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How to Maximize Your Business Exit Value · MaxValue Podcast

• 0:10
  SPEAKER_00: Welcome to Max Value, the show for business owners and their trusted advisors who are on a mission to maximize their value.
• 0:17
  SPEAKER_00: I'm your host, Ben Town.
• 0:18
  SPEAKER_00: And today we are joined by our guest, Adam Cipriano, owner of BSG Consulting.
• 0:24
  SPEAKER_00: Hey Adam, thanks for coming on.
• 0:27
  SPEAKER_00: Hi, Ben.
• 0:27
  SPEAKER_01: Thanks for having me.
• 0:28
  SPEAKER_01: Good to be here.
• 0:29
  SPEAKER_00: Awesome.
• 0:30
  SPEAKER_00: You know yourself better than I know yourself.
• 0:32
  SPEAKER_00: Can you give me a quick introduction?
• 0:35
  SPEAKER_01: Sure.
• 0:37
  SPEAKER_01: I started off my career as a commercial banker.
• 0:39
  SPEAKER_01: I did that for six years of my life.
• 0:42
  SPEAKER_01: I spent another six years in the staffing business, building and rebuilding staffing businesses in the professional space.
• 0:48
  SPEAKER_01: And I spent the last almost 25 in the exit and succession and MA space.
• 0:53
  SPEAKER_00: Talking about succession, exit, MA.
• 0:57
  SPEAKER_00: When we're dealing with private companies, where is the demand strongest for people looking to sell their company?
• 1:05
  SPEAKER_01: Well, there depends on the buyer you're talking about.
• 1:08
  SPEAKER_01: And it does depend on the industry that you're talking about as well.
• 1:12
  SPEAKER_01: Okay.
• 1:13
  SPEAKER_01: Boring businesses, businesses that churn out profits regularly, businesses that are stable, and businesses that are predictable tend to be businesses that are very attractive to buyers.
• 1:27
  SPEAKER_01: Let me break up the buying community into a couple parts.
• 1:32
  SPEAKER_01: Let's call one half strategic buyers, and let's call the other half financial buyers.
• 1:39
  SPEAKER_01: Strategic buyers, in my definition, are buyers that might be competitors.
• 1:43
  SPEAKER_01: They might be folks that are doing something very similar or even the same thing, just in a different geography or with a different type of client.
• 1:52
  SPEAKER_01: Those are buyers where the demand is strong, but not as strong as the financial community.
• 2:00
  SPEAKER_01: So a strategic buyer has to be a business that's got the wherewithal, first of all, to make the deal happen.
• 2:06
  SPEAKER_01: It's generally quite a bit larger than the company they're trying to acquire, 10 times bigger or more.
• 2:13
  SPEAKER_01: And it's got to be somebody that's in an aggressive growth mindset.
• 2:19
  SPEAKER_01: A financial buyer is a different animal.
• 2:22
  SPEAKER_01: Financial buyers are all over the place.
• 2:23
  SPEAKER_01: And you've heard them, these are PE firms, these are, in some cases, venture-backed firms, but mostly PE firms, or folks that are trying to aggregate companies in the same industry to build a portfolio to fill out a fund, an investment fund, so that they can then offer it to another PE firm, or maybe even take it public.
• 2:47
  SPEAKER_01: The demand from financial buyers at this point is voracious, particularly for small and medium-sized businesses.
• 2:57
  SPEAKER_01: Now, the nuances of those two communities are really important.
• 3:03
  SPEAKER_01: In the strategic buying sense, the deal has to fit directly with what one company wants to do.
• 3:13
  SPEAKER_01: In a financial buying sense, it just has to make money.
• 3:18
  SPEAKER_01: And another big difference in that demand is when you have that strategic buyer, they're gonna operate the business after the current ownership departs, whether that's a family or an individual or a partnership.
• 3:34
  SPEAKER_01: The other piece is the financial side, and the financial side is a group of people that are not operators, these are people that just want you to operate as the owner.
• 3:46
  SPEAKER_01: So your exit is a little bit longer in time.
• 3:49
  SPEAKER_00: Those are some of the nuances and differences between the two.
• 3:53
  SPEAKER_00: That makes sense.
• 3:53
  SPEAKER_00: And I think one of the things that you highlighted was the fact that the strategic buyer kind of by definition is going to be a very particular individual company firm, whatever.
• 4:07
  SPEAKER_00: And because of that, it can be harder to find that person.
• 4:15
  SPEAKER_00: Or you know, it's again has to be the the more of a quote unquote perfect fit for that to work.
• 4:21
  SPEAKER_01: It's usually somebody you know.
• 4:24
  SPEAKER_00: Fairly, so maybe not even harder to find.
• 4:25
  SPEAKER_01: Yeah, it's somebody it's somebody you met at a trade show, or it's somebody that said, Hey, you know what?
• 4:30
  SPEAKER_01: If you're ever in the market, give me a call.
• 4:33
  SPEAKER_01: Um, it's somebody that's generally younger, it's somebody that's generally got a longer horizon in terms of time to allow that business to continue to prosper.
• 4:43
  SPEAKER_01: Um, so they are out there.
• 4:46
  SPEAKER_01: Um, but as you said, they're more particular, they're more specific about their interest.
• 4:51
  SPEAKER_01: Um, they tend not necessarily to pay as much.
• 4:56
  SPEAKER_01: Um, we can talk about that later.
• 4:58
  SPEAKER_01: Um whereas a financial buyer is just hungry for an investment.
• 5:03
  SPEAKER_01: You've got a lot of you've got a lot of investors on the sidelines that have said, stock market isn't the only thing I want to do.
• 5:11
  SPEAKER_01: Let me go find a PE firm that's going to give me maybe a better return.
• 5:16
  SPEAKER_01: And they'll go and create a fund through one of these finance companies.
• 5:20
  SPEAKER_01: And the finance company's job is to go place that investment by buying companies.
• 5:26
  SPEAKER_00: Gotcha.
• 5:27
  SPEAKER_00: Well, and there's there is a lot of capital out there seeking returns, and maybe not as many companies that are prepared to take advantage of that.
• 5:37
  SPEAKER_01: Well, if you think about it just on a return basis, and I'll nerd out with you for a second, you've got an investment market, stock spawns cash, where you might go to a wealth advisor and create a portfolio where they say, How does six or seven or eight percent compounded every year sound to you?
• 5:58
  SPEAKER_01: And most investors say, that's great.
• 6:02
  SPEAKER_01: You've got a PE firm that says, we're gonna go buy businesses, and businesses that we buy are earning at least 10%.
• 6:11
  SPEAKER_01: Even after our fees, we're gonna beat the market.
• 6:15
  SPEAKER_01: So I'm not talking about SP as the benchmark that you beat.
• 6:20
  SPEAKER_01: I'm talking about a broadly diversified mix of stocks, bonds, cash.
• 6:26
  SPEAKER_01: So you've got businesses that are being owned by PE firms that are earning 12 and 14 and 16% or more, depending on what those businesses are.
• 6:36
  SPEAKER_01: When you compare those returns, even net of fees, they can be quite a bit better than that broad investment portfolio return.
• 6:46
  SPEAKER_01: That's what's so attractive about it for the finance firms.
• 6:51
  SPEAKER_00: Absolutely.
• 6:52
  SPEAKER_00: And of course, they can always improve the value, underlying value, not just get the earnings out of the business on a yearly basis.
• 6:58
  SPEAKER_01: How do we cut costs?
• 7:00
  SPEAKER_01: How do we create stability?
• 7:02
  SPEAKER_01: How do we create scalability?
• 7:04
  SPEAKER_01: How do we apply our own efficiencies on our other business partners?
• 7:07
  SPEAKER_01: How do we take the back shop away and cut those costs?
• 7:11
  SPEAKER_01: All of those are the tricks of those trades.
• 7:13
  SPEAKER_00: That definitely sounds like the uh the dreaded riff.
• 7:16
  SPEAKER_00: Uh being part of that.
• 7:19
  SPEAKER_01: And that could happen.
• 7:20
  SPEAKER_01: It's a big concern for business owners you know, hey, I built this team.
• 7:24
  SPEAKER_01: This team I'm I'm loyal to because they've created this large S for me.
• 7:31
  SPEAKER_01: And I'd like to see them taken care of.
• 7:34
  SPEAKER_01: That's a huge topic when we get down to the brass tacks of saying, should we do this or not?
• 7:41
  SPEAKER_00: Right.
• 7:42
  SPEAKER_00: And you and you said this deal specifically versus a any other deal or pursuing another path, uh, whatever.
• 7:50
  SPEAKER_00: Yeah.
• 7:50
  SPEAKER_00: So that actually brings brings it to a common question or a common misunderstanding.
• 7:56
  SPEAKER_00: The you are an exit and succession and MA advisor.
• 8:03
  SPEAKER_00: That's not a business broker, that's not the same thing.
• 8:06
  SPEAKER_00: So, what what is the difference?
• 8:10
  SPEAKER_01: My definition is just mine.
• 8:14
  SPEAKER_01: But a business broker is someone who takes a business that is ready to be sold, prepared in every way, and we can talk about what prepared means because it is something specific, and offers it to the marketplace.
• 8:29
  SPEAKER_01: That could be listed in a public exchange, it could be done in a shotgun kind of way.
• 8:35
  SPEAKER_01: Think about it as a real estate agent putting a for sale sign on the front lawn of a home.
• 8:40
  SPEAKER_01: Put it on the MLS, announce to the world that the business is for sale, take bids, figure out which are the best ones, negotiate with two or three of them, select one, work through the diligence, close the deal.
• 8:54
  SPEAKER_01: That's sort of an ideal and very shortened uh list of things that a business broker would do.
• 9:02
  SPEAKER_01: Um, they generally work on more main street businesses.
• 9:06
  SPEAKER_01: They generally work on smaller size deals.
• 9:10
  SPEAKER_01: Again, my definition of brokerage.
• 9:14
  SPEAKER_01: MA advisory or someone who's FINRA licensed to be able to develop capital and investment capital for deals tend to be at a different scale.
• 9:27
  SPEAKER_01: They're a little larger and sometimes quite a bit larger.
• 9:30
  SPEAKER_01: Um, but they're also more of a rifle shot in terms of finding the right buyer.
• 9:36
  SPEAKER_01: They might target a particular segment of an industry, they might target even specific companies or people that uh businesses that business owners already know, so that they can work a specific deal with a specific buyer.
• 9:52
  SPEAKER_01: Um it tends to be a little less of a shotgun and a little more customized to the individual client.
• 10:00
  SPEAKER_00: It tends to be fairly expensive too.
• 10:02
  SPEAKER_00: We're talking about investment bankers and that sort of thing.
• 10:04
  SPEAKER_00: And you know, in in fairness, when somebody is ready to go get that market made, if I can say it like that, yeah, then absolutely having a an investment banker makes a ton of sense and you can make up that fee in in the deal price and the deal terms.
• 10:21
  SPEAKER_00: Um, and so I yeah, hopefully nothing I ever say uh sounds negative against really either brokers or investment bankers, because that there's that's a hugely important role when it's time for that.
• 10:37
  SPEAKER_01: Well, there's a couple things there, and and one of them is about the actual exit and succession planning piece.
• 10:46
  SPEAKER_01: Brokers don't necessarily want to make a better business before you get to the point where you offer it for sale to anybody else.
• 10:56
  SPEAKER_01: They want a transaction.
• 10:58
  SPEAKER_01: And again, I'm not trying to diminish it like you.
• 11:01
  SPEAKER_01: I'm not trying to diminish that to anything less than it is.
• 11:03
  SPEAKER_01: It's an important uh and valuable service for lots of business owners.
• 11:09
  SPEAKER_01: But exit and succession planning as a component of the MA process is all about maximizing value, it's all about taking what you have and deciding, all right, let's do a SWOT analysis on the business.
• 11:23
  SPEAKER_01: Let's figure out if the time horizon allows, what can be done with this?
• 11:29
  SPEAKER_01: Is there are there places where we can improve the scalability?
• 11:34
  SPEAKER_01: Are there places where we can improve the efficiency?
• 11:36
  SPEAKER_01: Are there places where we can reduce cost?
• 11:38
  SPEAKER_01: Can we create better agreements with clients?
• 11:41
  SPEAKER_01: Can we create better market share?
• 11:43
  SPEAKER_01: Are there skeletons in the closet in the accounting world, for example, that we need to clean up?
• 11:49
  SPEAKER_01: Um, and and a bunch of other reasons to actually lift up the hood of that business and say, let's make it ideal.
• 11:57
  SPEAKER_01: And if we did that, that does a couple things.
• 12:01
  SPEAKER_01: First of all, that makes the business more attractive to a buyer because there's less to fix.
• 12:06
  SPEAKER_01: Probably makes it more valuable to a buyer as well, because now all of a sudden the business is producing what it should in terms of profitability, controlling expenses, controlling gross margins, and it's the master of its destiny.
• 12:21
  SPEAKER_01: If you've got that to sell versus a business that has things that need to be fixed or could be optimized, you've got a more valuable business.
• 12:30
  SPEAKER_01: So the role of exit and succession ahead of a transaction is really aimed at saying, what could it be worth?
• 12:38
  SPEAKER_01: And if we have enough time, let's do it.
• 12:43
  SPEAKER_00: Right.
• 12:44
  SPEAKER_00: And I think that's a really, really interesting perspective and really good point.
• 12:48
  SPEAKER_00: I mean, when I encounter a business that I'm valuing, sometimes they're a great match for our exit builder process, which basically is what you're talking about.
• 12:59
  SPEAKER_00: Some another thing that you had just said was maximize value.
• 13:05
  SPEAKER_00: Thank you for referencing the podcast title.
• 13:07
  SPEAKER_00: Um the the but value means different things to different people, which I think is a huge component that that you and I have have talked about many times before.
• 13:18
  SPEAKER_01: Yeah.
• 13:19
  SPEAKER_00: Obviously, the the business does a thing, and they have there's the metrics that you're talking about.
• 13:25
  SPEAKER_00: Let's make sure as much of that cash flow goes to the bottom line and and and it and really enriches the the owners.
• 13:33
  SPEAKER_00: And in your process, and mine too, you uncover the why for an exit or the why for even the business existing.
• 13:42
  SPEAKER_00: And so this can dictate the path that succession and exit take.
• 13:48
  SPEAKER_00: So, do you have a war story that that you love to share about this?
• 13:52
  SPEAKER_01: Yeah, it's very interesting that you bring it up.
• 13:54
  SPEAKER_01: And I know that we've talked about this before.
• 13:57
  SPEAKER_01: The the why to me is is the place to start with any potential client.
• 14:02
  SPEAKER_01: Um, because knowing that someone is ready to retire or or just ready to move on to the next thing in their life um is is part of the task.
• 14:13
  SPEAKER_01: But what are the other pieces of the puzzle in your life that are outside of the business but important to it that you need to consider?
• 14:21
  SPEAKER_01: So um, I'll give you an example of understanding the why in a client.
• 14:26
  SPEAKER_01: I had a manufacturing client uh in Central California that was having trouble getting along with each other.
• 14:33
  SPEAKER_01: Shocking as that might seem.
• 14:36
  SPEAKER_01: Family, third generation was running the business, brother and sister not getting along about what it was that they wanted to do in the business.
• 14:46
  SPEAKER_01: Second generation was retired, but still owned the business and controlled the stock.
• 14:52
  SPEAKER_01: So I get a call from the attorney of the second generation that says she's worried they're gonna blow up the business that her kids aren't getting along.
• 15:01
  SPEAKER_01: Now our kids are in their 50s.
• 15:04
  SPEAKER_01: Oh, these are adult children, professionals trying to do their best, but not seeing eye to eye.
• 15:11
  SPEAKER_01: Matriarch in the second generation says to me, Adam, all I care about is getting people to the Thanksgiving table.
• 15:17
  SPEAKER_01: I don't want my family blown up over the business.
• 15:20
  SPEAKER_01: As much as we have created this wonderful thing that we had always intended just to pass on because it makes money for us, they're not able to do it.
• 15:31
  SPEAKER_01: And I'm afraid that we might have to sell just to keep the family together.
• 15:37
  SPEAKER_01: Now we're not talking about a transaction anymore.
• 15:40
  SPEAKER_01: Now we're talking about what's the real motivation that an ownership group has for exiting that business.
• 15:49
  SPEAKER_01: In their case, it was to keep the family together.
• 15:52
  SPEAKER_01: Um we jumped in, we did try reconciliation, we tried to go through all of the consulting work that we could to get them on the same page.
• 16:02
  SPEAKER_01: Clear to us that we couldn't have done it, clear to them that they didn't want to do it.
• 16:07
  SPEAKER_01: We ended up selling the business.
• 16:09
  SPEAKER_01: We kept the real estate, it provided an income stream, but it saved the relationships and it allowed the friction that existed in that third generation between each other to go away.
• 16:21
  SPEAKER_01: And now what was left was, well, let's just be a family again.
• 16:27
  SPEAKER_01: Now, I didn't know any of that was going to happen when I stepped in, but it was because I asked the question that you asked me, which is, what's the motivation here?
• 16:37
  SPEAKER_01: So with every client, that was a powerful lesson for me to say, okay, why is it that you would like to exit the business?
• 16:43
  SPEAKER_01: For some people, it's money.
• 16:45
  SPEAKER_01: For some people, it's I'd like a different lifestyle.
• 16:49
  SPEAKER_01: I'd like to be able to spend time doing other things.
• 16:52
  SPEAKER_01: I want to travel, I want to spend time with my grandkids or my kids.
• 16:56
  SPEAKER_01: Um, I've got other interests in life and I'd like to pursue them.
• 17:01
  SPEAKER_01: Um, well, let me flip that coin over before we go on to the next thing.
• 17:05
  SPEAKER_01: If the answer to the why isn't good, I really get scared.
• 17:10
  SPEAKER_01: I get nervous.
• 17:12
  SPEAKER_01: If they haven't thought, if they haven't thought through what life looks like after they sell the business, if they don't know what they're going to do with their day, if they don't have a clear plan, that's a challenging place to be.
• 17:29
  SPEAKER_01: It leads to all kinds of challenges in their lives.
• 17:32
  SPEAKER_01: And I've seen it happen with clients that are unprepared for themselves not to have this wonderful toy and this reason for getting up in the morning, this re their identity to the world.
• 17:46
  SPEAKER_01: If if the answers to the why aren't there and they're not well thought out, that's a real challenge for a business because it's a sign that they may not want to do it at all.
• 17:56
  SPEAKER_01: Or they may not want to do it yet.
• 18:00
  SPEAKER_00: And you you've you've probably seen this as much or more than than I have, where you have an owner or maybe even several owners with that perspective, and it's really hidden deep down in the back of their minds.
• 18:14
  unknown: Oh, yeah.
• 18:15
  SPEAKER_00: So subconsciously, at some point, they sabotage the deal because they don't actually want to face the fact that they're going to not have to your point to not have the business.
• 18:29
  SPEAKER_00: They're kind of staring off into that void of retirement.
• 18:32
  SPEAKER_00: And it and when you don't have a plan, that can absolutely be scary.
• 18:38
  SPEAKER_00: They don't want to work so much, but also they don't not want to work so much.
• 18:42
  SPEAKER_01: Well, and it's like you said, it's very personal.
• 18:46
  SPEAKER_01: You know, sometimes this is about, like I said, it's about identity, it's about ego, it's about their relationship with their spouse, it it's about health, it's about concern for family members.
• 18:59
  SPEAKER_01: I mean, these are all things that have nothing to do with the balance sheet and the income statement.
• 19:03
  SPEAKER_01: As much as I want to dive into the spreadsheet, I'm as I'm as nerdy about financials as anybody, because I have to be.
• 19:10
  SPEAKER_01: This is about what it means to them inside.
• 19:13
  SPEAKER_01: And if if those things aren't settled or they aren't settled by the transaction itself, then you've got some places where I think it pays to invest in in the time to talk those things through.
• 19:27
  SPEAKER_01: And that to me truly is about are you really prepared to sell a business?
• 19:33
  SPEAKER_00: Right.
• 19:33
  SPEAKER_00: And so so you obviously you ask questions of the owner in order to make sure that you you understand where they're coming from.
• 19:41
  SPEAKER_00: Yep.
• 19:41
  SPEAKER_00: So let me flip that around though.
• 19:43
  SPEAKER_00: When you have a new client, what questions do they ask you?
• 19:50
  SPEAKER_01: Um, after how much is it worth?
• 19:54
  SPEAKER_01: How much can I get for it?
• 19:57
  SPEAKER_01: What do I what do I put in my pocket after we pay the tax man?
• 20:01
  SPEAKER_01: All questions that you know and love.
• 20:04
  SPEAKER_01: Um then it's really about what does structure mean?
• 20:10
  SPEAKER_01: Because I'll tell them it's not just price, it's about deal structure.
• 20:17
  SPEAKER_01: And deal structure is do you get paid up front all at once?
• 20:22
  SPEAKER_01: Everyone would love that to happen.
• 20:24
  SPEAKER_01: Not always the case.
• 20:26
  SPEAKER_01: In fact, it's the least common way for buyers to buy businesses.
• 20:30
  SPEAKER_01: Do you get paid in installments?
• 20:32
  SPEAKER_01: Is the owner being asked to carry a note?
• 20:35
  SPEAKER_01: Do they get paid based on some performance criteria in the business?
• 20:39
  SPEAKER_01: Are they being asked to stay and work?
• 20:42
  SPEAKER_01: Is there some transition period of time?
• 20:44
  SPEAKER_01: These are all pieces of the uh of the unknown for a seller that they'll come to me and say, What about this?
• 20:54
  SPEAKER_01: I don't want to work more than three months.
• 20:56
  SPEAKER_01: Okay, great.
• 20:57
  SPEAKER_01: How long am I gonna have to work?
• 20:58
  SPEAKER_01: Well, we don't know the answer to that question, obviously, until we get into the conversations with specific buyers, but those are very common questions uh for owners to ask.
• 21:10
  SPEAKER_01: Can I bonus my employees?
• 21:12
  SPEAKER_01: Can I take care of the people in my family that I would like to?
• 21:17
  SPEAKER_01: Very common questions.
• 21:19
  SPEAKER_01: Um what if what if I delayed the proceeds?
• 21:23
  SPEAKER_01: Could I reduce my tax bill?
• 21:25
  SPEAKER_01: How would I accept these monies into a retirement account?
• 21:29
  SPEAKER_01: Is that possible?
• 21:30
  SPEAKER_01: Um, what if I only sold half the shares?
• 21:33
  SPEAKER_01: Can I do that?
• 21:34
  SPEAKER_01: What if I don't sell the shares at all and I just sell assets?
• 21:39
  SPEAKER_01: And a lot of other questions in there.
• 21:42
  SPEAKER_01: So it's it sort of leads to another topic that we might want to talk about, which is who's on the team with these business owners to help answer some of these questions?
• 21:52
  SPEAKER_01: Because as the conduit for those questions, I can answer some of them, I can answer many of them, but I can't answer.
• 22:00
  SPEAKER_01: Them all.
• 22:01
  SPEAKER_01: There's valuation questions, there's tax questions, there's wealth advisory questions, there's estate planning questions.
• 22:09
  SPEAKER_01: Those are four that I can think of immediately, where other professionals, other advisors like you and others, are going to be important in that conversation, so that the owner's got enough information to make an intelligent choice.
• 22:24
  SPEAKER_00: Absolutely.
• 22:24
  SPEAKER_00: And they all have to work together.
• 22:26
  SPEAKER_00: So I think that's a a huge point that you're making that you really shouldn't go.
• 22:35
  SPEAKER_00: Certainly, nobody should go it alone.
• 22:37
  SPEAKER_00: And then even as an MA advisor, exit planning advisor, we're not going it alone, or at least that that's that's my my set mode.
• 22:45
  SPEAKER_00: I don't know all of those things.
• 22:47
  SPEAKER_00: I know many like you know many of those things and can talk and talk about them.
• 22:51
  SPEAKER_00: But you know, some of those things I know enough to ask the right question of the right person, which is the important.
• 22:57
  SPEAKER_00: Yeah, exactly.
• 22:58
  SPEAKER_00: So how how long does it take?
• 23:00
  SPEAKER_00: Quote unquote.
• 23:01
  SPEAKER_00: Is that a is that a question?
• 23:02
  SPEAKER_00: I get that question a lot.
• 23:03
  SPEAKER_01: Oh, yeah.
• 23:04
  SPEAKER_00: Or at least, or at least it comes up significantly often where there's this expectation I need to go sell my business today.
• 23:12
  SPEAKER_00: Yeah, but that's not realistic.
• 23:14
  SPEAKER_00: What what's more realistic?
• 23:16
  SPEAKER_01: I'll give you the textbook answer and then I'll give you the real world answer.
• 23:20
  SPEAKER_01: You know, the textbook answer from the community of brokers and even the community of MA folks is if the business is ready to go, all of the planning work, all of the why work, all of the preparation that needs to be done inside a business to be able to stand up to due diligence, the inspection of everything, if all of that is complete, the textbook answers six to nine months to go to market, identify a buyer, hold the best auction you can hold, negotiate the final deal, go through the due diligence, close the transaction.
• 23:57
  SPEAKER_01: The real world is different.
• 23:58
  SPEAKER_01: And the real world is different because if I gave you that six to month, nine month time frame, it's again a transaction ready business that starts that clock.
• 24:11
  SPEAKER_01: And some buyers, in fact, the more well-heeled ones, the financially backed buyers, will say, Well, we can do this in 90 days.
• 24:21
  SPEAKER_01: Don't believe that for a second.
• 24:25
  SPEAKER_01: It generally takes longer because you want to be thoughtful as the seller.
• 24:32
  SPEAKER_01: If you're selling to a buyer that's 10 times your size, they're more sophisticated than you are.
• 24:40
  SPEAKER_01: If you're selling to a buyer that's a hundred times your size, which is certainly the case in a lot of cases when you have a financial buyer, they're way more sophisticated.
• 24:52
  SPEAKER_01: You want to work through the nuance of the transaction prior to even signing a letter of intent.
• 25:00
  SPEAKER_01: And that's where the right advisory team can really help you to negotiate each piece of the deal that matters to the seller.
• 25:10
  SPEAKER_01: So, all that meant to say, time frame can be lengthened as well.
• 25:16
  SPEAKER_01: People change, investment companies change.
• 25:19
  SPEAKER_01: All of a sudden, we're six months down the road, the financials of the selling company are different, better or worse.
• 25:27
  SPEAKER_01: Lots of things can expand that time period.
• 25:30
  SPEAKER_01: And add to that, if you've got preparation work to do, it's longer still.
• 25:35
  SPEAKER_01: So, textbook answer, six to nine months.
• 25:38
  SPEAKER_01: All the preparation work could be one to three years to get it done right.
• 25:43
  SPEAKER_00: That sounds about right to me.
• 25:45
  SPEAKER_00: So let's uh let's just hit it, uh, go into a couple of uh real quick questions and and uh you know wrap wrap the uh I don't know, the technical part, I guess.
• 25:53
  SPEAKER_00: Sure.
• 25:54
  SPEAKER_00: Uh so what's your best exit story in one minute?
• 25:59
  SPEAKER_01: Wow.
• 26:00
  SPEAKER_01: Uh medical practice, year and a half in the works, big financial buyer, huge valuation beyond what seller had expected.
• 26:13
  SPEAKER_01: Deal dies at the last minute for an HR issue.
• 26:16
  SPEAKER_01: Nobody saw the HR issue.
• 26:19
  SPEAKER_00: Wow.
• 26:20
  SPEAKER_00: Wow.
• 26:21
  SPEAKER_00: What do we do?
• 26:22
  SPEAKER_00: But was that a was that a skeleton that that got unearthed, or was that something that happened kind of contemporaneously?
• 26:28
  SPEAKER_01: It happened contemporaneously.
• 26:29
  SPEAKER_01: It was not a skeleton, it was a per it was a the perception of future liability.
• 26:35
  SPEAKER_01: There was no actual liability, it was something they uncovered in the policies and procedures in due diligence that none of us saw.
• 26:44
  SPEAKER_01: That buyer backed out, left us completely flat footed.
• 26:49
  SPEAKER_01: We went in, fixed the issue, which took a little bit of time, but not much.
• 26:54
  SPEAKER_01: Went back to the second best buyer.
• 26:57
  SPEAKER_01: They said we'd love it.
• 27:00
  SPEAKER_01: Took us another six months to close that deal.
• 27:03
  SPEAKER_01: Same valuation.
• 27:06
  SPEAKER_01: A real curveball for all of us.
• 27:08
  SPEAKER_01: But the value of having understood the market of buyers and who was interested and having more than one interested party, where that lesson was learned that day.
• 27:20
  SPEAKER_00: Huge, huge.
• 27:21
  SPEAKER_00: Yeah, you have to make that market.
• 27:22
  SPEAKER_00: Yeah.
• 27:23
  SPEAKER_00: Well, what my next question was going to be, you know, what's the worst or you know, most instructive process?
• 27:28
  SPEAKER_00: I'm gonna take that answer though.
• 27:29
  SPEAKER_00: Yeah, because I think both the best and the worst, uh, in in in one there.
• 27:34
  SPEAKER_00: So let me go to you.
• 27:35
  SPEAKER_00: What what one myth do you wish would just go away about the exiting process?
• 27:41
  SPEAKER_01: Wow.
• 27:47
  SPEAKER_01: It's gonna sound self-serving.
• 27:50
  SPEAKER_01: Um buyers who want to do it themselves don't know what they don't know.
• 27:56
  SPEAKER_01: And they're capable in their mind of running a great business, but the transaction is something they've never done.
• 28:04
  SPEAKER_01: And the myth is I'm better off not paying all the fees to all these people than I am paying those fees.
• 28:12
  SPEAKER_01: I haven't participated in a deal where we didn't earn, we collectively, as advisors, didn't earn our keep by changing the valuation, changing the structure, changing the deal to be more buyer-friendly, more seller-friendly.
• 28:27
  SPEAKER_01: So that's a myth I'd like I'd like to bust.
• 28:31
  SPEAKER_01: We end up having those conversations one at a time.
• 28:36
  SPEAKER_00: That completely makes sense.
• 28:38
  SPEAKER_00: And it's I I truly don't believe it's uh it's self-serving.
• 28:42
  SPEAKER_00: We have something valuable to provide, so we get paid for it.
• 28:45
  SPEAKER_00: That's right.
• 28:46
  SPEAKER_00: The the the price that you get isn't always the price that you realize.
• 28:52
  unknown: Right.
• 28:52
  SPEAKER_00: Yeah, at the end of the deal, the deal's not done until you actually get that last dollar.
• 28:56
  SPEAKER_00: Plus, because of the structuring, which yeah is at least half of the half of the deal, yeah.
• 29:05
  SPEAKER_00: The it it places the risk in in different hands, uh, potentially.
• 29:10
  SPEAKER_00: So you get you get all that cash up front.
• 29:12
  SPEAKER_00: Well, the buyer's now taking on basically all the risk, basically.
• 29:17
  SPEAKER_00: And there are other structures that put the risk right back on the seller, and that's uh that's well, that's great for the buyer in in those cases, right?
• 29:25
  SPEAKER_00: So, Adam, this has been really cool.
• 29:28
  SPEAKER_00: Uh, but I want to know a little bit more about you, or at least I want the audience to know a little bit more about you, uh, as as well as me.
• 29:35
  SPEAKER_00: Adam, tell me something that's not on your LinkedIn or website profile.
• 29:42
  SPEAKER_01: It's a good question.
• 29:43
  SPEAKER_01: You know, we all try and use these platforms as a way to um shout from the rooftops as as professionally as you can about you know your accomplishments and the other things, but there there isn't a whole lot about why I do this.
• 29:59
  SPEAKER_01: And there's there's a little a little nod to that on my website, but um I do this because I want to change the trajectory of people's lives in a positive way, and it's it's meaningful to me to be able to move the needle in someone's own life because of what we create in terms of value for the business.
• 30:26
  SPEAKER_01: And whether we do that and the business just gets more profitable and easier to run and funner, and that's a word, or we do it because it changes the valuation of the business in the mind's eye of the buyer, and that changes the lifestyle and trajectory of a family for maybe generations if we do it right and it's big enough.
• 30:47
  SPEAKER_01: That to me is a really wonderful way to make a living.
• 30:51
  SPEAKER_01: Um, creating the relationships with these families and these ownership groups over all these years, um, they've become friends, and that's a big reason why I do what I do.
• 31:02
  SPEAKER_01: Uh, it isn't really about making money.
• 31:04
  SPEAKER_01: Money comes with it if you're good at it, but it's about changing people's lives for the better.
• 31:09
  SPEAKER_01: And that's that's a really incredible, uh, rewarding place to spend my time.
• 31:15
  SPEAKER_00: Where does that come from for you?
• 31:17
  SPEAKER_00: Arvine, I I don't know.
• 31:18
  SPEAKER_00: This is a little bit of you know psychoanalysis, you know, laying on the couch kind of kind of stuff.
• 31:22
  SPEAKER_00: But is there is there something that you know in your in your history, in your childhood or whatever that has made this a goal for you or a a guiding light for you?
• 31:34
  SPEAKER_01: It's a good question.
• 31:35
  SPEAKER_01: I don't know that I've ever ever tried to figure out why I approach the world that way.
• 31:40
  SPEAKER_01: Um, I I get a great deal of satisfaction out of having those around me live better because of our interaction.
• 31:50
  SPEAKER_01: And whether that's something simple, like I get to make them laugh, or it's something more complicated, like we're gonna move the needle in their wealth.
• 32:00
  SPEAKER_01: Um, for whatever reasons, those things have been powerful drivers for me.
• 32:06
  SPEAKER_01: Um, my parents were very influential in my life and still are.
• 32:10
  SPEAKER_01: Um and and for them, it was do the right thing.
• 32:16
  SPEAKER_01: And the right thing to me was if I'm gonna create something for someone professionally, what's in it for them?
• 32:25
  SPEAKER_01: Because for me, that's about value, that's about changing their life for the better.
• 32:30
  SPEAKER_01: And yeah, I don't know, those have been part of me for a long time.
• 32:33
  SPEAKER_00: That's awesome.
• 32:34
  SPEAKER_00: So maximizing not just value, but values.
• 32:38
  SPEAKER_00: Love that.
• 32:39
  SPEAKER_01: Well, yeah, why do it otherwise?
• 32:42
  SPEAKER_01: There's lots of things I could do just to make money, but that's not why I do this.
• 32:46
  SPEAKER_00: Probably, probably things that'll make you even more money, but I I totally I we're totally on the same page.
• 32:53
  SPEAKER_00: Yeah, the so uh now just a little bit about you personally.
• 33:00
  SPEAKER_00: We're always trying to improve ourselves.
• 33:03
  SPEAKER_00: Uh what what are you reading these days?
• 33:07
  SPEAKER_01: Um, I do lots of biography stuff, uh, nonfiction, lots of business books.
• 33:14
  SPEAKER_01: Um you might you might have already figured out that Simon Sinek's book on why was a big one for me.
• 33:23
  SPEAKER_01: Um, but I also go back to something really simple.
• 33:25
  SPEAKER_01: I found a book that my mother gave me a long time ago.
• 33:29
  SPEAKER_01: My mother was an English teacher, gave me a book called uh The Elements of Style by Strunk and White.
• 33:35
  SPEAKER_01: Strunk and White, absolutely.
• 33:37
  SPEAKER_01: It was about writing and writing clearly and writing concisely.
• 33:42
  SPEAKER_01: So I've spent a lot of time, as I imagine you do and others in our profession, trying to clearly communicate ideas.
• 33:51
  SPEAKER_01: And I was not a good writer as a young man, and I had to learn that skill.
• 33:57
  SPEAKER_01: So anything that I can do that helps me to communicate more clearly, more concisely, more persuasively obviously helps my clients now.
• 34:07
  SPEAKER_01: Um, so I spend a fair amount of time with writers.
• 34:10
  SPEAKER_01: Uh, Peggy Noonan was a speechwriter, for example, uh, and wrote a really, really wonderful book uh that I read recently about communicating clearly.
• 34:19
  SPEAKER_01: Um, so anyway, those are some stuff.
• 34:22
  SPEAKER_01: I'll get into physics and science and a few other nerdy sort of things that have nothing to do with my profession.
• 34:28
  SPEAKER_01: Um, and those are always fun too.
• 34:31
  SPEAKER_00: Awesome.
• 34:32
  SPEAKER_00: That I am uh very surprised and very interested in the fact that you chose elements of style as is one of the one of the things that you keep coming back to.
• 34:41
  SPEAKER_00: I I love it.
• 34:42
  SPEAKER_00: That's that's great.
• 34:43
  SPEAKER_00: Uh I like that you know it.
• 34:45
  SPEAKER_00: I have it on well, I don't think I have it behind me, but it's on on one of my shelves somewhere.
• 34:49
  SPEAKER_00: Yep, yep.
• 34:50
  SPEAKER_00: Uh so Adam, where can people find you if you want to be found?
• 34:55
  SPEAKER_01: Uh Bsgconsulting.com is the website.
• 34:59
  SPEAKER_01: My LinkedIn profile using my name.
• 35:01
  SPEAKER_01: Uh those are the two best places.
• 35:04
  SPEAKER_01: All right, great.
• 35:06
  SPEAKER_00: Well, Adam, Mr.
• 35:08
  SPEAKER_00: Cipriano, we've loved having you on the show.
• 35:11
  SPEAKER_00: This has been really instructive, and I think people really can extract a lot of value out of this.
• 35:16
  SPEAKER_00: Uh, thank you for being here.
• 35:18
  SPEAKER_01: It's been a real pleasure, man.
• 35:19
  SPEAKER_01: I'm so glad that you asked.
• 35:20
  SPEAKER_01: Thank you.
• 35:21
  SPEAKER_00: Absolutely.
• 35:22
  SPEAKER_00: All right, listeners, thank you for tuning in.
• 35:24
  SPEAKER_00: This has been an episode of Max Value.
• 35:27
  SPEAKER_00: Find us on YouTube, Apple Podcasts, and other streaming services.
• 35:30
  SPEAKER_00: Please like, subscribe, follow.
• 35:32
  SPEAKER_00: See you next time.
• 35:33
  SPEAKER_00: Listeners, thank you for tuning in.
• 35:35
  SPEAKER_00: This has been an episode of Max Value.
• 35:37
  SPEAKER_00: Find us on YouTube, Apple Podcasts, and other streaming services.
• 35:41
  SPEAKER_00: Please like, subscribe, and follow.
• 35:43
  SPEAKER_00: And we'll see you for the next show.