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How to Prepare for An Exit · The Expert Method

• speaker-0: Just a recipe for disaster. Putting together the right team makes everything easier to execute on. A lot of people go with the mentality of build it and they will come. That was basically my slap in the face and eye opener. speaker-1: What do founders think makes their company valuable that buyers may not actually value the same way? speaker-0: biggest eye opening moment for a founder is when they realize and and admit to themselves that ninety percent of their net worth is tied up in this illiquid asset called their company. speaker-1: A lot of founders start their business hoping that one day it can become a sellable asset, the exit. But that only works if the company is worth something to a buyer. So what actually makes a business exit ready? To help answer that question, I'm excited to be joined today by Steven Pivnik. Steven built his company Binary Tree from a small application development company into a global software business. He sold it after more than two decades of building, and now he helps founders prepare for exits of their own. In our conversation, we discuss what it means to be built to finish. The mistake that almost took his company binary tree down, how he assesses exit readiness, and why upgrading the team is often the hardest part of preparing a business to sell. If you get value from this conversation, be sure to subscribe and share it with a friend. And now here is my conversation with Steven Pivnik. Steven, thank you so much for being here. speaker-0: Ian, I appreciate the opportunity. Looking forward to the conversation. speaker-1: Absolutely. So Steven, you wrote a book, it's there behind you, called Built to Finish. And that phrase seems to connect everything that you do, from business to the exits that you help people with, endurance, mountaineering. When you say built to finish, what does that actually mean to you? speaker-0: I'm a firm believer that the first time you attempt something new, your results are going to be suboptimal at best or complete failure at worst. Right. So I never wrote a book before. So I surrounded myself with people that have, you know, been in this space. One of the ⁓ the key people was a ghostwriter. I love writing and I had a great time writing my blog often about my crazy adventures and other, you know, business topics, but I never wrote a book. And so him and I met for a couple of days and we we're just like throwing around all these titles, all these titles, potential titles, as we were working on the outline for the book. And he goes to me, he turns he turns to me and goes, You know what? You're built to finish. That's the title. Great. So we'll we'll we'll go with that. It just means like finishing what you started. There's so many people, you know, myself included, you know, I I should take, you know, ⁓ more of my own medicine. ⁓ more often, but it's so much easier to start something than to finish something. So I I just think it's really important to record successes and record, you know, finish lines, whether they're at, you know, optimum level or suboptimal, just giving yourself the the the confidence that you set out to do something and that you're done. Right. And I I think the more finishes people have, the better off they'll be and they the finishes can feed off of each other. and lead to bigger and better things. speaker-1: Yeah. And I think in business, in mountaineering, right, in any application of life, there really isn't there's not many finishes, right? You're not really ever like done with some things, right? So do you almost have to kind of intentionally map out these little finish lines in the longer journey? Is that kind of a part of your speaker-0: I'm a huge fan of celebrating successes, right? So there's, you know, man many steps along the way to a finish line, what whatever that may be. And most people kind of, you know, sweep them under the rug. ⁓ yeah, yeah. I got this, you know, first chapter done of a like 25 chapter book that I'm that that I'm writing. And they just agonize over how much is left versus what they just did. If somebody just took the first step towards a big goal. That should be celebrated. If you've got a big goal in mind and you just had AI, you know, map you out a you know, twenty six month plan on how you know how to get that done and you did your first task, that's worthy of of celebration. So it's it's the small steps along the way which are super, super important and they and they they mount on each other. speaker-1: Yeah. Yeah. It almost sounds just like a kind of a just a reframe, right? Like instead of, you know, the glass half full or the glass half empty, right? You're just focusing on like celebrating what you have accomplished because it's really easy to be mean to yourself ⁓ whenever you're going through some journey of trying to trying to do something, especially when you're just starting out, because you mentioned anytime you do something for the first time, you're gonna be suboptimal. I like to use more harsh words, like you're just you're gonna suck. Like whenever you start something new, you're gonna suck at it. For for a long time. ⁓ but you just have to get through sucking at it in order to get good, right? You have to suck long enough and be unhappy with sucking at it and do the work required to get good at it, get better at it. ⁓ so you're really intentional about celebrating the the progress that you make. Like is that kind of a an intentional counteraction to the kind of default state for most high achievers, which is just kind of beating themselves to death about like where they're falling short? speaker-0: Yeah, a a hundred percent. I mean, that's definitely one way. I mean, it's motivational, right? To beat yourself up and to say you could you could do better. But, you know, my my cousin my cousin likes to say, and I love this phrase, you know, suffering is optional, right? Anything we do in life, we no, we c we can suffer or we can actually, you know, in enjoy even the mistakes that we've made. Listen, it's it's great for me to sit up sit here and to say that this is the ⁓ my approach. And it's ten times easier said than done when you just like failed miserably at something. your launch was a flop. You lost X amount of dollars in whatever. It's so, so easy to beat yourself up over it. And I do. I'm I'm I'm far from perfect at it. I wish I was better. I should read my book more often. But y you ⁓ it's it's an option, right? The other option is celebrate what you did, record the lessons learned and move on. speaker-1: Yeah. A hundred percent. It's one of those things that when said, when written down, when you read it in a book, it makes a ton of sense, but it's so much harder to put into practice. Like the you know, the idea that it's not events that harm us, it's our reaction to those events that harm us. Right. I love what your cousin said. Suffering is optional, right? Suffering is a choice that you make. ⁓ right. 'Cause at the end of the day, right, you don't control the events, you don't control the outcome, you don't control the things that happened, you control your reaction. Like you could choose to when you finish the first chapter, you can choose to celebrate. you making progress and completing the first chapter, or you can choose to focus on like, well, you know, that's a drop in the bucket. I have twenty five more chapters to go. Right. But it's which one is going to give you more energy and be the more productive response to help you kind of continue pushing forward and and have the energy needed to continue kind of enduring this process, the necessary work required to get to the finish line, right? To get to that next finish line that you've created for yourself. Yeah. But it is way easier said than done. Right. I'm still at fault with it. Like There's literally, you know, yesterday I had an amazing conversation with a client. They're super happy. And then I get like one thing that that comes up and now it's just like all doom and gloom. So yeah, how do you find you have like are there any intentional practices that you have curated or have been working on to help you in that have a more productive response, right? Or or celebrate those wins? Like what are you doing to intentionally kind of build that muscle? speaker-0: Yeah, ⁓ my my biggest practice, which I I have in the book and I I actually exercise all the time is envisioning the finish. And it's scientifically proven that ⁓ the human body, the brain, doesn't understand the difference between an event that was properly envisioned and the we're not talking about like expert level meditation. There's like there's a myriad of YouTube videos on how to envision things. So the brain can't tell the difference between an event that was envisioned. versus physically actually completed. Right. So if you are envisioning something, you are subconsciously programming yourself to make better decisions and to take necessary actions towards a specific goal. So whatever the where whatever the goal is, if you can just go through an egg a daily morning ritual or before bed ritual or actually anytime during the day, I don't think there's any evidence whether which one is best, as long as it's done, just visualize yourself at the completion of the goal and that's just gonna create, you know, mental fuel literally on a daily basis to to keep going and going after it. And I I love that exercise. speaker-1: Yeah. So when you're closing your eyes to envision success, are you just like kind of what are you seeing? So maybe like use yourself as example, like what is the success that you're envisioning for yourself in your own life today? And maybe that example can help us at home, the listeners, apply that to our own life. speaker-0: I recently got into public speaking and I mean I love sharing my story. One of the reasons I wrote the book was actually just to get to build credibility for myself to get on more stages. I love sharing my story. I love sharing my framework. I love sharing like tips and tricks and methodologies on like what I did to achieve my two B Hags, which are covered in in the book. B Hag Big Hairy Ass Gold, Jim Collins. I love the guy, great books. My two B Hags were to sell my company and to compete in the Iron Man World Championship. And I visualized those things on a daily basis. I wrote a checkout to myself for a very specific amount of money and I hung it next to my computer and I saw it in my fur peripheral vision all day, every day. And I also printed out a small poster of the Iron Man World Championship in Kona, Hawaii, and I put that right next to the check. So I visualized and in addition to seeing it, I actually, you know, visualized being there. And it worked and resulted in me documenting that story and writing the book. But currently, I just want to get on more stages because I love sharing my story. And I'm currently also doing advisory work to help founders get to their finish line, you know, through an exit or a majority investor recapitalization. So and I have many under my belt already. And it's just incredibly rewarding for me and for them. More for them, me as an advisor. And I j I just, you know, en envision getting to more closings, you know, of of business deals. speaker-1: Yeah. So you're really just you're closing your eyes and you're seeing yourself in the moment of that finish line, right? For competing at the Iron Man World Championships, you're seeing yourself there. You're seeing yourself look around, seeing everybody at the starting line, right, going through that event, that race, right? You're really just like literally closing your eyes and seeing the finish line, seeing that moment happening and just making it as clear and as detailed as you can. speaker-0: A hundred percent. When when when I finally got to Kona, the Iron Man World Championship, and ⁓ my wife and I were driving from the airport, you know, to our hotel, every single turn was familiar to me. It was as if I'd been there dozens, if not hundreds, of times. Because I A, I watched a ton of YouTube videos, but B, I envisioned myself inside of those YouTube videos. I envisioned myself at the swim start. I envisioned myself going coming down Alihi Drive to a cheering crowd. They cheer for everybody, not just for me. I envisioned myself melting in the heat of, you know, Kona humidity and winds and and temperatures and and all that jazz. So when I was there, it was literally as if it was my hundredth time there. It was a surreal experience, to be frank. speaker-1: Yeah. That's incredible. That's definitely something that I'm gonna add to the routine. I you know, it's not the first time that I've heard it, but hearing it from you, knowing your story and the success that you've had makes it more real to me. So just taking, you know, a couple of minutes every day, like it starts by okay, you need to get clear on what your goal is, right? Which is a big starting point for most people. So just getting that clarity on what you want to achieve. And then once you have that, seeing it every day. Right, seeing it every day, take carving out a couple minutes to intentionally just sit there and be with it and see it happening in your life, making it more real, making it more tangible, and just doing that alone for some magical, weird, neuroscientific reason, it's gonna work and just gonna but the the brains are are really powerful things. So thank you for sharing that. You talked about yeah, you wrote the book kind of as a as a way to build credibility to get you on more stages because you love telling your story. I'd love to dive into that now. So for people who don't know your story, take me through how you built Binary Tree. ⁓ so from starting the company to nearly losing it to eventually selling it and walking away on your own terms. speaker-0: We started the company as a application development company. So back in the day, there was no such thing as software as a service. ⁓ there were no apps. ⁓ if a business wanted to automate any sort of ⁓ process that they had, they would hire the either hire developers or outsource the development to folks to build applications. So apps now it's a whole bunch of things on, you know, on our on our phone, but apps in the day actually solve serious big business problems. So we were an app development shop. JP Morgan hired us to build an app to convert email data. They were moving from one email system to another. And they said, we want all of our employees to come into the same inbox, the same calendar, and the same contacts so that they don't go through any disruption because they were switching from from Microsoft to IBM at the time. This is nineteen ninety four. So we said, sure, that's an and that's boring, but that's an app. We we can develop that for you. And we did. That mushroomed into an entire line of software for us because there was a lot of change in email systems. I mean, companies had like departmental email systems. Can you imagine a company with 14 departments and each department having its own email system that didn't communicate with each other? That was reality in the mid-90s. So IBM came around, they acquired a company called Lotus. speaker-1: My goodness. speaker-0: And came out with a product called Lotus Notes, which was the first true enterprise-grade email product. So we developed products to migrate from departmental email systems to an enterprise-level email system. Long story short, that led to a licensing deal with IBM. That led to an asset sale of one of our divisions to another company. several years later, it led to a relationship with Google because they entered the email space. And then the big boy, Microsoft, decided to rule the space. And Microsoft succeeds in anything that set their set they set their sights on. We partnered with Microsoft and wrote the entire wave of Office 365, basically, you know, dominating the email the enterprise email market. So we basically became an expert in moving email from one platform to another, consolidating systems, et cetera, et cetera. We did a whole bunch of things, but email is the easiest way to describe it. Grew the company to over forty million in sales, two hundred employees across twelve countries, and realized a really ⁓ good exit to well one of our biggest competitors, which was a four billion dollar ⁓ software company that got sick and tired of losing to us. speaker-1: Wow. That is a niche. That is a very specific niche. And that is amazing. Like you just completely dominated that very niche little service. And it's so weird. Like, granted, I'm very early on in my career, in my ⁓ business, like entrepreneurial journey. And it's like I've found small moments like that where it's like you just kind of start a business, offer a suite of services, you work with a bunch of different types of businesses until you just kind of stumble into a random little niche that like nobody else has even thought of. And you can just go all in and just dominate that. Is that like a part like have you kind of recognize that same pattern? speaker-0: A hundred percent. And listen, there's definitely some visionaries out there, right? So I I can't say that every single successful software company went the route that ⁓ we went, but many of them did. Right. You you do a project, you recognize that there's a there's a need that you're fulfilling, and then you take that the end product, you somehow retain the rights to it, and you go to market with it for other companies, which is, you know, what we did. Others, you know, have a vision for a need and they, you know, develop it and go to market with it, which is great. Kudos for th those visionaries. But others just, you know, fill a niche. And I I love to say I this is a often overused term, like there's riches in the niches. And my company was incredibly boring. You know, we didn't create AI, we didn't do any we didn't have anything super graphics in our in our software. It wasn't like cr it it was revolutionary in how it it recreated email data from one platform to another and calendar data, which was very hard to to recreate from it from a technical binary perspective. speaker-1: Mm-hmm. And you provided tremendous value, right? And nobody else was thinking like you found a blue ocean opportunity where nobody else was thinking about this. Or maybe there were other people, but it was really hard to replicate. And people just saw you already doing it really well. And they're like, All right, well, that was taken. But yeah, like in my video production company, we had we offered, you know, organic content and paid advertising retainers to all different kinds of service based businesses. And then one day we just get a call from the local iron workers trade union. And they're like, hey, we need some help. And we're okay, we'll help. And then we just come to find out like they needed so much help. They had a lot of money. And there was just nobody servicing that specific niche of iron worker trade unions. There's like 250 of them in this country. And we were able to just take over and dominate that niche. Like we built the tailored solution for iron worker trade unions around the country. It's just random. You just kind of stay in the game long enough until one day you find an opportunity that you can easily replicate. And it's just like a A niche that nobody else is thinking about has been the ⁓ my experience so far. speaker-0: And and and it's it's so easy to build credibility within a specific vertical if you have a solution for that vertical sp specifically, right? Yeah. So I mean, especially for something that unique, right? How many people can say that they have a solution for, you know, iron for ironworking unions, right? So when you do, all of a sudden, you know, their guard goes down and they're listening to whatever you're pitching. speaker-1: Yeah, yeah, because it's tailor made for them. You're using, you're speaking directly to them and you can use their language in ⁓ how you describe and just completely build a tailored solution specifically for that person. So going back to your story, I appreciate you kind of went the high level overview, but I know that there were some bumps in the road through that journey. So what do you would you say what was the lowest point in that journey for you? speaker-0: The lowest point was me making a massive mistake dur during so we had what I like to call like little mini exits. So mini exit number two, and like when a company approached us to buy one of our divisions, which was our consulting services division, I was part of the deal. They said, We're gonna acquire your consulting services division, but you need to come with ⁓ with that deal and work for us for a couple of years, which is very common in ⁓ sort of, you know, in in in MA deals. I trusted the leadership team that I put in place to run the the part of the company that remained. And I got burnt big time. Long story short, you know, falsified financial statements. I short short of like writing checks out to themselves and theft. It wasn't theft, but it was it was just, you know, gross negligence of, you know, run running a business and thinking that any day now we're gonna turn the corner and get this company, you know, back on track while they were bleeding the credit line dry. Because I was so busy at my new job, you know, working for this company that acquired us. Because we just did eight other acquisitions and I had all this additional responsibility. I was learning like from a super seasoned leadership team. I call that period of my life my MBA in a box because I'm a college dropout and I got to learn from a seasoned leadership team, which just raised $75 million, which was a ton of money in 1999. It's still a lot of money, but nine nine, that's like a massive raise. Long story short. I get a call I get a phone call from the bank saying, Hey Steven, you're personally co signed on the credit line for the company. It's been drawn upon for the last, you know, six months straight and no interest payments have been made. So that that was basically my slap in the face and eye opener to come to come back and say, like, what's going on? And I and I realized the financial statements that were presented to me were falsified, not accurate, and they were just hiding, mounting, mounting losses. And long story short, I got out of my contract with a company that acquired hours, came back to nurse my own baby back to health. There was like 30 employees at the time or so. I had to fire twenty two of them because we weren't gonna we we weren't gonna make payroll the next day because the credit line was at zero. The bank had called our credit line and they said, We're gonna foreclose on your house in order to ⁓ get our money back. And I said, Please give me some grace. I'm back. Let me figure this out. And thank thank God they did. And sl ⁓ after reducing the headcount down to a bear, bear, bear, bear essential eight. I was able to ⁓ nurse the company back to health over the next couple of years. And then we grew from near zero to over forty million. speaker-1: Wow. Wow. So as you reflected on that situation, what have you boiled down? Like if you had to label the mistake made, what was the mistake that you made in that moment? speaker-0: The mistake made was not requesting more frequent financial statements. Looking back at it, it I mean, it was it was so childish of me to accept some stuff. The accounting firm that I had hired was fired, and you know, they they hired like an in-house accountant to do the books. I was so busy, you know, doing what I was doing at at the at the other company. that I really did didn't look into the details of what was happening ⁓ with with within my own company from an ownership perspective. So I should have requested much more free you know frequent financial statements and updates on the business. ⁓ it should have come from a credible source that that you know was was loyal to me, not not to them. And th this entire, you know, fiasco could have been avoided. I could have insisted that they make much harder and I again the the company was hurting. Because the economy was hurting. This was right after the dot com collapse. Everybody was hurting. They sh should they should have made a lot more cuts a lot sooner and it it would have prevented the the literally the like the near bankruptcy of the company. speaker-1: That's surprising because I would have thought maybe the So you you don't find like the mistake to you in your mind wasn't like stepping away from your company, it was just not having the right kind of like check in and review process and like authentic, right? Getting authentic information, right? So finding a solution to getting authentic information. If you were getting authentic information throughout that whole period, you feel like you could have still made the right decisions and the business could have made the right moves even with you fully focused on the consulting services. speaker-0: Yeah, ⁓ a hundred percent. If if I if I had the right information and ⁓ the I I had the right team so it's a it's a combination of having the right information and the right team in place. Right. I had a I had a team which was and most founders are loyal to this. Like they're they're I'm sorry, they're guilty of this. They're loyal to their staff. And instead of most founders have a really hard time making hard decisions, even though this these people weren't founders, they were still loyal to their staff. And they're like, if we just work a little bit harder, if we just dig in a little bit deeper, and we just close these three big deals that are pending, we're gonna turn the corner, you know, start paying back their credit line and everything will be fine. Okay. ⁓ that's that's foolish optimism. speaker-1: Yeah. Okay. So I get it. So they were more so there was a side of them where they were doing these things, they were kind of falsifying these financial statements so that the big boss, right, wouldn't come in and make the hard decisions of letting everybody go. So like they knew that if they were sending you the real like they knew the decision, like what needed to happen. Like you needed to cut trim down on staff, you needed to let people go. And they were kind of almost protecting protecting them from that by falsifying and then, you know, kicking speaker-0: Yeah, exactly. It was a it was super sad. Anyway, one a massive ⁓ massive mistake, but ⁓ we we recovered and ⁓ learned to advise others against it in the future. speaker-1: Yeah, absolutely. So what was that recovery process? Like, what did that recovery process look like? Like I can only imagine putting myself in that situation. You're coming back to the business, you're getting calls from the bank. You have to let twenty two people go. And anybody that's listening that has had to fire somebody knows how challenging that is, like emotionally. Like that is just the worst thing that you have to do in business is let somebody go, at least in my opinion. So you're in that situation, you just let go twenty two people, you're down to the team of eight. You got the credit line drawn down to zero. The the bank has pretty much put a stall on credit. What is that road back? What is that road from there to to forty million? Like how do you kind of come back in and reset the reset? speaker-0: Yeah, I mean it it was I mean, talk about blood, sweat, and tears. I mean, it it was harder then than in startup mode. Because like in startup mode, you everything is great, everybody's happy, you know, you're closing new deals, you're executing on projects, you know, customers are happy, all this jazz. And here it's like you're the incredibly dependent on the next deal. Like there's just this insane sense of urgency. Around, you know, every task that's being executed, especially on the sales side, right? Like you're just you're not not near desperate, you're desperate like for the next deal. Cause like you have to you have to get some, you know, cash into the business. There's no more credit line. Raising capital was completely impossible, you know, based on you know the last years of financials. I personally had to put in a lot of money in into the business. to keep it afloat for a a little bit longer. But also I I it's not like I had, you know, infant resources. I had, you know, completely you know finite resources. And I had a, you know, a family to report to who was going to, you know, stop me from, you know, making, you know, horrible decisions on top of bad decisions. So I I put in some money to keep it afloat a little bit longer. And it proved to to be, you know, just enough. And nursed the company back to health, continue doing what we were known to be doing, which is execute on on projects, exceed customer expectations, and also promote all of the good work that we did so that others would hire us as well. And that led to, you know, the company growing again. That was at that was at our pivotal point where we started partnering with Microsoft more than with IBM and Google. And Microsoft's market share growth with Office 3665 was kicking in. And because we were a massive supporter from a technology perspective of Office three sixty five growth, their growth fueled our growth. And that that was that's what attributed to our our hockey stick. speaker-1: Wow. Just stayed in it long enough to kind of catch the lucky break. But it was ⁓ definitely extremely painful to stay in that. It reminds me of Elon Musk's story a bit. Your story like there with that of where he was at like, you know, he had three months left. Like if he wanted to keep Tesla, SpaceX and Solar City alive, he had like three months of runway left for all three of them. Then everybody was telling him you have to kill one of ⁓ Like you have to just kill one or two of them and just go all in on one. And he was like it was like killing my baby, like I couldn't make that decision. And You know, I there's this a famous story of like there were five hundred employees at Tesla. Everybody they had like thousands of pre orders for the Model S, but nobody was actually converting into full purchases. So every single person at the Tesla company was just converted into a salesperson where all they were doing, the the janitors, the front desk people, the admin, the engineers, all they were doing was just picking up the phones and calling these people who had submitted pre orders to just get purchasers for the Model S. And ⁓ Google almost bought Tesla. Th there was a deal on the table, but they delayed like two weeks and in that two weeks they got enough purchases to keep the company. speaker-0: I mean, I I I I thought I've heard every single story about Musk and Tesla and his companies. I I never heard that one, so thank you for sharing that. speaker-1: Yeah, it's I I love his biography is like one of the more entertaining reads just 'cause he is a relentless gambler of like going back all in, like just getting this huge payout going back all in. It's it's it's amazing. But he has so yeah. Steven, after going through the journey the hard way, right with binary tree, learning everything that you did, you now help founders prepare for their own exits. So when a founder comes to you and says, I think I want to sell my company one day, what process do you take them through? speaker-0: Sure. So it starts with an exit readiness assessment. And I do this through ⁓ three lenses. And this is actually a a product which I license that I love called value builders. So it starts with ⁓ actually a psychological assessment on whether or not they are ready to part from their company. Most founders attach their identity to their company's identity and they can't see themselves, you know, operating or, you know, going on with life without being the the head of their company. So there's there's there's a psychological assessment that needs to be done to make sure that the company that the founder is ready to part. Because the a deal can go many different ways, right? A c a a deal can go the the way my deal went, which is the day it closed, I was completely removed to the other extreme where you continue to work there for many, many years, many, sometimes indefinitely, and everything in between. Then there's a financial readiness assessment. What is the individual's, you know, financial goals for their lifestyle going forward? And what percentage of their current, you know, company's cash flow attributes to that? So if I have aspirations to have, you know, this type of lifestyle and my company contributes, accounts for 100% of that, then I'm at a a massive, massive risk, right? Because without my company, I can't have the lifestyle that I want. Some people want a higher lifestyle, some people want a lower lower lifestyle, but there's there's a there may be a gap that needs to be filled that helps us get to what an enterprise value may need to be for a potential exit. And the last one is the most important one, and that's the value builder score for what their current enterprise value is, based on eight different factors. I won't get into every single one of them, but there's eight main drivers that'll dictate enterprise value. Obviously revenue for the company, profitability, but there's other, you know, softer things like how much of a you know founder dependency is there with the business? Do they have some sort of monopoly control? You know, basically how big is their is their differentiator that's going to prevent competitors from swooping in and getting market share and other drivers? So basically the combination of these three reports and the scores and the findings. Not only, yes, it's spit out by AI and based on a whole bunch of different, you know, knowledge, which is super, super meaningful and useful in and of itself. But when read through a founder's lens who's like been in those shoes multiple times, and we've advised on like 38 exits, totaling over ⁓ 1.2 billion dollars in founder wealth created over the last eight years. So it's really important to take that output. Put it through the lens of somebody that's been through exits, has advised on exits, and come up with an actionable plan to get the founder to his or her number. speaker-1: Incredible. So that's where you start. And then is the process that you guide them through from there through your advising? Is that pretty tailored to whatever their output is, kind of whatever that action plan that is created, which was informed by that readiness assessment? speaker-0: Yeah, it's it's it's almost always bespoke, you know, to the to their situation specifically. So it starts with a number, right? What is our gap? What is our current enterprise value? And what does the enterprise value need to be to make the founder satisfied with whatever, you know, lifestyle and spending that they they want in the future. If there isn't much of a gap, we can go to market sooner rather than later, right? We can f we can hire an investment banker and take the company to market sooner rather if but most of the time there's a gap. And then we need to go figure out how to how to minimize that gap. It starts with the leadership team, most of the time with sales, right? Because if there's a gap to be filled, we got to get the company to to sell more and to be more profitable. So the top two positions, which are almost always addressed, is the head of sales and the head of finance. Right. Cause we need to figure out, you know, how do we, you know, get that revenue engine cranking again, and how do we get that profitability engine cranking again. And We need a head of finance to open up the founder's eyes to say, you know, there's a whole bunch of opportunities for improvement here. We get those two cranking. Everything else is still really important, but those are those are the two main drivers. speaker-1: Yeah. And I mean there's a lot of complexity that goes into obviously like revenue. Okay, we need to increase revenue, we need to lower costs, right? Those are the pretty standard solutions that you're going to take into every company. But then you might have one company that has like a huge key man risk, right? Where the founder is like the face in all the content, the face of the brand. Solving for key man risk might be a lot more complicated, or those other risk factors, like, okay, if you're dealing with a company that doesn't have a huge differentiation moat. Is that almost like a complete disqualifier? Like, how do you go about creating that differentiation now for their product or for their service to make it a real sellable enterprise? Right. So like would you argue that those are like where it gets really complex and where you're advising? speaker-0: It's lot more. ⁓ yeah. Those two things are really big. I mean, the the founder dependency is massive because a a a lot of companies have them. And that's something that isn't fixed overnight. It's a function of hiring the right team, right? The reason many founders have such a massive dependency on themselves is because they ha they haven't surrounded themselves with the right people. Or they've kept the same people around from when they found it. Many founders are super loyal. You know, I was. And you you you keep people around that have been with you, you know, from the beginning, but those aren't necessarily the folks that can operate your company at the scale that it's grown to. So eliminating that is really important. The differentiation and the moat, while super important, is mitigated by sales and profitability. Right. So if you can say, sure, I'm Uber, but there's also Lyft. And you know, other companies, but I, you know, I continue to grow and I'm throwing off X amount of cash year after year, year after year, with recurring revenue. Right. So if you can prove those three things, your moat is important, but becomes less so if you're this, you know, cash machine that buyers want. speaker-1: Yeah. Okay. Yeah, that makes a lot of sense. Sounds like you got like you've seen all of these examples before. That's the beauty of working with somebody like you who can kind of advise through this process. Where is the person at before they even reach out to you? Like, kind of what are the things that maybe a founder might be experiencing that maybe they're ready to consider exiting from their business? Like some people just never want to to do that. Like, so when is an exit the right move or like the right decision for somebody to make? Obviously it's very personal, but speaker-0: No, it's it's highly, highly personal. I I think the the biggest eye-opening moment for a founder is when they realize and and admitted themselves that ninety percent of their net worth is tied up in this illiquid asset called their company. Right. If they've done a great job of investing and have other ventures going on and they they got the super profitable company, kudos. They're super, super unique. Most founders that have been in business for, you know, 10 plus years. The majority of their net worth is tied up in this illiquid asset, which represents a ton of risks to them and to their family. You know, COVID can happen, the dot-com collapse can happen, AI can take over. There's, you know, so many things that'll, you know, literally wipe out the majority of their net worth. So as much as they love running their company, as much as some of their identity is tied up in it, they really need to de-risk their own personal. and families future by looking at a potential exit, even ev even if they don't pursue it, but they need to know what to do and what needs to happen in order for that to be of maximum benefit. speaker-1: Yeah. Just like seeing the other options that are out there so you can de-risk for your own situation. That makes a lot of sense. ⁓ when you're talking with founders, I can imagine a lot of conversations where somebody's really excited about this thing that they have in their business, but isn't actually that valuable. So, like what do founders think makes their company valuable that buyers may not actually value the same way? speaker-0: ⁓ my God. I I was so guilty of this. There's so many bright, shiny objects that, you know, founders and entrepreneurs go after after multiple like multi-million dollar side projects, which, you know, I felt were the best thing since white sliced bread. But you know, somebody finally, you know, opened up my eyes to say this is bleed like bleeding cash enough already. Right. So a lot of founders don't have an organization that's gonna tell them the truth, right? Which is why they need to be in the room where they're gonna get, you know, blunt honesty from others, whether it's you know, one-on-one advisory from stuff like the stuff that I provide or others. I mean, there's mi there's tens of thousands of me. Another thing that I'm a huge fan of is CEO peer groups, which I'm also a part of. So I I used to be a member of a program called the CEO project. I I'm now an executive coach in the CEO project. And there's multiple competitors, you know, Vistage at a lower level and others. Founders need to surround themselves with other founders in order to get, you know, honest and open feedback on everything that they're doing in a, you know, in a judgment free environment. speaker-1: Yeah. Yeah, for sure. Cause if you're just only around the people in your company that you've hired that you pay their salary, it's gonna be hard for those people to give you blunt and honest feedback and ⁓ kind of also just see the board from the angle and perspective that you see the board, right? You need to be talking to other founders. Like what were some examples from your business or your story where you were like shiny object, greatest thing since sliced bread, but it's just like wasn't actually a really meaningful thing to increase the enterprise value of your organization that you went after. speaker-0: So be because we were in the business of converting email and calendar data, obviously within an enter within an organization, you can see somebody else's calendar, right? You can see if you want to schedule a meeting from two to three, are the people that I want to invite available from two to three. I came up with this idea of being able to reference people's calendars from from disparate email systems. So if you're working for ABC Co. and you're doing a lot of business with XYZ Co. Why shouldn't you be able to see their calendar and vice versa, as long as you gave each other permission to do so? So created a product, launched our product, never took off. But I was just so passionate about it because even to this day, the amount of email chains and text messages that go between multiple people across multiple companies, are you available at so and so? Check out my calendarly, check out my calendarly. This problem still hasn't been solved. Different companies should be able to check each other's calendar availability. That was, you know, a a two million dollar sinkhole for me. speaker-1: Wow. And just nobody bought it. Like nobody so th like that was the outcome, just nobody ended up really wanting to pay for something like that. speaker-0: I mean, it was we we were a victim of our own success, right? We were selling so much of our core products and services that when I introduced this, I d I definitely didn't do a good enough job demanding that it be sold. I'm like, for every single deal you sell, Mr. Salesperson, make sure you get a license for twenty person pilot for this. So I I take responsibility for this. I should I should have demanded. that it'd be sold into our existing accounts. I didn't. And ⁓ a lot of people go with the mentality of build it and they will come. And th that that that is just an up just a recipe for disaster. speaker-1: Yeah. So you argue, you believe that, you know, you need to start with the the pain or the demand from the them, right? And then you build it, right? Start with ⁓ like where they're going to or what they're looking for, build that. Don't just build something that nobody's asked you for. speaker-0: If you are the visionary that wants to build something that nobody's requested, great. Build a minimally viable product, create some product market, you know, fit, you know, test it out. And if it's as great as you think it was or think it's going to be with a couple of customers, then you go all in and you make it perfect and shiny and excellent. And, you know, go all out with with your marketing efforts. But, you know, going all in on the development efforts and making it perfect and doing minimal marketing and thinking that it's just gonna spread with word of mouth. It worked for Facebook, but it's not gonna work for everybody else. speaker-1: Yeah. I think I'm honestly personally in a in a position where I might be guilty of that right now. Like I'm just so committed to this idea of building companions for information products like books and things like that. And I don't know. Like I'm just kind of having a hard time kind of explaining it. But like I have gotten some good feedback from people. But yeah, I think I going back to what you opened with, like we need to take our own advice. It's like I need to take my own advice of like starting with the problem and the pain that people are telling me that they're experiencing and building solutions for that. Trying to be the visionary is a is a much bigger gamble. And like just trying to invent this thing that you think should exist. But Steven, thank you so much for the time. I have two final questions for you. The first one is related to this journey, right? So when you're advising people, where you do this initial readiness assessment where you have the psychological accept assessment, like how psychologically available and ready are they to actually exit and step away from their baby, their business? Can they see themselves outside of their business? Also the financial readiness assessment, like let's actually get clear on what your number is. Like what is the number that you want? Can this business, can this exit meet that, or do we need to grow the business, right? Do we need to take some time, fix the business, make growth? And then the value builder scores. Like what is the actual value of your company? And then we weigh that against your number that you're looking for. So you do that initial assessment, and then you're advising them through this journey, through their action plan, through their roadmap to get to the end result desired outcome that they want. What parts of that plan of building your business to become exit ready? What parts are consistently the hardest for your clients to execute and actually do? speaker-0: It's the team. It's it's just so, so hard because founders are so incredibly loyal and putting together the right team makes everything easier to execute on. There could be a million on one initiatives and it's never gonna be it it can't land on the founder's shoulders. It's gotta land on the team's shoulders. And often it it re it requires, you know, ⁓ upgrading, you know, some some of the ⁓ some of the management team. There's instances where, you know, roles can be found for folks and there's instances where f roles can be found for others. But I I I think le leveling up the team is is the hardest almost ⁓ consistently across the board. speaker-1: Yeah. How do you find a rock star? Like how do you find a rock star, hire a rock star team member? speaker-0: ⁓ wow. Trial and error. I mean you you you get you gotta go, right? So you y you have to ⁓ obviously, you know, get get the word out. Some people have great networks. ⁓ advisors like we we personally have been able to fill a lot of roles just because like we've been at this for so many years. Now I've got a lot of CFOs, you know, CROs, chief development officers in my Rolodex, but I'm not gonna be able to fill every single role. But you know, advisors have great Rolodexes, headhunters. They're a necessary evil at times, right? And I've got a great r I've got a Rolodex of the ones that I I love because I I've I found that they do a better job than others. But you you go you go out there, ⁓ you you put the word out and you find them. And unfortunately, you will fail. It's just a given. People will sneak, will get through the interview process from these great head headhunters, from your interview process, from your great discern ⁓ discerning of, you know, talent and dedication from folks. So you will fail, then dust yourself off and l love like you've never lost before. speaker-1: Yeah. Right. And then ⁓ yeah, once you've made that realization that you made the wrong decision, it's you know, stepping up to the plate, doing the hard thing of making the necessary decision of letting that person go and and starting back over, even though it's gonna suck ⁓ just because it's what's required. Thank you so much, Steven. Before I ask you the final question, the recurring question I ask every guest, how can people get in touch with you? speaker-0: Best way to find me is on LinkedIn at Steven Pivnik. And also my website has all my other social media handles as well as my blog, my book, my book, my podcast. And that website is StevenPivnik.com. speaker-1: Love it. We'll have everything linked in the description. Go check out all of Steven's work. Get his book a build to finish. Check out his podcast. But Steven, my final question for you is a recurring question that I ask every guest. But if you had a giant billboard that everyone in the world could see for ten seconds, what would it say and why? speaker-0: Dream big, you can do it. I'm I'm I'm a firm believer that ⁓ b b hags are ⁓ accomplishable. speaker-1: Absolutely. Dream big, you can do it. I love it. Steven, thank you so much for the time. speaker-0: Thank you, Ian. I really appreciate it. speaker-1: Thank you for listening. The main thing that I'm taking away from my conversation with Steven is that the founder's loyalty can become a risk to the business. Steven talked about this in two different ways. In his own company, he trusted the team that he had put in place while he stepped into another role, and the business almost collapsed because he did not have the right information being fed to him. Then later, when he talked about helping founders prepare for an exit, he said that the hardest part is usually upgrading the team. That makes sense because founders are often loyal to the people who were there early, the people who are crazy enough to Join them in the early days to build something new. But at some point, the business has to be honest with itself about what is required to get to the next stage. If the company needs to become sellable, the team has to be able to carry the business without everything depending on the founder. If you want to get connected with Steven Pivnik, you can find the links to his website, LinkedIn, book, and podcast in the description of this episode. And if you're an author and you want your readers to engage more deeply with your ideas and connect more deeply with your readers, Download the program execution system toolkit in the description. It'll show you how to build what I call execution infrastructure, which is going to help your readers more deeply engage with your ideas and do the work that you tell them to do in your book. Thank you for listening, and I'll see you in the next one.