[00:00:00] Speaker A: Sa.
[00:00:31] Speaker B: Welcome to Power CEOs the truth behind the business. I'm your host, Jen Goday, entrepreneur, investor and business consultant.
[00:00:37] Speaker C: Why are we here?
[00:00:39] Speaker B: Because I believe that iron sharpens iron.
[00:00:41] Speaker C: And when we bring industry leaders, investors and other founders who can share what's working in business and maybe even some
[00:00:48] Speaker B: of what's not, we're all able to learn and grow.
[00:00:52] Speaker C: As a result, our businesses grow and the ripple effect impacts not only ourselves, our teams and our families, but also
[00:00:59] Speaker B: our communities and our world.
[00:01:02] Speaker C: Most founders think capital or an exit equals freedom.
[00:01:05] Speaker B: The truth capital or an exit without
[00:01:08] Speaker C: clarity can become control.
Today we're going to dive into one of the most misunderstood relationships in a business, Founders and capital.
[00:01:17] Speaker B: Kevin Peterson is a seasoned investor and
[00:01:20] Speaker C: business advisor whose CMD will succeed crash
[00:01:24] Speaker B: not because of the numbers, but because
[00:01:26] Speaker C: founders underestimate what capital actually means. He advises founders and investors globally through ATD USA and Growth Stack, working on strategic growth, M and A and innovative financing structures. If you're raising money, planning to sell, or want to protect your vision, this conversation is for you. Get ready, get your pens and paper out. Kevin, welcome to Power CEOs.
[00:01:49] Speaker A: Thank you so much, Jen. It's great to see you today.
[00:01:52] Speaker B: Likewise.
[00:01:53] Speaker C: I'm so excited for this. I've been waiting for this for quite some time. I think we were trying to schedule for over a month now, but this
[00:02:00] Speaker B: is a hot topic.
[00:02:02] Speaker C: Kevin Founders often view capital as fuel for growth. Investors often see it as leverage and structural control.
Without clarity on expectations, systems, governance, capital can quietly shift power dynamics inside a
[00:02:15] Speaker B: company and erode founder control.
[00:02:18] Speaker C: What is the biggest disconnect that you see between the capital side point of view and the founder?
[00:02:25] Speaker A: Yeah, that's a great question. I really appreciate today's topic. It's dear to me and it's a problem that really founders in any vertical have.
And the challenge that I see is that people think that fundraising is sort of a background part of their business, like they know they need capital in order to grow.
But there's a disconnect between the process of raising and running a business.
And so, I mean, just getting to the heart of the matter, the best advice I can give to a founder who's thinking about expansion is run your business as though you have the capital, right? You gotta, you, you need to run the business day to day for growth.
Because if you're focused on growth, you're more likely to attract the capital that you need and you're going to attract it at better terms if you're solely focused on. Okay, well, we can't do X, Y and Z until we raise the money.
Then you're going to be spending all your time raising the money. And I've seen businesses actually completely fail because the founder is so focused on raising the next round.
[00:03:30] Speaker B: Yeah, you speak absolute truth.
[00:03:32] Speaker C: And as an investor, I've been pitched several times since the New Year.
[00:03:35] Speaker B: Right.
[00:03:36] Speaker C: We're on the 30th of January, and that's the easy way for me as an investor to walk away if I hear I need this. I can't move forward until I get this. That's a red flag, an investor, at least for me, in an investment strategy. So thank you for sharing that. And I just want to reiterate what Kevin said for everybody who's watching. Fundraising is not just a background part of the business. It's. It's something that's a necessary evil. But you still have to run your business as if it's already there, because if you're stalling your growth, it's very hard to create that momentum. So. So talk to me a little bit, Kevin. What's the real cost of capital that founders don't talk about or think about the cost. It sort of shows up long after the money hits the bank.
[00:04:21] Speaker A: Yeah. Another great question. So the. The cost is, and you alluded to this in the intro, that the cost really is about the power struggle. And I don't know that there's a better phrase for it other than power struggle. And this can be between founders, where they jump into a business like on day one of your business, there's nothing more exciting than. Than getting to work.
And at that stage, founders or co founders are usually super energized around the plan and the vision and the future and the money.
And then friction starts to happen once capital is in. Right. And so it's very easy for founders to make a misstep early in the business where they either don't have terms well defined with their co founders, if there's more than one, or the terms that they accept on growth. Capital is not favorable thinking three years out or five years out.
So not being very careful and very explicit about the capital you accept into the business leads to landmines down the road.
[00:05:27] Speaker C: Absolutely. And we've talked about this on the show before.
A lot of times we are misaligned with the capital that we raise when we're not very experienced. We just see the money, we see the check, and we say, yes, yes, yes. But if it's not aligned, it causes so many headaches and can really Drag all of your growth down. So let's go a little bit about structure, because we've talked a lot about capital, but there are a lot of structural mistakes that happen. What are the most common structural mistakes you see founders make before a raise that sort of either kills the valuation almost instantly, or it creates that friction much more strongly as soon as that money rolls in.
[00:06:11] Speaker A: Sure. So and again. And a lot of it comes down to control. Right. So you will hear investors talk about controlling interest. Some. And it's kind of a funny thing, actually. Some investors specifically do not want controlling interest. Others will not invest in something where they do not have controlling interest.
Controlling interest at a very simplistic level means a board seat or an advisory role. So if. If an investor comes to you and says, hey, we love your business, we think you're the right founders to take this forward.
We want to participate with you, and we need controlling interest. What they're saying is they are going to be in your business.
So what a lot of founders don't fully appreciate when they're. When they're raising capital is that a lot of times they're really. The capital is buying a new job and a new boss for that founder. So a founder is running along. They're excited about the business, they have all kinds of plans for the future. And then the investor comes in and it's the second most exciting day where they're like, wow, I took my concept, made it a reality, and now somebody has invested in it.
And what they don't realize is that, oh, I have a new boss.
And that means I'm reporting to this person on a regular basis, whether it's monthly or quarterly or semi, annually. Right.
And they're expecting results, and they're expecting accountability. And they believe that they have a say in who I hire, who I fire, when I do these things, whether I scale, which vendors I use, all of those things can come into play.
And so if your terms are not well defined at the time of capital infusion, then you can have those friction points later where you realize that, well, wow, I'm running the business. It was my idea. I think I own it, but I don't fully own it.
[00:08:02] Speaker B: Yeah. And it's the moment in time when you realize that capital is truly a partner.
[00:08:09] Speaker C: And you need to make sure it's the right partner, too.
[00:08:12] Speaker A: Absolutely, yes.
[00:08:13] Speaker C: So let me ask you the question, because I love actionable items. I love things that people can take and implement immediately on this show, because I believe that we can talk about
[00:08:22] Speaker B: things until we're blue in the face like every other podcast or every other show. But if there's not something that people can implement today, then it's just another. Another show.
So if a founder came to you today and said, I'm ready for capital, because that's what they always say, right?
[00:08:37] Speaker C: I'm ready for capital, what are the three things you would require before you
[00:08:41] Speaker B: even take a meeting?
[00:08:42] Speaker A: Well, one, the first answer is going to sound ridiculously intuitive, but it's, it's just because. So simple. The first question is, what are you going to do with the money?
And if you don't have a very well defined plan and defined path and defined uses for the capital, then either you are raising too early or your business plan just isn't. Isn't fully flushed and it needs to be right. And even to attract the capital, you have to be able to answer those questions like, x amount is going to that, X amount is going to that. And this is how it's going to affect growth, and this is how I generate return for my investors.
So that's one.
The other thing is there's no such thing as preparing too soon.
Like on day one of your business, you should be thinking about, okay, what if this works? Right?
Usually founders are somewhat.
They're fueled by enthusiasm and energy and excitement, but they're also limited by some fear, which is, what if this business fails? Right? But the question you should be asking yourself on day one is, what if it works? Because if it works, then I'm going to need resources, I'm going to need people, whatever, depending on the business, materials, you know, supplies, money. I'm going to have to have vendors.
And, and if I grow to a certain stage, I can't do this myself. I need other people on the team, right? So.
And all of that comes into play when you're matching to capital, because different investors and different capital providers will bring different things to the table. Some might just be pure, like, hey, we're going to cut you a check and we'll check in quarterly. Others might be able to bring those vendors or bring resources or bring experience and really advise in a very meaningful way.
Those are the first two that come to mind.
[00:10:34] Speaker B: Well, I think those are great.
[00:10:36] Speaker C: So if you're watching, folks, you've got two things to ask yourself today. No matter where you are in business, whether you're starting up, whether you're at a growth phase, whether you're looking at partnering with capital, it's what happens if this works?
And there's no such thing as preparing too soon? What is it that, that you need? And then, and then remember it's really important that you have the right advisors, the right consultants in your, in your corner. Because if you haven't done this before, don't think you're just going to walk in and be able to do it right away.
We do have to take a brief break unfortunately, because we have a commercials coming up. But you know, it's really important that if you came today to any investor or any advisor, including Kevin, and said I'm ready for capital, make sure you know what you're going to do with the money. Because if you haven't decided where the money, what is happening with the money, where is it going and how it's going to yield a result, then you're not going to get the money as an investor. And I think those are sage advice from Kevin. We'll be right back after these important messages.
Foreign.
[00:12:13] Speaker B: Welcome Back to power CEOs the truth behind the Business.
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[00:12:40] Speaker B: Ready when you are.
Now we're back.
I'm here with Kevin Peterson and we're
[00:12:46] Speaker C: going to dive deeper into what happens when a business actually enters the buy sell market. Whether you're a buyer, a seller or preparing for future growth, Kevin breaks down what most founders don't learn until it's too late.
[00:13:02] Speaker B: Deals don't fail because of bad math
[00:13:04] Speaker C: they feel because they fail because founders
[00:13:05] Speaker B: don't understand the behavioral economics of buyers.
[00:13:08] Speaker C: M and I depends on prep, behavioral alignment, operational readiness, not just your valuation. Buyers are evaluating your leadership, your integration readiness and the long term risk beyond your financial statements. So Kevin, in your experience, what's the number one reason that you see deals collapse right before closing, even when the financials look good?
[00:13:32] Speaker A: Yeah, usually it comes down to operational things. So the financials may be in order but. But there are things that are not really reflected in the financials. Right.
So we were talking a minute ago about, you know, how it's never too soon or too early in a business to prepare and that's also true of an exit. So getting back to that question of hey, what if this business works, right? What if it really succeeds.
The next question is, okay, how do I want to exit this business someday? Like, is this really a business I'm going to run for 20 or 30 years and retire in? Or is it something that is like, you know, is it, is the, are the public markets the right place for my future? Do I really want to run a public company? That's another question. And then, and then, as you were saying, you know, there are marketplaces for selling your business along the way, and it's never too soon to get your business in order. Now, I am going to add one thing there. It's never been easier to do so because with AI, now you can create your SOPs, your standard operating procedures, documentation, and document everything about how your business operates.
You know, what vendors do you use, you know, how do you target customers, what's your, you know, your sales marketing process, all of that. It's never been easier to document these things from the start because of AI.
So take advantage of that and make sure your SOPs are in order because that's something that trips people up when they're exiting a business.
As you were saying, they go through financials and due diligence and it's all making sense. And then there might be two or three things in the business that aren't quite right or they're not well documented.
And there can be gotcha moments. They do happen.
[00:15:21] Speaker B: They absolutely do.
[00:15:22] Speaker C: And on a previous show, we discussed
[00:15:25] Speaker B: a little bit about the due dated, the due diligence data room and having that in order. Because if that's not in order, I mean, most of us just stop looking
[00:15:33] Speaker C: if it's too hard or we have to get clarification or we need to wait six weeks to get the information
[00:15:39] Speaker B: we already know it's not ready as, as a buyer.
Excuse me, but what are buyers really
[00:15:45] Speaker C: evaluating that doesn't show up on a
[00:15:48] Speaker B: panel or in that data room that, that founders need to know when they're looking to exit.
[00:15:54] Speaker A: Yeah. So a lot of it really does come down to credibility. So is this founder that I'm buying from, are they credible? Do they have the track record that that reflects the performance of the business?
So there is a correlation between, you know, founder, I don't know if pedigree is the right word, but founder background and performance, that, that dovetails with the business, but it's not, you know, the business and the financials are not the whole story.
So, so that's certainly one thing that I, you know, there's an adage that people invest in people and people Buy from people. And that's absolutely true. Like people don't buy from a P and L or a balance sheet. They buy from. The balance sheet matters. I'm not saying it doesn't, but people buy from people. And so if the founder is credible and they're willing to say like, oh, here's Here are 10 things that are going really right. Here's things that are going really wrong.
And this is how I'm thinking about it based on my experience. All of those things help, you know
[00:16:53] Speaker B: that that really comes down to transparency. And we talked also on our prior
[00:16:56] Speaker C: show about transparency and how if you're
[00:16:59] Speaker B: partnering with capital in a buying build,
[00:17:00] Speaker C: for example, it's really important to communicate
[00:17:02] Speaker B: with your investors when things are going well, but also when things are not going well and to leverage the intelligence in that room. Because the reality is most investors have been there and done that.
So I want to, I want to thank. Kind of dovetail onto that a little bit and say you have a founder for 60 minutes before they go to market with their business.
[00:17:21] Speaker C: What is the first thing you focus
[00:17:23] Speaker B: on with them and why?
[00:17:26] Speaker A: Yeah, so it really is the, I always say that let the data tell the story. So it does start with the data. And you mentioned data room. That's absolutely critical. And again, with AI, it's easier to have a data room well structured and organized.
So all of that matters.
The other thing is my, you know, one bit of advice I have for founders is never think that your business is too simple or too small to have a robust data room or robust SOPs documented. You know, the.
We, we just had this conversation yesterday with the client where, you know, a, for the founding seller, they've spent a year or possibly multiple years or even a decade in the business. The buyer has to absorb all of that knowledge and experience and usually like a 45 to 90 day window.
So the easier you make it for the buyer to really understand the business and not again, not just what's on, you know, cap table and balance sheet, but what's happening day to day.
The more comfort level that buyer will have as they're going through due diligence. Like they'll still be able to connect the dots easier between data that they're looking at and the story that's behind it.
[00:18:47] Speaker C: Yeah.
[00:18:47] Speaker B: So incredibly important. And that's one of the things as an investor, like if I'm buying a business or if I'm consulting with somebody who's buying a business, one of the things we look at is where are the discrepancies between the data and the story that's told. And if there's one, we walk away because that's, if one thing's wrong, what else is wrong or what are they
[00:19:04] Speaker C: hiding, whether it's intentionally or unintentionally. And how challenging is the integration going
[00:19:09] Speaker B: to be if you have those discrepancies? Because as someone seasoned, and you and
[00:19:15] Speaker C: I both know this, the integrate like
[00:19:17] Speaker B: we can buy a business and that
[00:19:19] Speaker C: can either accelerate our growth or kill our growth because the integration is where most of the things fail.
[00:19:24] Speaker B: So let's talk about that next.
Post closing.
[00:19:28] Speaker C: What's the number one integration failure point that you see? Is it tech? Is it culture? Is it leadership?
[00:19:34] Speaker B: Like, what do you see as the, as the most common failure point?
[00:19:38] Speaker C: Post close.
[00:19:40] Speaker A: Yeah, so that's a great question. A lot of time it comes down to contracts. So and when I say contracts, what I mean are vendor agreements and consultant agreements and even advisor agreements.
Like a lot of times everything else in due diligence checks out. And a lot of those gotcha moments that happen post close are with those things where, I mean, imagine from the buyer's perspective, they buy the business.
Very exciting day when the, when the transaction is done and now they're running the business. And a week in, you know, just like one week post close, I get a call from a vendor who's like, hey, I've been trying to get my contract renewed for three years or whatever. Pick a number, right? And these are the problems that I have. And by the way, the cost to use my services now is 40% higher, right? These are the kinds of things that, that are very troubling for buyers is when there are those landmines with any, any, again, any contract relationship that are not resolved before closing.
[00:20:49] Speaker B: And one of the other things that I'll talk about, one of the things I have to button up almost every time is contracts with clientele as well.
[00:20:56] Speaker C: They don't have, like, especially I do a lot in trades and they don't have contracts with their clientele or they don't have transferable contracts.
[00:21:02] Speaker B: Well, that's a big problem if you're
[00:21:04] Speaker C: looking to sell, sell your business because if it's not transferable, that means if I buy it, it's not going to transfer to my ownership and the new entity. And so that's a major risk. And if you're watching, if you're a founder and you're looking at an exit, buyers are looking to mitigate their risk. Otherwise they're going to buy you for pennies on the dollar. You're not going to get the value that you want. If they see these, these problems, that's like discounts. I'm going to buy it at a discount or it's walk away one of the two. And so those are, those are things that Kevin has really dove deep in today and you really need to consider. So, Kevin, I know we're getting kind of close to the end of our segment, so I want to ask, what is it that, how can people reach out to you? How do you want them to reach out to you? Because if you're watching, Kevin is an expert in this space. We have both been sharks and shark tanks before and he's really, really highly skilled at what he does. So how can they reach out to you? And what do you have that's exciting? That's coming up.
[00:22:03] Speaker A: Okay, so yeah, first, the easiest way to get started with me and engaged with me and my team and advisory for founders.
I see the AKD USA site is up. That's a great place to start. I also wanted to share that I've been running a mastermind group for six years that is specifically for tech founders and investors and we're getting now into AI and blockchain as well.
So the other place to find me is on this. It's actually sastermind.net so that's a good place to start as well.
And then finally, you alluded to an event that we have coming up on March 1, which is called Lift Pitch. It is Shark tank on chairlifts at a ski resort in Lake Tahoe. So for any founders who are listening, if you're interested in pitching at that event, we will have founders pitching of investors on an eight minute chairlift ride.
[00:23:03] Speaker B: That sounds like fun for those of
[00:23:05] Speaker C: you who are not allergic to the cold.
[00:23:08] Speaker A: That's right.
[00:23:09] Speaker B: I know I might be going, but I'm not getting on that lift. I'm going to stay inside.
[00:23:15] Speaker A: Yeah. There will be a chair in the lodge as well for pitching and it will be timed so that the people in the lodge do not have an unfair advantage against the people who are riding the chair.
[00:23:24] Speaker B: That's awesome. Yeah, so like equal opportunity, all inclusive,
[00:23:28] Speaker C: whether we're allergic to the cold or not. Thank you so much for being here, Kevin.
[00:23:32] Speaker B: Listen, folks, if you want to talk
[00:23:33] Speaker C: capital strategy, M and A or business valuation, connect with Kevin.
If you're a founder and you're looking
[00:23:39] Speaker B: at raising capital, his Lift pitch in
[00:23:42] Speaker C: on March 1 is an excellent opportunity.
[00:23:45] Speaker B: You're going to be there with investors
[00:23:46] Speaker C: and have that opportunity to pitch them and for ongoing elite executive insight. Connect with me on LinkedIn and join our Power CEOs Facebook group where we're going to sharpen the edge together. That's, you know, really important to activate the community because I'm bringing experts for you and I want to know what are the questions you have in your business. So please reach out to me and share what you want to learn so
[00:24:10] Speaker B: that I can build the best and bring the best experts for you. The best exit isn't the highest headline number.
[00:24:16] Speaker C: It's the one where you walk away respected, predictable and ready for what's next. That's the kind of legacy real CEOs build.
[00:24:22] Speaker B: We will be right back after these important messages.
Welcome Back to power CEOs Truth behind the Business. If you're loving what you're watching, you're going to want to download load the app for iOS or for Roku, the Now Media TV app or if you prefer podcast version. You can catch us on the go wherever you are at www.nowmedia.tv. we're going to switch gears now.
We're still going to talk about exit prep, but I Now have Jordan McMillan here with us from Sanson Partner Group. She's been an advisor in the space for many, many years and we want to dive a little bit into having a future ready business tech AI, the data that's going to multiply valuation for you. Because in modern mergers and acquisitions, data is not just a little bit of due diligence, it's due differentiation.
Buyers are not just buying your revenue, they're buying the leverage that they have when they bring your business into their portfolio.
Jordan, the market is changing. AI readiness, data maturity, technical infrastructure. How much does this now impact valuation?
[00:26:02] Speaker D: Well, it impacts it significantly. I have seen, you know, buyers get more and more sophisticated. They are.
Anytime that someone approaches you to buy your business, you can bet that they have already invested in SMEs and experts in this sector and so they have already gotten a sense of what these KPIs are that they are looking for and they expect to be able to see those KPIs from your data and from your business.
Having your benchmarks is important, but they will already know what KPIs that they want to see.
[00:26:36] Speaker B: So talk to me a little bit about what tech signals buyers are looking for that founders are still kind of ignoring.
[00:26:44] Speaker D: Certainly we talked about this earlier today off air. Certainly it is important to have documentation of your core processes, roles and responsibilities. And there's so much AI that is now off of the shelf. That's just easy to use.
Not having documentation of how your business functions of your core SOPs is no longer acceptable.
And on top of that, the way that you make technology decisions is also just as important as the tech stack that you have. Are you using an enterprise grade solution when you don't need to have you overspent in some areas or do you really need to pony up and invest in off of the shelf technology to make your business better? These are all considerations that buyers have when they look at businesses.
[00:27:30] Speaker B: Yeah, and they're getting much more savvy about it. I mean, I've been educating private equity for the last couple of years on exactly what this tech revolution means our evolution means and it's continually evolving. So talk to the the companies that are traditional, non technical. I'm talking trades.
A lot of industries are traditionally not heavy in the technical side. I mean, I come from sports medicine. We were on the field with athletes. We hated the fact that we had to document notes because that wasn't our core strength. So how can these non tech companies or industries demonstrate future readiness if they're looking at buying? Because sometimes if they're not up to date and they're looking to exit in the next 12 months, that capital expenditure could really hurt their valuation. But what can they do to be ready so that the company coming in goes okay? I know I need, I need to integrate some of this for optimization, but they're already ready to go.
[00:28:25] Speaker D: Yes. And keep in mind too that if you're making the capex expense but you are heading into a process, you can add back that expense and you can explain that to a buyer that you needed to make a technology improvement in order to pick up in the business. Now here's the thing. I will say with technology, if you are in one of these trades, I'm thinking of some restoration businesses that I've seen, some H vac businesses that I've seen. If you are in those trades and you are making a big swing at technology, it is important that you follow through with the implementation. Some things that I have seen trip people up is simply applying the technology or deploying the technology but not going through with the human training, with the accountability and ultimately making sure that what you have put in place ties back to your financials. Those are common missteps. It's really the sort of anti technology, the human side of it that trips us all up because we want the technology to do everything for us.
[00:29:23] Speaker B: Oh, you are preaching to the choir. You just Gave me a wonderful little snippet for what I've been doing. I mean, I've been the people side of the tech innovation for the last several years.
And I agree with you, the misstep and the other misstep I see is a lack of transparency that it's coming.
And with AI, it learns differently. The technology is different. This is not just an Excel spreadsheet that just pop it in and it's going to do what you need to do. It literally learns from the interactions. And if we're not clear as leaders in these companies that, hey, I'm not here to take away your job, I'm here to make your job easier for you to do, more fun and take away some of the stuff that you don't love.
I've actually seen those frontline workers, when they're interacting, sabotage the AI because they're afraid they're going to lose their jobs. So it is so incredibly important that we don't ignore the change management side because it is, it's change management when we're going from non tech to tech. Absolutely. And so let's talk about the data telling the story and the deal a little bit.
Because one of the first turnoffs for me as an investor, for example, is if I go to the data room and I can't figure out anything that I'm looking at, it's not worth my time. So when you talk about the data telling the story of the business, it's a common concept that you've explored. What do you mean by that?
[00:30:42] Speaker D: Well, we truly mean, of course, having good tight controls and financials is one thing. And we're really, I think with data, not even talking about an income statement, we're talking about how the income statement statement works. With your operational metrics in the business, we should be able to tie your profitability uptick that you had in Q2 and Q3 and beyond. We should be able to tie that to a similar correlation of your operational KPIs and your operational metrics. These things should work together with one another rather than seemingly contradict each other. And anytime that we find that in diligence, it's a big red flag as to, well, how are we doing the accounting here?
[00:31:21] Speaker B: This doesn't make sense. There's some funny money going on.
[00:31:23] Speaker D: Right, Right.
[00:31:25] Speaker B: Okay, so I'm going to switch gears just a little bit and ask you, in your recent transactions, how much has automation or AI integration moved the needle in a transaction? Just give me an example of a client recently where that actually was A differentiator that maybe got them a better evaluation.
[00:31:43] Speaker D: So I did a deal recently, this is one that I was advising as a very small person team. But they were doing a lot with AI to scale two of their subject matter experts that they had on the team and what was happening, and you could see it, talk about data, you could see it in their financials that they were really growth constrained. They weren't able to get above a certain top line and therefore weren't able to expand that margin for about two years. And what they did is they invested in technology and they invested in AI, actually coming alongside these to SMEs to learn what these folks were doing. And then when they were ready to exit, they had a fantastic, albeit a small, case study to prove out that that AI scaled those two resources to about six resources and that ended up telling the story to their buyer that they could grow at a 3x in the next year as opposed to staying flatlined. And ultimately that yielded them a fantastic valuation.
[00:32:45] Speaker B: And you know that that three to one ratio, that's actually quite common right now with, with what's off the shelf in technology. And so I just want to kind of hit on this folks, because we've talked about it in, in the technical speak before, but this is a really good example that you gave, you know, digital twinning, replacing, not replacing, but augmenting. I call it amplification. Amplification of our key personnel allows them to open capacity.
And so with the same team, you can now process 3x more volume. That is a huge value add, whether you're exiting or not. And so when you're thinking about your technology, be really cognizant of what is your business initiative that you want, what is going to get you there, what are your top three bottlenecks? And can tech actually eliminate one, two or three of those bottlenecks? Because that's how you're able to link that to your ROI and you're able to always have metrics with that. So let me ask you, how can
[00:33:44] Speaker C: people reach out to you if they would like to learn more about what
[00:33:48] Speaker B: you're doing and if they have questions about this, because you're very, very, very seasoned and can give them some excellent advice in their exit preparation?
[00:33:59] Speaker D: Well, you can always email me directly. Jordanamsonpartnersgroup.com Our website, Samsonpartnersgroup.com also has on it our EVRS toolkit, which is really our way of saying nothing that we're doing is proprietary. Please use this yourself if you would like a Toolkit, a process, a cadence by which to put more professionalization and discipline into your business. Please download our toolkit for free. Reach out to us on LinkedIn or through email.
[00:34:28] Speaker B: Thank you so much. And so if people were going to take one action today based off of this conversation, what would it be?
[00:34:34] Speaker D: I would say to take a hard look at those processes that are still repeatable in your business that a human being is doing that you haven't quite yet automated yet. And if you're not using one of those simple off the shelf AI tools that will record things for you, that will create job descriptions or create SOPs for you, please start leveraging that today. It is not an excuse to not have your core processes documented.
[00:34:59] Speaker C: Oh, boom.
[00:34:59] Speaker B: That's the mic drop for today.
[00:35:01] Speaker C: Thank you.
[00:35:01] Speaker B: Thank you so much for being here.
And you if your systems aren't telling the story of leverage, buyers are going to write their own story and their version is going to be conservative compared to what you're hoping for. So now we're going to make it personal because Exit is not just about transaction, it's about an identity shift. What happens after the identity? After the exit, who am I? What is my purpose? How am I moving forward? And what legacy am I leaving? After this break, The wire hits, the celebration fades, and you realize you just sold the thing that defined you. Exits are financial, but they're also psychological. I've got Jordan McMillan here of Samson Partners, and she has seen founders win big and struggle quietly. What happens after the deal, I want to dive into that now, Jordan, because it really is, it really is a very key topic. And a lot of times founders, they exit, they have a little bit of celebration, the champagne is gone, and then they enter a deep, dark hole. Talk to me a little bit about life post exit.
[00:36:32] Speaker D: Life post exit can be difficult.
In fact, I think there's some research that shows that about 8 or 9 out of 10 folks who sell their business and stay on afterwards have some kind of of psychological or emotional distress after that happens. It's akin to, you know, buyer's remorse or seller's remorse in real estate. But it's not the end of things. I think a lot of times knowing that this is natural and knowing that this is normal can sometimes really take the edge off.
But what I do find is that it's really the stark contrast between not being the boss anymore and not really having all of the autonomy to make any decision that you want. That sometimes while you know that that's going to happen post close, the reality sets in and it's uncomfortable.
[00:37:27] Speaker B: It is. And you know, I liken it to the grieving process. It's a piece of our identity. I have been responsible for feeding 256 families, you know, whatever that looks like. And post close now I'm not responsible for, for that anymore. That's not my role, especially if I've exited completely after like a 90 day or a short transition period.
So talk to me a little bit about what we can do before we exit so that we can maybe decouple our identity from the business and our purpose from the business so that we don't necessarily descend into as deep a pit.
[00:38:04] Speaker D: Yes, well, certainly your succession planning is so, so important. In fact, I have seen so many founders get so much joy and get so much energy into creating their own succession plan and then implementing their own succession plan, oftentimes pouring into another human being and enabling them to do what we did and even doing it better is so satisfying that it can really help bridge that gap between selling and then ultimately stepping away from the thing that again, they've become so entrenched with for a lot of their career. And on top of that, it's just really important to start thinking about your next passion.
Just because you've stepped away from this business doesn't mean that you lose your identity as an entrepreneur and doesn't mean that you lose your passion. There are so many other things that you can be passionate about and oftentimes you can structure those types of agreements into your transaction agreement where if you're going to stay on as a chairman or you're going to stay on as, as an advisor, that's often welcomed from buyers.
[00:39:10] Speaker B: You're exactly right. I mean, let's be real. I've exited. I even retired sports medicine. And what I did was I now empower others to get to the point where they can do the same and pursue what it is that they love. So it is a beginning. Yes, we all. And I'm going to be real. Like, even with all the planning in the world and pouring in, you're still
[00:39:29] Speaker C: going to have a little bit of
[00:39:30] Speaker B: a low point because you've just gotten out of a grueling due diligence process. You've gotten this big reward that doesn't last very long. You're not excited for very long. For me, it was two days the last time.
Because the reality is the entrepreneurial mind immediately goes to what's next. What's next.
And that's what got us where we are.
So let's talk a Little bit about legacy now, because this is something that enters the conversation a lot of times, times. And legacy doesn't write itself like we have to be active in. In. In our role with that. So what does that mean in practice? As we're thinking about exiting as.
[00:40:08] Speaker C: And.
[00:40:08] Speaker B: And let's say we're exiting and hanging up the cleats, because this is very common right now. There's a lot of people who are looking at retirement. They've been doing this for 25, 35, 45 years. Let's talk about that aspect. What is legacy and purpose planning all of these things look like for that individual?
[00:40:25] Speaker D: Well, what I have seen is a lot of times folks who are truly stepping away from the business. Their business has become their community over the last 10, 15, 20 years, and now their community is gone.
And so what I have always encouraged people to do, if I'm involved in prepping for sale or prepping for transaction, I always advise people to get back to their physical community.
Who is around you, who lives with you, who lives near you, what do you do and what do you want to do in those moments where you're not at work? Because very quickly you will find yourself in that scenario. And so though we were so excited about tech and innovation, I do really try to encourage people to get back to the physical world and to get back to what can you put your hands on and what can you do to make an impact in your immediate community?
So many of us, I find, and I'm a mother of three, so so many of us, I think, are so digital now and we're so online that we forget that you can make a huge impact to the woman across the street. And I know maybe that sounds a little bit trite, but it's so true that we often neglect those around us instead of.
Instead of pouring into them.
[00:41:39] Speaker B: So while we're on this topic, what mindset shift protects us as founders from losing our directions after the deal or from actually getting into that fe physical reality?
[00:41:51] Speaker C: Like what.
[00:41:52] Speaker B: What has to be unlocked so that we can move forward?
[00:41:56] Speaker D: I think it's that you have value outside of what you have created. And in fact, as an artist, as a creator, as a visionary, you still have something left to give, whether that is something left to give in your gym, in your family, in your community, or whether that's another business entirely.
I find that entrepreneurs are entrepreneurs for life, and you will continue to be so after you sell. And you may be one of those who ends up with multiple sales.
[00:42:26] Speaker A: That is true.
[00:42:27] Speaker B: So let's Talk a little bit about that. Like what happens, how do we build our exit thesis, if you will, because we're so accustomed to building our business plan, our strategic plan.
If we're buying companies preparing for an exit, we have a thesis for our buy.
What does that look like when we're planning it personally?
[00:42:48] Speaker D: Well, it certainly looks like leaning on your support system and starting to understand how you're going to be spending your time.
I do tell people frequently to go through and put as much rigor into what you're going to do next as you did when you started planning for that business so many years ago. Have a session. Get your mentors, your advisors, your spouse, folks who know you and understand your passion. Get them together and have a whiteboard session. If you're a whiteboard guy or gal, have a collaboration session and figure this thing out, Take it seriously because the risk of not and allowing it to surprise you psychologically, emotionally and mentally post close is too great.
And you can prepare now for it and you can leverage your friends and network and have a great time doing it.
[00:43:38] Speaker B: Absolutely. Now give me the one thing that every, almost everyone misses when they're thinking about this. What's the one blind spot that almost everyone misses?
[00:43:46] Speaker D: Well, I'm gonna say physical health.
Physical health is the thing to me that I see so many times. If it's a female entrepreneur, I see that typically she has just put herself on the back burner and served everyone else and everything else. If it is a man, I see sometimes indulgence getting too far or just not taking care of himself and exercising. And this can be something that is truly life altering. The stress and the psychological strain of just having sold your business and then your health is not in order as well, can be just kind of a double whammy.
[00:44:26] Speaker B: Absolutely. I couldn't agree with you more. You know, a lot of times we do neglect, and I would actually argue that part of your exit prep, if you're thinking about exiting a year, 18 months, three years from now, today's the day to make sure you rein that in. Because it requires stamina to get through due diligence and to get through the transaction. And so if you're listening and you're like, oh, I'm a couple years out, I'm going to retire. Great. Today's the day to take your physical health in order because it's going to take stamina if you're going to actually maximize your asset.
We do love to leave everybody with a daily action step or something that they can do Today that's going to shift their momentum.
What would be that one action that you would recommend today?
[00:45:09] Speaker D: I would tell everyone to get their. If you're thinking of exiting anytime soon, I would tell you to get your team ready, not your team of the business that you're selling, the team of your life that you're going to do after close.
Whether it's your spouse, whether it's your children, whether it's your friends, your community, your religious groups, get those folks together and get them with you and on the same page and share with them what you're thinking and share with them what you're going to do and ask for their support. You would do it with your business, so why not do it with your life?
[00:45:43] Speaker B: I think that's absolutely fantastic. And you know, being very transparent with those around us is so incredibly important. Jordan, how can people reach out to you? If they'd like to learn more or
[00:45:52] Speaker D: use your excellent services, you can always email
[email protected] Our website, SamsonPartnersGroup.com has so much information. Free toolkits, free assessments for your business for exit readiness. And of course, you can pick up our book, the Owner's why, When and how to sell your business to private equity. Even if you're not looking to sell, it's a great resource for you to figure out how to step back from the business and how, how to scale it without your being dependent on you.
[00:46:20] Speaker B: Thank you so much for being here. I appreciate you. Thank you for having me, folks.
[00:46:23] Speaker D: You.
[00:46:23] Speaker B: Yes, you. Unfortunately, all good things come to an end, including this show. But the good news is, is that you know that you have action to take right now. Not to tomorrow, not next week, but today. Because when we take that immediate action step, when we gather our support system around us because we're going to plan for the exit, when we take action, we're able to create that forward momentum that's going to elevate our businesses. It's going to set us up for success whether we're exiting or not to
[00:46:53] Speaker C: get to that next level.
[00:46:54] Speaker B: And it becomes inevitable because we are taking the actions that are going to create that success, no matter what. I encourage you to do that immediately. Don't wait. Because when we take action, we make things happen.
We will be here same time, same station next week. So until then, win today, Win, win
[00:47:11] Speaker C: this week and I'll see you next time.
