Dave and Doug: Quick Q&A on M&A

Q&AA recent lunch conversation with Dave Seitter, a partner with Spencer Fane LLP, and Doug Hubler with Apex Business Advisors, regarding the sale and acquisition process of businesses served as inspiration for this blog and a series to follow.

Dave has been involved with business acquisitions for years and offers a unique perspective from the legal side regarding deals. Doug has also been active in M&A activity for many years and offers a perspective from the deal-making side of the equation.

The goal of this post and future “Dave and Doug” posts is to educate our audience on the art of getting deals done.

Dave: What do you recommend when your client says “I have to have a certain price for the company” while at the same time all advisors indicate the company is not worth the amount the client seeks? How do you level-set expectations?

Doug: We run real numbers for the seller so they can better see that their anticipated value would put a buyer in a real bind financially. Almost every buyer will leverage their personal investment to buy a business and generally get a loan for 75%-80% of the purchase price. So, after debt service, a salary, and required cash to operate the business, there needs to be something remaining for a reasonable return for the risk. How do you handle these clients, Dave?

Dave: Folks will often come to my office with certain inherent beliefs about their business…and frankly, they’re right, because it is their business and they know it very well. Oftentimes in representation there’s a difference between what someone has been receiving from the business vs. what they can obtain from a sale. So we go to the yellow pad test and on one side outline what money they need from the business measured against what the business justifies for a sales price.

Doug: Sellers will often reverse the market price into how many years they would have to work to make the same money. For example, the seller says, “So if I only get $1 million for my business, I could just work 3 or 4 more years to make the same amount.” Absolutely! In our view, this person isn’t ready to sell. True, they could work for another 3 or 4 years, but is that really what they want to do?

We would be happy to sit down with you at any time to discuss business value and the strategy to go to market. If you’re interested, email me at  to learn more. This process takes time, so the earlier you get started, the better off you’ll be.

Guest Post: Mic Johnson: “I’m Just Trying To Get Away From People That Suck!”

Post author: Doug Hubler

I’ve known the Blue Gurus guys for a long time and I knew Jason Terry long before Blue Gurus existed. I’ve used them to help me in my business and trust them completely. But when I first read the post called “I’m Just Trying To Get Away From People That Suck” that Mic Johnson wrote back in 2011, I cringed!

How could somebody say that in a public/business forum and get away with it? It took guts to be that open and honest. I’ve always had a tough time sharing those kinds of feelings. (My wife can attest to the fact that I hold too much inside!)

Sometimes at Apex Business Advisors we take on clients who we know are going to be very challenging, but that’s just fine and it comes with the business. The hard part is being able to say “NO!” to someone who really sucks. The “suck” may not present its ugly head until after we’ve started working with them and it can really be hard to change direction once we’ve started working together.

In many cases, it probably makes sense for everyone to go their separate ways because we may not be fulfilling the client’s expectations at that point either. The fact is…we’re in an extremely stressful environment every day  – and that’s when things go well.

So I’m taking Mic’s advice and asking my co-brokers to do the same thing! Life is too short and too precious! I would like also like to add the following reminders to Mic’s list:

  • Stay away from people who only see the negative in every statement or action.
  • Stay away from those who can’t trust your good intentions and who think there must be ulterior motives. 
  • Stay away from those who can’t seem to tell the truth.

Read Mic’s blog and I think you’ll understand more what I’m talking about…

I’m Just Trying To Get Away From People That Suck!

A few months ago I had some time in between clients and I called Jason to share an, as Oprah would call it,”A-HA” moment.

In the weeks and months leading up to that call, I had been spending a lot of time reflecting on every step of my career to gain a better understanding of why it took me nearly 15 years to find something that I love to do every day.

I reflected on why I took each position over the course of my career, what my mindset was at the time, what I thought was important (size of company, salary, etc.), and so on. I also spent a lot of time analyzing the motivating factors that led me to leave each of those positions.

Going through the process taught me a lot about my career, but taught me even more about who I am as a person and what is core to my DNA. One of the most important lessons I learned is something that opened my eyes in more ways than one and helped lay the foundation for making real, positive, and lasting change in my life. The exact words I told Jason to describe this, and what I now believe is one of my secrets to career and life happiness, is this:

“I’ve realized that, my whole career, I’ve just been trying to get away from people that suck!”

suckJason laughed (as does every single person I tell the story to) because he knew exactly the type of people I was talking about. And I’m guessing you do too. Now I’m not literally saying that these people are bad people, have ill intent, or don’t have redeeming qualities. What I am saying is that there are certain characteristics about people that suck vs. people that are awesome. The sooner you learn to identify one vs. the other, the sooner you will become a much happier person in your career….and in your life.

Now that I have been fortunate enough to have learned this valuable lesson (way later in life than I wish I would have, but better late than never, right?), I feel it is my duty, my responsibility, in fact I believe it’s part of my calling, to share it with you so that you don’t waste one more second of your time on these type of people. I realize that my definition of “people that suck” may be different than yours and that’s OK. In the end, my goal in writing this article is simple and honest: I want you to get to your place of happy quicker than I did.

One of the most difficult things about this process is you are going to have to make some hard decisions. You need to know that “people that suck” come in all shapes and sizes. They could be coworkers. They could be managers. They could be neighbors. They could be business associates. They could be CEOs. They could be friends. They could be family members. Whoever they are, it’s  important to know that your goal through this process is to remove as many “people that suck” from your day-to-day life and replace them with “people that are awesome”.

That may mean a job change. That may mean changing the way you’ve always done things. That may mean letting some people go that have been a part of your life for a long time. That may mean having some difficult conversations. That may mean being honest with yourself and with other people in your life in a way that you haven’t been before. That very likely will mean taking some calculated risks. It’s not an easy road. Not by any stretch of the imagination. But trust me when I tell you that it is absolutely, positively a road worth traveling.

Ok, so how do you identify them? Take a look at the two lists below, one focusing on “People That Suck” and one focusing on “People That Are Awesome.” This is nowhere close to an exhaustive list (my fingers would get tired of typing!), but it should help get you started.

10 Characteristics Of People That Suck
1. They don’t return calls in a timely manner.
2. They don’t respond to emails in a timely manner.
3. They attend networking events or groups with a “selling” mindset instead of a “helping” mindset.
4. They are TAKERS who routinely try to befriend GIVERS.
5. They don’t do what they told you they would do. Lack of common courtesy and accountability.
6. They rarely make an effort to do anything more than the bare minimum.
7. Their #1 priority in virtually every situation is “What’s in it for me?”
8. They make excuses. Lots of them. About everything.
9. They have a unique ability to rarely, if ever, look in the mirror and realize that they are a part of the problem.
10. They fight CHANGE with every fiber in their body. Their mentality of “that’s just the way things have always been done” or “that’s just the way I’ve always been”, as if sucking is in their DNA.

At the same time, it’s important to know how to identify people that are awesome. When you surround yourself with people that are awesome, that is when the magic happens. You know it when you see it. In fact, I “feel” it when I’m around these type of people.

10 Characteristics Of People That Are Awesome
1. At their core, they LOVE helping people…without expecting anything in return. Helping is core to their DNA.
2. They give more than they take.
3. They return calls in a timely manner.
4. They return emails in a timely manner.
5. They CONSISTENTLY do what they tell you they are going to do. Accountability and common courtesy are built into the way they live their personal and professional lives.
6. They tout the success stories of other people around them.
7. They always say “Thank you”.
8. CARING is in their DNA.
9. They look at the bigger picture and understand the real value in raising other people up instead of just themselves.
10. They are natural connectors/referrers.

What do you think? What other characteristics have you witnessed from people that suck and people that are awesome? How have you gone about finding happiness in your career and in your life? I welcome and encourage your insight.

There Is No “Normal”

No NormalEvery deal is different.

Every opportunity is different.

Every buyer is different.

Every seller is different.

Every advisor is different.

Hmmm, I wonder why there are so many ways for deals either to get done or collapse? <<insert sarcasm here>>

What keeps things so exciting in our day-to-day work lives are the variables we deal with and trying to figure out how to manage specific situations when really there are no deals are exactly the same.

We want to figure out a “normal” to improve our odds of success, but how we handle one customer may have a different results from the last customer who was under very similar circumstances.

Out of the hundreds of deals we’ve closed (and hundreds of deals that fell apart) over the years, we develop general “rules” to live by. But sometimes those rules come back to bite us, so we adjust and do our best to create consistent outcomes.

How could we ever anticipate….

Getting a call the day of closing that the buyer isn’t going to show up because his wife threatened divorce that morning?

Sellers backing out of a deal because of a life-changing event that forces them to keep the business?

When the wife of the owner had to sign closing docs for her husband because he was going to “IRS jail”?

A landlord making it almost impossible to get a new lease?

The bottom line is that we can’t. Things happen that we couldn’t have imagined. All we can do is dig in and try to figure out how to make it work…and sometimes see if we can salvage it at all.

If we can’t, we just have to move on to the next opportunity. Fortunately for us and our customers, there are hundreds of opportunities out there every year.

There just isn’t a “normal”.

If you or someone you know is interested in buying or selling a business, please contact one of our Apex Business Advisors today!

Brokers Wanted: The Price of a Successful 2015

WantedPart of having a successful business is occasionally needing to add or replace staff. Fortunately, at Apex, our experience has been pretty good over the years with finding and retaining good brokers.

However, in the last 2 months, we lost two of our brokers, Jeff Wilson and Brandt Hill, as they pursue their own entrepreneurial dreams.

Their experience was no different from any other buyer who’s looking for a business. The timing was right, the deal looked good, and the business fit the personality of the brokers.

Of course we aren’t slowing down. Business goes on. And now Apex is looking to add new talent.

What makes a good broker?

Our Apex brokers have all owned businesses in the past or have a background that gives them insight into what it takes to own and operate a successful business. However, part of the success of our office can be attributed to the wide and varied backgrounds of our brokers and the different knowledge and perspective that each offer our team.

Credentials within our office range from college degrees to multiple advanced degrees and certifications, and previous careers include military, sales, finance, home remodeling, distribution, and medical.

But the best brokers have a couple of things in common…a strong desire to help both colleagues and clients succeed, and a motivation in this tough business that is fueled by both the ability to help others and the thrill of seeing a successful deal to fruition.

If you or someone you know may be interested in learning more about this industry and becoming an Apex business broker, please email me at .

And, as always, if you’re looking for assistance buying or selling a business, contact one of our Apex Business Advisors today!

 

3 Bullet Points Gets The Deal Done

A great deal just got done after about 4.5 months of ups and downs, in and outs, soothing nerves and tempering excitement. (Well maybe not so much tempering excitement…we love that!)

We have to keep emotions in check as we’re working with buyers and sellers. In our industry, 50% of deals fall apart for various reasons after an offer has been accepted.

signedcontractIn this latest deal, there were several advisors on both sides that couldn’t help but to raise blood pressure and point out that their clients were going to get scr****(taken advantage of), the price was going to get renegotiated, the person on the other side was an enemy to watch rather than a partner to work with, and surely the other side had no intention of completing the deal.

The lawyers and accountants argued back and forth for several weeks about one main calculation. Neither buyer or seller understood what their advisors were talking about.

How did we resolve it?

We got the buyer and seller on the phone, agreed to the calculation, the seller wrote it in the agreement encompassing three short bullet points, scratched the pages that the advisors were arguing about, and the buyer signed off. And that was just to get due diligence started!

Of course without the desire of both sides to get a deal done, it would have crashed very early based on advisor paranoia. Understanding that there will always be pitfalls to overcome makes the process a “little” easier to handle.

The best part of this transaction was taking both buyers and sellers out to a nice dinner at the end of the first day of the transition. And even though it took time to get there, both the buyer and seller are very happy!

Continuing Education is Critical to Success

IBBATo be a successful company year over year, it’s critical to keep up with your specific industry’s trends and continue to educate yourself as things change and evolve.

Aside from being licensed Real Estate professionals (which requires ongoing education after initial licensing), two of the main professional organizations we’re involved with (IBBA – International Business Brokers Association, Inc. and M&A Source) also provide education for certifying professionals and ongoing education.

It can be a fairly expensive certification process with ongoing fees and expenses, but there’s a huge benefit to meeting twice a year with other advisors/brokers in the industry, service providers (valuation and research companies, for example), and large strategic buyers. Everyone contributes by sharing activity, concerns, successes and failures, trends across the country, and focusing on improving the industry.

MASourceOf course not every business broker will participate and there’s no requirement to do so, but at Apex we believe it’s very important to stay involved and informed.

Both of these organizations offer ongoing webinars and online learning, educational summits, industry surveys, and other tools to ensure active and involved business advisors are well prepared to handle customer demands. These are fantastic benefits for us, but more importantly for our clients who receive the best the industry has to offer.

The message is to business owners is this: Stay involved in your industries. Stay informed. Prove to clients and prospects that you’re consistently at the top of your game.

In the end, it makes for a much more valuable business!

Guest Post: John Stevenson’s Sunday Snippet on “10 Commandments of Solving Issues”

John StevensonJohn Stevenson of Client Kudos has some great thoughts to share every Sunday in “The Sunday Snippet”.  I highly suggest you consider subscribing to his blog.

The one we’re passing along here has some fantastic “reminders” for entrepreneurs and hopeful entrepreneurs from Gino Wickman, the author of “Traction: How to Get a Grip on Your Business.

Common issues to completing a buy/sell transaction could also be potential problems with business owners. If it’s difficult to take action on the following Commandments, maybe business ownership isn’t the right path for you…

We hope you enjoy John’s “snippet” as much as we did….

 


Issues and problems pop up daily and there are a thousand ways to solve each one. Being stuck and being perfect are the enemies of progress and problem-solving, but how do you guard against those man-made traps?

Gino Wickman is the designer of EOS®, the Entrepreneurial Operating System, which is a set of simple business-building concepts and practices, and he’s also the author of the book “Traction: How to Get a Grip on Your Business.

Sunday SnippetOne particular section I like is The 10 Commandments of Solving Issues. Here are the highlights:

1. Thou Shalt Not Rule by Consensus – you can’t always get everyone on the same page. Decide, deal with it, and move on.
2. Thou Shalt Not Be a Weenie – the solution is easy to discuss, but always more difficult to implement. You must have strong will and resolve to see it through.
3. Thou Shalt Be Decisive – it’s less important what you decide than it is that you decide – so decide!
4. Thou Shalt Not Rely on Secondhand Information – when dealing with multiple sources of secondhand information, get everyone together, discuss it and solve it.
5. Thou Shalt Fight for the Greater Good – put egos, titles and past beliefs aside and focus on the vision of the greater good, the big picture.
6. Thou Shalt Not Try to Solve Them All – prioritize issues and take them one at a time. Deal with the most pressing and important first, and then move on.
7. Thou Shalt Live with it, End it, or Change it – those are the only three possible options and outcomes you have in solving an issue.
8. Thou Shalt Choose Short-Term Pain and Suffering – if something is a problem for longer than 36 hours it’s your own fault. Solve it now rather than later.
9. Thou Shalt Enter the Danger – deal first with the issue you fear most.
10. Thou Shalt Take a Shot – suggest something, try something, do something, even it is wrong.

Issues come up every day, in every life, and in every business. The key to moving forward is to identify them, discuss them and solve them.

Apex Incentive Trip Winners Soak Up Fun and Sun in Cancun

Setting sales goals at the beginning of the year is an important activity for all organizations. We do it every year at Apex to set the stage for the year ahead and provide incentives to reward successful Advisors for a job well done. I’m proud to say that all of our Advisors are dedicated to making sure our clients are taken care of and that deals are handled professionally and successfully.

Our biggest incentive is a vacation for the Advisor (and his or her significant other) and I’m happy to report that my wife Pam and I recently hosted our annual Cancun trip for our largest group ever…six very deserving Advisors!

Excellence ResortsBesides having the opportunity to show my appreciation (because they will tell you I’m not known to offer daily compliments) and to celebrate their success, it’s also an opportunity to build team bonds, recharge our batteries and refresh our minds.

We love going to the Excellence Resorts in Playa Mujeres because it’s all adult, all inclusive resort that makes it easy to relax and enjoy ourselves (Btw, the beach and spa are wonderful!)

This is a very stressful business, so getting away from it once in awhile is very important. I encourage every business owner to take a break periodically from the business to connect with family and friends and escape from the daily grind.

This practice was started by my predecessor 15 years ago and I’ve found tremendous value in keeping the tradition going. We’re often so focused on the deals, the ups and downs of transactions, and the process, that it’s sometimes too easy to forget about what’s important in life.

As I mentioned before, I’m definitely not the best at giving ongoing praise and feedback, so an annual vacation award will at least recognize those brokers who exceeded the goals we set. And it goes without saying that the significant others get to celebrate with us because they’ve been there to support us and have had to take on our stresses when deals fall apart, get delayed, or are just emotional transactions.

We’re already looking forward to next year’s trip!

Post written by Doug Hubler, President, Apex Business Advisors

ApexCancun

 

The One Thing That Prevents Good Deals From Getting Done

ParanoidI want to share a lesson in paranoia. It’s one of the easiest ways to kill a deal. Why? Because it often removes reason and logic from the buying or selling equation.

Now I’m not saying there aren’t going to be anxious and nervous moments when buying or selling a business. In fact, I’d be more surprised if a buyer or seller weren’t nervous.

But instead of letting those emotions negatively control the process, you should instead use them as a driving force to get answers, solve problems, and get a quality deal done.

Anxiety doesn’t mean you’re doing the wrong thing or that someone is bound to take advantage of you. It’s a normal part of the buying and selling process. Letting your anxiety turn into paranoia is where things can go south quickly. 

Sometimes advisors will read your anxiety as a sign that they need to protect/overprotect you at all costs because you might not be cut out for business dealings. But make no mistake about it…your advisor needs your direction to figure out how to get the right deal done.

I’ve had a few cases over the years where I was blaming the attorney for trying to kill a deal. More than likely they were feeding off of their clients paranoia, so the advisor continued to put up roadblocks to the transaction.

Here’s the deal: If you want to buy a particular business or sell a business to a particular buyer, then tell your advisor you want to figure out how to make it happen with as little pain (and cost) as possible for everyone involved. They will work according to your direction.

If the advisor is trying to drive the deal and make decisions for you, it’s time to find a different advisor.

So put the paranoia aside. All it does is get in the way of getting a good deal done for everyone involved. Trust your advisor to help you through the process. And, again, if you don’t trust your advisor, then you should work with someone else.

Part of their job is to help you get out of your own head so you can ultimately get what you’re after.

Post written by Doug Hubler, President, Apex Business Advisors

Qualifying Buyers and Sellers (Financial)

Help Me Help YouIt’s impossible to help people when they are not open and honest. As advisors we need to really understand our client’s situation so that we can develop a successful buy or sell strategy. Building a trusting relationship is critical.

In our last post we discussed motivation as a key factor in qualifying Buyers and Sellers of businesses. The next step in qualifying both Buyers and Sellers is their financial resources and requirements. Sometimes we feel like therapists trying to understand a person’s goals, desires, dreams, and pains, but this is necessary in order to understand the emotions and financial needs driving decisions.

Buying
Dreams and goals are great, but when buying a business, one has to have financial resources to get started.  If we try to help someone buy a million dollar business because it matches their dream, we need to make sure the buyer actually has funds for the initial down payment and working capital.

If funds aren’t there for a $1 million dollar purchase, maybe we need to adjust the dream to start at a more realistic $250,000 (for example). In all cases, the math needs to work to:
1. pay a loan,
2. provide the buyer their required income, and
3  still leave cash to operate the business.

It is easier to reach that ultimate goal if we don’t start out with a situation doomed to fail!

Selling
On the sell side, we need to make sure that the value of the business matches the seller’s expectation and that there will be money to fund retirement or their next project. If the market value doesn’t appear to be enough, we need to rethink the timing of the sale or reassess the seller’s real financial need post-sale. Sometimes a discussion with a good financial advisor will help identify a person’s actual retirement needs.

There may be other obligations that we should be aware of, for instance: tax or other liabilities weighing on the seller, family and estate issues, partnership difficulties, etc. These are stressors that can impact the seller’s financial picture but don’t change the value of the business. So, need does not equal value, but the need helps us develop a strategy for a transition. If we don’t know, it is hard for us to help.

Get some assistance from your Apex Business Advisor!

Doug Hubler
President