Building a Leadership Team for Your Exit

In this, The Faces of Business episode, Matt Haney, Founder & Chief Operating Officer (COO), Sinclair Ventures, discusses the key aspects of building a leadership team for your business exit. Matt specializes in strategic business expansion, operational processes, and executive leadership.

In this, The Faces of Business episode, Matt Haney, Founder & Chief Operating Officer (COO), Sinclair Ventures, discusses the key aspects of building a leadership team for your business exit. Matt specializes in strategic business expansion, operational processes, and executive leadership.

Matt is a serial entrepreneur and COO with over 15 years of experience managing small and medium-sized business operations. His expertise lies in accountability for profit and loss results, business plan execution, organizational leadership development, and effective operations scaling.

Matt is particularly effective at implementing best practices that improve the organization’s cross-level communication, coordination, and consistency. He helps people overcome challenges and find solutions, propels organizations toward their goals, and builds cohesive groups.

Download our free business valuation guide here to understand more about business valuations and view our business valuation FAQs to answer the most common valuation questions.

Sinclair Ventures is Matt’s consultancy that provides interim operations management for startups and growing businesses.

Filled with excitement, Damon eagerly begins the program with a warm welcome to his esteemed guest, Matt. Once the pleasantries have been exchanged, Damon’s curiosity arises, and he sets his sights on delving deeper into Matt’s background and experiences.

While recounting his professional, Matt reveals that he has had a diverse career, starting with a job at a family office buying single-family real estate. He then bought 350 single-family homes for the same family office.

Do you want to know if your business is ready for your exit or what you should do to prepare? Learn this and more with our business exit assessment here.

Subsequently, he worked for a construction company that built large-volume water storage systems. Throughout his various roles, he has worked alongside visionary leaders who had big ideas but struggled with execution, and he found his niche as a Chief Operating Officer (COO). The guest also worked as an interim consultant for other visionary types with defined goals and metrics to work towards.

He has worked in small to medium-sized businesses throughout his career.

Damon narrates that Damon someone asked him for advice on starting a business, and he mentioned how it could be challenging. He commends those who have a vision and take the leap to build a business from scratch.

Get the most value for your business by understanding the process and preparing for the sale with information here on our Selling a Business page.

Matt adds that visionaries focus on the result rather than recognizing that the business is functioning and going in the right direction. They advise not to be too hard on oneself and to acknowledge that the business is generally functional.

Damon talks about an interesting article about how visionaries and entrepreneurs are generally unhappy as they measure themselves against the ideal rather than how much they’ve gained.

Damon asks Matt about the latter’s learnings during his first exit, specifically about leadership team requirements from the buyer’s perspective.

The guest reveals that in 2013, he witnessed a big visionary CEO get courted by private equity to roll a series together. As private equity companies were pulling back the layers of the onion, they wanted to know the details of the business. Matt reveals they want to know where the skeletons are, what systems are broken, and about the real problems.

Matt was involved in every single due diligence period during his second exit. He learned that private equity companies use the same questions against the visionary to devalue some of the business. Matt realized that if he ever saw this with his own company, he would go in knowing what potential buyers or private equity would ask. Because “they got all the same questions.”

Damon notes that even if a business is successful and profitable, it may not look good to a private equity buyer, so knowing their perspective is crucial.

Matt emphasizes the importance of having a clear vision for one’s business and working towards it systematically. He suggests that working backward from the desired outcome can help set up the necessary systems, processes, and teams to achieve it.

Matt’s work involves helping business owners develop their teams and build leaders based on his experiences of being invested in and mentored.

Damon highlights the importance of reverse engineering a company’s exit strategy, focusing on the terminal value of the business and understanding potential buyers. He notes that private equity firms often have a clear plan for selling a company, which is a perspective that family-owned or privately held companies may not have.

Likewise, in Damon’s view, understanding the terminal value of a business and the buyer’s perspective can impact the company’s valuation and, ultimately, its return on investment.

Matt wonders how general business operators usually acquire small family-owned businesses.

Damon explains that private equity firms are usually not interested in small businesses unless they can be a good fit for an add-on to an existing platform. Such companies may not get a high value unless they are a strategic fit for a buyer. The markets are also currently interesting due to changes in interest rates.

Damon redirects the conversation to building a leadership team for a business exit plan and asks Matt to share his insights.

While sharing his insights on “these processes by looking at that,” Matt emphasizes the importance of having a strong leadership team when building a business for exit. He shares his experience of placing value on the right leadership level in his business in 2018 and how it helped him make a successful exit five years later.

Matt maintains that having a strong leadership team makes the transition for the buyer much easier as they will have capable individuals to run the business after the owner’s exit.

The guest argues that if someone is a good operator but lacks financial knowledge, give them a finance course and certificate to show their capability in managing profit and loss (P&L). This makes the transition smoother if the business owner faces an accident or decides to sell the business.

Damon shares how investing in training and mentorship significantly impacted his career. It allowed him to not only understand the technical aspects of the business but also to communicate effectively with financial experts and investors.

The host and the guest talk about the importance of having scorecards and demonstrating the ability to set and achieve goals over time to gain credibility with investors and buyers. Damon explains that this historical data can increase the value of a company and potentially increase the purchase price by 25-30%.

Matt suggests that having evidence of successful growth, such as opening a new category or geography, can make a business more attractive to strategic buyers. By documenting the process and lessons learned, a buyer can see the potential for further growth with additional investment. He also emphasizes the importance of stepping back and evaluating what can make a business more “bulletproof,” which is where his team comes in to help put guardrails in place and define success.

Damon discusses the growth trend by acquisition in small companies with an EBITDA of $1-3 million. He mentions that if a company is set up well and growing, there are opportunities for growth through acquisition in industries that aren’t increasing tremendously. He also talks about how he is turning these small companies into larger ones with EBITDA of 7-10 million for lucrative exits for the owners.

Matt notes the importance of building a leadership team ready for scale and having a voice outside the company, such as a mentor or an outsourced COO. He believes most people aren’t investing in leadership talent for mentorship, and having someone to bounce ideas off can strengthen and give leaders more humanity.

Matt talks about accountability and how businesses need to document their success. He suggests the EOS operating system but warns that it may not be right for every company. He emphasizes that accountability can bring fear, but its benefits are exponential in the long run, giving leaders purpose, confidence, and reinforcement.

Damon feels glad that Mat brought up accountability in business. The host gives an example of how having clear expectations and measures of success can lead to employees feeling more accomplished and confident in their work.

Matt talks about his challenges as a fractional CFO or integrator working with visionary leaders who share their vulnerabilities and challenges with him. He mentions the difficulty of setting goals that align with the leaders’ long-term vision, the leadership team’s short-term needs, and the importance of gradual improvement.

Similarly, Matt underscores the importance of having the right person in the right seat, especially when building a leadership team for an exit strategy. He mentions that it’s common for businesses to keep ineffective employees, and he offers to help businesses transition these employees to a different role or out of the company. Matt assures business owners that being the “bad guy” is unnecessary and that a transition of employees can be beneficial in the long run.

As a business grows, a buyer’s risk tolerance increases, but when they buy a business, they take on all the risk immediately. This is usually a binary decision and not a negotiation of price.

Agreeing with Matt, Damon shares a success story toward the end of the Livestream. He relates that an owner hired a CEO a year and a half before his exit, letting him run the company and make big deals while the owner focused on finding new opportunities. The CEO enabled growth and achieved nearly 100% growth for a couple of years, followed by 70% growth in the third year. When the business went up for sale, it generated much interest.

Damon finds Matt’s insights profoundly valuable.

The show comes to an end with Damon thanking Matt for his time.

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45:53

SUMMARY KEYWORDS

business, visionaries, people, leadership team, buyer, exit, private equity, integrator, building, person, company, fractional, big, accountability, ceo, talk, years, investing, matt, business owners

SPEAKERS

Damon Pistulka, Matt Haney

 

Damon Pistulka  00:04

All right, everyone, welcome once again to the faces of business. I am your host, Damon Pistulka. And I am excited for our show today. Because with me, I have none other than Matt Haney. And we’re gonna be talking about building a leadership team for your exit. Matt, welcome.

 

Matt Haney  00:22

Thank you. Thank you. So happy to be here and fired up to talk about this stuff today. I get excited. Yeah,

 

Damon Pistulka  00:27

it’s gonna be fun, dude. It’s gonna be fun. We got, we got lots of stuff to go over. And it’s, you know, I always love it when I get to talk to people that have actually been through a business exit. You guys some scars, I’m sure from that, learnings, things like that.

And then also, you know, your background, and we’ll talk about this more as is being now as you’re doing a fractional CEO. Oh, are you interim CEO and an EOS integrator. I mean, there’s just so much for us to talk about today. I’m excited to get going. But let’s start out with your background. Let’s learn a little bit more about Matt, and how you got where you are today and doing what you’re doing.

 

Matt Haney  01:12

Now. Awesome. Well, again, thanks for having me. Damon excited to chat through it. So I was fortunate to be right out of college and an entrepreneur gave me a an ass job. To have a family office that was buying single family real estate. And I was able to work under an entrepreneur got a finance background, spent some time at Arthur Andersen for years.

And he basically just said, Hey, come in learn, I’ll teach you as long as you show up, give it up, you give it your all, and you’re honest and equitable. And then you got it. So I spent a couple years with him as an analyst, and then moved up into basically buying single family assets for a family office, we bought 350 single family homes in the state of Texas, over a three year period.

And I did entrepreneurial love. And I was like, wow, I can I can do this. This is something that I can actually do. This guy gave me a chance. And, and I turned that into the next entrepreneur, while I found myself working next to visionary leaders that had big ideas, but just really struggled to kind of get it to the next step.

One of them gave me a partnership opportunity in a in a in a job that I was able to then and and we created this niche construction company where we were building large volume water storage systems, these big huge water silos that you see on the side of the road, not the ones in the air, but the ones on the ground that store water for municipal systems. And I know nothing about large volume water storage, but I knew operations and I knew how to help manage people.

And if you gave me the path, or the idea I could take it. So just a couple of different REO business things one led to the next next, but there’s always one common theme. And I was working alongside somebody who had a big vision. And they were very good at dreaming it up but had some just element of execution that they couldn’t quite get to.

And I found my niche and as a COO and then, you know, kind of parlayed that into an interim opportunity where I was going in and working for the same vision visionary types, but with, you know, confined accomplishments and goals and metrics to work towards. So you know, just a lot of small to medium sized businesses figuring it out as we go, Damon

 

Damon Pistulka  03:23

Yeah, yeah, well, that’s what most people do, honestly. I mean, you look at very few people, you know, I don’t know who starts a company and doesn’t just get in and figure it out. Right. You know, the,

 

Matt Haney  03:37

the internet stories would tell you that there’s some playbook for all of that. But in reality, until you’ve missed a payroll, or until you’ve had somebody not show up, and you have to shovel the muck that day, then you just you don’t know, you don’t know what it’s like,

 

Damon Pistulka  03:51

That is so funny. I had someone asked me today, and I’m actually gonna see if I can see it. They said, they asked me the what would love to know if you’ve got any advice for someone who’s starting out building a business? And I was? I was like, Where do you want to start?

Yeah, where do you want to start? Because because, you know, it is like that. And it really there’s there’s, you know, does take someone with that idea that I know that they know that, you know, they’ve got the least think that that’s something they can make money on. And I got to really commend those visionaries that that take that leap off the cliff and build the plane on the way down because

 

Matt Haney  04:36

it is incredible. It is incredible. You use that plane analogy. I mean, I’d say that at least once a week now, hey, remember what the airplanes flying and we’re still bolting on things. And we’re still figuring out what navigation equipment we’re using, but it’s flying.

Don’t don’t lose sight of the fact that we’re in the air. Yeah, and visionaries tend to mow theirs should be this way or that way. That way. It’s like, I use a term that I laugh every time I Say I’ve said it a million times. Generally functional. Yeah, business is functioning things are going in the right direction. Yes, we might be dysfunctional, but we’re functioning we’re operating the business is profitable metrics look good. Stop being so hard on yourself. Yeah. So

 

Damon Pistulka  05:16

it’s well, and that’s that I tell you, this is one thing, an interesting thing I read this week that’s kind of on a tangent, but it’s talked about visionaries and entrepreneurs in specific and said that we are the biggest group of people that are as a group, we’re very unhappy because we always measure ourselves against the ideal rather than how much we’ve gained.

 

Matt Haney  05:39

Yes, yes. Yeah, progress, not perfection. We have every cliche in the world. And yeah, you still frown at cliches. Now. I’m sure people tell you I like to use them just because they’re so there’s, they’re so true. There’s so true.

 

Damon Pistulka  05:55

Yes, yes. Yes. I mean, it just as you said, there, it’s like, oh, yeah, we’re not doing this. We’re not doing that. But look behind us and look at how big of a boat that we’ve got. And how many things are going right. So

 

Matt Haney  06:08

it’s right there. That’s that’s firm. Awesome. But yeah. Yeah, yeah. Awesome.

 

Damon Pistulka  06:16

Good stuff. So when you were in a when you did that first exit, what did you learn as you’re going through? And buyers? Were talking and doing those kinds of things? What did you learn about leadership team requirements? From the buyers perspective,

 

Matt Haney  06:38

I’m gonna I’m gonna back up because I think before my first exit, I got to witness somebody else exit as Oh, good, good, good. Even better. It’s interesting. Yeah. So in 2013, I was working for products company. Director level at that time, and part of the leadership team, early employee to consumer packaged goods, a fitness product, and a typical big visionary CEO. And I got to see him starting to get courted by private equity. And people looking to roll a series together.

And I wasn’t on the executive team, but I ended up kind of getting brought into the fold. As they start, as the private equity companies are pulling back the layers of the onion, they want to know, what’s this look like? And how’s this? What’s that? Well, they, they confided in me because I can deliver details around the business. Well, they kept like asking, asking all these questions, asking all these questions.

And I’m thinking, you know, and I’m young at this point, I don’t really know what I should and shouldn’t say, Oh, sure. So I probably shared a little too much. But you start to realize what’s important, and they want to know where the skeletons are. They want to know where things are missing, what systems are broken, where we’ve skimped where the real problems are.

And that just goes to show you to ask your question about my second exit, my first personal exit, but the second one I was involved in every single one, they asked the private equity company during that due diligence period, they went around and used against the visionary, because that was their MO for devaluing some piece of the business.

Yeah. And that so that was the first time I got to see all this. And I didn’t have any exposure or any downside of this thing. I was just making some cash on this deal on this business. And so that really frame my mind. It’s like, okay, if I ever see this, again, with my own company, I’m going to go in knowing what somebody a potential buyer or private equity is going to ask. And by the way, they got all the same questions. Yes, they do.

 

Damon Pistulka  08:49

Yeah, they tell you what the funny thing is about I was just talking to somebody today and one of our most popular blogs on our website for over three years, it’s been what is it something like how to get bought by a private equity company or something like that?

Or what private equity companies look for it? It goes through the list? Oh, yeah, let’s do the same thing, because it’s all the same. And the funny thing about it is just like you said, the owners, the visionaries can have a highly successful, highly profitable business. That doesn’t look very good to a private equity buyer for a number of reasons. Yeah. And knowing what they’re going to ask or the buyers perspective, is so critical.

 

Matt Haney  09:31

It’s huge. And if you could even look into that crystal ball of critical you know, critical mass learning it three years for your ideal. Is this the that’s the secret weapon, it’s like, and a lot of visionaries. A lot of folks that I typically work with aren’t looking for, you know, oh, I’ve got I want to 5x Multiple Aviva and seven years. They’re like, hey, I want to structure this one get better. But if you were looking for that number, and you did have that vision of what your exit look look like, then we can work backwards into it and set systems and process and people so that you’re set up for that.

So you to your private equity has a certain thing and a educated buyer that’s got a little bit of pocket change or good access to, you know, SBA loan, there’s somebody advising them, there’s some banker or somebody telling them what to go. Yes. And my work tends to be around my passion, tins, team development, and really helping business owners build leaders. And I was fortunate to have somebody invested in me becomes a leader, I try to give that back as much as I.

 

Damon Pistulka  10:45

Yeah, yeah. So you’re right, the three to five year exit, or not three to five year timeline, and thinking about where you want to be in reverse engineering. I mean, that’s what we do. That’s what we do in our company, and we’re usually working with buyers do, you figure out, hey, we’re worth 5 million today, we want to sell for whatever 810 20 or whatever the heck it is, and, and you know, then you, you reverse engineer it, like you said, but that three to five year window, allows you to really understand who is going to buy.

Because when we were in private equity running companies, we bought that company and we knew where the heck we’re gonna sell it or had a pretty good idea, we knew the value that we had to get to, we knew what we had to do. And that was the thing and I really learned that I hadn’t seen in private that other non investor owned businesses before was the fact that you just go really never thought about the fact that I’m I’m increasing value in something like it’s, it’s it’s like a commodity, that we’re raising the value somehow by improving it or whatever we’re doing.

And it’s just it was foreign to me, because I’d worked in family companies before that. And you know, that’s a family company or privately held mostly are just income generators, right? Absolutely, really don’t think about the the asset, the terminal value of that business. And that perspective, when you put that terminal value hat on, in and then understand the buyer, the way the buyer is going to look at it is a completely different thing, because we’ll go into businesses that are making a million dollars a year, which is awesome, right? Yeah, awesome.

Yep. I don’t think anybody we pissed about making no dollars. But when you look at it, and say that’s four or five, six, whatever million dollar exit value, they go, and that’s not very good. It’s the truth because you know, values math, it’s what gives you a return on

 

Matt Haney  12:47

are you seeing are you seeing in that million dollar, you know, family owned, privately held business is that generally, you know, a acquire that’s like a general business operator, and we private equity is not looking at stuff that’s that small are they aren’t,

 

Damon Pistulka  13:01

they aren’t unless you unless you’re lucky enough to have an add on that, you know, you could fit into a platform really good, a really good fit for a roll up into into that platform with them. They’ve already got that’s, that’s where we see those going. And really, those you won’t get, you won’t get quite the value. Usually. You can, you can sometimes you get a little better, because it could be a nice strategic fit.

But still, there are financial buyers, and you will find better, a little better value from a strategic straight up strategic buyer. Sometimes, but yeah, it is. Yeah, the markets are interesting, too. And then the markets recently are even more interesting with the interest rates changing and stuff like

 

Matt Haney  13:48

that. Because that’s that’s expensive debt all of a sudden, yeah, yeah, I

 

Damon Pistulka  13:52

got a lot different. But yeah, let’s back up, though, because I got off on something else. We were talking about starting talking about leadership, you’re talking about leadership leadership teams. So let’s get back to that we’re here to talk about is, is you know, building that leadership team for your exit. What did you learn in this, these processes by looking at that?

 

Matt Haney  14:10

So the biggest thing I’ve found is, is in consulting and operating my own business as well. It’s meant you’re placing the appropriate amount of value on what we what I call that leadership level, that could be a directory, peak demand or whatever it is. And then that tap level of people is important is because they’re the ones that carry the water, as we say, and they’re going to be the ones that are going to be in the business once you’re out of the business.

That’s the important thing that I really I learned myself and I will brag on myself for one second that the leader that I put in my business 2018 is when I sold this was that five years later, he’s grown the business exponentially The, for me is an absentee owner.

And he’s done a great job of taking care of individual that we put in the business. But my whole point with that is, if you put the right leadership level, you’re going to make your exit and your transition a hell of a lot easier because the buyer is going to come in and go, who is this person? What are their skills? How long have they been in the industry? And what level of depth Do they add to the business? Right?

 

Damon Pistulka  15:27

Yeah, yeah.

 

Matt Haney  15:30

I’ll give an example. Taking somebody who’s a good operator, maybe they know how to good naming options, but they lack financial acumen. Yeah, hold them in a finance course. Yeah, give them a certificate show about p&l invest them, because you know what? comes knocking on the door and says, Oh, this guy’s managed or gals manage p&l? Yeah, we’ve managed it to for the last 24 months, he or she is perfectly capable of roughness in the event that I get hit by a bus or you by my business.

 

Damon Pistulka  16:04

Yes. And that is the that is the thing. And I was fortunate. Early in my career, I worked for the first investment owners I worked for, they did just that. They sent me away to like school, like two or three times on finance. I got a hard head.

But and then they actually invested in a mentor for me, Lauren entire year. Love it. And in I cannot tell you the difference that that made. When you think about my abilities before that, yes, technically, I can I could walk through a business I could do. Sure. But when you change that to now I can walk into a boardroom and say we did this and it caused that. And this is why these numbers are like this is now I’m starting to talk like the the financial people and the investors. So they understand what we’re doing.

 

Matt Haney  16:58

Yep, that’s exactly right. And the thing you said that hit with me was you mitigated the buyers risk by being educated, and it’s in any little incremental, de risking of the transaction you can do gives that buyer more comfort in their multiple and more comfort and you know, the validity of the business and educating and growing and investing in your leadership team only makes you the seller. Look more? What’s the word? I guess, why is this probably the easiest way to say it.

But if you put your what would I look for in a business, if I was buying hat on? Then you’d look for somebody that’s got a leadership team that’s been developed and is ideally reporting on metrics, this is what we spend a lot of time on as fractional CEOs is building an operating system like you would for a computer, we build this up system for the business.

What does that mean? Well, it means we’re going to have, like we said, three years of operating metrics that we can go to this to the buyer and say, look, we’ve been tracking these metrics for the last three years. Here’s our scorecard. It’s our profitability. Here’s the volatility. We had an issue here because of this, you can talk to it. So building that structure and having a leadership team that can that can run the structure. Yes, yes.

 

Damon Pistulka  18:21

Yeah. And let’s talk about that for a minute. And I will I will segue into what you were just talking about. One of the things that we saw when we did that, in the times that we’ve we’ve done that is when you put those scorecards in place, and you demonstrate over time that we are setting goals and achieving goals, then when you say and this is where we’re going, and that’s up down wherever you’re saying you’re going people and investment buyers will tend to believe you because you’ll be historical but if you don’t have that in place,

you said three years of information, and when you can have three years of we laid out a budget we laid out operating goals and we hit that we surpassed it, we got close whatever it is, they’re going to be able to use that as an indicator going forward because if I say I’m going to Alaska and the last time I said I was going to Australia I didn’t make it Australia or even close you know wonder if you’re gonna make it to Alaska.

And that is so glad you said that because it is it literally it can be 25 30% more of your company going out because they will believe that that growth will continue if you’ve demonstrated is going just like it has before.

 

Matt Haney  19:51

Absolutely and then even one step more to understand around you. Let’s say you’re positioning your business for up strategic acquisition or somebody that has a growth growth idea, not just hey, we’re gonna operate and increase this incrementally, if you can evidence that and show that by what you’ve done, oh, we opened a new category and a new geography.

Oh, well, what do you do? We spent this much money and we measure just that piece of it. Right? And we did it on a shoestring budget. Oh, well, how successful were you? Well, we much it took us this long. Well, then the buyers gonna say, well, the he’ll only put $50,000 into that, what if we put $250,000 and go open up for other states? Well, here’s the blue ID.

And we’ve, we’ve, we’ve ever we’ve liked documented it. And here’s the process. And these is what was this is what we learned, like, you people just if you’re in the business every time you put my hand up and you’re staring so much, you don’t necessarily have the the the the the ability to step back and say, what’s gonna make this thing more bulletproof? Yes, that’s where we come in and love to put guardrails around things and help people be accountable and define what success looks like.

 

Damon Pistulka  21:07

Yeah. Yes. Yeah, that’s so cool. Because it really is, when you do that, and and some of the things that we I tell you in the last two years have really changed in our business as growth by acquisition in the smaller, you know, million to $3 million. EBIT accompanies is going crazy. It was partially driven by interest.

But now it’s it’s really driven by if you take a good company, and you get your company set up well, and it’s growing, what your industry is not growing tremendously, you got a lot of growth by acquisition opportunities, if you’re set up to do it. And so I’m really taking those one to $3 million companies and EBITA and turning them into seven to $10 million, even to companies. That’s pretty, that’s a lucrative spot. If you can get in there for the owners exits.

 

Matt Haney  22:03

You mentioned something earlier around talking about mentorship. A large part of what to in this, this ties in to building a leadership team. That’s Yes. Ready for scale, large part of what these I’ve found the is a voice outside of the company. You would be you probably wouldn’t be but your viewers probably be shocked at the level of growth I see.

And people get the visionary off the screen or out of the boardroom. Yeah, that’s like, Oh, no. Because what I’m telling you is that most people aren’t investing in that leadership, talent, for mentorship. They’re seen as a conduit to getting business done or whatnot.

But when I when we come in, we give that voice to the leader, and then we start developing them and growing them and, and holding them accountable. Sounds like micromanaging it. They just want someone to ask questions of, they want to make sure that direction is clear. And giving that voice be it a mentor or outsource COO or your Vistage friend that you trust, just somebody to bounce ideas off of strengthens them and gives them more human.

 

Damon Pistulka  23:18

Yes, yes, definitely. Definitely. So as you’re as you’re helping these visionaries, now let’s let’s talk a little bit about the, you know, you’re an EOS implementer. And I know us

 

Matt Haney  23:31

just makes these terms so confusing. The integrators and miss the CO implementer is the person that sets up us. Yes. So we run EOS every day has an operational framework with our companies that we are Clos experienced, chief operating officers. And that’s what that’s what we do as fractional integrators. So yeah, using tariffs

 

Damon Pistulka  23:56

us me into No, it’s fine. Ya know, the I always get our soda wine, either way. So now, explain how you’ve seen. EOS are a business operating system changed the way the trajectory of a business and the leadership teams in it?

 

Matt Haney  24:20

Absolutely. Well, first, I want to give a disclaimer, I don’t make money off of Eos. I don’t pay us. Yeah, I don’t I don’t I don’t monetize myself off EOS. And I think because this right for every company. Yeah. Oh, yeah. And holes. But I think just like 8020 rule on everything else. 80% of it’s fantastic. Yeah. So what I will tell you is accountability is a dirty word sometimes, but for me, it’s not.

Yeah, because what I’ve seen firsthand myself is the onset of the word accountability brings fear. But the it because it’s the element of the unknown, right? But the long term value and benefits of that accountability are exponential, because what ends up happening, there is somebody that wants to document their success, and they’ve never known how to do it.

Yes, I’ve never known how to say to anybody, this is what I did. This is what it meant. And this is what it can look in the future. If you give a leader that and they can come back to the table. Here’s all the stuff I’ve done the last few years. First of all, what are you going to that external asset to the business? Yeah, it’s like that accountability. People are just like, these, this gives them purpose, and it gives them confidence. Right. And, and, and reinforcement. Right? Yeah, that’s what operating systems do is they? They force ability.

 

Damon Pistulka  25:53

Yeah. And the thing you’re spot on about accountability. It’s like, this is a word that we don’t even want to say, because we don’t want to talk about that I can’t get or you listen to visually, I No one’s accountable for blah, blah, blah, but whatever. But once you take the time to flip the script on accountability, and go, we’re just showing people what success looks like.

 

Matt Haney  26:18

Every single time Damon, I’ve been, I’ve been let down a couple times. But they weren’t the right people in the right seat. If you have the right person in the right seat. Accountability to them. Is, is incredible. Yes. Yes. Yep.

 

Damon Pistulka  26:34

I’m glad you brought up accountability, because we had I can over the years, I can’t tell you. How many people have told me oh, you know, accountability. No one seems like your account. Well, did you take the time to say that, you know, and I always use the example of, if I’m the person that’s supposed to take the trash out in our company.

If I know that I have to empty 27 Cat trash cans, and they’re all in these locations. That means a good day. It’s got to be that simple for me to know that if I emptied all 27. I did was to do and go home. It’s awesome. I did great. And when we don’t do that, as as vision or visionary leaders don’t do that, or they don’t have those things in place. Those people go home wondering, why did I do

 

Matt Haney  27:21

my job today? Yeah, am I gonna get in trouble for not doing something it’s it’s so simple. And you put I love that analogy, because it takes a clear, a clear, concise view of success looks like. That’s what those operating that we talked about earlier. allow is for, it’s for clear and in unforced accountability, because remember, we’re giving these leaders to help build these checks. We it’s not a top down approach. We sit around a room with the leadership team, and we come up what success looks like together. And if you don’t like what’s coming up, you’re encouraged to speak up and say that is accountable.

Sure. What’s, so let’s find someone else. And then by doing that, you’re giving that leader the chance to buy in to what success looks like, well, then if they don’t hit the numbers, or if we need to adjust them. They’re involved in the conversation, not receiving the information and forcing, you know, being forced to act on it. Yeah,

 

Damon Pistulka  28:15

yeah. That’s, that’s awesome. Because I do I do, and I don’t make money off of us either. You know, I just, I just think that, honestly, I’ll be real honest, I think that, you know, you know, EOS is a combination of a lot of other people’s writing over the years in business who wrote the book in 2006. And, and let’s be honest, I was practicing this junk right here you know, so but but they’ve done a really good job.

I think a really good job of putting it together and making it really simple because you said one thing I think it plagues visionaries, is you have to understand the right people in the right spot. And one of the things we run we’re we have a client now that’s they’ve got a full time integrator in there.

And and one of the things that we’ve been dealing with is get it one the capacity to do it, and everybody has to be in the right role they have to get what that role means they have to they have to have the capacity to do it and they have to want to do it. Don’t have one of those three, it doesn’t matter if they’ve been there a long time. Or it’s your your buddy from high school,

 

Matt Haney  29:31

right? They’re in the wrong spot they are and that’s the that’s where I tell people get outside perspective. And I bang over the head with them get outside perspective don’t don’t just like go get somebody else to come look under the hood.

You know what you know you’re not you know, work on your own teeth. You know, if you’re if you’re a dentist, you don’t work on your own teeth, you need somebody else to look at it and, and business operations is no different than that and that you sometimes most all the time, need someone else to look from the outside end. Hey, I’m not sure this person’s in the right seat, they might be the most last employee, but they may devalue or add risk to your business, if you’re trying to transact. Yes.

 

Damon Pistulka  30:11

And when you talk about your leadership team, you’re building for an exit, it gets even more critical. Because they, they have to be able to communicate that well to the to and deliver that value in the future.

 

Matt Haney  30:26

I do have a quick question. And it’s on topic. And I know, I don’t know how much time we have. But I have a question for you around. What is your experience around sharing information with leaders? When you’re preparing a business? And what do you advise? Like your clients? how much information do you give the leadership team around exit? Like, hey, we’re prepping for exit or not, you know, it’s never never, you never talked about it.

 

Damon Pistulka  30:50

If you might have a C level person that understands that, hey, exits in the future, really? Okay, let’s let’s just back up a bit. People that are working in a business should know that that business will be for sale someday.

 

Matt Haney  31:06

Okay, so that beats aspirational discussion from the visionary

 

Damon Pistulka  31:12

teams, it’s like, Listen, I’m not going to be in this business forever. I’m going to get old. First of all, that’s one of the reasons why I’m not going to but but we’re going to have a viable business that’s going to survive far past me. Right. And if they begin doing that early, the team begins to understand that the business isn’t Damon, or it’s not mad, it’s it’s really, it’s the business has value on its own.

And when you start to treat them like that, this whole thing, this whole thing is yes, you don’t say, Hey, I’m, I’m actively selling the business, blah, blah, blah, because you’ll freak people out, right? But it doesn’t come as a huge surprise, because people are going, yeah, it makes sense.

We’re rocking it, it’s time for him to go, you know, we’ve done what they’ve done. So we don’t, we don’t generally broach the topic with people internally other than some C level people. But from an inside perspective, you really don’t know any difference, because it’s we’re trying to get consistently and incrementally better, every single day, every single week, every single month, you know, just just like you

 

Matt Haney  32:22

do constantly Yeah, and gradual gradual improvement, gradual improvement, it’s like last that because it’s like it’s I’m in an interesting spot as a fractional CFO or fractional integrator because I have the visionaries here and I have their the vulnerabilities that they share and the challenges that they’re coming to me with and, and I may know in one year that they want to sell, but the other air I’ve got, I’ve got the the leadership team talking to me,

and it’s like, it’s kind of hard for me to go Kelly, we really just need to ratchet another, you know, 50 basis points out of EBIT, ah, and then we can get to that bigger multiple, like, this is how we can do it. But But I can’t always go back to the leadership team and say, Hey, we need to get another half have them maybe flying the coop when when they learned he’s leaving or whatever. So it’s always something that comes up and goal setting.

 

Damon Pistulka  33:14

Yeah, and I think that, you know, this is where, if, early on, again, like I said, business owners are honest and say, Listen, I’m not going to be here forever. And then they can also start talking about the value of the business. And not in terms of selling next week, or next month or next year. But I’m concerned about growing the value of this business.

So it leaves a legacy for all of us people that work here and beyond the business. And if you if you approach it that way, and you’re talking about value, you can then go into those conversations, like you’re saying and say listen, we all know that Dave wants to builders are Sue wants to build value in this business.

And if we if we can get our EBIT, EBIT up by that, whatever you said, half a point or whatever point and that jumps us into a different multiple level. We’re all gonna look like heroes. Sorry, you know, it’s it. You’re really it’s, Hey, we’re all going to and I think that’s one of the things that business owners are afraid to say is, I do have something else that’s going to happen after this. Yep. Hard to admit it too hard to admit it. Yep. But yes, anyway,

 

Matt Haney  34:25

one, how are we doing on time we good?

 

Damon Pistulka  34:28

Oh, we’re good. We’re five or so 10 minutes. So one of the things

 

Matt Haney  34:31

I wanted to talk about and you brought it up earlier, and it’s something that I find myself working with a lot of clients on is this You mentioned the right person right seat. And this as it relates to building the leadership team for exit mate, how if we know we, you and me, the visionary know, we’ve got a leadership issue on one of our departments. And a lot of times those people are left in the business because it’s just easier to keep them. I mean times you just heard that just easier to keep them right now, they share a lot of information. They, you know, they’re the, they’re the the knowledge holder, right?

They’re the, they’re the cog in the wheel that keeps it spinning. So what I like to do is come in and be that person that says how, and I always tell visionaries, this, I promise you, I can learn 50 to 75% of what this person’s job is, as a leader in 45 days or less. And comfortably, say, if they walked out of the business tomorrow, I could assume their role for a finite period of time, and give you protection and ease that we can replace this person. I know it’s not going to be fun or easy.

But you’ve hired us to come in and help build your leadership team. And what that means is, it’s our responsibility to help transition that person to a different seat or out of the company. So two business owners that have a lump in their throat when they think about removing a person from the business, and they know in their heart that they’re not the right fit. Get somebody to help you. Like, you don’t have to be the bad guy. You’re the visionary. You’re the boss, you’re the CEO.

I’m somebody who’s got experience and transitioning out that person, because you will thank yourself when you do it. Eventually, it’s not going to be fun in the interim, but trust that most times the business isn’t going to fall apart if you transition that person out.

 

Damon Pistulka  36:29

Yeah, yeah. And you can be compassionate about it. And honestly, and I hate to say it. I do that a lot for clients. Yeah. So really, where we are, we’re, you know, might not necessarily be the one that’s learning the role and doing the transition, but, but making the tough decision and have the tough conversation. Because that outside perspective, they simply, visionaries have a very hard time at doing that, because of the things even when they know that people are not in the right spot. And the people themselves are not happy. That’s the other thing. They’re not happy.

 

Matt Haney  37:03

They’re phoning in their work. They’re just not quite there. They’re holding a big salary most times, you know, they’re one of the higher paid people. And yeah, it’s hard work. But it’s work. There are people like you and me who, who do it respectfully and help help visionaries realize that, you know, there is a better fit for that seed, and it’s going to add longer term value to the org. And yeah, short term frustration at the long term value.

 

Damon Pistulka  37:30

Yeah, yeah, definitely. And the other thing it does is it deflects the some of the if there’s ill will from that change. It’s not on the owner. That’s right, visionary, the visionary is not the one that gets the most of that. And it’s like, listen, they’re helping me do this, that, you know, blah, blah, blah. Taking that out, because they can continue in the other internal people can continue to do as well. It’s it’s really, it’s a key thing, though. It’s so key, because that one person on the exit could make the difference between you selling that business or not.

 

Matt Haney  38:03

I mean, think about it. If if we see it, you and I see it, sir, any wise buyers can see that this person is being defensive with information, they’re withholding things. They’re just not interested in our conversation. Man, what a disappointment to get all the way through diligence to have a leadership conversation with somebody that falls flat. And the guy’s like, our guy, this is who’s running your font, your ops team, this this guy or gal that doesn’t care. It’s like, oh, I should have thought about that before they all sit down. And so

 

Damon Pistulka  38:37

yeah, and the thing is, it’s not usually a reduction in price, it’s usually a binary decision. And so now we’re gonna pass. Yeah, yeah, that’s the thing because the the, the, the risk tolerance of a buyer is gradually or a seller, the owner is gradually increasing over time, as that business gets bigger, the risk is a little more over time.

But they’re also you know, if they’re profitable, they’re, they’re growing that risk without much debt and or, you know, a little bit of debt here and there, it’s going down, but that risk is growing over time. But when you think about the buyer, whether it’s an individual or private equity you’re walking in, they’ve just taken on that whole load of risk right there. Yep, one step walked in and took it all on.

 

Matt Haney  39:22

Yep. And wrote a big check doing it and wrote a

 

Damon Pistulka  39:27

wrote a big check. Yeah. And they’ve not run the business before. Right? They’ve not run that business. I don’t care if you’re in the same industry, I don’t care if they have not run that business. That’s right. So so the better off you can you can mitigate these risks and do it the better chance you have gone through it, but that that risk difference between the person that owns a business today and the buyer tomorrow is so drastically different. So

 

39:52

does that.

 

Damon Pistulka  39:53

If you know it might sound like what you’re saying, Oh, you can you know if I got one real strong person My my leadership team and the others aren’t, he really doesn’t work that way if you if they’re not going to going to be able to hold hold their own.

 

Matt Haney  40:08

That’s right. And how many times have you heard somebody say, Oh, I like this business, but we want anybody to run it, or somebody to run it, who’s going to run it when the leader when the CEO steps down the vision of sound? And that’s not to say, Hello, if you’ve got a decent leadership team, they’re doing the work. They’re doing the work. They’re doing the work, they’re gonna run the business. Yeah, they are. That’s, that’s the plan.

 

Damon Pistulka  40:29

We had to get. We had a an owner last year that almost did a textbook. I don’t know how you could do it any more textbook than he did. He hired a CEO about a year and a half before his exit. He got the CEO, running the company with his leadership team running the company, the CEO was the one making the big deals like this, I just want to say this, the CEO that he hired was the one making the big deals. Now the owner was out. Hunting, yep, finding some big opportunities.

And then he would bring the CEO in and let the CEO close the big deals, or just let them know that there’s a big opportunity, let him close the deals. And they and he was enabling growth. And he had a couple years of nearly 100% growth. And then the third year he had about 70% growth. And when that thing went up for sale, it was like wildfire. thing.

 

Matt Haney  41:33

Yes. Yeah. I mean, it’s intentional thought around structure.

 

Damon Pistulka  41:38

Yes. came down to came down to a bidding war between two people. He walked out with almost 95% of his money at the close lobby, and about 20% higher value. Love it, and we thought it was gonna get

 

Matt Haney  41:53

that’s so good. Again, it’s, yeah, it’s kind of like saying, and this just popped in my head because I’m buying a car. It’s like you’re getting the Carfax of the of the of the business, when you’ve got a leadership team, and they’re telling you all these things, and it’s like, Would you ever buy a used car without a CarFax? No, you wouldn’t. You’d want to know that it wasn’t in an accident. It hasn’t been flooded. What are these things? It’s like, that’s sort of what you’re doing with the leadership team. Right?

You’re Yes, Your Honor. Putting you’re putting a you know, a bit of some guardrails, some warranties reassurance and I just think it goes so overlooked. And there’s I think a lot of it has to do with ego and ignorance. Honestly, I don’t say that negatively. I just mean, buyer sellers, business owners are ignorant about what it takes to transact. And they need they need more direction and wisdom. And a lot of times putting their leadership team through training or investing in operating systems is at the front of their mind.

 

Damon Pistulka  42:51

Yeah, yeah. So yeah. And it’s, it’s something that that, you know, the people that have done it and seen it succeed. That’s why we get so passionate about it.

 

Matt Haney  43:02

It’s yeah, because it’s yeah, it’s true. You can’t deny it. It’s true. You’re exactly right. You’re exactly right.

 

Damon Pistulka  43:09

Matt, it has been absolutely incredible, dude. It’s so much fun talking to you about this, because you’ve been there, you’ve helped a lot of entrepreneurs and missionaries, you yourself have gotten through the process of building and exiting companies and and being around exits. And, man, so great to talk to you about building a leadership team for your exit.

 

Matt Haney  43:34

Well, I’d love to tell you for a second about what we’re doing it we’ll sedge. Yeah, so I’m, I’m a fractional coo. And what that means to, to most people that aren’t familiar is I’m brought in by visionaries or CEOs to help essentially co run their business add structure and formality. And there’s 12 of us over at Wolf sedge. We are all all experienced executives.

And we all love growing and scaling businesses. And we work fractionally so what that means is we work you know, basically an hour, I’m sorry, a day or two a week with several different clients. And our goal is to get them in, you know, three, six months, 912 engagements, get them in and out. And our job is, is based to our success is based on transitioning or graduating you into that. So that’s what we do every day all day. And that’s awesome. Find us online. It will search integrators all over LinkedIn all over the internet. And yeah, that’s what we do.

 

44:29

Yeah, the guy. You I always say guys, and I want to just peel people, the guys and gals. Yeah, because fo lots of great, folks. There

 

Damon Pistulka  44:41

you go. There you go. It’s, you know, I will said you’re doing some great work there. We’ve

 

Matt Haney  44:46

got an incredible team Damon. Yes, yes. I love

 

Damon Pistulka  44:49

  1. It’s so much fun. When you get to talk with experience people like yourself and others on your team. They’re at Wolf’s edge and really see the value that that people can access if they choose to.

 

Matt Haney  45:02

That’s right. That’s exactly right. Very well said.

 

Damon Pistulka  45:06

Well, Matt, thank you for being here. I want to thank Alana, thanks so much. She talked about Yes, she was talking about this when we were we were going through that projections and how you’re done. You’re talking about the scorecard and the length of time it’s so awesome to see that and thanks so much for being here everyone. If you haven’t heard this whole thing and listen to Matt, go back to the beginning.

I mean, there’s some real real golden here he was dropping and also follow up with Matt on LinkedIn here. Matt Haney ha N EY in and Sinclair ventures just thanks so much for being here. Thanks, everyone for listening. Love it. Thanks for talk to you soon. Be back again next week. Take care hanging out

 

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