturally in my brain. And I didn't know that before
4:22
that. And so, you know, then I felt
4:25
like I was really, really special and I was going to go
4:27
out and the markets were waiting for me and the world was waiting
4:30
for me. And, and you know, the way it
4:33
turned out is that, you know, I didn't want to continue on for
4:36
an MBA. I want to go right into the,
4:38
the, the kind of world of investments and finance.
4:42
I go to, you know, Merrill Lynch and back then Prudential Bache
4:46
and EF Hutton and all these terms.
4:48
And no one will talk to me. Nobody will talk to me because I
4:51
didn't have sales experience and I was crushed.
4:54
The idea that I was in my mind, this brilliant finance guy and
4:58
the world wanted me to go sell copiers or computers instead.
5:02
I mean that that like talk about idealism that just goes away
5:05
right away. So I actually kind of came in
5:07
the back door. I worked in operations for
5:10
Merrill Lynch for almost 2 years until I got what was called the
5:15
sales simulation and I got to, you know, a three hour live
5:19
simulation where I proved that I could do the job.
5:22
And that kind of got me on my way.
5:24
And I was an early adopter of a lot of things.
5:27
I was an early adopter of managed accounts when I was in
5:29
wealth management, early adopter of social media.
5:33
I think I was in, in a an article in Financial advisory
5:38
magazine back in the 90s about going online without crossing a
5:42
line. You know, I, you know, I kind
5:45
of, I was eager for more. I was curious about more and
5:50
when I got to the M and a world by becoming a partner at a
5:54
private equity firm, I loved the M and a part of things, but I
5:57
couldn't quite shake the idea that we had an unfair advantage
6:03
over the the people who built the businesses.
6:07
And, you know, holding that notion for a while and then, you
6:12
know, finally getting to the position where I was frustrated
6:15
enough with what I was doing and desirous enough to make a
6:19
change. You know, sort of the, the, the
6:21
fear of staying the same wasn't as big as the desire to make a
6:30
change. And so I made a change.
6:33
And that was when I founded Candor Advisor six years ago.
6:37
And as you mentioned in the intro, we've, I mean, we've, we
6:39
have been blessed after a lot of hard work with, you know, just a
6:44
constant flow of clients who want what we have and are
6:48
willing to kind of go to any length to get it.
6:50
And so, you know, we keep doing this work, which you know, so
6:54
it's a a little bit long winded answer, but that's.
6:57
It's a great answer. It actually a nice sort of
7:00
Reader's Digest condensed version of a pretty long and
7:03
illustrious career. Well, how did that bridge into
7:07
the M and A world first happened from the world of finance?
7:11
Well, so you know, when I, so when I became, when I went into
7:17
operations, they didn't want to let me become a broker because
7:20
they didn't have sales experience and I had to
7:23
breakthrough that barrier. And these look, I'm aware,
7:25
Anthony, that these are not actual hardships.
7:28
There are people that didn't have a fraction of the
7:30
opportunities that I've had that have overcome a lot more.
7:34
So, you know, the, the, you know, small things that I felt
7:38
like I had to pole Volt over, you know, and give myself a
7:42
rotator cuff injury, patting myself on the back.
7:46
Like I'm aware they were my hardships, but they weren't
7:49
necessarily objectively hardships.
7:51
But fair enough. The idea that I got, you know,
7:53
button holed as an operations guy and then I, you know,
7:57
finally become a broker. And the idea that, you know, I
8:01
don't have any sales experience, but I, but I become a top
8:04
quintile producer within the Merrill Lynch system.
8:08
And you know, I, I, you know, I couldn't get involved in
8:11
investment banking or private equity or anything like that
8:14
because I didn't have an MBA. And so I had to kind of attack
8:18
that the other way. And at the convergence point was
8:20
actually I had left the financial advisory world, had no
8:27
job, had raised a little money from investors to build what's
8:31
called a turnkey asset management platform or what, you
8:34
know, people think of as managed account platforms in the early
8:38
days of that. And the two biggest investors
8:41
who were going to back me both backed away for totally
8:45
different reasons. And so then all the sudden I was
8:48
running out of money. And, you know, I had, I, I, you
8:54
know, I was, I was, I was pretty bummed about the trajectory of
8:57
things because there had been one point where I felt like I
8:59
was really on track to do something significant.
9:02
And now all of a sudden I got nothing going on and no
9:05
investors. And I go see 310 to Yuma.
9:09
I might, my escape was to go to a movie in the middle of the
9:12
day, 310 to Yuma, with Christian Bale and Russell Crowe.
9:17
And there's a scene in there where Christian Bale's son is
9:21
looking at him, and he is so disappointed that his dad had
9:27
once been something significant, and now he was this guy that was
9:31
easy to kind of kick around. And so I, you know, it just kind
9:36
of clicked for me. I walked out and it was, you
9:39
know, yeah. I go from a dark room to literal
9:41
sunshine. You know, I was in Del Mar, CA
9:44
at the time. It's gorgeous outside.
9:47
I'm like, OK, that's it. I just got to go get a job.
9:49
I got to set this entrepreneurial thing, you know,
9:51
on track. And there was a message on my
9:54
phone from a close friend of mine that when I played it back,
9:57
said, hey, there's a private equity firm in Los Angeles
10:00
that's looking for a guy with your skill set.
10:02
Would you call this guy? And I called that guy and yeah,
10:08
boom, boom, boom. The domino suck.
10:11
Wow. And and that guy was in what?
10:13
What was he doing? Yeah.
10:15
He was buying kind of what we call lower middle market
10:19
businesses. So call them 20 to $75 million
10:22
private companies. You would call them all
10:25
bootstrapped, bootstrapped, but those entrepreneurs don't think
10:28
of having bootstrapped anything. They never considered going out
10:31
to raise capital from anybody to start their business anyway.
10:35
And these were, you know, low tech businesses for the most
10:39
part. Even the technology businesses
10:40
that we look at, they're, you know, were ones that were not
10:44
really, I mean, there were nothing kind of approaching the
10:46
AI that we're looking at today. These were, you know, kind of
10:49
practical software applications. These were healthcare services,
10:53
so not molecules, but you know, delivering home care, Hospice
10:57
services, things like that, buying, you know, kind of light
11:01
manufacturing businesses, value added resellers.
11:04
They were all really traditional entrepreneurial businesses and
11:08
they were, these were all people that for the most part had been,
11:11
you know, at it for two to four decades or maybe they were the
11:15
second or third generation of running the business and they
11:18
were ready to sell. And we were, you know, thanks
11:23
to, you know, our our fundraising efforts, a well
11:26
funded sponsor who could assure them that we could close the
11:29
transaction. We knew what we were doing.
11:31
And, you know, since I didn't have actual buyout experience,
11:36
you know, I was the guy that went out and raised the capital
11:39
and made sure that we could, you know, always do a deal because
11:42
we had enough capital to do it. And every once in a while it was
11:46
icy. But, but, you know, under my
11:49
watch, we bought 14 companies and we never came up short on
11:52
the capital raise. We had to kind of go to any
11:55
lengths to get that capital, but we did.
11:58
And so this was your first foray into the M&A space.
12:01
Then you came in on the capital raised side of things.
12:04
And then obviously by being there for so long, you got to
12:07
sort of understand the landscape better.
12:10
And you made the comment that one of the things that you
12:12
noticed being in the M&A space was that the business owners
12:16
seem to be at a distinct disadvantage.
12:19
Can you say more about that? Yeah, that's right.
12:22
So we were, the way I think about it now is that the buyer
12:26
of your business is a full time predator and you as the seller
12:30
or part time prey, like you'll only probably do this once and
12:34
the most junior person at the private equity firm or the
12:37
corporate development part of the strategic buyer has done
12:41
this more times in the last quarter then you'll do it if you
12:44
have multiple exits. They're recently minted MBAs who
12:49
are crunching around in the databases and building financial
12:52
models know far more about M&A than any of the most
12:55
sophisticated sellers. And what the, the breaking point
13:01
for me was the 14th deal we were doing, we were buying a debt
13:06
collection business and it was a fantastic model.
13:10
These guys had figured out the small balance debt collection
13:13
would almost always get repaid and they could find a ton of it,
13:17
you know, essentially getting charged off of bank and credit
13:21
card and health club balance sheets where like people were
13:25
getting sent to collections for owing, you know, $400.00 or
13:29
$2600. And, and, and, and these guys
13:32
had figured out that they could kind of robo send these letters
13:36
from a law firm that was barely even a law firm to threaten to,
13:41
you know, attach people's wages and stuff like that.
13:44
And you know, you know, they buy the debt for like 3 to 8 cents
13:49
on the dollar and they would settle out for at least $0.25
13:53
and sometimes almost the whole dollar.
13:55
So it was a fantastic model if you're a private equity buyer
13:59
who's trying to buy the transferable economics of a
14:02
business. For me, when I wrote the check
14:05
into that deal and sign the operating agreement, that was my
14:09
Roberto Duran moment. I'm like, no, Moss, this is not
14:13
like we are taking advantage of people when they are at their
14:17
lowest point. Also that our rich, privileged
14:23
limited partners can make money on this and we can take carried
14:26
interest and just felt icky to me.
14:29
I just couldn't do it. I couldn't do it.
14:31
So you know, I went to my partners then and I said,
14:34
listen, guys, I I know I'm the only person that our investors
14:37
know and it's going to take a little bit of time, but I can't
14:39
do this anymore. And it took a while, but I got
14:44
out. I lost all my carried interest
14:46
in the deals that I had done. That's, that's, that's
14:51
comfortably 7 figures, maybe 8, but but I feel like, and by the
14:57
way, my former partners are wonderful guys.
15:00
They're wonderful guys, incredibly smart and very
15:02
diligent and they're as good a buyer as any.
15:06
Still for me, it just was not aligned.
15:09
It just was not aligned. I mean, talk about putting your
15:13
money where your mouth is. It's one thing to say these are
15:16
my values. I won't do this.
15:17
I won't do that. But you walked away from
15:21
millions of dollars because this abutted up against your
15:26
principles in a way that was no longer comfortable.
15:29
And was that the moment in which you decided to start your own
15:32
firm, or did you leave and go somewhere else in between?
15:35
Well, it would be a much more poetic story if that's the
15:39
moment where, you know, this Horatio Alger goes off and, you
15:43
know, kind of starts his own firm.
15:44
But but here's the thing. I had a lifestyle that cost
15:49
around $20,000 a month to support and I needed the
15:53
healthcare benefits and I had too young, I was in the middle
15:59
of a tough divorce and I had two young children that were still
16:01
going to need to go to college. And, and then, you know, if
16:05
there was ever going to be any chance of me retiring, I was
16:08
going to have to, in addition to that, build up some, some money.
16:11
And so the only other thing I knew how to do was wealth
16:15
management. And so even though I didn't want
16:18
to be back in wealth management, it was a relatively frictionless
16:22
way for me to go back to doing something I knew how to do.
16:26
And so I reached back out to the guy who I had handed my book to
16:31
when I left Bernstein, you know, like 15 or 18 years before that,
16:36
who was now in charge of the whole country.
16:38
And, and I didn't even have his phone number, but we were
16:43
Facebook friends. And I sent him a Facebook
16:45
message and said, I want to come back to wealth management.
16:49
His immediate message back was great.
16:51
Where do you want to be? What do you want to do and like
16:55
and, and the interview process while the the chairman of the
17:00
firm was different because I joined Bernstein the first time
17:04
around when Mr. Bernstein was still alive, I actually met him.
17:06
He was like a heroic figure to most of us.
17:09
The chairman of the firm was different, an impressive guy
17:12
nonetheless, but a different guy.
17:14
But all the senior management were people that I was peers
17:16
with when I left the firm. And so, you know, the, the Zoom
17:21
meetings we had for me to come back to work for Bernstein were
17:24
like, we come on Zoom and they'd say, wow, you got old and you
17:27
lost all your hair. And I'd say, wow, you got fat.
17:30
You know, I mean, it's like, you know, it was it was old home
17:32
week. But everybody knew that, that I
17:34
knew how to do the job. And so I came back and I spent
17:37
five years not liking the wealth management part, but I used my
17:44
skill set around knowing the M and a process and this kind of
17:48
chip on my shoulder about feeling like entrepreneurs
17:51
didn't get the, you know, kind of the, the, the right end of
17:54
the stick to help all of these people prepare for exits.
17:58
And so all the money I brought into the firm over that five
18:01
year period of time were helping people get to exits and
18:05
reinvesting some of the proceeds.
18:07
That was before anybody thought about anybody being an exit
18:10
planner. That wasn't like it wasn't that
18:12
thing. When did exit planners become a
18:15
thing? Well, I'm not sure they
18:17
completely have yet. Most of the exit planners that I
18:21
meet don't have much transactional experience.
18:24
They've been through a course, they have a certification and
18:27
they certainly know how to help people get their financial
18:31
affairs in order and get ready for, you know, kind of I'll,
18:35
I'll call it the administrative and operational parts of going
18:38
to an exit, I think sometime in the next 5 to 10 years.
18:44
As more and more people pursue that and as more people with
18:47
transactional experience go after that and that, you know,
18:50
kind of becomes the thing, it it'll become important.
18:54
But I don't think it is yet, you know, So for us, we, we consider
18:59
doing it. I consider having all my people
19:01
do it. But every time I look at the
19:02
materials, I'm like, this is not really what drives transactions
19:05
and this is not what gets founders to better outcomes.
19:08
Oh, interesting. So what are you seeing in those
19:10
course materials that I don't know is wrong or is missing
19:15
perhaps? You know, it's been a few years
19:18
since I looked at them, but my, my recollection is that, you
19:22
know, kind of starting with the idea that the buyer is looking
19:26
at, I don't care how differentiated your business is.
19:31
You know, they're looking at the transferable economics of the
19:33
business and for the most part that's going to be what they
19:36
would call EBITDA. So just take your net income and
19:38
start adding back the formulaic things, the interest, taxes,
19:42
depreciation, amortization, but then take the owner economics
19:46
and add those back and say, all right, this is the cash flow of
19:49
the business. You know, in certain things like
19:52
in in software and a few other areas, they're going to buy the
19:55
recurring revenue. But for most businesses, they're
19:58
going to buy the EBITDA, the transferable economics.
20:01
And there's not a lot in the exit planning stuff around how
20:05
you improve upon your EBITDA, professionalize your financials.
20:10
Dig into the databases and figure out, well, like let's say
20:13
you, let's say Anthony, you come to me and you say, look, I want
20:16
to sell my business and I need to get at least $20 million.
20:20
So on a net after tax basis, I can endow the rest of my life
20:24
such that, you know, for expenses, taxes and you know,
20:27
inflation, I'll never run out of money.
20:30
If I look at businesses like yours and say, OK, we've got 2
20:35
million of EBITDA, but the average transaction for a
20:38
company your size is five times EBITDA.
20:41
So you're, you need the market to come like to double to, to
20:47
exit. Like in the exit planning
20:48
materials I've seen there's nothing about how you're going
20:52
to improve upon that. There's nothing about sort of
20:54
saying, OK, what are some of the other alternatives?
20:58
You know, we try and run through all the different alternatives
21:01
and we look at all of the things that hold the entrepreneurs back
21:05
from being able to maximize price terms and legacy control.
21:10
Like it. Like if you don't have over
21:12
$2,000,000 of EBITDA and it's not clean, meaning you've got
21:16
CPA prepared financials that show that you've got 2 million
21:20
of clean EBITDA. Most of the private equity firms
21:23
aren't that interested in you certainly as a platform
21:26
investment and maybe not even as an add on investment.
21:29
So you, you, you've got a narrow list of buyers.
21:33
Like you get some of these buyers that you know, you know,
21:36
entrepreneur through acquisition or ETA or what we would call
21:40
search funds. They, they're like bunnies.
21:43
They are multiplying like crazy. Keep in mind these are people
21:47
that have never bought a business and most cases never
21:49
run a business, but they got some pools of capital to back
21:53
them to try and buy a business, you know.
21:56
So, so you know, I know I'm a little kind of off topic here,
21:59
but I would say the exit planners for the most part don't
22:02
know how to make distinctions between am I talking to TPG or
22:07
KKR? Am I talking to Riverside?
22:10
Am I talking to, you know, some 29 year old guy whose dad is his
22:16
primary LP and he's got some other private equity firm trying
22:19
to buy the business? Or am I talking to independent
22:22
sponsors who have M&A experience but they don't raise a fund and
22:26
they do deals, you know, kind of deal by deal.
22:29
All those things are really, really important when you're
22:31
going to market because you're going to get a deal done if you
22:35
have an attractive business. But if it's an 8 figure deal,
22:40
your buyers going to take advantage of you by at least low
22:45
to mid 7 figures on structure. If it's a nine figure deal, it's
22:49
going to be 8 figures. And unless your exit planner has
22:54
true transactional experience, you know, then you're probably
22:58
going to get taken advantage of on terms because you're probably
23:01
not going to bring the M and A lawyer in until the deals
23:03
already negotiated. And so you're really not going
23:06
to know what you're agreeing to. So couple questions I want to
23:10
pull out of there. You mentioned that you know,
23:13
some of these exit planners are not really familiar with what
23:16
the alternatives are to increase EBITDA.
23:19
What are some of those? Yeah.
23:22
So look, if you have multiple lines of business, the most I
23:29
will generalize, but I will say that I'm directionally correct
23:33
about this, even if it's wrong about some of the buyers.
23:37
Private equity is the is kind of the prototypical buyer.
23:42
Now private equity firms, if they're experienced are really,
23:45
really good at buying companies. They're also really, really good
23:48
at financial engineering and structure that keeps the risk on
23:54
the entrepreneur and, you know, hold some of their capital back.
23:58
So they're the easiest one to kind of say, all right, if
24:01
you're going to sell the private equity and if and if that's the
24:04
apex predator, understand you need to get your business to
24:08
look like there's a lot of recurring or reoccurring
24:12
revenue, that your EBITDA is systematic and that you
24:17
professionalize the business in such a way that you're not that
24:21
necessary. So you're not a risk factor in
24:24
the transaction. And if you've got part of your
24:27
business, let's say you've got an engineering and construction
24:31
business, construction's going to trade in a much lower
24:34
multiple than engineering services, right?
24:37
And So what you've got to be doing is like, if you're
24:40
thinking about selling in the next few years and you've got,
24:43
you know, you know, a, a, a smaller percentage of the
24:47
business that is the higher multiple and a bigger percentage
24:51
of the business that's the lower multiple.
24:53
Well, you've got to start creating traction on the growth
24:56
in the higher multiple part of the business to be able to tell
25:00
the story that you're on the way to something and that you're
25:03
ready to hand it over to somebody who's got deeper
25:06
pockets and more resources to build it out to the next part of
25:09
the legacy. You're not going to get paid for
25:13
things you could do with the business.
25:16
You're going to sell your business on its trailing 12
25:20
months or last year's, you know, EBITDA or revenue.
25:23
They're going to want to pay you based on the next year or Two's
25:27
worth, right? And so the disconnect in there
25:30
is that if I've got a, you know, if I get 7 times trailing 12
25:35
months revenue or, you know, 8 or 10 times trailing 12 months
25:42
EBITDA. But but the buyer comes in and
25:44
they're only going to give me 60% in cash.
25:46
And they want me to take back a 20% seller note, which they're
25:50
not going to pay me any cash payments on for a while.
25:53
And they're not going to pay me back in full until they sell the
25:55
company. And then they want 20% based on
25:58
an earn out as long as I grow by 15% a year for the next two
26:02
years or three years. And maybe I don't get those
26:06
payments in cash. Maybe I get those payments as
26:10
rolled equity or added to the seller note at the board's
26:14
discretion, of which I'm going to be one of five people so the
26:17
board can outvote me. Well, maybe I just, I, you know,
26:21
I did sell my business technically for seven times or
26:24
12 times or whatever it is, but I only got 60% of that number
26:28
and the rest of it is a jump ball.
26:30
And I'm going to be the weakest voice in that like down the
26:33
road. So if you haven't prepared your
26:36
company so that you won't get taken advantage of that way and
26:40
you go to market with a weak transaction advisor or none at
26:43
all, you will get taken advantage of.
26:45
That is that what you're talking about?
26:47
When you said like an 8 figure deal, they're probably taking
26:49
advantage of you by at least seven figures.
26:51
A nine figure deal. They're doing the same by 8
26:54
figures at least. Yeah, absolutely.
26:56
Like every solid business, you know, should be looking at the
27:02
cash at close is the only thing that you should wait towards
27:06
saying, OK, that's money. That's certain rolled equity.
27:10
Like that's a common, you know, deal thing where I'm saying
27:13
like, Anthony, I'm going to buy your business and I'm going to
27:15
value it at 8 times your EBITDA. And I'm going to give you 75%
27:21
cash at close. And I'm going to ask you to
27:23
retain 25% of rolled equity. And we're going to go out and
27:26
we're going to add some more agencies around the edges.
27:29
And you're 25% that you rolled in equity.
27:32
You and I will exit together at the same time with all the other
27:35
businesses that we buy. And maybe that's a that second
27:38
bite of the apples even bigger than the first check that I
27:42
wrote. That's the rationale for rolled
27:44
equity. And that makes a ton of sense if
27:48
the buyer has a track record of creating those returns.
27:53
But if I'm buying your business for say $20 million and I'm
27:55
asking you to roll 5 million of equity and you say so Kirk, if I
27:59
were investing $5,000,000 with a financial advisor, I would be
28:03
asking for a track record. And I don't mean a resume.
28:06
I mean hard data that shows that there's a multiple on invested
28:11
capital return or an IRR or, you know, a net return.
28:15
So it's fine to say roll equity with the right group.
28:21
On the other hand, the right group is not just a charming
28:24
group of people that say a bunch of smart shit.
28:27
It's like, can they prove that they have created these
28:30
outcomes? And short of that, can they put
28:33
me on the phone or on a Zoom with some people that they
28:36
bought out so that I can ask without them, you know, without
28:39
the private equity sponsor on the line so I can ask him heads
28:42
up questions about what's it been like?
28:44
You know, so and the other, the other deal pieces, Anthony or,
28:49
you know, the contingent payments of like, you know, a
28:52
seller note or Ernow, they almost never go well.
28:57
They almost never go well. You know, I it's anecdotal, but
29:01
but it's not wrong that, you know, I was sitting down with an
29:06
M and a partner at a big law firm, am law 100 law firm.
29:10
We're just catching up over coffee.
29:12
He's been doing this 25 years. He's probably participated in
29:15
500 transactions over that period of time, maybe more.
29:18
I said, how often do you see earn outs go the way that they
29:22
are, you know, written up in the LOI of the purchase agreement?
29:26
And he said 20%. He didn't even pause.
29:30
He just said 20% right, doesn't mean they never get paid,
29:35
doesn't mean they don't get partially paid.
29:37
But you know, you should consider that money to be
29:40
contingent and certainly not certain.
29:43
And so, but my understanding is it's really difficult for deals
29:46
to get done without some sort of an earn out.
29:51
I would say it depends on how attractive your business is like
29:56
at at at certain points like so a really attractive high growth
30:01
software business with a lot of recurring revenue, very close
30:07
net revenue, net recurring revenues.
30:10
So very little churn and plenty of logo retention, meaning kind
30:14
of new, you know, new clients being a large part of the
30:17
growth. Like an attractive business like
30:21
that, you might get 20 bidders on it and throughout the process
30:25
you are a terms maker, not a terms taker.
30:28
On the other hand, if you have a business that is special and
30:33
unique from your perspective, but fairly generic from the
30:37
private equity firms perspective, you know they're
30:40
going to bid, maybe you know, somewhere between 4:00 and 7:00
30:44
times EBITDA depending on how big the business is, and they're
30:48
going to give you a formulaic deal.
30:51
They will have asked you to do a pro forma on the next two years
30:54
worth of financials to get an idea of where you think the
30:57
forecast is going. That's a trap, but you won't
31:00
know it until after you've walked into it because you will
31:04
think that if you tell them you're going to be flat to down,
31:06
they won't be interested in the business.
31:09
And you'll think 10%'s not quite enough, but 20%'s maybe a little
31:12
too aggressive. And so you settle on 15% and lo
31:16
and behold, the earn out is set at you hitting a 15% target for
31:20
the next two years. And then you're like, holy shit.
31:24
You know, a big chunk of my transaction is going to be
31:27
contingent on something that I put together last night after a
31:31
glass of wine when the kids went to sleep, you know, on an Excel
31:34
spreadsheet, right? And so, you know, what I would
31:37
say about earn outs is, you know, it depends on whether
31:41
you're a terms maker or terms taker in that part of the
31:44
transaction. You might have to live with it.
31:46
But I will tell you that everybody who's negotiating a
31:50
deal on it, just take the paradigm.
31:52
Seller's price, buyer's terms, buyer's price, seller's terms.
31:58
I say, you know that I need you to pay me $20 million for the
32:03
deal and you say I can pay you $20 million, but I'm only going
32:07
to give you 12 million in cash at closing.
32:09
And the other part's going to be what we in the M&A world call
32:11
structure, which might be any of these other things.
32:15
And in that case, I then come back to you because, you know,
32:20
the paradigm again is you hit my price, but structure wise you
32:24
put it together in a way that I'm not that thrilled about it.
32:27
So I say, look, I might give a little bit on price if I don't
32:33
have to get an earn out because and, and what we do usually when
32:36
we're talking to somebody about why we don't want an earn out,
32:40
because you know, in the same way that criminals don't think
32:45
of themselves as criminals, Predator buyers don't think of
32:49
themselves as predators. So you can't say, listen, I'm
32:52
not going to agree to a 20% earn out because you're going to add
32:55
a bunch of expenses. I'm not going to control the P&L
32:58
and I'm a whiff on the earn out anyway.
33:00
You're never going to have to pay me because you guys are
33:02
awful, right? They're not going to acknowledge
33:04
that. So you say, listen, I don't want
33:07
to agree to the earn out because we're going to have to be
33:10
working together in partnership because I'm rolling equity in
33:13
this business. We're going to be working side
33:14
by side trying to grow the business.
33:16
And if a year from now or two years from now, through no fault
33:21
of mine or maybe even yours, we don't hit the earn out and you
33:26
don't pay me, I'm not going to like you anymore.
33:29
And then it's going to be very challenging for us to work
33:31
together. So the earn out is almost a
33:33
guaranteed rapport break when it doesn't happen if there are
33:38
other contingent payments. So our viewpoint is no one
33:42
should like an earn out. The only the least experienced
33:45
buyers will try and put a lot of the purchase price in an earn
33:49
out. We looked at a deal for you know
33:51
one of our clients is selling for around $20 million right
33:54
now. One of the buyers put together
33:58
an offer and they and they put this to us in an LOI and then
34:03
jumped on the Zoom call with a straight face to explain to us
34:05
they want to buy our clients business for 12.
34:08
Now keep in mind it's going for 20.
34:10
They wanted to buy it for 12, including 2 million of cash
34:14
upfront and $1,000,000 a year for the next 10 years, right?
34:22
I'm not leasing the company to you.
34:23
I'm selling it to you. No, it's.
34:25
Like, so Anthony, I want to buy your business, but what I'd like
34:28
to do is use your cash flow to pay you.
34:31
Right, right. You know, it's like, I can't
34:34
blame anybody for trying to get their own pound of flesh and,
34:38
you know, trying to to, you know, kind of structure terms
34:40
that favor them. But sophisticated buyers, even
34:44
if they're a little bit predatory, you know, they know
34:47
what market terms look like. And and the thing that most
34:51
quickly puts them on kind of market footing is a good
34:55
transaction advisor, whether that's an investment banker or
34:58
an M and a lawyer, a good transaction advisor will get
35:01
them to comply with market terms.
35:04
So Kirk, at what point in the process is a client typically
35:08
engaging with you and Candor advisors?
35:12
Yeah. So for us on our consulting
35:14
business, it's usually three to five years before they're
35:17
selling. We do a 90 day engagement where
35:21
and we won't work past the 90 days.
35:23
They'll want to in many cases can have us continue on.
35:26
And what we tell them is like, look, we're going to look at the
35:29
potential buyer, University of Business, we're going to give
35:32
you that. We're going to look at the
35:34
potential valuation for your business and where the break
35:37
points are. Like do you have to clear 2
35:39
million to get two more turns of EBITDA or do you have to get the
35:42
5 million to get to, you know, the real rich EBITDA valuations
35:46
or does everything happen at 10? You know, so it kind of depends
35:49
on where you are in there. We talked about the components
35:53
of the transferable economics. So and, and then we also, you
35:57
know, give them what we call a trajectory analysis that say do
36:00
the following things. It's like a covenant, do the
36:02
following things and you will get to where you want to go.
36:06
And and you know, let's check back in with each other in 12 to
36:09
18 months and see how you're doing.
36:11
We have sold three companies that we did that work for five
36:14
or six years ago. In a couple of cases, you know,
36:18
the businesses are now selling for five to seven or 8X what
36:23
they would have sold for three to five years ago.
36:27
We're not magical. These are great entrepreneurs
36:29
that just just took direction about the trajectory they needed
36:32
to go on. For our investment banking
36:34
business, you know, it takes 4 to 9 months to sell a company. 4
36:39
would be the fastest possible. So look, they're engaging us
36:43
usually either because they got an unsolicited offer and what we
36:47
do for them is say we're going to write an e-mail for you to
36:51
send to the buyer that says, Anthony, I'm really intrigued by
36:54
our last conversation. I'd like to progress forward.
36:58
I've never done this before. So I've retained A transaction
37:01
advisor, Kirk Mitchie. He's copied here.
37:04
He doesn't think that you need all of the requests that you've
37:07
made to give us an idea, evaluation to figure out whether
37:10
we move forward. And he'd love to chat.
37:13
There's only one good response to that.
37:16
That makes a lot of sense. Thanks.
37:19
You know, Kirk, when can we get on a call That's the only right
37:22
response to that? Anything that's tepid or
37:26
hostile, what we did was just smoke out a bad buyer, right?
37:30
So a lot of times what we say is don't retain us.
37:33
Just send this e-mail, depending on the response, that'll tell
37:37
you whether you need to retain us or not.
37:39
And then you know, if if it's, if you've already signed the
37:43
LOI, it's too late. LO is a ceiling.
37:46
It is not a floor. And don't expect anything
37:49
collaborative to happen after you've sent signed that LOI.
37:52
You've lost all leverage. At that it only gets worse after
37:55
you sign the LOI. So if it like what we will say,
37:59
if somebody comes to us after they've signed the LOI and said,
38:02
you know, we need you to help us put this to bed, we'll say I'm
38:04
sorry, but we're going to refer you to a good M&A attorney
38:08
because you need them to make sure that, you know, whatever
38:12
else happens, including the purchase agreement, the
38:14
supporting documents gets tilted your way.
38:17
But yeah. So you guys can come in very
38:21
early, right years in advance of them wanting to sell you do the
38:25
analysis of the landscape, the valuation, you give them a plan
38:29
on, you know, do these things. It's going to help get you to
38:32
the place that you want to be. And then would I also be right
38:35
in thinking, Kurt, that you can take them all the way through to
38:39
the end of that transaction then?
38:41
Yeah, Yeah. When we say we've been involved
38:43
in a billion dollars worth of deals, we're talking about, you
38:45
know, the proceeds on exit. So what usually happens is that
38:51
whether it's responding to an unsolicited offer, making sure
38:55
it's market level and maybe creating some competitive
38:57
tension to drive price terms, legacy control a little bit
39:01
higher by bringing some other people into the equation or
39:06
starting from scratch and saying, all right, you want to
39:09
take your business to market, you know, retain us 60 to 90
39:13
days before you're ready to go to market.
39:14
My team will start building the confidential information
39:18
memorandum, the teaser. We might retain an accounting
39:22
firm to do a sell side quality of earnings to make sure that
39:25
the buyer can't assail the financial information we've
39:28
given them. And then we develop an outreach,
39:32
an FAQ for each client. We do a bid process letter that
39:36
helps all of the potential buyers understand what's the
39:39
expectation and what are the due dates.
39:41
And we just coalesce all that interest.
39:44
So what we what we do is make sure that whatever the best deal
39:48
is out there right now, we're getting to all the people that
39:52
can make the right offers and all the people that are actively
39:56
investing in this area. And we spend a lot of money
39:59
every year subscribing to databases to make sure we stay
40:01
current with that. And then we've also got our own
40:04
activity. We probably have 200 private
40:07
equity firms and strategic buyers in our own database that
40:11
want to check in with us once a quarter if we if we met as
40:15
often. With all of the private equity
40:17
firms that paying us and say they want to jump on a call for
40:20
15 minutes to hear what's going on, we wouldn't have any time to
40:23
do any investment banking work. We'd just be building rapport
40:26
with. What do they want to get on a
40:27
call and chat about for 15? Minutes, they want to hear what
40:30
kind of deal flow we're working on.
40:31
Everybody wants to get in a little bit early and our
40:34
standard response to anybody who wants to pre empt a process is
40:39
our covenant we build with the clients is that we're going to
40:42
get them the right combination of price terms and legacy
40:45
control that meets their buy for selling.
40:48
If you want to, no, no one would be happier than us to not have
40:53
to do all the work to go out there.
40:55
But we know what the market looks like.
40:56
So if you want to lob in a bid that's 25 to 50% above market to
41:02
make sure that we don't go to market and you don't lose the
41:04
opportunity to buy this business, you know, bring it.
41:07
We'll share limited financial information.
41:09
You give us a, you know, range of valuation and we'll see if
41:13
there's any reason for us not to go to market.
41:15
But otherwise we're going to market.
41:18
And I'll tell you, there's no heads up buyer that will be
41:21
scared off by a transaction advisor saying, hey, listen,
41:26
we're going to reach out to 125 other firms because we think
41:29
this is an attractive offering and we want to make sure what
41:33
you know, what the market looks like.
41:35
Any great buyer will be comfortable with their position
41:38
in there and they won't love it, but they also won't pout about
41:43
it and not make a bid when the time comes, you know, but but
41:47
sure, they'd like to be in there early.
41:49
So Kurt, you're the founder of Candor Advisors back in March of
41:54
2020, which is something that I hope we've got time to talk
41:57
about that timing of it, the start of COVID.
42:00
And we're talking to you today and you're driving a lot of
42:04
this. But I know from your
42:07
perspective, it's less about you and it's more you're proud of
42:12
the platform that you've built, you're proud of the business
42:17
model that's in place. Can you say more about that?
42:20
Yeah, Yeah, I look our our the raise on debt, you know, not
42:28
just like a mission statement is, you know, we guide founders
42:31
to better outcomes and whether that is telling them not to
42:35
sell, whether it's chasing away a bad buyer, whether it's taking
42:39
a step back and saying the market doesn't like businesses
42:43
like yours. And it's probably better if we
42:44
do an ESOP so you get maybe a tax advantage transaction or the
42:49
market's not going to pay you for the kind of economics you
42:53
take out of the business. And so maybe we figure out a way
42:56
to get an investor in to help your employees buy you out in
43:00
something that's more like a management buyout than a NESOP
43:04
or your business is attractive. Let's refine it and let's go to
43:08
market like that's where we live.
43:10
And I'm as proud of the deals where we've told founders not to
43:15
move forward with the sale as I am.
43:18
The transactions we've closed, we do not, we do not think of
43:21
ourselves in terms of the dollar value of transactions.
43:26
I have a performance coach that I work with and about a year ago
43:33
when I told him that I thought we could keep the level of
43:35
activity going the way it was. And we've done a bunch of nine
43:40
figure transactions. And for a boutique investment
43:43
bank, that's a rare thing to go head to head with like Mollus
43:46
and Raymond James and people like that and win, right, to get
43:49
the mandate and what we have. And, and what I told him was
43:55
that I'd rather do more transactions, you know, to a
43:58
point, I can't, I can't add a lot of value to a three to
44:02
$5,000,000 sale. But let's say 15 to 25,000,000
44:07
and above. We know that we do a really,
44:10
really good job, probably better than any of our competitors in
44:13
making sure that's handled the way you would handle 1/4 of a
44:17
billion dollar transaction. And even though we make a little
44:21
bit less money, and even though it means we've got to work a bit
44:25
harder to educate our clients and, you know, to work more
44:29
directly with the founder, you know, we're going to do 6 deals
44:33
this year. And the largest of them is
44:37
probably going to be around 200 million.
44:40
But the average taking out the 200 million is probably 30 to
44:45
$35 million. And those people really, really
44:47
need the help. And so to my mind, you know,
44:51
part of the reason that we try and do more deals and not just
44:55
bigger deals is that we think the founders need the help.
44:58
And, you know, we created another business called Exit.
45:02
Well, and it's not exit planning, but it's kind of a,
45:06
you know, a mentorship program for founders that want to exit
45:10
in the future. Because what happens for us is
45:12
that we got a lot, we get a lot of inbound traffic for people
45:16
that want to sell. And they may not quite be ready,
45:18
they may not be big enough, or they may want, you know, kind of
45:21
more of a trajectory and maybe they can't afford us from a
45:23
consulting standpoint. We still want to help those
45:26
people and So what we've done there and what we've done on our
45:30
own site is created Candor AI. So you know, you can go to our
45:35
website and what we've done, I've recorded 200 plus videos in
45:40
the last five years or so. And what we did is wall off the
45:44
large language model so it can't add any input.
45:47
This just transcribes my 200 videos.
45:50
And so Candor AI answers the question essentially in my voice
45:55
and will point you to its source, which will include the
45:58
videos that go into longer form about how do you think about
46:01
valuation? How do you pick your advisors
46:03
who should be on your deal team? What are the different kinds of
46:06
buyers? What are the biggest seller
46:08
mistakes? You know, what are some Horror
46:10
Story? You know, like all that stuff is
46:12
nested on our website and it's all accessible either by going
46:16
to the insights section of our site or plug in questions into
46:20
Candor AI, you're going to get my answers right?
46:24
And well, I'll just add one more thing.
46:27
You know, partly because I heard Preet Bharara interviewing.
46:34
No, it was Adam Grant interviewing Deepak Chopra, I
46:38
think. And Deepak has done this same
46:41
thing. This is not an original idea.
46:43
Guy Kawasaki has done it. Deepak Chopra has done it.
46:46
And you know, there were a couple of times he asked him
46:49
questions, the interview asked him questions and he said you
46:52
should probably go to Topro dot AI because it remembers
46:56
everything I've ever said. And I don't, right?
47:00
And I would tell you so. So I am amazed at how
47:03
comprehensive and short form you know the answers are from Candor
47:09
AI because as you know and just talking to me for an hour, I
47:12
don't do short form very well. I know I say too much.
47:15
I just don't know words, which words to leave out.
47:17
Candor AI does so. So why build this?
47:21
What? Why build this tool for folks to
47:23
be able to get free access to all that wealth of knowledge
47:27
inside your head? Yeah, same reason we do a video
47:31
on LinkedIn once a week that helps to train all of our best
47:35
competitors. If you look at my feed, you will
47:37
see people that never used to post video content now post
47:41
video content that looks just like mine.
47:44
And you know, my team is sort of like, why are we doing that?
47:47
And I say, look, it's going to, if we, if we do 5 or 6 deals a
47:52
year, do you know how many 10s of thousands, maybe hundreds of
47:55
thousands of entrepreneurs need to get to exits in the time
47:59
that's going to happen between me being 63 and me dying
48:03
whenever that happens, Like there needs to be lots of us.
48:07
There needs to be lots of us that level the playing field
48:10
because I will tell you that there are like boot camps with
48:16
1000 people and a waiting list for this entrepreneurship
48:20
through acquisition or search fund buying or how to set up an
48:25
independent sponsor. The Barbarians are, you know, at
48:28
the gate, right? They are developing tool sets
48:32
and the sellers are busy running their business, so they don't
48:36
have time to develop that that skill set.
48:38
So there need to be more great transaction advisors out there
48:42
in the lower middle market to make sure these people just
48:44
don't get fleeced by the buyers. So this is a public service.
48:49
This is a public service. Yeah, absolutely.
48:52
It's free. It's completely free.
48:54
That's wild. All right, I want to shift gears
48:57
on you for a moment, Kirk, because in my experience, behind
49:00
every success story, there is a time in life that almost broke
49:05
someone. What is a serious challenge,
49:08
whether it's personal or professional, that you've
49:10
overcome, and how did you get through it?
49:13
What did you learn? Yeah, so my, my kryptonite was
49:19
alcohol and everything that came after it.
49:21
And so in April of 2006, I got sober.
49:27
And, you know, so this April, I would say God willing, but I've
49:31
never had an experience that God wasn't willing.
49:33
So let's say Kirk willing, you know, in April I'll have 20
49:37
years of sobriety and that matters a lot.
49:40
That's precious to me. And it it's the touchstone for
49:45
all the stuff I've done since. It took me a while to get my
49:48
bearings. I was no longer as comfortable.
49:53
I was no longer as persuasive, and I didn't quite know who I
49:57
was. So it took me a while to get
50:01
there. But, you know, today I look at
50:06
who I was at my bottom. You know, I never crossed the
50:10
line in business, but that's a function of having stopped,
50:15
probably just in time, and probably a function of some good
50:19
luck. And, you know, So what I would
50:21
say is that, you know, that thing that was in some ways like
50:27
the worst thing about me became my greatest asset.
50:32
I'm conscious of it day in and day out.
50:35
And, you know, look, I am still someone who really, really
50:40
loves, you know, anything I love.
50:42
And I want more of it, right? That's the addictive personality
50:45
in me anyway. And so, you know, I think about
50:48
it this way, Anthony, that like, like if you look at the Marvel
50:51
Universe, all of the villains have superpowers.
50:54
They just use them for the wrong reasons, right?
50:57
And so like, what I've done is is just cut off, you know, kind
51:02
of the character defects. You know, I keep them at Bay.
51:05
I keep working on them and keep focusing on, you know, like my,
51:10
my kind of favorite quote from Stoicism, which is effectively
51:15
my religion kind of capitalist Stoicism is for Marcus Aurelius.
51:20
And it's, you know, spend no time arguing about what a good
51:23
man should be. Be 1 And and that like that,
51:28
that taken together with, you know, the continued sobriety and
51:31
the desire to be a better and better version of myself.
51:35
Yeah, that, you know, could have been hard, was hard.
51:39
But you know, now I look back at it and I thank God it happened.
51:43
Are you comfortable saying more about this?
51:44
I'm wondering if there was sort of a a triggering moment where
51:48
you were like, OK, my eyes are open, I got to make a change.
51:53
Yeah, so there are people that have bottoms in addiction,
51:59
alcoholism that are car wrecks and Duis and, you know, like
52:05
professional ruination, embarrassment, things like that.
52:10
Mine isn't really quite like that.
52:13
You know, I needed to be, to have something that made me feel
52:18
different because I really, really hated like what had
52:22
become of my life and who I had become and I needed to numb out.
52:28
And so I had life problems and I had alcohol and drug solutions
52:33
and, and so if we were going to take those away, I was still
52:37
going to have life problems and I no longer had any solutions.
52:40
So I went into a A to appear to be doing something about a
52:45
problem someone else thought I had, and I caught alcoholism, an
52:51
addiction in the rooms of A. You know that that I mean,
52:55
that's how it happened. I started listening.
52:57
That's when you became you. You realized.
52:59
Yeah, that's when I realized that, like, you know, I spent a
53:02
long time trying to look for the differences, like, oh, I never
53:05
did that. I'm not bad or I'm not that bad,
53:08
right? You know, like, like watching an
53:09
episode of Jerry Springer. I'd be kind of like, yeah, well,
53:12
I've never done that. Yeah, but I'll tell you that,
53:17
you know, when I started to, you know, pay attention to the
53:19
similarities and when I started paying attention to the fact
53:22
that I don't have to do what you did to feel what you felt.
53:25
And like that that builds a bridge even today.
53:29
Like, you know, I, I, I connect with people around, you know,
53:33
the vulnerable stuff, I connect with people around, you know,
53:36
the, the stuff that's quieter, the stuff that's more private.
53:40
You know, that's why we, when we're, we're, when we're talking
53:43
to someone who might become a client of Candid advisors, It is
53:46
not just do we have the sector expertise they're looking for.
53:50
I want to talk to the founder and find out why they really
53:53
want to sell. And I'm going to push for a real
53:56
answer, not just a well, I'm ready to retire and I think I
54:00
can get a lot of money for my business and yadda, yadda,
54:03
yadda. And if I you know, I'll say
54:05
really, Are you sure you're not just like burnout?
54:07
Are you sure you just don't want to go through one more, you
54:10
know, HR training exercise? Are you sure you're not just
54:13
sick and tired of having a longer To Do List at the end of
54:16
the day? Or have you been scaling for so
54:19
long? Do you think the best risk
54:20
control might be having somebody else take over the business?
54:24
Like I want to know, because if we're going to get the right
54:27
buyer, it's got to be the one that not only gives the best
54:31
combination of price terms and legacy control to my seller, but
54:35
they match up with their why those are the best transactions.
54:40
And I think all of that flows from my recovery, my willingness
54:45
to kind of dig in deeper, my willingness to have harder
54:48
conversations. You know, and you said that
54:52
you're coming out of that sort of transitioning into a new
54:55
stage of life. You weren't as comfortable, you
54:58
didn't have as much confidence. How did you work on finding
55:02
those in new ways? Well, it took me 15 years to
55:08
undo all of that it. And, you know, people around me
55:13
saw it. Every once in a while I'd have
55:15
coffee with somebody I knew back in the day because I was like,
55:19
I, I was one of Bernstein's, you know, biggest producers.
55:22
Now there were a lot of them, but I was up there in the call
55:25
it top 20 out of 100 nationwide and was cut in a pretty wide
55:31
swath. And I went to run the private
55:33
client business and another big asset management firm.
55:36
And you know, when you take a great salesman and make them a
55:40
sales manager, you usually get a mediocre bad sales manager.
55:45
And that's what happened there. You know, I didn't, I didn't
55:49
appreciate that, that that job was about leadership, not being
55:53
in charge. And I also was really, really
55:55
hard on people. I was terrible at it.
55:58
And, and I, you know, So what happened for me was that I was
56:03
no longer as confident and persuasive.
56:06
And that's important if you don't have any other skill sets
56:10
as a salesman. That's all I had.
56:13
And that job was about selling. That job was about convincing
56:15
people that job was about configuring our offering so that
56:19
it matched their desire to get whatever they wanted to get.
56:22
And I was good at that. I was really, really good at
56:24
that. And then, you know, when I got
56:26
sober, you know, none of it felt that authentic.
56:30
Which isn't to suggest that great salespeople aren't really,
56:34
really authentic people. It's just I wasn't, you know, my
56:37
being a great salesman was not an authentic thing.
56:40
I'm an introvert. I don't like every time I've
56:43
taken Myers Briggs, which may or may not be reflective.
56:47
It in the first letter is always I I would rather step into a
56:51
bookstore and spend an hour then return phone calls.
56:54
I just would. I mean, it was just like like,
56:56
you know, I love e-mail. I love Zoom because, you know,
57:00
like I'm going to go to an ACG event that's Association for
57:04
Corporate Growth that all the investment bankers and private
57:06
equity firms go to for the like speed dating of, you know,
57:10
catching up very quickly with a whole bunch of people.
57:13
I dread the idea that I'm going to walk into this big hotel
57:17
lobby and there's going to be hundreds of people.
57:21
And, you know, look, I'm 63. I've handed out business cards
57:25
for a long, long time. So there's a lot of people that
57:26
know me and a lot of those people like me, and they're
57:29
going to want to come up and talk to me.
57:31
And I want to honor that. But at the same time, like, I
57:34
suck at chitchat. I just like.
57:38
And part of it is because it's like, I know I'm here and I
57:41
appear to want to be here, but Get Me Out of here, right?
57:45
So I've had to configure it a different way.
57:48
And frankly, you know, digital marketing, you know, made a big,
57:52
big difference. I launched in COVID, as you
57:54
accurately pointed out, and that turned out to be fantastic
57:59
because I no longer had to like, you know, I was in provisor for
58:02
a while and he'd get on the Hollywood Squares and have, you
58:05
know, 23 others, you know, squares on there of people like
58:08
talking about like even that was too much for me.
58:11
I'm like, I I can't do this right.
58:13
So I started do posting the videos and then people started
58:18
responding and then I Co created 2 websites with my web designer
58:23
and my digital marketing guy, guy named Mike Simpson at
58:26
Variant Media who's just a genius.
58:28
He's fantastic. And and then we started figuring
58:33
out together with my daughter Allie, who also works in the
58:36
business, you know, how we could reach out to lots and lots and
58:41
lots of entrepreneurs who need to hear these messages.
58:45
And we get engagement, you know, of 35 to 80% weekly on 25 to
58:53
30,000 people. We send these things out to.
58:56
We get click throughs that any, you know, kind of e-commerce
59:00
business would be envious of. We don't try to do anything with
59:06
that data. We're glad that people show up
59:08
at the website. We see that lots and lots of
59:10
people are watching the videos When and if it's time, you know,
59:14
there's a button on the website that says talk to Kirk, you know
59:18
that. And that came from an M and a
59:20
lawyer with the big firm here in town that told his client this
59:24
may or may not be the right investment banking relationship
59:27
for you, but you should talk to Kirk 1st and talk to Kirk first.
59:32
Didn't fit on the green button that we were putting on the
59:34
website. So it just says talk to Kirk.
59:36
But lots and lots of people drop lines to us to say, you know,
59:41
hey, here's what's going on. And what's wonderful about
59:44
having done this for a long time now and having, you know, so
59:47
many videos out there is when I meet somebody for the first time
59:51
on Zoom, not only is my background the same, but they're
59:54
kind of like, oh, wow, it's you, right?
59:58
They've built you up as a celebrity in their mind and now
1:00:00
they get to talk to the real thing.
1:00:02
But you know what? What happens is, you know, all
1:00:07
in almost all cases, they say something like, I've been
1:00:10
watching your stuff for a couple of years and you seem really
1:00:14
authentic. That's the most common thing to
1:00:17
hear. And I wouldn't have thought that
1:00:20
that would come through in video, but it does.
1:00:23
You know, you do, you do this right, you know, you know, like
1:00:26
you, there's no litmus test. You know, nobody's, you know, on
1:00:31
trial at The Hague for their authenticism.
1:00:33
However, people do seem to be able to pick up on it.
1:00:37
And when I don't try and sell them on hiring Candor advisors
1:00:39
to be their consultant of their investment banker and just talk
1:00:42
to them about their deal and give them free tips, you know,
1:00:46
it's it, it's not meant to be a sales process.
1:00:49
But what ends up happening is, you know, we've got a big, big,
1:00:52
big network of people that refer to us and you know, they refer
1:00:57
to us even though they've never been client.
1:00:59
You should talk to that guy. He sends me videos once a week.
1:01:03
It builds up your trustworthiness, which is really
1:01:06
it's important in any kind of a business relationship, but
1:01:09
especially in what you're doing. So, Kirk, how would you
1:01:13
characterize your superpower? I think that if first of all, I
1:01:20
have a natural affinity for finance, I understand like, you
1:01:26
know, the the rule of 72 lives somewhere in my limbic system.
1:01:31
And so I can kind of figure out what numbers are going to
1:01:33
compound to. I can do math pretty quickly in
1:01:36
my head and I can do it in public, which, you know, I have
1:01:41
a close friend that gathers together, you know, 500 or so
1:01:44
CEOs of financial services companies twice a year.
1:01:48
And he proves that even the most, even the people that
1:01:51
should be able to do math in public are afraid to do math in
1:01:55
public. I'm not right, you know.
1:01:57
So I, I, I have that as a superpower.
1:02:01
And I would tell you that the ability to build financial
1:02:04
models and the ability to understand AP and L and the
1:02:07
ability to look at a forecast and find problems with it, those
1:02:10
are table stakes in the M&A business.
1:02:13
But I do believe our transactional expertise is up
1:02:16
there with a Goldman Sachs or Molas or you know, some of the
1:02:21
great, you know, middle market investment banks like you know,
1:02:24
American Discovery Capital or Intrepid up in Los Angeles and
1:02:28
so many others. I think we're on par with them
1:02:31
on the transactional expertise and the ability to put together
1:02:35
things that work and run a good process.
1:02:37
But it's really the idea that like I am more informed by like
1:02:41
Brené Brown, Adam Grant, Dan Pink, Ryan Holiday and a little
1:02:47
bit of Tony Robbins in there too, that like, you know, if you
1:02:51
took a great middle market investment banker and you said,
1:02:55
I want the one that's more heart forward.
1:02:59
Look, it doesn't work for everybody.
1:03:02
You know, I had a one of the biggest gun stores in Oklahoma
1:03:05
reach out to us and ask if we could, you know, help them sell.
1:03:10
And look, you know, you don't have like Muhammad Ali and
1:03:12
Barack Obama and Bruce Springsteen in your background
1:03:15
if you're all in on, you know, kind of NRA stuff.
1:03:18
So there's a little bit of ideological problem there.
1:03:21
But he really wanted to, you know, engage us.
1:03:24
And I said, you know, I'm I'm probably not your investment
1:03:28
banker because the conversations I have with my clients are
1:03:31
deeper. Like, you know, yesterday
1:03:34
morning we had something happen on a deal that should have sent
1:03:39
it sideways. You know, we had a buyer that
1:03:42
signed a letter of intent on a really, really attractive
1:03:45
business. And the clients #2 over the last
1:03:51
12 years turns out to have stolen a lot of information for
1:03:55
the business to go out and start a competitor.
1:03:57
And right after we got the LOI signed, the competitor started
1:04:01
attacking the business. And it's going to have a
1:04:04
material financial impact. And I said, look, we have the
1:04:08
LOI signed and we could pretend to go through this thing in the
1:04:11
right way. But I think the right thing to
1:04:12
do is for us to go to the buyer, offer him a Mulligan on the LOI
1:04:18
and, and tell him what's going on and see if they want to
1:04:21
proceed. And he's like, what do you
1:04:23
think's going to happen? I said, they're either going to
1:04:25
say, yeah, sorry, we're out, or we're probably going to have to
1:04:29
modify the terms, but we'd like to dig into this further or
1:04:33
let's move forward and we'll navigate this together.
1:04:37
And somewhere in between there is going to happen.
1:04:40
And she's like, OK, what do you think we ought to do?
1:04:43
This guy happens to have a really, really deep faith in a
1:04:46
specific religion. I said, I think you ought to
1:04:48
pray about it. And I think we both ought to
1:04:50
turn it over to our our powers. And I'll do what I need to do
1:04:54
from an action standpoint. I'll let them know this stuff,
1:04:58
but it's up to the universe how this works out, not us.
1:05:00
Right now there are lots and lots and lots of great
1:05:04
entrepreneurs to be like, yeah, that's a bit too crunchy for me,
1:05:07
dude. I, I need more tactics, you
1:05:10
know, and, and that would be fine, but this guy is like, OK,
1:05:14
bro. And so the private equity buyer
1:05:17
who are really, really heads up people asked some fantastic
1:05:20
questions. They probably asked 15 great
1:05:22
questions after I gave him the news.
1:05:25
I told him what I knew. I told him what I thought and I
1:05:28
told him what I didn't know. And and then I suggested we all
1:05:32
get together for a vibe check call because they said they
1:05:35
wanted to move forward. Now, you know, I'm like, I'm not
1:05:40
sure whether it was his higher power or my higher power or just
1:05:44
the universe has decided this deal ought to go forward, but
1:05:47
I'm positive that it wouldn't be going forward if I use
1:05:51
traditional investment banking tactics.
1:05:54
You know which is to try to ignore this.
1:05:56
Well, we had assigned LOI, we could just go right into due
1:05:59
diligence. Why tell them because it won't
1:06:02
show up in the financials for a while.
1:06:04
But if you had like this is going to be a meaningful hit to
1:06:07
revenue and there's probably some legal wrangling that goes
1:06:10
back and forth and that's going to change EBITDA because, you
1:06:13
know, we're going to have some, some kind of ongoing, but
1:06:16
ultimately one time expenses for legal costs of dealing with
1:06:20
this. We think this is a bad guy, but
1:06:22
we're in California and California is not going to limit
1:06:25
a guy's ability to try and start a business, even if he did steal
1:06:29
a bunch of shit from my client. And so, you know, I, I just
1:06:34
think that that, you know, I'm not sure if that quite answers
1:06:37
your question about our superpower.
1:06:38
I just, I think we do things differently enough that that
1:06:41
differentiation comes through. Kirk, I've just got one more
1:06:46
question for you today. But before I ask that, I want to
1:06:48
do three things. First of all, anybody who wants
1:06:51
to get in touch with Kirkers Company, first of all, their
1:06:54
website is Candor Dash advisors.com,
1:06:58
candor-advisors.com, Candor CANDOR Candor dash advisors.com
1:07:04
and his e-mail address. Kirk is K Mitchie, which is
1:07:08
KMICHIE at candor-advisors.com, and we'll have that in the show
1:07:14
notes in case you guys missed it.
1:07:16
But if you're enjoying the show, a quick comment or review on
1:07:19
your favorite podcast app goes a long way towards helping others
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discover our show. So thank you for taking a quick
1:07:25
moment to do that right now. And as a reminder, if you want
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to be the hero advisor that shows your clients how to get
1:07:31
their employees access to therapists, doctors, and
1:07:34
prescription meds, that is paradoxical as it seems,
1:07:38
actually increases the company's net profits.
1:07:40
Reach out to us at adbackbenefits.com.
1:07:44
OK. So last question for you, Kirk,
1:07:46
a year from now, what is 1 specific thing that you hope to
1:07:49
be? Celebrating one specific thing.
1:07:55
Boy, I got a narrow down. I think it'll will be having my
1:08:05
book Full Time Predators and Part Time Prey published.
1:08:11
You know, we're looking for an agent right now.
1:08:12
It's a business parable. And you know, that would get the
1:08:18
message out because even though it's fiction, every single thing
1:08:22
in it has happened. It just didn't all happen in the
1:08:24
same transaction. And it's configured in such a
1:08:27
way that, like, you know, if you're familiar with anything
1:08:30
Patrick Lencione has written, you know, it's sort of that
1:08:34
teaching through parable and metaphor.
1:08:38
Yeah. I'd.
1:08:39
I'd like that to happen because I think that can extend our
1:08:41
reach. I don't care about being on the
1:08:43
best seller list, but I do care about trying to get that in a
1:08:46
lot of people's hands. And, you know, one of the buyers
1:08:48
that I admire the most, a guy named Brett Bashore, wrote a
1:08:53
book called The Messy Marketplace.
1:08:55
And like, I think every buyer or seller who's in the lower middle
1:09:00
market ought to read that book. And I like, you know, if I got
1:09:05
to a fraction of his impact, that'd be fantastic.
1:09:09
Kirk Mitchie from Kander Advisors, I want to be the first
1:09:12
to thank you for sharing both your time and your story with us
1:09:15
today. I really appreciate you being
1:09:16
here. Thanks, Anthony.
1:09:18
It was wonderful. Really appreciate it.
1:09:20
Folks, that's a wrap on another episode of the Inspired Stories
1:09:23
podcast. Thanks for learning with us.
1:09:25
And if one thing stood out, try putting it into action today.