business, company, people, andrew, selling, troy, buyer, buy, talking, business owners, summer, run, awesome, deal, sale, owner, question, clients, helping, private equity, Business broker, Business value builder, M&A consultant.
Damon Pistulka, Jill Valdez, Andrew Deutsch, Grant Mathis, Dennis Bolger, Troy Neihaus, Andrew Cross, Majid Zafer
Damon Pistulka 00:00
Get going live here on LinkedIn and then we’ll All right everyone, Welcome once again to the eggs your way Business Roundtable. We are going to be talking today about the keys to building a business you can sell or succeed. I know this is a this is a subject that many people might think it’s a snoozer, something that we work on every day though, and and I really I get excited by it, because it’s fun, fun to be able to do and fun to be able to help great help people create businesses that they actually can do something with when they are ready.
So what we’re going to do today, we, we figured that this would be a slight crowd today, just because of the fact that we have the holiday week. And I hope there’s some people that are enjoying that. But what we’re going to do today, too, as we usually do, we’re going to let people come up and introduce themselves. And depending on how many people we have, we might keep keep a fair amount of people on the stage to participate in the discussion and go from there.
But Andrew, let’s go ahead and start, start bringing people up. And I was gonna say you’re on LinkedIn watching us on LinkedIn there. Let us know where you’re watching from. I’m looking over here to this other screen in mind. Let us know where you’re watching from if you’ve got any questions about the topic, once we get into it, we can do that. We’re gonna start out like we always do let people introduce themselves. So here we go. We got Jill, how’s Jill doing today?
Jill Valdez 01:41
Jill’s doing good. It’s gonna be 10 degrees cooler than it was yesterday.
Andrew Cross 01:47
your desk going up and down? I heard Yeah, I’ve been doing that for a while.
Jill Valdez 02:00
Very cool. My, a guy that I work with, he actually has one of those walking treadmills at his desk as a stand up desk. And so that’s what he does. He walks all day long.
Andrew Cross 02:12
I have a bouncy ball to sit on. Yeah, most gym balls anyways, but anyways, it’s done a lot for for my back.
Jill Valdez 02:20
Yeah, I have a great. Yeah, I use a kneeling chair for my back. So yeah, just to take that pressure off the lower back. Right. Damon, I think we’re getting a topic. I think we need to talk about it in the workplace, especially now with people going back to the office, right? Yeah.
Damon Pistulka 02:39
Yeah. Yeah, that could be a topic. I mean, because it is, it is. You got to think about this last year, people have sat probably a lot more than they normally did. Prior to that, because you think of the office environment, you get up and walk around a little bit sometimes and those kind of things. Whereas at home, you may not much at all.
Jill Valdez 02:58
Sorry, they got used to being able to, you know, be out walking around and you know, having, like, I got used to that I can I can have phone calls while walking around. And you know, I can be walking my neighborhood on the phone. Yeah.
Damon Pistulka 03:14
Yeah. Tell us how you’re helping
Andrew Cross 03:18
the liquor store yesterday, but buy and wine.
Damon Pistulka 03:25
multitasking. Week. Yeah, there you go.
Jill Valdez 03:36
Awesome. So David, I, I love working I work with small businesses, those small business service providers, and I work with them to develop their team, from what I say is average to amazing, which is gonna bring more certainty about the future for that company, right. And then I’m able to do without any service disruption.
Damon Pistulka 03:59
Cool. So when you talk about that, what what’s a what’s a typical business that you’re helping?
Jill Valdez 04:07
Um, there is no typical business as far as industry. I’ve worked with tons of different industries. I worked with a dentist, I worked with a meat processing company, insurance, digital media. So there’s lots of different industries, it’s really about the size of the company, I, I’m super passionate about small businesses, they are doing such great work in their, you know, they want to have access to the same tools that the bigger companies have access to. They just can’t simply can’t afford the kinds of things that Amazon Nike, you know, yeah, Mart, some of those places that they can’t afford. So, I love my, my point is 40 or less employees.
Damon Pistulka 04:53
Okay, that’s good. That’s good. It’s good to understand that that you can, you’re talking about employee count and Because of the way you’re helping people, it’s it’s relevant. Yeah,
Jill Valdez 05:02
really relevant because the principles are, are typically the same. Obviously, there’s nuances of each different service because they have some slightly different processes. But as far as how teams function how, how managers manage people, those are, you know, worldwide those those don’t change at all.
Damon Pistulka 05:25
Yep. Yep. Awesome. Awesome. Yeah, it’s that. Well, thanks so much for being here today. Jill
Andrew Cross 05:32
did a question though.
Damon Pistulka 05:34
Yes, we do. It is. It is. easy question today. It’s an easy question today, because what are you most looking forward to this summer?
Jill Valdez 05:47
Oh, I’m so excited about this summer. You know, when we moved to Portland, we moved here and like, within three days, everything shut down. Because of COVID. So we have not experienced what really we thought life was gonna be like up here. And now that things are starting to open up more, we’re super excited about all the adventures that we’re going to be going on and experiencing. We’re going to go to Crater Lake, we’re gonna do some fishing, we’re gonna just we just have a lot of adventures on the calendar. Awesome. Super excited about that.
Damon Pistulka 06:20
Crater Lake is beautiful. It’s been out five or six years since I’ve been up there. But I was up there on my motorcycle. And that was that was awesome sick.
Jill Valdez 06:28
On Monday, we have a 78 Corvette. And so we took that out on Monday. And we did a drive down the Dalles and then around Mount Hood. Oh, came back up through like Sandy and a cicada.
Andrew Cross 06:45
For you, then Portland. Yeah, that’s great. Despite what they say there’s a lot of it’s a great talent, a lot of great things to see there.
Jill Valdez 06:53
There really is, it’s, it’s been sad to see some of the decline in the last year because my day job has me out during the day. So I’m traveling quite a lot. So I’ve seen a lot of change. And it makes me kind of, you know, it’s sad, but, but I also think that as we are starting to open back up that people are going to start coming out and saying, you know, let’s make this a great place.
Again, it was a study that I read, for when I was working in school, and it was about the work that New York City did to to combat crime. And what they did is like, the biggest thing is they would eliminate graffiti. So every night, they would go in on the subways and they would you know, clean up all the graffiti, they clean everything up, they cleaned up their city. And they found the study found that as they did that, and they were consistent about that, that the crime rate actually went down. And I think that we’re gonna see that in Portland.
Damon Pistulka 07:53
Yeah, yeah. Yeah. Because, well, in your day jail. Awesome. Seeing again, professor. I know you’re enjoying the weather. I saw that you went out and did a wicked hike this last weekend. And again, yeah, yeah,
I did. I took advantage of it. And now I’m actually in California. So it’s in the weather’s really nice as well. Getting it in a good I literally, I didn’t need I didn’t need my co op yesterday from SeaTac. So it was really nice.
Damon Pistulka 08:29
Yeah. Yeah. Awesome. Well, Pete, tell us about yourself. And then then we’ll, we’ll get the question of the day goes on, for
sure. Sure. Well, you guys, most of you know me. In addition to being the popular hosts are not popular host. I’m the host of the popular, winning a business and life podcast. I’m the president of office plants by everything grows. And we help companies reduce stress, improve productivity, and receive outstanding ROI through the methodical design and placement of lush living plants and work environments. Yes,
Damon Pistulka 09:06
sorry. You’re working in California. Are you there? I am.
I actually have. I have a meeting. I’m going to be getting to here shortly. So it’s, it’s good. Normally, I would wear my, my my company stuff, but it’s too warm. So. So I’m just doing the normal stuff. And you know, for your question, I would say that I’m actually living it right now. Because it’s been a year and a half since I’ve had a chance to, to visit down here. And so a lot of family and friends that I haven’t live. I’m looking forward to being able to do that.
Damon Pistulka 09:44
Yeah. Yeah. Awesome. Awesome luck. Good luck on your meetings and have a wonderful week beat YouTube. Talk to you later, guys. All right, bye. Well, AJ, how are you today? Great. Oh, God, you guys. Wonderful. Wonderful. So tell us about yourself. aj
aj so like us, I work as a business development manager in an IT recruiter in a staffing firm IT staffing from. So I basically helped my clients to fulfill their hiring requirements mostly into the IT sector like developers, DevOps, Salesforce, DBS, and all kinds of stuff. Okay, so I basically the good throughout the nation for the US, but I’m from India.
Damon Pistulka 10:29
Yep. Awesome. They are recruiting for IT professionals to support us businesses. In India. Certainly. Awesome. And then, so, what are you looking forward to this summer? I know you guys are you’re still locked down pretty hard in India.
Exactly. Exactly. So just summarize finished. Okay. So we are enjoying the rainy season. So I just want to get this from this. COVID.
Damon Pistulka 10:58
Yeah, yeah. Yeah. So you guys are going into the rainy season now?
Exactly. So a couple of days from Jefferson. servantes is for us.
Damon Pistulka 11:13
All right. Well, thanks for being here. Day. J. Great to see you. Andrew Deutsch How are you doing today, my friend? I’m doing well. How are you? Good. Good. So how does fangled tech help people?
Andrew Deutsch 11:29
were the guys at the drive thru they give you that extra ketchup packet You didn’t even ask for?
Damon Pistulka 11:36
Ketchup? It would be good. Yeah, we
Andrew Deutsch 11:42
we we answer a question that people ask all the time, how can I get a C level executive marketing strategist on my team, when I can’t afford one and don’t need one five days a week. And we do that by really digging in becoming part of the companies that are our clients and as part of their executive team and help them actually build their core strategy before they go out and get all those tactical tools that bring it to market. We help you convert every touch into a voracious advocate for your brand.
Damon Pistulka 12:15
Nice good stuff. Well, what are you looking forward to this summer
Andrew Deutsch 12:22
letting the hostages out of my bait? I’m sorry um this summer getting my kayak back in the water and having some fun get out in the sun and enjoy the enjoy the wildlife? Yeah.
Damon Pistulka 12:36
So what were are there some rivers that you go on there you on? Oh,
Andrew Deutsch 12:41
yeah, you can hear it you can get there’s a bunch of natural rivers. You can also go down to the downtown Cleveland and pop into the canal and see the city from the water with the the Cuyahoga River going through there out on Lake Erie. There’s lots of places to go around here.
Damon Pistulka 12:56
Yeah, yeah. Good stuff. That’s it. Yep. Yep. All right. Good stuff. Good stuff. I want to do more of that. I was just looking at looking at the kayaks the other day. I think it’d be fun.
Andrew Deutsch 13:09
It’s a lot of fun. And it’s one of those things you don’t even have to be good at it to have fun.
Damon Pistulka 13:13
Yeah, yeah. See, that’s that’s kind of I need that stuff.
Andrew Deutsch 13:16
It wasn’t that wasn’t a you know, I wasn’t talking about you in particular, but you know.
Damon Pistulka 13:23
Regular, that’s good. Nice. That’s easy on the knees. Yeah.
Andrew Deutsch 13:29
I love canoeing. But usually with canoeing, you end up on one side of the canoe most of the time. And you you walk off cricket. Yeah. So you’re doing both sides.
Damon Pistulka 13:38
Yeah. Good stuff. Well, thanks, Andrew. And I’m sure we’re gonna have you up here a little bit later when we start talking about this subject, because I know you’ve helped companies in diligence on on buying businesses before so sure, that’d be good to see at das Bolger, how are we today?
Dennis Bolger 13:57
we be doing good. How are you all? Great, man. It’s a little late getting in. But we’re, we’re, we’re up and running. What we do is we are we help bring a less cost risk management solution to businesses and people’s lives. And so if you’ve got a risk question, we’re here to help. If you’ve got a situation where you think you’ve got a risk, you know, we’re here to, to answer that question and help with it. And and then we can actually operate now in all the lower 48 states. So we’re here to help all the way around. And that makes it even more fun. So working with somebody in Chicago land right now. Are Indiana. Where are they?
They’re in the Indiana. So lots lots of things we can do all over the United States, including right here and Pacific Northwest. And what am I looking forward to the summer? I want to see the grandkids actually play on a place that that we’re setting up in the side yard of our house. And we’re last last weekend, we moved about 10 yards of dirt to level that area out. And I’m feeling a little of that now. Yeah, as is Jr. But you don’t have us what it is. And then we want to get out in the trailer more often. So there you go.
Damon Pistulka 15:41
Yeah, good things and good things. Great to see you, Dennis. Good to be seen. Have a wonderful day. Thank you. Great grant. How are you today?
Grant Mathis 15:52
I’m doing well. Thank you for asking. And I’m glad to be here. All right,
Damon Pistulka 15:56
great. So tell us a little bit about your company and what you’re doing?
Grant Mathis 16:03
Well, let me come in at this time a little differently. We’re, we’re obsessed with healthy aging. It’s a it’s a personal journey to be sure. But why that’s important is that I used to play a lot of competitive tennis, a lot of sun damage, we know it’s cumulative. And so what I’ve done is I cover up when I go out in the sun and I supplement you know, d3, I’m most Americans by the way are chronically depleted in in d3.
So we know we can eat things that are healthier for us. So Healthy Aging is in supplementing can reduce some of the the stresses on what, where I’m coming from is is that a sustainable supplementing is is for daily use, we don’t want to toxic load. We don’t want to be destroying somebody else’s ecosystem just because we can’t see it. And I think there’s a global stewardship that we need to be sharing.
And that’s where that ties in with our hospitality line. Because packaging needs to be accounted for at the end of its life. It and so we’re shooting for landfill degradability. That’s what we’re doing is we’re trying to address those, those three points of sustainability and toxic loading sort of thing. So grant, I just take a sip out of a is that one of your products? No, no, it’s just a water bottle from that class. You know. I think it was Andrew that noted that I was it looked like I was drinking vodka.
Andrew Cross 17:48
That was last weekend.
Damon Pistulka 17:52
Yeah. So what are you looking forward to most this summer grant? Getting this bloody hotel amenity
Grant Mathis 17:58
business launched and into trials.
Damon Pistulka 18:03
Good. Good. Good. Yeah. Yeah. It’ll be fun for you for sure. Yeah. And then now that that, you know, resorts and everything are really starting to get busy. From what we see. Anyway. It’s I don’t know if the hotels are Yeah, but I know the resorts certainly are. Maybe they’re coming back. Yeah. Yeah. It’s good stuff. Good stuff. Awesome. See, Grant, how awesome rest of your week. So now first of all, I would call on you my heat last year. How do I properly pronounce your name?
Majid Zafer 18:35
Hey, man, you know, with a name like magic if you come close.
Damon Pistulka 18:41
But I was saying he last week I apologize. But you know, what was the last name like Pistulka? I pretty much kind of just whatever, you know,
Majid Zafer 18:51
I don’t even try.
Damon Pistulka 18:54
Alright, magic. awesome to see it today.
Majid Zafer 18:56
Tell us how you helping people you were on here last week did an awesome job talking about IoT, man you in played and it was great. Thank you. It’s good to see some familiar faces love this format. And I’ll be back here more often. But so what we do for organizations is basically give them insight into their businesses to be able to make decisions with you know, that’s really where organizations get stuck in all the bureaucracy, right where so being able to help them make data driven decisions.
And the way we do that is by making their building smart. Basically what we do is add intelligence into their lighting, which covers every square inch of the facility. So anything that they want to measure or monitor is at their fingertips. And so we basically take a building, which has one function and then make that a multifunction building, by have the building actually reach out to the organization. Say, Hey, this is this is what’s happening with me, you know, fix me. Right so or get ahead of, of issues that might be coming up. It’s more predictive than, you know, reactive. So it’s, it’s something that’s really exciting.
We’re working with mostly larger entities right now, by this year, we’re focusing more on the mid market. So we’re looking for both people who are in that mid market space, but might not even have the capital dollars or that, that, that are frozen right now for most companies to make decisions with because we have a whole suite of financial solutions to help them do this project with no money out of pocket with no money out of pocket, so or against their cap back. So we’re, we’re excited about it.
And then for, for your question, what we’re doing this summer. I just moved my parents out here to Vegas. So super excited for that. Because now my wife and I can actually do stuff. Yeah. So yes. And then, you know, we’re, we’ve been, we’ve been traveling quite a bit this book, we’ve been finding boondocking spots around in Arizona, actually, Vegas. I you know, they’re just so much natural beauty around here. So we’re super excited to explore it. We just were just moved to Vegas about 18 months ago.
Damon Pistulka 21:27
Nice. Nice. Awesome. Well, it’d be Yeah, 18 months ago, you’re there just enough to experience a little bit and then everything went?
Majid Zafer 21:34
Yeah, we were super excited. We came and then they shut to shut everything down. Right. Yeah. Well, if we were to be stuck, but in Vegas and in Chicago is so
Damon Pistulka 21:45
cool. Yes. The weather’s a little bit better. Awesome. Awesome. Magic. Thanks. Great. Great to see you today. So Troy, I gotta say it looks plush around you right now. You’re outside at your house? Because
Troy Neihaus 21:59
I am. I’m outside. It’s a bit of a different day than I’ve been working outside all day. Every day this week so far, cuz the weather’s been fantastic. Yeah, it’s a little bit overcast. But I see that it’s supposed to burn off. So that’s Yeah,
Damon Pistulka 22:13
it is. It is. It’s just been just magical. last few days up here hazmat. Oh, man.
Troy Neihaus 22:19
It’s this is. So you talk. I can answer the question first. You know, the, I want my summer has to be spending outside, right. I mean, we’ve got so many beautiful things in northwest we typically don’t even travel in the summer because it’s so beautiful here. And so, you know, my goal this summer is to really just get outside and enjoy the outdoors as much as possible. Whether it’s taking some hikes. You jump jumping in the beautiful waters we have all around these islands and stuff. So
Damon Pistulka 22:49
yeah, awesome. Awesome. Oh, great. Seeing you this morning, Troy, tell us how you’re helping people.
Troy Neihaus 22:56
Well, most of you know who we are. I work at Alliance Bernstein. And specifically on the private wealth side. We’re a global investment research and management firm. And as an advisor with Bernstein, my job is to make money meaningful for our clients. They know they’re going to be okay financially. But one of the biggest reasons they hire us is for our advice and our assistants, to help guide them through the complex issues that come with having significant amounts of wealth.
So people can think of us as essentially a client’s family office. But the only cost to them is the investment management that we do. I focus my practice on working with business owners. And so especially, my goal is to meet them early see where we can add value, there’s a number of ways. I’m a big believer in karma. And I don’t want to be that advisor who reaches out to an owner, once they’ve sold their company, or if they’re thinking about taking their company public. I rather you know, add value ahead of time and have a relationship with them. So, you know, that’s kind of the position I’m in.
One of the main reasons we get involved early with these owners. Well advance of some kind of an exit or sale is that we’ve created the system that you’re aware of Damon that simulates the sale of a private company, and it trades off different deal terms in an after tax environment based on how the family has structure that business and, and how wealth may be held to the generations.
And so we’re often referred to business owners to help them pre experience a few different planning ideas that may include things like transferring shares to the next generation, taking discounts in terms like that. And so, you know, in addition, there are several strategies that business owners can implement prior to the deal closing that can minimize the tax burden and transaction. So our goal is to really, you know, help them around those things and then hopefully, be have an opportunity to manage a part of that liquidity.
Damon Pistulka 24:58
Awesome, awesome, Troy. Well You’re going to be one of the people that if we can keep you on stage for a few minutes here, we’re going to let you know. And because it is it is a, and people will think this is funny, maybe, or kind of strange. Our first question that we’ll talk about when we get into our subject, but it deals with what you do so well, so Andrew dweet. Does this everyone on AI? Does everyone gotten up so far?
Andrew Cross 25:25
that I believe is everybody.
Damon Pistulka 25:27
Okay, awesome. Well, let’s get
Andrew Cross 25:30
Kenny. What’s up? Yeah.
Damon Pistulka 25:33
Yeah, if you haven’t gotten up, just put it in the chat. Let’s bring Troy and Andrew. Keep trying to Android on the on the stage.
Andrew Cross 25:41
By just Ziggy shuts.
Damon Pistulka 25:42
Just shut Troy off. We’ll get him back. Here. We’ll get Andrew over here. Sorry. Come back, come back. All right, it was the birds in the background. I
Andrew Deutsch 25:52
don’t know if I should be up here. We ran out of ketchup packets, I gave them all away.
Andrew Cross 25:58
Fry sauce. Here we got Mayo, mayo.
Damon Pistulka 26:03
It’s it’s great to get you guys here. And I know that this this subject. For some people, it’s a two things. None of us like to think about retirement First of all, right. And that’s I think that why business owners have a lot of tough times thinking about selling or succeeding company, because we don’t like to look at, and this, this may be something I’m just gonna throw it out there. And Troy, you deal with people like this every day, it may be just us confronting our own reality that we all have a limited lifespan, and we’re going to be here for so long. And people don’t like to do it. But how many times do you get to get business owners that are really near the end, and they haven’t planned?
Troy Neihaus 26:44
Oh, gosh, more than I more than I care to remember. It’s it’s actually pretty sad. They often these business owners are so busy focusing on their business. And, and, and you can spend a lot of the you can set up a structure, you can you know, spend a lot from what you’re the proceeds of a business. And so they’re living life, they’re staying busy, and they’re not thinking too many of them aren’t thinking about, Okay, once you sell the business, that’s been your baby for years and years, what are you going to do and have you properly set aside money in structures that are going to allow you to basically live off that what we call core capital.
And that’s the amount of money that someone you, me, Damon, Andrew, Andrew, need to live off of write it? Once we decide to retire, and we’re spending from a portfolio that’s core capital, and that money is supposed to be there to sustain our lifestyle for the rest of our lives. And too many people haven’t really put enough money away to even be thinking about it. And so it’s a to many than I care to remember. Yeah,
Damon Pistulka 27:47
yeah. Well, you know, the funny thing is joy that you just led us into the first question, you know, we said, the key is to build a business you can sell or succeed. And I think one of the first ones is, is exactly what you said, No, and how much money you need. Because how many times Andrew, do we get it to the point, and this is just going to Troy’s point to is that we get to the point where we’re sending down the business owner that wants to sell their business, but they haven’t talked to their retirement planner, they haven’t looked at their overall portfolio to see if the assets that they have outside the business, and the assets that the business will give them at the sale is enough to live on.
Andrew Cross 28:31
And I think further to what Troy was saying to a lot of these business owners really, I don’t think it dawns on them that what they have here, what they really, you know, there really is, you know, I think they think of it as you know, I’m running here, I’m trying to get my sales, you know, I’m thinking about next month and how we’re doing this month, they’re not thinking about, you know, building equity, that’s big stuff, acquisition, succession, tax strategies, you know, it and then still, like, curse them until that day gets there. And they’re like, Well, here it is, you know, plan for success. You know, I mean, that it was cool.
What, when Joe Valdez was on earlier to talking about, you know, this is I think this is a common trait in in these companies you’re you’re you know, you have access now to what the big boys have and you may not have the time, but the tools you have either with you know, these, you know, like, like what Troy’s offering and Andrews offering these are, these are the same kind of strategies and tools that the big companies use simply play like the big boys do and think about it as you find out later. I should have I that’s
Damon Pistulka 29:39
well and worthwhile. Honestly, too, and someone someone looks at the value of a company and comes to someone like Troy and they say, Okay, I’m gonna get $10 million for their company. That that might not be enough. Yeah, depending upon what they want to do, and we’ve all been I’ve tried to certainly battle situations where people have they a lifestyle, because you’ll get used to the business. And this is where people get trapped in the business, they can make a million dollars a year.
And and that business is a great income generator. But if they can sell the business for 6 million $8 million, then they look and they haven’t been investing any of that million dollars, and they’re building their portfolio that outside of the business, they’re going to certainly realize that that 6 million $8 million are getting for that business. First of all, that’s the gross number. And then when Troy talked about one thing in there, it says, tax would you say what’s what’s the term use net of taxes or something like that? Yeah, yeah, it’s the after tax proceeds, there you go. The after tax proceeds.
Andrew Cross 30:45
Tax after you pay, you know, your your, your closing costs after you. You’ve had to contribute to working capital on the deal, then we talked about that. And nobody knows what that is until it happens. You know, so it was 6 million and now it’s, you know, capital gains as well. 40%. Now, but potentially, well, yeah. We’re out the door, but two and a half, you know, so,
Troy Neihaus 31:10
yeah. Think about there’s a potential capital gains tax increase and reduction of the federal estate tax exemption that’s been proposed by the by the administration, and that could significantly affect a lot of goals.
Damon Pistulka 31:21
Yeah, yeah, you’re right. And I was just and it’s funny, because I was, it was a smaller business. So I was just talking about talking about this about an owner last week, because we had, we had gone through this process of them a long time ago. And we knew that he was going to have to run this business for a number of years, invest and do the other things.
And he is going through this process, and he is considering selling his business this year, just to potentially get ahead of those tax increases for next year. If If, if that’s what his tax advisor advises him on those kind of things, but it is a significant deal. Because just think, 20% on a $10 million deal. And you take everything out and just say there’s $6 million, that’s that’s part of capital gains taxes, and that that’s still $1.2 million tax difference, not not just not just total taxes, but tax difference on a year. So that’s a significant amount on a on a business owner leaving the business in and 2021 and beyond, potentially, yeah,
Troy Neihaus 32:22
I mean, Damon, you remember this, we work with a mutual client. And that that client, you had found some wonderful deals for that client. And the client, unfortunately, had thought he was doing the right thing with a, an estate planning attorney by stocking away a significant portion of his assets in the company into a trust ahead of the sale. And then realized, subsequently, that they set aside too much money, and he didn’t have enough of a pot to live off of, for he and his wife and all the other expenses that he needed.
And it was something as simple, something as simple as that. So, you know, calling us in ahead of time before you make those drastic decisions is imperative. Because then, you know, every deal that you had brought to him, I remember this vividly would have sustained his his lifestyle spending. But he had just made some unfortunate decisions ahead of time. Which kind of rectum.
Andrew Cross 33:21
Yeah, flown in, you know that that but you know, taking that step, and like I said, planning for success, right? So then you work with guys like Troy, and you know what you’re going to be looking like when you come out on the other side of the transaction. And maybe, if you’re sitting at that seat now, and you’re about five years away from that you can do something about it. Because if it isn’t where you need to be, you don’t need to find out at closing.
Damon Pistulka 33:46
Yeah, and that’s, that’s honestly not for business owners, typically they find out their business is not worth enough is when they start to talk to somebody about, hey, I want to sell my business. Or if you’re talking about succeeding your business, I look at the to the same, because essentially, you’re selling your business to the next generation, even if you’re not selling it, right.
Even if you’re not selling it, what you’re doing is you’re bringing another generation into that business. And if you still expect to stay in the business and pull cash out of that business, and the next generation is going to now you have more mouths to feed on that same business, you better be building the value in that business. So so you can sustain that next generation, just like a buyer would have to do. Yeah, well, I
Andrew Cross 34:27
like the word here. Weird words are important. But you know, the keys to building a business you can sell or succeed succeed. succession success, you know, that is really what a transaction is. It doesn’t matter if it’s succession to a family or to the next management or next ownership group or to investors or to an IPO. That’s succession. That’s legacy, you know, and that’s, that’s really what, you know, that’s really I think, to me, you know, when I understand it, that’s that’s a successful business.
Damon Pistulka 35:00
Yeah. So that summarize our first one that is know how much money you need. Don’t get yourself trapped in your business, understand, you know how much money you need first, and then we talk about the second subject. And then Andrew Doyle is going to be able to help us with this one a bit. But understand your business valuation and basic valuation fundamentals.
And when we talk about that we’re talking about, you know, profitability, obviously, as part of your your business, valuation and industry and different things like that. And as we go through that, though, there are things that I know Andrew has helped before. And that is on risk when you talk about things like customer concentration risk, and you talk about other risks that you have to do with your with on your customer side. So Andrew Deutsch, you’ve done a little bit of diligence for some equity groups on transactions in the customer base and things like that, what what do they typically look for in that, when they’re when they’re talking with you,
Andrew Deutsch 36:06
our program, we call it P forensics, we look at all the things that don’t show up on a balance sheet on a spreadsheet, or otherwise, it’s, we’re able to see beneath the surface, so we can look at a potential acquisition to see like you said, you know, what, what percentage of their clients are in one basket is in the spreadsheet. So for example, you know, 80% of our businesses with one customer is opposed. 80% of our business is divided between our top 10, which is a risk, but then how do you evaluate whether or not that that situation is actually beneficial or not? The other side of it is, you know, what is the quality of the marketing message?
What’s their, what’s the status of their brand in the market? How do they play against other alternatives that solve the same solutions, all of those things become factors. And there’s there’s cases, there was a project we did for private equity group, they were looking to buy a company that had a special technology for cutting and stamping metals for high temperature applications. They had 80% of their business with their top 10 customers, which seemed like a pretty decent scenario.
What we discovered in the research was that there was a new poured molded polymer that cost half, it could resist higher heat last longer, and was quicker to market. And all of their clients were in the process of testing that product. And so far successfully. So we recommended to the private equity group, you really ought to look at this, this is a huge risk, the chances are, everyone’s going to the polymer and you’re gonna lose 80% of your business. And sure enough, they backed out another group bought the company and 60 days later, they were selling the assets off because it was no longer viable business that they just spent, I think it was $11 million.
So you know, those kinds of things, other things, the quality of the sales team, the quality of the messaging, the branding, the we without giving away who the company was, they had been selling to Coca Cola, and coke, they had lost the account for three reasons that could be resolved. But the question was asked what you were selling so much to coke? How come you weren’t selling to Pepsi, Dr. Pepper Snapple and these other major brands? And the response from the head of sales was, well, they’ve never reached out to us. And in that case, the recommendation was, if you find a real sales manager, you guys could pick up to $3 million in business with these other players.
The fact is, they have a sales manager who thinks that customers look for him. And and you know, that was don’t just buy buy it now get rid of the guy and let’s let’s make this happen. And again, the success was they brought in a real sales team, they brought in a fractional sales manager for while they weren’t while they were searching. And before he left, he had picked back Coke, Dr. Pepper, Dr. Pepper, Snapple, and Pepsi all became clients, and they doubled the book in less than the first 30 days of the business.
Damon Pistulka 39:10
Andrew Deutsch 39:11
So it’s those kinds of things that you can’t see in the books. And then there’s there’s cases where we’re brought in, and our fee is wonderful, because it’s almost like an insurance policy. Hey, we evaluated everything. These guys are in great shape are ready to go to the next level. Congratulations, you’ve got a goodbye. And they wouldn’t, you know, is that beneficial? Absolutely. If I’m going to blow X amount on buying a new business to know I’ve got one more due diligence check that says hey, this is good.
Damon Pistulka 39:40
Yeah. Also about you, you do something that that helps, I think on both sides. It would help somebody selling a business or somebody that’s buying a business because you you touched on the one thing when you’re gonna make a multi million dollar business decision whether It’s 5 million 500 million, it’s a, it’s a significant decision in your world, whether you’re an investment buyer, whether you’re an individual buyer doesn’t matter. So that’s let’s
Andrew Deutsch 40:12
take it take it to the next step, though, into what you’re talking about. So in these cases, where where we’ve done this work, there’s there’s a little bonus prize that comes, typically, when private equity takes over a company, there’s a three to six month learning period, to figure out what they’re going to do next, we can actually have the total framework of that go to market strategy, almost finished to then to then compliment and within 30 days, they’re already taking positive actions to grow the business.
The other side of it is, you know, we’ve done projects where as we’re hired into a company, knowing that they have an interest, much like exit your way does, and we will be doing this together, they know in five years they want to sell. So they bring us in to say, let’s rethink the total marketing package, because they want to present to private equity, or whoever is going to be buying that company next in the best light so that they can share a solid strategy, they can show the kind of growth, that kind of margin, all of those things that are necessary.
So let’s do a rebrand or refresh of the brand brand retraining and growth of the message and sales. So that in five years, the maximum output is gained. And we’ve seen companies that we’ve actually doubled less than three years, and the most recent one, it sold for $10 million, more than the expectation was at the point of sale, because we doubled their business and expanded margin significantly.
Damon Pistulka 41:43
Yeah, well, we can change quickly. And that’s our
Andrew Cross 41:48
business owners to I mean, that’s it’s not just interesting, this is, you know, really interesting, because Anders, you know, I’ve I’ve had whether good or bad, I’ve been through a lot of diligence. But, you know, some successfully and some not, you know, the preparation is and all that, you know, really what we’re getting here to is that you’re a business owner, you, you should always have your company on diligence, just when it happens, you know, and that’s because what Andrews doing there is looking at every aspect of the business and evaluating it from the eyes of the buyer, you know, and what value it’s,
it’s it is contributing to the organization, you know, what every aspect of it, and if you have those processes in place, you have those people in place, those all add value to the company, you can’t just put it for sale sign, you got to step up there, and you’ve got to bring a playbook, you’ve got to show an operating manual, you know, with projections looking forward, and then in show some, some, if you start to show some traction towards that effort, you can get a lot of value for that and sealed them up.
Damon Pistulka 42:59
Yeah, well, it’s it’s good that you’re bringing this up, because I think this this comes back around to again to the business valuation, and as we talked about the fundamentals of business valuation are, are the same it’s it’s profitability and risk and Andrews adjusting risk in the current customer base, it’s also in how the growth potential and and those kinds of things, you know, they’re also going to be looking at the the valuations on the growth trajectory. And the management team in place.
Owner dependence is one that’s really big, you can have a $50 million company or $100 million company that if the owner fell over dead, the company would, you know, implode. And you can’t have that, that. And that’s one of the things and I know Troy sees this probably a fair amount that you can have an extremely successful company extremely successful.
And it’s awesome, because the sun’s coming out there try I can see it great. It’s extremely successful, a company that they can’t sell, I mean, hundreds of millions of dollars companies that they can’t sell, because this person is just the integral part of it. And how many times do you see that where they’re kind of stuck in them that way? Troy?
Troy Neihaus 44:12
Oh, often we often see that and that’s, that’s the sad part, right? Is I really, Andrew, we got to, we got to we got to work together, because there’s a number of companies that I see that really just don’t evaluate their risk. And, you know, my goal is to meet these companies early and for them to understand what their risk are. And one of them being the fact that what if the owner falls, then it gets hit by a bus and then you know, what’s going to happen to that company, suddenly, you know, all the intellectual capital and value of the company could be rolled up in one person and that’s that’s a high
Majid Zafer 44:45
level of risk. I see.
Damon Pistulka 44:48
Yeah, yeah. And it is and it is, you make a good point. It’s not just owner dependence, but a dependence upon one person, for some reason with key relationships or things that that affects your value. But really, you know, the second question that we are covering here is, understand your business value and basic value fundamentals. I think we’ve covered that well. And one of the things that androids covered, which is our third thing, and I want to thank Mike finger from exit Oasis, he helped small businesses exit, he’s got three things that he talks about, but this is one that he talks about a lot, you have to make it easier, easy for the new buyer to duplicate the results.
And that is one of the things that Andrew is you talked about with the sales in your evaluations, the sales process, because everybody, hey, that’s this, let’s meet, let’s be real, Frank here, if your company doesn’t have good sales, nobody’s gonna want to buy.
And that’s why I think having having understanding that really well and understanding your sales process, so that buyer can duplicate the results, whether it’s $100 million dollar private equity deal, that they’re going to take over the whole thing, or it’s or it’s, you know, an individual is going to buy business, that that’s the same. So the sales process management teams and everything else. So Andrew, what do you think about that? Oh, he’s on mute.
Andrew Deutsch 46:16
Just Just the show, I put in the chat, a recent podcast of the fangled cast, talking to a major player in the PE world, covering what they think about and what they look at in companies. So if somebody wants to complement we’re talking about today. And of course, like and subscribe, and all that kind of bullshit.
But But anyhow, the they’re one of the things that benefits us is when private equity, or buyers make the mistake of buying a company where the owner is the secret sauce, and now he’s either got his big check, even though he said, I’m going to stick around for a couple years, or left, we’ve done several projects where we’ve been brought in as the fractional cmo or implanted company, when the purchase was made. And then it went, there was a company in Georgia we worked with, they were like a $7 million company. And by the time we were brought in, they were a $2 million company.
Why? Because they, the secret sauce, got their big checks, and they left. Yeah, so. So that is one of the major risk factors of what’s there. And one of the things that private equity tends to in business, they want to see the documentation of everything that the company does, what are the the the rules of the road? What are the standard operating procedures of a company? And how well did those go through and are followed within the organization? Because if those are in place, then then there isn’t that one guy who has the tribal knowledge that will sink the business?
Damon Pistulka 47:47
Yeah, that’s so true. And in I, well, we talk a lot about investment buyers, because that’s typically what who we work with, but this, this is for any size business buyer, they’re gonna they’re gonna want to know that they can, it’s going to be easy for them as easy as possible for them to duplicate the results. I mean, they just have to, because they’re investing money again. And that lowers have been in business so long, usually, they don’t really think about that investment enough, and how significant that is to somebody when they’re doing it. And go ahead, enter.
Andrew Cross 48:20
Yeah, well, I think from from our experience, as well, it’s really difficult to get a business owner who is in the fire, you know, constantly to step back and go, you know, what, you know, to work hard on doing this with letting go of it. But if you take if you if you if you take a company, and you are, you know, really involved in the business, the buyers will come in and Andrew sorry about a situation where they actually keep you on running the company, but you know, you’ve lost the fire in the belly, because you you just pulled out a buttload of cash, and now you want to go spend it and have a good time and not work on the business.
And it’s not, you know, so you’ve lost that. The other aspect of it, the owner is just exiting completely. And now now there’s a vacuum when there’s no you know, is there a leadership team to fill that void?
You know, and buyers, those kind of buyers, equity buyers, they are financial people, they are not operations people, they have operations, people that they will bring in and sit in that role on the company, usually it happens after post transaction and again, they know it as well as I do, because I’ve seen it that that is somewhat successful. A lot of times, you know, the old owner leaves the new manager comes in an operations guy, you know, that’s a big risk, you know, whether the employees will accept that, you know, whether it just upsets everything.
Who knows. So the concept of that though, if you if you can get a, you know, the small business owner, to be proactive about this and say you act like you’re the buyer, so I this is my investment at my job. Alright, so take the time, work hard. If you Get a management team in there, and work really hard on setting that up and step back and let it run successfully. And you even done this for a few months, and it’s proven yourself, your value just went from a 4x to a six or 7x, or an even an 8x.
Because you’re at a platform level, though. And what does that mean? You know, while you’re selling, you know, if your your your company is profitable at four or 5 million, you can just do the math 740 $28 million deal as opposed to a 4x, which is a 12. It’s a $10 million investment difference. You will try big, big bucks. But there’s other people like Andrew, around I mean, if people in our audience, Joel Valdez, and these folks, these are very experienced operations people, you know, it’s a smart play, if you can pull back and build that engine and let it run. If you could, you got a bigger, a much more valuable commodity to sell to an investor when they see that in there.
Damon Pistulka 51:04
Yeah, yeah, that’s for sure. And I know we’re gonna be with 853 here in the West Coast, we’re gonna be running up on time here quick. But I think this leads into something that that the last I had to actually, but we’ll go through the last one really fast. But the next one I have is, you know, making this attractive to the new buyer.
And you just talked about it, Andrew, and it’s like, you know, if if, if someone’s got to go into a poop storm, they don’t want to buy it, man, if you’re if you’re working yourself to death, and Troy sees this, and Andrew Jarvis, I’ve seen this as you can have a very successful company, the owners making millions of dollars a year, but they’re working themselves to death every second of every day. Nobody wants to buy that for all the reasons above, they’re too dependent on them, it’s a crappy deal. They couldn’t even bring somebody in to do that if they wanted to with an investment group, because not set up.
So you need to be really working on that to make it attractive to the buyer, both from a financial standpoint, and from a business standpoint. Any comments? I mean, yeah, yeah, it’s, so that’s the one thing you talk about management team and be inappropriate on management teams and stuff it is, it is really, it is really a, a big deal to to get that, right. So in some of the things that we work in, you know, we work in companies that are in the $1 million, even to $5 million event where you’re in a search fund kind of thing when the search fund has CEOs that they fund in place in companies, and then you get above 5 million.
And you get into these companies that are actually platform companies, we’re an equity group, we’ll buy them. And then they’ll want to buy other companies and combine them with them. So those are two very different companies in the eyes of the buyer, the smaller one has to be a good middle management team ready for a CEO to come in, the owner needs to be in that CEO or board level, and lay that company run. And the next one, Anders got to go for it for a meeting? Thanks. No,
Andrew Deutsch 53:11
no, I want to I wanted to throw something in before before I run one of the other nuances to this that we find with business owners. If it’s a family business, it’s their baby, it’s their, their, you know what came a lot of times, you’ve got to recognize that the buyers don’t have the same vision for your company that you do. Yeah. And if you’re not comfortable with that, I know of a group that their, their their pitch is we’re going to keep your company name and the legacy alive. And that’s they’re able to buy companies for less money sometimes, then then the other.
But you have to know that just because somebody bought you and tells you what they’re gonna do with your company, doesn’t mean that you’re not going to become a bolt on be shattered, disappear. Because many times your company will be bought based on its value and removing it from the market. So you don’t compete with somebody else anymore. All of those, all of those factors are rarely disclosed in a way that that you would think in the buying process. So recognize that you are selling you know that the person who’s who’s building that business may be selling their baby into into a life that wasn’t really planned.
Damon Pistulka 54:24
Yeah, yeah, I
Andrew Cross 54:25
think those are the six the six stages of selling a business and that’s acceptance, right. So yeah, absolutely. Yeah, it would that is another reason that a lot of businesses don’t sell or they’re considered. It’s not a successful transaction, but in reality,
Damon Pistulka 54:47
yeah. And so, so, so powerful to so I you know, and when we talked about SEO later, Andrew, I got a run. Thanks so much, guys. And we’ll wrap up real quickly here. I’m gonna take one minute now, a lot of what we talked about, people go, Oh, you’re talking about selling a business, but put the hat on the other way you want to succeed this business to, to your child, your daughter, you want to give your your you want to see your daughter taking over your business and running it your, your son, your kids together, whatever, you got to go through the same process, your business has to be able to run with them, it has to be successful them, it’s got to be attractive to them.
You don’t you know, just because you grew up, like we did many years before our kids, right? They don’t like the same stuff, you got to make it attractive to them. And there’s different decision points, obviously in this, but what we’re talking about applies throughout.
So I think people think about selling and succeeding differently. But man, I’m gonna tell you succeeding in some ways is a hell of a lot harder than selling. And it but you have to consider the basic fundamentals of value and having good systems and management teams and easy to read, you know, replicate the whole kind of thing, because what is it, Andrew, how many businesses never succeed? Pass? The first generation is like 78 70% or something like that. And try you may know, because you work that lot. It’s not many
Andrew Cross 56:14
80 85% do not. Yeah, yeah.
Damon Pistulka 56:18
And you know, what’s really cool, I actually, the first company I started working with on ecology just succeeded to the third generation. I can’t believe it. You know, and they’re growing. I mean, they’re, I don’t know that they’re large now, but it’s, it’s pretty cool. Yeah. So anyway, thanks so much, Troy. Thanks to Andrew Deutsch for being here. Dave. Thanks, everyone for on LinkedIn for doing this.
Hey, this is something that obviously the Intel I’m passionate about, we love helping people do this. It’s lots of fun. And you know, when people successfully Troy when you see this, what, how much joy does it give you when you see somebody successfully, you know, either put that money in the bank or get their kids, you know, into the business. It’s, it’s, it’s one of the reasons I do this. Honestly.
Troy Neihaus 57:04
I do this because of relationships, being able to stay with someone who’s just worked so hard for everything. And now they get to enjoy the fruits of that labor. It’s it’s really rewarding.
Damon Pistulka 57:16
Yeah. Awesome. Awesome. Thanks so much, Troy. Andrew, take us away.
Andrew Cross 57:23
Yeah, well, thanks, everybody for for showing. This was good to see. Oh, great. holiday weekend, summer starting. David didn’t answer the question. So what is? What’s your
Damon Pistulka 57:35
question? Man? I’m a try on the question. I really don’t even like leaving the Northwest in the summer because people don’t realize the rain stops. The sun comes out. And it’s 65 to 7580 degrees all summer long. He has no reason and the wind doesn’t blow.
Andrew Cross 57:51
Yeah. Well, I think everybody get it was funny. Everybody had pretty much the same answer. We’re just get the get out of the house and just get out and start doing stuff. Up here in Park City. We’re doing the same thing. Just want to enjoy the music festivals. That’s what I want to do. Go sit on the lawn and the outdoor concerts back.
Damon Pistulka 58:12
Awesome. That’d be awesome. Because you have great summers up there, too.
Andrew Cross 58:15
You know, mountain breeze.
Damon Pistulka 58:17
Good. All right. We’re gonna drop off LinkedIn live here, everyone. Thanks for listening to us on LinkedIn live. Thanks to everyone for joining us on reimo. We will be back again next week. Talk to you then. See Oh. All right.