Tell Tale Signs it is Time for an Exit

12 Nov Tell Tale Signs it is Time for an Exit

Shoot The Moon

Tell Tale Signs it is Time for an Exit

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EPISODE TRANSCRIPT

Mike 

Hello, and welcome to this week’s. Shoot the moon podcast broadcasting live and direct from revenue rocket world headquarters. If you tune into this podcast weekly, or maybe even if you don’t revenue rocket is the world’s premier advisor to tech enabled services companies on their M a initiatives. And with me today are my partners, Ryan Barnett and matt Lockhart, welcome guys. 

Matt 

Great to be here. Beautiful fall day. We’re pretty darn busy. So can’t get out there and take advantage of it? But it sure is pretty, those leaves are changing. That means the year is starting to wind, what’s going on Ryan? 

Ryan 

Yeah. Thanks guys for coming on here. Today. As we look at every week, we try to tackle an issue that we’re seeing in M a and the it services world. And a common theme that we saw in the last few weeks was we had a number of people that were looking to understand what it looks like to sell. And a lot of them had come to a decision that it was time. And I think that’s a really hard decision to make. And so we wanted to have just a bit of a discussion here between the three of us on what does it look like to know when the time is right to start to sell your business? And perhaps what are a few things that are on someone’s mind that should help them start out in that journey? So, Mike, why don’t you get us going? What was something that came to our attention this week that made us think about this? 

Mike 

Well, I think it’s interesting. We have a lot of conversations with clients along the way. And when they’ve made the decision, they think it might be time they’re looking for input. Time feels right? There’s certainly different motivators, different motivations for folks, when they think the time is right? I can think of a few things my personal journey when I knew the time was right, either when I felt the business needed more talent… more outside capital, more resources to get to the next level, and something that I didn’t feel like I could provide certainly in my own journey, that was a time to do a deal. You know, one time I’d sold three companies at one time and it was much more about just the dialogue with another entrepreneur which was a one plus one equals three that I thought I could learn from and join them to build something bigger and better together. And then, you know, the third journey was much more about sort of doing something different, right? Ready to exit to explore other interests that I had. And I know for the clients that we talked to and potential clients that we talked to, there’s a whole host of reasons which we can unpack on this podcast that, you know, range from, you know, that same more capital kind of selling in wanting to take some chips off the table to change in life priorities, you know, maybe they’ve got a bad diagnosis or decide they want to spend more time with their family, and they feel that the entrepreneurial journey is not the right one right now for them. Sometimes it’s you know, more about, combining to do more together than they can do apart, or bringing in human capital that, you know, maybe they couldn’t afford that they felt they needed to get to the next level. There’s a host of reasons Ryan. 

Ryan 

Absolutely. And I think that’s, that’s something that each audience person should. And if you’re listening to this today when you’re evaluating where your company’s at today and where you’re at today, oftentimes, those things can be at odds. And sometimes you’re going to feel a need to focus on your family or focus on what’s, perhaps important that’s outside of the business. And sometimes it is actually focusing straight on the business and really looking for that next or in where what could be next. Matt, you’ve talked to a lot of founders who are kind of mid in their journey and think they got a lot of work left to do. So, maybe we could talk about maybe start off there on, you know, when you’re trying to make that type of decision, what kind of things should you be thinking about to say, hey, maybe let’s work for that next chapter of growth compared to that chapter, of letting go. 

Matt 

Yeah, I, you know, Mike talked a bit about, you know, some of those things where a… do you have, the capability, and probably more importantly the passion, right? The, the continued energy, to continue to really grow the business, not just, you know, manage but really grow the business to, that next level, the desire to continue to invest, right? I mean, you know, kudos… to Mike and all those, you know, previous founders out there, you know, risking and putting their… you know, putting their money where their mouth is, if you will. And, and, you know, continuing to drive that journey, is continuing to live within that. And, and, you know, so there’s certainly, some risk involved in that, and then balancing, you know, the work aspect of life versus, you know, everything else. And, you know, a very good friend of mine was approached by, you know, private equity, a few years ago, and, you know, went through the process with them and he was likely going to continue to, you know, stay with the business for a period of time in that standard, you know, relationship, but, it was going to be a step right towards, more fully letting go and it didn’t happen. He’s reinvested in the business. He’s expanded the business and we just talked a couple of days ago. He’s like it’s been great, right? And so, that was the right decision for him. He had time personally as well. I think that your characterization of sort of midpoint of career, right? Time time matters as well. And so, you know, it’s that individual journey, for each one, but I think it, you know, what we’ve talked about here is this sort of energy focus, ability to continue to grow, knowing the market well enough to know that you’re in a good spot, you’re you don’t have a service that is a service or product that is under threat, right? Sometimes, sometimes there’s a market condition that, is really important, to timing and making the decision about when you get out. I mean, shoot guys AI and the impact of AI on services, for different services within the it sector. It’s an example of an external market condition. So, you know, I think that all of these things, right? Are, are important pieces mid early and late. 

Ryan 

I think, both great starting points. Mike and Matt, one of the things that I’ve heard a lot, when people start to consider their process, it’s they have a feeling that I’m wearing so many hats. And you start, if you start to be, in the sales team and you’re on a bit on the delivery team and you’re a bit on project management and you’ve got your eyes on the financials and you’re really running that business. When you’re running that from the top, it can be a bit exhausting. And having all of those hats on each for each one of those functions, doesn’t necessarily allow some leaders to be the best leader that they can. And I think that’s one of the signals, that at least I see where you start to look at, well, what do you like to do? Where, where do you like to focus on the business? And are there opportunities, when you are wearing too many hats for you to, take a hat off and hand it to a potential, a quarter and, or a potential suitor who could perhaps do a lot more with you. I think one of the, that’s one of the great opportunities in utilizing, acquisition to mergers to your advantage is allowing you, especially if you’re continuing in the business to really pick the hat that you want, and to be able, to wear that and be a little bit better at what you want to be, 

Matt 

I think that’s a great point, Ryan, you know, we see those opportunities on a regular basis. Oftentimes, those are going to be with, you know, maybe smaller firms that haven’t built that scale, right? Where, that founder or owner, is doing too much, is wearing too many hats, right? And, and to Mike’s point that he made earlier where he recognized that in order for something to continue to grow and thrive, you know, maybe more people and, or other people need to be involved, in the business and looking at, an opportunity to be acquired to grow with, and join with, other partners beyond just the strategic gain. From a personal perspective, I think that’s a really good point. 

Ryan 

The other thing is, I think, you mentioned that, when you run into a bit of a wall, matt or Mike, I love your perspective, when companies, are get to a point. And you had mentioned earlier, you just got it, you recognize, you got it to a current phase. Is there a way to tell like, the difference between being tired and being done? What are some ways that someone could look and say, maybe there’s something else I can do that’s just a better fit for me. 

Mike 

Yeah, I mean, it’s a great question, Ryan, I think at the end of the day, you know, you have to be thinking about, you know, what motivates you, what gets you up in the morning? And I think if you get up in the morning and you’re not excited about the business, you’re not passionate about doing the work that, you know, probably is at this point, you know, constitutes one of the biggest investments in your portfolio if not the biggest. You’re more interested in other things, and that other things can range from personal to professional things. Then it might be time to consider moving on out of the business or what I call selling out. If it’s more, you know, logistical matters that are getting in the way. You know, you need to mature, a sales function or a marketing function or you need to be able to do like, you feel, you wish you could fund more acquisitions because you got the formula figured out, but you just need more access to capital that maybe the business has grown to a level that, you know, for you to do meaningful, M, a, you, you’ve got to have a capital partner, to get to your growth goals because it’s just outstripped your capacity individually and business wise to do it. You know, that’s a different sort of set of change and mandate. But, I think to answer the question, you know, people can be burned out and still passionate about the business or tired and still passionate about the business or they could be like, you know, it’s time to move on. Maybe I’m tired and I’m more interested in other things. It could be lifestyle things or business things, and certainly understanding and realizing those, being self aware, enough and honest, with yourself enough, to realize that you’re not going to do your best work when you’re distracted, when you’re tired or when you’re kind of feel like you, you’ve exhausted all options, right? You’re just going to not do your best work. And if you get to that point, you really have got to be introspective about making a change in order not only for yourself and your own health and wellness, but also for the business health and wellness. 

Ryan 

Sure. I’m curious on this. Is there, is there any kind of test that you can give yourself that can help you come to some of the awareness, like, if you anywhere that, it feels like a vacation could be a really good idea to that. It’s a, can either spark new energy or confirm your time to move on. Matt, have you seen, had any experience or seen people who have, made some decisions when they’ve had, perhaps a perspective by incongruity and just looking at the, at their situation from a literal different spot? 

Matt 

Well, yeah, and, you know, vacation’s a great one. We talked about that right getting away and get far away and disconnect, and turn that phone off, working with your peer groups, whoever that may be. Be it a formal peer group or informal, advisors, peer groups, friends. You’re better half, if that’s a, if you’re in that situation, I think that, you know, talking about it, with people, you know, is gonna help, being away is gonna help. And, it’s not a decision that is a, you know, flip of the light switch. It can, it can take a little bit of time. And so, I think that in whatever fashion that you, are doing it from a sort of a step away from the business, right? I think, is important, to be able to find that time and have that feedback of introspection that, you know, that Mike referenced for sure? 

Ryan 

Is there when you think about this, the context is huge. So, what you brought up here, you’ve got timing, just as a general market timing, you’ve got some big decisions, just what’s going on in your life. So there, we’ve heard, even just in this week, I’ve heard twice of, hey, I just had a child and I’m, looking forward to being what it means to be a mother and, or, and a father and I really wanna be there. There. So, there’s this kind of big life changes and it’s really hard sometimes to balance that in the timing, of where a market is at? Do you, do you feel when someone’s in this decision? You know, markets are always going up and down. Do, do you feel that someone should perhaps delay, a sales process simply based on market timing alone? I’ll let either one of you guys answer that. 

Mike 

I’ll weigh in on that. I think the answer is probably no, based on market timing, I would say yes, based on company health and wellness. So, you know, I think that’s a tougher, question to answer. I think your business, you always wanna have your business being as I like to say, up and to the right, if you’re gonna contemplate a market or making a change, and what does that mean? That means that you’re growing the business, you know, in a perfect world, wave a magic wand, you know, you’re growing the business, kind of in line with your peers. You’re you’ve got at or above industry standard profit. Now, you might wait forever if you try to do that. I think as a practical matter, you have to be honest with your own ability to scale and grow the business and contribute to profit. You know, sometimes, you’re just have gotten the business as far as you can get it, as an ownership group or an individual, and you’ve gotta, you know, then say, hey, I gotta make a move, period, I’ve done everything I can with this business. But if you feel you can actually make these changes and legitimately see the change, in the near term, then, you know, we think that’s a good idea. You know, I think certainly company performance has likely been linked to market conditions or market. If we wanna call them market sell offs or slowing or recessions or whatever you might talk about. So they may be integrally linked, but, you know, in doing this for a long time, you know, I haven’t meaningfully seen differences in sort of multiples that are paid. And if that’s your driving force, like, hey, you know, we wanna maximize valuation, then your individual performance is a much bigger lever there. Because the minor fluctuations, even what would be considered pretty big fluctuations in the market don’t impact, multiples very much, they might impact demand. You know, is it a buyer’s market or is a seller’s market? But it’s been my experience that if you run a healthy business that’s grown over time, you know, with a solid sort of footing in your market and leadership there’ll, always be someone interested in acquiring it or partnering or being your capital partner. And so, if you assume all those things make sense, then, you know, to answer the very specific question, trying to time, the market is pretty tough, right? These other variables I think become more of a decision point and frankly, they’re better because they’re, in your control, right? Conceivably in your control. If you, how you grow the business, how profitable it is, you know, what your staffing levels are like, and where the, trajectory of the business is going. And if you believe that to be the case, then control what you control and don’t worry about what you can’t and when the time’s right? You can certainly seek outside counsel to validate whether the time is right? From firms like us as advisors, or your peer groups, as matt mentions, or your peers, to get, you know, context, and then, you know, do some more, thinking as you engage with, you know, an advisor to see what is the real value of our business and is this the right time or isn’t this the right time? And, you know, reflect on that amongst all of those data points, or points of light, I’d like to say that can provide you input, in coming to your decision. 

Ryan 

I agree. I just want to switch gears a little bit, and I think this is something that we’ve talked about in the past and I think it’s if you’re starting to think about it’s, time to sell the business. I think many people don’t quite give themselves enough runway to think about what’s life after an access. And, and matt, Mike, I think maybe I want both of you to answer this, but can you give any advice to founders who worry about, you know, what’s next for selling? And have you seen any common traits among sellers that are able to really transition to life after their company versus those, who struggle after a deal gets done? Matt, if you want to kind of get us started here, kind of, you know, what advice can you give for the founders about what’s next? 

Matt 

Yeah, I mean, I, you know, again, every, each have our own individual journey that being said, a couple of things to keep in mind, you, you’ve been a very successful individual. You’ve ran a company, you’ve started a company. It doesn’t and it doesn’t mean that you have to have the exact plan laid out, have some trust that you are going to find and be busy and fulfilled, post exit, and that, that’s in the case that you’re selling out, right? Or you, you’re really taking a step away from the business, you’re not joining with somebody, and continuing to run, that, it is good to obviously have, some goals and some principles and, or vision, for what’s next, but it doesn’t you know, have to be mapped out in a, in a business plan per SE because most of the founders who have exited, they recognized it was the right time for whatever their reason was, and they were taking a step back. Are really happy, that, they made that decision. In some cases, they did have other things in mind. They had, they had the next, they had the next step, if not the next two steps mapped out, but nobody, we have, we only have so much control. We don’t have 10 steps mapped out. In other cases. They really didn’t but they knew that, you know, because of who they were and, some passions that they had in play, that they found, their lives and the purpose that they were, you know, working towards, you know, super fulfilling. So, you know, it’s there’s no exact formula. Obviously, it’s it is individual, and, but, I do think that oftentimes that fear of the unknown, right? Needs to be countered with that confidence, of who you are and what you’ve done, and then knowing that, you’re gonna find fun things to do moving forward. 

Ryan 

It feels like no matter what you do, you have to have a plan and if you don’t have that plan, it’s gonna be rough and so, understanding that if it’s going to be a focus on yourself or a focus on your family or Mike, you’ve told some stories of, opening other businesses. And sometimes it is just, there is a bit of that relaxing or exploring. And so, I think the most critical thing that I at least have seen is have a plan and make sure that, it’s having that plan just post exit will help making this decision, of, stepping away, just, so much more critical. 

Mike 

Yeah, I would add, I would add Ryan, that, you know, it’s more about having a purpose than a detailed plan. And I think the plan, you know, that you can use those words interchangeably, but understanding your purpose, whether you’re selling in and recapitalizing and going to the next level with a capital partner or whether you’re selling out and going on to doing something else, understanding why you’ve been put on this planet and what your purpose is more broadly will give you guidance and help you formulate the plan. And it’ll be in alignment with your purpose. I think if people’s purpose is so tied up only in their company, and they don’t have a lot of thought more broadly about their purpose, and why they’re here, and what, you know, they, they’re really meant to do, and, what is their superpower per SE? They struggle, you know, when a deal gets done, right? They sort of, they could lose their sense of purpose for a while. I think when they discover it again, then they get, they’re more content. And so, being, thinking, spending the time, thinking about what is my real purpose here? Why have I been put on this planet? And how can I contribute through that purpose? And that the work I do not only in the company that you may have founded and now are contemplating an exit or a change, with partnerships, but more broadly will always, I think bring more contentment especially in these points of inflection when you decide to, you know, sell your business or bring in a capital partner to sell a majority of your business? 

Ryan 

Yeah, I think that’s a great discussion here guys. I guess this is really tactical, but curiosity is getting me. Is there just a, is there a simple age component to this? Like, is it sometimes, or put it differently? Do people miss out on the opportunity to sell their business if they wait too long? 

Mike 

Good question. I would say the answer is, no, they may be missing other things in their life if they wait too long, that would I, where I’d be more concerned about, right? You know, I think, certainly, we see a lot of business owners that are very passionate about running their business and maybe it is conflated with their purpose. I don’t know, you know, into their eighties. But the reality of the matter is our, all of our tickets have been punched at some point and we are on a one way trip and no one will live forever. And so, if you think about that in the context of how much time you have left, you really have to be somewhat contemplative about that like, you know, do I want to do this, well into, you know, my eighties or nineties when, I may be passionate about the business, but what else could I be doing with my time? That would be more fulfilling or would allow me to achieve things that I might not be able to do if I continue to work in my business full time? And so, I think it does play into the conversation, right? You do have to be somewhat, again… self aware to understand when that has occurred for you. And I do think beyond that, you do have to be so, somewhat self aware about your skills. I think it’s hard sometimes to see if, you know, you’re still as sharp as you were when you were 40, right? Or, or 30 or 25. And, you know, are you sort of later in life, later in your career doing what’s needed to still be an excellent leader, mentor and guide for your business. And if that’s really not the case or you’re starting to find yourself thinking about other things or even your own mortality. I would encourage you to be more open to doing a deal. Because I don’t think it ever gets too late to think about doing a deal or, you know, need to do it for that reason. But I do know that, you know, we all are on a one way trip, we can’t live forever. And, you know, time is our most precious asset in many ways. And from that perspective, you do have to decide if you’re going to make time for other things before you leave this planet. And if that’s in the cards, you know, you do have to be, self aware enough to know that, you know, it may be time to do something. 

Matt 

You know, really well, said, Mike, I was just going to sort of reemphasize that last piece of, you know, you can always wait, but is it really the best thing for your business and your team? And, and then yourself, you know, personally, right? And, and, you know, have seen people who’ve waited quite, honestly too long and, you know, they lost certainly some of the enterprise value in the business, but it also just wasn’t a sort of a great period of time in the business, right? It was a, it was a tough end if you will, to that chapter. And so, you know, it doesn’t mean that waiting is the right or the wrong, but, it again goes back to, you know, is the business doing well? You know, have you met your goals personally? And, you know, what else? It’s a big, wide world out there, lots of things, to go, do and see. 

Ryan 

Absolutely. I think running a business and getting it to a point where you’re able to sell it is one of the most gratifying things, in life. And if you have the opportunity to have run that and you’re considering what is next, I think, really think, these, the discussion we had today, I think, is enlightening, you have an opportunity to think about what’s how you can make your life different, perhaps a different hats that you would like to wear and you want to focus that on, in a different company. Perhaps it’s even the time to take a step away and spend the time that you find to be most valuable. And it could be that, the, you’re just, you’re a bit tired of what you’re doing and you need that a little bit of a spark and that spark may not be in a business that you run today. And so, matt, you mentioned earlier, we see all sorts of reasons of why people would look to sell their firm. And the purpose of the discussion here today, I think has been helpful, in providing our audience, you know, what kind of things should you look for in your life? That says, maybe it is time maybe it is time for us to look at what’s next. And, and, the great opportunity that come with selling your business, the time to spend time with family, the capital that you get when you have a transaction, the, just even the satisfaction of going through the deal and getting that payment. And, and that next step that really allows you to kind of monetize, your life’s work. I think those are all really exciting ideas, for people to think. Hey, maybe this time, the value that I built in this company can be shared, with others and, I can take a good thing away from that. Thank you Mike, matt for this, conversation today. I’ll leave it up, to either of you for any closing comments or thoughts. 

Matt 

Great subject, Ryan, you know, I was thinking about, I, a much wiser Guy when I got into, this business, of helping, you know, founders, you know, realize their goals, and owners realize their goals. This, this old wise Guy said, well, you know, matt, you’re, you know, you, you’re well suited for this because, you know, you like the fight that’s the deal making, sort of the boxing aspect of it. You’ve got good experience, so, that’s sort of the counselor part of it. And I think the third part that you mentioned is, you know, you’re one part bartender too. So, I think this was the, a bit of the bartender discussion that we had today, but just a great subject. And this is why we’re here, guys. We love doing it, and working with people, on these really important decisions. So, Mike. 

Mike 

Thanks, Matt. I’ll untie my apron, and step out from behind the bar. And, we’ll tie a ribbon on it for this week’s. Shoot the moon podcast, encourage you to tune in next time we’ll unpack more topics of, hopefully topics of interest and intrigue around the world of M a and tech services. With that, make it a great week.