John Anderson - Increase the value of your business prior to putting it up for sale

Men, if you're ready to reclaim your edge, listen up. I used to be held back by constant bathroom trips with multiple wake-ups during my sleep and looking for restrooms whenever I was out. Then I discovered better man. After just two months, I started experiencing fewer trips to the bathroom, less urge to go, and I even slept through some nights. I feel a noticeable boost in my overall well-being, even sexual stamina. It gives me the freedom. And confidence to live life on my terms. Better Man is clinically tested and trusted by thousands of men over 25 years. Ready to take back control? Go to Bebetternow.com to order your supply today. That's Bebetternow.com. These statements have not been evaluated by the FDA. This is not intended to diagnose, treat cure or prevent any disease. Use this directed. Invidual results may vary. Hi everyone, it's Bill Black, the exit coach from the Exit Coach Radio show. You know, one of the biggest questions I get. On the show is what exactly goes into a business exit plan and when should I start creating mine? Well, I always tell people that the best time to start was 5 years ago, but the next best time is now because you never know when you might need it. So we put together a free report that describes what an exit plan is and what you should know. You can get it free by texting exit plan with no spaces to 44222. That's exit plan to 44222. Again, text exit plan to 44222. 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. The 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. All right, welcome back. Thanks so much for joining me today. Really a pleasure to have you with us. We've had some great guests today, but my next guest is even more special. He's John Anderson from the Glauan Consulting Group, and John is joining us from the area, I believe it's the San Diego area. He works with owner. Of privately owned businesses to increase the value of their business prior to putting it up for sale, which is of course why you're listening to the show in the first place. So John, thanks so much for joining me today. Welcome to the show. Oh, good morning, Bill. Thank you for having me. My pleasure. I hope I got that right. You're, you're, are you in the San Diego area? Did I, did I mess that up? No, I'm actually in Rancho Cucamonga. I messed it. OK. John Anderson is, is it Glowan or Glowin? How do you pronounce that? Glow. OK, let me just start all over again. John Anderson is joining us from the GOA Consulting Group in Rancho Cucamonga, California. And they're in the business of working with owners of privately held, privately owned businesses to increase the value of their business prior to putting it up for sale. OK, John, I got it all right this time. Tell us a little bit about you and your background and how you got started in this line of work. Oh well, first of all I'm a native Californian born here in Southern California. After a stint in the military, I moved to the San Francisco Bay Area and was up there for 40 years and only moved back to Southern California about 8 years ago. So the lure of Silicon Valley is what took me up north and a beautiful woman has brought me back down south, so. That's a bit about my personal background. Yeah, that's, that's the beginning of many stories, John. Yeah, we probably shouldn't go there. Um, in terms of tying that with my business, uh, well, I, uh, I got an education, uh, after the military, uh, and like in electrical engineering, and I'd heard about this place called Silicon Valley, and it seemed like, you know, kind of an interesting thing. It was in its infancy. So that's why I moved to the Bay Area and I actually spent 20 years in the high tech manufacturing business up there. And was president and CEO of 3 different manufacturing companies and, you know, grew them, sold them the pretty typical Silicon Valley story, and then I retired from that business after the last sale, but I didn't know what I was going to do with the rest of my life because I was way too young to actually be retired. And through a long story that I won't bore you with, I ended up founding the Glow and Consulting Group a little over 25 years ago in San Jose and If you happen to look at our website, you'll see how we started the business, particularly regarding the content on the site itself. We are known in the industry for our leadership development, management skill development, and executive coaching, and that's how I actually started the business. And what I'm doing today in Southern California, while we're still very active in Northern California and really around the world, what I'm doing down here is more what I call hard business consulting as opposed to coaching and skill development. Having said that, whenever I engage with a client, there's always coaching and skill development built into that, but it's a very different approach to the market, and that is based on the market, what the market needs and what they don't need. Yeah, I'm and I'm looking at your website right now and it's very interesting, and you have something on here about the L3 leadership. approach, I guess. Yes, can you share a little bit about what the what the three L's are in the L3 leadership development approach? Yeah, absolutely. L3 is something that we designed. It's been in the market for quite a while now, quite well accepted, and the three parts are L1, which is leading self or creating personal mastery, and we always begin. Developing people, we begin with a whole person. So really start with with your personal life and how well are you managing and leading all the various moving parts of your life. And the reason for that is if you, if your personal life is not really well managed, when you walk in the door in the morning to your employer, you're not fully present available to give the value that they're paying you for. So we really want people to pay attention to. To that part of their lives so that they, they can then focus on their skills and their career. The L2 portion is something we call creating collaborative advantage, and that's where we actually teach people of how to collaborate. It's a word that gets thrown around a lot, but most people don't understand collaboration. It has a structure, it has a hierarchy. Uh, what people do is, is they confuse cooperation with collaboration. And as an example, I will cooperate with you all day long as long as it's in my best interest. But if we're going to collaborate together, we have to have a structure and some governance and, and be willing to give up something personally for the benefit of the project or the team or the business or whatever it is, very different way to work together. And then finally L3 is creating a great place to work, and that's all about the culture of and it goes from one department or work group to a division to a corporation, but how do you build the esprit de corps in your organization and how do you really free people up to collaborate openly and to bring their whole self to the job or we can. Talk about things that are that are getting in the way of us being successful. So that's the very short course. Thank you very much. I know what our next interview is going to be about. We're going to go deep into L3, John, but and it's it's very interesting again it caught my eye on your website. It's a very interesting website. Today we wanted to talk about working with owners to increase the value of their business prior to putting it up for sale, and I I I think what what you're getting at here is something I hear a lot is that a lot of business owners think, OK, I'm going to go today is the day I'm going to go to the business broker or someone else, and they're going to tell my tell me what my business is worth, what they can sell it for. And unfortunately a lot of owners walk away from that meeting just shaking their head and saying I thought it was worth more than that. Right? That's absolutely true. I hear that every day. And with that, you know, uh, the, the question is then, then why isn't it, number one, why isn't it more valuable to a buyer? And number 2, of course, what can I do to make it more valuable to a buyer. So let's just talk about that from the surface level. Why do most business owners find Out that their business is worth much less than they think. What are some of those key reasons? Well, the most common reason is they've spent whatever it is, 20 or 30 years working in their business, head down, cranking out product or service or whatever it is, but they've spent virtually no time working on their business. So they're, you know, the finances aren't all that clean. They're probably carrying excess inventory if they're in that kind of a business. Uh, they've got things on the books that they write off that shouldn't be there. It's a kind of standard story and with many of them they haven't really put a management team in place. And so they think it's worth a lot and they've paid themselves well over a period of years, but they haven't built value in the business, value in the sense where an acquiring entity would say, Wow, I really have to buy that business. So there's no transferability in any of those things you just mentioned. If the if the books are supporting a lot of the owner's lifestyle and a lot of things have to be unwound and they're not trustworthy to a buy a buyer doesn't, in other words, trust those financials, there's, there's too much inventory to make it convenient for the for the owner as they're running the business and as you say, no team then if they leave, who's going to run the business? That is precisely so. And you know you can't really blame people. They, particularly if they're founders of the business, it's, it's sort of their baby and they've they've nourished it and nurtured it for, for decades and therefore that's a huge part of their life and they think it's worth more than it actually is on the open market. In fact, the first thing I ask when I get in front of a new client is what do you want to get out of this place by when? And about 120% of the time you get the deer in the headlights look because they've never spent any time thinking about it. And more appropriately, I think what do you need to get out of this because they, a lot of times so many, so much of their expense has been built into the profit and loss statement and paid for by the business. They haven't thought about what happens if I have to pay for everything, you know, a lot of things add up pretty quickly, don't they? Oh, they do absolutely do, and you're right, they Most privately held businesses, you know, exist for a couple of reasons. One is an income for the ownership, but the other is tax avoidance. So we run everything through the business. Everybody does it, but that doesn't add value and position your company to be sold. It just is a great way to live. But at some point in time, if you want to sell your business. You have to stop, take, you know, an inventory, not, not the uh material inventory, but the inventory of the entire business and say, OK, what do we have here and what do we need to do different for the next couple 3 years in order to get it really looking good for sale. Yeah, and there's a lot of, I'm sure a lot of byproducts of doing that planning. Even if you don't sell the business, you have a better run, more profitable business, and maybe you can transfer leadership or ownership inside, right, if you, if you're one of those, you know, as I said earlier, only 1 out of 10. A businesses that that try to sell these days seem to sell, so that's 9 out of 10 that that don't sell either right away because they're not ready, and then they need to come see you and say, Look, John, I can't sell it for that and walk away from this business. So what can you do to help me increase the value of this business? We've talked about some of those things, but where do they start? Well, normally the first place that I start is with the time horizon. And in a perfect world, I get 3 to 5 years working with them in their business to get them ready. That's not the norm. The norm is probably closer to 3 years and we're working on one right now where I have about 18 months, so you've just got to do it. And one thing is I usually start with the financials and and some of that is is just kind of blocking and tackling. You know, it gets really down into the accounting and how they account for things and all that, but I want them to have a squeaky clean income statement and balance sheet. And so we do all of that work. Some of that work I do, some of that I'll bring in accountants to do, but get the P&L on the balance sheet to really reflect how the business operates. Um, and so I have to have that conversation with the owners, OK, the cabinet Big Bear comes out of there. It's really not an executive retreat. And oh by the way, the garage full of Corvettes those are not company cars, and you know, Grandma's really not the CFO. Get her off the payroll. So you have to go through all of that culling to get numbers that actually reflect the business. And then the second thing I'll look at is the operations and the management. Who are the people? What are we going to be able to leave behind? What are, you know, what our IT systems look like? What are our qualities and all that stuff. I also spend a lot of time ensuring that my clients have the most appropriate banking relationship, insurance relationship, legal relationships, the right accounting firm, all of that stuff, because most of the, again, they don't pay attention to it. So their insurance brokers, you know, their friend Fred on the corner, and they haven't shopped their insurance in 20 years, right? So there's there's expense reduction. There's all of that. And of course we focus on increasing the revenues and the profits, and that's where the value comes from. And for a lot of that, you are a fellow member with me in a group called Provisors, which is a hugely successful and very, very connected. A database or gathering place for professionals of all types and so that makes you a tremendous resource for your clients and others to find those professionals, you know, one of the things I guess that comes to mind is that John, you're going to make me pay taxes, aren't you? Yeah, there's, there's actually two things that occur, um, about 3 years before the sale if we have the luxury of that time. And the, the first hurdle is I get the owner over the, I says we need to start getting our, our statements audited and you know they grab their chest and wheeze and I can't afford that, you know, now this is for larger businesses, not for the real small ones, but I want 3 years' worth of audit statements to hand to any potential buyer. The second, and once I, you know, get them recovered from that shock, the second one is, to your point, I need you to start paying income taxes, and that's where the wheels really fall off because as I said, Earlier they exist for tax avoidance, but what we end up doing is being able to hand any acquiring entity 3 years' worth of audited statements, 3 years of tax returns, and we can say, in all honesty, this is the way this business operates today, not how it could, not recasting the financials, not doing ad backs, not all that smoke and mirrors that business brokers like to do. This is the way the business operates. And oh by the way, here's our management team. Our price just went up. Yeah, and our management team is motivated to stick around and not, not run off when a new, a new buyer comes along, right? There's that's a big part of it in some cases. Sure, the transaction covers a whole host of things, but one of the biggest things is for the owner is we make sure that they have a the appropriate kind of financial adviser on board and we have a good tax attorney because what you don't want to do is sell your business and end up giving it half of it away to the government. So this is all part of the planning that goes into this and in many ways I sort of act as the quarterback of the team to make sure all these resources are pulling in the same direction and that we're getting the most out of it that we can. And then for the people who are going to stay behind, that's part of the transaction. You know, there are employment agreements, there could be contracts, there's all kinds of things that can go on depending on what the seller and the buyer want to do. So do you ever get asked the question, you know, why, John, why, why don't I just go right to a business broker or investment banker? Why should I use you? Oh sure, and the answer to that is very, very obvious. If you use us, I'll say not just me, but if we, if you use us, uh, you're going to get more money for your company, period. So, so and that's, that is really the bottom line when they have that initial conversation with that business broker or investment banker and they walk away shaking their heads saying, man, I thought we were worth a lot more than that. That's when I want to get him. I say, OK, give me 3 years and follow this kind of formula, and we will put this business up on the market for a much larger amount than what that broker just told you. That sounds like a good reason to me. And again, a lot of times they may have tried to approach someone to sell their business and they say, well, in the shape it's in. We're, you know, we're not going to get you what you need to get out of it, um, and you need to talk with someone like John Anderson then. So you, you mentioned some of your engagements are 18 months, I've heard 3 years as kind of a, a preferred timeline. Why, why 3 years? What, what's the magic about that? Well, it takes a lot of time to turn a business. There's an entrenched culture with every business, and some of that culture is positive and some of it's not so much. And so it's changing the behaviors of a lot of people in addition to doing all of this cleanup work. It's really getting, I'm working with one right now where their sales and marketing effort is absolutely anemic, and they're wondering why sales are down. You know, so you have to power through all that stuff, and you want to. I'm not a churn and burn guy. It's not my job to go in and get people fired at all. It's my job to help make this more successful, and it takes just time to do all that, just to do the clean up inventory and the financials and all that going to take going to take a year, and sometimes we have to bite off IT, and that's a, that's another hole that's probably a year if you have to change the IT system, so. You know, there's just a lot of work to be done there and a lot of hearts to win and behaviors to change. Yeah, good point, and especially in that in that situation you mentioned early on where the owner is the company, they, they are the, you know, they do so much. They are the hub of the of the wheel that is the company. Uh, it takes a long time to transition his, his or her tasks to be more of the, the owner than the operator, right? Oh, no question, and that's true whether it's a single owner or a team of owners or a family owned business, where there's there's family in the business. Those are some of the more difficult ones. Because a lot of owners assume, well, I'm just gonna give the family to my or give the business to my son or daughter and they haven't even had that conversation with the son or daughter about do they want to, do they want to do that for the rest of their lives. And the second part of it is I have to ask them how are they gonna pay you? I mean you have to cash out, so are you going to go sit on a beach with your umbrella drink and trust them to run the business the way you did and pay that, you know, $600,000 to a million dollars a year that you've been taken out of this business? And you can watch the color drain out of their face in that conversation because they haven't really nailed that down. Yeah, and if they haven't done that front end work, you've heard, I'm sure the saying in the mergers and acquisition or business brokerage world, the first check cashes, the second one's late, and the third one might not come. That's, that's the real nightmare of of selling a business is if you don't realize all of that and you're you're depending on every one of those checks to to make your retirement picture look good, that can be a real nightmare. So all that front end work is, is, ah, involving and how, how do you, what's your, how do you get compensated for all of this? Do you work with people on a retainer or how does it work? Yeah, I work on a monthly retainer and then from time to time they'll ask me to do a project that is really not part of the scope of work as we uncover some of the niceties of the business, and I'll quote them a separate price for that project, but I don't get, I don't take a piece of the action. Once we're bringing in either a business broker, say for a smaller business, or an investment banker, my job is basically done. So I get paid the retainer plus a little project money along the way, and I just feel like if I were to take a piece of the sale, there'd be an inherent conflict of interest, and I don't do that. Yeah, and that's, you know, I think that seems fair because the business broker is digging up buyers and vetting them and doing a whole different set of skills and work to find that buyer or the investment banker. Maybe they're doing a controlled auction or something. You're really working on helping them work on the business and that's a very important work. And John, I feel like we've just scratched the surface, but unfortunately our time's up today. But I noted also in here that you have a I believe it's a book running the corporate rapids, creating agile organizations. Can you tell me about that? Yeah, I wrote that book some years ago. It's still available on Amazon.com, and it's a book about personal and organizational transformation. It's how to really get out of the the old model, the hierarchical model, and really get into one that's more collaborative and more team oriented. It's great stuff. The website is glowan G O W A N.com. And John, would you prefer people go there and learn more about you, or would you rather they give you a call, or what's your preference? Well, either an email or a call, because if they're looking for stuff on the on selling businesses, they won't find it there. We're woefully behind on our own website, unfortunately. So my email address is initial J. Anderson, A N D E R S O N at glowan G O W A N dot com or they can call us at 909-476-7196. I prefer the personal contact up front so that I can decide whether I'm the correct resource for them right away. Well, you sound like a very approachable person and full of information, obviously very giving with all that you've created and And experienced with all that you've done. So I would encourage listeners get in touch with John Anderson 909-476-7196. Email him at jayanderson@gloan.com or visit the website at glowan.com. And John, I sure hope that we can talk again sometime in the near future cause I feel like we just really. We just really got to the, the very basics of what you do and it's, it's very interesting information for our listeners. So I thank you for coming on and I look forward to the next time we get to talk. My pleasure, Bill. Thank you. Thank you for listening to Exit Coach Radio. Men, if you're ready to reclaim your edge, listen up. I used to be held back by constant bathroom trips with multiple wake-ups during my sleep and looking for restrooms whenever I was out. Then I discovered better man. After just two months, I started experiencing fewer trips to the bathroom, less urge to go, and I even slept through some nights. I feel a noticeable boost in my overall well-being. And sexual stamina, it gives me the freedom and competence to live life on my terms. Betterman is clinically tested and trusted by thousands of men over 25 years. Ready to take back control? Go to Bebetternow.com to order your supply today. That's Bebetternow.com. These statements have not been evaluated by the FDA. This is not intended to diagnose, treat cure or prevent any disease. Use this directive. Individual results may vary.