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April 12, 2023

Business Transition Sherpa Laurie Barkman Reveals How To Avoid Succession Pitfalls (#220)

Business Transition Sherpa Laurie Barkman Reveals How To Avoid Succession Pitfalls (#220)
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“As a leader we can't assume people will follow us.” -Laurie Barkman

80% of business owners want to stop working in their business in the next 5-10 years, but most have not planned for that transition. Many need to improve the business first.

Laurie Barkman is a "business transition sherpa." With her firm, SmallDotBig, she advises owners on having more valuable, sellable businesses. And as a Partner with Stony Hill Advisors, a mergers andacquisitions firm, she guides them through the complex process of letting it go.

Laurie is the former CEO of a $100 million revenue company with an exit to a Fortune 50 company. With more than 25 years of C-Suite and award- winning marketing expertise, she provides actionable perspectives to drive sustainable value.

Engaging audiences across the US, Laurie is an Adjunct Professor of Entrepreneurship at Carnegie Mellon University, leads executive workshops with Vistage, and hosts a weekly podcast called Succession Stories.

Laurie earned her MBA from Carnegie Mellon and BS from Cornell University. She is a Certified Value Builder Advisor and has a Certificate from the Exit Planning Institute.

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This podcast is brought to you by Deep Wealth. 

Your liquidity event is the most important financial transaction of your life. You have one chance to get it right, and you better make it count. 

But unfortunately, up to 90% of liquidity events fail. Think about all that time, money and effort wasted. Of the "successful" liquidity events, most business owners leave 50% to over 100% of their deal value in the buyer's pocket and don't even know it.

Our founders said "no" to a 7-figure offer and "yes" to a 9-figure offer less than two years later. 

Don't become a statistic and make the fatal mistake of believing that the skills that built your business are the same ones for your liquidity event. 

After all, how can you master something you've never done before? 

Are you leaving millions on the table? 

Learn how the 90-day Deep Wealth Experience and our 9-step roadmap helps you capture the maximum value for your liquidity event.  

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Enjoy the interview!


[00:00:00] Jeffrey Feldberg: Welcome to the Deep Wealth Podcast where you learn how to extract your business and personal Deep Wealth.

I'm your host Jeffrey Feldberg.

This podcast is brought to you by Deep Wealth and the 90-day Deep Wealth Experience.

When it comes to your business deep wealth, your exit or liquidity event is the most important financial decision of your life.

But unfortunately, up to 90% of liquidity events fail. Think about all that time and your hard earned money wasted.

Of the quote unquote "successful" liquidity events, most business owners leave 50% to over 100% of the deal value in the buyer's pocket and don't even know it.

I should know. I said "no" to a seven-figure offer. And "yes" to mastering the art and the science of a liquidity event. Two years later, I said "yes" to a different buyer with a nine figure deal.

Are you thinking about an exit or liquidity event?

Don't become a statistic and make the fatal mistake of believing the skills that built your business are the same ones to sell it.

After all, how can you master something you've never done before?

Let the 90-day Deep Wealth Experience and the 9-step roadmap of preparation help you capture the best deal instead of any deal.

At the end of this episode, take a moment and hear from business owners like you, who went through the Deep Wealth Experience.

Laurie Barkman is a business transition sherpa with her firm, SmallDotBIg, she advises owners on having more valuable, sellable businesses. And as a partner with Stony Hill Advisors, a mergers and acquisitions firm she guides him through the complex process of letting it go.

Laurie is the former CEO of a $100 million dollar revenue company with an exit to a Fortune 50 company. With more than 25 years of C-suite and award-winning marketing expertise, she provides actionable perspectives to drive sustainable value.

Engaging audiences across the US, Laurie is an adjunct professor of entrepreneurship at Carnegie Mellon University, lead executive workshops with Vistige, and hosts, a weekly podcast called Succession Stories.

Laurie earned her MBA from Carnegie Mellon and BS from Cornell University. She is a Certified Value Builder Advisor and has a certificate from the Exit Planning Institute.

Welcome to the Deep Wealth Podcast, and she's back. She is back. The Transition Sherpa is back with us here on the Deep Wealth Podcast, and we are gonna do a deep dive on something every business owner should know, particularly when it comes to an Exit or liquidity event.

But probably doesn't. I'm gonna stop right there. There are no spoiler alerts. Laurie, welcome back. It's great to have you. And you know what, Laurie, for the new members of the community who didn't hear the wonderful episode that you and I had done, or even when you were gracious, you had me on your podcast, why don't you share the story behind the story, what got you to where you are today?

[00:03:14] Laurie Barkman: Jeffrey, first of all, thanks so much for this second appearance. You are a pro and I just love being with you. This is our third conversation, I know it's gonna probably be our best building on the other two. No pressure. What is my journey? My journey has been back and forth between small companies and big companies and everything in between, from startups to global corporations, and what really got me fueled into this world is going through an acquisition.

From the M&A side, I was part of a billion-dollar transaction with a small shipping company that's known around the world. And it was a really interesting experience and part of a management team that was acquired. I certainly was part of that process and part of that team, and I realized I'm a deal junkie. I like being on this side of the table, of course, and being on the other side of the table and understanding both sides of the buy-sell. I worked in private equity for a while so after I was the CEO and we had this exciting Exit and we went through integration and I worked in private equity for a bit, which helped me understand the other side of sourcing deals and trying to find the right fit and putting together a portfolio.

And then I met some great professionals who helped me understand the Exit planning space and how the demographics of business owners in the United States has really shifted where we have so many baby boomers who do not have a succession plan. And so when I really thought about it and was putting it together, I thought, okay, with all my corporate experience, startup experience, privately held companies, and mergers and acquisitions work, packaging it up and becoming the business transition Sherpa, what I do is I have a process, I have tools, and with all my business experience, I bring that to the table to benefit my clients, and I work with people from transition to transaction, from building value in your company to letting it go. And it's an exciting process. It's hard, it's not an easy process.

And I have my own firm, which is called Small Dot Big, which is an homage to playing pool with someone from Australia, which we could always revisit that story.

And then I'm a partner with Stony Hill Advisors, which is a mergers and acquisitions advisory firm focused on the lower middle market, which is in a very interesting niche and where a lot of companies are from a revenue standpoint.

[00:05:37] Jeffrey Feldberg: Certainly. And you know what, Laurie, you are, oh so, modest. You reference it. But for our listeners, if this is the first time that you're hearing Laurie, in our first episode, she shared with her first Exit that she did. It wasn't just any Exit, it wasn't just any liquidity event. It was a huge one.

And Laurie, maybe I can turn it to you just to give a little bit of a highlight there and then we can jump into some of the pitfalls to look out for. But you know, when you got out of the business and you were, I understand it was a division and there was other divisions, and it wasn't just you, but it was huge.

It was for most people in their life, they will not experience that. And I think for the benefit of the listeners, maybe do a quick recap on that because it gives so, much credibility to what you're doing and what you saw and what you went through.

[00:06:22] Laurie Barkman: I love companies that go through different stages of innovation and change. The company that I worked for was a third generation, privately held company, and my immediate boss was the chairman. He was third generation, and at the time was in his mid-sixties, younger sixties, for him, it was his grandfather that was the founder, and then his father, and then himself.

And then every time that baton switched over, the company had done something different in transportation and logistics, and they were very well known for the niche that they had.

And so, that ultimately probably drove a lot of value in the business. And it became a very attractive business to this global logistics company.

And they had their eyes on it for a while unbeknownst to us. We didn't know that. But when we did eventually find out and they came and knocking as we called, little Bluebird came and knocking and said, we're interested in buying you.

And what do you do with that information? You think, oh, this is gonna go anywhere.

And we did pursue it. It resulted in a deal. It resulted in an integration. And yeah, my experience with that, it was interesting because I know there's a lot of people listening who may have gotten these unsolicited offers over time and they don't know what to do with it. And because we had a really robust management team, and some people had been, mergers and acquisitions previously and other companies they'd been part of.

We were able to quarterback the deal ourselves so we didn't have a third party involved. We did have private equity group involved because they were a minority stakeholder in the company and they certainly had a lot of experience too. The point there is that we had really good advisors. This was a significant size transaction and you wanna surround yourself with the right advisors.

So We as our internal management team, were playing a role and we knew what our role needed to be, which was run the business. Don't mess it up, you gotta keep the engines moving. But there's this big thing that we also needed to take care of, which is we need, we needed to do our part in the due diligence to be providing information accurately, timely, because there's a defined window and a defined process for it.

And then our role, once the deal was done, was to make sure that this was successful. And our role to help make that in, you know, from the very beginning with the integration, all the communications, it really. One of the biggest lessons of this was I think for any business, if you wanna acquire a company, you cannot wait till the deal is done to come up with your integration plan.

You really need to be talking about that as a strategic effort early on in your planning process and even before you consummate a deal so, if on our side, call us the sellers.

We were motivated to make it successful because we were gonna still be there. Many of us, not everybody, of course.

But yeah, it was a very interesting experience. Very interesting.

[00:09:08] Jeffrey Feldberg: And you know what, Laurie, it's a terrific segue into what we're speaking about now because he says something really interesting that a lot of business owners overlook, and this is a huge pitfall. If we're talking about pitfalls. You know, a buyer comes onto the scene, whether it's perspective unsolicited offer or a whole competitive bid and an auction is going on regardless of how you get there.

Buyers are smart. Not all buyers, but a lot of buyers, perhaps they'll try and whisper sweet nothings into your ear and stroke the ego and everything else. And some business owners will fall into that and come up with these huge projections that even on the best day of the week, they would never hit.

Not realizing that, hey, some of these projections are actually happening during the liquidity event, and it's a huge pitfall. When you're putting your projections together, you better make sure that you hit them because talk about losing trust or losing the deal. But let me stop there. I mean, you're working with sellers and buyers, and from your own experiences and what you're doing now, let's go through some of the top pitfalls that every business owner should know, but probably doesn't.

So, what would be at the top of your list?

[00:10:14] Laurie Barkman: Number one on my list is that a hundred percent of business owners are going to leave their companies one day, but very, very few are prepared. And I know you are super passionate about that point and it's plays out in survey data and it plays out in practicality. Every time I have a conversation with someone about the process and where they are with it. And they don't know where to start. They just don't know where to start. And I think for many people they think it's the kind of thing you work on. And I'll put an age on it, right? I'll say, oh, I'll work on it when I'm 62 and I wanna retire at 65.

And it's like, okay. I mean, I have a client who just passed away unexpectedly. And he was in his young sixties, and I think if I will share this little bit of a sad story that he came to me too late, he did and he knew even when we were working together, it was a little bit too late because the value of the business wasn't really where he wanted it to be, and he knew that he didn't have a lot of runway to make changes

Given where he was in stage of his business and stage of his life.

[00:11:20] Jeffrey Feldberg: Wow. So, sad. So, sad with that. And you really bring up an interesting point because when you're talking about preparing for the post Exit, that can take so, many different phases. It can be immediately after the deal. It could be leading up to it, it could be years afterwards. Within there.

I'm sure there's a rich ground of different pitfalls that we can avoid, but is there any one area in particular in this one case, it sounds like succession planning and getting that in place and life after the business, all those things weren't done. What else are you seeing out there if we kind of group post-exit that, just generally speaking, anything else in there that jumps top of line for you?

[00:11:59] Laurie Barkman: Well related to that, you mentioned succession planning and succession planning can be done regardless of Exit planning. I think they're really separate activities. One is about the health and growth of the people in your team and considering them, if you've ever heard of the nine-box tool. But it's essentially who's ready now and coming up with a list of two or three people if you can get the deeper bench.

Ready now. Ready in two maybe two to five, and then ready five plus and ready for what? That's the other thing you have to figure out. Is it ready to assume my role if I'm the CEO or am I the president? Is this a person that might wanna have equity in the business and own the company one day?

Am I grooming my new owner? So, those answers can vary, right? And just allowing yourself to think about if you don't have a management team yet and your business is large enough, maybe you're 5 million plus in revenue and you don't have an obvious replacement for you. It does beg the question about a transition and also just contingency planning, smart contingency planning and what would you do if, but yeah, I mean, the point you brought up too about being ready once you leave, what do you do?

The three-legged stool picture, right? If you don't have one of the legs steady, this whole plan will fall down and the three things that we do try to work with clients on, especially upfront is the financial readiness, the business readiness, which is obviously very important. And the personal readiness, what is it that they have in their future vision?

And it boils down to mindset. Do you have a transition mindset? I do a workshop around the country with CEOs and business owners, and one of the activities I do in the very start of the seminar is I, I'll say, okay, if I say the word transition, what comes to mind? Go. And we just go around the room and I write 'em down, and then I cluster them into categories of positive associations, neutral associations, and negative.

And it tells me pretty clearly what the vibe is in the room.

[00:13:57] Jeffrey Feldberg: Uhhuh.

[00:13:58] Laurie Barkman: And a word like change is neutral. You can't say the word change is either there's certainly gonna be those words, but A, but words like fear or concern or worry. Sometimes I do hear those and sometimes it's health related as you it's worried about whatever they're worrying about, and then it's just the fear of the unknown.

Why that's important. Obviously, we want to have people participate in a process that they know is important. There's many things that pull at us during the day. If this is not inherently something value in working on, you're not gonna do it. right? You're not gonna spend time on it.

So, the mind and the body have to work together and we see a correlation there. It makes sense if your mindset is positive and supportive and the organization is headed in that direction and it's working towards it, most likely you will start to achieve what you need to get your enterprise value where you want it to be.

If you're resistant, you're not working on it. Then of course the corollary is it's probably not gonna happen. We need to have a game plan, just like you're running your company and hopefully, you have a strategic planning process that you're doing in your given cycle, whether it's one year or three years.

I work with clients to set the three-year plan and then do a refresh, but that's the business operation side. I also work with clients on what I call kind of strategic Exit value planning, which is. Combination of strap planning, but it's not for your whole team, right? It's more for just your closest business advisors or maybe your board of directors if you have one to at some point line up with your operational strap plan, right?

There's things that we will identify in your Exit planning that you're not gonna. Let everybody know about quite yet, you're not quite ready for that. And at the beginning, I think planning and the mindset for a transition is certainly where we need to start. And the reason for that is many people have an identity that is wrapped up in the business.

I find another pitfall I would say is that your organization needs you too much.

[00:15:52] Jeffrey Feldberg: Sure. The good old business doesn't run without you.

[00:15:55] Laurie Barkman: Yeah. It's like of course they need me. I'm the founder, right? I'm the face of the company. All these wonderful things that you're doing for the business, and we think how much value that's created and it has and we're not gonna take that away from your thinking.

The challenge is that a new owner might not see you in that future organization, maybe you're going to retire, maybe you're going to do other things. You wanna sail around the world or you wanna start another company. Are your people empowered the way they need to be to make this business thrive without you and that's the crux of this challenge.

[00:16:30] Jeffrey Feldberg: Such a key pitfall, and I'm sure Laurie, you see it all the time. I see it all the time. You're speaking to a business owner. It's a terrific business and they may even have a management team, but really when you get into the weeds and even you're speaking to the management team so when the owner isn't here, doesn't really run without the owner.

Well, you know, kind of on the QT here. No, it doesn't. Everything's gotta go through the owner and it's frustrating for the team and for the business. Let me ask you this, Laurie, let's reverse that for a second because you talked about a huge pitfall that every business owner should address right up front.

That the business has to run without the owner for all kinds of reasons. Notwithstanding that any future buyer will either walk away or lower the enterprise value, neither of which is a good scenario. But when we reverse it, and now we're stepping into the mindset of a business owner, can the business owner.

Mindset wise, lifewise, happiness wise, operate without the business. When the deal closes, that business is no longer in the owner's control. Or maybe the owner's more like a board of director and not day in, day out, because the day before it closed today. But as of yesterday, the business owner could tell you by the day, the week, the month, the quarter of the year, exactly what was happening.

All these rituals and poof, all that has gone, what are you seeing with that? I know as the transition Sherpa, it's not necessarily directly with what you do, particularly post-closing, but what do you see with that? Because I'd imagine, you can tell me if I'm off base, that's a huge pitfall that just, it's deer in the headlights for most business owners.

[00:18:01] Laurie Barkman: Yeah, they don't really give a lot of thought to it. They think about the aspects we talked about in the business, and they'll spend time on that. But what I try to do, if I'm lucky enough to work with them, call it in the pre-M&A phase. If they're working with me to get ready. I do spend time on this and I do it upfront because I do it up for two reasons.

One, it helps me get to know them, what makes them tick and what motivates them, what makes them excited, and what concerns them. And then also because we're spending that upfront time, it's really hard to rewind on the big why. If you start doing, and they're like, wait a minute, why am I doing this again? Let's start up front with the big why. And I try to understand the big why from their standpoint personally as well as the business. And I love the example of the family that I was referring to with my experience in this company that sold and they had a significant event.

This created a lot of generational wealth in their family that they didn't have necessarily at that same level previously. And it's this kind of thing. You don't just put it under your mattress, you need to do something with it. And what I love about what they did is they did two things. They created a family investment office, and then they also created a family foundation.

And everybody in their family was involved in some way in developing the mission and structure of those entities and how those entities carry those missions forward in a very purposeful way. And they're doing a great job in the communities that they serve, either the investment thesis that they have and or with the foundation and the areas that they support.

[00:19:33] Jeffrey Feldberg: And Laurie with that, I'm just curious, was that something that they set up post closing, or was that already well in place before the closing and they just moved into that once it was done?

[00:19:43] Laurie Barkman: That's a great question. I don't really know the answer to that. I think it was done if it was done, it was done behind the scenes. It wasn't anything that I was aware of. I don't literally know the answer, but once everything closed and the owners were no longer part of the company, that was indeed their focus. I'm sure it was, underway and structuring may be in parallel. Cause the deal's not done until it's done. There could have been some high-level thinking about it, but I think once the transaction closed, then of course the funds were distributed to where they wanted them to go.

[00:20:11] Jeffrey Feldberg: And you know what, you bring up a terrific point just for everyone to think about and that is depending on where you are, age-wise, life-wise, for some people, for some business owners, having a foundation now, having the opportunity to work on a legacy, what a terrific way to look at the next chapter of your life.

But your point, you can't just wake up the day after closing. Okay, I'm gonna do this. I mean, you could but there's so, much that's involved and you have to get things set up. And perhaps you would've done the liquidity event a little bit different if you had the foundation and taken advantage of all kinds of tax benefits and other kinds of strategies along the way.

But it's a terrific thing to know of not making that pitfall of, hey, Okay, the day after closing, I'm no longer involved or the business close and however period of time forward into the future. I'm no longer with the business. Now what, what am I gonna be doing?

It's something, something that gives a lot of food for thought. But Laurie, you mentioned another pitfall in passing. Why don't we circle back to that? And I don't know about you. I find that most business owners, it doesn't even get on the radar. And that is, it's not over till it's over. And just because the papers are signed just because the wire hit the bank account.

There's still a lot to be done. Can you walk our listeners through of, okay, wire's done, papers are signed, but now you have this transition period and most owners like, yeah, I'm checking out, doesn't really affect me. Not understanding that they have reps, they have warranties. There's an escrow that is there just for that purpose.

If they ride off into the sunset and all kinds of damages happen to the business, what can go wrong and what should we be thinking about with this?

[00:21:45] Laurie Barkman: Yeah, it really depends on the nature of the entity too, because if it's an entity sale versus an asset sale and there are liabilities associated with the sale. Let's say it's a manufacturing company and we become aware of some EPA issues that maybe we didn't know previously. That could be a reason why some of the funds are held back if they're held in a, I guess a structure would be, tipping basket.

Is that the right term? There's some technical terms for when things would spill over and get paid or not get paid and we don't need to dive into that, but I guess at, just at the high level. Are there any liabilities in the business that were not identified in the process of diligence that become a risk to the new owners, after the closing that's one area? Another area would be if the owner is going to stay in the business in some way. Many times there's an earn-out structure and an earn-out can be structured a variety of ways, such as maybe it's on top-line revenue or maybe it's on profitability. And certainly, there's a motivation for hitting those targets.

Another area of potential risk could be around retention. If the management team or others maybe there's no agreements, employment agreements, or perhaps there were no retention payments and some of those key people that intended to be staying or not staying. And that's obviously a choice people can make, but that could pose a challenge too if there's some agreements or understandings around some of those retention requirements.

I think it's just really good to make sure that whatever is agreed to is upheld to the most of your what's ever in your control and whatever you're agreeing to in the document, you obviously know what it means. You have good legal support. Hopefully, you have an M&A attorney, not your same attorney that helped you with your LLC document, or, 20 years ago, maybe it's somebody else who has more mergers and acquisitions experience and corporate law.

 And you're getting good advice along the way that you're aware of your responsibilities and again, these risks and pitfalls even after the closing.

[00:23:47] Jeffrey Feldberg: And Laurie, wow, what a pitfall that you just shared. And for our listeners, I hope you picked up on that. Just because you have a lawyer, and we're gonna circle back to that in just a moment, Laurie, but just because you have a lawyer and they've given you a document, it doesn't mean that. That's the end of the responsibility for the business owner.

You've gotta understand exactly what you're signing and exactly what's in there. Because last thing I would imagine anyone would want is something terrible happens and maybe some of the escrow's taken back, or haven't forbid, there's some kind of litigation that's coming against you and you're saying, hey, why did this happen?

I didn't expect this. It shouldn't have happened. And then you read the agreement. Ah, yeah, it's right, right in there. For the listeners. Yeah, it can be complicated, it can be confusing, it can be time-consuming. But hopefully to Laurie's point, you have a terrific M&A lawyer who will walk you through that of what are your responsibilities, what should you know going into it before you sign it.

And just because your M&A lawyer is saying, go ahead and sign it, doesn't mean that you necessarily should or that you want to and understanding and at least eyes wide open going into that. So, Laurie, you brought up another pitfall and we could probably have, forget an episode, we can have a whole series on these pitfalls, but one of the pitfalls that you mentioned was common out there where a business owner says, you know what?

I don't need to spend money on an M&A lawyer. Or I don't even need Laurie, someone like you on a transition Sherpa side or investment banker, or you know, an M&A specialist. Look, I have a regular business lawyer, or I have my accountants. They're gonna lead to the charge. They know the business. They can do the deal why is that such a pitfall? Because for many business owners, Why spend the money? I don't wanna spend the money. I already know these people. I know the business. I have to go out and spend the time and find all these other people, and they can give us all the reasons why it doesn't make sense on paper.

But reality speaking here, let's have you just uncover and uncloak this horrible pitfall that many business owners make.

[00:25:44] Laurie Barkman: Yeah. I would put this in the pitfall bucket of you're not familiar with the process of selling a business. You know, you're an entrepreneur who's worked with others to build your company. You haven't done it by yourself. Why would you try to sell your business? By yourself, especially if you've never done it before.

And yeah, what is the saying? Pound savvy,

[00:26:01] Jeffrey Feldberg: Penny wise, pound foolish.

[00:26:03] Laurie Barkman: Pound foolish. There you go. I got it backwards. Exactly. And that's very much the mindset here. I talked to someone yesterday and he said, I'm busy running my company. I don't know how to do this. I haven't done it before, and I don't necessarily want to do this on my own.

He was saying all the things that I would like to hear an owner say, he's come to that realization and he's said he's been thinking about this for probably a year and doing exploration. So he's let himself have that mind exercise of what if, right? And coming to that realization on his own, we're trying to help people shortcut that research and hear it from us.

Because if you don't believe us, that's okay. But anytime you hear someone who said they sold it on their own, they'll probably tell you all the concerns they had. And they, you know, in hindsight is 2020 what they wish they would've done differently.

[00:26:56] Jeffrey Feldberg: Sure.

[00:26:57] Laurie Barkman: I just talked to someone else on my show who did not have advisors at all. And for him, it was just really bad timing. And this is a story that from 20 years ago also, but at the peak, his business was valued at 30 million. And at the trough, which is where the business ended up, it was zero

[00:27:14] Jeffrey Feldberg: Oh wow. What a fall. Oh my goodness.

[00:27:17] Laurie Barkman: A huge fall. A huge fall. And the throw of our conversation was about he wished he had the right business advisors at the right time.

That's an extreme example. But yeah, I think just an honest realization that you need people around you to help see things you're not seeing. From all stages of the process. Let's say you get a phone call and someone offers to buy your business. This seems easy and it happens all the time.

We get phone calls about that saying, could you support us in that process? I have a named buyer I'm interested in exploring with them, and we do that. Not every M&A firm does that. We do, we call that a facilitated engagement where they've brought the buyer to the table. I would say very often those don't work out.

And that's okay. We run it through to make sure and see if it does work out. But If it doesn't, then we run a larger process. If a company has not run that process before to try to research the buyers how to package the company for sale, finding out its valuation, how to position it in the market.

Again, doing the research on the types of buyers, which we should talk about next. The different types of buyers, how do you reach out to them? Other times I have owners who have, Yeah, I get all these unsolicited offers. I don't know what to do with them. I just put 'em in a file.

And if they wanna work with me, I say, great.

Share the file with me. We'll use that as a starting point. We're also gonna build on it. There are so many tripwires along the way, Jeffrey, from all this upfront work that I've been talking about to just the back-and-forth negotiations, we all know that we can be emotional about our families. If someone insults our dog, we get mad, right?

Imagine if someone insults your company and then in negotiation can go south real quick. When an emotion is triggered, it's really hard to keep, just like in a rational business conversation about something that's so close to you.

Whether you're the founder or you're next generation leader, you feel like someone's, insulting your baby it's good to have a third party involved who's really gonna look at it in a more neutral way.

And also be a translator. It's important to have a translator from various aspects of the offer, right? Not taking things personally to what these terms actually mean, the type of deal structure, and then to get a tax Advisor who can help understand the implications.

The purchase price allocation, if you say, okay, my company's gonna sell for a million dollars at a high level, sure, but when it comes down to it, if it's a equity sale or it's an asset sale. And how are the components of the transaction, how are they defined?

Sometimes can influence the tax rates and I'm not a tax Advisor so I'm not gonna go deep down on this, but I would just say that we definitely wanna have tax Advisor support. Who has experience in mergers and acquisitions and is familiar with your situation. A role for me is I have a golden Rolodex that I share with my clients because I ask them, do you have an attorney already?

Yes. Oh, does that attorney have M&A experience? No, they don't. Okay. Let me make some introductions for you. They choose, they're the client, but they can choose who's a good fit for them. And that's a value add. So, they don't have to go sorting through and wondering who they should work with, we help with that. Again, the challenge of you're not familiar with the process of selling the business. That's where we started on this thread and this pitfall can be overcome.

[00:30:47] Jeffrey Feldberg: Absolutely. And as the saying goes, we're talking about sayings earlier. It was Pennywise pound foolish. The other saying, when we're talking about advisors, when the team works, the dream works, and as we like to say, a Deep Wealth. Surround yourself with a world class team. Even if you have to increase your line of credit, if you have to take out a bank loan, bring on the best advisors because you got one kick at the can.

You really wanna make it count, and this may be it. There may not be another one, and Laurie to put you on the spot for just a second. You know your Exit from that business that liquidity event. It was done maybe a little bit unconventionally of what we're talking about now, because it was a buyer that came in.

But the difference there, and I think it's an important one for the listeners, it was a billion dollar plus entity this wasn't a company that was chugging along at 10 million or even a hundred million. It was in the billions of dollars. And at that level, it's a very different game and the dynamics are different and the universe of potential buyers and everything else, and you had private equity folks on the team so it wasn't as though you just went into that blindfolded.

But to make that clear for the listeners, if you're not a billion dollar entity, which is just about most people that are out there unsolicited offers. If you just had to say, what's wrong with unsolicited offers in a sentence or two, what would that be?

[00:32:08] Laurie Barkman: Unsolicited offers can look right on the surface, but have risks underneath. One risk being it's undervaluing your business. You've got a bottom feeder that's nipping at you because they know you might not really be educated in what your business is worth. And the other thing with unsolicited offers is that it's tough to manage that process yourself

For the reasons we talked about.

[00:32:29] Jeffrey Feldberg: Yeah. And you know, from the unsolicited offers, which does go to a certain type of buyer, and this is something that you mentioned. Why don't we look at that, Jeffrey this would be a perfect segue into that. When we're looking at prospective buyers, and I'll throw our thesis out there, and Laurie, you can tell me if we've drunk the Kool-Aid too much or if you agree with it.

Our thesis at Deep Wealth is huge pitfall most business owners make. Jeffrey. I gotta know who the buyers gotta be. I'm gonna research everyone, and it's really up to me to know who the buyer is. And we're absolutely not. It's not your responsibility as the business owner to do that. It's someone like Laurie, that's what she's really good at.

Let her be the one to go out there and cast a huge net and bring people that you never would've imagine into the process. When it comes to buyers. What are some pitfalls that business owners are making when it comes to buyers, and what's your experience? What are you seeing out there?

[00:33:18] Laurie Barkman: The number one theme here is that you're not sure who would wanna buy your business. Let's just start with that as the top-line pitfall and kinda drilling from there. We don't know who's gonna buy our business and we're not really sure how to think about it. What I like to do is talk about the types of buyers in three categories.

The first one being a strategic buyer, the second is a financial buyer. And the third, a related buyer.

[00:33:39] Jeffrey Feldberg: Okay.

[00:33:40] Laurie Barkman: So, if we break it down a little bit, a strategic buyer is an entity, a company, it could be a competitor of yours, it could be upstream, downstream, from you in the value chain in your industry. A competitor is a tricky situation too.

Imagine you're negotiating directly with a competitor that's a great reason to have some intermediary there, right? Because you also wanna make sure your information is protected and the other characteristic about a strategic buyer is that typically, and I'll, say this about all these things I'm gonna describe.

Typically, a strategic buyer is going to integrate your entity or your assets into their assets.

Now, that could mean you're gonna be a division of something, right? It's not like maybe the name goes away, day one but it's getting integrated in. So, a strategic buyer is going to look for their ROI, their internal rate of return.

They're measuring it by what cost they can pull out from your business. A great example would be, If you have an HR team and the parent has an HR team, you have a sales and marketing team. They have a sales and marketing team. IT these back office pieces that doesn't necessarily need to be day one. Finance, it's usually another one where they look for cost synergies and then likewise, they're gonna be looking for top line growth synergies and so, when they're valuing the opportunity.

They tend to have higher valuations. Again, can be exceptions to that.

A financial buyer in comparison so a financial buyer is a most often a private equity group. It could be a venture capital group, it could be any other institutional Advisor where a group of folks have come together. A small category, which I'll just mention, is an individual buyer who is an entrepreneur through acquisition. They may have a search fund. Which makes them kind of in this category of a financial buyer.

But most often, especially for larger companies let's say companies revenue-wise, a million and a half, 2 million north of that, we're probably looking at some conversation of either an entrepreneur who's looking to acquire and or some sort of financial group. Now, a private equity group is going to do a standalone acquisition on a larger deal. And if they do that on the larger deal and it has enough again of a robust business to be a plat, what we they call platform deal in their portfolio, they're not integrating it in with anything else. But if it's a smaller deal that would talk in or be an add-on to a platform, then it looks a little bit more like what I described from the strategic

What does that mean? Well, It translates to valuations in price because a financial buyer is typically going to look at the predictability of future cash flows. And a business that has more predictable cash flows is gonna be worth more of course. A larger firm will be worth more and all those things, but, nonetheless, they are valuing the business a little bit differently and typically lower than a strategic.

An exception could be, of course, this tuck-in or add-on that I mentioned where they're doing it for strategic reasons and then integrating that asset in. Those might have valuations that look more similar to how a strategic might look at it. And then the third category is related buyers.

A related buyer could literally be related like family or insiders like management team. And management is a very common acquisition group.

[00:37:18] Jeffrey Feldberg: Would this be like an ESOP, an employee stock option plan that is going on here or they're just buying it outright? Or what are you thinking for related, particularly when it's management or employees?

[00:37:28] Laurie Barkman: They're buying it outright. Yeah. If it's management they typically buying it outright, it can be through debt, it could be done as a leveraged buyout and ESOP is a blend of financial and related because it's a banking deal. It's a debt deal that you're doing, but it's sponsored by the US government.

They have a very strong tax benefit and incentive to the owner, and it's good to this could be a show with an ESOP expert, which I am not. However, just at a high level to explain it, it's a great opportunity for a company that's large enough of an employee size. You have enough employees where you could essentially offer this to your employees as a defined benefit.

That in the future they're essentially gaining a share. And as the company grows, they can benefit from the growth of the business as well, have to have enough employees in the business. I don't know a hard and fast number, but let's just say benchmark is 50 or more employees.

Those are the three buckets. At a high level who would wanna buy your business? If people are coming to knock on your door? They might be more commonly again, depends on the size of your business, but more commonly, they're gonna look like a strategic or they're gonna look like a private equity group.

[00:38:36] Jeffrey Feldberg: And Laurie, let me ask you this because you referenced this earlier. I imagine this can be another huge pitfall, and again, as business owners and Laurie, you're one. I'm one. Everyone listening is one, the glass is always half full and oftentimes we just assume the best, even though it may not always be, and there not always, but there are instances when it is the competition and they're knocking at the door and they're saying, you know what?

We're really interested in buying the business. Personally, I think it's all the more reason that an unsolicited offer should never even be consideration. But the pitfall is competition has no intention of buying the business, but you've been beating them in the marketplace lately, and they're scratching their heads saying, what the heck are these guys doing?

Why don't we knock at the door, show that we have some interest in buying the company, but learn as much as we can and have no intention of following through with that? Any thoughts on that or insights or strategies to protect ourselves?

[00:39:28] Laurie Barkman: That's a really good question. I think from my standpoint, it's the preparation we're going to do to work on your business and make sure that it's ready for transition. It's gonna all make economic sense anyway. It's the things to make sure that your processes are documented, that you have empowered people who aren't coming to you for answers for everything you know 24 hours a day that you can actually take a vacation and unplug that your business is a well functioning business without you certainly over time, if you can't do it day one, that's okay, but to be working on that, to have some differentiation in the marketplace. To be known for a niche would be ideal to have a protective mode around your business, to have some amounts of recurring revenue where your business can have some predict more predictability as opposed to just ad hoc projects or things that you can't really depend on year over year to have the quality of your financial reporting be there so if you find inconsistencies. Now, imagine what that's gonna be like if you're going through a due diligence process to really have things clear if you're running expenses through the company, which you're certainly, you know, business owners can do, but to track those so, that we can do add backs when we do a financial and we're looking at the valuation and can come up with estimated EBITDA numbers. Also, I think to make sure that you are thinking about what's important to you and don't just wait till the end to think about what you would do if you left your business.

To let yourself be developing an identity outside of your company and outside of people affiliated with your company, that your relationships with your family, your friends, the things you enjoy that can be on your next path. And giving yourself some time and space to think about what's important to you.

And thinking about your big number, what would you need financially if you were gonna leave the business? I do encounter some owners sometimes. I hate to say it this way, but they get in their own financial trap where the earnings that they're able to take for them company and use it for living a very fun lifestyle.

They don't wanna sell because it's going to be money at closing and even with an earn-out than what they're taking from the business in the shorter term. And I encountered this a couple of times. In one situation, the owner is 72, 74 years old and he is still not ready to sell. And that's a big challenge for the other owners who are minority shareholders because they don't make that final decision.

He will and we can imagine where this might end up. I think you know, there's still, there's so, many pitfalls. You wanna have the right advisors on your team to help you and advise you. And if and when you're in the process to make sure that you're really able to focus on it and not just give it some lip service.

But if you wanna work on getting your business ready and improving your value, then there's the best time would be yesterday. And the next best time would be today. Third best would be tomorrow.

[00:42:20] Jeffrey Feldberg: Absolutely. And you know what, Laurie, that is such a poignant takeaway and such a huge pitfall, and we'll segue in a moment to start wrapping this up as my goodness, we can just go on with all the pitfalls that are there, but it really, you read my mind because I was thinking, okay, let me ask Laurieif there's one pitfall, if you had just one that you can choose from that you would share as a takeaway with the listeners, and you just said it, it's preparation or lack of in this case and preparation from what you were mentioning, hey, get a tax Advisor, get a Wealth Advisor check with your accountants. How much do you need to live on if you're no longer having the business right off expenses for you and writing the check for you? What does that look like? Can you live and what's that minimum number?

So, there's so much that comes out of that, and for our listeners, Listen to what the transition Sherpa is saying. Prepare well in advance. Get clarity. Know what you want, know what you don't want. It'll make things so much better. You'll have a better deal when all is sudden done coming out of it. And Laurie, I don't think I'm putting words in your mouth when I say yes, it takes time to prepare its effort and yes, it also costs money, but, and it's a big one.

It's a rounding error relative to the ROI. When all is said and done, would you agree with that?

[00:43:30] Laurie Barkman: Absolutely. You said it well.

[00:43:32] Jeffrey Feldberg: Terrific. You know what, we're wrapping this up, and since you've been back on the Deep Wealth Podcast now, this is your second visit and hopefully not the last one that we'll have you back. Why don't we do a little bit of a change up in the thought experiment?

Same thought experiment, which I'll go through in just a moment. But why don't we position it, Laurie, and you know, you can always answer it like you did the last one, or perhaps with pitfalls in mind. That's our theme. Pitfalls in mind. Here's a thought experiment just to refresh your memory.

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. And Laurie, it's your lucky day. You look outside the window and there it is. The DeLorean car is not only sitting there and waiting, but the door is open for you to hop on in you can go to any point in your life. You're now going back to the younger Laurie. Maybe when you're a teenager, a child, young, adult, whatever point in time it would be. What are you telling your younger self in terms of life wisdom or life lessons or, hey Laurie, do this but don't do that. What would that sound like?

[00:44:29] Laurie Barkman: I think if it was the, you know, we're on the honesty train, you know, when I had little kids, the honesty train would be, I should have left my desk before 6:30, that would be one. The other would be related to creating followers, I think as a leader, we can't just assume people will follow us.

And I think for a long time I thought people would wanna follow me because I'm a really hard worker and I wanna get things done and I produce good quality work and I'm focused on the process. And I know that there were others who were more fun than me, right? I was not the fun leader.

I was a nice leader, but not the most fun leader. And so I think really in my career, I probably could have learned more about leadership and followership.

And I've had some folks that I've seen along the way who I think have shown me how that worked for them and their success. And that's probably my takeaway.

[00:45:20] Jeffrey Feldberg: And Laurie's followership that's interesting. You know, just before we wrap up here for the followership side, what would that look like when you're saying combining leadership with followership?

[00:45:28] Laurie Barkman: It's just on the one side, I mean for you yourself to be a good steward of what you're leading. If you're in a company and you're managing people and resources and to steward that in a great way. But I think when it comes to people's careers, people enjoy their teammates. They wanna have friends where they work, and I think they want a relationship with their manager that fulfills them in some way.

I just think in general I could have done a better job at that, you know, again, if I rewind, 20, 25 years in my career and spend more time on that with people.

[00:45:59] Jeffrey Feldberg: Words to the Wise. You heard it from the Transition Sherpa herself, and you gave us not just one, but to talk about going above and beyond and the extra mile. Laurie, let me ask you this, we're gonna have this in the show notes of course. For a listener who wants to learn more about how to avoid these pitfalls, how you can help them with the transition, how you can take them across a finish line, where would be the best place online that they can find you?

[00:46:21] Laurie Barkman: They can go to and when they go there, they'll see an invitation to set up some time with me and they'll get some great access to eBooks and other tools that I have, including a business assessment all these questions about what are the strengths and some of the risks in my business today, and what might my business be worth?

We can give you a high-level answer to those questions through this business assessment. You have an open invitation for that, and then if you'd like to reach out just in general and understand a little bit more about the process. A lot of times we start with a business valuation exercise analysis that we do for clients.

And if you wanna learn more about that process, you can find me on LinkedIn also. And my two websites, if you wanna take a look, one is for pre M&A coaching and advising and You'll also see the services we provide there for mergers and acquisitions, advisory services for both buy side and sell side.

[00:47:18] Jeffrey Feldberg: Terrific. And for listeners, it can't be any easier. It is a point. And click so you come to the show notes and you know what? Take Laurie up on her offer. Reach out and say, hey, where are some blind spots or skeletons or gaps in the business, or what additional insights, because Laurie's doing this all day long.

And Laurie, to your point earlier, if the skills that built the business aren't the same ones to sell it, someone like yourself can really make all the difference out there. Well, Laurie, it's official. This is a wrap. Thank you so much for your insights, for your wisdom. And as we like to say here at Deep Wealth, please, and as always, continue to say healthy and safe.

[00:47:50] Laurie Barkman: Thanks so much, Jeffrey. Great to be with you.

[00:47:52] Sharon S.: The Deep Wealth Experience was definitely a game-changer for me.

[00:47:55] Lyn M.: This course is one of the best investments you will ever make because you will get an ROI of a hundred times that. Anybody who doesn't go through it will lose millions.

[00:48:05] Kam H.: If you don't have time for this program, you'll never have time for a successful liquidity

[00:48:10] Sharon S.: It was the best value of any business course I've ever taken. The money was very well spent.

[00:48:16] Lyn M.: Compared to when we first began, today I feel better prepared, but in some respects, may be less prepared, not because of the course, but because the course brought to light so many things that I thought we were on top of that we need to fix.

[00:48:32] Kam H.: I 100% believe there's never a great time for a business owner to allocate extra hours into his or her week or day. So it's an investment that will yield results today. I thought I will reap the benefit of this program in three to five years down the road. But as soon as I stepped forward into the program, my mind changed immediately.

[00:48:54] Sharon S.: There was so much value in the experience that the time I invested paid back so much for the energy that was expended.

[00:49:04] Lyn M.: The Deep Wealth Experience compared to other programs is the top. What we learned is very practical. Sometimes you learn stuff that it's great to learn, but you never use it. The stuff we learned from Deep Wealth Experience, I believe it's going to benefit us a boatload.

[00:49:18] Kam H.: I've done an executive MBA. I've worked for billion-dollar companies before. I've worked for smaller companies before I started my business. I've been running my business successfully now for getting close to a decade. We're on a growth trajectory. Reflecting back on the Deep Wealth, I knew less than 10% what I know now, maybe close to 1% even.

[00:49:36] Sharon S.: Hands down the best program in which I've ever participated. And we've done a lot of different things over the years. We've been in other mastermind groups, gone to many seminars, workshops, conferences, retreats, read books. This was so different. I haven't had an experience that's anything close to this in all the years that we've been at this.

It's five-star, A-plus.

[00:50:03] Kam H.: I would highly recommend it to any super busy business owner out there.

Deep Wealth is an accurate name for it. This program leads to deeper wealth and happier wealth, not just deeper wealth. I don't think there's a dollar value that could be associated with such an experience and knowledge that could be applied today and forever.

[00:50:22] Jeffrey Feldberg: Are you leaving millions on the table?

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