Armando (0:02 – 1:48)
Hi, I’m Armando Roman, host of the Founder’s Guidepost. You’ve built your business over decades, and now it’s time to think about that once-in-a-lifetime exit.
You’ve come to the right place. Here, you will hear business exit professionals talk about what you should know before exit. Besides hosting the Founder’s Guidepost, I’m CEO and founder of Axiom Founders Family Office, a Scottsdale wealth management firm helping founders and their families preserve their American success story.
We oversee and coordinate a network of vetted professional advisors to help maximize their probability of achieving everything that is most important to you. And we host the Scottsdale Founders Forum, a biannual live event for the founder considering exiting in the next 36 months. Here’s to your hard work and your American success story.
Enjoy. Hello, this is Armando Roman with the Founder’s Guidepost here today with Richard Dickens of Dickens Quality Demolition. Richard, you built your company years ago and then went through that sale process.
And I’ll just give a very quick introduction of you. Richard built this company from scratch and has become Arizona’s largest demolition contractor doing work in Arizona, but also throughout the Southwest. And Richard, you definitely are one of those American success stories that many business owners would look at and think to themselves, they want to do what you’ve done.
They want to have the success that you’ve had. So in this conversation, let’s talk about the exit, about when it was time for you to sell and that. So Richard, welcome.
Richard (1:49 – 1:50)
Thank you. Thank you.
Armando (1:51 – 2:12)
So Richard, let me ask you, when you had your company about 22 years when you actually exited the company, but how did you know it was time? How’d you know it was time, that it was time for you to look at the next phase and begin to go through that sale process?
Richard (2:14 – 3:46)
Well, for me, it started with just kind of understanding my own mind and my wife’s desires, you know, how we wanted to spend our time and kind of this second half of our lives, if you will. And we had reached a place where both of our daughters were through college and were really kind of starting their own lives. And financially, we were in a place that it seemed like we could start to really take a look at the possibility of transitioning out of the business.
And then I think from the work standpoint, we were continuing to grow. So the needs of the company itself were kind of getting a little bit bigger. And meanwhile, I was wanting to maybe not have that be the case, because I was at a place in my life where I kind of wanted to start to maybe slow things down.
But just the momentum of the business itself was definitely continuing to need more commitment from me. And so it was really that, you know, really kind of seeing that the business needs more of me and I want more of things outside of the business. So it just became obvious that I couldn’t, you know, it was going to be difficult to have those two opposite forces pulling at me.
So I needed to make a decision.
Armando (3:46 – 4:17)
You know, when I asked you that question, you started with your family. And I’m glad you started there, because really, when you’re going through such an enormous transition as you did, with letting go of the business and transitioning to a new owner, it really needs to start with, are you ready from a family standpoint? And it sounds like you were.
You were having dialogue, it sounds like, as well as with your wife, and talking about it and what that might look like. Were those easy or difficult conversations? How was that?
Richard (4:18 – 6:13)
I think that they’re fairly easy conversations, but with a lot of depth and and, you know, pieces to those conversations. You know, I’m fortunate that my wife actually helped me start the company and worked for the company for eight years. So, you know, she had a feel for the kind of stress and pressure that being, you know, involved in the day-to-day activity of the business, you know, she was familiar with it.
So it wasn’t like I was speaking a different language to her. She had lived it and worked it. And so she had a great understanding of what, you know, what I was dealing with from an executive level.
And then, you know, I think it’s important for us to have, you know, to make sure that we’re on the same sheet of music. And just with our goals and our desires, whether it is from, you know, just from an income standpoint to how we do see spending our time, not that we got to, you know, agree on every little detail, but I think it’s important that we, one, understand financially what our needs are as a couple. And then how do we balance that with, you know, kind of have that work-life kind of balance.
So I think that I’m fortunate that, like I said, I had a wife that was involved in the company, so knew what it was. And then also both of us were very involved in kind of our finances and, you know, our budget and spending and stuff like that. So, you know, like I said, I’m real fortunate that me and my wife have always kind of been a team in regards to that.
So, you know, for the most part, it was easy, but a lot of, you know, a lot of pieces to figure out for sure.
Armando (6:14 – 6:35)
Yeah. Good. And that matters.
That matters going into the sale and then beyond that, that matters. It’s critical because when the business, when you’re no longer hands-on in the company, that is what matters, that ongoing family, that ongoing relationship. So having that dialogue, those conversations before really helps set the stage for the time after.
Richard (6:36 – 8:48)
Yeah. And I think it’s important to also, you know, understand expectations after, you know, if you’re the type of person that has been out of the house 60, 70 hours a week, and then all of a sudden, you know, that’s going to change. I think it’s important to be thinking about what are you retiring to and what my activity is going to be.
Like I said, not that I think that you have to have every single little, you know, hour of every day planned out, but I think it’s important to realize that. And I think it’s important to go into that time of your life to make sure that your life outside of work and business is in check. I think that as a founder and as a leader, a lot of times we just put so much time and energy into leading a group at work that sometimes it’s our family that kind of gets the leftovers.
So I think it’s important before you actually move into that stage that you, you know, you’re not just coming home in the evening sitting on the couch and not engaging with your family. I think it’s important to have that strong kind of family interaction. Me and my wife have been empty nest for quite some time now.
So it’s, you know, really just me and her for the most part. But like I said, to go from, you know, a high level of commitment to the office and to the company, to how that’s going to transition and have those conversations. And, you know, like I said, some of it, you’re not going to have figured out, but I think that it’s important to have those conversations because the idea that I’m working 50, 60 hours a week, and then I’m just going to sleep in and go golfing every day.
I just don’t think it’s realistic. So, and I think that’s why a lot of guys, a lot of people that are founders, I think struggle with retirement, especially depending on their age. You know, I see a lot of people that have sold their business and, you know, within a year or two, they’ve started something else back up because they just, you know, didn’t have a good plan in place on what they were retiring to.
And that was the advice that had been given to me by a mentor that I had that just make sure that you understand what you’re retiring to and that you do the front end work to make sure that you’re ready for that change.
Armando (8:48 – 9:04)
Yeah. Excellent. I’m so glad you started there.
So let me ask you on day one, when you started your company, if you could talk about what it looked like at that point, and then fast forward to the point where you decided it was time for you to step out of the business. Fast forward to that time, if you couldn’t.
Richard (9:05 – 11:22)
Well, I think that when we started the company, it was all hands on deck. I mean, it was, and my wife actually worked for the company for a year for free on nights and weekends. And we had two young kids, four and seven, so raising kids.
And then I worked, you know, really seven days a week and 10 to 12 hours a day. And it was really just kind of mainly focused on establishing the foundation of the company, making sure that my vision of the work that we wanted to perform got, you know, transferred and handed down to the people I was working with and the people that were actually in the field producing. And that we were doing everything in our power to go above and beyond to perform at a level that our clients had gotten used to me, but really, you know, making sure that they understood what we had to offer so that the company would be viable and and had a strong foundation.
So just a lot of work. And I think that, you know, then when the decision was made to sell, I think that we kind of had to relook at all of that stuff and make sure that those that we were leaving the company in the hands of, and even the new partnership, that they understood the base foundation that the company was built on, what our clients expect from us and how to keep it being successful. You know, I think it’s easy to just think that you just come in and work hard and everything’s going to work out.
You know, I do believe that if you work hard that things will pan out, but you have to have a plan. You have to make sure that you communicate what expectations are. You have to be able to coach when expectations aren’t being met.
And then you have to be willing to take a break and celebrate when milestones are met or exceeded. And I think it’s important to do those things. So a lot of that, you know, kind of similar from the start to now that deciding to transfer the business, I think that really kind of focusing on what the company was based on and what I believe is important.
Armando (11:23 – 11:48)
And so, Rich, from a planning standpoint, how far in advance when you began to think about the exit, you know, whatever that was going to look like, how far in advance did you begin to actually plan and make some changes and do some things so that you could have that sale when the time was right?
Richard (11:50 – 16:07)
For me, I think that that time frame was probably a little bit shorter than most. I think from the time that I really accepted the fact that selling the business was really what was best for me and my wife, and then also best for the company and its employees and our clients. I think from the time that decision was made, that actual decision, that it was pretty quick for me.
You know, I would say within a year from the time that the decision was made that I actually hired a firm. We had gone through the process of interviewing firms and kind of narrowing that search down to who we felt was a good fit for us to work with. But it was probably only a year.
And then from as far as preparing the business for a sale, I’m really fortunate. I was actually thinking about this on my drive in today that I was really fortunate with the partnership that I have, that I’ve had in the business for the 25 years prior to the sale, in that we have always ran the business from a very, very, just a clean operation. We had four partners, three of which were active.
The three active partners all drew salaries. But then, you know, we all have different ownership percentages. So, we’ve always been a company that didn’t mingle personal stuff with business.
And I know that that can be difficult as a business owner. And it’s not always, you know, I think that when people think about that, they think about, you know, oh, you know, the company pays for a car that my wife drives, and that’s a perk because I’m the owner. You know, most people think about stuff like that.
But even down to charity stuff that’s important, you know, our company has supported charities that are important to me personally. And by me selling the business and moving out of that place of the decision maker on, you know, where are we charitable or not, it’s getting ready to go away. So, you know, so even things like that, not just, you know, dinners and going to games or whatever, you know, not just those type of perks, but even, you know, even charitable stuff, you know, all changes.
So, we’ve always ran the business in a very, you know, hey, this is business, that’s personal and don’t intermingle the things. So, we really, our company was what I would call very clean from that aspect. So, there wasn’t like a lot of stuff that we had to, you know, start doing differently.
But I would say that that’s something that really needs to be looked at because I mean, like I said, just from whether it’s golf or your entertainment or even charitable organizations that are important to you, if those are things that are really a result of you as a person and kind of perks for you, that stuff has to be looked at. And you have to have a realistic understanding of what that is. You know, I think that you have to look at that whole package, you know, and you’re getting paid this or bonus that, but all those perks as well, I think that they have to be looked at.
But for us, we didn’t have to do a bunch. But there are a few things, you know, definitely when it gets down to charitable stuff, because like I said, there are some organizations that are important to me personally, and then I’ve got to make a decision. Am I going to, you know, am I going to continue to support those, but now I’m going to support personally or, you know, just stuff like that.
So, I think it’s important for you to take a look at those things. But for me, you know, from the get-go, I’ve always, my partnership has always been one of keep personal stuff personal and business.
Armando (16:08 – 16:49)
Yeah. And that’s a very good point that if it had not been clean, and I use that word often myself, meaning clean the business is the business and personal family stuff stays out of the company in terms of even those gray area expenses, like maybe a car for the spouse, or maybe a family vacation or things like that. If that needs to get cleaned up and taken out of the company in preparation to sale, that can certainly affect the financials and can affect things that need to get cleaned up so that you are sale ready.
But since you’ve been running it clean that way the whole time, you didn’t have to go through that.
Richard (16:49 – 18:47)
No, I didn’t. And I had a really great understanding of what my personal expenses were. I think that going into something like this too, you have to have a really good understanding of what your personal expenses are and what I call your burn rate.
I think that a lot of times as owners, as founders and or high income producers, sometimes you just can be oblivious to that. And I know that that sounds ridiculous, even when you get into running the finances of a business and stuff like that. But even for myself and my wife who has a finance background, when you really truly track and then you create budgets based on historical data, it can really be eye opening.
But I think it’s important, once again, not only to understand maybe some benefits that you’re getting out of the business and what it’s going to take, but if you’re selling, I always say, if you’re selling the golden goose, you better make sure that you know how many golden eggs you need to potentially last you. Unless you’re just transferring it, hey, it’s one business, I’m selling this and then I’m starting this other one up, maybe that’s different. But I think that for this conversation sake and for myself personally, this is the business that really funded my life and my life spending and my life going forward.
And not only from spending, but also charitable support and stuff like that. And even stuff with family and everything that draws from your account. So yeah, I just think that it’s planning and all of that stuff is just…
Armando (18:47 – 19:10)
And so Richard, you mentioned about choosing a broker. Once you made that decision that it was time for you to transition out, you mentioned choosing a broker. How did you find the right broker to help transition you out of the company?
Richard (19:11 – 22:01)
Well, my process was that I actually had a business coach that kind of started the initial… I’d thrown a couple of names in the hat and then with his experience, he had a few names that… And honestly, he went through kind of that first round and narrowed it from 10 to five.
And then we really looked at brokers that had experience in the construction arena. And that really kind of narrowed us down to three. And then I just did interviews.
I did interviews and really through my interviews, I narrowed it to two. And then I brought in the balance of the ownership team. I brought in the three partners that had really helped me from an executive level, not only build but maintain the business and to see what their opinions were.
And at the end of the day, the four of us all landed on the same firm. So I think it’s important to actually go through the steps and do comparatives and really just go through the steps. I think that somebody that just meets with one firm and then signs them, I just feel like you’re not putting the work in and no differently than tearing a building down.
You have to put the work in upfront to make sure that the project goes smooth. And I think it’s the same in this area, especially when you’re selling your golden goose, you just want to make sure that it’s with the firm that is going to represent you and understands your desires. For me, and I think that for most anybody, founder, there’s definitely the financial aspect of it for sure.
But then there’s also, this is your baby, this is your baby that you raised from infancy, through adulthood. And I think it’s important to maximize your sale price, of course, but also to be able to have a firm that understands your wishes and desires with the business and the type of partner you’re looking for. And so like I said, for me, it was just a process that we went through.
And then I used the group that I had around me and then some wise counsel that I had around me as well to help me make that decision.
Armando (22:01 – 22:21)
Okay. So you interviewed several, narrowed that down, had your ownership team all have conversations with the prospective broker, and you all felt good about that broker and then chose that broker. And you had not gone through that process before, right?
Richard (22:22 – 22:24)
Never, never, nothing like this.
Armando (22:24 – 22:40)
So any thoughts you’d like to share about that process for the founder who has not gone through that before? Anything that you’d like to share that maybe things that were surprises or things you would have asked or should have asked or any thoughts you’d like to share?
Richard (22:41 – 22:47)
Well, I don’t know if there’s any major surprises, but I guess the biggest thing for me is…
Armando (22:48 – 23:06)
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Richard (23:06 – 25:26)
Is realizing that you don’t know everything. I think that going through this process no differently than my business. I think a lot of times founders go, I know what this business is worth.
I’ve been running this thing for X amount of time and this is what it makes. And so on a standard investment, it should return over this period of time. And here’s your ROI and looking at all this, this is what it’s worth.
But the reality is, is it doesn’t matter if you’re looking at taxes or looking at tearing buildings down or selling a building, people that that’s what they do, they know all the ins and outs. And I think that it’s important to hire professionals regardless of what you’re doing, whether you’re tearing a building down or you’re filing your taxes or creating legal documents or what have you that you get what you pay for. So I think it’s important to, the firm I actually selected, believe it or not, the initial assessment on the value of the business wasn’t the highest that I had received from the other firms and their fee was actually even a little bit higher.
So they say my business is worth less and their fee was higher. But in reality, they shared the process with me and why, where their valuation was. And they also shared that this is just an estimate and there might be a strategic buyer that makes this value even greater than that.
There could be things that we don’t know. So they went into it not with, hey, we know everything, but we’re going to work, we’re going to plan, we’re going to talk to everybody we can. So I just think it’s, like I said, you hire professionals.
I’m not going to go to my general contractors to talk about my health. I’m going to go to my doctor. So I think that you want to hire the best if they want the best done for you.
Armando (25:27 – 25:49)
Right. And that is something that does happen with founders that they feel comfortable, they feel that they can do that. But just as you said, when you hire a professional and that’s what they do day in, day out, they’re probably going to be pretty good at it and they’re probably worth the money to hire them to have them perform their expertise for your benefit.
Richard (25:50 – 25:51)
Yeah, totally agree. Totally agree.
Armando (25:52 – 26:19)
And so Richard, as you went through that process, you hadn’t gone through the process before. Now they’re out there looking for prospective buyers and then they were bringing you different people to look at. Eventually, you, the owner, you decided who was going to buy your company.
What was it about that particular company versus the others that you felt good about and decided they were the right ones?
Richard (26:20 – 28:26)
You know, I think that they really displayed that they understood just, I guess, the level of care that I wanted for my employees and my clients. You know, I really felt that they took the time to really get to know me, get to know the business, understand what was important and why we had the success we had. You know, there was a handful of different firms that looked at us and a few that were really looking at us more like just a piece of a puzzle.
And I get that. I mean, their goal was to build something that we looked like a good piece for what they were building. But the firm that we ended up partnering with and that we ended up selling to, I felt had a track record of understanding the importance of our culture and and, you know, just kind of their history and a deal or two that I was familiar with and companies that they had been involved with that I was familiar with what was important to those companies.
And it gave me a level of comfort. You know, the last thing that I wanted to do was to see what we had built just get ripped apart. And I just felt a level of comfort.
And like you said, with some knowledge of previous deals that they’d been involved with and companies and owners that had transitioned out, that had worked with these guys, really kind of, I don’t know, it just gave me a level of comfort, honestly.
Armando (28:26 – 28:55)
Okay. And then you stayed on, you stayed on after the sale. So you decided on that buyer, did that transaction.
And then part of the way you decided to exit, you actually stayed on. And you’ve been on with them for two years. You know, looking back, would you have done that again?
And really, why did you decide to stay on versus just walking away?
Richard (28:56 – 33:07)
Well, one, I’m very active in the business, you know, and so part of our valuation is tied to me running things, honestly. And it takes time to transfer that knowledge and whether it’s bring in others or promote from within, you know, that just takes time. So the reality is that part of it was just the necessity of the deal.
You know, they weren’t going to just, you know, sign the deal and let me walk out the door without, you know, showing the ability to repeat what we had done and give time for that actual transition. I’m active in the business. So part of it was just that necessity to make that happen.
And then also for myself, just to process, I think this is part of it. You know, I’m getting ready to start my last year of my three-year employment agreement. And I tell people that part of me honestly hasn’t even completely processed the selling of the business because, you know, the sale took place and, you know, a bunch of money came into my account and then went out to investments and charitable stuff.
And, you know, three days later, you know, I’m back at the office and I’m working and I’m running things. So some of it hasn’t really happened, you know, from a true emotional and just, you know, that physical transfer of power, if you will. But so, you know, so some of it was really by design a necessity of the business.
Some of it was to help me, you know, kind of really mentally be able to handle going from, you know, running this thing for 25 plus years to actually stepping out of it. And so for me, it’s been great. The partnership is fantastic.
The guys that are managing, you know, the new partnership that owns the company, they’re great to work with. There hasn’t been any, you know, I got a lot of warnings from people that I knew that had gone through it. And, you know, now you probably won’t even be there for 12 to 18 months.
And so I kind of had that in the back of my head that there is the potential that I get, you know, released early. But that hasn’t been the case for me. And I think it’s twofold.
I think it’s one, it’s me realizing that I no longer in the majority owner of the company, and that we have investors and we have a board and my job as president is to produce and to run the company and grow the business. And also, you know, staying with inside covenants we have, and, you know, and that’s different. And it’s taken a little bit of getting used to, you know, that for me.
But as far as working with the partnership, it’s been great. I really enjoy our partnership. I think they’re, you know, great guys, they’re smart, they respect my wishes, our employees, our clients, and they’re looking to grow the business.
So I think that the opportunity that this has reignited has been fantastic. So, you know, so for me, it’s been good. But I, you know, I do realize that in the next year, I’m going to have to kind of process that next, that next step, which is really, you know, kind of handing over control.
And I think I’m ready. But I’m sure there’ll be some times that, you know, well, there’ll be some, you know, I’m gonna have to mourn some of it as well. And I know that going into it.
And so Richard, I imagine about having good counsel around me to help keep my head screwed on straight.
Armando (33:08 – 33:18)
So. So I imagine that when your employees understood that you were selling, and that you were staying on, I imagine that that gave them comfort.
Richard (33:19 – 36:44)
It did. I think that in the first, you know, I communicated to them that in the first year, they weren’t going to see a lot of change that, that, you know, there would probably be a lot more closed door meetings. And, you know, there would be some partners that they would see around here today, here and there, but, you know, but the main day in day out operation that, that they, that the new ownership liked what they saw.
So, but I think that even when you communicate that to people, there’s always going to be, you know, fear. And, and, you know, we got through that first year and, and, you know, I think that people saw that, okay, you know, things haven’t really changed. And, and, you know, people are still being promoted and, and we’re still getting work and equipment and everything, you know, that, that, you know, it seems like things are continuing to happen the way that they have.
You know, in the, in the second year, we had some, some higher management kind of change out. We had a, one of our active partners was a CFO and, and, and she had had a retirement plan when we went into the sale. And so, you know, we, we saw our CFO retire who had been instrumental in the growth of the business and, and very, very involved and active and, and in the, in the company.
So to see her step out, I think that that, you know, gave people a little bit of fear, but, but, you know, we brought in a new COO and a new controller. And, and I think that people have seen that kind of smooth out and, and once again, seeing the company grow and people get promoted and opportunities and, and all of that stuff. I think that, I think that people have gone, okay, you know, they’re not just going to strip this thing down and, and we’re all out of a job.
You know, I tell people all the time, do you, you know, do your job, work hard and look to contribute and, and you’ll be successful, whether it’s here or somewhere else. So, and I think that, that, that, that they’ve seen that actually happen and are a little bit more comfortable. But I think that if I’m completely honest, you know, there’s, there’s, there’s some fear around the next year and the next, you know, we’re at that next stage, you know, we’ve, we’ve stabilized through the sale and, and, and managed through a transition of a key employee and brought in some new management and created some new systems and, and, and we’ve seen, seen them, those systems, those system changes be helpful and to us. But, you know, people are naturally afraid of how things affect them. And so most everybody here, they don’t necessarily know, you know, my end goals, but, but they know I have a three-year employment agreement.
You know, that’s usually the number one question that gets asked of me by whether it’s a client or, or even a high-level employee. So what’s your plans? How long are you going to be here?
And I just, you know, I share with them that, you know, right now we’re, we’re working towards transferring, you know, the management of the business and, and I’m not just going to abandon everybody, but, but we’re going to continue to work to, to have me be less and less the point person and, and, and really support kind of that transfer of, of management. So yeah.
Armando (36:45 – 36:54)
And transitions can be scary no matter what the transition is, because that’s part of our human nature of something new. We, it’s going to be a little uncomfortable.
Richard (36:55 – 36:56)
For sure.
Armando (36:56 – 37:46)
That’s normal. Yeah. So you’re, as you said, you’re, you’re, you’ve got a three-year stay on with the company.
You’ve just finished or finishing the second year of that one more year to go. So you really haven’t changed your day-to-day activity as, as, as will happen and say that a year from now. So you’re, you’re going to have to go through that yourself.
For sure. Are there things that as you look back at where you are now and you’re, you’re talking and say to a new, a founder who is thinking that he or she needs to begin to have that transition thought process of thinking about that, what would you like to share with them? What should they know that you’ve learned in this process that they should be thinking about that maybe they just weren’t aware of?
They just haven’t gone through this before.
Richard (37:47 – 41:21)
Yeah. You know, I think it’s understanding what’s important to you, you know, and where you place your identity. I had a conversation with a friend of mine that, that is probably at least 10 years older than me.
And, and it’s in a place financially that, that doesn’t need the business, but he, but he doesn’t see, he doesn’t, he doesn’t see himself. No, not running the business. And, and I think a lot of that is because that’s, you know, that’s where his identity lies.
And, and I think that it’s important. I think it’s very, very common, you know, and I would be lying if I said that, you know, part of my identity isn’t, you know, running this company and, and, and, and, you know, being the guy that people recognize as, as the guy that runs this company. So I think it’s important for you to, to really deep down, ask yourself those questions.
What’s important to you? You know, where’s your identity at? And, and do I need to shift maybe, you know, those, those views and, and am I going to be able to handle that?
You know, and if, and if you don’t know, then, then I would say maybe you’re not ready. You know, if it’s just that, Hey, I’m, you know, I’m exhausted all the time, then, then, okay, well, maybe it’s time to figure out a way to get a little bit more rest or, or rearrange your schedule. So you get a day off here and there, but, but I think it’s important for you to be really honest with yourself.
And then, and then, like I said, you know, for me, I’m really fortunate. Me and my wife, we, we’ve been married for a long time, but we, we enjoy doing stuff together. I had an uncle of mine, you know, just tell me years ago, honestly, that, Hey, kids aren’t going to be in the house forever.
And so when those kids are gone, you know, it’s going to be you and your wife. So before they’re gone, you better make sure that, that you guys actually have a relationship with each other. And your relationship isn’t just about paying the bills or getting the kids to the next practice, that you actually have a relationship with your wife and that, that your wife is a priority in the house versus just your kids.
So I think it’s important to really do some soul searching in that stuff. You know, whether that’s meditating in the backyard or, or whether, you know, I like to, I like to ride bicycles, you know, mountain bikes and stuff like that, but really get, get quiet and really, you know, maybe even do some journaling on what’s, what’s important to you. And, and, and, you know, cause like I said, for me, you know, for the last 25 years, it was, you know, build the company, take care of clients, take care of employees, you know, and have some fun, you know, take, take some time off, have some nice stuff, take some nice vacations, but really the business was the main driver.
And, and, and so I think it’s, it’s important to take inventory on, on where you’re at in that cycle. And maybe what are the changes? You know, there’s different exercises you can do in that, Hey, when I retire, I want to this, you know, or that, or this is what I want for my life.
Okay. What are the things I need to do today to make sure that I get to that place? You know, that those, those things are possible, you know, that you do have done this exercise in a couple of different seminars, but, you know, where the church just say about you, you know, at your funeral and you write these things down and you go, okay, what are the things I need to do to, to make those, those, you know, actually happen and then do the work, you know, and if you’re, you know, so I think that that, that kind of same type of exercise with, with the transition of business or prepare yourself, you know, that you go through that same process.
So.
Armando (41:21 – 42:45)
Yeah. Yeah. That’s very good advice.
And, you know, it’s been said that about 80% of people founders after they sell a year later, they regret it. They don’t feel good about what they did. So what you’re drilling home about making sure you do that soul searching and you know, do it somehow some way with your spouse so that you, you both feel that is, it is the right thing.
And then when it is done, you feel good about it. It was the right time. It was the right decision.
And you’re not having the regrets that most people do or that many people do after that sale. Okay. And so Richard, I do want to ask you a question about, you know, legal.
I’ve heard many attorneys say that, that they get a call often from their client, that the client’s already signed the letter of intent and had many conversations with the attorney. I mean, with the buyer perspective buyer, before they engage the attorney, the attorneys tell me that the clients just don’t want to, they don’t want to pay the lawyer, the fee. They’re being what’s that expression?
Penny pound wise and penny foolish or something like that. So when you were thinking about that and made the decision, when would you say would be the right time to begin those conversations with the attorney to help you get that to happen the way you want it to happen?
Richard (42:46 – 46:03)
I would say before you start the search for a firm to even market your business, you know, I think that for me, and really, I believe for most, you really have to to understand the, the, the people that you need, really protecting you through this process. So, so for me, you know, I believe that, that, you know, your accounting firm and, and, and your attorney and, or an attorney that, that is skilled in, in selling a business and all the nuances that come to that with that is important. So I, for me, I would say, gosh, probably even before you even start, before you even made the final decision, you know, just because there’s so many, you don’t know what you don’t know.
And so, you know, like I said, for me, we started those conversations with our attorney and our accountant, and I was fortunate that my attorney had managed through numerous business transactions and one of his specialties. And, and so, so to me, you really, that’s, that’s almost the starting point. And for me was actually part of what was involved in even deciding to sell, because I didn’t know exactly, you know, I just knew that, hey, you know, around 55, 56, you know, it’d be nice for me to not to, you know, not to be doing this anymore.
But, but it really was, you know, meeting with my attorney and our accountant and really understanding the legality and liability that I had. And even after the sale that I’d still have and, you know, and then re, you know, and even the tax, you know, the tax part of it, you know, when you have accelerated depreciations, you know, and it’s everything that is involved, you know, you go from, hey, we did this much work, we made this much money to all of, you know, just everything that you have to manage through from the, from the legal and tax. So, so for me, I think you got to engage. I would say that, that that’s probably the first people you have to engage even before you do anything, you know, because I think that they can help you understand also, hey, you know, this is where you’re at, you know, this is where you’re actually at, you’re, you might be five years prior to even, you know, being at a place where your business is ready to look at selling.
And I think that if you have the right professionals in that arena, you know, working with that and make sure that your, your business is set, whether it’s, you know, separating personal from business stuff, or, or truly understanding your tax liabilities and, and, or where are there opportunities to, to maybe shift some money around tax-wise and stuff like that. So yeah, I would do that first, for sure.
Armando (46:03 – 46:26)
Yeah, excellent. And you mentioned the word specialty when you talked about your lawyer. I’m glad you brought that up because there are lots of business attorneys out there, attorneys that do lots of things, but it is a real specialty, the buying and selling of companies and, and how important was it that your lawyer had that expertise as you were going through this process or began to think about this process?
Richard (46:28 – 47:41)
Yeah, to me, you have to have somebody that, you know, and I think that you just have to, so how important? Extremely. So, you know, and once again, you get what you pay for, you know, you know, when you start to add up all of these fees, you know, it’s, it’s easy for those fees between attorneys and accountants and, and, and, you know, M&A firms, you know, it’s, it’s depending on the size of the deal, you know, it can, it can, you know, deep into six, you know, potentially seven figures.
But once again, you know, at the end of the day, you, you know, I’m a firm believer in surrounding yourself, knowing what you know, understanding what you know, and then surround yourself with people that, that know what you don’t know. And, and, and I just believe that it’s pretty, you know, can you overpay for something? Yeah, I guess you can.
But I think that by trying to be cheap in that, in that arena, you know, at the end of the day, it’s probably going to cost you money. So.
Armando (47:43 – 48:04)
Yeah. And it is for many founders a once in a lifetime event, right? You know, the biggest asset that you own, you don’t want to, as you said, a few times, you don’t know what you don’t know.
And if you don’t get the right expertise on board, and they don’t know either, then the one that pays the price is you, it’s the founder.
Richard (48:05 – 48:56)
See, it’s just because nine times out of 10, the people buying, they know, they know, you know, and so, and like I said, not to talk about it like an adversary relationship, but but at the same time, you know, you are on two opposites of that contract. And, and like I said, I love my partnership. But, but you know, there was, there was, you know, push and pull during the negotiations of the deal.
And, and, you know, some stuff that they felt maybe I was, I was pulling on too hard. And, and other things that maybe I thought that they were pushing on too hard. But at the end of the day, you know, I think that we both feel good about what happened.
And it was, it was the help of the, of the professional team that I had around me that, that I think helped me get through the process. So, yeah.
Armando (48:56 – 49:24)
Yeah. And as you said, they are professional buyers looking at you. They’ve done this before.
They’ve got the right expertise on board. And if you don’t have your, if you don’t have your team, that’s, that’s going to be able to go up against them, not to make it adversarial, but someone’s got to look out for your interest in that, in that once in a lifetime event. It’s just so critical to have the right people on board for that, for you.
I’m glad to hear that you had them.
Richard (49:25 – 51:41)
Yeah. And I think that the other thing to really realize is, and I actually had a conversation with the guy briefly just yesterday. It’s an exhausting process.
If you think that this is just going to be, Hey, I’m going to pay some people and we’re going to breeze through this. No, it’s an exhausting process. And I think that’s the other piece that having professionals on your side is, is that is that when you’re ready to throw in the towel, they’re like, we ain’t throwing in no towel.
They’re holding you up and helping you to kind of get through that. But it’s, you know, it’s an exhausting process. And, you know, probably about 30 days before I closed, I was meeting with, with the potential, potential buyers and, and somebody that they had done business.
I ran into them and they said, Hey, how’s it going? And I said, honestly, I’m exhausted. And he said, he said, it’s not going to get any easier over the next 30 days, but, but you’ll get through it and just, you know, remember why you’re here.
And, and, you know, before you know it, that’s going to be behind you, but because he had been through the process before and, and, and, you know, but he was, you know, kind of gave me that little bit of encouragement, you know, and I get back in there, you know, so that was nice, but it’s, you know, I mean, if you, if you go into this thinking that, Oh, I’m going to hire these people. And then, I’m just going to get a check in a year, six months or 18 months, whatever, however long it takes, you know, you’re naive. It takes a lot of work.
I mean, it really, really does. And, and for most of us, we’re still running the business. You know, I, I, you know, the truth is, is that your deal isn’t done until your deal is done.
So, so you better not take your eye off the ball and, you know, at the same time. So, cause you know, in my opinion, I think that you, the things that you do to run a business, to make it attractive for a potential buyer, the same things that you do, you know, a lot of the same things that you do as an owner to, to make the company viable and profitable. And, and, and, you know, I always say that I try to make decisions on running the business, whether it was attractive for a buyer or attractive for an existing owner to stay in, you know, from, from a financial standpoint mainly, but, but yeah, it’s a lot of work.
Sure.
Armando (51:42 – 52:04)
So given that it was a lot of work and it was exhausting and you were trying to run the company, of course, and go through this process, are there things that, that, that, I mean, now that you know, that was exhaustive that way, are there things that you would maybe advise or recommend someone do that might help minimize some of that? Or is it just the nature of the beast?
Richard (52:05 – 53:32)
Well, for me, I think, I think, yeah, that’s a hard one for me to answer. I think it’s, it’s partially the nature of the beast, you know, unless you’re not an active, you know, unless you’re not an active owner, but you know, the reality is, is most, most people selling a business have, you know, have a full schedule. I mean, I don’t, I don’t know of anybody, I mean, maybe there are people that, that, you know, just hang out and they got, you know, four hours free time in their schedule every single day.
And they’re just looking for something to do, like reread the same contract, you know, 27 times, but, but for the most part, you know, most of our days are full, you know, most of us, most of us don’t sleep eight hours a night, you know? And so I think that going into the process, you need to be realistic, you know, you need to be realistic with your schedule. I would, I would advise that that you carve out time, you know, that, that, hey, you know, what are the things you can give up?
You know, I guess I mentioned, I love to ride bicycles and stuff. And, you know, I ride three, four, five times a week. Not when I’m selling the business, I can’t.
And, and, you know, keep the things that are priority to you, you know, make sure that you’re taking care of your family and doing those things. But, but I think that realistically, you need to, you know, you need to look at your vacation schedule and all of that stuff and be appropriate. You know, it’s an important time.
So I think that it has to be given the time and the attention that it needs.
Armando (53:33 – 53:52)
Yeah. It sounds like what you’re saying is that it’s going to take more time than you, than you probably know. Absolutely.
And prioritize and keep your own, your own sanity and your health so that you can go the distance on this. Absolutely. It sounds important.
Richard (53:52 – 54:05)
The last thing that you want to do is at the end, just go ahead, whatever, you know, just put it on fire. But you don’t want to be in that position. You know, you just, you want to be able to give it the energy that it needs, but yeah, it definitely a lot of long, long nights for sure.
Armando (54:06 – 55:50)
Yeah. Okay, good. Yeah.
That’s all good information. Any things that you, that you would tell a founder who’s, who’s, who’s hearing this conversation and they want to be able to emulate the success that you’ve had and they want to do the right steps. You’ve talked about having the right professional team on board.
You talked about engaging your tax CPA and your attorney early on in the process, even before you begin the process so that you know what you’re looking at and they can help guide and coach along the way you talked about how you, how you interviewed different brokers, narrowed that field down. And then when you had that narrowed down to maybe three or five, you had your, your owner team, all interview them as well. And then you all felt good about the one that you selected.
The industry experience was important as well. And then you, you, I think began about a year before you actually sold it to, to go through that process. But even before that, it sounds like from day one, you really ran this business as a standalone business.
That was not kind of an extension of your family and your family expenses. So it was clean using your words, clean from the get-go, which meant when it was time to sell, you didn’t have to clean it up. It was already clean.
And many founders do have to clean it up. And that takes longer to get to that point. Other thoughts that you’d like to share or as you’ve learned, and you’ve got other founders looking at you, asking you questions that you might want to share with them that could help them before they go through this process?
Richard (55:51 – 1:00:28)
You know, I guess one of the biggest, you know, probably even before I would engage my attorney and my accountant is my financial advisor. You know, I think it’s truly important for you to understand. And I think for the most part, you know, we quasi understand our financial goals.
But, you know, to really get a handle on, on your finances. And, you know, I know that we hate the word budget. I know that I remember when, I remember when my wife put us on the budget, you know, it’s like, Oh God, you know, but the reality is, I think it’s important for you to really, truly understand those goals.
You know, like I said, I’ve been very fortunate in that arena. And I think that, I think it’s important to have a financial advisor that truly understands what’s important to you. And, you know, and then that they honor that.
And for me, that was, you know, I grew up, I grew up with a really, really hardworking parents. My mom had a small business, my dad was a construction worker, and just very, very hardworking people. And so I think that, and they, you know, we never went without, we didn’t have a bunch, but we never went without.
And, but I think that even at a higher income level, I think I’ve always kind of had a little bit of a scarcity mindset. So I think it’s important to be able to truly understand, you know, your finances, investments, charitable organizations that are important to you, come up with a plan that allows you to, you know, to be in a position to be able to do something like this. I think you got to have a really, really great understanding of your finances.
Somebody told me once, and I don’t remember who it was, but I tell people this all the time, is that the 10 most important years in your financial existence is the five years before you retire, and the first five years after you retire, that you really have to have a solid handle on your spending, on what you spend. And like I said, that doesn’t mean, hey, whether you live on 50 grand a year, or you live on $500,000 a year, just know what it is. And then, you know, then you have to be able to maintain that, or have a realistic view of what life looks like after retirement, you’re probably gonna have more time, you know, your travel budget might go up, or your, you know, your hobby budget, whatever it is, you know, you’re not spending all this time at work, you’re probably gonna spend it doing something.
And so, I think that just being really in a good place with that is important. And then, you know, the other thing is kind of the charitable stuff, I think is important. You know, especially when you got, you know, people that depend on you, you know, whether it’s, you know, organizations or family members or whatever.
I think I just, I believe that that is key is really having a great understanding of that. And like I said, I’ve been very fortunate with having some really strong mentorship around me. But one of the first things I did is I sat down when I really said, okay, I think we’re gonna go down this road as I said, okay, what are the areas that I need to make sure that I have advisors around me?
And for me, it was legal, investment, tax, faith, and then kind of a business coach. So for me, it was those five. And then I seek them out.
And I said, okay, you know, hey, would you be willing to, you know, not spend a bunch of time with me, but you know, hey, maybe it’s once a month, a phone call and once a quarter, sit down and help me make sure that I’m, you know, that I’m keeping, that I’m doing the things that I’ve communicated to you that, you know, that I want you to hold me accountable for to help coach me in. And so I think it’s really good to just take that time to assess what, you know, what you need around you to feel good about the decisions you make. Many, you know, many advisors help us make, you know, good decisions.
I wouldn’t have, you know, three different people advising me on my taxes, because it can get a bit overwhelming at that point. But I think it’s important to have those people around you to be able to be honest with you and give you good advice. So.
Armando (1:00:29 – 1:01:17)
Right, right. No, that’s very good advice. And you mentioned, as you mentioned, you’re selling the golden goose, and you’re going to sell that golden goose once.
So once that happens, net attacks, how’s that going to leave the family? And will you be able to live the lifestyle that you want for the rest of your lives? And then when that when your time comes, what does that mean for your adult children, grandchildren?
How does that, you know, how does that also help you support your community, your community of faith, as it’s important to you, and making sure from a from a financial standpoint, that you can meet all those things that are important, and that you and your wife are both clear together as a team, that it’s, it’s understood, and it’s well planned out, as much as can be.
Richard (1:01:19 – 1:02:53)
Yeah, for sure. You know, I think there’s, there’s, there’s a lot of great books out there that talk about it. And I, you know, I think that you have to make a decision on where you’re going to take your advice from.
But, but, you know, making sure that your trusts and just all of that stuff is in place. Now, you know, that’s something that the reality is, as founders, we should already be, you know, we should already be doing all that stuff. But, but, you know, I’ve always felt like we’ve done a pretty good job at that.
But until we went back through and did our trust, and it was like, wow, you know, some of these decisions, you know, were made 10 years ago, and who is going to, who’s going to be, you know, who’s going to take care of our kids. And, you know, now our kids are both out of college, and we had to throw some of this stuff. And so I think it’s important to, to really, to really do that.
And, and, you know, and I think that you have to give yourself a little bit of wiggle room, you know, I, you know, I think that the idea that you’re just gonna have everything set in place, and, you know, the day of the sale, everything is already done. And, you know, we had done a lot of work and had, and really had gone into this whole process in a, you know, what I felt a very strong position. And, and we literally just finished revising some trust stuff a month or two ago, you know, that’s two years after the sale.
And, and, you know, I would advise that you do that quicker than that. But, but, you know, it just takes time to get through all of this stuff.
Armando (1:02:53 – 1:02:55)
And you’ve got to set those priorities. So yeah,
Richard (1:02:55 – 1:04:27)
set priorities, you know, and even, you know, deciding up front, you know, what you’re going to do from a charitable standpoint, you know, there’s, you know, me and you, Armando have talked about this before, but, you know, there’s, there’s, there’s opportunity to, to, you know, do some, you know, deferred, you know, you can give your money to the government, you know, you can give a chunk of money to the government and let them make decisions for you, or, you know, there’s some stuff that you can do before even deciding to sell your business.
Right. And, or at the time of the sale that, that help you kind of defer having to make some of those decisions, but being able to take advantage of the tax opportunity with, with donating, you know, to, to, you know, worthwhile organizations and stuff. And, and, you know, people sometimes get, you know, afraid that, gosh, you got to make all these decisions right now.
Not necessarily. I mean, there’s, there’s vehicles that are available that allow you to, to make a decision to donate, but not determine where it’s physically going to yet and take advantage of that from a tax standpoint and allow, instead of a charity getting this much, getting this much. And that for me is, is making decisions on, on where you’re, you know, it’s almost like self-directing tax dollars, you know, so, you know, and you’re going to pay some taxes.
I mean, if you make money, you’re going to pay some taxes. I mean, but, and that’s okay. You don’t want to have a problem with that, but.
Armando (1:04:27 – 1:04:34)
Yeah. And that really drills home two points, you know, the, the, what you said about engaging that tax CPA early on.
Richard (1:04:34 – 1:05:43)
Their parents and, you know, but the reality is, is that a lot of that stuff can be predetermined and pre-decided and, and, and, and if managed to accordingly take some of that pressure off and, and have your wishes be, you know, be met. And, and so, and I think it’s important to, you know, for next generation, for, for the, for your next gen stuff to be, to be involved in, in things that are important for you so that, that they understand, you know, maybe some of the decisions that you’re making, you know, that we engage our kids and, and giving and stuff that’s important to us. But I also don’t want to just, you know, completely just go, Oh, my kids know what’s important to me.
They’re going to, they’re going to carry on my legacy. Hey, that’s great. If that’s what you want, you know, for me you know, I, I, I don’t necessarily you know, I want to make sure that the things that are important to us, I want to support my kids and all that.
And maybe even get involved with some stuff that, that wouldn’t be on my radar. That’s important to them. But at the same time, you can make a lot of those decisions in advance and have your wishes be honored and not put that pressure and stress on the next gen and all that.
Armando (1:05:44 – 1:06:18)
So yeah. And beyond the sale where you can still engage, you can engage your adult kids and or grandkids or both ongoing, because as you said before that, you know, the company is going to, it’s going to be gone. And then, and then what, what do you after that?
And it’s good to plan ahead and it can be a very engaging philanthropy and charitable causes after the sale. And you can set that up before the sale in or during the sale for the best impact on your family and really position things well for what you do with your day when you’re done working.
Richard (1:06:19 – 1:06:20)
For sure.
Armando (1:06:21 – 1:06:47)
Good. Well, Richard, thank you so much for this conversation. It’s been very, very insightful.
You’ve been very freely sharing your experience and what you went through. And I’m hoping that, that a founder, other founders can hear what you’ve shared and they can use that to benefit their own family and their own goals and, and that as they go through their once in a lifetime exit. So thank you.
Richard (1:06:47 – 1:06:49)
You’re welcome. Thank you.
Armando (1:06:49 – 1:06:51)
Good. Richard really enjoyed this.
Richard (1:06:51 – 1:06:54)
Cool. Cool. No, great doing it.
And I enjoy talking with you.
Armando (1:06:55 – 1:07:30)
Hope you enjoyed this episode of the founder’s guideposts, whether exit is on your immediate horizon, or maybe 10 years down the road, there’s something here for you. And remember, we all have an expiration date. We just don’t know when that will be, which is why planning ahead is critical.
And if you’re wondering if you’ve missed anything in your planning, contact me to schedule your founder’s strategy call. You may call our office at 480-367-9000 or schedule a call at axiomcorp.com. Here’s to your American success story.
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