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July 13, 2022

Investment Banker Ilan Jacobson On What You Need To Know For Your Liquidity Event But Probably Don't (#142)

Investment Banker Ilan Jacobson On What You Need To Know For Your Liquidity Event But Probably Don't (#142)

"Don't worry, it gets better." - Ilan Jacobson

Ilan Jacobson is the Founding Partner & CEO of FirePower Capital, and has transformed the firm from a small 4-person family office into a 40+ strong M&A advisory and private capital powerhouse. Ilan leads FirePower Capital in all its endeavours, setting its strategic direction, providing top-level guidance on key transactions undertaken by the M&A division, and assessing new direct investments for FirePower’s Private Capital funds. Under his leadership, FirePower invests in Canada’s entrepreneurs by financing their growth directly with venture debt or private equity, and helps them complete their most critical transactions.

Ilan is sought after for his expertise on topics related to entrepreneurship, private capital, and M&A, and has appeared at numerous events as a speaker, moderator, and workshop leader. Previously, Ilan was a Portfolio Manager at a leading venture capital firm in Toronto, where he sat on numerous boards. He received his MBA from the Ted Rogers School of Management at Ryerson University, and has an Honours Degree in Science with a specialization in genetics from the University of Western Ontario.

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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. 

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Enjoy the interview!


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

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

Your liquidity event is the largest and most important financial transaction of your life.

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 anywhere from 50% to over 100% of their 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 science of a liquidity event. Two years later, I said yes to a different buyer with a nine-figure offer.

Are you thinking about an exit or liquidity event?

If you believe that you either don't have the time or you'll prepare closer to your liquidity event, think again.

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?

Let the 90-day Deep Wealth Experience and our nine-step roadmap of preparation help you capture the maximum value for your liquidity event.

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

Ilan Jacobson is the Founding Partner and CEO of FirePower Capital and has transformed the firm from a small four-person family office into a 40-plus strong M&A advisory and private capital powerhouse.

Ilan leads FirePower Capital in all its endeavors setting its strategic direction, providing top-level guidance on key transactions undertaken by the M&A division, and assessing new direct investments for FirePower's private capital funds. Under his leadership, FirePower invests in Canada's entrepreneurs by financing their growth directly with venture debt or private equity and helps them complete their most critical transactions.

Ilan is sought after for his experience on topics related to entrepreneurship, private capital, and M&A, and has appeared at numerous events as a speaker, moderator, and workshop leader.

Previously Ilan was a portfolio manager at a leading venture capital firm in Toronto where he sat on numerous boards. He received his MBA from the Ted Rogers School of Management at Ryerson University, and has an honors degree in science with a specialization in genetics, from the University of Western Ontario.

Welcome to the Sell My Business Podcast and I have a terrific, terrific episode for you today. I have one of those mythical creatures, otherwise known as an investment banker, but not just any investment banker. This investment banker is going to take you to the wall and back in terms of things that you probably should know, but don't, I'm getting ahead of myself.

Ilan, Welcome to The Sell My Business Podcast. It's such a pleasure to have you with us. Why don't we start off this way? Elon, there's always a story behind the story. What's your story? What got you to where you are today?

[00:03:33] Ilan Jacobson: So Jeffrey, I love how you started with the introduction of the investment banker. That's something I keep hidden because I am an entrepreneur turned banker, not the opposite way around. And I'll give you a bit of the Cole's notes. I'm an immigrant came here in 1987 grew up with very modest beginnings was really passionate about science and math. So I have a background in genetics. I ended up getting into medical school and probably had the only Jewish parents on planet Earth that begged me not to go to medical school.

I took a year off to the side and did my MBA and got recruited by a venture capital fund and decided not to go to medical school and then realized pretty soon thereafter. I was basically unemployable. I got way too big of a mouth. And as I like to say, unless you sleep in the bed next to me, I don't need to listen to you.

So I got one boss and she sleeps with me. You know, left in '09 to start Firepower. Firepower is started originally as a family office then morphed into an investment bank and we also have a lending division and a private equity division. Pretty diversified at this point.

[00:04:32] Jeffrey Feldberg: I love it. Entrepreneur turned investment banker. So obviously we're all going to be right at home. You never really hear this of parents not wanting you go to medical school. What was that all about? Where's that coming from?

[00:04:42] Ilan Jacobson: You know it's really interesting. I had done really well in school and I was a real nerd. And I think what happened was when you do really well kind of push you into the stem and that's kind of where my life was headed, but I think my parents knew my DNA more than I did and realized that that's not really what I was passionate about.

I had started businesses and being involved in entrepreneurial endeavors throughout my university career. And I think that they really identified quite early that, knowing me the way they knew me, I was not made to be a doctor. I was far better suited to be in business. My father is in business.

I was the eldest of four and I think they also knew that there was better doctors coming in our own family. And my youngest brother is now a doctor, so they were right. And he is much better suited to be a doctor that I would've ever been.

[00:05:32] Jeffrey Feldberg: All parents always know as it seems to go. So Ilan, it's interesting because really as business owners and let's just talk as business owners here, we often make the fatal mistake. As we like to say in Deep Wealth that the skills that built the business are the same ones to sell it. And as we both know that's not the case, but it'd be great for our listeners to hear straight from the horse's mouth as the saying goes.

What are you seeing out there Ilan, when you start to work with business owners, what are some of the typical I'll call them costly or fatal mistakes that business owners are making when they show up to you? So in other words, if you could go back in time and have them not do these things before they got to you, it would make everyone's life that much easier.

[00:06:13] Ilan Jacobson: Sure. I mean the first one is by far the most prevalent in that I try and explain to people that buyers buy entities. They don't buy people. They don't buy you. And what I mean by that is an entity is something unto itself. So if a business is you. It's not really sellable because they also know that you're probably not employable.

So I'd say the biggest thing is building infrastructure around you, such that you don't hold all the relationships that it's not all about you, and that you have a more robust team that could continue running that company. If you got hit by a bus tomorrow. So I'd say that's one of the things that is important.

I would say that really institutionalizing the business. And what I mean by that is the quality of data. Everything from your financials to how you know, your processes, your systems. Do you have a robust payroll system? Really making sure that is professionalized is super important.

Not only that you run a really good organization, but also it makes due diligence far less painful. And it does absolutely increase your value. Things like working capital, I see a lot of owners that leave many, many millions on the balance sheet because they run the business like a family business.

And, if there AR is a little long, so be it, they know their customers they have cash, they pay payables as quickly as possible, then you get to this weird thing called a working capital peg. You and I both know that's that is extremely important. It can be quite material depending on the business.

We see more deals die from working capital pegs than we do from any other structural components. VTB's, reps, and warranties more deals die from working capital.

[00:07:56] Jeffrey Feldberg: Wow. And so before you go forward, then let's do a little bit of a deep dive on the working capital. So when it comes to the working capital peg, ideally you wave your magic wand in the perfect scenario you're doing everything right. What does it look like?

[00:08:11] Ilan Jacobson: Yeah, I think it looks like 12 months. Because typically what they do is they take an average 12 month for the peg and you stretch your payables. And you collect receivables as quickly as possible. Any amount of money that you can off the balance sheet, through stretching payables, and receivables thats money in your pocket.

So it's the discipline of the AR and AP that is most fundamental and that ended up there. There are other components and it depends on the business. So some people just buy a lot of inventory Because who cares? Like they got the cash, the balance sheet is healthy. They don't want the headache of having to order inventory on a weekly basis.

So they just order it all in advance, being disciplined and making sure that your inventory is turning as much as possible. Again, depending on the nature of your business, but that's also a very important components of the working capital.

[00:08:57] Jeffrey Feldberg: And Ilan, you bring up a really important point and it's not just the working capital peg. Let's expand it a little bit because all too often, look, let's be honest as business owners when we start the business, it's also a lifestyle. So we run the business in a way that's good for us.

So if you're a sports fan, you probably have seasons tickets to your favorite sports team. If you're into the arts, maybe you're having tickets to the opera or to the theater, whatever it is. And then comes this thing called a liquidity event. And next thing you know, you're making all these EBITDA adjustments. Maybe the buyer believes you, maybe the buyer doesn't and it can be a really big issue.

So I think if you look at things like you're talking about inventory and how you're dealing with your payables receivables, but also the lifestyle expenses that you're putting through the business. I would suspect from what you've seen out there in the trenches, it can really cloud a deal and in get in the way of enterprise value.

[00:09:48] Ilan Jacobson: As long as you're very disciplined with the tracking and your financial systems. Like I don't see a lot of buyers have an issue with you adding back you know, seasons tickets, they all get it, like in the car for the wife and the kid.

But again, it comes down to quality of information and if it could be articulated succinctly and there's sufficient evidence to support that these are non-business expenses, non-business quote-unquote.

Then I don't see a lot of pushback as it relates to adding back those sorts of activities. But the reality is those are typically not even close to as material as something like working capital.

[00:10:19] Jeffrey Feldberg: Fair enough. And while we're speaking of just things not to do, I mean, what would be some of the things that are just so outlandish, but you've seen them time and time again. So out there for us business owners, hey, remember what Ilan said? Keep this in mind. Don't do this as you head towards your liquidity event.

[00:10:35] Ilan Jacobson: Cash. If you can take cash we all know what I mean by that. I would highly recommend you don't do that A from a legal standpoint and B guess what, when you sell it for eight times, EBITDA that cash is now with eight times. So you would have to collect it, for quite a few years to make up for the differential. If you are entertaining those sorts of activities I would tell you to put it on your income statements as soon as possible.

[00:11:00] Jeffrey Feldberg: And so I'm wondering then, so you talked a little bit about the buying entities and not you and for us a Deep Wealth that's really our step number two in X-Factors what we call it. The business runs without you. You talked about the quality of data and we're all about that just in terms of being organized and prepared.

Let's flip it though when you've represented clients and business owners that they've just done it right. Ilan, they come to you, you take them to market. They actually get a premium because they've done things right. They've made it so easy. What's the secret sauce that you're seeing in there. What should we be doing?

[00:11:32] Ilan Jacobson: It's interesting. It's multifactorial. They bring their team in early. That's a big thing, because if you can show that, A, the team is onside with this liquidity event that they are very supportive, that they want to work for a new buyer, and that they're motivated to work for new buyer.

And by the way, they're the superstars, they're rock stars. Especially if you're looking at a private equity buyer. You know, they need to know that they have a team that they can go on a consolidation spree with and that could drive significant value. So I would say that's definitely a key component.

The transparency and not trying to hide it, the warts, every business has warts there's no such thing as a perfect business, having that transparency and authenticity and comfortable, say I got a great business. You know there's some things that aren't perfect, but no business is, and being open and honest about those things. People really appreciate that. And I honestly think they pay a premium for that.

[00:12:22] Jeffrey Feldberg: And so we've heard the good we've heard the not so good. Let's now start to bring this together. So as we're recording this interview, I'd like to say the pandemics behind us.

[00:12:31] Ilan Jacobson: I agree with you.

[00:12:32] Jeffrey Feldberg: And we're looking forward to things. So what's changed now. I mean, we've heard some of the horror stories in the pandemic and our hearts go out to all the families and the people that were affected by that.

As I like to say, though, there's always two sides to a coin and I know M&A dramatically change and in some sectors for the better because of the pandemic, but where we sit today, what's changed for you compared to say three years ago, or even six months ago.

[00:12:55] Ilan Jacobson: The ability to do due diligence remotely is radically changed. So the whole process of deal-making has changed that it's done so much more efficiently through virtual means. I would say that from a valuation standpoint, the markets remain strong, but I don't think that's pandemic related.

If you're specifically talking about the pandemic, the one thing that we'd see over and over again is supply chain. So you know, this idea of having the lowest cost supply chain but single source. That used to be highly valuable and that's not as valuable. And that's very pandemic driven.

Having redundancies in your supply chain is very valuable even if you have to pay more and your margins lower. A buyer and knowing that you are not gonna be a situation where you actually can't deliver products is hugely important. Having suppliers onshore has become far more important. So supply chain-related issues and supply chain-related strategy has become a very hot topic and supply chain continues. So we talk about the you know Covid being done. I think that most entrepreneurs listening to this would probably be nodding their head when I say one of them has something wrong or something causing them stress within their supply chain.

[00:14:10] Jeffrey Feldberg: So if a business who's done it right with a supply chain, maybe there's some local suppliers or maybe it's multi-source like you're saying you're not dependent on one location for the manufacturing of it.

Even if you have a little bit of a lower bottom line you're not as profitable because of that. From a valuation perspective, you'll likely get a higher value compared to a company who's more profitable, but they're a single source reliant on one supplier perhaps overseas.

[00:14:35] Ilan Jacobson: One hundred percent, we all know that a concentration of your revenue. So if you have a single client, no one was really interested in that kind of business. We've known that for years, but people really overlooked the supply chain risk. That's not happening anymore. So what you just said is absolutely correct.

[00:14:51] Jeffrey Feldberg: Wow. So that's definitely pandemic-related and obviously a huge impact in terms of how we plan our businesses, how we run our businesses. Along those lines, Ilan are there any other changes that you've seen? That'd be similar to the magnitude of the supply chain?

[00:15:04] Ilan Jacobson: You know, just having the appropriate systems internally to run a remote workforce, people are asking like, how are you maintaining your culture when you know, you're not around each other anymore. Just being able to show that you have a professionalism, as it relates to understanding that managing a remote workforce is different than having an in-office workforce. I think that's also an important piece.

[00:15:28] Jeffrey Feldberg: And so it sounds like if we start to go back now to the source of where all this is coming from, so obviously it's coming from buyers. And like we say in The Deep Wealth Experience, that's our step number three, future buyer. Your future buyer will do everything and anything to minimize the risk. And so it sounds like on the supply chain side, they want to see a multifaceted supply chain.

They want to see a rich culture. You're in embracing remote work. It doesn't matter where people are. You got it together as a company, you have a nice and vibrant culture. I'm going to call it the ethos of a buyer or the mindset of a buyer. What kind of changes have you seen?

[00:16:02] Ilan Jacobson: It's funny. I thought I was going to see more changes. The reality is if you think about what drives most multiple, compression and expansion, I believe it first starts with the private equity space by financial buyers. And the financial buyer, if you think about how they operate and how they make money by placing capital.

So in a way, whether they're right or wrong, they have to be diluted in fact or they have to believe in the fact that it's business as usual. So they're back on the train, they're placing capital. They're looking for good businesses. I think they've tried to put everything behind them as much as possible.

So I don't see a lot that has changed from the financial sponsor. And I think in turn that's strategic buyers to if they want to play in the game, they got to act pretty similarly. I still think it's a seller's market. And I would've said to you if you would've told me two years ago that this would have all happened I couldn't have pictured a situation where I still thought it would be a seller's market.

But the reality is you have a lack of supply of good sellers. You have an abundance of demand. We've raised more money in private equity than ever before. We have more money on balance sheets in the public markets than ever before. So simple supply and demand. It's still a good time to be a seller.

I think it's going to change dramatically over the next five years. I think inflationary pressure we give the higher interest rates will be the kind of canary in the mine. And I think that will drive multiples significantly down. And I also think that private equity will have a harder time generating the IRR on their historical funds they raised five, six years ago, which will lead institutional investors to deploy less capital into that strategy.

So and again I've kind of been saying this the last three years and being wrong but I'm going to be right eventually.

[00:17:44] Jeffrey Feldberg: If you're persistent enough.

[00:17:45] Ilan Jacobson: Exactly.

[00:17:46] Jeffrey Feldberg: So let me ask you a little bit of a loaded question. And I know I'm thinking now from our listener side and we talk a lot about this in the Deep Wealth Experience. It's step number six, the advisory team. And like I said, at the start of the episode, this mythical creature, otherwise known as the investment banker.

And Ilan, I mean, let's be honest about this. The right investment banker versus the wrong investment banker for a business owner, that's everything. So as business owners, how do we tell the real deal in your books as an investment banker versus the one that says all the right things, but isn't going to do the right things? What would be some telltale signs? What should we be looking for?

[00:18:24] Ilan Jacobson: So I'm going to start by saying that I have an incredible bias as I answered this question. I'm an entrepreneur. The reason that firepower has grown the way it has and I started this business at 26. I didn't know that you shouldn't start an investment bank without a track record.

I was young enough, naive enough not to know that, but the reality is, dealmaking is about people, it's EQ driven. And it's about storytelling. It's not about the dollars and cents. It's about the story and the storyteller. When my kids who are nine and eight asked me what I do.

I did tell them that I'm a storyteller and I really believe that. I tell stories to the right people at the right time to create competitive tension and to create leverage. That's literally what an investment banker should do. They should create leverage.

 So I'd say first off as an entrepreneur, you can tell another one.

You could tell if someone knows how to deal make or not. I think most entrepreneurs have that innate ability. I'd say the first thing that I would do, I would be asking them to speak to former clients. I think that tells you a ton. You can't hide from what others will tell others about you.

And when they ask and when they tell you, oh, these are the three people that I've lined up to talk to you. Say I don't want to speak to them, give me two others, because of course you didn't get the top three. So I would say that's a pretty good strategy, but the other thing is, and I say this to my clients all the time.

If you can't picture having a beer with that person and having a trusting conversation, inviting them to your daughter or son's wedding, probably the wrong person. This is like the M&A process is extremely intimate. You have to know that person, you could trust them. And I also think that a big part of being a good investment banker is to not always be your best friend.

My job is not to be your best friend. You have other best friends. My job is to do what's right by you. And guess what sometimes I'm an entrepreneur. I know this you're stubborn. You think you know everything and you don't get told no very often. My job sometimes is to tell you no. I think another part of it is like, does this person have the personality where they're not going to be scared of me?

I think that's very important because you need to know the truth. And I tell my clients right away that you may not like me at all times during this process, but all I care about is delivering the outcome for you. I don't care about making you feel good or bad. I care about delivering the outcome.

[00:20:36] Jeffrey Feldberg: I love that. And let's go back. You said a lot there, a lot to unpack, but let's go back to the start of what you were saying, storytelling or a narrative that's what's giving you leverage. I would love to hear from you what is it, what aspects of the business allow you to tell the story? That's not only going to get a buyer interested but gets that buyer excited and you gain that leverage.

What would be some of the secret ingredients, the magic sauce going on in there that makes it easier for you as a storyteller?

[00:21:04] Ilan Jacobson: Sure. It's very like company-driven. Like of course every company has their, if factors like they have higher margins than the industry average. Hey, wouldn't you want to know how these generate more margin? My mentor, who is been my mentor from day one, told me one time why margins matter?

I said, yeah, because that tells you how much money you make. No, no margins matter because it's a clear indicator of how much your clients respect you. And I firmly believe that. I think that's you know, you have higher margins than industry average. It's very telling, but I really believe that what I say, storytelling, it's the art of the deal, making and understanding what drives people to do, what they do, because deal-making is always about the people.

So for us, the thing that are super important is understanding. Let's just say you're a private equity buyer or a strategic buyer, that's strategic buyers, not hard to see this person is a corporate development employee. They're not an owner. They don't think the same way as you as an owner but how do you create a champion within that organization that really wants you to win and wants that deal to happen and will drive that extra turn of EBITDA.

I think part of it is to create a meaningful relationship. And I tell my clients just so you know, I have two clients, you are my client, but the buyers also my client, because I know that the only way to drive a successful outcome is for them to trust me as well. If they think that I'm so biased on one side, I won't be able to drive the value for you.

I also think that fear plays a big role in deal-making. And I say this quite often, the defensive component of deal-making, I believe drives more value in the offensive. And what I mean by that is they're a strategic buyer's desire to buy your business is not important to them as their desire for competitors to not buy your business. So, you know, finding that champion and saying, Hey bell at Corp dev at XYZ co like you just lost the last deal to Joe at, you know, your biggest competitor. You really don't want to do that again. Let me help you prevent that from happening. I'll tell you what multiple like it's gotta be, but you got to work with me, and let's tell the story together.

So when I talk about storytelling, it's the art of I hate using this word because people construe it, incorrectly, but the art of manipulation, it's super, super important to deal-making and that's an EQ-driven activity. The reason, I don't think that the word manipulation is a bad one is because If your genuine desire is to drive a good outcome for both parties, then manipulation, we use as a tool that can help achieve that.

Now, if your desire is to do bad now, of course, manipulation is a bad word, but I think that back to your last question, an investment banker that has that art down to a science is super important.

[00:23:50] Jeffrey Feldberg: Wow. Love that. Love just how you're positioning that. So let's go back then when the buyer is also your client, and you're saying the buyer has to see that your bias isn't just towards the business owner. What does that look like? Can you give us an example of what you've done for that?

[00:24:08] Ilan Jacobson: Yeah. So I think what it looks like is like first off, I have to believe in my client. If I really believe, and we've done the due diligence, this is a great company. It's not difficult for me to tell him all the reasons why it's a great company why I think it would be hugely beneficial for them to buy the business for all these strategic reasons.

And because I'm an entrepreneur, because we have entrepreneurial DNA in our firm, understanding the strategic reasons why a deal makes sense is so much more important than a discount of cash flow. That is so irrelevant. If you're coming in. And talking about EBITDA and this kind of cash.

I'm like, I don't care. You're missing the point. You're not the right buyer because there has to be a reason outside of just the dollars and cents to drive what I would call strategic value. I don't know if that's a good enough example, but it's really being transparent and honest being an advocate for our client, which is the seller.

And telling them all the reasons why it would be a good idea and all the reasons that they could drive more profit from the deal.

[00:25:08] Jeffrey Feldberg: So you're really walking that fine line, but it is really transparency and the other T-word trust with the buyer, trust with the business owner to make things happen. That's really the currency.

[00:25:19] Ilan Jacobson: For sure. And people make the assumption that strategic buyers always know all the strategic reasons why they should buy a business. I think that's false, especially because most of the time it's a Corp dev person doing the deal and they might not see the strategic reasons, the way maybe the CEO would, or maybe, the head of operations or whoever.

Spell it out for them so that they have the story to tell internally is super important. Like you want to make this a no-brainer and you got to equip them with the story because they need to tell the story. And I think that's what people do incorrectly is they tell the story to the individual that person is A, the only decision-maker, which is never the case, and B that they're able to articulate all the strategic reasons, which has never the case.

So I think thinking like the buyer, we do a lot of role-playing. So in anticipation of what we call management meetings, I act like a buyer and I will work with that seller to work on things that say like, no, no, don't take that for granted. Really articulate that point further because they may not know that. All the things that you think are obvious may not be so obvious.

[00:26:24] Jeffrey Feldberg: It's a really in your storytelling it's making it abundantly clear, hey, I'm not gonna leave anything on the table. I'm not going to assume that you know this because maybe you don't, but let's just get it out there just to make sure that we cover all the bases.

[00:26:37] Ilan Jacobson: Making assumptions for why people do what they do and the information that they may have, or are not having deal-making is a fail flaw. I've seen it over and over again. Never assume, it is one of the most dangerous things you could do in deal-making.

[00:26:49] Jeffrey Feldberg: It's interesting. So, and on the deal-making side Ilan, so we've talked about investment bankers, obviously, you're not doing it alone. You're working with the other advisors, whether it be an M&A lawyer, Q of E specialist. You know, On and on it goes. Talk to us about the chemistry, because I absolutely agree with what you said about an investment banker and the thought experiment that we have a Deep Wealth.

Imagine you're considering someone as your investment. Do the thought experiment you're on a plane. The plane's about to take off pilot comes on the PA system, hey, we've had a problem. We're in the middle of the runway, but we can't go back to the gate. And you're now stuck on that plane for the next nine hours.

Are you crawling out of your skin after five minutes of being with this person that you're considering for your investment banker or does time fly by that it's oh, here we go? We're taking off. I never even knew that happened. So the chemistry is everything.

As a business owner, what can we do to make sure if I've hired you as an example, Ilana, as our investment banker, and we're now looking at the other advisors, how do we make sure we have a team that works?

What does that look like?

[00:27:50] Ilan Jacobson: Yeah, I think so. It depends. I would argue that there were some components that are less important from chemistry standpoint than others. Q of E is a product, in my opinion. We could work with kind of anyone who is decent enough at doing a Q of E, your tax planner is your tax planner.

Again, not super important, but the relationship you have with the lawyer is crucial. I have a lot of lawyer friends, and I hope they don't kill you when I say this, but lawyers kill more deals than anyone else.

 When I hear someone say to me I have a corporate lawyer I've worked with for 25 years and he's done M&A deals.

I'm like, no, do not. You need to be in the profession of doing deals all day, every day. A good M&A lawyer is worth their weight in gold because when you're negotiating a liability cap that M&A lawyer that's on 40 deals this year can then say, look, are you kidding me? a 75% liability cap. I've done 40 deals.

And you and I both know that the industry average right now is 10. So that credibility that comes with being in the market is super important. And also a lawyer who knows what their role is and not overstepping their boundaries because, if I have a whole plan in place of how I'm going to drive the outcome, I'm looking for, I'm thinking 25 steps in advance and the moves I'm going to make and the calls I'm going to make and the emails I'm going to send.

A lawyer can interrupt that flow. So having a lawyer that won't get their ego in a knock when they're told to do things and not to do things, I think it's important. Most of our client thank goodness ask us who we recommend. And we have a few lawyers that we work with a lot.

That's not to say we won't work with someone who we don't know, but the chemistry we have to your point like we work so well together. Like we've been on the field for 5, 6, 7 years now. And we just, we get it. Even when we're on the phone together, we know what each other are doing and we understand the dynamic and how we play off each other.

So I do think it would be smart to use a team that has worked together. The investment banking, lawyer combo. It's not always crucial. You don't need to, but I do think it can lead to a better result.

[00:29:47] Jeffrey Feldberg: Well, Like we say, Deep Wealth and it's not our saying, we took it from somewhere else, but it really applies when the team works, the dream works. And just having that chemistry, particularly with you as a lead, as the investment banker, and then the M&A lawyer, just to help provide that support and that cover, if you will makes all the difference.

[00:30:05] Ilan Jacobson: On that point Jeffrey. I don't want to lose this point. I totally agree. And I think that as a business owner as you're starting this process, I think that you need to have a kind of a kickoff meeting where you set the, like the rules. This is what I expect of you guys and this like the investment banker, like he's the quarterback like lawyer this is what you need to do. Like there's no egos here. I'm telling you who's in charge. Who's responsible for what, and this is what I expect from the team. And I think that people will respect that. It's your team, ultimately, it's your team. And you're the coach in a lot of ways, you may not know the sport that's being played the outcome you're trying to generate.

[00:30:41] Jeffrey Feldberg: And speaking of that of the team and just the opportunities, is there one of the things that we educate in the Deep Wealth community, business owners on look and Ilan, you're an entrepreneur, you get this sometimes as business owners, we're just selfish. We only think of ourselves and as business owners, we're going to an investment banker or we're thinking there'll be thrilled to take my business no matter how I show up or what I do or what I say. And we explained to business owners, that's not the case because an investment banker, in addition to trust as your currency, time is also your currency. You can only do so many deals in a year. And given the choice between one business or another business, you're going to choose the business that has that chemistry.

It has all the right things. So let me ask you this Ilan, From your perspective, if you could wave your magic wand. The perfect client for you as an investment banker, what does that look like? What has to happen? What do you need to see demonstrated for you?

[00:31:32] Ilan Jacobson: So the person is very important. This is a bi-directional relationship to your point. We say no to 90% of potential clients. If the person is an asshole. I'm not interested.

I got better things to do than have to deal with an a****** all day long. The other thing that I would say is it's someone who really respects what we do. People want to feel respected. We respect what you've built as an entrepreneur, respect what we do as investment bankers.

So sometimes people come to say like yeah, my board says, I have to hire you guys. I think you guys are full of s***. , Thanks. But no, thanks, appreciate that. Someone who's really open and saying I want your coaching. I want you to be there as an advisor. So the lack of ego is crucial, from a business.

What do we always want? A great company with great management teams with no customer concentration risk with a great supply chain. With margins that are better than the industry standard, but ultimately I will tell you.

 I would rather work for someone who I want to see win than a perfect business. That's what drives us more like I want the outcome like you have to want that person to win to get the most out of that team.

[00:32:30] Jeffrey Feldberg: So how do we get you to want me to win? What should I be demonstrating saying or doing?

[00:32:35] Ilan Jacobson: I want to know why, like, why is this important to you? What do you plan on doing afterwards? Do you plan on giving back? Do you plan on being a net positive in the world after you know we just made you a multi-multimillionaire?

Do you have causes that matter? Do you want to see your children have great lives and set them up? I think that we want to know who you are as humans. I think that's super important because I want my friend to win. And we generate meaningful relationships. Like we leave at the end of a good transaction we're friends and I still meet my clients for dinners. I get invited to weddings, that's so important. And I truly believe whether it's conscious people want good people to win and they'll go the extra mile.

[00:33:16] Jeffrey Feldberg: Ilan, you know, what's amazing. It all goes back to the storytelling, to the narrative, whether it be for a business that you're explaining to a buyer, whether it be of the business owner who's coming to you of, hey, here's why I want to have this liquidity event. Let me tell you Ilan, let me tell you the story behind this of really what's going on.

It's amazing. It never ceases to really amaze me of how important that storytelling is.

[00:33:37] Ilan Jacobson: Absolutely. Transaction it's never just transaction. You know, when people say to me like, oh, you know, this business, isn't a people's business. Every business is a people's business. There is no such thing as a business is not a people's business.

[00:33:49] Jeffrey Feldberg: And so as we begin to look ahead now, so we've talked, what's taken place from pandemic to today, and now we're looking ahead, you've made one prediction a bit earlier. Any other predictions for us that we can look forward to? What do you think?

[00:34:02] Ilan Jacobson: I'm so biased because I make money by selling companies. So fear tactics is actually a pretty smart strategy if that's what I was really trying to do, I'm 38 years old. I tell all the entrepreneurs, like 90% of the entrepreneurs I deal with. I say, I'm going to outlive you. So I'm not worried about when you're going to sell your business.

That's just being me in transparent. Hopefully unless like detrimental happens.

[00:34:22] Jeffrey Feldberg: I don't think you're direct enough. Can you just be more direct with us, please?

[00:34:26] Ilan Jacobson: Yeah. Didn't you know what, it's funny you say that because people ask me why I've been successful? And I think one of the main reasons is I'm going to tell you exactly what I think. And I think entrepreneurs really value that because they're so used to dealing with people positioning and not being authentic, or saying things because they're the employee.

People like to know that they're being told the truth. But so I try and take that bias hat off. I really believe this. I don't think that the market's going to be rosy, at some point soon, and when I say some point soon, I would be very scared of selling my business five years from now, I don't care as an investment banker with all that sell more companies that are worth less.

It doesn't matter to me ultimately, I speak to entrepreneurs this is the plight of entrepreneurs is that they're usually, half glass full and they say I'm at $10 million in EBITDA, five years I know I can double EBITDA. And I said, that's awesome, but you're now worth 10 times EBITDA because the market is insane.

And who's to say, you're not worth five times EBITDA, which is the average historically of what you should be worth. So you've done incredibly well with building your EBITDA, but you're worth not a penny more. People lose sight of how important the macro environment is when they are planning a liquidity event.

It doesn't matter if your time horizon is 10 plus years, it's irrelevant. Go run your business. Don't worry about liquidity events, but if your liquidity, mindset is in a five-year time horizon, I do think that timing the market matters. I really do unlike the housing market where you buy and sell in the same market, I don't think it really matters unless you're moving out of country or whatever.

You're not going to be buying another business in that same market, most likely. So timing matters. And so again, like interest rates going up supply of good companies going up. If you look at any of the stats, amount of companies that will be coming for sale over the next 10 years is astronomical.

You have a whole bunch of entrepreneurs with no succession plans. And I think that the amount of a liquidity it will go down. So supply, demand, interest rates, I can't see a picture where it's going to get better for our seller.

[00:36:30] Jeffrey Feldberg: Some good solid insights and a lot to think about it. And you're right, as business owners, as entrepreneurs, glass half, full out, this will just continue forever. So yeah, I'll just keep on doing what I'm doing and I'll even be worth that much more 5 years from now 10 years from now, whatever the case may be.

I think that's some solid advice there. So Ilan, let me ask you this. We're at the point in the episode where we're starting to wrap things up and we're bumping up against time, but I tell you, I could just go on for days on the topics that we're talking about. I just love your insights and the clarity that you're bringing.

But here's the question for you. I want you to think about the movie Back to the Future and in the movie, you have the magical DeLorean car that can take you to any point in time. So imagine it's tomorrow morning, you look outside, and lo and behold, the DeLorean car is there. It's curbside. The door is open.

It's waiting for you to hop on in and Ilan, you can now go back to any point in your life, Ilan as a young child or teenager, adult, whatever the case would be. What are you telling yourself in terms of life wisdom or lessons, or, hey, do this, but don't do that? What does that look and sound like for you?

[00:37:34] Ilan Jacobson: Besides buying Bitcoin in 2014?

[00:37:38] Jeffrey Feldberg: Yeah.

[00:37:39] Ilan Jacobson: I'll get a little vulnerable with you, people see me today and they may think something of me what my childhood may have looked like, but I was a extremely overweight, bullied kid. I had a really tough childhood. And there were times in my life where I did not think I'd be this version of myself. I'm really happy with where I'm at in my life and with my kids and my wife, I would probably tell my earlier self don't worry, it gets better.

They'll be working for you at some point. Don't worry.

[00:38:05] Jeffrey Feldberg: I love that.

[00:38:06] Ilan Jacobson: Yeah I don't think I'd want to influence much because I think that you as a person is an outcome of the good, the bad, and the ugly. And I think you need to go through all of that to fulfill the journey that leads to the person you are today.

So I don't know if I would want to tell myself something too drastic that could fundamentally change where I would be in my life because I'm fairly content. And of course, there are things that I want to work towards. And then of course there are things that need improvements like everyone's life, but life's the journey and I'm happy with being on the journey and I'm glad you didn't ask me, where I'd want to go in the future. Because I would tell you, I wouldn't, I want to live in the presence and it's a huge component of what drives happiness for me. And I think what people get wrong quite often is not living for the moment and being so outcome-driven that you don't realize that your whole life is a journey.

It's not the outcome, the outcomes incident time, you have to enjoy the journey along the way.

[00:38:54] Jeffrey Feldberg: Some terrific wisdom and insights there Ilan. And you're in a really good company because I'll share with you many of the guests on the Deep Wealth Sell My Business Podcast. The common theme that I tend to see is, Hey, Jeffrey, I love where I am today. I don't think I would change anything.

Just like what you said, because if I changed something to drastically. Maybe I wouldn't be here. That's so smart but also live in the present moment. This moment, right now, this is all that you got, make the most of it, enjoy it, relish it, and run with it. And I think we all can do a better job at that.

So thank you so much for sharing that.

And Ilan as we begin to wrap this up, now, if someone would like to reach you online, what's the best place.

[00:39:32] Ilan Jacobson: Yeah, look at anywhere, LinkedIn. I'm super easily accessible through LinkedIn, my website. I'm pretty sure my email address is on my website. Not hard to find, if you'd like to find me you can find me.

[00:39:43] Jeffrey Feldberg: And for listeners, we'll put this in the show notes, it'll be a simple point and click we'll make it easier for you. So Ilan, as we wrap this up now, thank you so much for taking part of your day and spending it with us on the Deep Wealth Sell My Business Podcast and as always, please stay healthy and safe.

[00:39:56] Ilan Jacobson: Thanks, Jeffrey.

[00:39:57] Sharon S.: The Deep Wealth Experience was definitely a game-changer for me.

[00:40:00] 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.

[00:40:10] Kam H.: If you don't have time for this program, you'll never have time for a successful liquidity

[00:40:15] Sharon S.: It was the best value of any business course I've ever taken. The money was very well spent.

[00:40:21] 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.

[00:40:37] 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.

[00:40:59] 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.

[00:41:10] 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.

[00:41:23] 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.

[00:41:41] 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.

[00:42:08] 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.

[00:42:27] Jeffrey Feldberg: Are you leaving millions on the table?

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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? 

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