February 17, 2025 • 35 mins
Join Misty Lynch as she explores the intricacies of business exit strategies with Megan Kearney and Todd Enghauser, co-owners of Exit Factor. Discover valuable insights to elevate your business for a successful future.
Where to find Megan Kearney and Todd Enghauser
Where to find Misty
Websites:
Instagram: @mistylynchcfp
- Discussing the importance of planning an exit strategy early in the business lifecycle.
- Exploring various ways to exit a business beyond simply selling it.
- Understanding the impact of proper documentation and process on business valuation.
- Analyzing the changing trends in mergers, acquisitions, and private equity involvement.
- Highlighting the significance of setting a solid foundation for both new and existing businesses.
Where to find Megan Kearney and Todd Enghauser
- Website: exitfactor.com
- LinkedIn: linkedin.com/in/m-kearney
Where to find Misty
Websites:
Instagram: @mistylynchcfp
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to the Demistifying Money podcast, where each week you
will hear unforgettable conversations with expert guests about success, money, business,
and small steps you can take to elevate your life
and wealth. Now here's your host, Misty Lynch.
Speaker 2 (00:17):
Hey everyone, thank you so much for joining me today
for this episode of demist Defying Money. Today we're going
to talk about different parts of the business, but focusing
more on exiting the business, which is something that a
lot of entrepreneurs don't think about for most of their
business life cycle because we're looking maybe a week ahead,
a quarter ahead. But as a financial planner, sometimes I
(00:40):
like people to look decades down the road, really thinking
about what, you know, what things could look like in
the future. So I was excited to talk with Megan
Kearney and Todd Angkhauser today. They are the co owners
of Exit Factor and they're in the Boston metro West area,
but they're helping people really think about their business a
little bit differently, so I was excited to have them
on to talk about today. So thank you so much
(01:03):
Megan and Todd for joining Thanks for having it.
Speaker 3 (01:05):
This episode of Demystifying Money with Misty Lynch is proudly
sponsored by Soundview Financial Advisors. Visit www dot Soundview financial
Advisors dot com to learn more.
Speaker 2 (01:19):
I'd love to hear a little bit more from one
of you about exit factor and when somebody might reach
out to you for help when it comes to their
business planning.
Speaker 4 (01:29):
Yeah, so really there's multiple ways, I would say. The
first thing, the name in itself is exit, So people
think about exit first off as selling your business, but
there are also variations of even family transition. So someone
that's looking to you know, a baby boomer especially nowadays,
(01:51):
looking to sell their business, but rather transition to their
son or their daughter, So we help with that transition.
And then lastly, is is really putting a operator into
place and scaling back time. We've also started seeing the
enter side of things, not just the exit, but the entering.
So someone who just bought a business, how can we
(02:12):
help them set them up for success and almost have
a roadmap so ten twenty years down the line, their
foundation is set and they don't have to think, oh no,
what do I need to do now? But they've already
had that path ahead of them.
Speaker 2 (02:25):
That's great and Todd, what made you get into this line?
Speaker 4 (02:28):
Of work.
Speaker 2 (02:28):
Can you tell me what kind of brought you to
this path.
Speaker 5 (02:31):
Yeah, so myself got about twenty five years of experience
in M and A and so almost my entire adult
life have been either starting businesses, buying businesses, and then
of course as that process goes scaling and then eventually exiting.
So it's also what my family has been a part of,
so I grew up into it. So it's really my bloodline,
(02:53):
I guess you could say. But yeah, so when I
came across an exit factor as an opportunity because it
is a franchise, we were really excited about that opportunity
because it was providing value in that small business market
and even lower mid market that didn't exist today. So
we were eager to get in and help businesses. And
you know, wish myself I had this ten years ago,
(03:15):
I could have used it on my own businesses over
the years.
Speaker 2 (03:18):
Yeah, So on that topic, what are some things you know,
a lot of business owners they're not thinking about their
exit strategy. And I've worked with a lot of entrepreneurs.
I was raised by one who loved what he did
and he could never see himself ever retiring. I think
his officially worked until like the day before he died,
and so I think a lot of us have that
mindset like how could we ever want to leave? We
(03:38):
love it? But then you look at the numbers and
there's about ten thousand baby boomers retiring every single day,
Like there is a massive transfer as far as business.
So what are some of the mistakes that business owners
make if they don't think about their exit strategy until
either they're forced to or they just maybe they never
think about it at all.
Speaker 5 (03:58):
So I what people need to understand is the process
around exiting does take a little time, so it's not overnight,
and if you're doing it properly, there's things that are
definitely on the financial side, but ways to package your
business for a proper exit. So this talks about accounting,
but is also process and procedures, contracts, just making sure
(04:19):
things are easily transferable and ready for that potential exit.
This ultimately raises the value of your business and then
packages is nicely to be sold. So we're seeing where
businesses are selling faster, they're selling for a higher multiple
if they're preparing properly for that exit. And that process
generally takes somewhere between one and three years if you're
(04:40):
doing it properly and can take longer on bigger businesses
or businesses with multiple facets within their business.
Speaker 2 (04:48):
Megan, what are some of the ways that you approach
the business owners when you're talking about increasing the value
of their business in that way? What are some things
that maybe people aren't thinking about as far as increasing
the value or scaling because they're just you know, maybe
they're they're just thinking about maybe this year compared to
last year. How do you help people identify some of
those areas?
Speaker 4 (05:10):
Yeah, I think a perfect example is the business owner themselves.
They are a lot of the value of the business.
So if they're wanting to sell the business in three years,
they're like, oh, shoot, they've gotten to a point. I'm
the value of the business. So what we try to
help these business owners with is that could be putting
(05:30):
an operator into place over those few years before their
transitioned to exit. So when they get to that point,
you know, the operator could have some equity in the
business and super excited to potentially take it over or
just be running the business in itself. I think that's
the main one at least that comes to me.
Speaker 2 (05:51):
Yeah, I think that's a good point. I think a
lot of people do think that they are them and
the business are inseparable, and I think in a lot
of ways that's unfortunate because you know, a lot of
times the business could continue and thrive if you were
to step aside, and maybe that can help a lot
of people and help your clients with continuity anything like that,
(06:12):
and it can become part of your identity for some business.
Speaker 4 (06:16):
Yeah. And I think another part is just the marketing aspect,
Like business owners are so like even myself, like you're
so honed in on what you're focusing on, you don't
think about the bigger picture of it all. And for example,
we could dissect into their marketing and see, Okay, in
their marketing piece, they're spending X amount of dollars on
(06:37):
this one specific you know area, and they're generating zero
dollars in revenue, and people don't recognize that because they're
so focused on this is what I've always done, this
is what I'm doing, and just taking a another kind
of step back and recognizing and almost like a second
set of eyes coming in and seeing how can we
(06:58):
add value to that. So that's another one that comes
to my mind. Automatically that we've seen.
Speaker 2 (07:03):
Yeah, I think a lot of us don't have a
second set of eyes necessarily when we're the owner or
the CEO, and we could continue a lot of times
to spend money in different areas that aren't giving us
that return on investment just because we don't really know
when it's time to, you know, pull the plug on
that and shift somewhere else. So I think it is
important if you have somebody who's asking those questions like
(07:24):
what is this part doing for you? How is this
you know, and seeing what happens when it comes to
the bottom line. So a lot of us like to
try the new shiny thing and think that maybe this
is going to be it or this will change things,
and then there could be some things that are actually
really really effective that could put more attention to So
I think that's such an interesting way to look at
it and so important, especially with a lot of you know,
(07:46):
a lot of marketing and things like that are saying
to business owners todd that you have to show up.
You have You're the business, your who people are making
deals with and wanting to work with, So it has
to be your face. You you you, How can that help
and harm businesses that are trying to scale and get
to a bigger level.
Speaker 5 (08:05):
Yeah, I think you know, it is often tough, especially
in businesses where the business is named after an individual,
right and our businesses, we recently were talking to somebody
the business owner had owned that business for forty years.
So in this case, you know, the recommendation is we're
bringing somebody up with from within who knows the business's
benefits of the business as well, just not you know,
(08:27):
maybe not in the front. So it can it can
harm a business in a way that it makes it
hard to transfer because that likeness is that person. So
I think over time you can make changes, direct your
marketing a little bit, and just do things to not
be so focused on that individual and then test different
(08:47):
things to see if you you know, are these relationships
the way they are because it was that guy or
that woman who controlled that relationship, and if not, how
do we how do we bring other people into that
to just make sure that those you know, especially in
a business, been around a long time A lot of
times it is that person, so you know, understanding how
(09:09):
we can make those changes and still have some success
in that business when it goes to transfer. Them over
to another operator or another business owner.
Speaker 2 (09:18):
Megan, is there any ego and emotion that's involved in
your work when it comes to thinking about a business
maybe continuing without you?
Speaker 5 (09:26):
Do you have?
Speaker 2 (09:26):
How do you help business owners who maybe are thinking, Yes,
part of me wants to exit, part of me wants
to either retire or do something different, And then the
other part of it is thinking, but everyone's gonna want
to leave and they're working with me, So how do
you handle those those feelings when they come up with
your clients?
Speaker 4 (09:44):
Yeah, there's definitely no ego. No, I'm just kidding. I
think that's definitely a big part of it. It's not
even ego, it's it's this is their baby. This is
something that they've developed for so many years and it's
so crucial to them. And I think it's almost a
realization like we Todd and I talk a lot about
(10:06):
like legacy, who do we want to leave our legacy for?
What does that look like? And so I think automatically
more it's like an educational moment, switching your thought to
I'm leaving this business to I'm leaving this business to
continue my legacy that I've been doing for the past
(10:26):
thirty years, five years, ten years, whatever it is. So
I think for them it's almost just recognizing that this
is exciting, this is so amazing. You just developed, you
just built this great business and company that's profitable. Why
don't we continue that, whether that's to a family member
or someone that's looking to take it over and have
(10:48):
that legacy continue on. And I think for me that's
always what gets the business owners excited and interested, because
you see the love when they're talking about their business
and wanting to keep it or wanting to know what
to do. So I think it's mainly focused on that
legacy part of it.
Speaker 2 (11:08):
Do you ever see business owners that maybe hang around
longer then they maybe should and all impacts the value
of the business.
Speaker 4 (11:18):
Yeah, I think. I mean, Todd, you've you should definitely
speak on this. You've owned lots of businesses, and I
think I've seen that of your own self.
Speaker 5 (11:28):
What we've seen. What I think is most common is
they don't realize they might be slowing things down. And
some of that has to do with the fact that
they've done things a certain way for a certain period
of time, or maybe if it's an older owner, they're
not up to date. On some of the newer technologies
or advancements and what they can do to speed things along.
So a lot of times it's, you know, they don't
(11:50):
want to let go, and some of it is might
be they they're afraid of what they're going to do next,
or be being bored, and that is one of the
things we touch on. So as we're going through our
exit process, we are having conversations about what day zero
looks like once they fully exited, whatever that exit means
to them. So and then we try to engage with
(12:11):
partners of ours to also help them into that next
step transition.
Speaker 2 (12:15):
Yeah, I think that's I think that's an important piece
of it. I think that could be why a lot
of people do feel conflicted about leaving or saying because
they really when I talk to people even who are
leaving corporate careers, a lot of times they haven't spent
too much time planning on day one or day twenty
of retirement after they get back from the cruise or
whatever it is that they're planning to do. So I
think it's such an important thing for people to start
(12:37):
to visualize because usually the entrepreneurs and the seat they're
creative people or they're used to being very engaged, and
so it can feel like a dramatic shift, almost like
an empty nest when maybe the business baby is gone.
I want to ask you about valuations because I think
that sometimes we get a little bit confused about what,
you know, what is actually adding to the to the
(12:59):
valuation of our business, kind of like the way some
people will make some home improvements and think, oh, yeah,
this wallpaper I put up is going to add so
much value and it doesn't. So what are the ways
that you actually can look at certain things? What are
some of the big ones that add a lot of
value to the businesses that are up for sale?
Speaker 5 (13:16):
So I think a big portion of it is financial
on that side for sure. So from that respect that
this is always one of the places we start. There
are specific accounting practices that we can go by and
look at that when most business owners, especially in smaller businesses,
are really laser focused on saving as much taxes as possible,
(13:38):
we can show where there's some evidence when we're thinking
about exiting where that strategy needs to adjust a little.
So it's not more about tax savings, but there may
be ways you want to report it so it shows
more value in that business that might increase the ultimate
multiple of that sale. I think the other things we
get into there's a lot of process and procedure, So
(13:58):
businesses hack to be able to be transitioned over to
somebody else. So we want to make sure that those
processes are documented, can be followed, that they make sense.
Contracts are another one, so this could be vendor agreements,
maybe it's a lease agreement. We need to make sure
those are transferable to other owners and that aren't going
(14:19):
to get in the way at that time of the sale.
And then ultimately, if we are you know, exiting doesn't
have to mean selling, but if we are talking about
it sell, we want to make sure that that business
sells quickly if it can, so by packaging it up
and making all these things come into play, and we
know that they can be transitioned easily. If people can
understand and follow the directions easily, that's what makes it
(14:40):
more attractive and it allows that business to sell faster.
Speaker 2 (14:44):
What are some of the other ways that people exit
besides a sale, because some people might think that is
the only path, But what are some of the other
ways you see it?
Speaker 5 (14:52):
So I mean transitioning to other family members is an
example of exit. Scaling back and maybe putting an operation
so you take more of an advisory role, I think
is another opportunity so that you know that's that technically
is an exit. So they might not be selling that business,
but maybe they're scaling back and then creating more of
(15:13):
a residual income in retirement process. For lack of a
better term, I think yeah, No.
Speaker 2 (15:20):
I think those those are really helpful things for people
to think about. And I'm curious when you when you
see other exits that have happened, or maybe experiences with
your own, what are some of the common pitfalls that
you see or some of the mistakes that maybe people
are making when it comes to exiting their business. I
know it's hard for a lot of people to understand
that they might not be in control of when they're
(15:42):
unable to work anymore or when they have to stop working,
but most people are not. Most of these decisions are
made for you. So what are some of the things
that you've seen that people might you know commonly have
happened to them when they're in this in this space.
Speaker 5 (15:56):
I think the biggest mistake people are making is they're
not starting early. Enough, you know. So whether I'm entering
into a business or I think I might exit a
business in ten or even twenty years from now, exit
should always be in mind, right, You should have some
sort of thought as to what you think this process
is for you down the line, so you can be
(16:17):
doing things in your business strategy that prepares you for
a great exit later on down the line. So I
think starting early.
Speaker 4 (16:25):
Yeah, I would also say documentation. That's I was just
meeting with family transition the other week and the father
who's a baby boomer and you know, the son who's
a millennial, and during the conversation of discovery, it was interesting,
the millennial was like, well, I don't really know if
(16:48):
my father has fully documented everything in his mind. He's like, oh,
I know what I'm doing, I know, you know, all
these different aspects of it. And so I think documentation
is so key that gets honestly miss coonscruted or just
through the pipeline of just being unorganized. And so during
(17:10):
those transitions or even exits, people don't realize there's so
much you know, legal documents or just documents within you know,
the business itself. I mean, it's crazy all the different
aspects that go into what how to run a.
Speaker 2 (17:27):
Business, And I think I'm in a very regulated business.
I did purchase a business from somebody who created it
in twenty ten, so I think when I talk to
other people, I had the most goldilocks version of acquiring
a practice that I've ever heard of. You know, she
was looking to retire. Her clients were asking when are
you going to retire? Because she we're in the retirement space.
(17:48):
We're helping people with their financial plans. And she didn't
have a natural successor no one in her family wanted it.
And then the other person working here was not interested
in the investment management side of it, and so I
met her through my network, which was helpful. But what
are some of the ways that you see people making
connections If there is no natural next person in line
(18:13):
to take over, that could potentially keep cause some anxiety.
So how do you help people connect with the right
person to potentially take over their business if they're looking
to exit, if it's not if they've always worked for themselves.
Speaker 5 (18:28):
So this is a big challenge because a lot of businesses,
they don't exit right they close their doors. So this
is kind of why we're here we're trying to help
avoid some of that, and networking is a part of it.
But you know, I think having the right partnerships, getting
in front of the right people, and so in our case,
(18:48):
we have a network full of advisors, business brokers. You know,
we even have interest from private equity if that's a
route people want to take. So I think that exposure
and exposing in different ways. I think through networking and
advertising that kind of stuff is what helps. But to
your point, there are a lot of businesses that are
(19:09):
just shutting down and closing the doors because there is
no succession, because there is unknown interest, or just the
fact that nobody knows that that business is ready to sell.
Speaker 2 (19:20):
Yeah. I think in my space there's a lot of
mergers and acquisitions with financial advisory practices. But I've been
in rooms where it's like, all right, who's looking to
buy a business? And a million hands go up, and
then who wants to sell? And there's like three people
that are like okay, like wow, and it's kind of
mind blowing. But I will say one thing about the
transition that I had. When someone works for themselves for
(19:41):
over a decade, You're right, there's not usually a lot
of policies and procedures in place. It's all right here, yeah,
And so how do you help them? Is there any
tools or technology or any things that you've found to
be helpful as far as getting those things out in
the least painful way possible for people who are like,
oh my god, this sounds like a lot of work.
Speaker 5 (19:59):
Yeah, it's mostly an interview process, right, So we have
some proprietary tools that we use, but also we're engaging
with some third party technology where we're doing some interviews
and trying to extract that information out so we can
help create that documentation. So whether these are visuals or
like manuals, right, so maybe it's an operation manual or
maybe it's just HR documentation, so things of that nature.
(20:22):
So this could be a third party that we bring
in to assist if it's maybe an HR accounting related
Otherwise we'll be viewing a lot of interviews trying of
dragging that information out of the folks to do that.
Speaker 2 (20:36):
Do you see any trends in the merger acquisition space.
I know I'm seeing online a lot of people being
like how to get rich buy a business? All these
business owners are leaving and you see these like, and
I'm like, how does like who's giving you the lending
to buy a business in a field that go zero experience?
Like are there any things that you're seeing where maybe
(20:56):
people are thinking like I want to buy a business,
Like tell me who's selling and there not maybe the
right person or what trends are you seeing out there?
Speaker 4 (21:04):
And yeah, I would say, I mean as a millennial
myself and being a part of a mastermind group of
other individuals who are looking at buying businesses, and then
even just reading articles. There was an article recently that
talked about fifteen percent of millennials, which I know is low,
but will own in their lifetime three to five businesses.
(21:27):
That's crazy. I mean when you think about baby boomers today,
they're owning one business for thirty years. So that is
a huge trend as I'm seeing it with my friends
who are transitioning to or who are taking over their
family's business, or they're not taking over their family's business
and they're looking at buying a business. I think a
(21:49):
lot of it also has to do with people wanting
to work with other people. So say there's one other
friend of mine is interested in buying a business. People
are starting to partner together and go in to businesses together,
So you could have up to even three individuals running
a singular business just based on being able to afford
(22:12):
that business, run it properly, and also probably have their
full time job at the same time. So there's definitely
a trend, I would say with millennials and just in
general people wanting to buy business businesses that are out there.
Speaker 2 (22:26):
Yeah, I think that's definitely a trend. And I'm wondering
if we're owning three to five businesses, if it's success
stories or if it's a little bit of trial and error,
or maybe a combination of both. Todd, you've owned a
few businesses, what are your thoughts there?
Speaker 5 (22:39):
Yeah, so there is definitely a little trial and error
that's happening, no question. But what I'm seeing, probably in
the last five years, more and more of is stacking
of businesses. So home services is a great example, so
you know, plumbing, electrical, HVAC. But now I'm even seeing
where they're stacking in pressure washing in warmer states, pool
(23:01):
cleaning services all within one group of companies. So that's
a trend I'm seeing. And then, yeah, some of this
has been a little bit of trial and error and
getting through, but there's a lot of resources out there
to help. And the other big trend, I would say,
and that's coming into play as private equity. So private equity,
(23:22):
which used to have very strict rules, maybe higher thresholds
for entering, are lowering those entry thresholds, and so they're
requiring some of these smaller businesses which may not have
been on the table a few years ago.
Speaker 2 (23:36):
And what I think we do with them? What is
happening with those you know, if businesses seem to be
getting kind of gobbled up from different you know, corporate
you know, or other entities, what are you seeing there?
Is it just kind of somebody looking for a buyer
and you know, they might have the highest software I.
Speaker 5 (23:54):
Think for them. A lot of times, especially on the
private equity side, we're seeing where they're just creating larger
market business by combining some of these services. But we've
seen both where they're buying and holding for short term
and just trying to gre you know, mesh businesses together
to create a bigger portfolio. But we've also recognized that
(24:15):
some of them are holding for long term and their
goal is to hold for long term, So just creating
that bigger value. Even on the financial side, we've seen
where books of businesses are are being bought out and
they're doing a stay in play where they're keeping the
owners in place for say three to five years, so
that name of that business can con continue forward in
(24:36):
that relationship. But then they're transitioning over to a salary.
But then these larger firms are looking just acquire that
overall book of business so they can bring it together
with the other groups and make a larger portfolio out
of it.
Speaker 2 (24:50):
Yeah, there's definitely a lot of that in the financial
services space. I definitely have people as soon as I
took over the business being like so it's interesting, But
sometimes I think about the transition that I experienced and
really we both kind of went into it not knowing
very much, and we did get some help externally to
try to value the business. But I do wonder sometimes
(25:12):
if things were kept more organized or kind of planned
out more, you know, is this a good opportunity for
buyers when maybe their seller hasn't done a lot of
planning ahead, And is that something that you've talked to
people about as far as you know, growing that valuation,
Because if people don't know. Then it could it could
(25:32):
be kind of the wild wild West out there as
far as anybody.
Speaker 5 (25:35):
Who's buying a business wants a good deal, and so
for businesses who haven't prepared, they can find those good deals.
But there's also risk with that because because things aren't documented,
or because things aren't done in a proper way, it
can make transitioning very difficult. It can even result in
loss of clients or maybe a loss of a vendor
in that transition process you didn't think of, or you're
(25:56):
at least going up like thirty percent and you didn't
account or so it is a double edged sword a
little bit where you can find good deals that haven't
been prepared properly, but then also that transitioning risk goes up.
Speaker 2 (26:09):
What are some early warning signs that a business might
not be ready for a sale and how can owners
start to correct those?
Speaker 4 (26:17):
Oh gosh, yeah, I'm like there's so many. I would say,
I mean, it depends if they're the value of their
business and they're like, oh, I want to sell, we can't.
If they're looking to sell, they have to continue moving
forward being the operator. And so a lot of it
is where's the value of the business is there lots
(26:39):
of mom and pop shops. The aunt or the uncle
someone is the bookkeeper. So finding ways to automate and
get you know, an actual bookkeeping service in place of
their aunt, because that's not going to you know, it's
not going to show value in the end. What about you, Todd, Yeah, I.
Speaker 5 (26:57):
Mean, so we see some telltale signs would be if
a business has been around for a while and maybe
they're stagnant, right so that their social media isn't updated,
their websites are older. There's some signs like that that
Megan mentioned. Maybe they're bookkeeping is being done internally instead
of professionally. So there's some things there that we can
(27:17):
see that are signs that a business may not be ready.
Speaker 2 (27:22):
How important do you think? You know, maybe there's a
business and they're looking and they've done everything on their own.
Is bookkeeping really one of the first places we look
as far as where to hire a professional or have
somebody come in when it comes to valuations.
Speaker 5 (27:35):
Well, I think bookkeeping is definitely key, just as it's
like the baseline to everything in a company. But that
doesn't mean if they're doing it internally they're doing it wrong.
But it is one of the places we take a
first deep dive look only because this is where we
can show a really quick turnaround in value. So by
(27:56):
making some key strategic changes, we can also hire a
lot of value right up front through the bookkeeping process.
Speaker 2 (28:04):
From the lending side, are people who maybe are thinking
about maybe think about selling a business, someone thinking about
buying a business. Has the climate changed as far as
the banking side or lending as far as what people
might need to consider if maybe it is a little
bit harder to get your hands on the money that
you might need in order to make certain investments.
Speaker 5 (28:24):
Yeah, I mean things have tightened a little, I would say,
just in general over the last couple of years. But
the funds are available. A business that is generating good revenue,
a business that has proper things in place for transition
or attractive to banks, so they want to see what's
nice about our process. As we go through and get
(28:45):
a business ready, it really is almost like this is
packaged stuff ready to go, and we know what SBA
lenders are looking for, we know what private lenders are
looking for, and so we can tailor it to those
things and then they're getting not only an evaluation of
that business that is very close to a CPA certified evaluation,
(29:06):
but then also a roadmap of what that looks like
to potentially grow that business. And and so not only
do the buyers like that, but lenders know they say, Okay, wow,
well this business is worth X y z today, but
we know it can grow to this over the next
three to five years. They see a lot of value
in that and are more willing to lend in those
scenarios as opposed to somebody that you know, maybe not
(29:29):
a business a proper business plan is written out, or
they don't know the history of that business or where
that business can grow to. And the opposite of that,
even maybe it's a business that his medits peak right
and we think the outcome or the long term outcome
may be flat. So those are important things to recognize.
Speaker 3 (29:49):
That's interesting.
Speaker 2 (29:50):
Yeah, No, I think sometimes I've talked to people who,
you know, maybe they want to sell their business and
they just think, like you know, we talk to lenders,
but they just don't see it. They don't see the value,
you know, the way that that person feels that it's there.
So I think having that strategy or having somebody else
come in and kind of know what the lenders are
looking for can be incredibly valuable because they might be
able to communicate it really well to you, where you
(30:12):
can then translate into okay, this is where we should
head instead of, you know, trying to find a buyer
and make it happen on their own. It's definitely an
interesting and interesting for people to think about at any
stage of their business. Megan, if you're talking to somebody
who's new into business and they're thinking like, I can't
ever think about leaving because they equate it to like
getting a prenup before you get married, and I don't
(30:32):
want to even think about the time when we're not together.
But what are some of the ways that you, guys,
convince people or or kind of show them the value
of what you do and how it can help them
through each step of the process up to the ultimate exit,
which most people should plan for anyway.
Speaker 4 (30:47):
Yeah, I think it's not even we're trying to get them, Oh, okay,
start thinking about this, you know, in five years. But
really I think what it is about is it's never
too early, and it's never too early to prepare to
set the foundation. Think about it as if you're building
a house. What's the first thing that you're going to
(31:08):
do is you're going to lay the foundation. So it's
always important whether you just bought a business, have a
business that you have a solid foundation, and especially one
that you just started or just bought, you don't know
what that foundation is about. So being able to really
dig into that and pinpoint different pieces of this is
where you're at today and this is where you can
(31:30):
be or will be in ten twenty years, I think
is really important. So it's just recognizing the value add
of having a strong foundation and knowing where you're going
to go. Because great, you start a business or you
have a business, do you know what that end goal is?
Typically they have an idea, but we really dive into
(31:53):
the value piece of their business, the optimization, the record,
the people, the processes, the transform are we going to
grow the business? And then of course, lastly the exit.
So it's not just focused on the exit, but it's
all the holistic view of the of the business.
Speaker 2 (32:10):
I think that sounds like taking care of your business
in a way. Yeah, you know, really you know understanding
that especially for people who maybe do acquire a business
and maybe maybe everything is a little bit unorganized and
maybe you can either continue like we've always done. But
I think for a lot of people, they they know
the risk in that of doing things the way they've
always been done. So I think it sounds like a
(32:31):
really smart opportunity for people to engage with you at
any level of their business, whether they're just starting and
you know, maybe in the middle of it and things
are going and they think they want to scale, or
they're about to you know, maybe consider you know, what
they want to do next. So how can people reach
out to you and learn more if they're interested in
talking with you about about their own business.
Speaker 4 (32:53):
Yeah, they can reach out to us at our direct
line is seventy one four four two nine to nine
five zero, or they can shoot us an email at
you can do megant Kerney at exit factor dot com
and then our website is just exit factor dot com
backslash Lexington. Awesome.
Speaker 2 (33:14):
Thank you. Any final thoughts to add, Todd anything. If
you had to tell everybody business owners one thing, what
would you suggest that we all think about as a guest?
Speaker 5 (33:24):
I think for me, I wish I would have come
across that exit Factor years ago in some of my
own businesses and exit and to be fair, I'm I
also operate other businesses outside of this, and I'm engaging
this into my own businesses as well. So my advice
is take a look at it. Start early, think about
whether where you want to be today and say ten
(33:46):
years from now, and if it's anything in between, definitely
reach out to us. I think we can help awesome.
Speaker 2 (33:51):
Well, it's always good to hear that you're in your
own cooking and you understand what the value is and
you do it yourself. But thank you both so much
for joining. If you're a business owner and you are,
you're just you know, maybe maybe you realize you haven't
thought too too much about the future, or maybe you're
getting to that point where you're thinking about it. I
think it's definitely worth consulting with somebody from the outside,
bring a brush that eyes in, look at the business
(34:11):
and help you get the most for it. Because you've
put your energy, your money, your time into this business,
so it's certainly worth it for you to take care
of it and make sure that you are getting the
most the value out of it that you've put in.
So thank you both so much for joining. And if
you're looking to do a financial plan because you want
to figure out if it's time for you to be
work optional, Please head over to mister Lynch dot com.
(34:34):
We can set up some time to chat with you
about your own financial plan, or you could catch up
on old episodes up the podcast. Thank you all so
much for listening, and we'll talk again next week. Thank
you for joining us on another insightful episode of demonst
Buying Money. If you enjoyed this episode, please subscribe, rate
and leave a review. Stay tuned for more engaging conversations
on our next episode, and remember knowledge is the key
(34:56):
to financial empowerment.
Speaker 5 (35:02):
Last Las
Welcome to the Demistifying Money podcast, where each week you
will hear unforgettable conversations with expert guests about success, money, business,
and small steps you can take to elevate your life
and wealth. Now here's your host, Misty Lynch.
Speaker 2 (00:17):
Hey everyone, thank you so much for joining me today
for this episode of demist Defying Money. Today we're going
to talk about different parts of the business, but focusing
more on exiting the business, which is something that a
lot of entrepreneurs don't think about for most of their
business life cycle because we're looking maybe a week ahead,
a quarter ahead. But as a financial planner, sometimes I
(00:40):
like people to look decades down the road, really thinking
about what, you know, what things could look like in
the future. So I was excited to talk with Megan
Kearney and Todd Angkhauser today. They are the co owners
of Exit Factor and they're in the Boston metro West area,
but they're helping people really think about their business a
little bit differently, so I was excited to have them
on to talk about today. So thank you so much
(01:03):
Megan and Todd for joining Thanks for having it.
Speaker 3 (01:05):
This episode of Demystifying Money with Misty Lynch is proudly
sponsored by Soundview Financial Advisors. Visit www dot Soundview financial
Advisors dot com to learn more.
Speaker 2 (01:19):
I'd love to hear a little bit more from one
of you about exit factor and when somebody might reach
out to you for help when it comes to their
business planning.
Speaker 4 (01:29):
Yeah, so really there's multiple ways, I would say. The
first thing, the name in itself is exit, So people
think about exit first off as selling your business, but
there are also variations of even family transition. So someone
that's looking to you know, a baby boomer especially nowadays,
(01:51):
looking to sell their business, but rather transition to their
son or their daughter, So we help with that transition.
And then lastly, is is really putting a operator into
place and scaling back time. We've also started seeing the
enter side of things, not just the exit, but the entering.
So someone who just bought a business, how can we
(02:12):
help them set them up for success and almost have
a roadmap so ten twenty years down the line, their
foundation is set and they don't have to think, oh no,
what do I need to do now? But they've already
had that path ahead of them.
Speaker 2 (02:25):
That's great and Todd, what made you get into this line?
Speaker 4 (02:28):
Of work.
Speaker 2 (02:28):
Can you tell me what kind of brought you to
this path.
Speaker 5 (02:31):
Yeah, so myself got about twenty five years of experience
in M and A and so almost my entire adult
life have been either starting businesses, buying businesses, and then
of course as that process goes scaling and then eventually exiting.
So it's also what my family has been a part of,
so I grew up into it. So it's really my bloodline,
(02:53):
I guess you could say. But yeah, so when I
came across an exit factor as an opportunity because it
is a franchise, we were really excited about that opportunity
because it was providing value in that small business market
and even lower mid market that didn't exist today. So
we were eager to get in and help businesses. And
you know, wish myself I had this ten years ago,
(03:15):
I could have used it on my own businesses over
the years.
Speaker 2 (03:18):
Yeah, So on that topic, what are some things you know,
a lot of business owners they're not thinking about their
exit strategy. And I've worked with a lot of entrepreneurs.
I was raised by one who loved what he did
and he could never see himself ever retiring. I think
his officially worked until like the day before he died,
and so I think a lot of us have that
mindset like how could we ever want to leave? We
(03:38):
love it? But then you look at the numbers and
there's about ten thousand baby boomers retiring every single day,
Like there is a massive transfer as far as business.
So what are some of the mistakes that business owners
make if they don't think about their exit strategy until
either they're forced to or they just maybe they never
think about it at all.
Speaker 5 (03:58):
So I what people need to understand is the process
around exiting does take a little time, so it's not overnight,
and if you're doing it properly, there's things that are
definitely on the financial side, but ways to package your
business for a proper exit. So this talks about accounting,
but is also process and procedures, contracts, just making sure
(04:19):
things are easily transferable and ready for that potential exit.
This ultimately raises the value of your business and then
packages is nicely to be sold. So we're seeing where
businesses are selling faster, they're selling for a higher multiple
if they're preparing properly for that exit. And that process
generally takes somewhere between one and three years if you're
(04:40):
doing it properly and can take longer on bigger businesses
or businesses with multiple facets within their business.
Speaker 2 (04:48):
Megan, what are some of the ways that you approach
the business owners when you're talking about increasing the value
of their business in that way? What are some things
that maybe people aren't thinking about as far as increasing
the value or scaling because they're just you know, maybe
they're they're just thinking about maybe this year compared to
last year. How do you help people identify some of
those areas?
Speaker 4 (05:10):
Yeah, I think a perfect example is the business owner themselves.
They are a lot of the value of the business.
So if they're wanting to sell the business in three years,
they're like, oh, shoot, they've gotten to a point. I'm
the value of the business. So what we try to
help these business owners with is that could be putting
(05:30):
an operator into place over those few years before their
transitioned to exit. So when they get to that point,
you know, the operator could have some equity in the
business and super excited to potentially take it over or
just be running the business in itself. I think that's
the main one at least that comes to me.
Speaker 2 (05:51):
Yeah, I think that's a good point. I think a
lot of people do think that they are them and
the business are inseparable, and I think in a lot
of ways that's unfortunate because you know, a lot of
times the business could continue and thrive if you were
to step aside, and maybe that can help a lot
of people and help your clients with continuity anything like that,
(06:12):
and it can become part of your identity for some business.
Speaker 4 (06:16):
Yeah. And I think another part is just the marketing aspect,
Like business owners are so like even myself, like you're
so honed in on what you're focusing on, you don't
think about the bigger picture of it all. And for example,
we could dissect into their marketing and see, Okay, in
their marketing piece, they're spending X amount of dollars on
(06:37):
this one specific you know area, and they're generating zero
dollars in revenue, and people don't recognize that because they're
so focused on this is what I've always done, this
is what I'm doing, and just taking a another kind
of step back and recognizing and almost like a second
set of eyes coming in and seeing how can we
(06:58):
add value to that. So that's another one that comes
to my mind. Automatically that we've seen.
Speaker 2 (07:03):
Yeah, I think a lot of us don't have a
second set of eyes necessarily when we're the owner or
the CEO, and we could continue a lot of times
to spend money in different areas that aren't giving us
that return on investment just because we don't really know
when it's time to, you know, pull the plug on
that and shift somewhere else. So I think it is
important if you have somebody who's asking those questions like
(07:24):
what is this part doing for you? How is this
you know, and seeing what happens when it comes to
the bottom line. So a lot of us like to
try the new shiny thing and think that maybe this
is going to be it or this will change things,
and then there could be some things that are actually
really really effective that could put more attention to So
I think that's such an interesting way to look at
it and so important, especially with a lot of you know,
(07:46):
a lot of marketing and things like that are saying
to business owners todd that you have to show up.
You have You're the business, your who people are making
deals with and wanting to work with, So it has
to be your face. You you you, How can that help
and harm businesses that are trying to scale and get
to a bigger level.
Speaker 5 (08:05):
Yeah, I think you know, it is often tough, especially
in businesses where the business is named after an individual,
right and our businesses, we recently were talking to somebody
the business owner had owned that business for forty years.
So in this case, you know, the recommendation is we're
bringing somebody up with from within who knows the business's
benefits of the business as well, just not you know,
(08:27):
maybe not in the front. So it can it can
harm a business in a way that it makes it
hard to transfer because that likeness is that person. So
I think over time you can make changes, direct your
marketing a little bit, and just do things to not
be so focused on that individual and then test different
(08:47):
things to see if you you know, are these relationships
the way they are because it was that guy or
that woman who controlled that relationship, and if not, how
do we how do we bring other people into that
to just make sure that those you know, especially in
a business, been around a long time A lot of
times it is that person, so you know, understanding how
(09:09):
we can make those changes and still have some success
in that business when it goes to transfer. Them over
to another operator or another business owner.
Speaker 2 (09:18):
Megan, is there any ego and emotion that's involved in
your work when it comes to thinking about a business
maybe continuing without you?
Speaker 5 (09:26):
Do you have?
Speaker 2 (09:26):
How do you help business owners who maybe are thinking, Yes,
part of me wants to exit, part of me wants
to either retire or do something different, And then the
other part of it is thinking, but everyone's gonna want
to leave and they're working with me, So how do
you handle those those feelings when they come up with
your clients?
Speaker 4 (09:44):
Yeah, there's definitely no ego. No, I'm just kidding. I
think that's definitely a big part of it. It's not
even ego, it's it's this is their baby. This is
something that they've developed for so many years and it's
so crucial to them. And I think it's almost a
realization like we Todd and I talk a lot about
(10:06):
like legacy, who do we want to leave our legacy for?
What does that look like? And so I think automatically
more it's like an educational moment, switching your thought to
I'm leaving this business to I'm leaving this business to
continue my legacy that I've been doing for the past
(10:26):
thirty years, five years, ten years, whatever it is. So
I think for them it's almost just recognizing that this
is exciting, this is so amazing. You just developed, you
just built this great business and company that's profitable. Why
don't we continue that, whether that's to a family member
or someone that's looking to take it over and have
(10:48):
that legacy continue on. And I think for me that's
always what gets the business owners excited and interested, because
you see the love when they're talking about their business
and wanting to keep it or wanting to know what
to do. So I think it's mainly focused on that
legacy part of it.
Speaker 2 (11:08):
Do you ever see business owners that maybe hang around
longer then they maybe should and all impacts the value
of the business.
Speaker 4 (11:18):
Yeah, I think. I mean, Todd, you've you should definitely
speak on this. You've owned lots of businesses, and I
think I've seen that of your own self.
Speaker 5 (11:28):
What we've seen. What I think is most common is
they don't realize they might be slowing things down. And
some of that has to do with the fact that
they've done things a certain way for a certain period
of time, or maybe if it's an older owner, they're
not up to date. On some of the newer technologies
or advancements and what they can do to speed things along.
So a lot of times it's, you know, they don't
(11:50):
want to let go, and some of it is might
be they they're afraid of what they're going to do next,
or be being bored, and that is one of the
things we touch on. So as we're going through our
exit process, we are having conversations about what day zero
looks like once they fully exited, whatever that exit means
to them. So and then we try to engage with
(12:11):
partners of ours to also help them into that next
step transition.
Speaker 2 (12:15):
Yeah, I think that's I think that's an important piece
of it. I think that could be why a lot
of people do feel conflicted about leaving or saying because
they really when I talk to people even who are
leaving corporate careers, a lot of times they haven't spent
too much time planning on day one or day twenty
of retirement after they get back from the cruise or
whatever it is that they're planning to do. So I
think it's such an important thing for people to start
(12:37):
to visualize because usually the entrepreneurs and the seat they're
creative people or they're used to being very engaged, and
so it can feel like a dramatic shift, almost like
an empty nest when maybe the business baby is gone.
I want to ask you about valuations because I think
that sometimes we get a little bit confused about what,
you know, what is actually adding to the to the
(12:59):
valuation of our business, kind of like the way some
people will make some home improvements and think, oh, yeah,
this wallpaper I put up is going to add so
much value and it doesn't. So what are the ways
that you actually can look at certain things? What are
some of the big ones that add a lot of
value to the businesses that are up for sale?
Speaker 5 (13:16):
So I think a big portion of it is financial
on that side for sure. So from that respect that
this is always one of the places we start. There
are specific accounting practices that we can go by and
look at that when most business owners, especially in smaller businesses,
are really laser focused on saving as much taxes as possible,
(13:38):
we can show where there's some evidence when we're thinking
about exiting where that strategy needs to adjust a little.
So it's not more about tax savings, but there may
be ways you want to report it so it shows
more value in that business that might increase the ultimate
multiple of that sale. I think the other things we
get into there's a lot of process and procedure, So
(13:58):
businesses hack to be able to be transitioned over to
somebody else. So we want to make sure that those
processes are documented, can be followed, that they make sense.
Contracts are another one, so this could be vendor agreements,
maybe it's a lease agreement. We need to make sure
those are transferable to other owners and that aren't going
(14:19):
to get in the way at that time of the sale.
And then ultimately, if we are you know, exiting doesn't
have to mean selling, but if we are talking about
it sell, we want to make sure that that business
sells quickly if it can, so by packaging it up
and making all these things come into play, and we
know that they can be transitioned easily. If people can
understand and follow the directions easily, that's what makes it
(14:40):
more attractive and it allows that business to sell faster.
Speaker 2 (14:44):
What are some of the other ways that people exit
besides a sale, because some people might think that is
the only path, But what are some of the other
ways you see it?
Speaker 5 (14:52):
So I mean transitioning to other family members is an
example of exit. Scaling back and maybe putting an operation
so you take more of an advisory role, I think
is another opportunity so that you know that's that technically
is an exit. So they might not be selling that business,
but maybe they're scaling back and then creating more of
(15:13):
a residual income in retirement process. For lack of a
better term, I think yeah, No.
Speaker 2 (15:20):
I think those those are really helpful things for people
to think about. And I'm curious when you when you
see other exits that have happened, or maybe experiences with
your own, what are some of the common pitfalls that
you see or some of the mistakes that maybe people
are making when it comes to exiting their business. I
know it's hard for a lot of people to understand
that they might not be in control of when they're
(15:42):
unable to work anymore or when they have to stop working,
but most people are not. Most of these decisions are
made for you. So what are some of the things
that you've seen that people might you know commonly have
happened to them when they're in this in this space.
Speaker 5 (15:56):
I think the biggest mistake people are making is they're
not starting early. Enough, you know. So whether I'm entering
into a business or I think I might exit a
business in ten or even twenty years from now, exit
should always be in mind, right, You should have some
sort of thought as to what you think this process
is for you down the line, so you can be
(16:17):
doing things in your business strategy that prepares you for
a great exit later on down the line. So I
think starting early.
Speaker 4 (16:25):
Yeah, I would also say documentation. That's I was just
meeting with family transition the other week and the father
who's a baby boomer and you know, the son who's
a millennial, and during the conversation of discovery, it was interesting,
the millennial was like, well, I don't really know if
(16:48):
my father has fully documented everything in his mind. He's like, oh,
I know what I'm doing, I know, you know, all
these different aspects of it. And so I think documentation
is so key that gets honestly miss coonscruted or just
through the pipeline of just being unorganized. And so during
(17:10):
those transitions or even exits, people don't realize there's so
much you know, legal documents or just documents within you know,
the business itself. I mean, it's crazy all the different
aspects that go into what how to run a.
Speaker 2 (17:27):
Business, And I think I'm in a very regulated business.
I did purchase a business from somebody who created it
in twenty ten, so I think when I talk to
other people, I had the most goldilocks version of acquiring
a practice that I've ever heard of. You know, she
was looking to retire. Her clients were asking when are
you going to retire? Because she we're in the retirement space.
(17:48):
We're helping people with their financial plans. And she didn't
have a natural successor no one in her family wanted it.
And then the other person working here was not interested
in the investment management side of it, and so I
met her through my network, which was helpful. But what
are some of the ways that you see people making
connections If there is no natural next person in line
(18:13):
to take over, that could potentially keep cause some anxiety.
So how do you help people connect with the right
person to potentially take over their business if they're looking
to exit, if it's not if they've always worked for themselves.
Speaker 5 (18:28):
So this is a big challenge because a lot of businesses,
they don't exit right they close their doors. So this
is kind of why we're here we're trying to help
avoid some of that, and networking is a part of it.
But you know, I think having the right partnerships, getting
in front of the right people, and so in our case,
(18:48):
we have a network full of advisors, business brokers. You know,
we even have interest from private equity if that's a
route people want to take. So I think that exposure
and exposing in different ways. I think through networking and
advertising that kind of stuff is what helps. But to
your point, there are a lot of businesses that are
(19:09):
just shutting down and closing the doors because there is
no succession, because there is unknown interest, or just the
fact that nobody knows that that business is ready to sell.
Speaker 2 (19:20):
Yeah. I think in my space there's a lot of
mergers and acquisitions with financial advisory practices. But I've been
in rooms where it's like, all right, who's looking to
buy a business? And a million hands go up, and
then who wants to sell? And there's like three people
that are like okay, like wow, and it's kind of
mind blowing. But I will say one thing about the
transition that I had. When someone works for themselves for
(19:41):
over a decade, You're right, there's not usually a lot
of policies and procedures in place. It's all right here, yeah,
And so how do you help them? Is there any
tools or technology or any things that you've found to
be helpful as far as getting those things out in
the least painful way possible for people who are like,
oh my god, this sounds like a lot of work.
Speaker 5 (19:59):
Yeah, it's mostly an interview process, right, So we have
some proprietary tools that we use, but also we're engaging
with some third party technology where we're doing some interviews
and trying to extract that information out so we can
help create that documentation. So whether these are visuals or
like manuals, right, so maybe it's an operation manual or
maybe it's just HR documentation, so things of that nature.
(20:22):
So this could be a third party that we bring
in to assist if it's maybe an HR accounting related
Otherwise we'll be viewing a lot of interviews trying of
dragging that information out of the folks to do that.
Speaker 2 (20:36):
Do you see any trends in the merger acquisition space.
I know I'm seeing online a lot of people being
like how to get rich buy a business? All these
business owners are leaving and you see these like, and
I'm like, how does like who's giving you the lending
to buy a business in a field that go zero experience?
Like are there any things that you're seeing where maybe
(20:56):
people are thinking like I want to buy a business,
Like tell me who's selling and there not maybe the
right person or what trends are you seeing out there?
Speaker 4 (21:04):
And yeah, I would say, I mean as a millennial
myself and being a part of a mastermind group of
other individuals who are looking at buying businesses, and then
even just reading articles. There was an article recently that
talked about fifteen percent of millennials, which I know is low,
but will own in their lifetime three to five businesses.
(21:27):
That's crazy. I mean when you think about baby boomers today,
they're owning one business for thirty years. So that is
a huge trend as I'm seeing it with my friends
who are transitioning to or who are taking over their
family's business, or they're not taking over their family's business
and they're looking at buying a business. I think a
(21:49):
lot of it also has to do with people wanting
to work with other people. So say there's one other
friend of mine is interested in buying a business. People
are starting to partner together and go in to businesses together,
So you could have up to even three individuals running
a singular business just based on being able to afford
(22:12):
that business, run it properly, and also probably have their
full time job at the same time. So there's definitely
a trend, I would say with millennials and just in
general people wanting to buy business businesses that are out there.
Speaker 2 (22:26):
Yeah, I think that's definitely a trend. And I'm wondering
if we're owning three to five businesses, if it's success
stories or if it's a little bit of trial and error,
or maybe a combination of both. Todd, you've owned a
few businesses, what are your thoughts there?
Speaker 5 (22:39):
Yeah, so there is definitely a little trial and error
that's happening, no question. But what I'm seeing, probably in
the last five years, more and more of is stacking
of businesses. So home services is a great example, so
you know, plumbing, electrical, HVAC. But now I'm even seeing
where they're stacking in pressure washing in warmer states, pool
(23:01):
cleaning services all within one group of companies. So that's
a trend I'm seeing. And then, yeah, some of this
has been a little bit of trial and error and
getting through, but there's a lot of resources out there
to help. And the other big trend, I would say,
and that's coming into play as private equity. So private equity,
(23:22):
which used to have very strict rules, maybe higher thresholds
for entering, are lowering those entry thresholds, and so they're
requiring some of these smaller businesses which may not have
been on the table a few years ago.
Speaker 2 (23:36):
And what I think we do with them? What is
happening with those you know, if businesses seem to be
getting kind of gobbled up from different you know, corporate
you know, or other entities, what are you seeing there?
Is it just kind of somebody looking for a buyer
and you know, they might have the highest software I.
Speaker 5 (23:54):
Think for them. A lot of times, especially on the
private equity side, we're seeing where they're just creating larger
market business by combining some of these services. But we've
seen both where they're buying and holding for short term
and just trying to gre you know, mesh businesses together
to create a bigger portfolio. But we've also recognized that
(24:15):
some of them are holding for long term and their
goal is to hold for long term, So just creating
that bigger value. Even on the financial side, we've seen
where books of businesses are are being bought out and
they're doing a stay in play where they're keeping the
owners in place for say three to five years, so
that name of that business can con continue forward in
(24:36):
that relationship. But then they're transitioning over to a salary.
But then these larger firms are looking just acquire that
overall book of business so they can bring it together
with the other groups and make a larger portfolio out
of it.
Speaker 2 (24:50):
Yeah, there's definitely a lot of that in the financial
services space. I definitely have people as soon as I
took over the business being like so it's interesting, But
sometimes I think about the transition that I experienced and
really we both kind of went into it not knowing
very much, and we did get some help externally to
try to value the business. But I do wonder sometimes
(25:12):
if things were kept more organized or kind of planned
out more, you know, is this a good opportunity for
buyers when maybe their seller hasn't done a lot of
planning ahead, And is that something that you've talked to
people about as far as you know, growing that valuation,
Because if people don't know. Then it could it could
(25:32):
be kind of the wild wild West out there as
far as anybody.
Speaker 5 (25:35):
Who's buying a business wants a good deal, and so
for businesses who haven't prepared, they can find those good deals.
But there's also risk with that because because things aren't documented,
or because things aren't done in a proper way, it
can make transitioning very difficult. It can even result in
loss of clients or maybe a loss of a vendor
in that transition process you didn't think of, or you're
(25:56):
at least going up like thirty percent and you didn't
account or so it is a double edged sword a
little bit where you can find good deals that haven't
been prepared properly, but then also that transitioning risk goes up.
Speaker 2 (26:09):
What are some early warning signs that a business might
not be ready for a sale and how can owners
start to correct those?
Speaker 4 (26:17):
Oh gosh, yeah, I'm like there's so many. I would say,
I mean, it depends if they're the value of their
business and they're like, oh, I want to sell, we can't.
If they're looking to sell, they have to continue moving
forward being the operator. And so a lot of it
is where's the value of the business is there lots
(26:39):
of mom and pop shops. The aunt or the uncle
someone is the bookkeeper. So finding ways to automate and
get you know, an actual bookkeeping service in place of
their aunt, because that's not going to you know, it's
not going to show value in the end. What about you, Todd, Yeah, I.
Speaker 5 (26:57):
Mean, so we see some telltale signs would be if
a business has been around for a while and maybe
they're stagnant, right so that their social media isn't updated,
their websites are older. There's some signs like that that
Megan mentioned. Maybe they're bookkeeping is being done internally instead
of professionally. So there's some things there that we can
(27:17):
see that are signs that a business may not be ready.
Speaker 2 (27:22):
How important do you think? You know, maybe there's a
business and they're looking and they've done everything on their own.
Is bookkeeping really one of the first places we look
as far as where to hire a professional or have
somebody come in when it comes to valuations.
Speaker 5 (27:35):
Well, I think bookkeeping is definitely key, just as it's
like the baseline to everything in a company. But that
doesn't mean if they're doing it internally they're doing it wrong.
But it is one of the places we take a
first deep dive look only because this is where we
can show a really quick turnaround in value. So by
(27:56):
making some key strategic changes, we can also hire a
lot of value right up front through the bookkeeping process.
Speaker 2 (28:04):
From the lending side, are people who maybe are thinking
about maybe think about selling a business, someone thinking about
buying a business. Has the climate changed as far as
the banking side or lending as far as what people
might need to consider if maybe it is a little
bit harder to get your hands on the money that
you might need in order to make certain investments.
Speaker 5 (28:24):
Yeah, I mean things have tightened a little, I would say,
just in general over the last couple of years. But
the funds are available. A business that is generating good revenue,
a business that has proper things in place for transition
or attractive to banks, so they want to see what's
nice about our process. As we go through and get
(28:45):
a business ready, it really is almost like this is
packaged stuff ready to go, and we know what SBA
lenders are looking for, we know what private lenders are
looking for, and so we can tailor it to those
things and then they're getting not only an evaluation of
that business that is very close to a CPA certified evaluation,
(29:06):
but then also a roadmap of what that looks like
to potentially grow that business. And and so not only
do the buyers like that, but lenders know they say, Okay, wow,
well this business is worth X y z today, but
we know it can grow to this over the next
three to five years. They see a lot of value
in that and are more willing to lend in those
scenarios as opposed to somebody that you know, maybe not
(29:29):
a business a proper business plan is written out, or
they don't know the history of that business or where
that business can grow to. And the opposite of that,
even maybe it's a business that his medits peak right
and we think the outcome or the long term outcome
may be flat. So those are important things to recognize.
Speaker 3 (29:49):
That's interesting.
Speaker 2 (29:50):
Yeah, No, I think sometimes I've talked to people who,
you know, maybe they want to sell their business and
they just think, like you know, we talk to lenders,
but they just don't see it. They don't see the value,
you know, the way that that person feels that it's there.
So I think having that strategy or having somebody else
come in and kind of know what the lenders are
looking for can be incredibly valuable because they might be
able to communicate it really well to you, where you
(30:12):
can then translate into okay, this is where we should
head instead of, you know, trying to find a buyer
and make it happen on their own. It's definitely an
interesting and interesting for people to think about at any
stage of their business. Megan, if you're talking to somebody
who's new into business and they're thinking like, I can't
ever think about leaving because they equate it to like
getting a prenup before you get married, and I don't
(30:32):
want to even think about the time when we're not together.
But what are some of the ways that you, guys,
convince people or or kind of show them the value
of what you do and how it can help them
through each step of the process up to the ultimate exit,
which most people should plan for anyway.
Speaker 4 (30:47):
Yeah, I think it's not even we're trying to get them, Oh, okay,
start thinking about this, you know, in five years. But
really I think what it is about is it's never
too early, and it's never too early to prepare to
set the foundation. Think about it as if you're building
a house. What's the first thing that you're going to
(31:08):
do is you're going to lay the foundation. So it's
always important whether you just bought a business, have a
business that you have a solid foundation, and especially one
that you just started or just bought, you don't know
what that foundation is about. So being able to really
dig into that and pinpoint different pieces of this is
where you're at today and this is where you can
(31:30):
be or will be in ten twenty years, I think
is really important. So it's just recognizing the value add
of having a strong foundation and knowing where you're going
to go. Because great, you start a business or you
have a business, do you know what that end goal is?
Typically they have an idea, but we really dive into
(31:53):
the value piece of their business, the optimization, the record,
the people, the processes, the transform are we going to
grow the business? And then of course, lastly the exit.
So it's not just focused on the exit, but it's
all the holistic view of the of the business.
Speaker 2 (32:10):
I think that sounds like taking care of your business
in a way. Yeah, you know, really you know understanding
that especially for people who maybe do acquire a business
and maybe maybe everything is a little bit unorganized and
maybe you can either continue like we've always done. But
I think for a lot of people, they they know
the risk in that of doing things the way they've
always been done. So I think it sounds like a
(32:31):
really smart opportunity for people to engage with you at
any level of their business, whether they're just starting and
you know, maybe in the middle of it and things
are going and they think they want to scale, or
they're about to you know, maybe consider you know, what
they want to do next. So how can people reach
out to you and learn more if they're interested in
talking with you about about their own business.
Speaker 4 (32:53):
Yeah, they can reach out to us at our direct
line is seventy one four four two nine to nine
five zero, or they can shoot us an email at
you can do megant Kerney at exit factor dot com
and then our website is just exit factor dot com
backslash Lexington. Awesome.
Speaker 2 (33:14):
Thank you. Any final thoughts to add, Todd anything. If
you had to tell everybody business owners one thing, what
would you suggest that we all think about as a guest?
Speaker 5 (33:24):
I think for me, I wish I would have come
across that exit Factor years ago in some of my
own businesses and exit and to be fair, I'm I
also operate other businesses outside of this, and I'm engaging
this into my own businesses as well. So my advice
is take a look at it. Start early, think about
whether where you want to be today and say ten
(33:46):
years from now, and if it's anything in between, definitely
reach out to us. I think we can help awesome.
Speaker 2 (33:51):
Well, it's always good to hear that you're in your
own cooking and you understand what the value is and
you do it yourself. But thank you both so much
for joining. If you're a business owner and you are,
you're just you know, maybe maybe you realize you haven't
thought too too much about the future, or maybe you're
getting to that point where you're thinking about it. I
think it's definitely worth consulting with somebody from the outside,
bring a brush that eyes in, look at the business
(34:11):
and help you get the most for it. Because you've
put your energy, your money, your time into this business,
so it's certainly worth it for you to take care
of it and make sure that you are getting the
most the value out of it that you've put in.
So thank you both so much for joining. And if
you're looking to do a financial plan because you want
to figure out if it's time for you to be
work optional, Please head over to mister Lynch dot com.
(34:34):
We can set up some time to chat with you
about your own financial plan, or you could catch up
on old episodes up the podcast. Thank you all so
much for listening, and we'll talk again next week. Thank
you for joining us on another insightful episode of demonst
Buying Money. If you enjoyed this episode, please subscribe, rate
and leave a review. Stay tuned for more engaging conversations
on our next episode, and remember knowledge is the key
(34:56):
to financial empowerment.
Speaker 5 (35:02):
Last Las
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