[Speaker 1] (0:00 – 11:23)
Hi, I’m Armand 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 Founder’s Family Office, working with founders to help preserve their American success story. And it all begins with a founder stress test.
We also host the Scottsdale Founders Forum for the founders considering exiting in the next 36 months. Here’s to your hard work and to your American success story. Enjoy.
So this is part two of our three-part series where we’re going through the Scottsdale Founders Forum events that we had. We had four of those live events here in Metro Phoenix. At those live events, we had 150 founders come to the live events.
The events were focused all on exit, meaning when it’s time for you to step out of your business, what should you be doing? What should you be thinking about? And if you’ve never sold a business before, the Scottsdale Founders Forum events would have been perfect for you.
We’re having more of this here later, not right now. But what I’m doing with this video is talking about the white paper we put together, which is a summary of those four events, the questions the founders had, the advice the experts gave, and the tips the experts gave as well. For this one, I’ll give you first a little recap of that, the events we had.
Again, it was 150 founders who came to our live events, and there was a live panel of people, private equity people, tax strategists, CPAs, investment bankers, merger and acquisition attorneys, a variety of people on the live panel that I moderated. And in the audience, we had founders who had never sold a company before. They’d had successful businesses, maybe had that company 20, 30, 40 years, and now it was time to think about exit in the next five years.
So the event was focused for them, put together specifically for them. We put together a one-page white paper on that. In this session, I’ll be going through the questions, or actually the advice that the experts gave them.
So the advice, number one, start planning two to five years in advance. Selling a company is not like listing your home and putting an MLS and selling it. When they said start two to five years in advance, what they said is really prepare, get the company ready, clean up the financials, get your processes and procedures in place, get everything in place so that when you do sell, the buyer walks in and takes over a nice, clean company without doubts, without questions.
So that’s why they recommended starting two to five years in advance. Number two tip or advice that the experts gave, get your professional exit team together in advance. So the exit team is different than your normal team.
And what that means is there are people who specialize in exit and those who specialize in that do that on a recurring basis and they know more and they can help you more. So that professional team will be an investment banker and or a business broker and or some type of intermediary. And their job as the intermediary is to come in and help get your company listed, get an auction process going and help sell off your company.
And also the tax CPA, you might’ve had the same CPA for a number of years, but as he or she understand the working capital that has to get calculated and the other requirements that are very, very specific to the selling of a business. And then also leading up to that sale is this same tax firm that you’ve been working with? Have they been doing reviewed financials for you and or audited financials for you?
So that tax person that you might’ve had might be great at the taxes, but if they don’t do reviewed financials and you need those, then you probably don’t want to go to them for that because they’ll learn on your dime. And if they make any errors, who pays the price? The client does.
You. So you don’t want that, obviously. The third point the experts gave is be prepared to spend a lot of time resale and during the sale because things come up.
There’s what’s called the data room, and that’s where you store all those things that the buyer wants to see. And when you talk with a prospective buyer and you begin that actual process, they will ask you lots and lots of questions, ask you for lots of documents going back for a number of years. And when you’re getting that information together, it’s not like it’s right at your fingertips, easy to get ahold of.
Typically instead, you’ve got to go through files, old tax returns, old amendments to your corporate structure. Maybe you’re looking at resolutions into your corporate charter that you made many years ago, and now they matter. So that’s why the advice is be prepared to spend a lot of time resale, getting ready for the sale.
And during the sale, getting other things together that need to get forwarded and provided to the buyer as you go through that transaction. The fourth advice from the expert, operate your business as if you are going to sell, even if you aren’t. And what that means is be sale ready.
And there are a couple of reasons why that makes sense. And one is if you operate as if you were going to sell, you will operate a more efficient, more process oriented business. So even if you never sell, it will still help you run a better company and keep track of things better.
But what if you have a health issue? What if you have a health issue that suddenly sparks up and it’s going to take you away from the company and that just happens, right? That’s just life.
But when it happens, if you have this valuable asset called a business and you are not ready to sell that, but you have to, then if you’re sale ready, it’s going to be in your best interest because you will be much more prepared to liquidate and sell off that business if you have to. And often when that happens, it’s because there’s a health issue, either with you directly, the owner of the business, or maybe a health issue with your spouse. And now you need to be home more.
And so it takes you away from the company. So again, that fourth point, operate your business as if you’re going to sell, even if you aren’t. Great advice.
The fifth expert point, know what drives value in your business. So let’s say that you have five products that you’re selling. Two of those, you’re breaking even or going negative.
You’re selling them at a loss. Maybe they’re lost leaders for your company. But understanding what drives value in your business is going to help you focus on those because that is what the buyer will focus on.
What drives value. And I’ve heard it said before that when a buyer is looking at your company to buy, what they really want is a machine that produces cash. And anything that slows that cash down, anything that makes it more inefficient is not helping them to get you the best price.
So again, that advice, number five, know what drives value in your business. That’s product lines. That’s services.
What makes your company valuable? Are you wondering if you’ve missed anything in your planning? We hear that a lot from very smart, very successful people.
And that’s why you may want to know more about our If so, go to axiomcorp.com. Understand what that is. Number six, know what you would do after the sale.
And this is advice that the experts gave, but also as we’ve interviewed founders who’ve already gone through that exit, they all say the same thing. Know what you’re going to do after the sale. And the reason is when you’re going through that sale process, you might get caught up in so many due dates and so many things that have to happen right away.
And there’s this big rush and it’s very hectic, very busy at that time. And then all of a sudden, the cash gets wired into your account and all those people who are helping you get this to happen, they go away. And now it’s quiet.
That’s when you’ve got to have that plan in place of knowing what you will do after the sale so that you don’t go crazy or drive your spouse crazy because now you have nothing to do. So if you’re not sure what that is, think about it. What did you enjoy when you were younger as a kid?
What was fun for you before you got consumed with this company? And maybe think about some of those things that you can do now that you will have time. So again, point number six, know what you will do after the sale.
And the last point in the experts advice is you, the founder must emotionally and financially be ready to sell. And the emotional part of it is really you on the inside. Are you going to be ready to walk away?
You’ve built this baby from nothing and now it’s yours. It has you written all over it. Are you going to be ready to step away and be done with that company?
Because that is an enormous hurdle that you will have to get past. The financial part, being financially ready to sell, that’s easy enough to look at numbers, run numbers, look at net taxes, consider inflation, consider your expected longevity and what you want to do from this point going forward, what you want to do for your kids and or grandkids and what you want to do for charity and for the community at large. Those are number calculations.
So the financial numbers, those are probably easier to figure out than the emotionally ready part. Are you emotionally ready to step out of this company and be done? So again, those are the experts advice.
There were seven of them. There was a white paper on this. If you’d like the white paper, what you’ll do is click on the link and put your email in there.
And that email will then give you the ability to receive the one page white paper from our Scottsdale Founders Forum events. Again, we had four of them, four live events. 150 founders who’d never sold a business before came and they were greeted by a panel of experts who buy and sell companies for a living.
Private equity, tax strategist, investment bankers, mergers and acquisitions attorneys and others. So that’s what the Scottsdale Founders Forum events were all about. Hope you find this information helpful.
Hope you enjoyed this episode of the Founders Guidepost. Whether exit is on your immediate horizon or maybe 10 years down the road, there’s something here for you. Wondering if you’ve missed anything in your planning?
Schedule your 30 minute founders strategy call at axiomcorp.com. And congratulations on your business success. You are the American success story.
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