[00:00:00] Speaker A: Sa.
[00:00:30] Speaker B: Welcome to Power CEOs, the truth behind the business. I'm Jan Gode, your fearless host, investor, business advisor and entrepreneur. Why are we here? Because I believe that iron sharpens iron. And when we bring industry leaders, founders, investors to share what's working in business and maybe some of what's not, we're all able to learn and grow. As a result, our businesses grow and the ripple effect impacts not only ourselves, but our teams and their families, but also our communities and our world. You're going to want to dive in, get ready, get settled, because I've got two amazing guests today. I have with me Seth Deutsch, founder of Sampson Partners Group, and his partner, Jordan McMillan. These are some of the leading minds behind founder led exits. They have operational excellence expertise. They've transformed organizations across North America through disciplined, scalable business systems. Together, they've helped build, acquire and prepare companies for exits long before those companies even imagined a deal was on the table. I'm really excited to introduce you, Seth and Jordan. Welcome to the show.
[00:01:35] Speaker C: Thank you for having us.
[00:01:37] Speaker A: I'm so excited. Now I want to like, go run through the wall.
[00:01:40] Speaker C: That was an amazing intro. My goodness.
[00:01:43] Speaker B: You know, I really, I've been looking forward to this because a lot of founders are looking at exits and, and I deal with this as well in my business and they really don't know what to expect. They have very unrealistic expectations. So I'm really excited to sort of talk about what founders don't realize.
Exit preparation, folks, begins with a lot of preparation. It begins years before your sale even might be on the horizon.
So talk to me a little bit about this. You've written a book, the Owner's Manual, four founders, in order to sort of prepare them so they're not rushing at the last minute. Talk to me about some of the key mindsets that founders need when they're looking at a transaction.
[00:02:27] Speaker A: Yeah. And thank you so much for having us. We've been excited about this as well. Yeah. So, you know, in the owner's manual, what we've done is really distilled down for me. I actually started my career here in Houston, first as a basketball coach, but then I went to work for Apache, the oil and gas company. And the first deal that I worked on when I was 22 years old was the acquisition of Shell Canada.
So I started doing this at a very young age.
Fast forward to today. Personally, I have executed more than 70 acquisitions of small businesses.
And the thing that really breaks my heart is how many times I had to tell Founders. No.
Or tell them what they didn't want to hear because the people around them that were on their side did not prepare them, weren't honest with them, didn't manage expectations, didn't help them see the investor view. And so we decided a number of years ago to switch sides, to come to the other side of the deal table, to leave the private equity side and the investor side and to bring decades of knowledge over to the founder. But before I go on, Jordan, is there anything you want to add to that?
[00:03:39] Speaker C: No, I think what we're really passionate about is just giving power back to the founders.
We both have so much respect for business owners. We are business owners now, which is crazy to even think about because I don't think we ever even intended for that to happen or certainly didn't set out making that something that we wanted to do over the last 15 years that we've been together.
But it's really something that is important to us. We have so much respect for the businesses that make this country go round, the families that are affected by these small and medium sized businesses. So that's what's important to us, is that folks get the exit that they want.
[00:04:24] Speaker B: You know, let's talk about that a little bit because you said that the people around them are not doing them justice, how they're advising them. And one of the things that I see, folks, for those of you who are watching, is you think you're going to sell a business, you get excited about it, you go to a broker or someone else and they list your business for way more than it's worth and they tell you maybe that your business is worth $5 million, when actually the valuation objectively might be 850 to a million. And so what happens is you have this expectation and you're already counting your money, right? As soon as you hear that big dollar amount, you, you're like, yes, I know how I'm going to spend this, I'm going to retire. And so it's actually a disservice and it's kind of like real estate a lot of times in real estate and I think you use this analogy in the book we do in real estate, there's realtors that maybe have a little less experience or they're just trying to win the business and they'll tell you your home is worth a million dollars when actually everything around and all the comparables are 750,000. So can you talk to us a little bit about how to view that? And when they go and, and they Hear the number, what questions should they be asking so they can get the right expectation?
[00:05:31] Speaker A: Absolutely. And you're exactly right. It's the analogy that we use. What we say to people is we want you to start taking the investor view of your business the way that the market will and the way that when you are acquiring, let's say, a piece of rental property, here we are in a suburb of Houston, I don't know, but it's possible, if I went on Zillow or any website, listing website right now, I could tell you that where I am, the price per square foot in this neighborhood is, let's say, 350 to $550 a foot. Now, we also all know, wherever we live, whatever that range is, we know the things that go into that, that calculation.
Location, school district, foundation. How old is the roof? How old is the H vac? When was the last time you updated the kitchen appliances? Have you painted the thing? Like all these factors go in, in a business, it's the same thing. We break these down to the seven foundations within our book. And so that's leadership, succession, quality of revenue, quality of financials, quality of operations. These are very simple, simple things. And so every business in the United States, whether you know it or not and really around the world, has a known trade range to private investors. And so we always want to anchor the founder, the seller, in reality, help them understand what is the trade range for a business like yours, given the industry that you're in, the size of the business, and then all the other factors. And we can tell you today, based off of what we see in the business, if you were to sell today, number one, are you transactable? Number two, are you @ the low end or high end of that range? Number three, what would the deal structure look like, depending on the characteristics that we see in the business? And the other thing that we really try to understand when we speak to a founder is why.
Why?
What is your why?
And is that a good why?
And. But once we understand it, we can then also start to think about what's the right home for you next, where would we envision you being happy? And by the way, if you want to retire, when you sell the business, and depending on the type of exit you're envisioning, we also have to understand those characteristics. And so as we take a look at this, what we often say to founders is, listen, given your expectations and what you want, it's possible that, sure, you're ready to go now, or what you might need to do the same Way before you would list a piece of property is remodel the business before you take it to market. But that takes time, money and effort. So we try to lay these things out and we try to put this power and this knowledge in the founder's hands from a place of reality and care and empathy, which is different, I think, than how most people approach it.
[00:08:36] Speaker B: Wait, so it's not just about cleaning up the books? Because I'll tell you, the first thing that I hear is, oh, I already know I need to clean up my financials first, folks. If you're cleaning up your financials and you think you're going to sell in two months, think again. You need to do this way in advance. But what else are we cleaning up when we're looking at this business?
[00:08:53] Speaker C: Well, a lot of times the financials are actually more difficult to clean up, I find in my experience than most people assume. So that does take some Runway. But we're also talking about, particularly with folks that have either family businesses or it's multi generational, we're talking a lot about key man risk.
And so it's really important. This goes back to why Seth mentioned. We ask why.
Are you just looking to take more time off? Are you just looking to spend time with your family? Because that's a different exit than selling to an institutional investor. But keyman risk is abundant when it comes to small and medium sized businesses. It's usually the power and all decision making is concentrated at the top with either the founder or maybe one other executive.
[00:09:44] Speaker A: Yeah. And then the other big issue is client concentration.
Because as many times as we are building our businesses for ourselves, we're creating a great lifestyle, we're creating wealth, we have the things that we want, the business is comfortable to us. And I can't tell you how many times I've stepped into a blue collar business, maybe an electrical business, a contractor, H vac, plumbing, whatever, across the trades. And someone will say to us, you wouldn't believe this incredible client relationship that I have with my friend who's a developer and we do all of his work. And by the way, it makes up that one client, which is a personal relationship of mine, makes up 60% of my business.
That's almost untransactable.
[00:10:27] Speaker B: I wouldn't buy it.
[00:10:28] Speaker C: Right?
[00:10:28] Speaker A: No, right. It's because you have this and it doesn't have to even be to that extreme. But, but you know what? So what you might need to do is take some time to diversify your customer base. Right. So that maybe your top 10 clients make up no more than 25 or 30% of the revenue. Again, that will take time. But what an investor is thinking is what happens could be no fault of your own. What happens if that one client goes bankrupt?
What happens if they sell? If they sell, your client sells their business to someone else. What happens if a competitor comes in and takes that business away from you?
So the whole point of this is to make the business antifragile. And those are the principles we try to teach in the book.
[00:11:14] Speaker B: And on that note, we do have to take a brief break. So, folks, it's about de risking your business. It's about making sure that the key personnel who are making decisions are going to stay with the business because the buyer is going to think about it from that standpoint. They're looking at what is the risk? What happens if those people leave? What happens if our top clients leave? So I want you to be thinking about this as we go into break. We're going to be right back. And up next, we're going to talk about how AI systems and legal structure are reshaping what buyers look for in today's deals after these important messages.
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So let's get back into the nitty gritty. If you built your business as an operator, you're not going to be selling to an acquirer who's looking for a system unless you prepare. Before the break, Seth and Jordan and I were talking a lot about the unrealistic expectations, setting the realistic expectations. What are the things we need to consider before we think about exiting our company and why? Why are we looking for that? Because it's really important that we understand the drivers of valuation today. There's a lot of things that are happening in the marketplace. You know, we talk here about tech readiness and AI integration all the time. And, and those things are systems based. And that proves whether a company can scale in a lot of ways. A lot of founders are underestimating how much buyers, especially private equity, care about the infrastructure but those are the questions that are asked in those rooms. What is the infrastructure for scale? Have you architected your business for scale? Seth Jordan, you guys both have seen this firsthand. You've seen how tech maturity, operational discipline, and legal preparedness can actually make or break a deal.
So I really want to go into that. And before we do, though, we talked about your book. And I'd like to show that for our viewers so that they can pick up this, because, guys, this is a legitimate step by step.
It's a step by step, hold it up journey for you. If you're looking at exit, the owner's manual. And so, Seth, you talked about this book.
Why did we write this book?
[00:14:15] Speaker A: It was an emotional journey for me.
You asked me earlier, we said a bhag that I put out there publicly online the other day that we would like to help over the next five years. 10,000 founders have the exits that they deserve.
And I know that there is no way that we could ever reach through our firm, that amount of founders directly. And so what I really challenged ourselves to do was to say, could we create a blueprint? Could we create a system that they could access? If you can spend $10 and then go online and download our toolkit for free, it is possible that they might be able to follow the steps and never have to talk to us and that we could have an impact on them. That that was the desire. And then in doing so, I knew that me just telling the story myself, that would not have the impact. And so this book has 25 stories from friends of mine, from founders, from investors, from investment bankers who I've come to know and trust after doing this for 25 years, who all were so gracious to share their stories because we are all one.
We are all founders. We all want every. We want the success for all of us. And whatever that exit looks like, whether that's teaming with an investor or selling whatever vision you have, we have this great desire to help and to make sure that people get what they want. You know, our company is named after my first dog who is a cavalier, King Charles Spaniel. And on our initial logo, we had the cross donkey jawbones on his cape. Because Samson, while he was my little dog, a cavalier who's got a big heart. Samson was also a warrior in the Old Testament and he slayed the Philistines with the jawbone of an ass. So we have two cross donkey jawbones on his cape because we say we don't have clients, we have partners, we lock arms we go to war with you because this is something you're only going to do once. It means so much to you, and it means just as much to us as it does to you. And so we tried to put all of that passion and knowledge and wisdom into this and into the toolkit. So that's why we did it, was to try to find a way to help as many people as possible. We're also bringing out an addition of this specifically for the personal injury law firm market just in a few weeks.
[00:16:51] Speaker B: You know, let's talk a little bit about that evolution before we dive into our next questions. It's relatively new that legal industry can partner with capital and transact in the way that they're moving into. And you have experience in the space. Like what was the driver behind pursuing that space? And what is it that you want every attorney who owns a practice to. To know when private equity knocks on the door?
[00:17:20] Speaker A: Do you want to take the first. You want me to take the first part?
[00:17:22] Speaker C: Well, I'll take the first part, which is. Seth is the thesis whisperer. So that's why, I mean, really, that's why four and a half years ago he said, we really need to, I think we really need to get into this space. And I was like, why?
What do you mean? And he's like, well, there's, there's something coming and it's time that we get in. And so, yeah, he is the thesis whisperer. I guarantee you the next one will be there too. Probably already knows it.
[00:17:56] Speaker A: Yeah, but let's stick on this one because we're still in the first inning. Yeah, still in the first inning. What's actually interesting is MSOs, managed service organizations that enable you to carve out the back office from a law firm the same way that you would in a CPA space. Dental space, medical space have actually been happening and there's documentation of it in the United states since around 2004.
In Canada since 2003, they're just not widely spoken about. What really accelerated this was when Arizona created the Arizona abs, which now allows, if you get, you know, if you get the blessing from the State Supreme Court of Arizona and the ABS committee, you can now have non lawyer ownership directly of law firms.
And I think there are now probably about 135 entities like that in the state of Arizona. And this has been going on for a few years now. And so it's really opened up people's imagination to what is possible. And so I think that that was the catalyst to really accelerate this.
But MSOs can be done nationally. There's no restriction on them. And so I think what has happened is private equity starting to look for the next professional service industry to invest in. They have gravitated toward legal, but then some very specific niches of legal. By the way, this has happened globally for some time. The United Kingdom deregulated completely the legal industry in 2011. You have publicly traded law firms. Australia then followed.
And so what we see are kind of two major segments, but the North American legal industry, which has never been touched by outside investment to any extreme, to any great Measure, is a $400 billion a year industry.
I would also tell you that the United States is fairly litigious compared to other societies. And so the growth rate is fairly strong and stable.
And just the personal injury law firm segment this year in the United States was a $55 billion segment comprised of over 50,000 law firms that are all privately held, the majority of which by one to three owners, because the rest of the employees, while they may say partner on their title, are typically employees, not partners.
And I would tell you that the largest in the United States this year probably did about 1.2 billion in free cash flow.
And there are likely over 1500 that have over $20 million cash in net income. And the space has never, ever been touched.
So that is why there's so much interest in the space. If you take a look at a parallel, the CPA space, the MSO structure was discovered in the CPA space in 2012. The first institutional private equity came into it in 2021, the Eisner Ampner note, that took 270 partners to agree to take on outside investment. That's what took so long.
Now fast forward just really four or five years later.
One third of the top 30 CPA firms in the United States are private equity backed. So the acceleration of private equity investment was quite rapid. And we're still probably in the third or fourth inning of that game.
[00:21:30] Speaker B: And so what I'm hearing is all the things that investors like to hear. There's plenty of free cash flow, there's plenty of fragmentation. This is an area that we can definitely move in and make some change. And folks, if you're a founder and you're like, okay, those are big numbers, I don't have that, but maybe I'm cash flowing 1 million or 2 million, which is more common in a lot of the smaller firms, that doesn't mean that you're out of place.
So for those founders who may be the 1, 2, 3 partners, what do they need to know or be thinking about because let's be real, a lot of these folks work their tails off and they're like, I'm going to die with the business because I just don't see a way out. What would you like them to know?
[00:22:13] Speaker A: I'd like them to know the same thing that I want every founder in the industry to know. But there are certain things I want every founder to know. The space.
Let's just go to the personal injury segment of the market, right? The reason that investors are clamoring right now for personal injury law firms, they're looking at estate planning, they're looking at family law, they're looking at consumer bankruptcy. These types of firms tend to be brand driven with low key man risk because consumers are attracted to the brand. Here is the thing that is different. In the legal industry, unlike any other professional services industry in the United States, you cannot get a non compete owner lawyer.
So this is what's really critical as investors are taking a look at the space they are looking at. These must have low, low key man risk, otherwise what is it that they are acquiring?
Now these deals today also have a lot of structure to them, right? Because the industry is just unfolding right now.
So you will see many, many deal structures where you might see a third cash at closing, a third on a three year earn out or seller note, a third rollover equity. But in today's market, because this industry is just unfolding, because these are professional services firms and because these are professional services firms where you cannot lock employees up in a non compete, they need to be brand driven, they need to have low key man risk, they need to have low client concentration, they need to be technology people, process enabled, right? So they have to have really, really well honed systems, processes and procedures.
When we look at the corporate side, the areas that are really kind of getting a lot of interest are those again that can be highly technology enabled where there's a lot of, let's say recurring or reoccurring revenue, where there are strong tailwinds and they're not like really transaction dependent. So we're seeing a lot of deals and things, let's say like IP law, we're seeing a lot of, we're seeing movement in let's say business or personal, immigration, Social Security benefits, consumer bank, you know, bankruptcy. These types of things are quite procedural. You can use a lot of AI technology, workflow, automation and a lot of the matter types don't require a huge amount of lawyer touch time. We have a particular client, their Matter type, they're able, their time on desk is about 10 months and the amount of because of their technology, it only takes them three hours of human time to settle a matter. Now that's total human time, combination of intake, case management, medical records collection and lawyer time.
That's incredible. And that's a small private company that has invested massively in process technology automation to enable that. And that type of business is highly scalable.
[00:25:18] Speaker B: So we need to take a brief break because we do have to go to commercial. But folks, I want to really dial in and we're going to start start the next segment, diving deeper into this because we heard a lot of things that you've heard on the show before, but you're hearing it from the people who are doing this day in and day out. You need to be tech ready. You need to be thinking about processes and are you operationally optimized? Because when we are operationally optimized, when we've lowered our team in risk and when anybody can step into the plate to do what it is that we need to do, we are now talking about being prepared for an investor ready success.
So coming up next, you can expect that as well as how to choose the right exit partner and why the deal terms matter more than the headline price. After these important messages.
Not all exits are equal. Picking the wrong acquirer is like marrying a stranger you haven't vetted. We wouldn't marry somebody on the first date. That's ridiculous. Why would you do that in business? Welcome back. Back to power CEOs the truth behind the business. I'm Jen Gooday and I'm here with Seth and Jordan. We are going to get into a time topic that makes or breaks an exit. We're going to talk about choosing the right partner. But first we're going to go back to what we were talking about right before we took a break. Seth was talking about what was really key. When we're looking at how do we, how do we know if we're exit ready? We want to be operationally sound, we want to have tech integrations, we want to make sure that we're process driven. We want to de risk. So I wanted to ask Jordan a little bit about this, like what are the things that our viewers need to hear? If they're maybe they're a small business and they're considering exit, what should they be looking at so that they can answer that question for themselves?
[00:27:25] Speaker C: Yeah, I think you really have to consider, of course, Jen, you talked about tech readiness.
You absolutely have to consider that as well as the integration of all of your systems, your finance and accounting, your operational systems, your CRM, are all of these tied out together.
You have to assume that an investor is going to say, well, you're either going to be my first buy in the space, in which case you're part of my platform that I'm gonna then tuck everybody else into, or I need to tuck you in somewhere else. And so really you have to take a really hard look at your systems and you have to take a really hard look at how well do they all work together. Because eventually you will be integrating. Either someone else will be integrating into your systems or you will into someone else's.
[00:28:11] Speaker B: Yeah, and it's a very different, it's a very different set of considerations too. Because if you're the platform business, a lot of times you get a better deal. Is that correct?
[00:28:19] Speaker C: Oh, yes. It also comes with some more headaches, I think. Being the first.
[00:28:24] Speaker B: Absolutely.
[00:28:25] Speaker C: Especially if it's a buyer who's, you know, sort of first. This is their first foray into the space. So then you're really working with someone who doesn't know how to operate in your space. But they have, you know, deep pockets and they have the ability to tell you, you know, what your growth potential is. They have, they can tell you what your tech roadmap is, everything like that. And they can really start to get into the day to day operations.
So being first to market is sometimes not the best, but it can pay off.
[00:28:55] Speaker B: So let me ask you, the opening of today's segment just now was find the right buyer. So if you're a founder and you are thinking you're going to hang up the cleats because you're just done.
Do you want to be a platform business?
[00:29:11] Speaker C: Well, I think it goes back to that central question of why, at least for us, because it's important we have the privilege of being able to choose who we want to work with.
And we want to work with great people who are motivated in the right way and who also have a firm understanding of reality and are not so far off from that reality that we have to fight and pull to get them where they need to be.
And so I think that it really comes back to why are you selling your business, why are you exiting? And based on that, why? We can then help folks understand who would be a good fit for them. But it's really, really important. Don't throw the thing away that you've been working on for could have been a generational business or could be 10, 15, 20 years. And I tell Seth all the time that one of the things that really makes me so happy is that we get to talk to people who at some point probably made that risk assessment in their own lives and said, I'm either going to be able to make my mortgage payment or I'm going to start this business and maybe I get to make the payment next month, but I'm also willing to take that risk. And if you did that, then you have to find the right buyer ultimately. And it's okay to wait, it's okay to say no to 20 of them and it's okay to go back to the drawing board and say, you know what, I need three more years and then I can see a path.
[00:30:40] Speaker B: So let me ask you the next question, because this comes up a lot, right?
Sometimes the price isn't the most important part of the deal, sometimes it's the deal structure. But a lot of founders don't know that if it's their first time exiting, they go for the biggest price tag instead of the deal straight structure that works best for them. So as a founder who's looking at a first time potential exit, what are some of the deal structures that we should know about and be thinking about in addition to just that price tag?
[00:31:09] Speaker A: I have to say something here and then, Jordan, I'm going to hand it to you. And this is really important. I blame part of the investment banking industry for this, quite honestly, and we have our own investment bank and part of the reason we do is because we wanted to bring something different. If you think about it, a real estate agent, typically that's selling your house. How do they get paid? They get paid a commission, right. And in that case, right. When you sell that house, you're done with that house. Right. And so the only thing that matters in that transaction is cash at close valuation. That is it. Especially if that's just an investment property, whatever, that's it. It's not done.
Unfortunately, a lot of the industry takes this same approach when they're selling a business and they're conditioned to kind of think that way. Now listen, if you are a founder that you're not concerned about your legacy, you're ready to retire, you just want the business to be sold, you're done, whether you've prepped it or not. And at the end of the day, the only thing you care about is the number.
There's, that's fine, there's nothing wrong with that. But if there are other things that you care about, if you actually have A vision to grow the business. If you care about where the employees are going, if you care about what's going to happen with your legacy, if you actually want to stay on and continue to grow like your why is so critically important that who you partner with matters. But Jen said, and I'll let Jordan go into this, there's much, much more to the headline price. When you then start to look at deal structures. Would you like to deal structures are.
[00:32:51] Speaker C: So much your thing.
[00:32:52] Speaker A: I know, but you take it.
[00:32:55] Speaker C: All I will add to that is I think that it's really important to come to an understanding of do you want to walk away or not? Because there's a number of modalities that can be utilized to incentivize your performance and to incentivize you when or if you stay on. If you want to walk away though, we're talking very transactional. The other thing that I will say, particularly about when you're wanting to stay on, if someone comes to you and tells you nothing will change for you if they tell you, my goodness, we're buying this happens a lot. It happens because there's. Listen, we all love to be told that what we have spent 10 or 15 years or 20 years on is good. You want to know your baby isn't ugly. And so sometimes flattery is utilized in a way that really it can make you, it can lull you into a sense of security that, hey, they're telling me they're buying my culture, they're buying how I've structured my operations. They love all of these things.
And then post close, there is a difference and there will always be a difference, which is why vetting that partner is so incredibly important as well as structuring the deal that will make it worth your while.
[00:34:12] Speaker A: And so we will talk. You asked about structure, so. And Jordan wants me to take it, which I will very quickly. Right. Cash at close. Then there can be. That's going to make up a component of the deal.
If they want you to stay involved in the business and continue with the success, you're typically going to have to take a portion of the deal and roll it in and continue in ownership stake post. Not in all cases, but that's what happens. And then there's the middle. The middle between the rollover equity and the cash at close. This can come in so many shapes and forms. It can come in terms of an earn out that are not can be organic or inorganic. It can come in the form of a seller's note. But this is really typically a Seller's note tends to, tends to be a guaranteed deferred payment over time.
And earn out is performative.
And so you're going to have to hit certain milestones under their ownership structure in order to achieve this. And we see earn outs as short as a year, as long as five years. Boy, five years is just, that's way, way too long.
And the other thing that happens during the earn out period, and this is what causes, can cause a lot of contention is the owner can't really get in your way of achieving that. And so you know, we like this if there are. But there are plenty of reasons to have earnouts. It's really a hedge for the buyer because they're not sure if you're going to continue to perform. Maybe you've had a spike in your business and you're selling on that spike. They're not sure if that's a sustainable bump.
But if you are insistent on selling right now, they're going to say guess what, prove it to me. If you're so confident that that spike is sustainable, then may then sustain it for the next two years. But not just from a revenue perspective, from a net income or EBITDA perspective as well. And so typically earnouts will end up or even seller notes can be tied to three critical metrics, revenue, gross margin and ebitda.
[00:36:10] Speaker B: And I think immediately when Covid when the pandemic happened and there was a huge influx and like margins went up in the container industry because of all the supply and demand, because of all of the issues with shutdown and then there was a very big dip while you had earn outs and they didn't even see their earn out necessarily because it's a commoditized market. Folks like you have to understand your market too.
And it's about de risking. So a lot of people found that themselves up a creek because they were promising things they couldn't. So it's really important that you understand the ins and outs and you hire professionals such as these guys here. If you have questions, I want you to reach out to Seth and Jordan. You can reach out to me. I will put you in touch with them. But for sure pick up the owner's manual because this is in the book. It's important that you arm yourself and you understand all the aspects that are coming. We are going to be right back up next we're going to talk about what life really looks like after the exit and how CEOs can forget protect their wealth, their mindset and the next chapter. Stick around. We'll be right back.
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Let's get into it, folks. You did the deal. You signed the papers. What next? The next act doesn't start necessarily on that closing date. It starts when you wake up Monday morning not answering to the business you built.
How do we make sure that that next act looks the way that we want? For our final segment, I've got Seth and Jordan here. We're going to talk about the stage that no founder talks about enough life after exit. So many believe that exit means automatic freedom. But in reality, it often creates a lot of challenges, an identity shift, a deep, dark hole, which we actually have talked about on this show in the past. We're going to dive deeper into it. It looks like different financial responsibilities, a different way of looking things, and we don't have that cash flow anymore. We just had a big bucket of money. What do we do? It also looks like a completely different relationship with the company that you built.
Seth and Jordan guide founders through this transition and help them build meaningful, aligned next chapters. So I want to talk to you a little bit today about how exiting a company isn't an ending, it's entering the next doorway. So, guys, oh my gosh, we could.
[00:39:09] Speaker C: Spend like three days.
[00:39:10] Speaker B: This is an hour long topic.
[00:39:12] Speaker A: Yeah, go ahead.
[00:39:13] Speaker B: Well, first things first. A lot of deals fall apart in the days leading up to the transaction because founders go, well, what am I going to do next?
How do we prepare founders for that next chapter?
[00:39:26] Speaker A: Many ways. And look, I have, I've seen about all of it.
[00:39:31] Speaker C: You've been, oh, it's such a difficult.
[00:39:32] Speaker A: You've been there with me. Yeah. You know, I have had one deal.
Hi, Dan.
Your wife had a bad dream the night before the deal and you canceled. Now, year and a half later, we were together.
Right. And so part of this is also really understanding what's going on at home between founders and spouse, no matter the gender. Because it's going to change. Let's say you're retiring or even you're selling. Right. It's going to change the dynamic. Right. And that can cause fear within your loved ones as well, who care very deeply about you. And so we also have to think about preparing our spouses. I had another deal we were working on for two years.
The morning of the signing, canceled. Yeah, now you remember. And listen, we ended up closing that a year and a half later. What was interesting is both of the founders. Hi guys.
Ended up having deaths in their family. Families.
And what ended up happening for them was really kind of a mortality check and an understanding that, you know, they owed it to themselves, to their families, to their employees. What if something happened right to them? So. But I will tell you this, and I'll hand it to Jordan. We speak about it in this book.
And one of the things that we talk about is no matter what, no matter your incredible intention and the partnership that you're forming, in my opinion, no matter what, every founder will enter the grief cycle after the transaction. And I will tell you, being on the buying side of this, what I tell every single founder, and she will tell you it's true. I tell them all about it, and I tell them there will be no judgment when it hits. And they look at me like I have three heads.
And I'm just. And I'm saying to them, listen, I just. I've been through it. I'm a founder myself. I've been through this with so. With so many founders because your identity is so tied up in the business and they forget the next day that they might still even have equity in the business that they build this business. And they're kind of, look, they're lost a little bit.
So much of their identity was wrapped up in it. They don't know what to do that they're looking at you to tell them what to do. And I'm like, do what you did the day before. But there is an emotional.
There's a lot of fatigue building up and a lot of emotion because you're running the business while you're doing the deal.
As much as we can tell you that this is going to happen, you actually don't even believe us. And then it. And then the depression and the grief hits you. What's important is that we are there, the seller is there, your family is there, your friends are there, et cetera, to help you through this. But I got to tell you this. What's really, really important is remember, in most. As. As you might be grief stricken, your identity might be shifted, you might feel lost. Remember this, in most businesses, when the transaction occurs, you, the seller, you, the founder probably knew this was going on for a year, two years, six months, whatever. And it's quite possible that there are 50, 100, 400, 1,000, 10,000 people in your organization, that the day the announcement occurs, it's the first time they heard it.
Your responsibility is to show up and reduce fear, uncertainty and doubt for them. It's to be there for them. It's to explain to them, the WIFMs, what's in it for them. And as much as you might be hurting and struggling on the other side the first 30 days, I need you, please, to show up for them and show up in the right way. And there will be time to process all of that this out.
[00:43:11] Speaker C: Yes to all of that.
The psychology of a deal is so difficult because you have to keep performing while also preparing for the transaction. And it can be so daunting. I'm working with a team right now.
Two of the guys are gung ho. This deal is going to happen. And one of them has said, I came back from vacation and what I have to do, pretend that this will never happen. And I have to tell myself that. And I've told my spouse that it will never happen because he can't take his eyes off of the ball for a minute or he will psychologically just crumble.
And so what Seth mentioned is incredibly important about the deal fatigue. And knowing that you will be exhausted, knowing that the fatigue will set in, but knowing that just as when you started, it's not just about you, it's also about your employees, your clients. And so post deal, this is much more of a champion change management, carry the banner scenario. We did a deal where literally two. I think it was a week or a matter of days after close, the two named guys on the deal off for a month.
And their folks were left just asking a whole bunch of questions. And we stepped in and said, it's gonna be okay, but you gotta take a vacation. Cause you're tired and I get it. But you also have to really plan how you do that because you've gotta take care of your folks in the meantime and assuage all those fears like.
[00:44:51] Speaker B: Seth mentioned, you know, and if they don't hit that mentality immediately, for some people, there's a little bit of a time frame. Maybe they had a little bit of a transition period and they're still. And then six months later, it hits what I think the most important thing for everyone here to take away from this conversation is there is a grieving process. It's like you're retiring. Retirees have a grieving process too. Everyone goes through this.
It's a human emotional process to go through it is a grieving process, but no matter where you are or when it happens, during this process, you are not alone.
This is why it's so incredibly important. And I think, Seth, you actually said this in your book. I believe that you need to have a peer group get with other founders who are also transacting their businesses. Because if we don't have those people to rely on and we go to a deep, dark hole, nobody wins. It's not good for us. It's not good for our families. It's not good for anyone involved in the situation. So make sure you know that you're not alone and talk about it. Because a lot of times what happens is founders, they kind of are in this. In their head. They're in, like, an emotional isolation island. Right. We think we're the only person on the planet that ever felt this way. But the reality is, that's not the truth. Like, you have three people sitting right here. We've been on every side of that spectrum. And so.
[00:46:06] Speaker A: And we're founders ourselves.
[00:46:08] Speaker B: And we're founders ourselves. Yeah. And I'm addicted to it. I don't know what's my problem.
[00:46:11] Speaker A: Yeah. And the biggest thing, too, is, right, and we talked to them about it. I mean, it's like there's only so much you can say to. To prepare for. You know, it's. It's like, well, I'll speak to myself. You know, being an adult male, it means I'm either 7 years old or 12. That's about where my emotional maturity stops. Right. And I do a lot of youth coaching. Right. And you go up and you, the parent, have been telling the child five times how to hold the bat. And then stranger from outside shows up and tells them how to adjust their swaying. And all of a sudden, it's like the first time they heard it. So this happens. Here's the thing. You're a founder, which means that you struck out on your own for a reason.
It means you had this passion, you've created, you've built. You have probably not had a boss for a long time, and you're telling yourself you can handle it, you want it, all those things. And the day after, you realize that you are now reporting to someone. It will hit you like a ton of bricks. And that is. Okay, here's the thing I want you to hear. It's normal, you're not alone. And if you need help, you need to talk about. If you don't have a peer group, reach out to one of us.
[00:47:13] Speaker B: So that's a great time to talk about this. Seth Jordan, incredible insights today. Thank you for everything. I think we're gonna have to bring you back and dive deeper into some of these topics. One hour is not enough. Where can founders connect with you so they can learn more?
[00:47:26] Speaker A: Www.sampsonpartnersgroup.com. you can also find us on Amazon.
My phone number, 312-560-5577. My email is
[email protected] and Nadia schedules me. So feel free to reach out and if there needs to be a schedule, my wife will take care of that.
[00:47:49] Speaker B: Thank you so much. I really appreciate you guys being on today because this is a really critical conversation. A lot of founders, there's a lot of transfer happening.
So you, yes, you. Today is the day where you take action. Even if you're not thinking about an exit. I'm going to tell you that sometimes we don't plan for things to happen. Today's the day you start your succession plan, no matter what your intentions are because it might be anticipated, it might be unanticipated, where someone else needs to take the reins for some time. So I recommend that you're actually pick up the owner's manual. That book is amazing.
I've already read it and they really do walk you through what do you need to do so that you can be set for success. But today's the day you think about your exit, your succession plan plan. No matter what that looks like. Because if we just sat here listening to this amazingness for the last hour, no one grows. We don't move forward. The power is when we start to take action and move forward, that positive momentum is what's going to grow our business. Unfortunately, all good things come to an end, including this show. But the good news is we'll be here same time, same station next week. So until then, win today, win this week, and I'll see you next time. It.
