Ben Griffin - Exit Strategies: The Mental Game (H0417)

Time is precious and so are our pets, so time with our pets is extra precious. That's why we started Dutch. Dutch provides 24/7 access to licensed vets with unlimited virtual visits and follow-ups for up to 5 pets. You can message a vet at any time and schedule a video visit the same day. Our vets can even prescribe medication for many ailments, and shipping is always free. With Dutch, you'll get more time with your pets and year-round peace of mind when it comes to their vet care. Welcome to the Exit Coach Radio show, the show for baby boomer business owners who are looking for cutting edge information as they plan their 3 to 10 year business succession and exit. Every week we interview top professional advisors for their best tips, strategies, and precautions so you can be well planned. And don't miss our one minute exit coach tip of the day on Exitcoachradio.com. And now here's your host, the exit coach. Bill Black, welcome everyone. Thanks for joining us today. I am excited about my next guest. We're going to talk about exit strategies, the mental game, and our guest is Ben Griffin, and the company name is CEO IQ. Ben's from Baltimore, Maryland, and they provide executive coaching, peer advisory group programs, strategy and team alignment workshops for entrepreneurs and their leadership teams. So Ben, thanks very much for joining us. Welcome to the show. Well, thank you very much, Bill. It's great to be with you this afternoon. Thank you, Ben. Um, tell us a little bit about CEO IQ. I'm intrigued by the, the name of the company. How did you, uh, how did you, uh, what's your background and how did you get started with CEO IQ? Well, my, my, uh, corporate and entrepreneurial background, I'm a former corporate executive. I actually spent 15 years as a turnaround guy. I was kind of the guy you didn't want to see on your doorstep because we probably weren't going to have a lot of fun together. I, uh, that was the role of tearing apart companies and either attempting to put them back together or closing on one of the two, and, uh, I did that for a while as a corporate guy. I finally kind of burned out on it. I wasn't uh. Uh quite as enamored with it as a chainsaw Al Dunlap was in the 70s and 80s. So, in late 1999, I transitioned into thinking about that I'd like to help people on the growth side of business and, and begin a process of transforming myself, reinventing as I like to say, into an executive coach and a facilitator for peer advisory groups. OK. And so on the growth side, you still have some tearing down before you can move forward, I'm sure. So a lot of that gave you some great insights as to determining what the stumbling blocks or the roadblocks were in a business situation. I would imagine that that education and experience helped you quite a bit in that regard. What else was different? Well, that's a great comment because more than I ever thought, I have certainly been involved in the fact that sometimes you got to tear, tear down and rebuild foundations before you can start uh going forward again and uh and that's been certainly part of the process. I'm, uh, and, and sometimes unfortunately, I've had to learn that you can't save them all. I've had. Uh, of all the companies I've worked with over the last 15 years, we've only had one actually go down and, and go bankrupt because I couldn't get the owner to understand he didn't have enough working capital to handle the growth. He didn't have the cash to handle the growth, uh, but. One of our great success stories is taking a guy that literally had $5 million of negative equity on his balance sheet, putting in an advisory board, getting to listen, and he successfully exited with about a $10 million check about six years later. So that's one of our stories that I'm particularly proud of that, you know, you can break it down a little bit and build it back up and exit successfully. That is a story a lot of people would love to hear. Because uh uh I I think you know, and I'm sure you can validate this, but there's a lot of business owners out there saying I just don't know how I'm gonna get any value out of this thing, um, or they go to a business broker or someone who might might tell them we can sell it, but it's not gonna be worth anywhere near what you thought. So let's talk about the mental game. How important is the mental game in exiting a business a business? Well, you know, I mean, if, if you go on the web and you start searching and uh actually I know uh your previous, uh, the guests you just had on Tom Young, well, as a matter of fact, I love the work he does. You start doing some Google searches and playing in Tom's world a little bit. And uh and you find out that there is a mountain of information out there about the financial side of exit, about grooming your company financially, about getting the books in shape, about all the things you need to do to get EIA up and and get enterprise value up. The thing that seems to be uh. A bit of a hole is getting ready mentally to think about exiting your company and what the process is going to be, and my experience is it takes as long to do that as the 3 to 5 years that I tell entrepreneurs all the time you're going to have to spend getting your company financially ready. Uh, so we get all the energy focused on the financial side and what, what's left is something that many, the, the vast majority of entrepreneurs I come in contact with, uh, are not very good at, which is some serious deep introspective thinking and self-analysis that needs to start way in advance of saying I'm ready to sell my company. And, um, and either retire or go go do something different. And that introspection is, is just by, by nature, entrepreneurs are not very introspective people. They are outgoing, put it out there, make things happen, go build something, and then in particularly baby boomers, uh, much less so than our millennials that kind of build it to flip it. uh baby boomers tend to have gotten to a place where they're 60, 65 years old today and are not 100% sure what's going to happen, particularly if the kids haven't indicated an interest in running the business. So that whole mental process is a 3 to 5 year kind of what's life going to look like on the day I sign the papers and the check clears and I've got all that money sitting in my account. That's a, that's a mouthful. I mean, it really is, uh, you know, you're talking about a goal oriented group and without any, remember that there's a book out the Purpose Driven Life. Well, without any purpose there is no life for a lot of these people and they have to not only they not only be um ready obviously financially, but they have to be excited about what's next, right? I mean, it's not just enough to say, I, I'm gonna retire. I've got, I've got to do. I've got to get involved. Well, an entrepreneurs forget that they spent their entire lives doing and then they think, oh well, I'm gonna finally sell this business and be away from the pressures and the responsibilities of running it. And, and then they find out that it's not nearly as um it's not nearly what it's cracked up to be, Bill, in terms of what that looks like, uh, once you've collected the money, because you're used to a pretty high level of activity, and oftentimes what I see is people running from something and something. Now I, I just had one of the entrepreneurs in our peer advisory group, a very successful 9-digit exit. They sold the company for just north of $100 million and the guy was ready with a plan. He knew what he was doing. He had worked on it. I coached him for 3 or 4 years in advance of it and literally the day the check. Cleared he was out buying rental real estate and hiring a guy to run it and has put together a very successful company in the rental real estate business in the two years since he sold the company, and he's traveling all over the world and getting a chance to go do great things. That's the right way to think about it rather than thinking about I'll figure out what to do when the check clears. Mhm absolutely you get a lot of new friends then too don't you? Uh, well, yeah, once the check clears everybody wants to be your friend, you know there is absolutely no doubt about it and that, uh, that process of making sure. You are being appropriately introspective about what you're gonna do is really important. I think the other thing that, that, that's really important is spending some time with your family about it, you know, about what's this gonna look like, you know, the Uh, entrepreneurs are particularly famous for saying my wife said I married you for better or worse but not for lunch and, uh, and suddenly, uh, you find out that uh if you haven't really planned it and talked about it you're just kind of there and you're wondering what to do with yourselves so I. I think that whole family side of mental readiness is really important, and there is no pat answer to that because it's going to look different for each person depending on their personal circumstances. Very wise advice is getting your family's input and getting Uh, getting everybody involved in the decision because it's going to affect them too and maybe they've been waiting this this is finally the time they're gonna get with you and now you're off on something else and uh it can cause a lot of conflict and discord. So, so, uh, Ben, great advice so far uh what's the biggest mistake that you see entrepreneurs make when planning to exit their companies? Well, the biggest mistake I see them making is waking up one morning and saying, I'm ready to sell this place, uh, and not thinking about that, gee, just because I got the idea in my head to sell it, that doesn't mean it's gonna sell tomorrow. You know, you mentioned it in a lot of, uh, most of your listeners still are baby boomers, uh, that are reaching into their mid-50s to mid-60s now. and they're starting to think about exit and the challenge is if you look at any of the statistics for the for small to mid-market businesses from the investment bankers, the best guess is if you take the whole range from very successful companies that will sell for a lot of money down to the corner bar or convenience store, there are something north of 7 or 8 million baby boomer owned businesses that are likely to come on the market in the next 10 years or so. And the challenge is the number of transactions every year if you track transaction velocity through any of the the statistics and the firms that keep track of that stuff is that there's only about 40 or 50,000 transactions done every year. That means there's going to. Be a lot of businesses that aren't going to market the way the owner thinks that they're going to sell. And so getting yourself mentally prepared for I'm going to have to take money back. It's going to take paperback, excuse me, you have to take financing back, provide some of the financing. It's going to take longer than I, I expected. I'm not going to get the price that I thought I was going to get. Um, and it's going to, it's going to be a process. It's going to be far more exhausting than I thought it was going to be. That whole thought process and thinking that through is one of the first big mistakes I see. The second one is a real reluctance to use and pay for outside advisers, you know, a. The guy that's built a $40 to $50.60 million dollars a year revenue business that's churning out, say, 5%, $2 million.03 million dollars, $4 million of IA, and he's expecting to get 8 times he's talking about a transaction well north of $20 million. When the investment bankers start talking about the deal fees, he gags because it is just. An anathema to pay those people that money and in fact coming to the point of view that it's some of the best money you could pay is really important because this is not a do it-yourself project to get your business sold successfully. Absolutely. Well, it's a huge transaction and there's so much involved with it and there's so many enhancements that can happen along the way if you do it right and If you do it wrong, you're probably gonna find out that you just wasted a lot of time and money on something that didn't happen because as you know there are a lot of deals that that start that never finish and that's that's even worse outcome, right? So we even a worse outcome. Uh, listeners, we are, we are lamenting situations that we've seen both seen over the years, but what, what I heard you say a few minutes ago was that let's say that that in the next 10 years 10 of those 8 million businesses goes up for sale. That's 800,000 businesses a year, and there's only 50,000 transactions to outside business owners every year, even using the most aggressive numbers. That leaves a huge number of businesses that will not. Sell to an outsider, so you have to plan for the alternative, and that is sell to somebody who has no money, probably, you know, can't get money. So planning to buy yourself out almost through your insider transaction as a as a good strong possibility. Is that right? Without a doubt, Bill, almost any business under $5 million in revenue, in my experience has pretty much got to buy itself, OK? And most of them between 5 and 10. Million dollars have got to contribute in some significant way to what I call buying it yourself, meaning that that the business has got to be generating enough free cash flow to pay you the note that you're going to take back from whoever buys it from you. Uh, and of course that is for most entrepreneurs a scary prospect because the other thing that most people don't spend enough time in the territory of am I really ready to give up. Control of this business, you know, by their nature, entrepreneurs are control freaks. I mean, and, and I know it only too well. I definitely raised my hand when somebody says, who are the control freaks in the room because I qualify too. And so as a control freak, you've got to really get yourself mentally prepared for the fact that you're not going to control this thing anymore. And if you're taking back paper, that's scary, if you are selling it, let's say, to a private equity firm, the best of all possible situations. You've got a private equity firm that's ready to stroke you the check, and they want you to stay for 2 years. One of some of the toughest transitions I have seen on the mental side is entrepreneurs trying to work for private equity and having a real live board of directors that starts asking them the really hard questions and pushing back during that two year period of time. It can be miserable for an entrepreneur to go through that when they realize that, oh my gosh, I've had to give up control of my baby. Yeah, yeah, and that's another huge mental stumbling block for a lot of people. So, uh, give us a tip or two on what entrepreneurs can do to better prepare for that mental side of the exit. Start early, start planning early, start thinking about what it is you're gonna do, what are you going to the day you sign the papers as opposed to what are you running from? That's probably the biggest thing you can think about. Get a team around you, not just financial people, the legal people and all of that that you need, but get an executive coach, get somebody you can talk to about this stuff. in confidence that you feel comfortable with, that the chemistry is good, that understands what it looks like and can help you think through what some of this might look like because if you will get that team around you and be willing to listen to them, the whole process will go much more smoothly and be a lot less painful in going through it and after you've done the deal. And again to reiterate what Ben's talking about, the reason to plan earlier is there are some strategies that are going to take all of 3 to 5 years to implement, and it's not just something where you put the plan together and then put it on the shelf until your exit comes up. This is something that needs to become part of your routine planning as you move forward, correct, Ben? Oh, with, without a doubt, you know, a thing, a deal that I am in the middle of right now. I, it was literally one of those deals, an entrepreneur that I coach and it coached regularly. I walked in one day for our regular monthly 1 to 1 meeting and the guy said, I'm ready to sell this thing, and I've called an investment banker. I was like, huh? And I knew what shape the books were in and all that, and I said, you know what, you're in for a rude shock. And in fact, when the first Valuations and all that came in. He's on a cash basis. He's got a significant amount of assets outside the business that ought to be inside the business. There's some restructuring to be done. That was 5 years ago and we're just getting ready to put that business back on the market again. And, and so taking the time to go make sure you've crossed all those T's and dotted all those I's is something that entrepreneurs just don't think about enough. Really great wisdom, great tips, Ben and unfortunately we're out of time for today, but I'd love to have you back on again because I know we could talk about this stuff for hours. It sounds like we have some some some great stories. Hey, so tell our listeners what's the best way for them to get in touch with you? I know let me give them your website URL if I may. It's www. CEOIQOIQ.com. Uh, then is there another way for what will they find there? Is there another way for them to get in touch with you? They'll find lots of resources on the website. Uh, there's a, uh, actually a totally no cost membership. It's lots of access to our, uh, the, to the, uh, material that we've got out there. They can also email me from the website info at CEOIQ.com. Uh, or I would invite anyone to call me directly. My personal cell phone number that I answer is area code 410-804-3848. I'd be happy to talk to any of your listeners about helping and thinking through and answering questions about exit strategies, Bill. That's fantastic and that's a great offer for those of you out there. You can tell. When you're listening to the voice of experience and wisdom, and not only has Ben been helping business owners to move towards that exit, but remember before that he helped businesses that needed to restructure and and get their businesses in good shape and good order after maybe they've they he so he knows where the trouble spots are. Let me put it that way, right, Ben? I have definitely been there, done that, and got the t-shirt, Bill. I tell people, you know, picture a picture a wide open river, and while you're growing and running your business in a good economy, you're part of that river, and then you turn to go down this channel and this channel is dark and it's got lots of rocks and lots of shipwrecks along the way. That's where you need somebody like Ben to come in and tell you, Hey, I know this channel. Don't worry, we'll get down this one together. So Ben, thanks so much for joining us. It's been a real pleasure. Bill, thank you. Great being with you today. We're gonna take a short break and be right back with another guest, so please stay with us. Just thinking about what will happen to your business if you're gone keep you awake at night? Will you get the price you need from your business to carry you through retirement? The BEI Network of Exit Planning Professions is the world's leading advisor network with the power to help business owners transition out of business on their own timeline and terms. Ask your most trusted advisor to create a BEI plan for you, or visit us at exitplanning.com. That's exitplanning.com. You're listening to Exit Coachradio.com, the information station for age 50 plus business owners, where we're interviewing top advisors for their best tips, ideas, and precautions so you can be well planned. We upload new one minute tips every day. Exitcoachradio.com. Come listen for a minute. Thank you for listening to Exit Coach Radio. Time is precious and so are our pets, so time with our pets is extra precious. That's why we started Dutch. Dutch provides 24/7 access to licensed vets with unlimited virtual visits and follow-ups for up to 5 pets. You can message a vet at any time and schedule a video visit the same day. Our vets can even prescribe medication for many ailments, and shipping is always free. With Dutch, you'll get more time with your pets and year-round peace of mind when it comes to their vet care.