[Speaker 1] (0:00 – 12:54)
Hi, I’m Armand Roman, host of the Founders 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 Founders Guidepost, I’m CEO and founder of Axiom Founders 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.
This is part three of the Scottsdale Founders Forum white paper that we put together. And a quick reminder of what the white paper actually is doing. It’s summarizing four live events that we had here in metropolitan Phoenix.
The events were targeted towards that business owner who had never sold a company before. And they’ve had their company maybe 20, 30, 40 years. And they had to think about their exit from that business.
What was that going to look like? Since they had not gone through a sale before or any kind of a succession before, this information to them was quite helpful. So this is part three.
Part one of this series was the questions that the founders had. Part two was all about the experts’ advice. And this one, part three, are the tips, the experts’ tips on what that founder needs to be thinking about as they go through that once-in-a-lifetime exit.
And those experts, before I tell you the tips, there are five of them, but the experts were these people. They were merger and acquisition attorneys, investment bankers, tax CPAs, private equity, philanthropic advisors, transitioned founders, founders who had already gone through their themselves. We had a Fortune 500 CEO on the panel as well, business advisors, financial planner, and family office CEO.
So these were the experts that came to the event who provided advice and shared their knowledge and expertise with the founders in the audience. The founders in the audience, a quick summary of them and their companies. They represented many companies here in Metropolitan Phoenix.
Enterprise value was estimated at $2.5 billion. That’s what was represented by the people who were in those seats who owned and controlled those companies. They had employees between about 20 employees up to almost 500 employees, all here in Metropolitan Phoenix.
Although this is where they were headquartered, it doesn’t mean they were focused solely in Arizona, in other states as well, but this is where their primary office was. So let’s get to the tips that the experts gave. There are five of those tips.
First tip is do not sell on your own because professional buyers may take advantage of you. Think about it. It makes sense.
When you are up against somebody who does one thing for a living, that’s all they do, and you yourself have never done this, then yes, they will know a heck of a lot more than you, and they could very well take advantage of you. Take advantage sounds like such a negative term, but let me phrase that in the words you might hear in the media. Their interest is in serving their stakeholders, serving their shareholders.
It is not in serving you. So if this is your company, they don’t care about you. 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 Founder Stress Test. If so, go to axiomcorp.com. You’re not their paycheck.
Their paycheck is their stakeholders, their investors. And when they can get a better deal for their stakeholders and their investors, then they are quote, doing their job the right way. So from your side of the fence, it’s how do you make sure that they don’t take advantage of you?
Then you don’t sell on your own. Point number two, exit is a specialty. Have the right professional advisors on your side.
So what that means is that when you think about the professional advisors, the people who are around you now, who have helped you grow that business and help you keep things where they need to be, it might be your intellectual property attorney. It might be your day-to-day business attorney. It might be the tax CPA who’s been with you since day one.
And they may be great at what they do. They also might know nothing about exit of a business. And if they don’t know, then they certainly are not going to be the best arrow in your quiver.
Meaning, make sure that you ask them if they understand about business sales. And sometimes people want to say yes, even if they don’t really have that expertise. So you might want to be even more direct and say, hey, how many business sales were you the lawyer on last year in your client base?
I mean, you were the lawyer, not your team, not your people, but you. You were the attorney who led that on behalf of the client. Ask the lawyer, ask the tax CPA, how many exits were you directly the leader on from the tax perspective?
Not you were involved in after the fact, not they told you what was happening and you just did the tax calculations, but where that tax CPA was actually understanding that space and leading in that space and adding value for you, for that founder in that exit. So again, point number two, exit is especially have the right professional advisors on your side. Point number three, understand all your exit choices before deciding.
And what that means is as you think about your exit, I would say, think about what you and your family, what’s going to serve you and your family and what is going to serve the employees in your company. So you really have to think about what are you trying to get to? And as you think about the different options, think about the options.
You could do an ESOP, an employee stock ownership plan, sell the company using an ESOP vehicle, sell the company to the employees. You could sell it to maybe one or two of your key staff. Maybe they want to buy it, but they can’t afford it.
Well, SBA has some pretty good deals out there that might be worth exploring. Or maybe you want to sell it to your employees and carry back a note. Great.
Maybe that’s the best choice for you. But before you make any decision, make sure you understand what those exit options are so that you can put those in the context of you and your family and your company and what is really going to be the best fit for you. So that was point number three, understand all your exit choices before deciding.
Point number four is don’t rush. You have one chance to get the sale right. Your family depends on it.
Don’t rush. When you get that potential buyer on the phone and he or she has all this urgency about them and they have to get this done before the end of the year or before the next quarter or before the next board meeting, that’s not your problem. That is not your concern.
Your concern is doing what is right for you and your family and your company at this time. So they may try to rush that deal for their own benefit and their own gain, not for you, not what’s best for you. So the point number four, don’t rush.
Take your time and engage the right people on board, but don’t rush the process. Don’t make hasty decisions because those are the people who are more likely to regret that decision to exit the business when they’re all done with that exit. You don’t want to be that person.
Don’t rush. Point number five, exit can help reach lifetime goals, which are financial, legacy, family and charity goals. So as you think about your exit and what that’s going to do for you, you’ve got to take a step back and think about you, who you are, where you are with your life, with your career, with your health, with all those things in the context of your family.
What is your family? What’s going to serve your family best at this time? How do you serve your family?
How do you help your family? And when you’re thinking about that exit, is the value of your company today, net of taxes after the sale, is the value of your company today going to put you in that position where you reach those financial goals? Or do you need to put your foot on the gas and maybe go a couple more years, work on the metrics, get the right person on board to help you understand what those metrics are, and just work on building that value before exit?
And what about your legacy goals? What is your legacy? What do you want that to be?
And only you can answer that question. Now, people like me can help you have conversation about that and maybe help bring clarity to it, but only you can answer that question about what your legacy is and what you want it to be. And what about your family?
Your family now, do you have little kids at home? Are they in college? Are they out of college?
Do you have no children at all? And yet, your family is the extended family, the siblings, the nieces and nephews, the parents, and others like that. In the context of your family, what is this exit going to help you accomplish with them in or for them?
What will it help you do that will allow you to do what you want to do for your family? And the last point there about charity, do you have charitable goals? And will this exit at this time help you achieve those goals?
And when you think about charity, I don’t want you to think about writing one big fat check to a charitable organization. Don’t think about that. Yes, that is certainly one way to accomplish charity, but there are lots of ways to accomplish charity.
You can do it over time. You can do it all at once. You can do it with a life insurance policy.
You can do it by volunteering your time, volunteering your family’s time. There are lots of ways that you can be charitable and have a charitable impact. Many people do that by serving on boards and volunteering their time.
But as you think about your charitable goals, again, think about you and your family and where you are now with your life. And what is going to make you feel like you’ve reached those charitable goals? Because again, more than one way to get there.
So I’ll just quickly recap again. The experts gave five tips. First tip, do not sell on your own.
Second tip, exit is a special to get the right advisors on board. Third tip, understand all your exit options before choosing. Fourth tip, don’t rush.
You have one chance to get this right. Don’t rush. And fourth tip, exit can help reach your lifetime goals, which are financial, legacy, family, and charitable goals.
I hope this helps. If you are thinking about your exit, this is maybe the last big decision you will ever make in your life. And it will be substantial.
In net of taxes, it has to be the right time and the right way for you. Hoping this information helps. If you have questions that I can help answer for you or that my team can help explore and get you to where you need to be, where you want to be, so that you are in that minority that feels great about exit, you did it right, and everything is good, and you wake up that day after exit, birds are chirping, the coffee smells great, and you just feel awesome because you did all those things that you needed to do when you exited. And you just feel fantastic.
That’s my hope and wish and dream for you. And I hope this helps. Hope you enjoyed this episode of the Founder’s Guide Post.
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 founder’s strategy call at axiomcorp.com.
And congratulations on your business success. You are the American success story.
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