[SPECIAL] The Untold Secrets Behind Our 9-Figure Exit (#400)

Jeffrey Feldberg: [00:00:00] Deep Wealth Nation. welcome to the 400th episode of the Deep Wealth Podcast. And to celebrate, to commemorate is my partner, my partner in crime. Hey firstly.

Steve Wells: Happy New Year. It's great to be here. It's amazing. 400 such a great accomplishment. I know your podcast has touched literally thousands of people and business people on how to prepare for an exit or how to maximize the value of your company.

So congratulations.

Jeffrey Feldberg: Thank you with that. But you're being modest there because as you're talking about that, I'm going back to episode one, actually episode zero. COVID had just come onto the scene. Everything was shut down. You and I were talking, there's gotta be something that we can do to help people and back and forth, back and forth.

And then we said, hey, why don't we do a podcast? And then the next question was, How do you do a podcast? We listen to podcasts. We've never done one before. And I know the very early episodes, we had amazing guests. We started the podcast [00:01:00] to make a difference. People were at home, they couldn't do anything, and we brought on people who'd been through not the same but similar kinds of things.

I'm going back a little bit, but remember the very early days, your first few episodes we had done?

Steve Wells: Sure. We had ideas on what we were doing and how we accomplished really a great exit. And Deep Wealth was a systematic approach to that. But over the years and having the privilege to speak to business owners, people who successfully and unsuccessfully had exits, investment bankers buyers that knowledge has even expanded and increased and the whole Deep Wealth system, I think, has really advanced and become better because of the podcast and all the discussions that you've had.

Jeffrey Feldberg: Well, thank you for that, and as you're talking about that, it really, it's a great segue for what we want to talk about today, because Deep Wealth Nation, you've heard the story of Steve, Waleuska, myself. [00:02:00] You heard how we got that 7-figure offer. We said no to that, thankfully. And then less than two years later, we got the 9-figure offer.

So we have the beginning, we have the ending part of the story, but the middle we've never really gone into. So what do you say, partner? Should we talk about the middle of what we did to not necessarily deserve that 7-figure offer? We sure didn't, but we sure didn't help ourselves either in getting a higher number.

What do you think?

Steve Wells: Sure. Let's see if we can remember. Let's try.

Jeffrey Feldberg: Yeah, it was a dark and stormy night.

Steve Wells: Yes.

Jeffrey Feldberg: Well, if you recall, like so many other business owners, it was pedal to the metal, and we were focused on the business. And then this very large company reached out, and I suspect we're not alone in what I'm going to describe next. They reached out and said, hey, really like what you're doing, Embanet.

Maybe there are some ways that we can find to work together with each other. It wasn't even an outright, we want to buy you. It was a work together. Remember that?

Steve Wells: Sure. Why not? Of [00:03:00] course. Why not expand our potential opportunities and have a discussion with this very, very, very large company. And that's what we did. And We weren't specifically looking to sell. We had it in our mind that we wanted to do an exit, but we weren't really, we didn't have it really refined in our thought process at all, did we?

Jeffrey Feldberg: No, not at all. And on the one hand, we were excited about the opportunity. Here's a really large company. They have a wide community base, a large number of customers. This would be a terrific way to grow our business. And as we're talking, looking back now, it's so easy to see, but at the time we are very naive. We were focused on the business. We were too busy, quite openly. We hadn't finished building out our entire leadership team. Looking back though, I suspect for a lot of buyers, if they're not coming out directly, hey, here's an unsolicited offer. I want to buy your company. I suspect that what happened to us [00:04:00] probably happens a lot. Embanet, love what you're doing. Let's explore how we can work together. Because what happened through that process, they got to know a lot about us. And then at one point, they said, you know what, we've spoken about this. I took this back to our board and spoke to our president. It was the business development fellow that had reached out to us.

And instead of working together, why don't we just buy you? There's so much more that we can do. As you're listening to this Deep Wealth Nation, I want you really to listen carefully of what not to do, because success, both in business and life, it's as much knowing what to do as what not to do. So, Steve, back in the day when we began going down this journey with this particular company, do you remember some of the requests that they had of us and these different reports and what they wanted from us, which we had never done before?

And I'm thinking about all these projections and not just P& L, profit and loss reports, but very specific. kinds of accounting reports. You remember that?

Steve Wells: Well, sure, and at that point, we hadn't developed what we You know, we, we know as a data room, when you're, when you're preparing [00:05:00] to put your, your company on the market. So, so we, we didn't have that. We didn't have a long term plan. We didn't have really an analysis of, what were our advantages?

When, what were those things that we could present that would be opportunities for them that we weren't able to really fulfill yet? Those, those those things that, that we just needed more time or money that would increase our valuation. So, all those things would make a big difference. But, let me pause one second because I personally have talked to many business people and owners, and I know you have too, and we've done it together on this podcast, that when they got to this point, they were very excited, and they took the offer. And even after the counsel of you and me saying, listen, you really shouldn't take this. I know it looks like a lot of money, it looks great, but, you're not ready.

You, you haven't really prepared. You're probably leaving a lot of money [00:06:00] on the table, so, don't do it. But I know cases where they did it and we'll never know for sure, but I'm pretty certain that they could have maybe doubled.

So being unprepared really is going to pay off in the negative sense if you don't watch out,

Jeffrey Feldberg: Oh, absolutely. And here's what's interesting. For those business owners who we spoke to, hey guys, I got this unsolicited offer, and we're walking them through and we're seeing where things are at and we're telling them Why don't you hold off? This is where buyers are counting on what is commonly known as deal fatigue.

Because if you recall, all the business owners that went forward and it was an unsolicited offer, they did not have a competitive process. Like us, they did not have a data room. The common thing they said, you know, guys, this is pretty good for me. Could I do better? Maybe I could. That said, I spent all this time and money and energy.

I can't imagine doing this again. [00:07:00] I'm just going to move forward with it. And besides, how much do I really need to live on? This is more than I ever dreamed of when I started the company. And that's really the challenge for us as entrepreneurs. It's as though you're speaking to someone and they say, well, I'm not really hungry, but you put some food in front of them.

Well, what happens? We tend to eat that food. And it's the same thing with the buyers. What they know that when they see these zeros, they see all these zeros on the table that they put in front of us, that more times than not, entrepreneurs, are taking it. Business owners are taking it. They're tired. They see the zeros.

They're not thinking straight. And the statistics when we turned to them, they're very interesting. We were really not the exception, we're the rule. Most business owners are leaving a minimum of 50 percent to over 100 percent of the value of the business. In the buyer's pocket. And look at us, if we said yes to that 7-figure offer, those 9-figures, we would have left in the buyer's pocket and we never really would have known.

Could we have done better? Well, maybe we could, but you [00:08:00] never really know because once is done. It's done. So, Steve, when you look back at that, and we really weren't prepared, yes, it was a wolf in sheep's clothing that showed up, they did this all the time, and there's a reason why buyers love the unsolicited offers, but let's put ourselves under the microscope for just a second.

Where did we not prepare, or where did we go wrong in this particular case? Because I know we just showed up. And in just showing up, we didn't prepare. We made many mistakes that ultimately gave a justification for the buyer to give a lower enterprise value. So what do you think was going on with that?

Steve Wells: Entrepreneurs are builders and we're building the company and we're running very quickly. And in our case, we hadn't developed a management team yet. The thought of trying to put together and prepare for a sale on top of all this fast growth seems daunting.

It seems impossible, really. We weren't ready because number one, we didn't have the people around us to run the company while we prepared to sell the company. And I think that's a very common mistake and [00:09:00] quite frankly, if we're honest, we really never did get to the level that I wish we had, and I think it did cost us, even though we did a fantastic exit if we had developed those people sooner, that was, the biggest negative that we had, even ultimately, after preparing, and you think, you can just get this stuff together and prepare to sell your company in a few months, it's going to take a minimum of a year, and I would probably say, depending on like us, and you got to build this team out, Maybe that's a two year, year and a half process that you really need to work hard at.

There's a lot to that because you're going to pick the wrong people, they're going to fail, you're going to pick pick the right people, and the potential buyer is going to see right through that, don't you think?

Jeffrey Feldberg: Oh, absolutely. And as you're talking about that here's what happened with us. So very large company approached us. They said, we want to work with you. And then very quickly that became, hey, we want to buy you. Now here's what this particular buyer did.

And I don't want to paint all buyers with this broad brushstroke [00:10:00] because they're not all like that. Although I would say more times than not, the buyers are like this. And the buyer said, right off the bat, I want you to sign an exclusive with me. And what he meant by that, and that's all he left it at.

And he sent the paperwork. He didn't really explain it any further. We went through that, and what the exclusive meant was, for a period of time, and for him it was, I want to say, eight or nine months, we were not allowed to speak to any other potential buyer. That this buyer was the only one that was there, and even if we signed it today, and another company approached us tomorrow, and they wanted to give us a trillion dollars, legally, we could not accept it, because we bound ourselves to the buyer.

The other interesting thing that the buyer did, The buyer was very explicit and said, you're more than welcome to get an investment banker, but I got to tell you, if you do that, my legal fees are going to go up, the time is going to increase. I'm not going to be able to pay top dollar. So if you want top dollar from me, you can have a lawyer.

That's fine. You can have your accountants. That's fine. But any other M&A advisors, I [00:11:00] just. Can't guarantee anything. In fact, I may take this off the table. So you have to decide if you want to move forward as you are, as is, I'm happy to do that. But if you bring on any of these M&A advisors, the deal is potentially off.

So I'm gonna put a pause on it right there. So let's discuss that in terms of what that meant to us and why we ended up moving forward anyways, because it became a bit of an experiment with us. But let's talk about this particular tactic

Steve Wells: Yeah, well, think about it. It seems very obvious really now, but they don't want that outside competition. They don't, they don't want the expertise of an investment banker. They see this as an opportunity to take, advantage of this, maybe that's too strong of a word, it's a way to get the best price if you're trying to buy something, and you and I have talked to people that are buyers, even on this podcast, and There you go.

And, that's what they're looking for. They're looking for deals, for good companies, but their objective is to try to pay the least amount of money possible, of course, so, we didn't even [00:12:00] realize at that point how powerful and how effective and what the advice of our investment banker would do for us.

The doors they would open up and the opportunity to create this auction. All that was really unknown to us at the moment. Now, we had some great investment bankers. They did a fabulous job for us. I'm kind of jumping ahead, but not only were we going to pay them money, we actually paid them more money than they initially wanted because we created a tiering system. So just think about that. We're trying to create a competitive situation where we are at the driver's seat. We're the ones who are trying to raise the price. So of course the buyers, they don't want this investment banker in the way. And they sure don't want us to incentivize the investment banker to get a better price.

They're trying to find the least amount possible to buy us. And we've said it before, many investment bankers, they work with both the client, meaning us, the buyer and the seller. And so where is their [00:13:00] loyalty lie? So it's important that our investment bankers loyalty was with us.

It could have been the other way, and we had very, very stand up people that were working with us, but we wanted to put that advantage in our court. We didn't know it at the time. We had a gut feel that, no, that just didn't feel right, but I'm so glad that, we went with some good people.

Jeffrey Feldberg: and what we're not mentioning that needs to be mentioned. We really on we said okay, something's up with this buyer and we don't like the terms that they're putting up. They're probably gonna lowball us, but you know what? Why don't we go through this process? We're going to educate ourselves. Yes, it's going to take time.

Yes, it's certainly gonna take money. Let's go through it now so that when we are ready to sell the business, It'll be lessons learned and we'll have some experience that we didn't have before because as I often say, it's a rhetorical question, there is no answer to it or at least not a good answer. How can you win at a game you've never played before?

How can you win at a game you don't even know the rules and the game that we're talking about it's your financial [00:14:00] freedom. It's your legacy when it comes time to sell your business. So here's a perfect recipe of what not to do. So in other words, if you want to get the lowest possible enterprise value for your company, here's what you should do.

You show up unprepared. You don't know what your X-Factors and your Rembrandts are. You don't create any narratives of what makes your company unique and special. You do not have your advisor team set up. You haven't done any due diligence on yourself ahead of time. So those skeletons in the closet. Well, guess what?

The potential buyer is going to find your skeletons in the closet. You don't even know about them. You don't have all the financial reports. And even going into this experiment at the time, Steve, I remember the time with the accountants, the dollars that we spent with the accountants. I remember we're running the business, we have these calls from the accountants, we have these reports, and now the buyers asking all these questions, they would send 30 questions at a time.

We thought, okay, good. Finally done all these 30 questions. We gave them the answers. We're now good. And guess what? We get another 30 questions, another 40 [00:15:00] questions. And it was just relentless as they started to come through. And they even put this, I'm going to call him a financial genius from their side on the scene.

This guy knew the numbers back and forth. One of the smartest people at that point in time that we ever spoken with, with the questions that they were asking and what they're trying to glean from us. What do you recall from that period?

Steve Wells: Well, yeah, and, what, what it pointed, even though we, we kind of knew we weren't going to go through with it, I'm so glad we did, because it's, it's like doing a dry run. You're gonna, you're gonna open, have an opening act on play, but you, you've got to see, what, what's working, what's not working.

And so we found a lot of our faults through that process. One, just financially, we had some people that helped us. We saw we needed a lot more help. We needed some bigger time players than some of the advisors, the lawyers and accountants that we had been using. This is big league and, I didn't realize how much bigger they were, so that was clear that we didn't have that.

And then going through the process, we didn't know some of our [00:16:00] downsides and they were able to point those out to us, which we were able to fix, or we were able . to have a narrative that explained them. And we, we didn't know that at the time. And as you mentioned, we did not have a positive forward looking narrative to explain where we were going, what the potential was.

And that's the biggest thing. People want to see the future, obviously, and they want to buy you on your past, but you're going to get more value on your future. And we had not prepared to show them how big this future could be with them at the helm. And, that was one of the huge eye opening things to me.

Jeffrey Feldberg: And what was really big for any buyer, any investor, To your point, Steve, they knew what we did yesterday, last year, even today. And that's all fine and good, but what they really wanted to know, what are you going to do not just next year, but three years from now, five years from now? And for them, that was really important because they want their profit.

They want their [00:17:00] return on investment. And in running the business, and let's be honest, you and I really aren't the financial type. So those kind of projections were really outside of us. We weren't prepared for that. Hadn't really done that exercise. The business was growing really in a terrific way.

We didn't have to worry too much about that for these kinds of projections, but you need that when you're going to be going out and do that. And I want to talk now about some of the, I'll call them buyer tactics of what they had done. I'll share a few, and then we can reminisce on a few. And Deep Wealth Nation, we're sharing this, it's not about us, we're using us as an example so that you know what to look out for.

And I still remember to this day, any time that we would send an email, or we would put a phone call in and we couldn't get them, we got an immediate response back. We are talking, as soon as we hung up, it was a phone call right back to us, or as soon as we sent the send on the email, we had another email coming back to us, and I would imagine they may have had some kind of alert set up. Hey, if an email comes from anyone at Embanet, notify me about this, [00:18:00] text me about this so I can get back in touch with them right away. And then the other thing, when they invited us to their headquarters and we got out there, oh my goodness, we felt like we were rock stars or we were these famous Hollywood actors that were showing up.

Remember that, Steve?

Steve Wells: Yeah, they, they really wanted to make us feel important. Of course, they wanted to stroke your ego. They, they want to flash the gold in front of you to, to, to let you see what, what it's going to be like to go to the other side where they are. So, yeah, all those things are tempting. And And the fact that they are so much bigger and they are so much quicker and they have so much more information and resources.

It made me at least me feel like, wow, how can we do this? How are we going to compete in this? Cause we don't really have this. We don't have the acumen ourselves or the time we need some experts to help us put together these financial packages and, and all the other things we had to do.

And like, how are we going to make that happen? Again, we hadn't hired anybody at that [00:19:00] point, but it did seem like, well, maybe we should just take this, is this a bird in the hand better than two in the bush? Is this the last time we're going to be able to see this? Maybe we should just take it. That was a temptation.

That was what they were trying to get us to think.

Jeffrey Feldberg: And then I will never forget when we show up, they take us to their boardroom. It was massive. I think my house could have fit into the boardroom. That's how big it was. And it was mahogany wood. And we're meeting all the top executives, the CEO, the president. And then later on that night at dinner, oh my goodness, when they took us out to dinner, the wine was flowing.

It was a fabulous restaurant. The price tags on the menu items are really out there, but they were really whining and dining. But looking back now, it wasn't for fun. It was to get, really, an intel from us. What information can we get from Steve, from Waleuska, from Jeffrey about the business? What aren't they telling us that isn't showing up in all these financial statements of what was there?

[00:20:00] And they use the entertainment, the meal, the beverages, the wine, all those other things to loosen us up and to get us talking. Thoughts about that, Steve?

Steve Wells: Yeah. And, we're out there by ourselves. Pretty vulnerable and we're, I think we're smart enough not to share, but some things you've got to share. So they're going to get inside your, your business and, and you wonder, this doesn't happen or, how can they use this against us?

Is there another company they're going to buy or start something themselves? So there again, By having that interface, the investment banker, your representative, is going to field those questions and insulate you from that and they're going to be shrewder about it they can get back to those people with information if they don't have it.

But again, I'm repeating myself, but by the time we got to the real event, not at this point, we were so prepared because we had gone through and had all the information anybody would ever have wanted and was all put together. But, we've, again, we've interviewed people and [00:21:00] people who buy companies and they're looking for these, value investments

Jeffrey Feldberg: Absolutely. And on this podcast, we've heard from, if I can put them into categories, two different kinds of buyers. So one buyer is looking for everything to be done right. They don't mind paying a premium for it because they're all about, I don't want a second full time job. I'm gonna buy this company, it's gonna run without the founder or the business owner, the entrepreneur, and it's gonna do some wonderful things for me.

There's other buyers, they've come on the show, and it's all there in the earlier episodes, listen to them, where they're saying, I actually want to find many mistakes in the company because every mistake I find it lowers the price that I'm going to pay. And on the back end, I have the team, I have the expertise, I have the wherewithal to work through those mistakes.

I want to buy it on a discount. And that's really what they're looking for. So what's interesting, Steve, why don't we just do this in real time? Let's look at when we did our 9-figure deal and let's look at when we had the 7-figure offer and let's compare and contrast the differences. And actually, I'm just going to go through the Deep Wealth 9-step Roadmap because [00:22:00] that's what came out of this crazy system that we developed.

So after we said no to this buyer, we created the system that now is known as the 90 Day Deep Wealth Mastery Program, the Deep Wealth 9-step Roadmap. And that's really the tool, the system that helped us welcome a 9-figure exit deal. And remember, Embanet for the 9-figure deal, okay, some time had passed, what did we not do?

Well, we didn't buy companies, our growth rate didn't change really much year over year, and so it was the same company. What was the difference from 7-figure to 9-figures? 

The system that we created. So let's start with Step 1 Big Picture, inflection points. And what's interesting for the inflection point, we had picked up on an inflection point and that was, it was no longer enough to keep the seats filled with amazing technical support and servers that are always up.

It was now becoming, how do I fill the seats? 

So we picked up on that inflection point. See, if you really led the charge on the marketing side to fill the seats with that, but that [00:23:00] was, at the time, very small, not a lot of people were talking about that and that's what made us so powerful in being able to identify that and as the guy out there leading the charge on filling the seats for early days, before it became more popular like it is today, anything you want to share on that?

Steve Wells: Well, again, marketing and, acquisition of a customer changes very quickly over time. And so lot of the methods that we use wouldn't be used today, but that doesn't matter. The thing that never changes is how to acquire that customer at the lowest cost point, We were at least 50% less than any other company doing the same thing.. 

So we had a system and this doesn't matter how you do it, what's your specific marketing channels are, but if you can project and predict what you're going to be doing, that again, becomes very valuable. So we didn't have it in our first meetings. We've showed the roadmap of how this could happen, how we could [00:24:00] project, how we knew what our marketing dollars were going to be spent on and how we would get x times more in our case tuition revenue from those marketing dollars. 

So what does that create? 

And it creates a runway for them to look out and, and that creates value. Anything that has a recurring revenue that you can be predicted on is going to create more value. So that marketing inflection point was something that put us there in a more positive way that we didn't initially have.

Jeffrey Feldberg: And to your point, Steve, what was interesting, when we met for the 7-figure offer with that buyer, we were already doing this. This wasn't new by the time we showed up for the 9-figure. We were doing a lot of it intuitively, though. We didn't have the reports. We couldn't justify it. We couldn't talk about it.

I know in the 9-figure exit deal, wow, in particular, Steve, you got hammered from the buyer. Well, how can you be doing this? No one else is even close to this. We don't believe you. Show it to me. But we were prepared, and we had the reports, and we had the data, we had the facts, all that was there, and we not only [00:25:00] showed it to them, we not only told it to them, we proved it to them.

We weren't in that position for the initial offer. And then, let's go to Step 2 X-Factors. So 7-figure offer, that buyer said, okay, tell us what makes you special. And we said something along the lines, we have terrific service. People really like us. Our customers think we're the world over. Well, that sounds like every other company that was out there.

We weren't prepared for that. And the buyer really said as much, okay, well, we hear that from a lot of companies. If we're going to buy a company, we may look at a hundred companies, a thousand companies. They all say the same thing. Can you tell us more? And we really couldn't. Now, when you compare that to the 9-figure exit deal for Step 2 X-Factors, we knew all of our X-Factors.

We were very specific from the kinds of contracts that we had, and we had those contracts when we spoke with the original buyer. We just didn't know how to position them, or what to say, or that they're even valuable through to the kinds of projections, through the kinds of reports, and we even had those very valuable Rembrandts in the attic, but they weren't in the attic for us. They were [00:26:00] out for public display, and we were able to talk about that. 

And then Step 3 Future Buyer. Here, we talked about creating these powerful narratives, how to think and act like a buyer. And Steve, would you say I'm on base or off base? 

For the original buyer that came on the scene for the 7-figure offer, were we talking like a buyer?

Were we thinking like a buyer? 

Or were we selfishly thinking as business owners and entrepreneurs?

Steve Wells: Yeah, I think we were thinking of ourselves, and I think by the time we got to our final offer, we were thinking about how to position ourselves for them. 

What do they want? 

Some of the things that we want are fine, but what are they looking for? And it goes back to, again, identifying your potential buyer.

Are they a financial buyer? 

Are they a strategic buyer? 

So do they want people? 

Do they not want people? 

Everybody wants reoccurring revenue, I think, so some of these things are common , to whatever the buyer is, but you're right. We didn't know how to position ourselves with that particular buyer.

We knew what they were and what kind of business they're, they were going to want to have. And we, we didn't [00:27:00] know some of the advantages that we offered, because we hadn't really analyzed our competition. You were talking about everyone's got customers and we kept our customer much, much longer.

And they completed our programs at the 90 percent plus range where other people were at the 50%. So whatever your product is, retaining customer. 

And so how do you show how you did that? 

We didn't know how to show that in the beginning. By the end, we showed the model, how that happened.

And then we showed the history of how we could acquire the customer, of course, but how we kept the customer. And that makes you a very valuable company.

Jeffrey Feldberg: Absolutely. And at the same time, we had created all kinds of different narratives as we were going through a competitive process, which by the way, we never had a competitive process as we mentioned earlier, when the buyer with the 7-figure offer came on the scene. It was exclusive. It was that buyer or nobody else.

For the 9-figure exit deal, we had a competitive process. And I'm going to be off here, Steve. I don't remember the exact number, but I want to say we [00:28:00] had between 150 to 200 interested parties that said, hey, yeah, I love what Embanet is doing, I want to be a part of this, I'm interested in buying this company, and that was done through a letter of intent.

So think about this, Deep Wealth Nation, and I've used this example many times on the podcast before. You're looking to buy a house, Steve, I'm going to buy your house. Now I'm walking through your open house, Steve, and I'm the only one there, and I say, Steve, what's your asking price? And you tell me what it is.

I know you've been on the market for a while, I know I'm the only one that's there, there's no other buyers. Steve, am I going to give you what you're asking or am I likely to give you a lower number and conditions that are more favorable to me?

Steve Wells: Of course not. And what is amazing, and those 150 to 200 got boiled down to 80, and then somewhere around that 50 to 80 range, they're spending a lot, a lot of money. Hundreds and hundreds of thousands of dollars to do due diligence, and then finally it gets down to a few buyers.

But it's remarkable to me that we have interviewed people who are selling their business and they go, I don't want to do an auction. I could [00:29:00] never understand that. They didn't want to go through the process. I'm not even sure why they thought that. If you can do an auction, why not?

You're going to get a better price, of course.

Jeffrey Feldberg: Not only do you get a better price, it also keeps the buyers on their best behavior. So Steve, let me flip this one by you now. It's your open house and I'm walking around and I see there's 10 other likely buyers and I'm hearing them talk. Oh, wow. Look at Steve's house. It's so amazing. I can see myself in it.

And now, Steve, I'm coming to you and I'm going to come with a lowball offer, what are you telling me?

Steve Wells: Well, listen, I've got 10 people behind you. Let me go see what they're going to offer. And, it's not necessarily just a number. It could be terms. These things get pretty complicated. Like, oh yeah, I'll pay you, I'll pay you. All this money, but, you're gonna get it over time, and maybe if this happens, if that happens, oh, and by the way, you have no control of that, I don't think I want that deal.

So, these numbers come with conditions, and so we want not only the good number, we want the best condition, and that takes multiple offers to sort [00:30:00] that out and go back and go, listen, that number is fine, but we got someone who's gonna give to us tomorrow, and not ten years from now.

Jeffrey Feldberg: And there's a difference between bluffing and when you're speaking from the facts. And so, as a homeowner, Steve, if there's no other buyers and I come to you and I give you this offer, well, you can try and bluff, Jeffrey, you've got to do better, I have other offers. How confident, though, are you, especially when you get an offer in hand, you haven't had one for a while now.

Versus, let's look to you and I, when we're in the liquidity event, and we had all these interested parties, and it actually happened. Some buyers approached us and said, well, why don't you want to work with us? And we came back and said, you seem like a terrific company, you seem like terrific people, your numbers aren't competitive.

If you can get your numbers up there, we would love to speak with you. And we were speaking from a position of strength. We had many, many buyers. How was your mindset for that?

Steve Wells: Yeah, and think about you're using the house selling analogy, okay, we get a contract, they're contingent upon who knows what, selling their house, getting a raise, who knows what it could [00:31:00] be, and then they're out, they exercise their contingency and now you're out, We wouldn't want to do that if we're selling a company on these contingencies and everything else.

The more people we have interested in our company, the less contingencies, if any contingencies, are they allowed to put into those contracts.

Jeffrey Feldberg: And so the confidence that you have, the peace of mind that you have, the assurance, there's no guarantees, you know though, hey, I don't have to go to that level because I have all these other companies that want to be at that level. So that's just Step 3 Future Buyer. We had the competitive process, we had all the narratives down, we had our projections in place, we had these very high level financial people now with us, they're full time, they're putting all these projections together, going through all of that.

And then we go to Step 4 Due Diligence. Before we go into the liquidity event, we had done an internal audit on ourselves. We found the skeletons in the closet. We knew what they were. We weren't going to be surprised by the buyers that we couldn't get all the skeletons out of the closet, but at least we knew about them that we [00:32:00] could be very open and honest with the buyers saying, hey, we know this is a skeleton.

Here's what we're doing to remediate this. Here are the timelines for that. And Steve, do you remember the trust that we created with the buyers when they saw us being vulnerable, admitting what potential issues were, but also walking them through the roadmap?

Steve Wells: Sure, it gave us a lot of credibility when you think about it. We weren't just waiting for them to find it. We knew they were going to eventually find it. So we were forthright and said, listen, here's a problem we have, but here's our solution for it. So, that gave us a lot of credibility and it Kind of diffused their negative response right away.

This devaluation because of this potential negative is either mitigated or at least reduced.

Jeffrey Feldberg: And so, we had all of that, and yes, it took time. Yes, it took money. We went in, though, with confidence. And by the way, what's often overlooked, I'm getting a little bit ahead of myself, I'm going to Step 6 here, we'll go back there in a moment. Let me just say, I'll put a reference in here and we'll come back to it, that our investment bankers, [00:33:00] wow, did they ever do their own diligence on us to make sure that we were the real deal.

And as they found things, we said, yeah, we already know about that and here's what's going on, and it created even more trust. So, from Step 4 Due Diligence, unlike the 7-figure offer where the buyer was telling us what our skeletons were, the buyer was telling us where the potential issues or shortcomings of the business was, we took that off the table.

And then Step 5 Winning Mindset, there's two parts to the winning mindset, actually three parts. Winning mindset of the business owner, winning mindset of the team that's working with the business owner, and then the winning mindset of the M&A advisors, the future buyer, everyone involved in the liquidity event.

And for the 7-figure offer, Steve, certainly as the business owners, yourself, Waleuska, myself. We had that winning mindset. I'm not so sure though, our team quite had the same vision that we did so that wasn't there, but we also didn't have that winning mindset for the buyer.

We were selfish. It was all about us, not what we could do for the buyer. What could the buyer [00:34:00] do for us? Thoughts about that? 

Steve Wells: Yeah, exactly. And, we hadn't talked to the team about this and as we went forward, we told the team they knew what was going to happen. They knew they were protected. Protected in different ways. So obviously our team wasn't prepared for that. We mentioned to it before, we weren't really looking at it from the buyer's point of view.

And at the end we were,

Jeffrey Feldberg: Absolutely. And. In the 7-figure offer, we weren't coming forward to the buyer like we were in the 9-figure offer. Hey, we can't do this. This is outside of our capabilities. We either don't have the capital, we don't have the experience, the team. But here's what you could do with the business, because we know this business, and we know you, and we know the two of them together.

It's one plus one equals ten, not two, not three, not even five. And we came up with all these scenarios for the potential buyers when we did the 9-figure exit deal. We never had that opportunity. In the 7-figure because we just didn't have that mindset. We didn't have that mindset of service, that mindset of how am I going to help this buyer not only get what they want, but get what they want and create a win-win-win.

And now I'm going [00:35:00] to Step 6 Advisory Team. For the 7-figure offer, we had no advisory team, and it showed, and in the buyer's mind, it was amateur night. Okay, here's Steve, here's Waleuska, here's Jeffrey, and they said to themselves, they've got no representation because I've crafted it that way, I'm going to treat it as such, versus In the 9-figure deal, when we went to the competitive marketplace, well, Steve, I'm going to turn to you, what do you think the buyers or the potential buyers are saying when they saw our team?

Steve Wells: Well, listen, , you out there listening may not have this, but we had. Harvard graduate MBAs, Wharton graduates, Stanford MBAs, these guys working for the top, top investment banking accounting companies, young women and men, the brightest people you've ever seen, and they're working 24 hours a day, it seemed like.

So, these mass of people coming at us, we had the same thing. We had these bright, young minds on our [00:36:00] side it would have been comical by ourself. It would be like, elementary school basketball team going against the NBA, now we had our pros up there, we had our all stars, and, without that, it would have been impossible for us to provide any competition.

Jeffrey Feldberg: And Deep Wealth Nation, here's what you need to know. When you're showing up with your regular business lawyer, you don't have an investment banker, you don't have the M&A advisors. To the buyer or the future investor of your company. They're not going to tell you this. In the back of their minds, they're probably clapping their hands and they're giving themselves a pat on the back saying, okay, I got this.

Steve, to your point, I'm dealing with an elementary school. This is not a fellow NBA team here. I'm going to walk all over these people. Versus you're showing up with a reputable investment bank. Their name speaks for themselves, their deal flow, their experience. It's vast. It's deep. It's way out there. It sends a very different message.

It sends a game on, okay, I better be on my best behavior. I can't pull any funny stuff here because I won't be welcomed as part of the [00:37:00] process. And from there. We go to Step 7 Timing And Communications. Now, unfortunately, we failed in this step, and that's why it's in the Deep Wealth 9-step Roadmap.

We reverse engineered some of our failures. This was one of the big ones. We didn't have the right way and the right timing of what to say, when do you say it, to whom do you say it to, and we made some bad mistakes of the wrong timing.

What would you say to that, Steve?

Steve Wells: Well, now we know and so that's why we try to help people out there to let them, share our mistakes. We made mistakes with some employees. We made some mistakes with our customers. We didn't really communicate to them properly afterwards. Some of it in our defense is we didn't know how fast we would be kicked out, the buyer had their own team they didn't need us. They didn't think we had any value. And we were fine with that. We were ready to go, but we could have helped prepare ourselves and some of our customers better.

Jeffrey Feldberg: I'm going to use the T word, the trust word, for some of our clients that were there from the beginning, we broke their trust when we didn't manage the process [00:38:00] properly, when they didn't hear from us that there was a deal and the company was sold, and also heading into it, we could have done a much better job with our team.

With. the team at the company of preparing them for what was going to be happening and what that looked like with the right timing. And this is where a lot of business owners, they get it wrong. They either speak too soon or they speak too late. We spoke too late and there's lots of lessons learned from that. And so there is some really good takeaways on that part. 

And then Step 8 Skeletons And Rembrandts. There's no comparison between the 9-figure exit deal and the 7-figure deal. Step 8 wasn't even existent. We just showed up. We let the buyer point out our skeletons. We let the buyer tell us some of our Rembrandts, but they kept most of them to themselves because they didn't want to pay a higher price.

Versus in the 9-figure exit deal, we were sharing with the buyers, both our skeletons and our Rembrandts. And Steve, you and I discovered very early on that for most business owners, it's very easy, even for the investment banker that you hire, to look to pigeonhole the company [00:39:00] into a comparable, Oh, you're just like this company because investment bankers, as good as they are, they want to get the deal done.

They want to move on. Their currency is time. They can only do so many deals in a year. And if they could make a business owner or another 50 million, a hundred million or 5 million, 10 million, whatever it's going to be versus getting a deal on the table done now. They'll walk away from a slightly higher commission because there's more risk to it.

And so when it came to Step 8 Skeletons And Rembrandts, particularly for the investment bankers, remember the many meetings we had of why we're not like anyone else, why we had to be in our own category, why there's no multiple that they can put on us and the marketplace is going to determine that?

Steve Wells: Yeah. And, it took us some convincing. When they finally believed what we're doing and saw the vision, and they could discriminate between who we were and what all the other companies were doing, and we were very different, they got it, and that helped our multiple significantly, but we had to sell them on that.

As smart as they are, everybody does this. They [00:40:00] look at you and they compare you to another company and, they see a number and it's just a number. When we could go deep, deep, deep and show, we've, we already spoken. I don't want to repeat some of the things that were unique about us, but those things could be monetized and when they caught that vision, they were then our advocates and they could help sell that for us.

Jeffrey Feldberg: And at the same time, every investment banker, for most entrepreneurs out there, including ourselves, we are a one time deal. No investment banker who's credible, who's respected out there, is going to put his or her credibility on the line for you. When they knew, beyond any shadow of a doubt, that Embanet, in fact, was its own category, that there's nobody out there doing what we were doing the way that we were doing it and how unique we were.

It gave them that confidence that they can look a future buyer in the eye and say, hey, this is really where it's at. You're either with us or you're not. Let us know, because if it's not you, we have many others that are interested, and we've already gone through this, and we've vetted this. [00:41:00] This is the real deal.

That makes all the difference. And then we round it out to Step 9. It's the execution, what we call Launch Plans, heading into that 9-figure exit deal. For us, Steve, if you remember, this became not just a to do list. This became ritualized. This became part of our culture. So, whether we had the liquidity event then or at another time, we operated differently as a company.

This forever changed our trajectory because of the system that we created.

Steve Wells: Yeah, and you've said it, and I've said it many, many times, you can't exactly time when you're going to exit. So you've got to be ready, you might have a vague idea, but you've got to get everything in ready, because you don't know, maybe the economy turns down, you've got to wait, maybe it heats up, and now's the time.

 You've got to take advantage of those opportunities. And if you don't exit, all the things that we've talked about are going to make you a more profitable and better company anyway. So why not get it going? 

And, we had to take some of our entrepreneurial sales [00:42:00] hats off and become really a little more diligent as an operator.

We're getting large enough then, and as we mentioned, we got our team going. so, we had the time to think about a little bit bigger vision, a little bit bigger picture of what the company could be and do.

Jeffrey Feldberg: And it made all the difference for us. And here's the thing, when we were going through the 7-figure offer, through that process, Conventional wisdom, which usually isn't so wise, and it certainly wasn't in our case, it was, okay, if you're not going to sell your company, there's really nothing to do differently, so keep on doing what you're doing, and if you're going to sell your company, then sell your company, and that couldn't be further from the truth.

We busted that myth, and so many other countless entrepreneurs and business owners who have gone through the Deep Wealth Mastery Program, What they love about it is, okay, I'm going to sell my company in two years or 22 years. It doesn't make a difference because whenever it is, I'm going to show up with a more valuable company.

I'm not going to fall into that myth, do nothing, keep on doing what I'm doing with all those skeletons, with all those issues that are there. I'm going to make my company better. I'm going to show up for a bigger, more [00:43:00] profitable, better business. I'm going to sell my company. I'm going to lose the golden handcuffs, I'm going to unshackle myself, I'm going to enjoy my time, I'm going to go back to why I started the company in the first place, and get that lifestyle that I've always wanted, so many things going on there, so looking back, I would say, Steve, and you can say Jeffrey, on base or off base, when we began to implement the system, and we implemented it as we began to figure things out, we didn't have the benefit of having the system all at once and putting it out there, so it was in real time, the company changed.

It was as though we took on, I'm going to compare it to a new product or new service, and we began changing the company around that to make the difference for us. And when I look at the 9-figure exit deal versus the 7-figure offer, two different buyers, it was the same company, Embanet, but it was a different company.

Not in our growth, not in our services, here's the crazy part, it was all in our preparation. And the irony is, how many business owners have we spoken to on this podcast, outside this podcast, they don't want to put the time in, [00:44:00] they don't want to prepare, yet they've drunk their own Kool Aid, fooling themselves into believing, I don't need to prepare, but I'm still going to get the best deal.

Steve Wells: Right. And, we didn't know it at the time. Because of our disciplined approach, we closed and it was a great thing. Had we delayed, not a fault of our own, not a fault of our preparation, but I think the deal would probably not have gone through and we would have had to wait many years just because the economy, just weeks later take a nose dive. It didn't hurt our business at all. The business did fine, it hurt those people who are willing to put money into anything. So, being prepared was just crucial for us and we didn't really even know it.

Jeffrey Feldberg: So, Deep Wealth Nation, as we begin to wrap this up, here are some key takeaways for you. For starters, more times than not, an unsolicited offer from a buyer is likely the worst offer you're going to get for all the reasons that we discussed because it's on the buyer's terms, you're not prepared, and it's in the buyer's court.

They do this all day, every [00:45:00] day. This is their specialty. That's number one. Even if you're going to bring on an investment banker. Showing up to an investment banker, okay, take me to the world, that's still not enough. In fact, the investment banker was one of the last people that we brought on because we were going through this entire system.

And that's really the third takeaway, the most important takeaway. It's your preparation. That preparation, in Embanet's case, that was the difference, not a difference, the difference between a 7-figure offer and a 9-figure offer. Same company, the only difference was the preparation, the system that we created.

So three big takeaways, Steve. Before we go into wrap up mode, anything you want to add to that?

Steve Wells: No, I think you hit the nail on the head. I mean, Just to make it simple, that preparation is so important. And, again, we've said it before. Not everyone has ever listened. Don't take that first offer. . I know you can do better. So, listen to what we've said and hopefully this has been helpful to other people.

Jeffrey Feldberg: Hey Steve, when we go into wrap up mode, after all, when this episode [00:46:00] drops, it's the New Year. This is the first episode of the New Year. It's also the 400th episode. Usually at the end of the podcast, we do the back to the future question where we're going back in time to tell our younger selves some advice.

For everyone who's listening though, as we have a brand new chapter, a clean slate, the start of a New Year, or whenever they may be listening to this, when you look back on our exit journey, is there one or two key takeaways that you'd have them think about to really rev them up? Charge them up for the New Year, a fresh start, a new beginning, and no pressure on you, Steve, as I'm asking this.

Out of the blue, we didn't prepare for this. I just thought I'd throw this out there.

Steve Wells: Well, we've gone through it and of course, we're nail biting and I'm not going to go through some of the examples that were nail biting. Looking back, we made it and we got through it. I would say, trust the process. We didn't do this, but, keep your loved ones around you.

You don't want to gain a company and lose a family. And , we didn't do that. , but I know a lot of people who have, and I just [00:47:00] think looking forward, I'm very hopeful about 2025. I think the, the whole business outlook and people willing to buy companies right now seems very positive.

So if this is something you're working on, preparing, I think you got a great time and a great opportunity. So I, think we live in a very fortunate time in a, great country to make your dreams come true.

Jeffrey Feldberg: Amen to that. Nothing to add to that other than Deep Wealth Nation, as we wrap this up, as always, may you continue to thrive and prosper while you remain healthy and protected. Thank you so much for being part of the Deep Wealth Podcast, and as always, God bless.