379 Jonathan Baker

Jeffrey Feldberg: [00:00:00] Punctuation is a small advisory practice working exclusively with small to mid size, independent marketing services firms. Founded by industry veteran David C. Baker, Punctuation helps firms with positioning, lead generation, benchmarking, valuation, and succession planning. Jonathan heads up the M& A practice at Punctuation.

He has Jonathan has worked on deals both inside and outside the industry and brings a unique perspective as a fellow owner who's gone through the process himself. He graduated from Emory University's Goizueta Business School in 2005.

His career began at a small boutique marketing strategy consultancy. There, he was able to do marketing strategy and positioning work for many well known Fortune 500 CPG companies. In 2011, he left to start a craft brewery, Monday Night Brewing, where his focus was on marketing, sales, and tap rooms.

After helping his business partners grow to 180 plus employees at numerous locations, Jonathan stepped away from the day to head up the M& A practice for punctuation. He loves [00:01:00] cocktails, music, and hiking, and lives in Atlanta with his wife, two kids, and entitled rescue Australian shepherd, Oscar Snuggs. 

And before we start this episode, a quick word from our sponsor, Deep Wealth and the 90 Day Deep Wealth Mastery Program. Here's Jane, a graduate who says, and I quote, the Deep Wealth Mastery Program prevented me from making what would have been one of the biggest mistakes of my career. I almost signed on the dotted line with an unsolicited offer that I now realized would have shortchanged my hard work and my future had I accepted that offer. Deep Wealth Mastery has tilted the playing field to my advantage.

Or how about Lyn? Wow, he gets right to the point, and I quote, Deep Wealth Mastery is one of the best investments ever made because you'll get an ROI of a hundred times that. Anyone who doesn't go through this will lose millions. 

And as you're listening to these testimonials, are you wondering if you have the time? Are you even thinking that you've got this covered, you have the advisors or people in your network? Well, I got to tell you, these myths, they're often behind the [00:02:00] 90 percent failure rate for liquidity events. Think about it. You have one chance to get it right for your financial freedom. You really want to make it count.

And when it comes to time, let's hear what William has to say. We just got in this testimonial, William says, and I quote, I didn't have the time for Deep Wealth Mastery. But I made the time and I'm glad I did. What I learned goes far beyond any other executive program or coach I've experienced. 

So what do you think?

As I hear that, that's exactly what gets me out of bed every day. That's my mission. That's the team's mission here at Deep Wealth to literally change the social fabric of society. One business owner at a time, one liquidity event at a time, and my Deep Wealth Nation, what I want you to know, the Deep Wealth Mastery Program, it isn't theory.

It's from the trenches. It's the only one based on a nine figure deal. And that deal, that was my deal. You know my story. I said no to a seven figure offer. I created the system that later on, myself and my business partners, we said yes to a different buyer, a different offer, a nine figure deal. [00:03:00] That's what we now call the Deep Wealth Mastery Program or the Scale For Ultimate Sales system.

It's built by business owners, for business owners, so if you're interested in growing your profits for preparing for a future liquidity event, and that may be two years away, it could be 22 years away, whatever the time may be, you want to do this now, and you want to optimize your post exit life, Deep Wealth Mastery is for you.

To get started, email success at deepwealth. com. Again, that's success. S U C C E S S at DeepWealth. com. You'll receive all the information about the Deep Wealth Mastery Program or better yet, why not hop on a complimentary strategy call.

We'll go through exactly where your business is today and what's standing between you and your financial independence and your dreams. So that's where you want to be. You want to be with other successful business owners, entrepreneurs, and founders, just like you they're looking to grow their businesses, create markets.

Market disruptions and unlock their financial freedom to get what they deserve. And whether you've been in business [00:04:00] for three years, 40 years, you're a startup, you're manufacturing you're in high tech, low tech, whatever the case may be, coming in and network with other business owners, it's a safe space.

It's a confidential space with business owners, with businesses just like you, because they all wanna lock in their financial freedom and enjoy both success and fulfillment. So again, the 90 Day Deep Wealth Mastery Program, it has your name on it. All you need to do is take the next step. Please send an email to success at deepwealth. com.

Welcome to the Deep Wealth Podcast. Well, Deep Wealth Nation, I have a fellow M& A colleague who's on the show today. Really excited where we're going to go, what we're going to do. And by the way. If you're in the marketing industry, specifically, if you have an agency, you're going to want to listen in.

We're going to be going into the ins and outs, probably things that you have never heard of before. And even if you're not in a digital agency or a marketing agency, listen in because what you're going to hear, it's not gold, it's platinum. So I'm going to put a plug in it right there. Jonathan, welcome to the Deep Wealth Podcast.

An absolute pleasure to have you with us. [00:05:00] And I'm curious, Jonathan, because there is always a story behind the story. So what's your story? What got you from where you were to where you are today?

Jonathan Baker: Yeah. So, thanks for having me. I did five years in the corporate world and then left to start my own business. I started a brewery with two friends. We grew that it's now at six locations, 200 employees over the years. As it grew, it got. Less fun for me and we a few years back went through kind of a failed M& A engagement where we were left at the altar, but that process got me very interested in M& A.

From a seller's perspective I wish I had known more and I wish I had known more about the kind of emotional side of the process. I saw an opportunity. After that, to join my father, who is the other half of our firm, [00:06:00] Punctuation to help small to mid sized marketing services firms find kind of a, an exit.

So, we advise. Marketing services firms, but a lot of the stuff that we do and talk about is applicable to any professional services firm.

Jeffrey Feldberg: Terrific story. So really you've been on both sides in the corporate world doing the entrepreneurial thing. Now it's a little bit of both. I'm curious when you're in the corporate world and by the way, no disrespect to the corporate world. I can't do that kind of stuff. I was never cut out for that. But when did you know, Jonathan, that, hey, corporate world is great, but it may not be for me.

Were there any telltale signs for you?

Jonathan Baker: I mean, I think, probably within the first year, I started thinking about business ideas To launch. And so, the brewery was actually something that was five years in planning, which I was doing in the background while doing my corporate job. And so I tried to learn as much as I could throughout that process, make as many connections as I could.

But [00:07:00] knew that I didn't want to be in the business of. Helping other folks get rich I wanted to be the one making the decisions and, hopefully doing some good for the world as well. Making a physical product was really important to me at the time. So yeah it started early on.

Jeffrey Feldberg: I love that. Didn't want to help other people get rich and so many entrepreneurs, myself included, have felt that or said that along the way. And so when you got into advisory services, specifically helping business owners in, let's just call it marketing in general or digital agencies, why there? I mean, you really could have gone anywhere, Jonathan.

What was going on that you picked that specific industry?

Jonathan Baker: Well, my father had a ad agency growing up. So, came about it honestly in the mid nineties, he had his own firm. And then he started advising firms like his and he's been doing that for, 20 plus years. I've always had a fascination with marketing. That was my. Kind of background and [00:08:00] piece of the brewery.

I was always ahead of marketing. And I think the, the reason that we go after small to mid sized firms is that's where I can provide the most value coming from, the other side of the table where, There's no big investment banks involved. It's regular people.

this is the first time and last time they'll sell their business. They need true kind of therapist, counselor, not just a finance bro. And I don't own a finance bro. Enough Patagonia vests to be a finance bro.

Jeffrey Feldberg: Love that. You know, What's interesting, Deep Wealth Nation, where we at Deep Wealth, where we end off in our Deep Wealth Mastery Program, you go through a 90 day program, you're now set, and that's exactly where Jonathan picks up. So, Jonathan, I'm curious, Let's look at the glass half full, the glass half empty, and I know as entrepreneurs, it's always half full.

It's always going to be better tomorrow and even better the next day and the next month and the next year. But that said, I'm [00:09:00] wondering, is the 80 20 principle, Pareto's Law, is Do you find that 20 percent of the same, we'll call them negative issues, so called problems, that are creating 80 percent of the issues for the businesses before you take them to market, that you're dealing with it again and again?

And if that's the case, what are you seeing out there that you can share with us?

Jonathan Baker: We do see some of the same things again and again. One of the big ones is a firm that is not specialized enough. So, if you think about who the buyers of these types of firms are, it's going to be larger, less specialized firms, and they don't want to buy another firm like them that's just smaller with less.

Process and structure. They want to buy a deeper expertise or they want to unlock, a specific client pool. So they're looking to purchase expertise effectively. And so one of the things that we advise firms to do as early on as possible [00:10:00] is to really focus your. Your message, your marketing, and develop some deep knowledge in a specific category, either horizontal or vertical.

We also see some of the same mistakes on the financial side. I would say one of the big ones professional services firms is the owner's not paying themselves enough. And they don't understand that a buyer's going to look at their replacement cost, not what they're paying themselves right now, right?

So, for valuation purposes, it doesn't really matter what you're paying yourself. You're, they're going to normalize all that,

And you're likely Inflating net income artificially if you're paying yourself too little.

Jeffrey Feldberg: Yeah. And, we call that here Deep Wealthy EBITDA adjustments where you're not paying yourself at all and you're thinking, hey, my profits are looking really great, but a sophisticated buyer is going to come along. Well, Jeffrey, you're not going to be there. I'm going to have to hire somebody to run the company and that's going to be [00:11:00] XYZ dollars.

I'm going to take that out of the bottom line because you're not showing that. That's what I need to do. Or you're not paying yourself rent if you own the building, all those kinds of things. And I agree with you a thousand percent when you're talking about specialization. So some people say, well, listen, it's better to be the jack of all trades, master to none.

This way, I'm not going to miss any opportunities. And the flip side of that, some people say, well, if I focus too much, I am going to miss those opportunities. I'm with you, Jonathan. If we can be very specific, find a very specific problem, solve it, be world class at it, we're now in a class of our own, a league of our own.

But sometimes you're never a profit in your hometown. So for the benefit of Deep Wealth Nation, what's going on with that? What would you tell? It doesn't matter if I'm running a digital agency or XYZ manufacturing company. Talk to us about specialization and how that makes it easier for you to get top dollar when you're out in market looking to be the matchmaker between the business owner and the future buyer.

Jonathan Baker: Yeah. Well, first of all, let me say that [00:12:00] philosophically specialization means that you are getting really good at one thing. And so over time you are able to charge more for that one thing, right? You get faster at it, you get better at it, and there are less people who can do it like you. And so you are building value, even though.

There's a smaller pool of folks that might purchase from you but on the transaction side, the deals that give the sellers the best return are the strategic transactions and strategics only happen if you are specialized and you have something very specific that the buyer wants. I will say specialization also helps because it helps, me as an advisor know Who and how to sell like, who am I going after?

And I can be a lot more deliberate and personalized in my approach. So, in the same way that specialization gives you focus in your own business [00:13:00] development efforts, it helps Me as well, fine, just the exact right fit for you.

Jeffrey Feldberg: Terrific. So the specialization really is what we call here in our nine step roadmap and Jonathan, you can say Jeffrey, on base, off base, step two X Factors, this is what differentiates one business from another business. And when we do it really well, most businesses, I'm going to say three to five areas, they are world class and they don't necessarily recognize that.

But once you do, You can create narratives around that, why you're different than everyone else, why you can charge a premium, why you're missing out if you're not a customer. So I hear you loud and clear on that. And so let's flip it. And I suppose we could just as easily take the opposite of what you said, of what we've been speaking about right now.

For businesses that come to you and you're saying, yes, this is exactly where they need to be. This is going to be not necessarily easy, but relatively easy to get them out to market. It's going to be fairly effortless. We'll get top dollar. This is a no brainer. We'll What kind of attributes are you seeing in companies that would really walk in the [00:14:00] door and you're checking all the boxes that you want to check?

Huh.

Jonathan Baker: So this is an obvious one, but profitability. There are some folks that think that their firm will be valued on top line revenue or, gross profit. And the reality is buyers are really going to be valuing you on your EBITDA your profitability. I will also say that the. Absolute nature of your profit matters.

So, if you can get your, annual EBITDA up to a million or more, that's going to kind of unlock this whole new pool of potential buyers. Because buyers have these deal costs that they have to spread across kind of The entirety of the deal. And so they're not interested in looking at smaller deals, particularly if the owner is super involved in the day to day still, and that's kind of one telltale sign of smaller firms is that, you've got a small team.

What happens when the owner leaves? What's going to fall apart? The larger the team is, the less [00:15:00] likely things will fall apart when the founder leaves.

Jeffrey Feldberg: And that actually leads to one of our favorite questions at Deep Wealth. Someone's looking to join the community. They want to go through the Deep Wealth Mastery Program. Or they're saying, hey, Jeffrey, I don't really need to do the Deep Wealth Mastery Program. I'm fine on my own. And we answered one question.

Hey, Jeffrey, does your business run without you? Please, yes or no. No, ums or ahs or hemming and hawing or stories. Ums or ahs or hemming and hawing or stories. And Jonathan, you're right, for most people, even if they have a management team, for a lot of business owners, management team, no management team, everything goes through them.

And you're right, that future buyer, that future investor, they don't want a second full time job. When the business owner sells a company, they're riding off into the sunset. As an investor or buyer, I want to know I have a company the next day that's going to be there, but even bigger and better. So I hear you loud and clear on that.

So let's now talk about. Buyers, they are a creature unto themselves, always very interesting. So, someone who has been a through and through entrepreneur, because again, at Deep Wealth, we say the skills that build your business certainly aren't the same ones to grow it, and they're definitely not [00:16:00] the ones to sell it.

They are very different. And how can you master something that you've never done before? So broadly speaking, I know we have different types of buyers. You can say, well, Jeffrey, you got the strategic buyers, you have the financial buyers, you have your family offices, you have your individuals, you have all the hybrids of all that.

But generally speaking, what's going through the mind of buyers that's either going to have them run as fast as they can in the opposite direction, they don't want the deal, or yes, this is a deal I'm going to overpay because I don't want to lose it. It's so good.

Jonathan Baker: So two things first on the profit side, they want. To feel good about the company's ability to make money in the future. Sometimes they look at this through a quality of earnings report during due diligence, but generally to the extent that you can prove that your revenue is, monthly recurring, or you've got longer term contracts, or long term relationships with clients and that no one client, And so, they're going to do a lot of research [00:17:00] into whether or not the X Factor is, a significant portion of your total revenues.

They want to just minimize the risk of losing money effectively, right? And they're going to price that into the deal regardless. The other thing they're going to look for Is something that they don't know how to build themselves and that's what can really vary, but it could be a senior leadership team.

It could be access to, again, a particular client base. it could be any number of things.

Jeffrey Feldberg: Interesting. And, really, Deep Wealth Nation, imagine now you're going to buy, could be some stocks, it could be even another business, who knows, what do you want to do? You want to pay the least amount of money. And you want to maximize your profits or return on investment as really no different from the world of the buyers.

So Jonathan, what can you do that a business owner, particularly someone who's in the marketing world, they can still be saying, well, Jonathan, look, I do marketing all the time. I can speak to these buyers. I can put the narratives out there. I'm going to get them excited. And [00:18:00] more times than not, that's a recipe for disaster.

So what are you doing now? Share with us some of your secret sauce. So you're working with me. I have a marketing agency. It's time to move on to the next chapter. How are you getting that excitement out there, getting people to the table who don't just want a deal, they're going to be paying top dollars so I can get not any deal, but the best deal.

Jonathan Baker: Yeah, I think the first piece there is kind of echoing what you said. Don't want to be doing this yourself because you also have a business to run, right? And going through the M& A process is, More emotionally intense than buying a house. It's a, more personal and it's a bigger number,

And so you can't be putting yourself out there emotionally in that way because there's a good chance that a certain deal won't happen, right?

I mean, and yes, it only takes one, but you don't know which one. And so you need kind of an emotional buffer almost. Which is the first thing we provide. So we'll, at this point, we have relationships with hundreds of different [00:19:00] buyers. You're kind of, when you're engaging us, you're engaging us not only for expertise in deals, but also for our access to that buyer pool, which is just hard to build yourself.

And if you're only going to do it once, it's just not worth the time. So, we will go. To our buyer network, we also have a database of 15, 000 agency owners that we email weekly. And then we do customized research depending on the deal, based on and the the owner's kind of preferred outcomes to try to find the types of buyers that we think would fit best.

So it's pronged approach.

Jeffrey Feldberg: And it's interesting how you're doing that. So Deep Wealth Nation, again, you're busy running the business. Have you sold the business before? Probably not. So are you going to know who to speak to, what to do, where to go? So listen to what Jonathan is saying of what they're doing behind the scenes. And so one thing that he said that was interesting, Jonathan, and we hear this all the time.

I went through this in my own [00:20:00] liquidity event when I was selling the business. It is very emotional. And in many ways, until you go through it, it's hard to imagine. You hear it. But yeah, whatever, guys, I won't be like that, or I'm different. For the benefit of Deep Wealth Nation, what would you tell them about the emotionality that goes on when you're going through this process?

Jonathan Baker: I think the first thing is to expect it know that there is going to be a low point and there are going to be high points. The second thing, which is I think more important, is that to the degree that you get emotionally invested, that's the same degree to which you lose your leverage in the deal.

And, so that's another reason to keep it at arm's length until it's real. You need someone with negotiating power who can say no for you effectively. When you might not be able to yourself because you've already imagined this beautiful future drinking Mai Tais on the beach,

Jeffrey Feldberg: Exactly. And again, it goes back to, [00:21:00] hey, how do you know what you don't know? And the short answer is you don't. And when you have one kick at the can to get it right, and for not all entrepreneurs, but for most entrepreneurs, this is their life's work. This is the proverbial blood, sweat, and tears. Do you really want to be the guinea pig on yourself and probably blow it?

Because the stats are horrible, up to 90%. Exits or liquidity events fail. And even worse, most business owners are leaving anywhere from 50 percent to over 100 percent of the deal value in the buyer's pocket and they don't even know it. So from that vantage point, Jonathan, someone's coming to you and say, okay, Jonathan, you've convinced me.

I don't know what I don't know. I don't want to be the guinea pig. Now when it comes to fees, we don't have to use specific dollars and cents. We can use percentages, but not just for your services, going through the preparation, getting the business ready. Approximately of the value of the sale, and I know it's a tough one, but percentage wise, what should an entrepreneur be budgeting or putting aside if they're going to be selling the [00:22:00] business?

Jonathan Baker: More than you'd expect. It can be, it can get expensive because, you not only have an advisor like me involved, you've got lawyers, you've got tax advisors, and the bigger you are, the more complex the deal, you might have other folks as well. I think, Somewhere between 10 percent of the total deal cost likely gets wrapped up in that deal.

That percentage goes down, the bigger you get and it goes up the smaller you get.

Jeffrey Feldberg: So 5 10 percent is what we should be budgeting for, Deep Wealth Nation, you heard it straight here from the horses mouth, as they say. And what are you seeing preparation time? So if I know. Listen, it doesn't have to be tomorrow and it certainly doesn't have to be in the next six months. I have a few years.

I have maybe more than that. I have 20 years. Whatever it is, what would be a reasonable amount of preparation time, Jonathan, that's not too stressful, not too quick, but not too slow either that, okay, I'm going to take this time to prep and when I show up, I'm actually ready and I can go through the liquidity event.

I'll be making fewer mistakes. [00:23:00] How long does that typically take in your experience?

Jonathan Baker: I think two to three years is a good timeline primarily because valuations go back. About three years. And so you've got three years worth of clean books. You've got three years where you are focused on the exact right things. You're showing trends in the right directions. That's typically what we see when people start to approach us is, two to three years out.

Jeffrey Feldberg: Terrific, and yeah, that has been our experience as well. We've had some of our clients do it in as little as nine months, and others typically around the two ish year, give or take mark, is where they're at and what they're setting to go. And I know we say this here all the time, but again, Jonathan, not being the profit in your hometown, for the benefit of Deep Wealth Nation, most business owners believe, well, hey, I'm too busy now.

I don't have enough time as it is. Nevermind preparing for something that might be years away, you So maybe six months before, a year max, I will begin to do that preparation and I'm just going to show up and I'm going to come to you, [00:24:00] Jonathan, you're going to take me to market and you're going to make the magic happen.

What would you say to that entrepreneur of perhaps why they should stop, reconsider, and actually put in the time, take the time, invest the time to do it right?

Jonathan Baker: It doesn't even have to take a lot of time, honestly. It's really about understanding the process, understanding where you are, and then for some folks, yes, it will take time because you've got more to fix, but you really just need to have a starting point knowing where you are. So one of the things we recommend folks do relatively early in the valuation done, just so that they have, A starting point and can then start creating goals, right?

You need markers in the ground into the future so that you can start making progress. So, evaluation and then an annual check in is kind of a good way to think about it. And, obviously you do a lot of work in this area, so I'm sure you have many more thoughts than I do.

Jeffrey Feldberg: Well said, I always love hearing from a fellow colleague in terms of what's going on and what's there. And so let me ask you this, because as we're speaking, by the [00:25:00] time this episode comes out, the world of AI will likely have changed and AI continues to rewrite the rules of business, of society, as life as we know it.

And on the one extreme, there are some who are saying, AI is going to completely replace the world of marketing. We're not going to need agencies. We're not going to need copywriters. AI is just going to do it all. And then on the other hand, the other extreme saying, hey, not so fast. People like stuff written by people.

And yeah, maybe there's a role for AI, but not as big as you think. So what are you seeing right now in the industry itself because of AI? Is it the disruption? That we're hearing about elsewhere or not just yet or something in between. Okay.

Jonathan Baker: There's certainly a lot of trepidation and hand wringing right now folks worried about the future of AI, what it will bring. I think I tend to fall in that ladder camp where it will not be as big of a deal as some people think, even in marketing services. I think if you are the money to [00:26:00] invest.

In your own marketing, you want to make sure it's done right. And so you're not going to just rely on AI. AI is going to be useful to the extent that it helps these companies drive profitability. But I don't think it's going to be a replacement for humans.

Jeffrey Feldberg: So AI, perhaps in what are you thinking, Jonathan, saving some time, perhaps doing a little bit more of the heavy lifting, getting some insights, doing some of the repetitive work. Is that where you're going with that?

Jonathan Baker: Yeah and I'm a little, what I am concerned about is kind of content, the whole just idea of content as marketing, right? Because AI makes it so easy to create content that it's just going to become an overwhelming amount of content. And so what, next? It was paid ads for a while, and then it's, you realize you're just flushing money down the drain and then it's content and.

How are people going to kind of pivot their marketing engines? [00:27:00] Once content has taken over the world?

Jeffrey Feldberg: It will be certainly interesting. And let me ask you this on the M& A side, from what you're seeing of taking companies to market, how has AI played or perhaps not played a role so far? And where do you see that going?

Jonathan Baker: I have not seen a play role at all. Not yet

Jeffrey Feldberg: And do you want to be so bold as to have any predictions of where, or it might be a year from now, three years from now?

Jonathan Baker: I don't think it will play much of a role in m and a. I think these are large transactions. They're really important transactions. It's just hard to see AI get involved unless it's at the really. Administrative level that's still gut checked by humans.

Jeffrey Feldberg: It's interesting, just the human psyche, and I'm going to date myself a little bit here. Jonathan, maybe you're too young to remember this, or maybe you'll remember it right alongside with me. Back in the day when the internet just was coming on board, there was all that euphoria and a few examples that came to mind.

Oh yeah, the internet's going to replace real estate agents. No one's going to use a real [00:28:00] estate agent anymore. You'll just go online, find the property that you want and just buy it directly. Or all the brick and mortar stores. Are going to go out of business and there was that one big storm, not going to name names, but it had to do with pets and pet supplies and all those other things.

And so we saw a lot of hype, but there really wasn't a lot of action behind the hype and AI certainly is making inroads. We're seeing some of the hype, some of it's true and some to be determined, I suppose, is how we can position that. So back to the world of business, Jonathan, being an entrepreneur yourself, being at the deal table now, if you were to give advice to Deep Wealth Nation, they're growing their business.

They're perhaps going to be two years or 20 years away. They're not sure when that exit's going to be, but they know at one point they're going to do it. Generally speaking, if they had to do between one and three things that really makes a difference for them, what would that be based on what you've seen, what you've gone through, what your clients have gone through that you would share with them?

Jonathan Baker: Focus, position your business well, right? We've talked a little bit about that already. [00:29:00] yourself as much as possible from the day to day, slowly over time. Sales is usually the last thing to give up and you might never give it up completely because you're going to care more and do it better than even a very highly paid salesperson in most cases.

But pull yourself out of things like project management and administrative. That's it. Professionalize your bookkeeping, and that's a boring one, but it comes deal time, your financials are half of what a buyer is looking at, and so if they start seeing you. So, issues in your financials, they're going to assume that you're running your company in a similar way and that there are issues with your company.

You lose negotiating power, you might lose the buyer completely, but make sure that, your chart of accounts makes sense. Make sure that. You're [00:30:00] categorizing things correctly, make sure that you're running accrual, not cash. I'm probably losing half of your audience right now, but this boring stuff is pretty important and it's not that hard to implement early on.

Jeffrey Feldberg: And on the accounting side, you're spot on, and it's interesting because that can really be what makes or breaks a deal. And again, Jonathan, you said, Jeffrey, you're on base or off base. You can have the best story, you can have the most promising future, but if your books aren't in order, or you have what we call Deep Wealth, all those skeletons in the closet because you didn't do a proper job, that buyer who's going to spend a lot of time and money before they put a nickel into the business is going to find those things.

So when it comes to accounting. What kind of insights can you share with Deep Wealth Nation of what they should be doing, what they shouldn't be doing?

Jonathan Baker: one thing we see that gets used incorrectly a lot is the cost of goods sold category. So make sure you're using that correctly. That can vary a little bit depending on your industry. Make sure that things like depreciation, amortization, Basically the things in EBITDA, [00:31:00] we like to have those below net income and other income, other expenses, that gives you a truer read on what the value of your business is day to day.

One of the biggest mistakes we make, or people, we see people make is not paying attention to their balance sheet. And yeah, maybe it's not, like, something that you need to look at every day. But, those skeletons, that's where they get buried, is on the balance sheet. So make sure that you understand every line item on the balance sheet and there's nothing that you're going to have to kind of unwind later on.

Jeffrey Feldberg: And absolutely spot on with that, Jonathan. And someone like myself, that's never really been my strength. I've always made sure, two things to what you're saying. Number one, I had terrific accountants, but not just terrific accountants. I also had people on the team who really understand the numbers. And it's not me that's going to be giving the answers.

It's going to be my team members, but I'm understanding, they're understanding. Everyone's looking into that. And I would suppose, we see this all the time, sadly, who you use as your advisors really speaks volumes. [00:32:00] So for a future buyer or investor who's coming in, is it Amateur Night because you're using, I'm going to really over exaggerate on this one, well, for your books, you're not really using Certified Accountants.

You're using your, you Best friends, mothers, third cousin, uncle on the left, they happen to be doing good with books and they're doing that, or are you actually going to, it doesn't have to be one of the top two, three, four accounting firms, but you're going with a professional accountant who has the experience, knows what they're doing all the reports, doing all the filings, maybe even have audited statements along the way.

That really speaks volumes. You're using someone like yourself, Jonathan, to represent you. That puts the buyer or the investor on notice, hey, this is not amateur night. Jeffrey knows what he's doing, so you better come with your best foot forward, otherwise you're not going to be part of the deal process.

Thoughts about that? Agree? Disagree? I've

Jonathan Baker: Agree, and I'll add we usually see a lot of value when folks are Agree, and I'll also say that we usually see a lot of value when folks are using industry specific accountants because those [00:33:00] accountants Can also do benchmarking work, right? Are you in line with competitors, out of line? They know how to set up your chart of accounts correctly. They know what's weird and what's not weird and can ask the right questions.

So those are usually smaller accounting firms but you can get a lot more value out of those.

Jeffrey Feldberg: Been there, done that, and I have to share my own liquidity event. The buyers spoke to the accountants, and the accountants were spot on with what they said, and they gave confidence. I mean, the currency in M& A, and Jonathan, again, you can say Jeffrey, on base or off base, it's trust. Can I trust you? Are you doing what you're saying?

And is it happening or not happening? Because when you do make a mistake and mistakes are made, well, you know what? Jeffrey's been pretty spot on up to this point. I'm going to give him the benefit of the doubt. I really do trust him, what he said he's done. And yeah, hey, no one's perfect. But if that trust isn't there, that's usually the beginning of the end of the deal.

Thoughts on that?

Jonathan Baker: That's exactly right.

Jeffrey Feldberg: So there you have it, Deep Wealth Nation, and Jonathan, before we go into wrap up mode, I'm wondering, is there a question that I didn't [00:34:00] ask or a topic we haven't covered, even a message you'd like to get out to Deep Wealth Nation?

Jonathan Baker: I will say we have set up a special webpage just for your listeners, punctuation. com slash deep wealth and that'll have a way to kind of Explore our services a little bit. You'll be able to book a meeting with me directly if you like. You can subscribe to our weekly insights. But that's just kind of a quick way for your listeners to get to know us a little bit more.

Jeffrey Feldberg: Absolutely love that, Deep Wealth Nation, if you go to the show notes, it is all point and click, it doesn't get any easier for you. From the email newsletter to having that Deep Wealth special page to book that call with Jonathan, or just seeing what Jonathan's all about. Check the show notes. It's a point and click.

It's all there for you. So Jonathan, that said, it's a perfect segue into our wrap up. And I know I said this on every episode, but it's the absolute truth. It's really my privilege and honor where our tradition here on the Deep Wealth Podcast is I ask every guest the same question. It's a really fun question.

So let me set this up for [00:35:00] you. When you think of the movie Back to the Future. You have that magical DeLorean car that will take you to any point in time. So imagine now, it's tomorrow morning. You look outside your window, and Jonathan, this is the fun part. Not only do you see the DeLorean car, which is curbside, the door is open, and it's waiting for you to hop on in, which you do, and you're now gonna go back to any point in your life.

Jonathan, as a young child, a teenager, whatever point in time that would be, what are you telling your younger self in terms of life lessons or life wisdom, or, hey, Jonathan, do this, but don't do that? What would that sound like? 

Jonathan Baker: I'd go back to college, and I did very well in college, but I did not spend the time making the relationships that I think I should have. So I would have hung out with my professors a lot more specifically and tried to just network. You don't realize when you're in it, but that's a really special time dealing with really smart people who will be connected all over the place.

Jeffrey Feldberg: So that would be perhaps enjoy [00:36:00] the journey, particularly when you're in the school environment, network, connect with those around you, make the most of it. And Jonathan, as you're saying that, it's so true, some family members, one specifically has just graduated and I was talking with a family member and they felt like I felt.

What do I do? Where do I turn? I don't have that same schedule, that same ritual anymore, that it can really be a special time when you're there. So any of you out there, regardless of where you are in your journey, perhaps you're in school, you're not in school, but you're in some kind of group or environment, hey, take Jonathan's advice.

Just take the time, enjoy the journey, network, get to know the people that are in your life, and you'll even form some lifelong friends that come out of that. So Jonathan, that said, before we officially wrap up, I know you have that special Deep Wealth page. If someone does want to reach you, have a conversation with you, ask some questions, learn more about you, where would be the best place online to do that?

Jonathan Baker: You can email me directly, jonathan. punctuation. com or go to that page, punctuation. com slash deep wealth.

Jeffrey Feldberg: Love that. Thanks so much. By the way, [00:37:00] punctuation. com, what's the story behind the story on that one before we officially wrap up?

Jonathan Baker: So, we realize that we enter the firm's life cycle at moments of pause, moments of reflection. So moments where there needs to be kind of punctuation in a sentence effectively.

Jeffrey Feldberg: I love that, okay. I love how you approached that and thought about that. Well, Jonathan, all that said, it's official. Congratulations. This is a wrap. And as we love to say here at Deep Wealth, may you continue to thrive and prosper while you remain healthy and safe. Thank you so much.

Jonathan Baker: Thank you. 

Jeffrey Feldberg: So there you have it, Deep Wealth Nation. What did you think? 

So with all that said and as we wrap it up, I have another question for you.

Actually, it's more of a personal favor. 

Did you find this episode helpful? 

Have you found other episodes of the Deep Wealth Podcast empowering and a game changer for your journey? 

And if you said yes, and I really hope you did, I have a small but really meaningful way that you can actually help us out and keep these episodes coming to you.

Are you ready for it? 

The [00:38:00] dramatic pause. I'll just wait a moment. Drumroll, please. Subscribe. Please subscribe to the Deep Wealth Podcast on your favorite podcast channel. When you subscribe to the Deep Wealth Podcast, you're saving yourself time. Every episode automatically comes to you, and I want you to know that we meticulously craft Every one of our episodes to have impactful strategies, stories, expert insights that are designed to help you grow your profits, increase the value of your business, and yes, even optimize your post exit life and your life right now, whatever you want that to look like.

And every time you subscribe and a fellow entrepreneur subscribe, it's a testament to how together, Yes, we are. We are changing the social fabric of society. One business owner at a time, one liquidity event at a time. So don't let the momentum stop here. Subscribe now on your favorite podcast channel.

You'll never miss an episode. You'll be the first to hear from the top industry leaders, the innovators, the disruptors that are really changing and shaping the business world, and maybe you're commuting, maybe you're at the gym, maybe you're taking a well [00:39:00] deserved break that we spoke all about on this episode.

The Deep Wealth Podcast, it's your reliable source for the next big idea that could literally revolutionize your business. So once again, please hit that subscribe button, stay connected, inspired, and ahead of the curve. And again, your next big breakthrough moment, it might just be one episode away. Maybe it was even this episode.

So all that said. Thank you so much for listening. And remember your wealth isn't just about the money in the bank. It's about the depth of your journey and the impact that you're creating. So let's continue this journey together. And from the bottom of my heart, thank you so much for listening to this episode.

And as we love to say here at Deep Wealth, may you continue to thrive and prosper while you remain healthy and safe. 

Thank you so much. 

God bless.