The Buyer of Your Business is a Full-Time Predator and You're Part-Time Prey - Armor Up with Kirk Michie: An EOFire Classic from 2022

0:01Light that spark fire nation JLD here and welcome to entrepreneurs on fire brought to you by high level, the all-in-one sales and marketing platform. On today's classic episode, we'll be breaking down the buyer of your business is a full-time predator in your part-time prey. Armor up. To drop these vibe bombs, I brought Kirk Michie into EO Fire Studios. Kirk is the founder of Kandor Advisors. For more than 30 years, he has worked with entrepreneurs, closely held business owners, and high net worth families to achieve their strategic planning, liquidity, investment, and legacy objectives. In today's show, we talk about how every successful business and every successful founder has figured out whether through impulses or versions of scaling, how to make their business more successful.

0:41Just because your business is successful doesn't mean it's valuable and oh, so much more. And a big thing for sponsoring today's episode goes to Kirk and our sponsors. Fire Nation, we believe this is your year to transform your business. Start your transformation by attending the world's highest rated business growth workshop taught personally by Clay Clark and featuring football star and entrepreneur Tim Tebow and President Trump's son, Eric Trump, at thrivetimeshow.com slash eofire. Again, request life-changing tickets today at thrivetimeshow.com slash eofire. Are you ready for the ultimate all-in-one platform for entrepreneurs, marketers, coaches, and agencies?

1:20Build funnels, automate follow-ups, manage clients, and even white-label your own software. Say hello to our featured partner, High Level and visit highlevelfire.com to start your free trial today. Kirk, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Hey, what's up, Fire Nation? I would say digging into the emotional side of why you're doing what you're doing and what you're afraid of and getting to the essence of that will leave a trail of breadcrumbs towards what can make you the most successful. Well, Fire Nation, I hope you were a little intrigued by our topic today about how the buyer of your business is a full-time predator in your part-time prey.

2:16So it's time to armor up. and it's hard to believe it, but most sellers of private businesses have regrets. They just think it's going to be the best day of their life and they're just left with regrets. So Kirk, share some of those regrets that these sellers have and how can we avoid them? Sellers don't often spend a lot of time thinking about the why of selling. They sort of get to a point where they're either burnt out and don't acknowledge it or are afraid of economic cycles turning against them or competition getting too great, or they just feel like it's time to retire or to move on and figure, well, I guess it's time to go find a buyer.

3:03And because they haven't spent time, you know, kind of digging into their why, they don't really get to an outcome that's going to satisfy them. And so when they get a wire transfer, or they get notification from their bank that the money's there, it's either less than they thought it was going to be, you know, because there's some structure to the deal that means they don't get all the cash up front, or it doesn't give them the endorphin release they were thinking they would have when they sold their business. And if you add that to the fact that they've now taken an unsystematic, but controllable risk running a business to more of a systematic risk of being invested in the markets and then add to that kind of an identity crisis, you don't have a great recipe for kind of riding off into the sunset happily ever after.

3:58And Fire Nation, that's what we want for you. We want you riding off into these sunsets happily ever after. So Kirk, a lot of sellers actually end up leaving substantially more money on the table when they leave and they actually end up selling. And we're talking about either the terms that they end up with or even the price when they end up selling that company. So can you talk about why this happens and how our listeners could avoid it if they're in a similar situation? The first thing that happens is that if you're a successful entrepreneur, chances are you have ignored over time a lot of well-meaning but poor advice.

4:39And in fact, your impulses, which may or may not scale, have caused a lot of your success. So the natural thing to do is to either do this on your own or do it with more familiar resources. So a lot of sellers don't seek out good M &A counsel and they don't seek out transaction professionals who have a lot more reps in the M &A gym than they do. So what ends up happening is they either give up way too much information too soon. So they equip their buyer with a lot of data that allows the buyer to kind of take advantage structurally, or they take the buyer's word for it in terms of the valuation of the business or they don't quite know how to structure the deal.

5:28So they don't know what to ask for or demand or which things to react to. And then afterwards, if they're sharing, whether it be at the country club or their YPO group or their Vistage group or somewhere else, what deal they agreed to, they find out that there were a lot of things that they could have either asked for or structured differently or focused on. And they think, well, I guess the next time I do this, I would do something different. But chances are they've spent 10 years or even 50 years building up that business and there won't be a next time. Fire Nation, this is a lot of food for thought because the reality is you are wanting to have this culmination of a sale of your business that's the best day of your life.

6:14You don't want the regret of leaving money on the table, agreeing to the wrong terms. So that's what we'll be talking through here as we continue to have this conversation. Now, what I want to go into next is the fact of the sellers. Should sellers hire Wall Street investment banks to optimize their sale? Is that a route they should take? Well, maybe. And I know that's kind of an amorphous answer. So here's the thing. Look, If the seller is pretty sure that they want their business to be sold in a semi-confidential auction, where the investment bank puts together a financial model and the materials and then creates a buyer universe and goes out to that buyer universe, and whether it be 20 strategic and financial buyers or 200 different kinds of buyers, and spray that information out there and pray for a good response back and hope to create some competitive tension to drive up price terms and control of legacy like that might be the right answer but for a lot of businesses an internal sale like a sale to management or a sale to employees or developing a successor and taking a step back and kind of becoming a limited partner in the business and taking distributions, or a narrower process where finding just the right buyer to create just the right structure so that maybe on an after-tax basis as a seller, you get more of what you want or need.

7:46Those might be the right ways to do it, but the Wall Street investment banks don't really have the right incentive alignment to seek out those alternative structures. And so, again, it could be the right thing to do, But it's important to look at the alignment of economics and then think about human nature in terms of who you choose as a transactional professional to get to the right outcome. So Fire Nation, I hope you're really sitting here taking notes, realizing that there's a lot of right ways to do things when it comes time to selling your business. And there's a lot of wrong ways to do it as well.

8:21And we're actually going to be getting into the six secrets of every successful sale when we get back from thanking our sponsors. I'm all about the basics when it comes to running my business, and there's nothing more basic and important than how you talk to customers and keeping your team on the same page. That's why today's episode is sponsored by Quo, spelled Q-U-O, the modern alternative to run your business communications. Quo makes it easy for your entire team to handle calls and texts from one shared business number so nothing slips through the cracks. No more missed messages or disconnected to conversations, everyone sees the full thread, which means faster replies and a better experience for your customers.

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9:40Are you looking to learn the proven processes and success systems that have been used to create thousands of millionaire success stories. See thousands of success stories and testimonials from real people just like you who Clay Clark has mentored and coached into prosperity at thrivetimeshow.com slash EO fire. Clay's proven business coaching program is month to month and it costs less money than hiring a minimum wage employee. Yes, it's month to month and it costs less money than hiring a minimum wage employee. Schedule your free personal 13 point assessment with Clay Clark himself today at thrivetimeshow.com slash EO fire.

10:13Because Clay only takes on 160 clients and only allows 300 attendees to each business conference, you will interact with Clay directly. See thousands of real success stories and learn about attending the Thrive Time Show two-day in-person workshop featuring football star and entrepreneur Tim Tebow and President Trump's son, Eric Trump today at thrivetimeshow.com slash EO fire. Become the next success story. Schedule a free consultation and request tickets to join football star and entrepreneur Tim Tebow and President Trump's son, Eric Trump, at Clay Clark's next business conference today at thrivetimeshow.com slash EO fire.

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11:52So visit highlevelfire.com to start your free trial and see why thousands of businesses are switching. That's highlevelfire.com, where marketing, sales, and automation finally come together. High level, join the revolution. Kirk, we're back, and I kind of teased to Fire Nation the fact we're going to be going over the six secrets to every successful sale. So can you take a step back, go through one by one, and then maybe give an example on every one of these steps as well for the secrets to successful sales? Yeah, absolutely. So these are, while not exhaustive, they're the six points that I've seen every successful transaction.

12:35We've been involved in almost five dozen deals, been at a due diligence level involved in two to three hundred more, and then have screened probably two or three thousand deals. And the ones that work out best for seller and buyer, but especially for seller, have some commonalities. The first one is the sellers are clear on why they want to sell. Now, this may seem kind of crunchy and amorphous, but here's where kind of the rubber hits the road. Like if the seller wants to have an all cash closing and kind of ride off into the sunset, well, then a financial buyer like a private equity firm, that's chances are they're going to give 60 to 80 % of the money up front and expect the seller to roll over some equity and play for a second bite of the apple, a second sale three to five years down the road.

13:29That's bad alignment. That doesn't meet the seller's why. So we need to find the right buyer to get to an all cash closing. So that's the first one. The second one is the seller's got to nail their financials. Look, every business sells at a multiple of its historical financial results, whether that be what's called the adjusted EBITDA, sort of a buildup from net income, or a multiple of revenue. And then it gets adjusted up or down based upon the persistency and growth in those numbers or the lumpiness in those numbers. So if the seller isn't clear on how the money flows through the business and can't represent that in their financials, it's not going to lead to a great outcome.

14:13Minimally, it's going to lead to a lot of confusion, a lot of back and forth. Then the third thing is that because the buyers are savvier than the sellers about M &A, they will typically try and start due diligence or asking a lot of information that may not be in the seller's interest to provide to them. They'll start asking for it too soon. And the seller, if he's not well advised, may give up too much too soon and be at a disadvantage disadvantage when it comes to the terms of the deal, which then kind of leads into the fourth secret, which is, look, as a seller, you've got to find the right advisors, whether that be savvy M &A attorneys, whether that be an investment banker or a transactional professional.

15:01One way or the other, find someone who's been through this a lot of times, who knows how to structure the deal the right way so you don't get taken advantage of, so that you don't leave money on the table, so you don't have to go back to work after you've sold your company, so that it really does meet all of your objectives. And then the last two are kind of connected. And that is, you know, make sure that the buyer meets your why. Right. So I talked a little bit about this on the clarity on the why. But make sure at the process of starting to talk to the buyers that you're talking to the right buyers and chase away the bad buyers quickly.

15:44bringing in a transactional professional will not chase away the right buyer but it will chase away somebody who's trying to like steal your company out from under you which then comes to kind of the sixth thing which is self-management and this again sounds a little crunchy but i would tell you that between reasonable people price and terms can usually get worked out but sellers oftentimes are their own worst enemies. They react to things that they shouldn't react to that are just common, you know, deal terms or questions to be asked. And they don't focus on the things that are going to drive the highest price or terms or legacy for the business.

16:24And so they either need to, you know, really kind of armor up on what I would call kind of the four agreements of due diligence, or seek the right outside advisors to make sure that they don't become their own worst enemy, because they have a sounding board on their deal. So Fire Nation, the six secrets behind every sale. And I think, Kirk, the most natural progression of this conversation is going to have to go to the why. Because there has to be a why behind the founder's desire to sell. Can you talk through what the why is for most founders' desire to sell that you found through the years? The most common why that the sellers that are referred to us or that seek us out through our website at least start with is the desire to sell the business and retire.

17:17But we tend to not take that at face value because it's more complex than that. A lot of times what the sellers really want is to be able to either do something else, be that retirement or invest in another business or to come to the office less often or not have the responsibility of managing people anymore or to not have to deal with the ebbs and flows of whether it be regulatory environments or economic cycles. So sometimes the why is as simple as, you know, the person's tired of going to the office every day or they're tired of dealing with HR issues or they're burnt out on their business.

18:03It provides great financial return and a great lifestyle, but they just don't want to do it anymore. And then there's also the, you know, in the last couple of years, it's been opportunistic. A lot of people that weren't necessarily at retirement age or hadn't planned to sell in the next couple of years have seen the buyout boom kind of rage away and lots and lots of money chase lots and lots of deals. And they're, to some extent, you know, in kind of what I would call FOMO mode. They're afraid of missing out on big dollars chasing deals. And so they go to market thinking, well, okay, I might as well sell now.

18:40And so, you know, being really, really clear about what it is you're trying to accomplish, not just what the headline number for the sale price might be, but how the right buyer or right new financial partner or right new structure might meet up with what you're actually trying to solve for as a founder. Because in many cases, selling to an external buyer and taking as much as possible off the table is not the right solution for a lot of people that are thinking about this decision. So Fire Nation, I hope you're thinking about your why when it comes to your decision to sell your business. And sometimes it's a little deeper than you might initially think.

19:23Now, Kirk, take the stage for a second here. You shared a lot today. You talked about the regrets, about how a lot of sellers leave more on the table. You talked about dealing with Wall Street investment banks, six secrets of every sale, the why. What do you want to make sure Fire Nation gets from our conversation today? What is the big takeaway that you really want our listeners to walk away with? Every successful business and every successful founder has figured out, whether it be through their own impulses, through some version of scaling, maybe a combination of, you know, kind of scar tissue and or coursework and whatever else, how to make their business more successful.

20:10But just because your business is successful doesn't mean it's valuable. You might have a really incredible lifestyle business that provides you and your family with a lot of financial return and lots of economic prosperity, but maybe 80 % of your revenue comes from one customer. And if that's true, then very few buyers are going to be interested in your business. So it's successful, but it's not valuable. Your business might feed 100 employees and keep lots and lots of people working really productively, and it might provide a lot of jobs and, you know, kind of concentric circles out in prosperity.

20:54But maybe it's got really, really low margins. And maybe you've got so much market share already that the next buyer, you know, can't really double, triple, quadruple, can tuple it. And so it's not that attractive for somebody to come along and buy it. So maybe it's more of a lifestyle business and maybe you can't drive a sale. And it's really, really important to think about as much as three to five years ahead of a potential sale, okay, I've got a successful business. How do I now make it a valuable business? And where Canada Advisors really thrives is in that what I would call kind of the fat middle part of our consulting process, where we help people figure out what their businesses are worth and what they could be worth with a little bit more financial control, a little bit better margin, a little bit less customer concentration, maybe some additional or adjacent product or service areas.

21:53because the difference between a really, really successful business and a really, really valuable business has to do with just a few strategic tweaks and a little bit different focus. And they're not at all opposed to one another. It's just that if it takes you 20 years to build a really successful business, it's worth taking another 18 months to make sure that it's a truly valuable business. So Kirk, give Fire Nation a place where they can go to learn more about you, connect with you and your business, any call to action you might have, and then we'll say goodbye. Excellent. Navigate over to candor-advisors.com or give me a buzz directly, 424-365-2525.

22:36We built a business so that I'm still very much available. We've got a great team here to work on things for anyone. And for many of those first phone calls, we can help quite a bit in a quick phone call and they never even have to retain us. So one way or the other, please reach out. Fire Nation, you're the average of the five people you spend the most time with. And you've been hanging out with KM and JLD today. So keep up the heat. And head over to eofire.com and type Kirk, K-I-R-K in the search bar. The show notes page will pop up with everything that we've been talking about here today. And Kirk, I just want to say thank you for sharing your truth, your knowledge, your value with Fire Nation today.

23:21For that, we salute you. And Kirk, we'll catch you on the flip side. Thanks, man. Hey, Fire Nation. Today's value bomb content was brought to you by Kirk. And Fire Nation, what can 3 ,000 of the world's most successful entrepreneurs teach you? How about how to achieve financial freedom and fulfillment? My first traditionally published book, The Common Path to Uncommon Success, is a revolutionary 17-step roadmap that will lead you to the lifestyle that you've been dreaming about. This book took me 10 years of accumulating the genius of the world's top entrepreneurs, and you can get it all in one place when you visit UncommonSuccessBook.com, and I'll catch you there or on the flip side.

24:05Fire Nation, we believe this is your year to transform your business. Start your transformation by attending the world's highest rated business growth workshop taught personally by Clay Clark and featuring football star and entrepreneur Tim Tebow and President Trump's son, Eric Trump at thrivetimeshow.com slash EO fire. Again, request life changing tickets today at thrivetimeshow.com slash EO fire. Are you ready for the ultimate all-in-one platform for entrepreneurs, marketers, coaches, and agencies? Build funnels, automate follow-ups, manage clients, and even white-label your own software. Say hello to our featured partner, HighLevel, and visit highlevelfire.com to start your free trial today.