MAU 51 | Selling A Business

 

Being that businesses are often among a person’s top three most valuable assets, selling a business isn’t an easy process. There’s a lot to take into account, from the valuation to the buyer selection. At the end of the day, what’s important is that you are able to sell the business and get the most out of it. In a special episode of M&A Unplugged, Domenic Rinaldi joins the popular podcast, Nice Guys on Business, for an interview with host Doug Sandler. Together, Domenic and Doug discuss the process of selling a business. Looking to sell your business? This lively discussion between Domenic and Doug will definitely help you find your way!

Listen to the podcast here:

The Value Of A Business With Doug Sandler

We thought we’d switch it up a little bit here. I did an interview with The Nice Guys on Business when we first had started our show and we’re 50 episodes in now. It’s been a tremendous ride. I have appreciated all of the guests that have taken the time to be on the show. All of the readers and the feedback that we’ve gotten has been tremendous. We appreciate all the great reviews. I did this interview with Doug Sandler, who is the host of The Nice Guys on Business. If you don’t know The Nice Guys on Business, you should hop over there and check out that podcast.

Doug Sandler and Strickland Bonner do a great job. They have a tremendous following. They always have great guests across a broad range of skills and talents and backgrounds. It’s a tremendous podcast. Doug and Strickland helped me launch M&A Unplugged. They have another business called Turnkey Podcast that helps people get into the podcasting world. We thought we would air the episode where I was on The Nice Guys on Business. Things have changed since that time, but we’ll get back to deals being the way they were. We will get through this crisis and get back to better days. I hope you enjoy this special episode.

Have you ever dreamed about selling your business or thought about expanding your business through the acquisition of another? We’ll talk about a potential windfall of opportunity here. My good buddy and Turnkey Podcast client, that is a great cross-section of someone to have on the show, Domenic Rinaldi. He will make a potentially intimidating subject sound totally doable for you. Domenic is the Owner and Managing Partner of Sun Acquisitions and the host of the M&A Unplugged Podcast. He shares his stories, lessons, and the how-tos of everything M&A on the show. He’s legit. Welcome, Domenic, to The Nice Guys on Business podcast.

Doug, thanks. I appreciate being here. When you talked about the podcast, it’s been a bit of a journey getting there. Thanks to you and the people at Turnkey. You made it so awesome. We’re launched and I can’t sing your praises enough.

MAU 51 | Selling A Business

Selling A Business: There are lots of professionals out there that specialize in valuing a business. It’s beyond just the numbers.

 

I very much appreciate that, but let’s not turn this into a Turnkey commercial. I know I will have an opportunity to do that at every step of the way. I don’t want to do that. What’s cool about what you do is I thought this was hugely overwhelming, almost like the business equivalent of a spreadsheet to me. It was like, “I don’t want to know about it.” I only thought this was for big, huge companies. I had no idea that M&A, Mergers, and Acquisitions, was something that even smaller businesses could get in tune to. Maybe share a little bit about why this is something that’s in your world, how this even started for you, and share why this isn’t one of those things that’s only for billion-dollar companies that are out there.

Let me take the ‘why’ first, Doug. The ‘why’ is I was a potential buyer of a business. I go back to 2004, early 2005. I was in transition and I’m looking for the next thing to do. I had been in Corporate America and been in executive management for a long time. I knew that I wanted to do my own thing. I went out looking for the next opportunity. I wound up buying this mergers and acquisitions business, Sun Acquisitions. If you have any buyers in the audience, I was in their shoes. I looked at the universe and ultimately decided to buy something where I can help other people do transactions.

The second part of your question is it’s for everybody. If you own a business, the statistics are that your business is within your top three assets. For many people, it is their single largest asset. If it’s your largest asset or even top three, knowing the value of the business, understanding what the potential exit is of business is critically important. It’s not only important the day you decide to sell, but you should also run your business every day as though you’re going to sell it. If you do that, you’re going to maximize value. You’re always going to understand what your asset is worth, which puts you in a position of knowledge and leverage.

What does that look like? For you, if I remember correctly, your ideal sweet spot of a client is a company that’s doing between $2 million and $30 million or worth between $2 million and $30 million.

That’s correct.

How does somebody even begin to value what their business is? I don’t need you to go through like here’s every step of the way, but in a nutshell, how does somebody even know how much the value of their business is?

There are lots of professionals out there that specialize in valuing a business. It’s beyond the numbers. Without getting into details, the numbers are important and they inform the advisor on what the business is doing historically, presently, and what it might do in the future. As important as the numbers are, what are the key value drivers of business? For example, are you as the owner of the business? What I mean by that is, do all roads lead to you to get stuff done, or do you have a self-managing business? You can imagine if the numbers are the same and you have a business where all roads lead to the owner and nothing could get done without their decision making or they’re the key salesperson versus the numbers are the same and the business is self-managing. That business that’s self-managing is going to be worth a lot more than the business where the owner is the bottleneck to everything.

If you own a business, typically, the statistics will show that your business is within your top three assets. Click To Tweet

I want to put some level of relate-ability to that. I owned a DJ business and I’ve had it since the mid-‘80s. As DJ Doug, the business would not continue without me not because I think I’m so cool, but because people were hiring me. I never put myself in a position, maybe I thought it was, fortunately, but it’s unfortunately, in a position to have someone else be able to not only do the selling but do the act also. It didn’t have to be DJ Doug, but it could have been another DJ or a series of other DJs that are out there. I probably made a huge mistake in the many years in creating this business. I don’t want to say it didn’t have any value. It created a great cashflow for me. That was about it. When I decided at some point in my recent past, within the last few years, that I’m going to let this business go, there was no value to it because if you removed me from it, then it’s worthless.

It’s the difference between a lifestyle business, which is perfectly fine. A lot of people want a lifestyle business. If your goal and your objective are not to have something of value that you can resell later on, so be it. If you own a business and you want to someday monetize all the hard work, effort, goodwill and brand recognition that you’ve built up, it’s important to run that business so it can be turned over to new owners. There are many things that go into it that ultimately creates value for you as the owner of that business.

Tell me a little bit about what some of those things are. What creates value within a business contract that you have for future business coming in or assets that the business owns? What’s the stuff that’s got value?

It’s all of the above. We talked about the owner not being the business. That is key. Revenue and how you get the revenue and the trajectory and trend of the revenue. Do you have to go out and make a new sale every time or is there some terminal value to your clients? Do you have recurring revenues in your business? As you can imagine, a business where you have to go out and get the next client every time is less valuable than when you build a business where there’s recurring revenue. There’s a good example. How you run the operations of your business. Do you have operations manuals? Is there a roadmap for people to follow? You don’t need to be there. Thinking forward, if you want it to be sellable at some point in the future, do the new owners have the roadmap?

I love the idea of where you head with. It sounds like every time you bring on a new client, it’s almost like you have to be part soothsayer, part psychologist, part hand holder. It’s almost like you’re the expert in this case and you’re taking a business that knows how to do their business well, but you become an extremely trusted advisor in this merger or acquisition process. Does that sound fair?

We hope that’s the case. In a perfect scenario, prospective clients are coming to us a couple of years before they’re ready to sell because that gives us an opportunity to work with them on all of these things. We only hit on a few, but there are probably 12 to 15 areas that every business should be focused on that will maximize the value of their business. The worst call I get is an owner of a business who says, “I woke up this morning and I decided to sell.” “What have you done?” Invariably, they haven’t done a lot. I think the statistics are that only 20% to 25% of all business owners prepare their business for sale. Think about how much money owners of businesses are leaving on the table by not doing the proper preparation.

It gets to be pretty ugly. If you’re not doing the prep, then you can’t be ready for the outcome. All of the stuff that Domenic is talking about, if you want to get some hardcore facts about what he does, how he does it, it’s available on his website, which is SunAcquisitions.com. Let me get back into finding some stuff out for those that might be in our community that may be interested in selling their business or want to get some more idea on how to even value their business or what their business is valued. What are the kinds of questions that someone needs to ask themselves if they feel like they could be ready or they’re thinking about getting ready to sell? You said you’ve got to start a couple of years in advance. Ideally, that would be a good situation for somebody to come to you have already done the homework. What are some of the questions that they have to ask themselves to see if they feel like they’re ready to do this?

The place that I always start with clients is, “Are you emotionally ready, and are you financially ready?” Let’s take the emotional piece first. Why is now potentially the right time to sell? Are you curious or would you like to dip your toes in the water? Do you envision the next thing that you’re going to go do? For example, maybe you’re at retirement age, have a couple of grandkids, have a second home. Your vision is you want to sell this business, retire, and spend time with your grandkids doing whatever it is that you do.

When I talk to owners who can describe for me that next phase, I know that they’re mentally walking down the path to selling. They envisioned the next phase. Conversely, when I talk to owners who can’t spell out what they’re going to go do next, I always worry. I worry because if they wind up selling the business, even if they get the number that they were hoping to get, there’s a high likelihood that they’re going to feel remorseful. They don’t have the next thing to do and they’re lost. I’ve talked to a fair number of owners that are in that situation. They sold the business. They weren’t unhappy with the financial outcome, but they didn’t know what to do next and they’re lost without their business. They might have spent 20, 30 years in that business. It was a big part of who they were.

Sometimes one of the goals that somebody wants to sell their business is to take the cash out of the business, but stay working within the business. They would need to look for an owner or a buyer for their business that would be interested in keeping them on as a management consultant.

There are many ways to do that, Doug. You could sell the business outright. One good example that I have from a transaction that we did a number of years ago was for a very large paving company. The owner of that business wanted to get all of his chips off the table. Meaning he wanted to sell 100% of the business, but he was fine sticking around in some business development and sales capacity. We sold the business for him. He wound up working for the new owners under what was a one-year employment agreement. Six years later, he was still there selling. He was so happy he had given up all of the day-to-day responsibilities. He was doing what he loved. He was able to make money off the table, which he’s very happy about. There are also scenarios where people might look to sell a portion of their business. In our terms, we call that a recapitalization. You’re selling a portion of your business. You’re bringing in an investor. You might sell a minority position or a majority position and you stay on in some management or executive capacity and continue to operate the business. Either of those scenarios is possible.

MAU 51 | Selling A Business

Selling A Business: Recapitalization is a scenario where people might look to sell a portion of their business to basically bring in an investor.

 

If you want to get more information, Nice Guy community, about are you ready? Is this something that you’re thinking about? What the questions that you need to ask yourself and want to find out about how Domenic’s business runs, it’s SunAcquisitions.com. I want to head over to the podcast, M&A Unplugged. If you have not checked out the podcast yet, Domenic is not only a client of ours, but he’s also a sponsor of The Nice Guys on Business. You’ll be sure to hear a lot of the plugs for his show. I’ve listened to some episodes that have aired so far.

I can tell in a number of these cases now. I don’t know if all of these clients that you’ve had and you’ve done hundreds of transactions, but what’s so great about it is you become friends with the people that you go through this process with. You’re taking somebody’s livelihood and you’re unplugging them or you’re plugging them into something else in the case of an acquisition. Tell me about the relationship that you build with people over the term of them being a client of yours.

It’s a very intense process. When somebody decides to entrust their business to us, we’re always grateful and thankful because if it’s not their largest asset, then their top three. We never take that for granted. There’s no repeatability to our business. Other than if we represent somebody on the buy side, and that’s a whole separate practice that we operate where we represent buyers and they might make successive transactions. On the sell side, it’s a one and done. We sell their business and there’s nothing else to do with them. Our process lasts somewhere between six months at the very low-end to maybe eighteen months or two years.

We’re with these clients in the process of selling their business. It’s pretty intense. The lock goes on. As you can imagine, it can be a fairly emotional process. We talk to our clients in some cases 10, 12, 15, 20 times a day when we get in the middle of negotiation or we’re in due diligence. It gets very intense. There also might be periods where you don’t talk for a while because you’re marketing the business and there’s nothing to do on a day-in, day-out basis. My point being that for 6 to 18 months, you’re tied to this client. You’re talking and meeting a lot.

You sell the business and it’s like withdrawals. You’re not talking to that client anymore every day. I’m thankful because over the years, we’ve been able to maintain friendships with so many of our clients after the sale of their business. While we don’t get the pleasure of having long-term clients where we can work with them for 10, 15, 20 years, the thing that has developed in our business is we wind up having personal friendships with them, which in some cases is more meaningful. I can think of any number of clients that I count now as personal friends where I get together with them on a very regular basis. It’s been a cool thing. Even though I don’t get the terminal value in recurring revenue, I’m in that earlier category I described earlier. I have to go out and keep getting my people, my advisors on my team to keep going and getting the next client. We’ve been able to enjoy some nice relationships.

You’re on the other side of that though. You get the clients. You build a relationship with them, but you also have the ability to help them through this. It is amazing the process that you have. You have a system. I’m assuming that although each one has its own specifics, there is a system in place that probably remains very much the same. You need similar contracts or is every scenario unique?

One of the questions I often get from clients is, “Have you ever sold a business like mine?” This point in time, after several years, we’re approaching 400 transactions and we’ve sold businesses in almost every industry. I can now say, “Yes, we’ve done a transaction in your industry.” When I used to get that question early on, my answer was, “No, we haven’t but let me explain. The process of selling a business, at least the proprietary process that we’ve built is the same regardless if you have a manufacturing business, a distribution business, or a healthcare business.” The only two things that change in a transaction are how you value that particular business and where you’re going to find the best buyers for that type of business. Outside of those two things, everything else in the process is very standard.

Tell me a little bit about the conversations that you get into on M&A Unplugged, your podcast. I know it will continue to evolve but what was the hope when you said, “I’m going to launch this podcast?”

We started with the goal in mind of helping business owners maximize the value of either their sale or their acquisition. That’s the goal of M&A Unplugged. The beauty of it is we’re interviewing actual buyers and actual sellers. They’re bringing to the table their experiences, their firsthand accounts of what they’ve been through. I’m hoping that’s going to resonate with the audience because it’s not me talking about what happens in a transaction. It’s actual clients sharing their information and their experiences.

When somebody decides to entrust their business to you, it’s a very intense process. Click To Tweet

How has your experience so far with the podcast as a host? There are many in our audience that has speculated one day that they may have their own podcast. You lead an organization. You have a bunch of people in your company and you know how to talk. You have a good way about it. Did the same skillset transfer over to the podcast world?

For me, it’s been a tremendous transition and fairly easy for me because my career is nothing but asking owners of business questions all day long. I need to uncover where the value is in their business and what’s going on. I ask questions. My clients probably get very tired of it, but I need to figure out what’s happening in their business, and is it the right time? What’s the best advice I can give them? Translating that over to the podcast has been so much fun for me. My daughter who listened to the first episode said, “Dad, I listened to your episode and I felt like we were sitting at the dinner table. I’ve been listening to this for years. It’s so cool to hear you doing it in a podcast.” Podcasting has completely re-energized me. I’m passionate about my business. I love what I do. I love helping owners maximize the value of their sales or acquisitions but the podcasting has completely re-energized me and it’s been so much fun.

How is that the case though? Tell me a little bit about that. I’m always curious about what has it done. Some people use it as a business development tool. Some people use it as a prospecting tool. Some people use it to create influence or to build a community. In your case, all of those things are possible but I have never heard someone say this will also help you reenergize yourself about your business. How has it helped you?

It’s creating all sorts of new connections for me. I’m talking to people that I would’ve never met otherwise. I’m hearing stories. I’ve seen so much in several years. I’ve seen almost every transaction issue you can imagine but it’s so much fun to interview people and hear them tell it from their perspective. I’m reconnecting with people that I haven’t spoken to in a long time. Because interviewing is second nature to me, it’s been so much fun to do it in this new medium. Quite frankly, I’ve gotten to meet people like you, Strickland and all sorts of other podcasters. Now I’m starting to be a guest on other shows and I’m enjoying the process of learning so many new things and getting to meet so many new people.

Let me bring this up, and this is only because I have never thought about this until this time. Because you’re in the business that you’re in, do you see podcasting potentially as something that would add to the valuation of a business?

Potentially, for sure. I’ll caution that going back to my comment, you have to be careful that if you’re the owner of that business, that podcast doesn’t become so tied to you that if you walk away, what happens? You have to do it in a thoughtful way so that podcasts can be transitioned over to new owners. I see the progression of this medium and how many people it’s reaching but, for sure that it could add tremendous value.

I had never thought about it until you were on the show. The nature of your business led me to believe, if you’ve got somebody within your organization to be a potential host of the show, maybe there is an opportunity for you to grow the value. If a new owner is coming and you’re the only host, potentially offer that opportunity as a co-host to that new owner coming in. All of a sudden, now you have another business development and lead generation marketing tool that is a community builder, influence builder, and all of those things that we talk about as reasons why to have a podcast. It’s possible. It’s very interesting. I never thought about it until I had you on the show.

You think about all of the other social media posts. There’s pay-per-click, SEO optimization, writing blogs, video, and all this other stuff. Many other companies have already caught up with all of these other things. This medium is still so early stage that if you catch the wave early enough, you can build some momentum for your business.

MAU 51 | Selling A Business

Selling A Business: The only two things that change in a transaction are how you value a particular business and where you’re going to find the best buyers for that type of business.

 

Your subject matter is fascinating. As much as technology has been bumping up the way people do business, this is a lot about relationship building but tell me how technology has affected your business.

I’ll give you a story. When I first acquired this business, the way to promote that business was for sale was to take out ads in the sports section of the local papers. I kid you not. Every Friday, we would talk about what businesses we’re going to go to in the ads. There was this business opportunity section in the back of the newspapers. We would talk about how many businesses we’re going to promote and what are we going to do an inline ad and all this stuff. We were doing a lot of advertising with the Chicago Tribune at the time. We’d call our ad rep and say, “Here’s what we’re going to run, and here’s the copy.”

Fast forward now, the way you promote businesses is so different. It has changed so much. What’s changed for us is we’ve gone upmarket. We’ve been for the last 5, 6, 7 years handling much bigger transactions, which probably wouldn’t have gotten marketed that way early on. The advent of marketing online on third party websites, the technology that we use internally, our CRM systems, and some of the tracking tools that we have on our website, some of the software and the tracking mechanisms that we have. When I think about what’s happened in my technology budget over the years, it’s exploded that along with my social media, internet marketing budget. There are a lot of changes.

Go out and keep getting your people together. Click To Tweet

I’d never even thought about that stuff changing as a part of technology. I thought you were such a relationship-based type of system and transactions, but it turns out everything. It’s not the relationship, it’s all of the backend stuff that could potentially be affected by technology. I appreciate, Domenic, you being on the show. Thank you for sharing your message and all that you’re about. It’s cool. The Nice Guy community, if you want to get more info about Sun Acquisitions, go over to his website. It’s SunAcquisitions.com. Domenic, thanks for being on the show and sharing what you’re all about.

Doug, thank you so much. I appreciate you having me.

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About Doug Sandler

MAU 51 | Selling A BusinessDoug Sandler has over 30 years of business experience as an entrepreneur and leader. His book, Nice Guys Finish First is a #1 ranked Amazon Best Seller.  As a podcaster, Doug has interviewed Arianna Huffington from HuffPost, Dan Harris from Good Morning America, Ron Klain, White House Chief of Staff, and dozens of celebs. He specializes in teaching others the how-to’s of building relationships and strengthening connections. Doug is a nationally recognized speaker and writer. His weekly posts reach hundreds of thousands of readers. Doug has been titled by a leading social media marketing company in the top 100 of Social Media Thought Influencers to follow. Doug can be reached on Twitter at all hours of the day and night @DJDoug or by E-Mail at [email protected].

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