Dan Lubeck, Successful Private Equity Founder of Solis Capital, Reveals Proven Strategies To Grow Your Business And Increase Enterprise Value (#60)

Steve Wells: [00:00:05] I'm Steve Wells.

Jeffrey Feldberg: [00:00:11] And I'm Jeffrey Feldberg. Welcome to the Sell My Business Podcast.

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Jeffrey Feldberg: [00:01:40] Welcome to episode 60 of The Sell My Business Podcast.

Today I have a very special guest. Dan is going to share a story with you. He's going to have you rethink the entire narrative that goes around buyers. You have buyers and you have buyers. Dan is the real deal. You're going to learn why. But first Dan, welcome to the podcast.

Thank you so much for taking part of your time to be with us today. Why don't we start things off Dan with what's the story behind the story? How did you get to where you are today?

Dan Lubeck: [00:02:09]  Thanks, Jeffrey. I appreciate being here. The story behind the story. I started my career as a lawyer with the intention of being a real estate developer. And in my early lawyer years at Paul Hastings, I realized a couple of things very quickly. One, the happiest lawyers were the ones that had their own clients.

And two, that more lawyers were very unhappy than were happy. And so, very early on, I sought to find my own clients and was very fortunate to find little companies that for whatever reason, trusted me and engaged me to be really their advisor, which was such an honor for me having really no true business experience other than my instincts.

And in the course of representing those companies. And in the course of learning more about what they did, I will say there was a shift and my emphasis in my aspirations. I really fell in love with entrepreneurs and the organic nature of companies and how they evolved and changed every day.

Compared to real estate it's interesting. It's not nearly as dynamic. You have something with intrinsic value, but you also have something with an intrinsic limitation on its value. And if you think about companies, with the exception of ones that maybe have a patent or other kind of assets that have an intrinsic value, you really have a company that could be worth nothing, if not run well.

And it's not able to execute the plan, but also, they have no limit as to what they can be worth. And this has been shown probably even more than ever in the last decade of what companies can accomplish in a very short time and look at Amazon, for example. So, in my early days in working with these companies, my focus really shifted in that I really want to be involved with companies. I want to help entrepreneurs. I want to be part of that organic process. What that did is it started formulating my investment thesis, which has been consistent throughout my entire investing career. And that thesis is very simple. That what we do as investors in companies, isn't buy part or all of companies. It's, we're betting on leaders and leadership teams.

And that's the fundamental premise on how Solis Capital invests. It drives everything that we do and drives how we look for opportunities. How we diligence opportunities. How we structure opportunities. And then how we support those opportunities on a go-forward basis.

Jeffrey Feldberg: [00:04:52]  Wow. Dan that's quite a story and there's a lot to unpack there, but you said something interesting, and this is something at Deep Wealth that we can't say enough. That for most business owners for better, or for worse, usually for worse it's the founder who tends to run the company. And what was interesting, your thesis, you didn't say leader, or you said we bet on leaders in the plural, and maybe we can start there of having business owners hear from you.

You're a veteran you've done this day in day out for many years. Why is it important for a founder to understand the business has got to run without the founder?

Dan Lubeck: [00:05:29] That's such an important question. Thank you for asking it. And I don't know that I'd agree it has to be able to run without the founder. I look at these things in a lot of ways. Most businesses that we invest in, they don't need us. They're choosing us to be a partnering investor.

In my dialogue with them, I always look at well, what are your options? It could be do nothing. And in many cases, if that founder does nothing, they can probably run a very nice business and have a very nice life and have nice value creation and not have anyone that they have to be accountable to and not have to evolve and not have to bring people on that they have to invest in.

And live a really nice life and create good value. And that's fine. It's a subjective choice. Now, those aren't interesting to us. So, the ones that are interesting to us are where you've got founders and say, hey, I realized there's a lot more potential here and I want to realize it.

And the ones that really are capable of realizing it, some don't need us. Some realize that, hey, if I want to get from where I am now to realize this potential, I need to invest in my company. I need to have other talent on board that can take some of the things off my plate and does them as well, or even better than I do them myself.

A lot of entrepreneurs get stuck right at that level. For example, a lot of founders are the best salespeople that their company will ever have. And so, for them, it's very hard to invest in inexpensive salespeople because they're so good at it. And they think, gosh, I've got to train them and they're going to cost all this money to get them up to speed.

But the reality is if they don't build a sales capability, then they're really limiting their company's growth. Same with marketing. Marketing is a very hard expense for a lot of entrepreneurial founders to make because there's not a direct payback. It's a little vague and ambiguous.

Today maybe it's a little less so than it was historically because with digital marketing, you get much more quick and ready feedback on campaigns. But it's a similar type of expense. Also, I'd say the same in finance. Those are typically the areas that are hugely under-invested in an entrepreneurial-run company.

The reason you're asking that question. And it is a very important question. If you're thinking of exiting your business and you want to maximize your value creation, then the highest value will be paid for businesses where you're not critical anymore. Because a buyer typically wants to know that they're buying something that's sustainable without any one individual having to be present.

They want to know that they're buying something that they can continue and grow. That's going to continue to prosper and thrive. And if there's a risk, if you as a founder get hit by a bus, and that would have a big detrimental impact on the company's ability to perform, that's going to impact the valuation and ultimately your ability to exit and maximize that.

Jeffrey Feldberg: [00:08:41]  It's interesting, Dan, because lately when you pick up a publication, you read something online. You hear a lot of Private Equity or PE as some people call it. Offline, we were talking and you're saying, Jeffrey, we're not your typical PE kind of company or play here. We're very different than that.

And you hear some great things about PE there are some not-great things about PE lately. They've been getting a broad-brush stroke of some negative things that are out there. So, for our community who is thinking about their options of, okay, who's going to be, my future investor or buyer, Dan, how are you different?

And how is Solis is different in terms of your quote-unquote typical PE kind of group? What's the X factor for you that really shines?

Dan Lubeck: [00:09:27]  Such a great question. So, I started investing before the term private equity existed. And my joke is this, I used to be a lawyer and I'd meet a business owner and say, hey, I used to be a lawyer and they'd go, oh, geez. But I'm an investor now and they go, oh, okay, great.

Then, let's talk. And the irony is, at a certain point. And I'm going to say starting maybe 10 years ago, I would say to a business owner, hey, I'm a private equity investor and they'd go ah, and have a negative visceral reaction. But I used to be a lawyer and they go, oh, okay, then let's talk.

So, you're right. PE has gained a negative reputation in the marketplace. But I think in part that's because it's become so pervasive and generally negative stories get talked about a lot more than positive stories. So, I think it'd be wrong to put a negative, broad brushstroke against private equity.

It really has everything to do with what your aspirations are as a stakeholder. For example, we sell probably about half of our companies to financial buyers, private equity buyers, and about half to strategic buyers. And I'd say about half the time, we use an intermediary, and about half the time we don't. But more often than not, we're not using an intermediary for selling to strategic buyers.

But back to your question, PE is now an enormous industry and there's a tremendous amount of capital that is encompassed within that industry trying to find homes. So, if you are an owner founder and your aspiration is to sell your company and be done, maybe you'll have to roll some small percentage to maximize the process and the valuation.

I would go and find a great banker to help run a process. And there's a better than not chance that among the finalist buyers will be private equity buyers. Now flip side is we don't even call ourselves private equity on our website anymore. So, if you look at the Solis capital website, you won't see we're private equity.

You'll just see that we are investors in private companies. And we want to make that distinction because there are differences between how we view the world and how typical PE views the world. I'll give you the easy ones. One, most of our investments have a very heavy partnering element to them, which means most of our investments are with stakeholders’ founders that say, hey, we still have a lot of passion for this business. We still love what we do every day, but we recognize that we could use a partner to help accelerate the realization of this business's potential and often to address other issues. Maybe family transition, maybe retiring non-participating shareholders, maybe rightsizing the balance sheet.

So, there's often more than one consideration, but often it's just, hey, we realize we need a good partner to grow. And we also want to take some chips off the table right now to diversify our wealth. Which is fine. So, that's one difference. Another difference is when we make an investment, we really don't have a time horizon within which we want to exit.

And it's very typical in PE they're committed funds. There's a cadence that they like to perform to which, your average exit timing is four to five years. And that's very typical. For us, we look at it if we're in a business and our partners that are running the company every day are still having fun.

They still see value creation there. Then we'd rather stay in and keep growing. At the end of the day, we want to make sure that we have their final exit. be very wealth creative for them. And the way you do that is you grow your company and you realize as much potential as possible, but really that exit timing almost without exception is driven by our partners, the people in there running the company, and when they're ready to exit. So, that's another difference. I'd say another difference is, and this is we're going to get more subtle. The more we talk about the differences is just how we view our role relative to the stakeholders and the people running the company because of our core philosophy and that we're betting on leaders.

We view our role as a support role. We're not oversight. We're not the guy behind the screen telling him what to do and when to do it. We really view our role as we're there to support our team, to help them problem-solve to be a good sounding board if there are issues that occur. To bring them resources, that they couldn't otherwise access and really accelerate their growth.

Jeffrey Feldberg: [00:14:28]  What's interesting, Dan, and for our listeners, I hope you're paying close attention because one of the things that Dan was talking about is huge and it's often an oversight for founders or business owners or sellers.

Cultural alignment is such an important thing between a seller and a buyer. On either side, if the cultural alignment isn't there, it's going to be asking for some problems. The offer with the highest price, but the wrong cultural alignment is not a deal at all to have.

I'd love your thoughts on that, on how you've seen that cultural alignment works really well when it's working and how it just can sidetrack everything when it's not.

Dan Lubeck: [00:15:07]  Absolutely Jeffrey. There are some sellers that say, I don't care. I just want the highest value. And if I can get that I'm going to take my money and ride off into the sunset. That's very rare. Most, founders have a real appreciation for their company and their teams. They love their company.

They want it to thrive even when they're not around. And for those folks, you're a hundred percent, which is, if you don't have good alignment, then at the very least, there's going to be big issues. And in the worst case, it could significantly undermine the operation and ultimately the value of the company and really take a great of company and make it a much less great company or a company that's not successful at all. And that's in a full sale scenario.

In our case, it's even more important. So, in our case, we're partnering. And we encourage the people that we're talking with, to talk to other entrepreneurs we've partnered with. Do your diligence.

I want to emphasize that this is your process. It's not a banker's process. It's no one's process, but yours, and you have as much right to diligence people that are considering investing in you or buying you as they have a right to diligence you and your company.

And so, you can't be shy. Often, owners, they feel like, gosh, I don't understand this process. This is not my world and investment bankers and all these professionals, and they're all so smart. And they're also sophisticated, but here's the reality. They have not created a great business like you have, and you can't undermine your ability to assess a circumstance or a potential buyer. If you're going to do a partnering investment, you have to do your homework. You've got to understand their track record. You've got to understand how they approach investing.

You've got to understand how they react when things don't go as planned. Ultimately the true test of someone's personality and how they conduct their business affairs. Yeah, the cultural alignment is a very critical aspect of how you evaluate a potential buyer or even more important, partner.

Jeffrey Feldberg: [00:17:23] What's interesting, Dan is you want to see a grown person cry, you mentioned two words due diligence and anyone who's been through it knows it. What sellers don't often realize is that on the buyer's side, you're spending a great deal of time and money on diligence. And That's why buyers actually want to see a business owner and the company be prepared ahead of time so you're not wasting your time. You're not wasting your money. And if there's going to be a deal, you can get there quicker. So, having said that, maybe you can look back at some of the deals that didn't go through. Some of the opportunities that you thought would be terrific. But when you looked under the hood, you had to walk away because diligence turned up some skeletons in the closet that otherwise just shouldn't have been there. What would be some of the classic mistakes Dan that you're seeing time and time again, that business owners, founders, entrepreneurs really shouldn't be doing.

Dan Lubeck: [00:18:16]  That's a great question. We spend a lot of time getting to know our future partners in their companies before we even put a structure in place. So, it's very rare for us to have any big surprises in diligence unless someone's just really trying to pull a fast one, which has only happened once to me in 27 years.

But in general, I think the way that a business owner can best prepare for a sale or bringing in a partner is one that has accurate information. Really have financials that reflect the business, have been thoughtful about what things within the business might be personal expenses that won't continue after a transaction.

Those are called add-backs. It's a very common dialogue in a transaction as to what really is part of the ongoing business and what isn't. The more that those have been really identified and segmented and is clear the less time is wasted talking about those.

I think having a true leadership bench and transition planning, so that once again, a buyer or investor, won't be surprised about a lot of risks in any one particular leadership position. If you're really put yourself in a buyer or investor shoes, they want to know that whatever they're buying or investing in ideally is going to sustain and grow in the future.

And they're trying to find where the risks are? Where could that work, could that thesis prove wrong? And so, one is just being given information that proves to be inaccurate. Another is when looking at the leadership team, is there anyone that has a particularly significant influence that there's no redundancy for?

Let's say a classic example would be maybe a salesperson that's responsible for a huge percentage of the revenue. And then similarly, are there customers that if something happened with them that they'd have a huge detriment to the business. Concentrations in customers can be okay, but they also can cause concerns or even a lower valuation when it comes time to bring in an investor or selling the company.

Let's see other things that have blown up deals. At the end of the day, when I look to sell a company, I absolutely disclose everything I possibly can that I think it is relevant to buyers' potential concerns because I don't want to waste time. And I would advise that to anybody that's considering embarking on this process.

You've gotta be thoughtful about how you present stuff. It's not like you show everything in its most negative light. But my attitude is I want to show everything that I know of that might be significant to a buyer's decision and present it in the way that I think is most meaningful and appropriate.

And, you know, not spin it in a way where if they dug deeper that they're going to be disappointed or surprised. You want to eliminate surprises. The more you can eliminate surprises the better things are going to go.

Jeffrey Feldberg: [00:21:34]  So, when a prospective company that you're looking to either buy outright or invest in is coming forward with, hey, here are some of the mistakes that we've made here are some of the failed initiatives that we've done.

How does that impact you, both from an enterprise value side of things and just overall in terms of dealing with the leadership?

Dan Lubeck: [00:21:52]  Well, that's a very important question and it touches on a lot of things. The first thing it touches on is, as an investor, we're spending a lot of time evaluating those leaders. So, for us, it's the most critical thing we do in diligence is trying to understand the leaders that we're betting on.

And we want to know who they are and how they view the world. And if someone doesn't own mistakes, then I think it's natural to question their credibility. Because no one in business has ever not made a mistake. To me, I would add to your idea of, Hey, here's an initiative we underwent, we realized it wasn't a good initiative.

It was a mistake. And here's what we learned from it. And here's how we've applied what we've learned in the business that's actually making it even better. It's not about whether a business owner or we, as individuals are not going to make mistakes. It's how we take those mistakes, understand why we made them, and then use those learnings to be better.

If you're looking at a business and they keep making the same mistake again and again, I think that would be very disconcerting. But if we look at an owner and says, hey, here's what we did. It turned out it wasn't a good idea. Here's what we learned from it. And here's how we've implemented those learnings in our strategy going forward.

That's a very impressive mentality. And that's the type of leader that we want to be around and support and help them to continue to evolve. You know Ultimately if you want to know our secret sauce, I'm going to share it with you. You got to promise me no one else can notice.

Jeffrey Feldberg: [00:23:31]  Promise this is just between the two of us. And no one else is going to know. Go for it.

Dan Lubeck: [00:23:35]  Between the two of us. Our most important thing we do as partners is help our leaders understand how they invest their time and then help them better leverage that time by adding resources to the company. And also, changing their mentality about how they invest their time so that they can grow as leaders and then their company can grow accordingly.

And so, back to this question, you asked about mistakes. If you've got a leader that shows that they're open, that they are self-reflective, that they're not ego-driven and we all have egos. But that their ego isn't what leads them and every conversation and every room and every dialogue. Then those are the kind of leaders we gravitate towards because we look at them and go, man, this person wants to be better.

And this person has an openness to the world and an openness to opportunities and an openness to learning from what's around them and we can do a great job of supporting a leader like that and helping them evolve.

Jeffrey Feldberg: [00:24:43]  And for our listeners, I really hope that you were paying close attention to what Dan was sharing. And this goes back to one of the earlier questions. As a founder, as a business owner, when you have a management team that can run the company in your place, it gets back to what Dan was saying. It frees up your time. And you're the visionary.

Go find a new problem that you're passionate to solve and create a market disruption. Dan would love that if he invested in your company and you now have this free time and you can go create a market disruption while you're solving problems or helping people, you're increasing revenue, you're adding profits.

It's a win-win all the way around. So, then let's talk about the management team for a moment here. Many business owners that I speak with, say, you know what Jeffrey I'm going to sell the company at one point, it's probably, you're going to be my competition who's going to come in and buy me. I'm the company. The company is me.

Why bother with the time the recruiting fees, the hassles of hiring a president or CEO? My future buyer, my competitor already has a person. I'm not going to waste my time doing that. And on our side, Dan, what we share and maybe you'll agree or disagree in this would be the question to you.

You don't know who your future investor or buyer is going to be, and maybe they have a management team in place, but what if they don't. That by investing in your management team, having a solid track record of success, whatever time and money that's spent, it's a rounding error relative to the enterprise value that you'll receive for your future liquidity event.

But where do you sit on that? And maybe we're drinking our own, Kool-Aid here, Dan, on that particular topic. Where are you on that in terms of the business has grown to a point where it can have an outside professional run the company, but the business founder is on the fence with that? What would be your thoughts?

Dan Lubeck: [00:26:26]  That's a really good question. And there is some subjectivity to the answer. If some founders. I'll say the ones that choose to bring us in. Okay. Are there things that we're doing with them that they couldn't do on their own? Probably not. But would they do those things without us there encouraging, inspiring, sharing the risk?

Probably not. So, question number one is, do you want to go it on your own? And if so then what do you need? What support, what resource do you need to go out on your own without a partner like Solis? And if you built your business to 10 million, 20 million, 30 million revenue, chances are, you can do it without us as a partner or someone like us as a partner.

But you have to recognize again, you have to be self-aware enough to know where your limitations are. Where your fears are, where your constraints are. And then figure out a way to address those. For some people, it might be that they'd be helped by putting together a small advisory board. People that have been there and done that.

Yeah, it's a small investment, but again, in your question, you asked, these investments could be a rounding error relative to the value creation, and the answer is yes, you're absolutely right. But it's not just about economics. There's a human element to this and you gotta be, at least self-aware enough to know what the limiting factors are so that you can then address those.

And it may be, Jeffrey you were telling an entrepreneur and you turned down a seven-figure offer and ultimately got a nine-figure value for your company. So, there was something that happened at that point you intrinsically knew, hey, I can do more than what I've done. And so, you said no.

But some people might say, you know what, I could use some help. And either I'm going to bring in a partner to help me. First of all, somebody could say, if I just sell for X, that's fine. I'm done. There's nothing wrong with that. There's no judgment in any of these decisions.

I can't be more clear. These are subjective decisions. If someone could get 10 million for their company and that satisfies their aspirations and then they can go invest all of their time into something else that's more important to them and that's sufficient economics for their purposes.

Great outcome. But if someone says, I do believe there's a lot of potential left in my business. I recognize that I'm going to have to do things either with myself or with the company or both to realize that potential. Then the question is what are those things that they have to do?

And the answer is where are my limitations that I have to address so that then the company and I can evolve further?

Jeffrey Feldberg: [00:29:26]  Let me ask you something. You wear many hats. Let me focus on two of the hats that you wear because it makes you unique in the marketplace. You wear the hat of a buyer and you wear the hat of a seller.

You're wearing the hat of a buyer when you're first looking to either invest in or buy a company. And then you're wearing the hat of the seller where at some point down the road, whenever that is, you're looking to actually sell the company. And so, you're thinking on your feet from both perspectives, which gives you an incredible vantage point.

So, here's the question for you. As you look back to the transactions that you've done, and let's just take it for now on the buying side or the investing side. When you look back at all the companies that you've invested in. Is there a company or maybe a few companies that did something so unique in the preparation for you in the diligence period, or for talking with them that just had them stand out from the crowd that you wish other companies would do this?

Dan Lubeck: [00:30:19]  Yes, I wear two hats where anytime we're looking at an investment, we're not only looking at the investment as it is, but we're also thinking of the exit at some point in the future. And I would say something, every business owner should do is wear those same two hats. I don't care whether you're thinking about selling it in one year or three years or five years or seven years. Always be wearing the hat because at the end of the day, ultimately the mission is to create value.

And if you're wearing that seller hat in all the decisions that you make every day, where are we going to invest? How is our workforce? Are they all adding the value they should be adding? It'll help make decisions that otherwise might be hard. And the classic decision I think about is often when we come along, our partners are so relieved to have, let's call it a bully pulpit or someone to blame for some of these hard personnel decisions where you have people that have been around that are wonderful people.

Those have been very loyal, but whose skills are no longer relevant for where the company's going. And they just can't find it in themselves to make those changes. If you're wearing both hats, maybe, again, you do the right thing and you take good care of those people. And let me tell you the funny irony, those people also know that they don't belong there anymore. And so, more often than not, it's a relief for them too. And if you treat them right in that transition, it's a win-win for everybody. But if you're wearing both those hats as a business owner, then you may make those decisions more quickly, which greatly benefits the company and the workforce,

Jeffrey Feldberg: [00:32:04]  You're preaching to the choir. One of the things that we talk a lot about it at Deep Wealth, and as people go through the nine-step roadmap, we call it tuning in to everyone's favorite radio station, WII.FM. The What's In It For Me radio station and business owners, entrepreneurs, founders, listen up, you got to think like a buyer.

You have to think like Dan. He's going to come in and it's great that you have your exit. But Dan is looking at his exit at one point down the road and it can't just be, is Dan's check, going to clear and that's all I care about. it's got to be a whole lot more to make sure that there's going to be some synergy there for you.

Dan Lubeck: [00:32:40]  I agree with you. It can just be about Dan's check is going to clear if you don't care about your company. It's not just about profitability that drives value. It's about quality. It's about depth. It's about how good is this company? How good is this leadership team? Is their stuff piled in either the hypothetical corners or the real corners of this business? And if so, why? There are both tangible things that drive value and intangible things that drive value. Both of which are very important for ultimately getting something that's going to be the highest and best value and the highest and best outcome.

For not only you but also then all the people that are in that company that have families and careers that have been invested in that company for, in many cases, a very long time.

Jeffrey Feldberg: [00:33:33]  Dan you're absolutely right. There is so much riding on the success of a business and it's not just about us as business owners. We have our team, our managers, our employees, our stakeholders, who are also relying on us to do things right. So, speaking of success and long-term viability as we record this interview, we're still in the midst of this worldwide pandemic. Light is at the end of the tunnel, but we're not quite there yet.

Have things changed for you, Dan, as a buyer and even as a seller of different companies, different investments that you're looking to do on either side of the table? What's happened as a result of the pandemic that's different today than it was a year ago?

Dan Lubeck: [00:34:09]  Not a lot. Yeah. It is different because you know what, we're looking at, things that are fairly fundamental. The obvious difference is when we're looking at a company today, you have to factor in both potential positive or negative impacts of the pandemic that won't be the same, hopefully, 12 months from now.

Before this interview, I was looking at an opportunity that was sent to me that was a high-end. Motor home rental company that's done really well in the last 12 months. And you have to say, all right is that going to sustain once travel becomes the norm again.

There's a lot of companies that have hugely benefited from the pandemic. Glove manufacturers, hand sanitize companies. I was using a hand sanitizer and I noticed it was manufactured by Sterno. And I don't know if that rings a bell, but Sterno is the company that, for most of their lifetime made these little cans of fuel that would go under buffet warmers. And, they did a quick transition to make hand sanitizer. One of the biggest differences now is when you look at a company's performance, typically we look at the last 12 months as a real indicator of what their future is. But now when we look at the company, you got to go, okay, what did the last 12 months look like?

And what in here is anomalous that will be different 12 months from now, only because we're no longer in a global pandemic.

Jeffrey Feldberg: [00:35:34]  It's interesting, Dan, because you bring that up. Some sellers have begun to use this as this new term that's come out. We all know EBITDA depending on who you speak to it's EBITDAC or EBITDA-C.

Dan Lubeck: [00:35:45]  That's funny. I haven't heard that, but that makes a lot of.

Jeffrey Feldberg: [00:35:48]  So, if I'm curious, if a seller came to and said, look, Dan, for better or for worse, we can pick out other side of it, but here's this C factor in the EBITDA. Maybe our company's done better. Maybe it's done worse, but because of that, we're labeling with a C and this is what it really looks like. Does that weigh into your enterprise value big picture-wise?

Dan Lubeck: [00:36:06]  As an investor, do we believe the C? And if we really believe the C, then we're going to take it for what's presented and, structure and value accordingly. But if it's more of a, let's wait and see about this C, then the structure is going to reflect that. And it's funny because, as an investor, there's a lot of issues where the harder a seller fights for it the more concerned you become.

And so, it's a really interesting issue and we love to suss those out. If someone says, hey, as a seller, we know that X is going to happen. We'll get okay, great. Then let's create a structure based on X happening.

And then if they say well, I'm not sure I'm comfortable with that. But we thought you were really confident. X was going to happen. What's changed?

Jeffrey Feldberg: [00:36:54]  And you really get to the heart of the matter, and we can't stress this enough, from a buyer's point of view and even a seller's point of view. Money is not the currency. It has to be trust.

If a seller tells you something and it checks out and it's okay. And then something else comes up and that checks out and that's okay. And something else comes up. You now have a track record of trust, or you're still going to look into it, but you're going to give them a benefit of a doubt, or if there's some kind of gray area.

Well, you know, everything else that they said was true. So, I'm sure this was just one small little deviation here. But if that trust wasn't there in the first place, I imagine you're walking away from the table or you're going to penalize the enterprise value. So, let me ask you this. And this would be really a heads up for all the business owners out there that are looking to have some kind of liquidity event at one point in time. Dan, what's happened over time where a business owner has just lost your trust or lost your confidence?

Dan Lubeck: [00:37:47]  For our kind of investing, if that happens then in all likelihood than the investment is over.

Jeffrey Feldberg: [00:37:52]  So, what would lead to a distrust that, okay guys, nice talking to you, but we're walking away from the table. Wish you all the best.

Dan Lubeck: [00:37:59]  If someone displays ways of dealing with things that aren't trustworthy, so inaccurate information or not doing what they say they're going to do. We have such a deep cultural norm.

Don't say you're going to do something unless you're going to do it. We like to under-commit and over-deliver. And that's a great quality. Let's say you're selling a company you don't want to under-commit because that might undermine, how much someone values your company.

But let me tell you something. If you're looking at a process and option A is under committing and then beating those expectations consistently throughout the process. And option B is committing to a higher expectation and missing those consistently throughout the process. And it's the exact same performance.

You're going to get a higher value for A, than you are for B, even though the performance is exactly the same. Does that make sense?

Jeffrey Feldberg: [00:38:55]  Dan, I love it. You're so spot on. What a gem for our listeners out there because oftentimes business owners forget, hey, while you're having the liquidity event, you still have to run your business. Those projections that you're giving while some of them may be years away, but some of them are a quarter away and you're still at the table when this is happening.

So, under-promise over-deliver will never take you down the wrong path. And you're doing what you say, saying what you're doing. A tremendous gem for the community. And you've heard it right here, folks from an incredibly successful and experienced buyer. Anything else that would come to mind, Dan, in terms of just wowing you on, I trust these guys, and let's see what else we can do with them?

Dan Lubeck: [00:39:35]  We're wowed by people that surprise us to the good. We're wowed by people that under-commit and over-deliver, it's just a great quality. Maybe that's just a personality thing because that's how we are.

So, maybe we're drawn to those types of personalities and I want to be open to that possibility. But, if someone overplays their hand, it just undermines credibility and that could be in the team. It could be in customer relationships; it could be in performance numbers. And let me tell you, as someone who's conducting a good due diligence, they're going to figure it out.

They're going to spend the time to understand the customer relationships. I've made mistakes in my investing career where we really didn't spend the time. We took things at face value and didn't dig deeper and it turned out to be very expensive mistakes. So, we don't do that anymore. We really try and understand those relationships. We just entered a letter on investment. Now, this is unusual that we've been basically building a relationship with this company for five years. And this company and these founders, they're just wonderful entrepreneurs.

They've always been very transparent with us and very open with us and it's made us want to help them in any way we can. And we have even in this period where we have no economic interest, no obligation, we've invested in that relationship because we want to win them over to see that we're great partners.

But we also wanted to see how they reacted in circumstances. And so, it's just been this long courting process, but we're so excited now that, we just signed this letter, which is such an important rite of passage. And I believe the transaction will happen, just they showed us over time who they are and how they approach challenges and it's just been so interesting and impressive.

Jeffrey Feldberg: [00:41:31]  Dan from anyone else, I'd be surprised to hear that. Coming from you though with your thesis on how you invest in both the people and the leaders and leadership is not surprising at all. And I really think it's a testament to Solis Capital and your thought leadership on that and what you're doing and where you're taking the company.

And so, Dan, let me ask you this. As we begin to wrap up this wonderful interview, there is a question that I absolutely love to ask every single guest. And the question is this. When you think about the movie back to the future, in the movie, there is this magical DeLorean car that can take you back in time, any point in time.

So, Dan, I want you to imagine tomorrow morning, you look outside your door and there is a DeLorean. The door is open, waiting for you to come in. And you can go back to any point in your life. Maybe you're a child or a teenager or a young man or an adult. Whatever time period that would be. You're going to go back to share some lessons learned or some life wisdom, or don't do this, or do that.

What would you be telling yourself?

Dan Lubeck: [00:42:32]  Very good question. A very profound question. There's both personal and business. I'm going to give you an answer that transcends both in a lot of ways. I'm a guest professor at this guy puts on a seminar class at business schools and he has me come every year. And I always start the class with everybody here that has done mazes as a kid, raise your hand. So, everybody always raises their hand. And then I say, all right, everybody here has that figured out. It's easier if you start at the end and we're back to the beginning, raise your hand. And almost everybody raises their hand. Some people actually don't raise their hands. And I said, okay, life is a maze.

And the lesson here is that if you clear your image of the finish, then the straightest path it'll will be to get there. So, what does that mean? It means less dead ends, less places where you'd go down a road and you have to turn around and backtrack and go try another path. Now, is that wrong?

Is that a waste of time? No, because you learn a lot of lessons and probably your most profound lessons by your biggest mistakes. But I would say if you want to accomplish something, if there's a scenario where you have an objective that you want to accomplish, that the clearer the vision is for what you want to accomplish the straightest path you will take to be there.

So, in a personal context, it can be all right I want to marry an amazing woman and have a great family. Then I'd say, all right, really spend some time thinking, what are the characteristics that are most important to you in that partner so that you can then really spend less time trying to bind them.

And when you find them, you'll know it. And then if you think about a business, you can say, all right, and this is a big value add that we often bring to our partners, which is let's create a really clear vision of where we want to be in five years. That may change, but let's create a very clear vision of where we want to be.

And then that'll really clarify the path that we need to be on to get there and help us make decisions as to where to invest and help us make decisions as to who the right people are and what skills we need to stay on that path. If I was going to go back to Dan of whatever age it would help me. You know, I think people in general are either very strategic in nature or are very tactical in nature.

You tend to gravitate to one or the other. I have a strategic brain, but I also love tactical thinking. I like to think, how might I get to point A to point B? And so I tend to gravitate to tactical. If you're that type of person and you can really force yourself to be that strategic thinking, which you can, or vice versa. If you're always looking forward, If you can force yourself to put a tactical path to this vision, you have either way it can be a huge benefit.

Jeffrey Feldberg: [00:45:46]  A lot of wisdom there and very powerful, a wonderful takeaway. Dan, this has been absolutely terrific. The last question for you, for our listeners, either for you Dan or Solis capital. Where would be the best place to find you online? For the listeners, everything that Dan says, I will be putting into the show notes. so, you don't have to worry about writing this down, but if you're listening in on the go and want to take a look at where Dan is or Solis Capital after this, Dan, how can someone do that?

Dan Lubeck: [00:46:13]  So, my wife complains that I'm way too easy to find and reach. The SolisCapital.com website has our contact information. I'm also on LinkedIn and really appreciate the power of that platform. So, we're easy to find. My email is Dan [at] SolisCapital [dot] com.

If you just want to drop us a line and we always are happy to hear the story and to share our thoughts. A lot of our time is spent doing that with zero expectation of the relationship evolving to anything, but a hope that maybe somewhere along the line, we'll help people. And then another hope that maybe somewhere along the line, we'll find a great opportunity where we can be a good partner.

Jeffrey Feldberg: [00:46:57]  Spoken like the true champion and professional that you are, Dan, this has been wonderful. I can't thank you enough for your time. And as always as we look to close this out, please stay healthy and safe. Thank you so much.

Dan Lubeck: [00:47:08] Thanks, Jeff. Really appreciate it.