Greg Voisen
Welcome back to Inside Personal Growth. This is Greg Voisen and the host of Inside Personal Growth. And for all my listeners, John, we have John Ovrom, and John is joining us from Coronado, California, just down the street from me. Most of my listeners know I do this podcast, they also know that I'm involved in succession planning, I got to know John, through the succession planning, business and introduction through various, actually was an accountant that introduced me to John. And I've always been impressed with his business acumen, his ability to put the dots together. And while this particular podcast is really more about your business, it's probably the most important podcast about your business that we could speak about. Good day to you, John, how you doing?

John Ovrom
Neuro wonderful, great, happy Thursday to you, buddy,

Greg Voisen
it's good to have you on inside personal growth, and to speak about something that you and I obviously believe is probably the biggest, most important thing that a business owner could do, or plan for. And I'm gonna let the listeners know a tad bit about you. John has written a book, which I'm gonna hold up here. There it is. The book is called Exit and answers. And this is version 2.0. We had a 1.0 version. But this is the 2.0 version. And he's the founder of exit Consulting Group. And he shares his expertise and written richness on the firsthand experience inside this book based on working with hundreds of business owners over the past 15 years. He explores and provides insights on all the things he wishes he had known before he sold his first business. This book dives into the buying and selling process both to the external buyers, as well as to family key employees and business partners, highlighting common pitfalls business succumb and to the opportunities for businesses to implement value drivers. The book outlines how to attract multiple qualified buyers to your door. If you want to know more about John, his company, and all of the great staff that he has there, just go to Well, the book website is exit and answers.com. His website for the consulting company is exit consulting.com. So either of those will get you there. Is that correct, John, or don't Consulting Group,

John Ovrom
the exit Consulting

Greg Voisen
Group, I left off the group part because actually when you push on your website that actually goes to exit and answers.com on the book itself. So for the book, we'll put the link to exit and answers.com great book for you to get, we'll also put a link to Amazon because book now is on Amazon for you to be able to get that book. And I think it's a great starting place for people. And that's why I want to start this conversation really ever and make it a dialogue because more important that the people that are listening are really kind of listening to not only understand better what they could do, but more importantly, to gather knowledge and information. And so go to John's website to do that as well. John, you've consulted business owner sirs, as I said, 15 years, it's in your bio. You mentioned in the introduction, that there'll come a time when we're all going to access it. And we are whether we die and exit from a death or we exit through some great planning that we did. And we hired somebody like you or myself to help that. Yep, can you briefly discuss with our listeners about the ways an owner can exit their business successfully now there's a lot of ways to exit unsuccessfully. And we could talk about those as well. And I've seen many of those happen you know, fire sales and auctions and all kinds of things that sure people get involved into because they over committed themselves and had to get out of the business quick. So yeah, let's talk about those successful ones and maybe those not so successful ones.

John Ovrom
Well, thank you, Greg, thank you so much for all of our years together as well as you know, the partnerships that we've had and thank you for giving me the opportunity. I mean, we're both very passionate about this. So I can sit around and talk with you for a long time and I know we could give out a lot of stories to a lot of a lot of your listeners on wins and losses and things we've seen and things we wish they would do when wish they didn't do but you know we're all here because we care and that's why we're in the service provider side. You know, I would say that the there's kind of five exits that we start with, you know, you either do an inside sale, which is going to be your key employee family members, you know, a partner, you know, somebody that already knows the business and outside sale by the strategic anyone in their competition. Right, you can do a liquidation, which is still an exit, you literally can just shut your doors and do that. You can do what we say die at your desk, which is I don't want to deal with this. And we've worked with owners that literally say, this is not going to be my problem, I'm gonna die on my desk, I'm gonna leave it to somebody else to deal with. That is still an exit plan, wouldn't

Greg Voisen
all we say is not a good one?

John Ovrom
Not a great one. But let me just say, can we talk to your wife? Can we talk to your kids, you talk to the state, because they're the ones going to deal with the exit? So we'll work with them. But it is an exit. Yeah, it is, you know, and then the other exit is hire someone to run the company, you know, so many owners feel like an exit means that they have to sell and leave. And our concept is an exit is you leaving the business, and then deciding what to do, those are two separate things as an employee or as an owner, most business owners think they're both the same. And in reality and Exit Planning, those are two totally different steps, you exit as an employee, and or you exit as an owner are two different conversations. But so many owners say I, I can't do one without the other. If I if I own it, I have to be there. Or you know, I don't want to be part of it. And so there's just a lot in the gut, what is an exit? And how to be successful in that is defining what is your exit? And what do you want out of it personally, as an employee, and you as an owner? And then how do you set those strategies up to be successful?

Greg Voisen
And I think that brings us to kind of the size, the psychology of success. And you know, we might lead on with that, you know, when a business owner reaches a ripe old age of Acts, and it's different for everybody, they start to think about their life they start to reflect on are Is there anything else that I should be doing, besides coming here every day, and managing employees and finances and so on? The biggest stressor that I see, and a lot of these people, even after we finish the succession plan financially, and all the rest of this stuff is like, hey, what am I going to do? Where am I going to go? Do you want to address that a little bit? Because that that that could be a good kind of jump off point for the following question here. It's really, you know, like, they're sitting there, and they're contemplating Mike and play golf every day. No, I don't really want to do that. I'm not going to pay bridge with my wife every day. You know, I don't like that I'm not going to Las Vegas and gamble my money away. So what do you what do you advise people? What would you say?

John Ovrom
So when it comes to figuring out your exit, we throw them into three buckets. You know, if you're going to Vegas, you pull the slot machine and you get the three little things to get the perfect exit, it's is the owner ready? And is the owner emotionally ready? Is the business ready? And then is there a market that actually wants to buy your business, and you try to align those three items up? When it comes to owner readiness? It really becomes what am I going to do next? What I have got so much value out of my business, and I have associated who I am. And my relevance, and the probably the biggest term that we hear from owners after the sale is I don't feel relevant anymore. Right. And it's true. I mean, they're very successful in their business, they have everything made all the money, they transitioned it, the key employees are good, they're happy with everything, their life is good. And they still sit and go, I just don't feel relevant because that was who my friends were, those were my peers. People would call me people would ask me questions. And it's a reality, particularly with Generation One. G one founders have really associated their business and personal value in their business because they're all in. And so acknowledging it is the first step, and then finding the fact finding something else that will give you the passion. Right? Right. If you don't have it, you're never going to leave because you're scared. You don't know it emotionally. But you've seen it Greg, these people struggle with not they'll use price as a reason, though, you have a bunch of reasons why not but internally, they don't know what they're gonna do with their day every day. And they don't know how to fill their batteries out. They're still you try to get well you tried to get Tom Brady off the football field. Right, right. He's competitive. He wants to win he's been how do you take a Tom Brady? How do you take a LeBron Jax? How do you LeBron James? How do you take these people that are phenomenally successful have gift and they love what they do and this is their life to say you're done, walk off the field walk off the court, even when in when you're doing really well? And it's really an emotional process that we have to deal with. Now, if it's death or divorce, you know or the company is starting to fail or you know, AI is taking over their business or they want to move or they want to there are good reasons that Make it easier, but still, the emotional process of leaving your company is by far the biggest hurdle in being not having a successful exit.

Greg Voisen
It is. And it's one of those that a good succession planner is going to address with you, whether it's still sitting on the board of directors, and playing some active role, whether it's having a small role in the company, where you're still advising as a consultant to the company, whatever it might be, to keep what you call the relevance. And I think that's important. And that is part of what a good succession architect will do. Now, you state that most business owners want to know how much they can receive for their business. And that's true. That's one of the first things they want to know, what's the valuation, but what's most important element is not the gross selling price, but the net after tax value they're going to take. Can you talk about some of the considerations of businesses might want to take into account when selling or transferring their businesses to take to get the most out of the business?

John Ovrom
Sure, I would say most brokers investment bankers, transaction people, always pitch sale price, how much can you? How much can I get for your business? How much can I get for it? And for me, prices, ego prices, I sold my company for this much. But in the end, if you don't get paid for 10 years, and then the company goes BK, and you don't get all the money, it doesn't matter what you sold it for, what matters is how much money did I actually receive? And then how much risk was associated with him? And how did I get paid? So one is price, but we don't. Price is where we call the ego. What matters is how much cash do I get in my pocket? When the deal is done? How much does it cost in a transaction for transaction fees? What's the value of those fees? How much do I have to pay in taxes from the state and the Fed, depending on where you live? And then what can you do from a strategy pre close versus post close? Because there are pre close transactional opportunities of where you live? You know, where your revenue comes in, what state there is, is it in a trust, there are creative solutions that people smarter than I can come up with, I can give you ideas on pretax, pre-close, and then post close. Whether you do charitable remainder trusts, you do sales, or maybe you sales, deferred trust, there are other strategies on installment sales, that might give you an opportunity to defer or even be exempt from sales from some of the taxes. So the game is, as the business owner, no one told me this. I just they just said, Hey, I can sell your company go for it. And I didn't know what that really meant. I didn't know what cash free debt free. I didn't know what earnouts were. And it really for the for the listeners they need to be aware of how much do I get at the end?

Greg Voisen
Right? Now, let me ask you this, how many of your business owners that fall in that 5 million and under and I know this isn't the biggest part of your market. But let's when we say 5 million $5 million, are doing installment type sales, you know, promissory note installment sale, waiting for the money collecting it over a period of five years, or whatever it might be from a key employee who bought the business. What comments would you have about that? Because there obviously is some risk there. Right? Associated with that. But do any of your trends are any of your transactions in that realm? Or is everything you're dealing with much larger than that?

John Ovrom
So we do a lot of transactions between our minimums $1 million sale price. So we do a lot of one two fives because we're in San Diego and there's still a lot of smaller two three $4 million sale price which is good money, you know, and that San Diego is a small market we're not Orange County la San Francisco we're playing with you know, good, you know, just regular Mom and Pop service based manufacturing machine shop, you know, contractor type people when it comes to deal structure, rarely, anything over a million bucks, there's always some seller carry. If you're going to be selling your main street, USA flower shop, restaurant, shoe shop, you know, for a couple 100 grand, you usually get all cash, but you start getting a million dollars on up. And particularly when you get an SBA financing. SBA likes to have an owner have to see you know, the seller have some skin in the game in order to make the deal so you'll get 90% down on the smaller deals, and then a 10% seller carry for a couple of years to five years depending on what SBA is requiring. But those are usually loans and they're usually fairly strong but you Get 90% down, when you get into the, you know, 5 million on up, really, the part that you get strung out is, how realistic is the sale price associated with the revenue, right. And if the revenue is stable, and you've got a recurring revenue stream, and you are just a recurring revenue model, then generally you can get most of your money up front, if you are project based service based, if you're a dentist, doctor, lawyer, CPA, contractor, any of these where your relationship depends on the future. And because it's project based, you're gonna have to if you want a good price, you want a better higher sale price, they're gonna have to pay you over a period of time to make sure that that revenue stays.

Greg Voisen
Yeah. Oh, there's so many things. There's so many just packed into that answer that we could talk about. But let's leave it at that. We'll kind of move forward here. But the point is, folks, go get the book, contact John, you can have these kinds of discussions more in depth, because no matter what you do with succession planning, there's always the next question, and then the next question. And the next question. So you personally have sold businesses that you owned, and you learned that it takes time and patience to sell a business? How long can a business owner expect that it would take them to sell or transfer their business effectively from the time they start planning, so let me preface this sure, to the time they actually exit because, you know, some of the one the gigs I've worked on a couple of years. And I know you've been involved, too shoring business up getting the right financial, getting the right people, making sure there's somebody there with the ability to take it over and run it. So just generally comment on that as a general timeframe within maybe categories, you know, that, that that flower shop, that's not going to take very long to do, I'm really talking about businesses that are much larger than

John Ovrom
I would general and we're going to overgeneralize, because that's what we have to do, I would generally say the sale process, if you call today and you said I'm ready to sell, I would tell you plan for a year before the transaction is closed, and then plan for at least one year continuation agreement for consulting, and maybe two, depending on the sale price. So, so minimum, two years, if you want to be done paid, you know, no longer showing up. And I'm done, done. If it's an inside sale, and you want to sell it to your kids, or a key employee or an ESOP, where there's a lot of seller financing, because they don't have any money. Or let's say your partner wants to buy you out, and he's buying you out at the 50% that he's not giving you any money, those typically takes seven, seven to 10 years to pay out, because they got to pay you back with after tax cash. And so it's a minimum of five. And I would say usually seven and depending on how big the deal is, it could go to 10 years before an employee, a kid can pay you back at a decent multiple.

Greg Voisen
Yeah, and the thing you've got to do there, and I'll just add this to it, is you've got to forecast that period of time, the five year seven year to make sure that there's enough cash flow in that business to not only sustain the payment that's going to be made, but also so that there's enough profit for the person buying the business to say this was worth buying, right? Because I took an increase in pay and my equity was going up at the same time. Right? So you want to look at the balance sheet too.

John Ovrom
It's a great, great point, right? That's exactly right. You're 100% right on. Yeah.

Greg Voisen
And if you don't do that, I think you could be in trouble. Because the reality is you may not get fully paid out. You know, you have a list of takeaways from the first chapter and all the subsequent chapters as well, which I think is great. It's, you know, it's a way to kind of summarize a chapter and just get to the heart. And so it's, it's a great summary, can we discuss some of the takeaways that business owners should be considering? If they're planning to exit their business? So in other words, generally, there's, there's takeaways, everybody on every chapter of the book. Sure, but there really are kind of general takeaways that you could take from this. And that's what I'm asking about here.

John Ovrom
From the overall perspective of exiting your business, the general takeaway? Yeah, there's probably three points. One is it's going to take you longer than you think. It's going to be harder than you think on you emotionally. Because it actually is a it's an emotional process to let go. This is a child that you just raised, and you've grown this thing up and you've been a helicopter parent, and this person is trying to move Have out and go to college and get married to somebody else and you're like, but no, I want you to stay home and you know, you're finally becoming fun. And, you know, now you're an adult, we can do things together and the adult children are going, that's cool that we're good. We're going and the parents and, and so they, they just want to hold on even though the company is outgrowing them. And you know, so it's going to be hard, it's going to be hard, and you need help, don't try to do it yourself this this, you know, it's a complicated transaction. And there are a lot of tax consequences. And there's a lot of deal makers out there that are professional, and they will take advantage, all the people that are always calling all our clients, Greg that are like, Hey, Greg, you know, I just got this person. They said they're interested, Greg, what do you think and you're like, Guys, we haven't even taken to market, we haven't been prepared, you haven't, they said they would give me a great offer. And you're saying, there’s no such thing as a great offer from someone who doesn't even know your business, and you haven't given them anything, these guys are professional leeches, that are trying to take advantage of an opportunity of an owner who's just done that day. Because we all as business owners know there are days where we just sit around and say, What, why?

Greg Voisen
Yeah, well, and the last thing I'd add to that is that, you know, whatever expense you're anticipating between attorney’s fees, and tax advisers, and consultants, and so on, you may want to think about, you know, as a percentage of the total, what are the all of those fees going to be, and you know, some of that strings out over a period of time. And I'm not going to say it's always going to be more than you anticipate. But it probably is more than you would anticipate. And the reason is, is it's very complex. Like John said, this is not like something you just take lightly, you've been working at it 25 years. And there wouldn't be anything else that you would do. It's not like having a house that you sell after 25 years has a ton of equity in it, you put it in escrow and you it's gone. There's too many moving parts, there's a lot of moving parts.

John Ovrom
And Greg, the other point on the value that I was that I tried to get a hold of these clients, particularly with $5 million dollars down low and sale price, is the owners are so involved in the business, that the opportunity cost of them taking their hands off the steering wheel of their own business, trying to do something for their first time and trying to learn if the company starts to slow down, and the revenues go down, or we miss a job or people employees move away, or we lose a client bid, and the opportunity of just staying in your business 100% focus like that's all you there's a significant value, you will lose hundreds of 1000s of dollars. If you spend a year or two trying to do something you've never done instead of focusing on growing your business, and all that because you'll lose it either in losing a cash flow, or you're gonna lose it in value because of the multiple on the value of what you've just lost. And they just don't understand that cost.

Greg Voisen
Well, and I think it's important what you said earlier, about 15 minutes ago, you know, and you refer to it in the book as an annuity. I think if a person's not really willing to let go and wants to stay on board and wants to find someone to run their business. Yep. And collect the chips that keep coming off of the business, the annuity payment, whatever it is the 400,000 $500,000 year, that is your that can be an exit strategy. Right. Exactly. Yeah. So it is something to think about now. You speak about lifestyle versus investment. Yep. And most of these businesses, you say are lifestyle businesses, which they are you mentioned in reality that they are lifestyle businesses, although a lot of owners would disagree with us. Sure. But the reality is they still are. Can you speak with us about the differences and the questions business owners should be asking of themselves regarding this lifestyle versus investment kind of business?

John Ovrom
Sure. The best is a visual, I would tell you an owner operated lifestyle business is where this is a wagon wheel with the owner in the middle and everyone reports to them. They've got their hands and everything. Maybe not personally every day, but everybody knows they better go by Greg to make sure that this gets done and Greg has to be part of knowing what's going on, from sales to marketing to ops to finance to HMI there, they are the blue and they are the middle versus professionally run, which is more of an org chart where you actually have delegated middle managers that have authority and responsibility that report to them and all the employees don't report to you the only ones that report to you or your C suite. And that's it or one or two people and everybody else runs everybody else. It's probably the most visually clear way to explain to an owner that a professionally run company is where it's not if you pull the owner The whole thing doesn't fall apart. Right? And that's how I would define it

Greg Voisen
well, and it's a great definition because you know, when you're going to duplicate, you need to have those managers in place, right. And those departments need to be responsible for their own p&l. In other words, what I'm saying is, okay, you can have direct expenses and indirect expenses, and you deal a lot with contracting as I do. So, you know, as these are being allocated over the budget, it's really important to understand that if you do have the big of a company, and you have those mid line manager, people, that all they're doing is you have the top people reporting to you on all the progress that's being made in those departments. That isn't investment type of business. If you're involved in every one of those departments, that's not as John was saying. And that's the easiest way to look at it.

John Ovrom
Greg, that's what we're calling me the biggest discount the biggest haircut that buyers do, they'll give you the multiple, but then they'll take a discount because of the owner involvement. And the owner risk, they'll say, Sure, I'll give you that multiple. But because the owner is so involved in it, I got to do a haircut because they're, what if my employees leave, and my vendors leave, and my suppliers leave? And then I gotta hire three people, because they're working 6070 hours a week, I've been doing it for 35 years, and I gotta hire three people to do that job. Man I got this isn't the same company post owner. So then they get a haircut on it for sure. The biggest haircut we get is owner engagement.

Greg Voisen
Well, do something for me, it wasn't one of my questions. But you know, many owners out there aren't going to understand some of the things we're talking about. Many of them do. But when you recast numbers, you're talking about a recasting of numbers, because a lot of people in this financial world will ask them to recast the business's profitability without them, you know, what have they been taking out of the business? What is the cost for them and recasting speak a little bit, a few minutes, maybe about recasting what it means, and how important it is, in considering the real value in the business.

John Ovrom
So on, mainly on the smaller businesses, because bigger businesses, people don't run as much personal through smaller businesses, because it's a lifestyle, they'll have their wife cell phones and their kids’ college and their medical and their trip to whatever, right. So what they're basically saying what we have to do is we try to take their profit, start with their profit or loss or take their profit at the end of the year. And then we do add backs for what we call sellers, discretionary earnings. And those are things that the owners are running through that if they weren't there, we wouldn't pay for, right. So we got to add back all of the, you know, the scrap metal that you get cash for, right or the travel, the trips that you're putting through that really aren't there that you added some other people to it, well, you can call it what you want to call the meals, the auto the boat that you know, the kids this, the Hey, I got some work done at my house, you know, had them run it through here, hey, I had my personal seat, my CPA, do my personal and also run it through the company. You know, I had my trust get updated, and I had them build my company, all those things that if you're not there, we add back in to come up with what a real business would do if you didn't have all of your personal run through it. And then that gives you your SD or seller's discretion, or that's how much you actually make between your salary, and your 401, k's and all of the your car allowance. And all this is literally what you're taking out of this business. That's the number we want. Because that's the number that buyers will actually be buying. Because that's what you're really running. That's not what your k one looks like. That's not what your W two looks like. But that's really what your company runs through. And that's what we mean by recasting is tell me how much you're really making out of the company before you start scraping it out. Through salary through distributions through benefits through expenses.

Greg Voisen
Yeah, and that's a great way to explain it. You know, you speak about inside sale versus outside sale? Yep. Obviously, inside sales to a key employee or to somebody like that outside sale is to a company that wants to acquire, can you discuss the pros and cons of each type of those kinds of sales? Meaning? Sure, hey, I'm going to, I'm going to sell this to a key employee, let's say, who actually has no ability to qualify for a loan?

John Ovrom
Well, they have my last name, so they must be qualified to run the company. By definition. Yeah.

Greg Voisen
So just speak with us some of the pros and cons if you would about those two, because, look, if I'm sitting there saying I'm going to sell to a key employee, or I have a lesser offer, from maybe an outside company that wants to buy it, and somebody is trying to make a judgment as to, hey, I want to be nice to the key employees and I'll hold the note now. Collect my note over Ciao however long it is, I just want to know what you're thinking about pros and cons.

John Ovrom
So my advice to owners that are looking for an inside sale to a key employee or to family or to any ESOP, not if it's a business, if it's a partner buy out. So if you and I are partners, Greg, and we're 5050, and I sell to you already know the company, you know, that's different, because you know, we've been partners, but on an inside sale to a key employee or family, that's, you know, a generation below, the game is only about legacy, do it because you want the legacy, don't do it, because you think you're going to make enough money out of this, because you're going to be disappointed, particularly when it comes to family, because you've seen it, I said, if you're going to sell it to your kid, and what happens in five years at Thanksgiving, when he doesn't make the cut, because the economy turns every 10 years, and we know it, and he's made some decisions, or she's made some choices, and they're going down a different path, and they're not paying you and they can't afford to pay you how was Thanksgiving gonna go, how's the time with your grandkids, because they're going to be resentful for you that you sold it to them for too much money, they can't afford it, you're going to be mad at them for not making the payment, your wife's gonna be mad that she's not able to, to, you know, provide and then she's gonna see the grandkids, make sure that if you're going to do an inside sale to Family First, understand it's not about the money, it's about the legacy, it's giving them the opportunity. key employees can be a little different, but just, you have to take so long for them to pay you back, that you just have to stay on board. So if you want to stay on board, and you want to keep working for a salary, I would say stay on as long as it is for you to get paid. Because once you leave the company is going to tank and just be prepared because they're gonna buy it from you because they don't have to put any money down. The employees gonna come to you and say, I'll ask you to buy the company from me, Greg, whatever profits we make, I'll give you 50% of those for the next 10 years. And I keep the rest and like well, what risk? Are you putting? You're putting any skin in? Well, no. What do you then why would I do it? Well, I'm telling you don't do that. But if you want to do just be aware that there's a lot of value for the sake of a legacy, and just treat it that way.

Greg Voisen
And I would agree that is the probably the only reason you would do the only reason you do that, that you want that legacy. Now you speak about the timeline associated with planning and sale and business, we talked a little bit about it. And we said, two years, you state that most business owners should take between three to five years before they leave the business. Speak with our listeners about what it takes, or why it takes this long to plan and execute on the sale of their business. Because a lot of people would be saying, Hey, I'm ready to sell now. And you're saying, No, you're not ready to sell. Now we did the readiness assessment, right Readiness Assessment doesn't tell us that you're ready to sell, and especially not at the highest price that you potentially might be able to sell it for again, and the terms you'd like to sell it for. So

John Ovrom
we're there because of the three trigger points on a readiness, business readiness and market readiness that really is what's determining time, our opinion is set your company so it's always ready to sell, run your business. So it whenever you're ready, and the market is ready, you can sell it. Most businesses, particularly the smaller ones, the one to $5 million sale price, once they it was just an owner walks in and goes, Okay, I'm done. There's no, it's when the owner is ready. And then the business hasn't been running correctly. They haven't managed their cash flow. They haven't been putting money aside, they just bought some big piece of equipment, they have a bunch of debt. They just took out a big PPP or an eidl. And there was no strategy around it. And so it costs them money. If you can, if you can come up with what's the win. What do you want? Do you just want it to be a legacy? Is it a sale price? You want that you need an after tax cash? Have you worked with your financial planner? Do you know how much expenses you running through the company that you've been taking pretax that you're now going to have to take post tax? And do you have that? Do you have medical insurance in the future? Like how are you going to do this practically in the world and from this point forward? You're good, like you're set. And it's the it's the evaluation with your financial planner, the evaluation with your broke business broker, your transaction person, it's your valuation with your CPA. It's getting everybody in a room and saying what's the win getting it with your spouse and just saying how much is enough? In How do I drive towards that? And then what does my company look like for that value? Because we've had I had someone say I need $3 million and after tax cash and I just said the based on your company, you're just not you're gonna have to triple the size or you know, and you don't have it in you. So instead of that, why don't you you're making half a million dollars a year, work for the next three more years. take that money out, reinvest it in something else and then sell it for a million and a half, which is what we could sell it for. It's still a good exit. You still got the number you needed. It's just the ego says, right? Why money and let's say, you so you got to get out of, it's just a lot of processing that they just don't think about. And the more that you get them to think about it, and understand that there is a goal here. And what is that goal, the longer we know what that goal is, the better we have a chance of achieving.

Greg Voisen
It's a, it's a lot of assessment and readiness assessment, as we just said, and the challenge with it is, is, as you said, and when you look at is he personally ready is the business ready, is really cleaning things up, I'm gonna call it scrubbing everything, you know, like Clean up, clean, clean up, that has to be done, to make sure that everything is ready. And I like your point about, you know, look, the business for most people in this range, there's $5 million range, it's, that is their biggest asset. If you look at their house, look at their cars, you look at their 401 K plan, or their IRA accounts or other real estate they own, they'll unequivocally that is the biggest asset they have. Right, right. And you're looking at this asset saying how am I going to now extract cash from it? If I'm not there? Meaning, what are what are the mechanisms that will trigger that? Grant? I think it's so important. What are some of the things that you find happen, that need to happen? In kind of cleaning up a business, when you go in? Let's talk about, you know, doing some housekeeping. What are typically the things you find that most business owners aren't thinking about? Or if they are, you know, you find them and you see there can be more efficiencies?

John Ovrom
So we call those value drivers. Right? One of the things, Greg, that you've been there we go through it and kind of go what are the things that can drive this company higher value or lower value? So things that we would look at is customer concentration, right? Do they have one customer that's 80% of their business? Really anything over 15% becomes a risk to a buyer and they're going to discount it? So do they have good customer concentration? Do they have good customer diversification? product? Or service diversification? Is there only one product, they might sell 5000 skews or do one service? But if they did three services, or five or different products, which ones are the more diversification they have? Then the better it is? And you know, so it's customer concentration, vendor concentration, if they only have one key vendor in a particular area, and they change their pricing, everything changes? Because they're a reseller of that product. Employee and then really their org chart, and how does their middle management work? Again, owner involvement is a big haircut. So we really spend time on job descriptions, evaluations, you know, how are you doing on your training and promoting people? I'd also say a big haircut we're getting right now is it right? A lot of the 60 and 70 year olds that are selling for 5 million around, they haven't invested into the technology. And don't really want to, to be honest, this is how it's always worked for the last 30 years and they're leaving money on the table, but they just don't have the energy or desire to convert to an inventory management system or a sales management CRM or get my books into the latest program management tools that are available out there. They just go this is how I've always done it. And they'll give it to somebody else. So you know it sales operations, which is their org chart, and how that works. Are problems and then their financial records. By far our biggest challenge is crap in is crap out. If the owners aren't keeping track of their numbers, and they're not giving us trustworthy financials, how can a buyer take that to a bank or take that to an investment group? Or take that back to their CFO who's the no person in every deal? And you know, and show them within competence that these are my numbers. They foot they tie they tied to my sales tax and income tax they tied to everything ties and floods and balances and everything you see is legit. And they spend the time to do so instead of I don't know that's my bookkeeper. They did it. I don't know why that balance sheets that way. I already know how much I need. I already know how much I have. And they don't spend the time with buyers’ eyes. Put the glasses on where the buyers’ glasses and say would you buy your company the way this is?

Greg Voisen
That is probably the best advice you've given. And I think that and in the way that I'd say that is if you were to look at it, you need to look at it with those goggles on the buyers’ goggles. Because what's happening is you're missing all of this most important stuff that needs to be cleaned up right now. And that stuff being cleaned up is the stuff that's going to drive value you call them value drivers, it's going to drive the value out, right. But more importantly, it's going to give confidence to the buyer to say, hey, this guy has run his business properly. And if it takes you two years to get that done, Alright, with that stuff that John just said, then that's probably the best two years you ever spent. Right? 100%.

John Ovrom
Because remember, it's a multiple on the money that you make. So if you, if you get a three time multiple, and he made 100,000, or change, you just sold it for $300,000 more, right? Because you took the time to do it. Plus, it actually ups the ante that someone actually might want to buy it. Because they feel confident that you know that it actually is going to be a business that can survive without you.

Greg Voisen
Yeah, and I think a lot of it is the confidence that they have that the business can sustain its current sales and grow, does it have the ability to grow? What kind of industry? Is it in? What are we doing this unique that other people don't do that possibly gives this business value more value than others? You know, who were our competitors in the market, all of those kinds of things. Now, throughout the book, you provide lots of takeaways for me to the chapters that you said, if you were to summarize these takeaways, which you gave me three earlier shirt now, what are the key things that you would leave the listeners with, with regarding need to know and the research that they might want to do before selling their business?

John Ovrom
The number one challenge we have in selling a company is understanding what's the trigger for them to sell? What is it? Is it health? Is it a number I need? You know, is it so typically, what we want to know is why is it that you're just done, it's just the timing, I'm not, I'm just done, it can COVID We had some people just going you know, I just done I've had I got enough, retired, I've got enough money, I'm doing fine, I'm just done. I just want to be done. Sometimes, I just don't want to put any more risk into it. I've invested enough I have enough stuff, I just want to get out because of risk. Sell it for what we can sell it for some people are this is my liquidity event, and I need this dollar amount. Some people are Hey, my partner's leaving. And I don't I'm not ready to go yet. So I want to buy him out the game is why? Because there are so many the owners say they want to do this. But so many people also want to lose 20 pounds. You know, so many people want to travel more, you know, support my wife and love show her love more love. I mean, there's so much that people want, but the reality is, not many people do and it's not very many can do it successfully. And in the number one key to success is that they go in it with their eyes open and get educated on what it means. How much do they need? What is it worth? What's the what's my risk in my business? Evaluate the challenges, how does the buyer look at it, get educated, just plan and you learn, which is what you and I do, Greg, I mean, we're just out there trying to educate 80% of our of our time is just education. 20% of it's the transactions, very little of it, and very little of it because the transaction is great. Once you've done the education, everyone knows the word they understand what it means. And they it's their emotionally mentally financially prepared.

Greg Voisen
And I think it's the kind of Simon Sinek question is the why you just said that? Yeah. What's that driver? Right? Has their health changed? Has have they had a change in maybe a divorce or a separation or an issue? There's all kinds of triggers, let's call them triggers. Have you lost key employees that potentially you're trying to find replacements for but it's driving more stress in your life, because you can't find the new people to fill the positions, whatever it might be? You'll find at some point there's a trigger that gets people to want to talk about it.

John Ovrom
We break it out into two Greg we break it out when we do the interviewing those triggering events we break it out is are usually is the goal. For us. This is an internal evaluation when we when we meet with them, is it out of cars? Or is it out of convenience? Because if it's out of cars, then we can actually help them. My husband passed away I haven't changed my partner's leave. Like there are reasons where they have to like this is there's a reason I'm going to then there is out of convenience, which is you know, maybe I just want to retire I've been done. I think I have enough and then that's a different element when it comes to pre-qualifying our clients because we know for cause they're gonna get out.

Greg Voisen
Yes, definitely. And for convenience, you don't know. Don't know. Chances are they're going to stay on the board, and they're gonna work in the business. For all my listeners, we've been on with John over from exit consulting group.com is the web Right there'll be a link to the book is called Exit and answers. Navigate your business exit like an expert. This book really is a fire starter. Not I don't mean literally put it in the fire, fire starter for your thought process your thought it gets you thinking. And I think that's the best thing that John could have done was to provide a book that he says exit and answers. I think he, the answer is within sight of them. But the reality is, is that this book helps drive you to understanding more about what might be causing that right what you're going to do. Absolutely. So. So John, thanks for being on insight, personal growth. Thank you, Greg. I'm with the listeners. It was a very dynamic, good podcast. And I think for the people that listened to it, they'll get a lot out of it. So

John Ovrom
I appreciate it. Greg, you're awesome. We love working with you. You're passionate about the same thing and helping all of your clients. So thank you for what you do, and hopefully we can change the lives.

Greg Voisen
We certainly will. For the better for.

John Ovrom
Exactly. Okay, thank you. Okay. Okay.