How to sell your manufacturing business

Thank you very much. Um, we work with companies helping them with manufacturing operations, business financials and strategy as well as workforce solutions. Uh, obviously a successful business at some point needs to transition hopefully in a way that the owner wants it to. So, um, today's webinar is to introduce you to a couple of our partners that help help our manufacturing clients with that. Next slide, Mike. Marin, I'm I just admitted a bunch of people that are coming in now. Okay, just admitted one more. Uh, like I said, we're partners. We refer each other to services in areas that we have expertise in. And with that, I'm going to let Patrick and Emily talk a little bit about what they do and the organizations they work for. Sure. Thanks, Aaron. Uh, good morning everyone. Patrick Corkin here. with the Reineer Group. We're based here in the Pacific Northwest. Uh we have offices in both Portland and Seattle and our primary focus is working with owners and founders of privately held companies. Um typically most of our work is helping them, you know, identify, build and implement a transition strategy. So there's kind of two segments that we think of our business. One is the strategic advisory or consulting side. So, a lot of the transitions that we're working on in that category is is primarily internal sales to key employees or family members. And then on the investment banking side, we're helping clients with external sales to a third party. Um, most of the clients we serve, you know, are based here in the Pacific Northwest, but also really national as well. And they range from anywhere from 10 million of topline revenue to 100 million. And these are your traditional middle market companies, you know, manufacturing, oil and gas, distribution, branded products. Um, so collectively since our founding, we've transitioned close to 700 private companies. So, you know, we we haven't seen everything, but we've seen a lot. So, it's it's pleasure to be here and I look forward to the discussion. All right. Well, my name is Emily Bergstrom. I work with a group called Project Equity. We're a nonprofit. Um we're based in California, but we work nationwide. And um we do three main things. Um the first thing is educate um owners about employee ownership as a potential exit option. We also provide technical assistance to do um two formats of employee ownership conversions, worker co-ops and employee ownership trusts. And then we refer out um ESOPS, which a lot of times people in manufacturing are more familiar with. And then um we also have an impact investing fund. Um so we come to the table as a finance partner as well to promote employee ownership. [Music] Oh and maybe one thing I'll mention about myself. I just try to get a little bit of street credit with the manufacturing um folks by saying I I spent a long time 12 years at McMaster car. So very familiar with the manufacturing space. All right. So, we thought we'd start out just um giving kind of an overview of um of some of the market dynamics. If you could go to the next one, Mike. So, one of the um important things I think for anyone who owns a business right now and is thinking about exiting in the next 10 years is to understand there's this huge demographic shift that's happening where um you know many people are of retirement age right now. Over half of business owners in Oregon and and this stat is true across the United States are retirement age. Um and so this is really like an unprecedented time for um ownership change of hands in American history. And so um it's important to understand we call this a silver tsunami. A lot of people use this um this language too. But um you know there are a lot of businesses that are for sale now and that is going to continue to be the case. And so it's important as a business owner to think um of yourselves kind of in that context and and do as much as you can ahead uh to make sure that um you know that you're kind of ahead of the game. And then you know I I pulled up the these stats. These are from the Bureau of Labor Statistics. Um just to help folks understand that um as a manufacturer, I think there are specific um challenges to selling a business and um I just think these stats are so interesting because most, you know, most businesses across America are small. Um and um manufacturers tend to be much smaller than um um than businesses of the same revenue size in terms of employees. And so um you know when we have businesses that have a thin or no management layer or like a a very involved owner, a lot of customer concentration and capital intensivity, you know, those are sort of headwinds for for selling a business and and those are often really common in manufacturing companies. Hey Emily, I'll add a fun fact there. 87% of the manufacturers in the state of Oregon have less than 20 employees. Yeah, very very common. Very common. and and when I was at McMaster, I mean, I don't know how many, you know, 20 employee machine shops I visited, but you know, that that's just that's that those are the realities, right? We're using capital um to to do things a lot more than labor sometimes. Yeah. Yeah. And so just a a quick overview of the current M&A environment. So this would be relating primarily to external sales. I mean, it's been in short incredible activity over the last 5 years. And if this chart was to extend back to 2012, you've kind of you'd kind of see a gradual incline all the way up uh to where we are today, you know, with the exception of Q2 2020 with COVID. Um but really what's been driving a lot of this activity is just really historically low interest rates. Um pre2022 there was kind of looming tax changes which encouraged a lot of owners to go to market to hopefully beat any changes to capital gains. Um, but to Emily's earlier slide about the silver tsunami, that's coming. But it's interesting because there's there's really been a supply and demand issue in terms of more buyers than sellers, which has just created a really good environment in terms of multiples and valuations for companies that did want to go to market. And then you couple that with there was a record amount of undeployed capital, especially on the private equity or financial buyer side. Um, you guys might remember, you know, during PPP loans, if you were backed by a private equity firm because there was close to three trillion of unemployed capital, you weren't even eligible for those those loans. Um, so as we come into 2023, it's interesting because a lot of those fundamentals are still there, but we are seeing rising interest rates, which is starting to lower the multiples a little bit. is just because you know if a buyer has to you know pay more for the capital that they're leveraging to buy the asset that'll show up in the multiple. So that's one of the negatives that we're starting to see. But these are still like historically if you look at the multiples companies are getting when I say multiple companies usually trade on a multiple of EVA net profit. Um and so those multiples come down a little bit. Some of the due diligence periods have become a little bit longer. Um taking a closer look. Usually we close a transaction at the time we sign a letter of intent is what we call it. They'd close in about 90 days. Now it might be 120. Um but the good news is sectors that are showing you know resilience especially through COVID we used to always talk about the great recession now we just talk about how did the business do during COVID have become very attractive there's still a record amount of undeployed capital um and so I think the biggest change we'll see though is in the prior years you know everyone was chasing really large assets where now we're seeing them kind of shift to the lower middle market because if it's a complimentary business that you bolts on nice or you know has good synergies with an existing asset. It's pretty low risk and they still want to grow during you know potentially down times. So still a really good time in the overall M&A market. You go to the next slide Mike. Yeah. So we tried to give sort of just a big picture of like where is the world and then now we'll kind of zoom in um you know thinking about an individual person. Um you know go ahead Mike. Um the question that I get a lot of times um from people is they just don't know what their options are when it comes time to sell. Um and I think one of the really um key things that you need from an adviser is to help you understand the full suite of options that are available to you. Um so you want to take it away um Patrick and talk through those. Yeah, sure. So I mean there's really two options when we think about a a transition, right? There's an internal sale. So, that's where you're structuring a transition to either one or a group of key employees um or a family member. And they're both kind of they're both different, but they have similarities. When it's a family member, you're typically trying to sell the business for what the exiting shareholder needs to fund their retirement and do it in the most taxefficient way for estate planning where when it's a key employee, it's also a very amicable sale. I mean, these parties typically know each other for a long time. Um, but you really have in both those scenarios, you really have to balance essentially the P&L because what happens is those parties usually take a loan out for a portion of the sale and then there's some type of ongoing payment that happens either monthly, quarterly, annually, etc. So it's really important to stress test you know the amount that's remaining that that the internal member will have to pay how that impacts their business to grow the company as you have with this ongoing liability of paying and exiting shareholders. So the more you can just make sure that's successful um it minimizes your risk too because you're the owner with still you know skin in the game if you will and that's different with you know than a third party sale. It's a little, you know, less personal as you can imagine. Um, these are unknown parties. We're usually trying to accomplish the best price and frankly the best terms. Um, also thinking about the employees or potentially the community that you live in. Um, but there's really three types of buyers that we consider. Strategic buyers, that might be someone that you compete with that uh bolts you on to just kind of expand their geography. where there's individual buyers and we're actually starting to see a lot more of that where these are people that might work in a corporate position and want to own a business but don't want to start a business. So, they'll go out, they'll raise some financing and look for an owner that they can relate to in an industry that they understand and and purchase that from a shareholder. And the last one, and this is, you know, we talked about undeployed capital is the private equity side. So these are groups that, you know, are raising capital to go out with the intent of buying privately held businesses. This is a really, you know, growing area and they're very motivated to deploy that capital because really they don't get compensated until they do. Um, so we've seen a lot of kind of aggressive biders on the private equity side, but but generally speaking, those are the two main types of transitions that uh we're seeing in in today's market. But Mike, if you go to the next slide, these are just some other some other options that people don't always think about. And Emily, I don't know if you want to to start this off and I'm happy to kind of Sure. Yeah. And I I'll add quickly on you were talking about internal sale. Um and and thinking about that debt burden and that's exactly how we think of it with a full employee group sale, too. Um you know, we're we're trying to figure out, you know, the the employees don't come with the money for a sale like that. um they're they're borrowing it and the business is taking out a loan um to to sort of to buy itself and so it's all about what is the debt capacity um and then you know other alternatives it's so important when you know when I have conversations with um business owners really to get to the heart of what their goal is sometimes people want to sell because they need to um diversify their assets you know they're coming to retirement age other times people say that they want to sell but really what they want is to to work less time in the business, you know, and so I think a good adviser will spend some time with you trying to figure out what is it exactly at the heart of um your exit. What are the important what are the important things to you? Um because the best um the best exit option is going to need you to have um you know really clear prioritization of what your goals are. Um so obviously you know people can can wait. You can build management if if you need to just take a step back. Um you can start working on your succession plan internally. um you can make a key hire and completely step away, you know, maintain the business. Um you know, maybe hire a CFO, someone else that can can help you run things and just become a passive owner. Um you know, and then there's also cases where um maybe it makes the most sense to sell or to to close the business. Um uh but I think what's key with all of this is one understanding what you want as the owner and two understanding you know what are the realistic paths of all of these that are open to you. Um and um and that's sort of the the beginning job as as you're thinking through exit strategies. Yeah. Well one thing I'd add on passive ownership. This is often a pretty overlooked one. Um, but it can be a great one, especially, you know, we have a lot of clients that might come to us because they want to explore an external sale because there's no one inside the walls of their business that's expressed interest in acquiring the company. But it's also a business that you you c couldn't sell for, you know, a high multiple um or the valuation that the owner wants. So, but it's still, you know, it still accomplishes a great cash flow where you can you can really incentivize your management team with different equity forms to not really think like employees, but think like owners and continue to run the business in your absence. It does take time. It's a transition. Obviously, you still carry some risk as the actual owner, but it's a great way where you could keep it as a legacy asset for your family and just to continue to collect cash flow from a really good performing asset without having to sell it and still be able to retire whatever your personal objectives are. So, we're seeing a lot a lot more of that these days. Yeah. And if Mikey, if you could go to the next one, I think it's important, you know, we're sometimes in the sort of world of M&A, people use these different terms and if you don't come from that world, you know, not everyone has heard these before. So, um, you know, thinking through just the basics of if you talk to Patrick, if you talk to us, if you talk to a broker, you know, people are going to use this word multiple all of the time. Um, and and this is a helpful concept to understand in broad terms. So, I always point owners to um this data. This comes from the International Business Brokers Association. They have a really cool quarterly report that they put out that I think is worth taking a look. Um and it shows that you know if you just look AC across like a really long time series typically businesses will sell for a multiple of their um either you know sellers discretionary earnings or IBIDA whichever term you want to use. Um and so if you're a half a million um ITA sellers discretionary earnings business probably you're going to sell for about two times that um and and then it kind of the multiples go up the line. Um, and so if you are here just to think of like, well, what is a ballpark? How do I understand where I fit? This is a decent guide. You know, every single business is different and there's, you know, all different kinds of variables that will determine what a sale price is. But if you want a just a general understanding of how these things work, um, you know, this is a good resource. And go ahead to the next one. Another um question that we get um is, you know, well, how how does it work? What what are you know, when when do I get my check as the as the selling owner? And um the thing that I always tell people is like, okay, well, no matter who you work with, whether it's private equity or a strategic or you're selling to your employees, you're going to get some money now and you're going to get some money later. the the fantasy that all selling business owners have is that they're going to have this easy process where they get 100% of the purchase price, you know, on on day two of thinking about it and that is not realistic. You know, we're here to help you understand how this works. So, um if you look AC across, you know, the same data set, um this is comparing 2022 with 2012. So, you know, 10 10 years difference. Most the time you're going to get somewhere between, you know, 70 to 80% in cash at close. And that's either going to come from the person that's buying it or the loan that they take out um you know, to to buy the business. And then you're going to have some kind of skin in the game for some period, usually like five or seven years, where it's a loan that you're making to that um to that business. And so this is important when you're thinking about your retirement um planning that you understand that there's this chunk of cash that happens now and then there's some that happens later. And um one of the important tools as you're thinking about different structures is um to think about the tax implications of when that money comes to you. Um, you know, this is a a good uh thing to talk about with your tax advisor, but there are some structures that can help, you know, optimize your your tax profile and um and and I always tell people it's not the sale price, it's what you actually get at the end of the day a after taxes. It's important to to recognize those and to be strategic about um the tax side, too. One piece we didn't talk much about maybe well Emily is uh the retained equity. So the private equity buyers they they typically want some type of retained equity because they don't always drop in to run the business. They would love to keep a management team or an owner that's willing to stick around. And so what we're seeing is they usually want ownership or or some form of management end ownership to retain about 10 to 20% of the business. And the idea there is it just it just lowers their risk, right? They keep the management team in place. They know that you still are attached to the business. The customers know that. And you know the the pitch they would make to the owner, if you will, is well, we're going to help you grow the business for another three to five years before we sell the asset again. and it's going to be a much larger company. So, you're going to be a smaller part of something large. And so, it's just kind of a way that you can increase, to Emily's point, your net proceeds um if you have a three to five year timeline to to stick around prior to a full exit. So, we're seeing a lot more of that. Just thought I'd share that. Yeah. And I was on a call earlier today with um some a couple of bankers in Oregon and we we're saying yes, you know, even if you sell to an individual, you know, and they're getting a loan from a bank, they're going to require that seller know, too. If you do an employee ownership transition, everyone in this world that that money later piece is all about helping them manage the risk of the transition of buying the business. There's kind of no escaping that, you know. Um I guess to to your family sometimes you don't have that, but um but Patrick can tell you that sometimes you do too. There exactly. You go ahead to the next one. Mike, another question that we both get quite often is, well, how long does it take to sell a business? Um, and you know, it's sort of like asking how long does it take to sell a house. You know, each situation is different, but there's stages um that you just can't move through any faster. You know, that there's a certain amount of time that they take. And so, from the moment that you decide to when the purchase agreement is signed, you should plan on somewhere between two and three years of time between that. Um, you know, and and Patrick can tell you there's some places where you can squeeze this timeline a little bit if you're lucky, but it's not really up to you. You know, you're selling your business to someone else and that other entity takes time to find. Um, it takes time to diligence the the company. If you're getting lending from somewhere, it takes time for them to do their underwriting. So, you know, this isn't just like I'm gonna list my business and then I'm gonna move to Florida, you know, in six months. That that's that's not how things work. So, it's important to start early. Um, you know, you can control what you can and um and and hopefully by um you know, being flexible, you know, you can move through that process as quickly as possible. Yeah. Could you click that one more time, Mike, so that the um words come up? Yeah. So, um you know, go ahead. Yeah. And this relates perfectly into this slide because, you know, getting ready to transition your business. You know, although they could take a lot of different forms, it's it's always the same type of preparation. I mean, the first thing you can do before you ever, you know, talk to an adviser or anything is really just get your financial house in order. Um, you know, typically reviewed statements at least, but if you can get audited financials, even better. um any any potential buyer, internal or external, is going to need to thoroughly review at least three years of financials, maybe more. Um so the more you can do to get that piece ready is is incredibly important. Um the second one's obvious, but you know, try to transition your business when you're in a good cycle, when it's profitable. That's going to obviously get you the best outcome. Um and the business needs to be transferable. I mean, if you have one customer, for example, I know this is a, you know, probably not a likely scenario, but if you have one customer and the relationship's completely attached to you and you want to leave, that's a huge risk to a buyer. So, the more that you can bring your leadership team in, um, kind of diversify the responsibilities, diversify the revenue in terms of the customer base that you have, just the more seamless it's going to make that transition. And that leads right into the last point. It's just going to lower the buyer risk. And that's really what they're trying to assess is just what's my risk as an acquirer when I take over this business if X person leaves or exclient leaves? Um what kind of uh what kind of issue could I have on hand with with paying the debt service on what I paid for the business? So these are just four pieces to really think about. Um and then of course consult with your adviserss because they can make this process a lot easier for you. Yeah. And one of the things that we were talking about, you know, kind of preparing for this talk is, you know, the OMP is a great resource for anyone to just help you run your business well. And nothing makes a business easy to sell like it just being wellrun, you know. So investments that you make in your time, um, building up your management team, um, you know, getting your financials in order, those things all help you now just run the business well and they'll also help in the future when it comes time to sell. Oh yeah, I'm ahead of the game here. So here, so what if you're not ready? Uh number one, talk to old map as I was just saying. And then um you know, work with your CFO, get get your CP involved. Um so much of this is about your own tax burden as an individual. And so you know, you really need to talk to your personal financial planner to hear what they see and and be thinking of those dynamics um at the same time. And then um I I think that examining your options really I've talked to so many business owners who have this concept of what their options might be, but they're not grounded in reality. And so the more outside people that you're asking about your business, the more those options that you're imagining are going to be real options for you and and grounded in in reality. Um it's easy and so tempting to just say, "Oh, well, I'm just going to do this. I'm going to sell it to my son. and I'm going to sell it to the employees and and have a kind of a vague idea, but if you haven't really um gotten outside help sort of talking through what that's going to look like and the specifics of that, um it may be that when it comes time for you to do that, it isn't really an option. Um so, so you know, we're trying to hammer home this um you know, start early and uh and get outside help. And you know, we wanted to do a a couple of case studies just to walk through a specific businesses that we've both helped. Um, so the first one here is a client that was referred to Project Equity through OMAP. Um, you know, $10 million revenue. They've got a little bit north of 50 employees. Um, they ended up going with employee ownership trust. Um, you know, we we did some free consultations with them to help them understand what their goals are. um as a as a nonprofit, you know, we can do that. And then um uh you know, we did a feasibility um uh process where we help, you know, the the owner walks us through the P&L. We get to really understand their business. We build um financial projections and then kind of work backwards doing a debt capacity analysis to figure out what the the business um can afford to pay. Um once we had a a structure worked out, we developed um a buy side within the employee group of about four people. Um Project Equity coached them through that role. We, you know, we trained them on the financial literacy needed in order to um to negotiate with the owner and they're currently working out a purchase agreement this month. So hopefully next time I'm talking with the OM crowd, we can um share who it is and um maybe get them to speak too. But um this is a sort of typical client size for us and that process is is pretty standard. Um and happy to talk um you know more specifically if we have questions about how that process works. Yeah. And this one this was an interesting one. It was a a branded food manufacturer that we worked with and they came to us with two things there two transition structures they were interested. They said, you know, I think we want to set up an ESOP, but we've also heard valuations are really high. And one thing I'll say is ESOPs are, you know, really common to hear from companies that have attachments to a brand. So, breweries or, you know, branded food products like this was where they want to have everyone kind of share in that success. But a lot of times, you know, kind of like the Bob's Redm Mill story, right? And so, but what's a lot of times missed is you're essentially, you know, setting up a a public a public structure with a private company. And so, you know, what we did on this case is we overlaid both those. We showed them what an ESOP would look like, pros and cons. We also showed them what a third party sale would look like and the valuation and all the things that would go into a process. And really what we learned through that is, you know, they were only trying to incentivize a couple people in their business. That was really their objective. um and the valuation that they could get at that time was a little bit shy of what they hoped to get and there was some things that they could do to really increase the valuation of the company. Um and so we suggested what about short-term passive ownership because it sounds like really your true objective is incentivize these these couple people but phase out to retirement. And so what we did is we created like a synthe synthetic equity plan for two of these managers to run the company to where they could make a lot of these changes within the business that would increase the valuation. And so they're still doing that. But what it's also done is it's it's brought the key management team into the fold in terms of the long-term plan. It's given the shareholders a chance to really go off and retire and let them take the reigns. But it's made the business more attractive because they've made a lot of changes internally that they wanted to do to increase their margins. But they've also essentially worked themselves out of a job which lowers the risk from a buyer. So at a certain point that company will be transacted um to a third party, but everyone's you know aligned on um how that would work and it's just kind of monitoring when the right time is. So it's it's a really interesting story of just kind of you know it can take a lot of different forms and sometimes there's an inter solution rather than just exiting at that point. So not a common one but but interesting. So I think that's just one thing I'll add on to that. Um you know Patrick is that a lot of times people think about a sale as like a point in time. You know one thing needs to happen and needs to happen and then there's like a before and an after. And I would encourage people to think about this as a process, you know, and maybe um as you explore different um avenues, you know, you may find that you're comfortable in that space for longer, you know, it doesn't have to be so black and white. Um so yeah, if you go back with just to hammer home to what what is it that you need to take away, start early, please. Um please owners, start early. Give yourself the runway to have options. Um, you know, I think sometimes people are afraid to get started, but the truth is the sooner you start, the more control that you'll have and and the more you'll be able to choose what happens to you. Um, you know, market conditions matter. So, you know, if we do have a recession this year, you know, these things can really have a huge impact on the value of the business. And so, you need to be in the driver's seat as the owner ready to hit that wave when it comes and and and market conditions are good for you. Um so so please start early. And then the second point is um seek help. Um I think as founders especially you know as as business owners we tend to um want to do everything ourselves and and um you know be be very self-reliant. This is an area where um good advice at the right time can really make a difference for you. And um you know this isn't just a commercial for project equity or for you know Patrick at Rainey or you know you can find help in all different kinds of areas you know but just educate yourself. Um, ask questions, talk to your peers, you know, talk to other people that you know. Um, and and as often as possible when you're talking about things, get very specific about your business because, you know, maybe someone that you know on the golf course, you know, had this thing happen for them, right? But your business is going to be different. And the more you're talking to a financial, you know, person who's looking exactly at your business as a banker, they're going to be able to tell you um what you need to know for your specific situation. And um finally, you know, our our call here is be strategic. Um I think uh sometimes we sort of um you know, don't want this change to happen. You know, our our identity is tied up in our business. And so you kind of want to just like not look at it. But you can't be strategic if you're blind. You know, you you need to have all the information available to you. And also just like anything in life, I think the more flexibility that you can bring to the situation, the better your outcome is going to be. So, you know, just be intentional. Figure out what is it that you need, what does your family need, what is good, you know, for for the business itself. Um, and and really take the time to to think strategically about this change. All right. Well, Emily Patrick, thank you very much. That was great information. Want to take the last, excuse me, 10 minutes to open this up for any questions. You're welcome to throw it in the chat and I can um present them to Emily and Patrick or feel free to go off mute and ask them yourself if there any question. I saw one from Trish earlier about audited financials. Yeah. Why don't you talk a little bit about that and then I um Yeah. And then I'm going to make an introduction. Sure. Yeah. Um Patrick, do you want to take that one for for you guys' perspective and then I can share from from what I've seen? Pretty interest. Uh yeah, so that could be an external accountant, Trish. I mean, that's certainly who would would audit financials. Um but sometimes, you know, it's pretty common for for an external CPA or accountant just to do reviewed financials where audited is just kind of an additional layer of like verifying that all the numbers are correct. Because what happens is when you when you go to sell a business, they do what they call a quality of earnings where they're just verifying that the earnings that we showed them are are there. They're true. And so the more um forensic that your books have been reviewed, the better. And so just because you have an outside accountant doesn't always mean that they're audited, but that's certainly the step in the right direction because internal financials are always tricky if you're just doing them in-house where um it's just nice to have a third party verify that everything's done according to what they call GAP, which is just general accounting principles. Talk a little bit about protected margins, too. Um protected margins, I don't know if I fully understand the question. Uh there was just a question said can you give examples of protected margin? I think we were talking about um I think the time I mentioned margins Patrick is when we were talking about um readiness for a business sale. Um, and if if I'm hearing this from the right part of the presentation, you know, making your business transferable means that um the margin that you're earning in that business can happen for somebody else. Um, and so sometimes you'll hear people say like, oh, you know, I have to have a moat, you know, around your business. You have to have some kind of thing that makes you different, some some niche, you know, differentiator that isn't going to go away. Um, and so I think that um, when you're thinking about margin, so for example, in the case um, of if you only have one or two customers and they go away, your business can't exist anymore without them. Um, and so that's that's instability in your profit margin because you're too reliant on one or two clients to um to to give a buyer that sense that this business can keep happening even if there are some bumps in the road. Um, so I think that's where it was. Yeah. Thanks, Emily. And another one that comes to mind is like sometimes we'll have clients where they own the building and so they're not charging the company rent. Yeah. Reality is when you sell the business, they might have um, you know, a lease back and so now the P&L is going to have a lease expense that it didn't have before. So that would be like a negative adjustment to profit. So yeah, there's or or maybe like sh handshake deals that you have with certain um vendors that you might buy products from. If all of a sudden the buyer is going to pay more for those products than you were, those are those are margin deficiencies that you just want to get ahead of. And um yeah, I think a classic Oh, sorry. Oh, go ahead. A classic one too is an owner not paying themselves a salary. um you know and and so you know maybe the person that buys your business doesn't want to run it dayto-day. You know maybe they want to have a manager in that position. So that means that they're going to take whatever it is that you're taking home from the business and they're going to subtract outund something thousand for a manager to do some of the things that you were doing as the owner or a salesperson whatever it is that your role is. They've got to backfill that. Um, and so you can't sort of count yourself as free labor in your business and and then point to your earnings and say, "Oh, this is how much I'm earning." Because you do have to be compensated. Um, one way or another, you know, this business can only exist with somebody doing that work and and no one else is going to do it for free. But on the flip side though, it is interesting because sometimes we'll have owners that are taking really high salaries and distributions, but only be performing a general manager role. And so what we'll do is usually like a comp study of like in your specific geography like what would a comparable role be? And so a lot of times you can find that there's a surplus of profit in the form of what we call an adback because the owner is taking a lot more from the business than really the buyer would need to replace them with a manager doing the same duties. Yeah. And for from the buyer perspective, the fewer variables that there are like that that are uncertain, you know, like if you if you know you have to hire somebody in order to sell your business, just do it now, you know, and and then you don't have to do the comp study. You can say, "Okay, well, I've got Jerry in here. He's doing this job. I used to do it, and so here's what we're doing, you know, here's how we're performing with him in this role." The fewer things that are uncertain or unproven, um, the better. Yeah, I see a question here. Oh, sorry. No, I was just going to say you saw it. Um the process of getting an objective evaluation. Yep. Yeah. So, I mean there's third parties that you could just get valuations um done from, but also a lot of adviserss that help with transitions. Usually, that's just part of their process to help you understand what the value of your company is. A lot of times at no cost. Um but really what goes into that though is, you know, they look at a lot of the things that we're talking about. What's the true profitability or ibidatada business? um what are companies that are similar to yours trading for? Um because then it gives them a comparable transaction to look at. Okay, a company doing your type of profitability. Um what would the market, you know, pay for an asset like that? So, it's not always too too costly of an endeavor. Um it's certainly good to get an unbiased third party of of value. Um, yeah. And I I think too, you know, I'd always think of that show, Antiques Road Show, you know, where you have like this antique whatever thing. It's worth so much money. Well, it's only worth that if you find the person who will pay that, you know. So, the I think a a um the best adviser will be someone who has the pathway to make that happen. Um, you know, and can and can talk to you about that. So, another question came through and this is a great one. I mean, if this is something somebody's interested in starting down the path of preparing, be it a three-year plan or an eight-year plan, uh, do you recommend any third party companies to come in and do the evaluation or is this something that they should engage with an advisor like you you two in starting the process? Go ahead, Emily. I always think that more information is better. Um, if it were me and I was thinking about selling my business, I would pay the 15 grand or whatever it is in your area to to get the valuation just to have an anchor. Um, and then I would go to another place that um, you know, that maybe I would work with and say, "Okay, well, I've got this piece of data from these guys now. I'm working with you." The truth is going to be somewhere um, you know, in the middle. So, I I think the more information that you can get, the better. and recommendations, you know, would you all, Erin, have folks that that you would recommend in your like partner list so people could just reach out to you and and get a a referral? Yeah, I see Mike's head shaking. So, yes. Yes. And I don't know, Patrick, I don't know if you have a thought about that, too. Like, when you have people coming in who have a valuation, do you feel like that has helped them prepare for the conversation with you better or is it not necessary from your perspective? No, I mean well it's always the it depends right on valuation and how we view the business but it's always helpful just for setting expectations and timing for the owners to see is it the right time or do I still have some growth to to achieve because usually it's you know to fund their retirement. So if doesn't fund their retirement the timing is probably not right or you need to have some variation of a different type of transition. But um I agree with you 100% that the more information and the more you can do up front the better. And Mike, if we have a couple resources we could send as well that you could share with the group for for just starting that type of assessment, right, we're coming close to the end. Is there if there's any more questions again, you can throw them in the chat. We can hit it here in the last minute or unmute and ask. Um, I do want to take this opportunity to thank Patrick and Emily for um preparing this information for the audience and taking the time to share. These are are two great people that we've worked with uh in the past. We trust them. They're great resources. If anybody wants to learn more, feel free to reach out to me or Patrick or Emily uh personally. And uh everybody, we will be sharing the recording of this webinar with um everyone as well as the slides. and uh you're interested in learning more, again, you've got three names right there that you're welcome to connect with and we'll make sure you have the right resource working with you. Thank you, Emily. Thank you, everyone. Enjoy the snow. Yeah. Have a great day. Take care. Bye.