Preparing Your Business for a Successful Exit, with Tom Gledhill

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Tom Gledhill brings a powerful wake-up call to business owners with his revelation that a staggering 80% of small businesses that go to market never actually sell. Drawing from his unique perspective as both a former business owner who successfully sold his multi-million dollar company and a certified business broker, Gledhill shares invaluable insights into why so many businesses fail to transition successfully.

The key culprits behind failed business sales? Unrealistic owner expectations about valuation and the "owner is the business" syndrome where all systems and knowledge remain locked in the entrepreneur's head. This latter problem is particularly prevalent among what Gledhill calls "lifestyle entrepreneurs" - those who excel at their craft but haven't built the business infrastructure necessary for successful transition.

For business owners looking to position themselves in the successful 20%, Gledhill recommends focusing on two critical value drivers: developing well-trained, loyal employees and creating well-documented, efficient systems. These elements address the fundamental transition problem by ensuring the business can function without the original owner. Importantly, this preparation should begin at least two to three years before an intended sale, not in the final months when retirement looms.

The podcast explores fascinating alternatives to traditional business sales, including employee ownership transitions. Gledhill's XITpro program has pioneered an innovative approach where they purchase small businesses, implement AI to improve efficiency, train key employees for leadership, and eventually sell to those employees once the company has sufficient cash flow and trained leadership.

Beyond the individual business owner's concerns, Gledhill highlights the broader impact of failed business transitions - from owners losing their net worth to employees losing jobs and communities losing economic vitality. This ripple effect underscores why proper exit planning mat

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Hosted and produced by Gary Pageau
Edited by Olivia Pageau
Announcer:
Here's your host, gary Pegeau.
The Dead Pixel Society podcastis brought to you by MediaClip,
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Gary Pageau (00:18):
Hello again, and welcome to the Dead Pixel
Society podcast.
I'm your host, Gary Pageau, andtoday we're joined by Tom ,
who's a business sales expert Iguess is what we call it, right,
Tom, and the name of yourcompany XITPlus, and you're
coming to us from Cape Cod today.
How are you, Tom?

Tom Gledhill (00:35):
I'm great.
I'm great, Gary, thanks forhaving me.

Gary Pageau (00:39):
So, Tom, tell us a little bit about your background
that makes you an expert inbusiness sales and preparing
businesses to be sold.
Wow.

Tom Gledhill (00:49):
Okay, I think my advantage is that I was a
business owner for several years, right.
And I started the company on mydining room table and built it
to a multimillion dollar company.
We had clients all over thenortheast and when I sold that,
I sold it to a large publiccompany.

(01:11):
Okay, after that I didn't knowwhat I was going to do and a
friend approached me and he saidwhy don't you get involved in
mergers and acquisitions?
Sure, I think you'd be good atit.
So I did.
I got involved in reallybusiness brokerage.
You know mergers andacquisitions, they're all
brokers, right?
So I was a business broker andso I have two views.
I have the view of a businessowner being inside, looking out,

(01:38):
and from a business broker'sperspective, from the outside
looking in, broker's perspective, from the outside looking in,
right.
So I learned a lot when I gotinto business brokerage, because
then I learned about valuationand I still do a lot of
valuations, and so I learnedabout valuations.
I learned about the wholebuying and selling of companies.

(02:02):
One thing I learned that wasshocking really and I didn't
believe it when I heard it, butwhen I was in one of the courses
that I took in preparing for mycertification, I learned that
only 80, only 20% of businesssmall businesses that go to
market actually sell Really.
Yeah, I thought they've got itmixed up.

(02:24):
Right, it's got to be flipped.
It's got to be the other way.
Right, got to be flipped.
But when I first started inbusiness brokerage, it was my
brokerage.
I didn't go with somebody thatwas established, so I was really
started out with the lowhanging fruit as it was and I
talked to literally hundreds ofsmall business people over the

(02:45):
first couple of years and Ilearned that it was true 80%
don't sell for a variety ofreasons.

Gary Pageau (02:54):
What would be probably the number one reason,
you think.
Is it because the businesswasn't ready or it wasn't in the
condition that was able to bepassed on?
What would be, you know, if youcan say one or two things that
were the reason.
Like you said, there's a lot ofreasons, but the one or two
reasons.

Tom Gledhill (03:14):
I think, to talk.
Two reasons really, and they'rekind of tied for the first
position, number one,expectations.
Okay, they, most of them, thinkthey're.
Well, you, you said it to beginwith.
When somebody had a $4 millioncompany and they're going to
sell it for $5 million, you gotto realize what the valuation is
based on.
It's only based on revenues forthe really hot industries, and

(03:40):
that changes.
You know that can change.
So I would say highexpectations and the owner is
the business, right, okay, hehasn't delegated anything.
It's all in his head, all ofthe systems are in his head,
right, oh, that those are thetwo top reasons.

Gary Pageau (04:01):
Yeah, and and and.
In our industry I've seen thata lot right, I've seen the
people who have been, you know,they've been running the family
camera store, maybe they'veinherited from their parents and
now they're a boomer andthey're looking to retire and
it's all in their head, right,and they don't have a system in
place and, you know, maybe theyhaven't cleaned out the
inventory or something andthey've got, you know, way too

(04:21):
much inventory and they'recarrying too much, so it's, you
know, dragging the profits andall that.
So if someone wants to rectifythose problems, right, you know,
let's tackle expectations first.
What would be a typicalexpectation for someone who is,
let's say, they're, you know,they're generating, you know,
maybe 6% profit a year netprofit.

(04:42):
What would you think they wouldexpect for that?
Something like that.

Tom Gledhill (04:45):
Yeah, that's on the low end, right, yeah, so
what I would say is that youwant to focus on two things.
If you're going to increase thevalue of your company, there
are two things that you shouldfocus on.
Number one your employees.
Okay, you want well-trained,loyal employees.
Number one your employees Okay,you want well-trained, loyal

(05:07):
employees Number one.
Number two your systems.
Your systems are criticalwell-documented, effective and
efficient systems.
You focus on those two thingsand you focus on a huge chunk of
the value drivers that aregoing to really increase the

(05:27):
value of your company.
Okay, so that's where you'dstart.
In my book, XIT Pro System, Idelineate 16 value drivers and
how to improve each one of them.
But some of those value driversare much more important than
others, and the two that Imentioned, employees, personnel

(05:51):
and systems are the two mostimportant, because cash flow and
growth you know most most a lotof these small business owners.
They grow the company to acertain level.
It in their lifestyle, what Icall them as lifestyle
entrepreneurs.
To a certain level they stopand they're making good money.
They don't want the aggravationof hiring new people and

(06:14):
opening new locations, so theystop at that level.
So that's what I.
But things like lease Lease isvery important, right, but a lot
of people own the building,okay, so that's not a that's not
an issue.
So those are the things I woulddo, and if you're going to
prepare for that, you shouldreally do it a couple of years

(06:37):
before you're going to sell.

Gary Pageau (06:38):
Well, that was.
My next question was what kindof timetable are we looking at?
You know, because, like one ofthe things that most of my
listeners know, I teach anentrepreneurship class for
incarcerated people and we talkabout that and I said, you know,
you should set up your businesswith the intention of knowing
how you're going to get out ofit.
Right Kind of position for that, because a lot of people don't.

(07:00):
But you're saying, let's say,someone should be taking at
least two or three years to preptheir business for sale.

Tom Gledhill (07:08):
You know, what you just said start your business
with the end in mind is reallyimportant, but they're the
growth people typically, becausea lot of the people, Gary, that
start businesses, they eitherstart them because they have to
Right or they're very good atsomething Right, and they get.

(07:28):
But they don't understandbusiness and they don't care
about business Right, they go oh, I've got an accountant, I've
got a lawyer, you know, I don'tworry about business, right.
So they're the, they're thelifestyle buyers, right, and so
they they have.
They don't have any idea whatthe end, they don't even think
about the end.
Right, right, until it's toolate, right?

Gary Pageau (07:49):
I mean, as we see it.
On the other side of thebusiness, like you know, my
audience are primarily, you know, people who serve photographers
, but they see it among theirclients, right, who are
professional photographersperson got in the business, they
like taking pictures, they likebeing with people and they like
creating moments and using thetechnology, but they haven't
really thought about thebusiness side of it.
Like, just like you said, whenyou talk about having your

(08:11):
processes in place, what doesthat really mean?
Because you know, I've workedin different companies where
they have what they call likeevery department has a
procedures manual, right, whereyou know this is how we do
something like that.
Is that the kind of thingyou're talking about?
Documenting all the steps, soif something does happen,
someone else could step in?
And what would be a platform todo that?

(08:32):
Because I remember doing thatin like well, you know a three
ring binder, right?
I don't think that's whatpeople use anymore.
Could people do it with, like,videos, or what do you suggest?

Tom Gledhill (08:41):
You could do it any way you want, as long as you
do it Right.
You can do videos, text it,have it digitally and put it on
the cloud for safekeeping.
But, yeah, you should, youreally should do it.
And, quite frankly, that's thelast thing people think about,
because when you start abusiness, what your first issue

(09:03):
is survival, right, right,you're not thinking about, gee,
I've got to do this and I've gotto do that.
You're just thinking aboutsurviving, right, okay, and that
last might last for a couple oftwo, three years.
Right, you know, do this andI've got to do that.
You're just thinking aboutsurviving, right, okay, and that
last might last for a couple,two, three years, right, you
know you start thinking aboutyour infrastructure, all right,
but you what you're saying?
Before you sell a company, youknow, certainly way back several

(09:25):
years before that you know it'salways a good idea to all have
your company ready for sale,because it might be something
from that you can't control.
It might be a divorce, it mightbe disability, somebody might
be deaf.

Gary Pageau (09:39):
You can't tell yeah , I mean you might have a
business partner pass or thatkind of stuff happens Sure.

Tom Gledhill (09:44):
You should always be ready, okay, but very few
people are Right.
But getting back to yourquestion about the process and
the procedures, that, yeah, theyshould have it Now.
It's becoming critical nowbecause I'm very involved in AI
now and actually we'reinstalling AI in small
businesses, sure, and one thingwe say to them look, you need to

(10:10):
define all of your systems,because you don't define your
systems, you can't define yourworkflows.
Right, and AI is based onworkflows.
So, yeah, it's a criticalprocess.
And how they do it, it doesn'tmatter as long as they do it.
And I would do it really systemby system.

(10:31):
And you know, go from there.
If you need to break it downfurther from the system, then
you can do that, but you've gotto have that documentation.
It increases the business valuetremendously.

Gary Pageau (10:46):
So one of the other key value drivers of the
business, as you've said, is theemployees themselves.
Right, the staff, the long-termpeople.
One of the things you like totalk about is looking at the
employees as potential buyers.
Can you talk about that process?
How early do you bring them in?
How long do you think thetransition should be, or
something like that.

Tom Gledhill (11:07):
I'm glad you mentioned that because I'm just
finishing a book on employeeownership, because it's really a
worldwide movement right nowand we have kind of flipped what
we did.
We had a program in place thatwe would train the employees to
take over and we would help thebusiness owner do that, but we

(11:29):
were doing it in too short aperiod of time for the whole
thing and we also gettingfunding for the employees is
difficult.
Why is that?
Well, number one, they don'thave any money.
Well, yeah, there's that small,they don't have a and they
don't have a rich uncle Right.

Gary Pageau (11:49):
But you think.
I mean, if I was a lender,right, If I was the bank for the
business, that would be anattractive component for helping
finance that transition.
Because just because of thecontinuity, right, if you had a
good cut, you would, you wouldjust think that would be
factored in.

Tom Gledhill (12:08):
That's a pro, but the the cons are how are they
going to fund it?
The banks want to get paid back.
Oh, absolutely, yeah, you know.
So that that's a problem, andwe've we have experienced that
as a problem.
So what we've done, Gary, isnow these are a lot of these
companies.
There are about five millioncompanies just in the united

(12:29):
states that have revenuesbetween one and 5 million.
All right, 5 million is kind ofan inflection point for
entrepreneurs as they grow.
Right, because at that pointthey really need to hire
professional people.
Right, okay, I hired a manager,a marketing director and a

(12:49):
controller when I reached thatpoint.
Most small business peoplenever get to that point anyway.
Right, that's a real problem.
What we do now is we buy thesesmall companies.
We buy them.
Now, we're in control.
We employ AI to make thecompanies effective and
efficient and to scale thecompany.

(13:10):
Okay, right, it might be two orthree or four years before
we've scaled that company threeor four times.
Right, now, initially, too, wetake the key employees and we
make one of them the president.
The others have key managementpositions and we train them and
monitor them over that period oftime.

(13:31):
Okay, when we get to a pointand we train them and monitor
them over that period of time.
When we get to a point wherethey have sufficient cash flow,
the key employees are trainedand can take the company forward
.
We sell it to the key employees.
All right.
So that's how it works now.
That's our program as it is nowand it's the XIT plus program.

Gary Pageau (13:54):
But in general, I mean, that is sort of an idea
that I think people will like,because I think in terms of
because we've seen it a fewtimes and I've just seen the
last couple of years in thephoto industry, where we've had
employees step up and buy thebusiness and it's attractive for
a lot of reasons one, forcontinuity purposes by the
business, and it's attractivefor a lot of reasons one for
continuity purposes and two,it's, you know, the people

(14:15):
within the business.
You know the other employeesare, you know, happy because you
know one of their own isinvolved still, and the vendors
are happy because theircontinuity.
So it can be a win-win allaround.
Why is it then that mostbusiness owners don't do that?
Right, they look outside first.
Why do you think that is?

Tom Gledhill (14:34):
Well, that's a classic way of doing it, right?
There are three kinds of buyertypes.
They got your strategic buyers,you've got your financial
buyers and you've got yourlifestyle buyers, and they're
all the classical buyers, andthey're all on the outside, all
right, but right now, there areso many people selling, all of

(14:55):
these baby boomer businessowners they call it the silver
tsunami, right, right, that'swhat all of these and so there
were only 80% sold before thesilver tsunami.
Right Now, you've got that 80%that don't sell, that
historically didn't sell, inaddition to all of these baby

(15:16):
boomers that now increase thenumber of sellers, right,
they're going to be more ofthese small companies that don't
sell.

Gary Pageau (15:24):
So if you're a younger person looking for an
opportunity, you might be ableto get a decent business at a I
wouldn't say a discount, but amore affordable price, just
because the market's flooded.

Tom Gledhill (15:34):
Yeah, if you have the experience to do it, you
know and you have the funding todo it one of the areas that
we're looking at.
If they don't want to sell tothe employees or if there are no
employees that want to buy it,the VA has several programs for
people that were in Iraq andAfghanistan and whatever around
and they're interested in buyingand getting involved in

(15:57):
business right and they havegrants so they have access to
money.

Gary Pageau (16:04):
And didn't know that.
So now I mean you mentionedearlier you're a veteran, so are
there decent programs inaddition to that that, uh,
veterans can look at?

Tom Gledhill (16:14):
there are yeah, there are for veterans, yeah for
them, and they're you know,they're free for the veterans.
And there were also grants tohelp the veteran.
You know, get involved in agoing business.
You know why would you want tostart a business from scratch?
There's a business out therethat has all this infrastructure

(16:36):
right, it has customers, it'sgot staff, it's got channels of
distribution, it's got systems,it's got all this infrastructure
sitting there and all of asudden they close the doors,
right yeah, it's, it's a.

Gary Pageau (16:49):
It's a sad thing.
I mean, sadly, we're seeing alot of that just sort of in big
retail right now.
We're seeing that.
I think that's a whole otherissue.
Yeah, especially in therestaurant space, there seems to
be a lot of mom and poprestaurants really struggling
right now.
Are there certain types ofbusinesses, just as a category,
that are selling well now, thatare selling well now?

(17:09):
I mean, like I said, there'sall kinds of businesses, but in
terms of, are smallmanufacturers more appealing
than, say, a restaurant or agrocery store?

Tom Gledhill (17:19):
Well, I think what we're doing, gary, is we're
looking to niche down to anindustry, sure, and we're kind
of looking at smallmanufacturing.
Okay, that's what I was gettingat.

Gary Pageau (17:30):
Okay, and why is that?
Why is that appealing to you?

Tom Gledhill (17:34):
Well, one of the reasons it's appealing to me is
that it's easy to switchindustries.
I had a client at one timeyears ago that had a job shop
and he had these big machinesand he was going bankrupt.
We got him to switch to makingmedical devices for orthopedic

(17:57):
surgeons Sure, and his companyjust took off.
So what he did was he switchedfrom job shopping to medical
device.
He switched industries.
Right, and it's not difficultto do if you're a small
manufacturer, to switch yourproducts or you switch
industries.

Gary Pageau (18:16):
Right, because I mean you have the equipment, you
have the processes, you've goteverything there?

Tom Gledhill (18:20):
Yeah, right.
One of the points I would liketo make, too, is the number of
people and organizations thatare hurt when these businesses
close.
Right, number one most of thenet worth of a small business
owner is in the company, right,so he loses most of his net
worth.
Okay, the employees are out ofa job?

(18:41):
Right, all right.
The community, the money thatflowed through that company has
now gone somewhere else right,all right.
And who likes to see a boardedup business for sale?
Right, you know, yeah, so ithurts the morale of the
community.
Hurts, you know.
And there were also people thatsupported that company, like
trusted advisors, accountants,lawyers you know people that

(19:03):
came in at night and cleaned it.
You know the food truck downthe street, vendors, suppliers
yeah, you know, they were allhurt.
Vendors, suppliers you know,they're all hurt, that happened.
So we would like to see acompany, you know, not only
survive but thrive in thatcommunity, so it becomes more of
an asset to that community.

(19:24):
A couple of things we'rethinking of is having a, you
know, with a company that we buyover that period of time.
We have it.
We want to have a scholarshipfor a needy student.
We want to sponsor a littleleague baseball team or some
other recreation team, maybefeed the homeless during holiday
periods.
Be a real asset to thecommunity Right.

Gary Pageau (19:47):
Yeah, there's a lot of appetite, I think, for that
among businesses, these,especially with younger people
right the millennials or whatwho do want companies to serve
their communities and I thinkyou know if you are an older
person prepping your businessfor sale, you know, maybe that's
something you need to look atis make that part of your
business process, if you will,as sort of the charitable or

(20:10):
philanthropic or service aspectof it one of the things that
we're concerned with, myself andmy colleagues, is that the
small business owners aren'taware of the problem, and so I I
feel like I've got to stand ona rooftop and just yell yeah
right, there is a problem here.

Tom Gledhill (20:31):
you, you know, you , you can take care of it.
You've got a, a business thathas value, sure, you know, and
so that's a.
That's a real problem.

Gary Pageau (20:42):
So to sum up, you know some of the things is a
business owner shouldn't wait tosay you know, I'm I'm 66.
I need to retire and put thebusiness up.
This process should have beenstarted a few years earlier.

Tom Gledhill (20:55):
You know, the problem is that if you're a
business owner, you can't wakeup one morning and say gee, I
think I'll sell my company today, Right?

Gary Pageau (21:01):
But it happens.

Tom Gledhill (21:03):
It happens.
I did that in a piece of realestate I owned.
I woke up one morning and Isaid I think I'll sell this
place.
Well, it was during a hotperiod the next week.
Next week I sold it.
That doesn't happen in thebusiness world.
You've got to plan for it, butthey don't think about it until
it's too late.

Gary Pageau (21:24):
Yeah, so where can people go for more information
to learn about the XITp lus planand some of the advice that you
offer?

Tom Gledhill (21:40):
Well, the simple thing, Gary, is to send me an
email at Tom at XITp lus, andthat's X-I-T-P-L-U-S dot com,
and we will schedule aconversation and see what your
situation is and how we can helpyou Well that sounds great, tom
, listen, it was great to meetyou, and best wishes out there
on Cape Cod and hope to catch upwith you again soon.
Oh, thank you, Gary.
It's been a pleasure talkingwith you.

Erin Manning (22:02):
Thank you for listening to the Dead Pixels
Society podcast.
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