Exit Planning with Patrick Ungashick

Reading Time: 28 Minutes

Have you recently asked yourself the questions you should be asking to prepare for a successful exit?

Do you know the steps for your business exit strategy? It’s never too early to plan for a good exit. Planning ahead can make the difference between an average selling price, no selling price, or a massively successful transition.

After the Interview

About Patrick Ungashick

Patrick is an exit-planning advisor at NAVIX Consultants. For more than 25 years, he’s been helping business owners plan for and create successful exits. He’s consulted for businesses ranging from several million in revenue to nearly half a billion. Patrick is the author of the books Dance in the End Zone and A Tale of Two Owners.

Read the Transcript

This transcript was auto-generated from the original video recording using Otter Voice Meeting Notes. While the transcript has not been human edited, we hope it will still help you to quickly find or reference useful information from the interview.


Deliberate Leaders welcome. I am your host, Allison Dunn, Executive Business Coach and founder of the Deliberate Leaders Podcast where we help leaders build strong, thriving businesses. Today in each episode, we work to bring you inspiring interviews to help you on your leadership journey. And today is no exception. I have Patrick, I forgot to ask you how to say it correctly. So I’m going to take a stab at it and gajic.


Very close, okay, and you’re courageous because most people won’t even touch it. It’s pronounced UNGA. Schick.


So, Patrick, I’m gonna check and thank you for correcting me and allowing.


That’s all right, roll with it. Patrick is an exit exit planning advisor with Nadex Consultants. And for more than 25 years he’s been helping business owners plan for and create successful exits. He’s consulted for businesses ranging from several, several million dollars in revenue to nearly a half a billion. Gosh, that’s a big amount. Patrick is also the author of Dance In the End Zone and a Tale of Two oOners. Yes.


Patrick, thank you so much for joining us today.


Oh, thank you, Allison. It’s my pleasure to be with you today.


So before we dive in deep, I always like to ask all of my guests to share their number one leadership tip with our listeners.


Number one leadership tip be intentional. I’m familiar with your materials and I think that aligns with much of what you and the coaches as part of your program teach. A lot of very successful business leaders found their companies and have a great run, usually reacting to things reacting to the market, reacting to customer needs, reacting to opportunities that Doesn’t mean that they can’t be incredibly successful. But it’s still a theme of reacting, and up and being opportunistic. And at some point, and we’re going to, we’re going to talk about exit. But at some point, you have to define your desired outcomes. And you’ve got to make some choices to get there, sometimes some harder choices. And that can be a struggle for a lot of business leaders who have otherwise been very successful. So be intentional about that.


Thank you very much for sharing. So tell me just a high level before I kind of drill down into some of my questions. What is it that you do at your company?


Sure. A typical engagement for us as we start working with the owner or ownership team, because there’s very often multiple owners of small to medium sized companies, 5 million to 50 million would be the most of the companies we work with, from a revenue size standpoint. And we start working with them three to five years Allison before they think they want to exit. We help them to find their goals. There’s usually goals for the company and goals for the individuals involved. So we help them get absolutely clear around their goals and then work with them to design the plan that’s going to make sure they have the best chance of achieving those goals because if a company is what you’ve spent your life building and most the time you have a lot of goodwill tied up in it, a lot of financial equity tied up in it and a lot of people that that company touches last thing any successful business owner wants to see is an exit that that falls short. So that’s we spend those last three to five years making sure they reach those goals.


So I’m always keeping the end in mind is what I do working with a lot of my clients and when we get to the point where we start to talk about exit strategies, and you have very four distinct exit strategies so for Can you just kind of highlight better ways you can exit?


Okay, that’s the way we see the world there are four and only four Allison ways to exit from a company very quickly. When you have ownership in a company, whether you own some or all of it, that ownership, one of four things is going to happen to it, you’re either going to give it to family, which is usually the kids. That’s number one. Number two, you’re going to sell it to an outside buyer, competitor private equity. That’s number two. Number three, you’re going to sell it to an inside buyer, one or more of your people. Or number four, you’re going to shut it down. That’s it. And you know, I talked to a lot of business owners every year and my speaking and very often people say, but I love what I do. I never want to exit. And my reply is, that’s great. That’s a blessing. But last time I checked, dying is not a strategy. So even if you own your business, on the day, you die, one of those four things is still gonna happen. You’re going to give it to your kids sell to an outsider, sell it to an insider or shut it down. And the reason why that question is just so terribly important, it goes back to being intentional, because when you stop and just even begin to get involved in the work and preparing for exit, the choices that business leaders have to make to effectively pursue one of those four strategies. Allison are mutually exclusive from the other three. So right away, you reach some forks in the road, and you’ve got to begin to do some things. It’s different. For example, if I want to get my business to my kids versus selling my business to a competitor, and business owners who don’t gain clarity around which exit applies to them find themselves really struggling.


Um, it is. So regardless of whether you plan for it or not, it’s happening and what would you say are the most right now, in the last year or so? Are all four of those strategies you work or what’s the most common strategy that you find you get a chance to help people create for themselves?


Yeah, the most common strategy is selling to an outside buyer, because and it’s about 70% of the market and the size of the companies we work with. And if you think about it, there’s one advantage of selling to an outside buyer that the three other strategies usually don’t create, and that is cash at closing. So if you’ve built something that is sellable, then more often than not the overwhelming preference would be to see if I can effectively sell this business to an outside buyer, without compromising the other goals that very often are part of the conversation.


Fantastic can, can you kind of outline what you perceive to be some of the exit strategy? What does an exit strategy include?


Oh, boy, what a great question. an exit strategy includes nearly universally a set of financial goals right? There’s a number a magic number that I want to make sure I realize for myself and my family Otherwise, why exit right I would just go back to work the next day. So that’s practically universal. And for a lot of business owners the top of the list which is I don’t think that in any way there’s any shame or any problem with that is making sure you reach your financial when, in almost 30 years doing this however, I’ve seen that very rare is it only about the number? The exit strategy usually includes some more difficult to express goals but no less important? I’ve got people I want to make sure that I take care of and treat with dignity and respect all the way through this process. There may be a brand that we want really want to make sure the goodwill around that brand is certainly not tarnished. Probably some customers and clients that we want to see treated well up to and beyond going forward. most business owners have some mix of those non financial goals that that they want to see upheld and respected as part of their exit plan and their goals and their strategy.


Do you find that your clients need some education on what the magic number is?




A little bit about that?


Sure. So we talk about reaching financial freedom. Now financial freedom has become a bit of a buzz phrase. I mean, you go to your local bank and they’ve got a brochure that’s going to tell you talk about financial freedom. It has Allison for us it has a very specific meaning. financial freedom in our lexicon means that someone has reached a point where work is a choice and not in necessity. Money does not buy happiness. And it absolutely does not. I’m just going to make a personal observation though. I’m around a lot of former business leaders who have reached financial freedom, and they’re typically smiling. So there’s a connection in there on some level. And the number of how much do I need to get to financial freedom? It’s different for everybody. I will make a couple of observations. First, I think the majority, we’ve never really measured this, but I think it’d be accurate to say the majority of business owners when you get them talking will realize they might have some educated idea that gets them in the ballpark, but they really don’t know how much that number needs to be. I think that’s probably the most common answer is I just don’t know. The second most common answer is business owners who say I know what my number is, and they state it. And Allison, I will tell you that nearly always 90 plus percent of the time their number is wrong. And it’s Wrong on the light side, it’s too little. There’s a couple reasons about that. And we can we can talk in length but one of the key reasons why they usually underestimate the size of the of the amount to reach financial freedom is because if you’re a business owner you’ve had any amount of success your personal lifestyle, to some extent, is subsidized by your company. You’ve got the cell phone, the, you know, plan on the cell phone, the iPad, the tablet, the computer, the meals, five to 10 meals a week, the travel, right, the taxes, the benefits, to some extent, even a moderately successful business owner, the company is subsidizing your personal lifestyle. And in our observation, a lot of times when business owners think they know what their number is, they tend to have overlooked the extent to which their company does subsidize their personal lifestyle. And you really got to add those dollars back into the picture, right. And that’s often a little bit about Ooh, and in our We have measured this, that usually means that the number that they thought is usually light by somewhere between 25 and 50%.


Okay, so under estimate 25 to 50. You’re right, that is a significant swing.


Significant swing. That’s right.


In the concept of things, what would you say is the number one leverage point for people where you consultant and maximize their value?


Maximize the value in the business? Yeah, yeah. undoubtably, it starts with people. And I think that takes two forms. On the one hand, if you’re a business owner, especially if you’re a founder, but not solely, if you’re a founder, you’re probably really good at what you do. And you’re probably a pretty valuable person to your company’s day to day, profitable existence. You’re probably really valued by customers and clients. You’re probably very knowledgeable in your industry and your products and services and in the beginning, especially that knowledge and that skill set and that drive is what creates the company. I mean, without that the company probably never launches and certainly never survives. Well, but fast forward over time, the closer you get to exit, the more that the company needs its current owner or owners in order to execute day to day, that flips from a strength to a liability. We call that whole issue Allison owner dependency. And as you move closer to exit, there’s a switch that has to be thrown. And unfortunately for a lot of business leaders, first of all, no one ever tells them they got throw the switch, and throwing the switch is hard. Because you got to morph from being a very good knowledgeable technician in your product or service industry, to being a builder of others. And a lot of business leaders struggle with that. I mean, that’s one of my favorite books of all time, the EMF, that’s what the math is all about. So, I know I said there’s two issues to it on the one hand on the people side There’s migrating from an owner dependent business to a business that can not only survive without the current owners, but can actually grow can actually thrive without the current owners. And that takes us into the second side, which is the next level of leaders by level, you know, that classic org chart, the next rung down, have those non owner leaders or maybe they’re minority owners, but those people who are going to stick around, hopefully after the current owner or owners have exited, and what’s their development? What’s their skills? And can they handle the key customers key clients to the key customers, key clients trust and rely upon them? vendors, suppliers, can they drive those relationships? Do they have the practice of being decision makers in the organization on the important strategic matters? So value takes many forms. But you asked a great question which is a key leverage point for creating value. First and foremost is starts with people. If you get that right Then you can explore and pursue the other ways to create value. If you don’t get that one, right, you’re gonna be, you know, a lot of wheel spinning will probably happen.


I’m curious, is there a, like a formula that weighs in on if you have your people, right, then it accounts for certain percentage of the value?


Oh, you’re asking like a holy grail question there. Allison so serious. It’s a great question. I know, no clear formula, but there is some numbers you can put behind it. So we’ve observed over the years that if you take an industry, and if someone’s contemplating selling their company, and they research, the sales in their industry, and what the multiples what their company might be selling for, almost always there’s a range. So I might say, Hey, I’m a plumbing supplier, and I’m just giving a you know, imaginary example. I’m a plumbing supply company. And right now companies in my industry are selling between, you know, six and eight times earnings. For example, there’s usually a range. And that ranges, you know, if you’ve done your research that range is usually an accurate representation of what’s going on in your industry right now. Well, here’s the key issue. What determines whether I get a six times my earnings if I sell or if I get an eight times my earnings? Because if my earnings are a million dollars, just to put a number on it? Is my company worth six? Or is it worth eight? Because that range that range is not based upon size? Because we’ve already determined where we start based on size? And in their lives? The answer to your question, which is the companies that sell for the lower multiple, or the companies that don’t have that quality leadership, that don’t have that platform, they don’t represent a strong as a platform for growth, in part because the leadership may not be as strong or the company may be too owner dependent. And the companies that sell for the higher end of the range, whatever the range is, eight in my example, those companies get the higher multiples when they sell because they have stronger value proposition including the people, so yes, so Somewhere in there, you can, it’s hard to break apart, what drives the $2 million difference in my example, but it starts with people.


I think, just in my experience that I’ve had is that it you’re I sometimes straddled both sides of the fence where I’m trying to help owners build a business that has greatest value as the asset for their retirement and their transition into your next things. Or the entrepreneur or business owner who wants to buy something that has a lot of growth potential still left in it and you know, something that is an easy buy and an easy fix.


So that’s, that’s interesting. So you typically work with people you said three, three to five years, typically, yes, quickly. And can you talk to me about like, how often should someone so someone should definitely consider utilizing you or a service such as yours, if they’re going to sell the next three to five years.


That’s the sweet spot that seems to be I mean, I can make the argument. And what’s the old saying the best time to plant a tree is, you know, 35 years ago and the second best time is today, right? So I think the same applies here. It goes back to what you said a few minutes ago, Allison, which is you always begin with the end in mind. Why build my life? Why spend my life building something and by the way, I have typically 80 to 90% of my net worth tied into it without knowing what my exit strategy is. The reality however, is not a lot of business entrepreneurs approach this topic this way. So what we’ve learned is at three to five years, the light bulb is beginning to glow above my head. I’m like, Hmm, I don’t want to go anywhere tomorrow, but I’m not sure that I want to be required to be here five years from now. I mean, three to five years, that’s 36 to 60 months time flies itself, but it’s also a lot of time to make a lot of changes.


That’s exactly right. You’re exactly right, three to five years if my leadership team is not strong enough for For example, to run my company without me day to day, if I’ve got three to five years, I’ve got sufficient time to make whatever steps I need in order to grow that team and get them to where they want to be. If I’ve got three to six months, forget about it. So you’re exactly right and, and all the other opportunities to create value. So that does seem to be the sweet spot where, where in my business, you know, a business leader will go Okay, I get that I’ve got work to do. And it’s probably time that I get some help because with very rare exception, most business owners and leaders only have one shot at exit success, they only got one shot to get this right. And they and they need to get it right.


Um, I think, you know, I coach that you’re always working now to build a business that you can sell at any time. And so you know, you can play it three to five years, but if the right offer comes in, are you and are you gonna get the greatest value from it? Right. A question is, the distraction sometimes is, is that those of you that I don’t, I would say facts comes in and says you know, someone’s interested in your company, which it can be a significant distraction. So how common is it? You think to receive unsolicited offers and how should someone treat such a thing?


It’s extremely common. It’s extremely distracting. It loads a lot of very bright and successful business owners into a sense of complacency because hey, when I’m ready, I’ll just wait for the next fax to come in or the next email or the next, go to the next industry meeting and someone will grab my arm and away we go. The reality is that a very large number and there’s no data out there that I’m aware of, but investment bankers, people so companies for a living they will tell you that a very significant percentage 50% maybe or more of the companies that they represent in the sale process. The buyer didn’t make an intentional excuse me, the seller did not make an intentional decision to say I have a plan. I’m executing against my plan. Now’s the time to sell. What happens is someone knocked on their door and they got put into play. That’s probably not the best way to do it. And I completely agree with what you said, Allison, no business can ever afford to be unready to exit. Because if any business leader looks if I look myself in the mirror or you in the mirror him, him or herself in the mirror and says, you know, if I really am truthful about it, my company is not ready. Being not ready to exit is a sign of some weakness that we can’t afford to tolerate. But you’re right, we all can have aspirations and plans. But in this issue very often, those aspirations and plans get set aside when somebody puts that company into play maybe a lot sooner than anybody was expecting.




I’m just curious, you know, we’re in an interesting time, you know, here in 2020. And I’m just curious if you have any insight as to the economic impacts or the economic conditions that make it at the right time or the wrong time to sell Yes, I’ve had to Possible acquisitions fell off the table. Right? Um, you know, breakdown not just because of economic conditions, but I mean that we were kind of banking on it going forward and it’s the right decision. But so what’s your what’s your guidance that you would give to people right here right now who might be in the next five years? Or Yeah, there?


It’s a great question and there’s a lot of layers to it. First, of course, is you know, keep survive and keep your business healthy, as healthy as you can. Because if we don’t survive, then everything else gets pushed into the moot column. So that’s the first responsibility. Second is your right you know, the Coronavirus crisis. It’s impacting companies across the nation. It’s impacting however industries unevenly. Some industries are seeing record growth given what they do we have a client that manufactures air filters for hospital system for hospitals. You know, can you really work it to be in brilliant market to be in and of course, other clients, their companies have basically been wiped off, you know, been wiped off the street and given out. their businesses evaporated almost overnight. So it’s highly uneven. And of course, the situation’s evolving. At some point, you know, I’m not qualified to say what that is. But at some point, we’re going to get back to something that looks more like business normal, it probably won’t be the old normal, it’ll be a new normal, but we’re going to look at it and we’re going to call it normal. And I’m, I make I’m at this point, I’m making an observation when we reach that point, and it might take some time, probably months, maybe even sometime next year. When we reach that point, this country is going to see the largest wave of business owners wanting to exit and it is ever seen. And there have been people talking about that for a while. And I’ve been saying I don’t I don’t think I’m ready for that. I’m ready now because very briefly, there’s 9 million baby boomers in this country who make a living by owning some or all of a privately held company. And of that number, excuse me, 9 million baby boomers total about 15,000,009 million of whom are baby boomers. by next year, the youngest are 57, and the oldest are 75. And most of them, Allison have not exited. And my prediction and all this, that’s just basic data. My prediction and all this is most of those people are going to say, you know what, I don’t want to do this again. I went through the Great Recession. I’ve said we survived Coronavirus, I really don’t want to do this again. So you’ve got to time the market. When you’re contemplating exit. No one wants to sell their company in difficult economic times when buyers might not be able to afford to pay or the company might not survive. So you’ve got to be paying very careful attention to your industry. And I think we’re when we do as I’m not talking about the public health crisis, I’m talking about the economic crisis, when our country does manage to get its legs back underneath us. If you’re a business owner and you’re think you’re in that three to five Your time period, you better be ready because it’s going to be probably a crowded room of business owners that want to make a successful event happen. And there’s probably going to be more business owners looking to exit that they’re going to be buyers looking to buy. And that if that does happen, Allison, that would be a complete inverse of what we’ve seen over the last 10 years. But I think the data just says that’s exactly what’s going to happen.


And it makes me uneasy and sad, knowing that that is the likelihood of what we’re facing for people who’ve invested their entire lives. And that’s Yes, and to not possibly find a potential buyer. Does that mean that people should focus on potentially different strategies than going to an outside buyer and doing some type of transition instead?


If it’s available to them? I mean, let’s go back to the four exit strategies. The first one is, give it to family. It’s usually the kids you’ve got to simply obviously, but Is there somebody there who wants it? Who has the competence? Who has the entrepreneurial desire and commitment? You can’t manufacture that. So they’re either there or they’re not. That’s one piece. The other is the sale to the inside buyer. And there’s a key. One of the key issues here is there’s a big difference between having a rock star team who just when you say jump, they enthusiastically say how high versus at least one, at least one individual on the team who doesn’t even need to be told to jump. They’re already thinking that way. They’re already that strategic. And a lot of very successful small to mid market companies don’t have that. That individual on the team, that successor CEO, is what I’m referring to, if you do have someone who has that capability and that aptitude, and that potential for growth and for performance. Oh my gosh, I mean, everybody wins if you embrace the leadership development and the succession planning around that individual because if that individual can lead an inside sale, and be the buyer or lead a team of buyers, everybody wins. If that individual just for whatever reason, decides that buying the company is not in his or her future, still everybody wins because that person benefited from all that development. And if you’re, if you still find yourself trying to sell your company down the road to an outside buyer, all that much better to say, look at this amazing team that we have, which includes among other people, this person who really could be a star in your organization if you buy my company, so everybody wins.


In my experience, so I come from a family business where it was partners. And you know, partners get along and can agree right on out of the gate of how to sell it and transition. Right.


And then I also come from an organization that the primary owner and transition to any stock so we were all owners and that was a beautiful strategy. Well, um, so let’s talk about partnerships where, and when is the best time to agree on what you’re going to sell the business for to the other partner.


If you’re selling to two if you are selling to your other partner. So as you said in the wonderful introduction, I’ve written two books, and my second book is called a tale of two owners. And that book is entirely about being in a business partnership, and figuring these issues out. We did some research a number of years ago, Allison and we learned that 70% of privately held small to mid market companies have more than one owner, which is incredible because the myth is being a business owner alone at the top by yourself in the corner office, you just stick with the classic imagery. That’s myth that’s only happens about a third of the time usually you’re sharing ownership with one or more other people. By the way, the average number is 2.9. If cocktail trivia Good to know. So yes, the majority of businesses share ownership. And what I explore in the book of tale of two owners is what happens. Let’s just imagine for a moment, Alison, you and I are business partners. We in the beginning, let’s just get to keep the example simple. We were if we founded the business together, 5050 right. In the beginning, we shared the most important thing between us, which is an enthusiasm and a zeal to launch this business and see it grow. Because there’s really nothing else to do because the business doesn’t grow. There’s nothing else to talk about. But as time goes on, there’s a near certainty that happens. We’re not we may not be the exact same age we may not have the exact same number of family members, may be may or may not have the same marital status may or may not have the same health may or may not have the same definition of work life balance, and on aspirations and hobbies outside of work and have it in other words, we’re not clones of each other. And as a result, no matter how deep and our mutual respect and trust can continues over the course of this business partnership. At some point, it’s almost inevitable that you and I are going to have different goals at exit, right. And that’s what we see happen and those goals, if the business partners don’t have a way to explore and identify and address those goals and compare notes on them, what happens is a tension creeps into the relationship that feels like it’s an erosion of respect for one another. It’s not what it is, is it’s we’re now rowing this boat in different directions, and we don’t even realize it. Maybe, maybe you have a child in the business and you have aspirations around that child taking over the business and I don’t have a child in the business and I’m thinking about selling it for one day. And right away, now we have completely incompatible exit goals. Or, again, maybe you are financially more of a saver than I ever have been. And you can contemplate selling the business for just a little bit and I look at my personal financial situation and realize I’ve got to sell the business for a whole lot more Otherwise, you know, I’m trapped. And you go down the list of all the normal realities between two different people, two different stages in life, two different family profiles, etc. And it’s it is I use the word inevitable, it’s practically inevitable that we realize we’re not on the same page. And our goals might not just be different that might be incompatible. So when should business partners start talking about this as soon as possible? You know, if sticking with you and me as a hypothetical example, if we’re exploring what do we both want out of exit three years or five years before anybody who wants to go anywhere, then this is a prudent strategic planning conversation, if we’re exploring this conversation, because one of us got that email or that fax from a potential buyer, and that potential buyer is coming to our offices next Thursday. I mean, now it’s like it’s like pulling the pin out of a grenade and throwing it in a room between the two of us that with the power and the end the story liveness of this issue. So the earlier business partners can start to talk about this better because it’s, it’s inevitable. And as you get two or more partners in the room together, it’s normal that we might have different sets of outcomes.




I call the conflicting, conflicting outcomes to be just a complete misalignment. What are what are techniques that you employ to help create that alignment so that they can both win?


Yes. So it back to the tale of two owners in that book, we list a 2426 of them. Some of them are quite familiar and often surprise people that it’s a that this well recognize business concept and tool actually helps keep partners in alignment. A couple that come to mind that fit that description is a business plan. Because if you and I and the rest of our leadership team if we have others on our leadership team, if we have an agreed upon current ratio Business Plan. That means we’ve had to discuss where do we want to row this boat? And how do we want to get there. So just having a strategic business plan helps maintain that alignment for that longer term vision for we’re going to go. Another one that, again, is a familiar business tool, but has a direct application here is a budget. Simple budget, a budget is nothing more than a financial plan for the business for the typical year. And it’s answers questions like what are we going to do with our money? Because go back to, again, imaginary You and I are partners, Allison, let’s just say our company makes an extra $100,000 or an extra million dollars. In any given time period, you might look at that and go, Oh, great time to bring it home. And I look at that money and say no time to go hire another three people or 30 people. Nobody’s right. But we have different ideas. We have different ideas for the use of the company resources, in this case, financial budget makes us have these conversations and explore these issues before they become contentious. So there are some familiar ones. There are some more So less familiar ones that we identify we share with clients, owners need to go on an ownership retreat once a year, at a minimum, you need some downtime, you need to go to the proverbial top of the mountain for a couple days and just talk and stay on that same page. Because you know, time flies and the business pulls you in so many different directions. Those are just those are some of the more foundational techniques. Yes.




Can we talk about how to engineer a deal?


On the deals that you see how many of them are all cash? I guess if you’re if it’s outside and 70%, then 70% are outside. You may have already answered that question.


No, no. Well, no, that’s you’re asking, you’re asking it the insightful way because, yes, so of the 70% that sell to an outside buyer. How many of them are all cash because the ones that were that mom and dad are giving it to the kids, those are not all cash and the ones where you’re selling to an inside buyer. Almost Always those are not all cash either. So of the ones where you’re selling to an outside buyer, everybody wishes they were all cash, but that tends to not be true. I’ve never seen any data on this, somebody out there might have it. But I know from experience that it’s probably less than half there’s at least some material hold back in the form of an urn out or an escrow account, you know, or have or a covenant not to compete. There’s some you know, dollars that you don’t get at closing. And that’s a big deal terms is more important than price when you’re actually contemplating selling.


So explain that I just want because I think in engineering the deal the terms you set forward are so very critical for tax I mean, so please share your everything for everything for taxes for risk for comfort zone for does how excited is my family about this or not about this? Right You know, and but what happens terms never get discussed you go To the industry meeting, you’re having cocktails with someone back in the days when we can go to meetings, and those days will eventually come back. Right? And having cocktails and you learn about so and so in your industry who sold for $10 million? And you’re like, Holy $10 million that person sold for, right? Did they get $10 million in cash? Or did they get $2 million in cash and a legal responsibility to go back to work for the next three to five years and $8 million is in the form of an urn out you just don’t know. And that rarely makes the bragging talking points. Right. And, you know, but sticking with that same number. If you, you know, if you say I would sell for 10 million, well, would you sell for 2 million down and 8 million? Potentially? Maybe not. So terms ultimately, definitely are the reality where the rubber meets the road when you’re contemplating selling your business. Now, very briefly, what drives terms who gets the cash deals and who doesn’t. And that goes back to the exact same factors that drive value because, well, let’s just look at owner dependency. If my company He is overly dependent upon me for its day to day operations and profitable conduct. I’m probably not going to see that cash deal because a buyer is going to be leery about me and me walking out the door. On the flip side if I have developed the team, and the team can not only survive the company without me but thrive without me going forward, I’m more likely to see an all cash deal because I have made myself unnecessary.


That example of the deals that you’ve seen come together. Do you feel confident that the engineers deal is fair on both sides or does it one party always have to compromise?


I think both parties end up compromising on a on a good deal on a healthy deal. If one party is you know, walking away snickering with a Cheshire Cat grin on their face and the other party is you know, really questioning The very wisdom of the decisions they made they made, then that probably and then it’s not the it’s not the American Dream outcome and it’s probably not sustainable. And so I think in a healthy deal where everybody does have a full and unrestricted opportunity to win, at some point, both parties probably made concessions over the course of the negotiation, the pricing and the and the valuation. Yes.


And what do most of your clients do after they’ve exited their business?


It’s all over the place. It’s that’s another hugely important question. We call that life after exit. Yeah, it doesn’t matter how much money any one of us has in the bank. If I wake up every day with something without something rewarding and challenging and engaging to do. Allison, I’ve seen that and people who find themselves in that situation, they regret their decisions. They feel like someone took their company away from them. We know the data now that in order Just the last 10 years of science on this has gotten pretty, pretty amazing that it leads to have shorter lifespans and greater disease and greater failed relationships and life after exit. I mean, this is huge. The answers are all over the place in terms of what people it’s everything from, you know, true retirement, a life of pure recreation to pursuing other business ventures, to hobbies that people want to turn into vocations. It’s all over. The key thing. And the mistake to avoid is to test your ideas before you exit. We call it chirp. We call it taking an externship. Now, obviously, we didn’t invent the word. But before you pull the trigger, and it’s permanent, right, take 30 days, and you know, teaching sounds like fun. Take 30 days when schools are back open and go teach a guest be a guest Professor somewhere and Teaching does sound like fun until you have to spend a weekend grading papers then maybe it’s not so fun. A lot of business leaders either exit without knowing at all what they’re going to do. And boy, that’s a that’s a risk and I think it’s frankly an unnecessary risk. A lot of it and other business leaders think they know what they’re going to do teaching sounds like fun. I’ve always wanted to take up woodworking. You know, of course, I love playing golf, seven, you know, days a week, and they have ideas and then they get on the other side of exit. And they realize what was fun as a hobby kind of sucks as a job. And now it’s too late to turn back the clock. And so, an externship take 30 days, go test that idea test, drive it, develop the business idea you have in mind, teach, as I said, play that golf non stop and see if you really can like it. In my experience most people if they’ll make that 30 day investment and test drive that idea That’s sufficient time to tell them whether or not as their next life’s calling. And then you can go back to the company. By the way, one more thing on this, it’s a great way to develop your team. Because if you’re completely unplugged for the business for 30 days, as you’re test driving this idea for life after exit, you get to come back and see how well did your team do in your absence. And if they didn’t do as great as you want them to be, now you’re back to coaching and developing, that’s exactly what you’re supposed to be doing anyway. And if the team exceeded your expectations, which happens a lot, you just learn your company is more valuable, more scalable, more developed along than you would have known. If you kept coming to work every day during those 30 days. It’s pretty amazing.


I love the term that you’ve used externship. That’s cool. That’s cool. Did you say you made that one up?


No, I don’t think we did. I’m pretty sure we as far as I know we made up the application in this context.


Okay, fair enough, fair enough. In the last of Five years I’ve, I have worked with a number, many more than I would have guessed, of retired people starting their second career or their second, you know, life business or life after retirement, I guess is the way I would describe it. So it’s been neat. Patrick, you have some really phenomenal resources on your website. And I just want to specifically point out that you have a fantastic due diligence list. Yes, that is right there for download. And then also frequently asked questions regarding exit. And so you’ve got a whole list of answers there, which is outstanding. Is there anything specific that you would like to point our listeners to as far as their resource if they’re in that three to five year?


Great question, there is one and it’s called the last five years. And it is meant to be that starting point for the business owner or owners who are telling themselves they think they’ve reached that that point in this industry. journey. It’s two forms. There’s a downloadable ebook, which has all the issues to be thinking about and the resources and steps to explore. And then there’s also a webinar of the exact same name. So just depending upon what medium you tend to like whether you’re a reader or watcher and a listener, but it is called the last five years, and it is a complimentary download or a complimentary webinar for anyone who visits the site.


Fantastic. And I just want to make sure that everyone listening knows that those links will be directly below this, this podcast episode. There’ll be right there for easy access. And so you’ve written two books. Do you have anything else that you’re appending at this moment?


I do I trying to use the shelter at home time that we’ve all been enjoying these last couple months besides catching up with family? Yeah, I’ve got a third or maybe even a fourth book in me. I’ve learned I enjoy the writing. I also, I’ve also learned that, you know, writing forces us to organize our thoughts and communicate our thoughts. in a, in a stricter, cleaner, more concise way. And it’s benefited, you know, my thinking it’s benefited our team by refining how we communicate because you know what we do. As I mentioned a little while ago, Allison most business leaders and owners only exit once, and they typically are looking for help and advice and, and the books have helped us to help our audience and our clients in our market.


Fantastic. I look forward to hearing when those come out. You’d like to ask, Is there a particular way that you would like to have people connect with you where should they follow you?


Great, thank you. So yes, the best place to go is our website. And I know you’ll have a link to it in your show notes. Our company name is Navix Consultants. So it’s just all pushed together Navixconsultants.com, they can find me and contact me directly the phone in the email from there, but I think that’s probably the best starting point.


Fantastic Patrick, and it has been such a pleasure. Thank you. Awesome afternoon. Thank you for your time sharing your area of expertise and helping everyone who’s worked hard to get the make the most out of the asset that they poured their life into. So, thank you very much. Thank


Thank you. Awesome.

I'm Allison Dunn,

Your Business Executive Coach

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