Seller Priorities: Is it only about the money?

In this episode of Integrated Insights, we explore the factors business owners consider when contemplating a sale. From the welfare of family and employees to the emotional attachment to their business, sellers weigh various non-financial in addition to the more obvious monetary considerations. This episode reveals that for sellers, the decision to transition often hinges on a delicate balance between financial gain, personal pride, and the well-being of those they care about.

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TRANSCRIPT

Welcome to Integrated Insights with ICCG. For more than 30 years our team has

partnered with small business owners to prepare for and navigate the business

transaction process. Pull up a chair as we share stories and insights from our

experience on all sides of the M &A table. Alright, well let's talk about what is

actually really important to us, right? I don't know if you saw that what I did

there, but we're gonna talk about what is important in deals, right? So, but right

now what we're gonna talk about is what's important to a seller. And so let me

just go ahead and ask specifically, what does a seller normally say is important to

them. When we're first sitting down with them, what do you guys say is pretty

typical for them to say, "Hey, this is important to me in approaching the steal?"

Well, I mean, I think it really depends on the seller what they're after, but first

thing they always want to know is, "What do you think I can get for my business?"

But I'm not so sure that's always the most important thing to them It's and they're

number one get to ask right off off the back But they they definitely want to know

if they leave our office without ever having a valuation question come up It would

be highly unusual

Lot of that's I think a lot of that's Gives us a great opportunity though because

if we can if we can kind of start walking down that road You know Grant's always

got a great thing he asked and he says, you know, really, it's not about what we

can get for your business. It's about what you want to take home. And I think

that's one way we redirect this is really what's what's most important. And honestly,

that's that is I think what the question they're wanting, the two do not equate

each other. And you can talk a little bit about that a little bit later on. But

that's what I first think about grant. But I mean, there's lots of other things

that I know are on buyer's minds when they come in, or student's colors minds when

they come in. Yeah, I think one of the most common phrases that I've heard,

both of you guys, but Grant, you specifically, is the net, net, net. And so net,

net, net, walk us through what you mean by when you say net, net, net.

Well, Most of the time they come in, they want to know, just like Dave said, what

the business is worth. And, but what we steer them towards is net of taxes,

net of debt, net of fees, all those things. What am I going to take home at the

end of the day and be able to invest in the next opportunity or invest for

retirement or those kinds of things. So, you know, that's really the most important

financial thing, but they equate that with getting more foot on the top line.

And that's, as we know, is just not, not equivalent because you can get paid more.

But if it's structured badly, then it'll end up with less on the bottom line. I

would say, you know, most of our business owners really care about, we're We're

gonna call it the PPP, just like the loans, right? They like proceeds,

people, and pub. And I had to get the third one as a P, right?

But they care about their reputation, they care about their people, and they care

about the amount of money that they're gonna get. And they don't always articulate

that. - Yeah, and I think people, I think people are probably one of the greatest

things on most business people's minds. I mean, I was talking to, I had a service

provider come to my house and I've always been kind of interested in this company,

which is one reason I had them start offering servicing my house in this one

specific area of home service, knowing that there's a lot of activity in that. But

I was always curious about the business. I knew it was locally owned. I knew it

was multi -generational. And I started asking this technician about, you know, what do

you know about the company? What do you know about this? And, and he says, oh, you

know, this is like third generation and, you know, it's really like a family.

And he started telling me all about the culture of this company. And he said, you

know, I even, I've even sat down with, with the owner himself. And, you know, I

got, I got an opportunity to talk to him one time. I know there's probably hundreds

of employees in this company. So, you know, to him that was really, really

important. We'll now take that and have that same owner come walking into someone

like us and sitting around our table. I know for a fact that the thing that's

probably on his mind is what's going to happen to this family if I sell.

Normally, if someone has been financially successful in a business, they may already

have the money they really ultimately need. But you know, so they're really looking

beyond just the exit strategy. You know, if it's especially it's multi -generational

and they've built this through the years, they've built family. And I think that

that's something that's just really, really on people's minds. What's going to happen

to my people? What's going to happen to my family that may be working there? What's

going to happen to my bookkeeper? And that typically always comes up in the course

of a conversation, unless the business just haven't been on that long. I think, you

know, I was talking to somebody post transaction, a buddy of mine,

and he,

I remember, we didn't do his transaction, but he just kind of, he said,

"Yeah, you know, we try to take care of the employees, you know,

after we sold for, you know, a good amount and, but, but really, a lot of the

to let go of that, or how do you handle that kind of conversation up front? I

think that's a good question because I think that we have to acknowledge and I

think part of our job is to be the realist in the room. A lot of business owners

come in and ideally they would like to sell it under these conditions, but I think

they don't always like it, but I do think our responsibility is to be the realist

and to say, look, you know, that's awesome, glad you care about that. Just know

that these are some of the possible outcomes. These are, and then start giving them

examples of over doing this for over a couple of decades of buying and selling for

ourselves and mainly for other people, is just start giving some of the, you know,

some of the ideas. I mean, we had one, I won't say recently, but in the last

year or two that, you know, I mean, they just were so like, boy,

they're going to miss us. Well, once we got in there, we, you know, honestly, it

was once our buyer got in, there was a furthest thing from the mind. These people

couldn't wait for the buyer to be gone or excuse me for the seller to be out of

there. And so I think we pick up on some things like that.

And but, you know, there again, it's really so specific to what that circumstance is

but you're absolutely right we've had some that are people are just kind of just

ticked off about it but people are resilient they're not as my wife always likes to

say she's a she's a life coach and relationship coach because people are not fragile

and we often people are running around with their feelings on their sleeve all the

time they're fragile but really people are resilient they can they bounce back if

they You know, this is a job and this is this is a future for them But yeah,

I was gonna say what what about legacy? I mean, I know I it's funny people who I

I've talked to More people that that aren't that don't own their business about you

know Oh, you know, you must talk about legacy a lot leaving a legacy and and and

it doesn't come up as much I mean, do you think that that that that comes up

quite a bit and that people or business owners really care about the legacy that

they're leaving in the business?

I do.

I don't know that it's ultimately as important as maybe they think. But look, when

you've got someone who's built a company,

Mason, you know, we get the opportunity of selling a company that had been built a

couple of years ago for 35 years and you know having sat in a lot of meetings

with that buyer I think in private or the seller who I think you probably know I'm

talking about was legacy important to them. Yeah. And so much so that I mean there

was a lot of talk about you know what was going to happen afterwards right. For

sure. And so I don't think that's a bad, even if it's not,

even if it ends up being not important, and even if it is something that, you

know, it doesn't really live on, let me tell you something about legacy. So we,

this is a funny thing. I was on an airplane once, and I'd gotten upgraded to first

class coming back from, to Seattle from, from a, from DFJ. The only reason I'm

saying that is it was kind of-- - Of course, - Of course you did.

(both laughing) - Only upgraded.

(both laughing) Yeah, can we talk about being a travel diva one of these days?

- Yeah, absolutely. I mean, only if you were on it.

- So the last minute, the guy can bring his kids down. Listen, he's the only guy

I've assigned you, right? And right across the aisle from me is the guy that was

evidently, they were traveling together a couple of younger guys in their mid -30s or

so. And we start talking and I look over and he's got a hat.

And that hat has a logo on it. And I thought to myself, oh my goodness,

there is only one logo. And that was a logo of a company we used to own.

And it was a transportation company in the Dallas area. And We'd sold this thing 10

years before, maybe more than that. And I looked over at him and I went, that low

good, is this Stanford? And I told him, he says, yeah, how did you know that? And

I said, well, I used to be one of the owners of that company. I said, I know

what's happened since then. And I said, I think you're number owner three since

we've left. And he asked me my name. He says, I recognize you." He said,

"You and Grant, your Grant McCook, Grant McCook is your business partner." Yeah, and

I said, "Yeah." And he says, "Your picture is still hanging on the wall in this

place." Yeah. Oh my gosh.

That's awesome. Okay. All that to say, that's an expected legacy, you know. But,

you know, they had all, they still have all these pictures of people. And to him,

that was something that was just kind of cool. And that was part of the history of

the company. I think that's really where Legacy plays in. It's part of that history,

but if you built a company over 35 years, that's the legacy you've built. In many

cases, this amazing company that's just served a lot of people and has kept a lot

of people employed. Guys, that's, I mean, you talk, I mean, yes, people like that,

that's what America in so many ways has been built on. It's awesome,

we have the big Amazons and XPs and all those in this world, but so much of

America has been built on the backs of people working their tails off for

generations. That is really, really significant, that in itself is a legacy,

and I think that they're part of that dream of owning a business, that's part of

their legacy. Yeah. So, I know that they won't always admit that right and an owner

won't necessarily admit that they legacy is important to them or some things are

important. So what do you think is truly important to a seller but they may not

admit it? Well, I think one of the things that's really important to a seller but

they may not admit it is what's their role going to be afterwards and helping them

understand what their role, what they want their role to be today is I would say

90 % sure that that's not what they want their role to be a year full now and

probably even six months from now. Very rarely do we have a business owner who's

wanting to sell that says I want to be done with this and walk away. I mean,

maybe 25 % of them Like I just done. I want to walk. I don't have anything to do

with it Most of them want to stay around and I get that because you know, we've

we've owned businesses that it's like it's really hard to walk away and not feel

like your input matters at all and and so, you know,

normally Their expectation is I want to be around a year or so, you know And

normally it's about three months and they're ready to jump ship or the or the

buyers ready to tell them to jump in here, because they bring the information they

need. - Could you say money at all? Like they come in and think that it's not

important to them, oh, money is not important to me in this deal. And then they

get an offer and then they start to realize that it is important to them. - Yeah,

and that's a great point. And we've seen that over and over. And a lot of it just

becomes kind of a pride thing. It's like, if you got the deal on the house in the

neighborhood, you're gonna kind of say, "Hey, I got my house for X." You're knowing

that everyone paid more, right? You got a deal on yours or my interest rates. I

mean, that's where it was touting now. My interest rate's not seven. It's 2 .5, you

know? And well, for decades, seven would have been a great rate. So people find

themselves kind of in this time where they're like, yeah, that's that's what I want.

But boy, what if I could get this? And it kind of buys in, it kind of folds

right into the whole, you know, the whole philosophy of the more you get, the more

you want. And there's a lot of truth in that, guys. I think a lot of people, if

we really sit back, we're all like that in a way, right? We get a little bit, you

know, wouldn't this little bit more be just better and it does become a pride

thing, I'm afraid in many cases. I think it's as much agreed as it is pride. On

that, is there ever a time that we have had to kind of just accept the higher,

I mean look, I know that the way that an M &A advisor is traditionally paid is by

getting the higher price And so it's kind of counterintuitive for us to try to say,

okay, we can lower it just because we're going to get you more because of X,

Y, and Z, how we structure it. But if they're wanting to increase it and be okay

with the lower net, is there ever a time that we have to just kind of accept that

and say, okay, this is your decision here. Oh, yeah, we definitely have. I mean,

and, you know, I think it's one of those deals where you just have to realize

we're there to serve the client, the client's not there to serve us. So we're

serving the client, we're going to ultimately let the client make the final decision.

And, you know, if that's, if that's what's best, that's what's best. You know,

there's something else I was thinking about, what is a business owner not know

They're not expecting but it is important to them I find that also that the way

the business has been run the operations the things that have been in place Are

often sacred, you know, that's kind of the sacred cow, you know I remember that

transportation company early on there used to be dispatch and I love it when Grant

tells a story They had those guys you wouldn't know this but back in the day

spindles, you know, and they're like these little pointy things. And as the call

would come in, they'd write it down, and they would put it at the top. And when

the dispatch was done, when they dispatch the truck, they would push it down

halfway. And when the call was completed, they'd push it down at the bottom. And so

I think that if the owner of that company who sold that to us had lived long

enough to see us put technology he might have he might have a little bit of a fit

because I don't I'm not sure it did in any better way to do this until we

literally bought a dispatch uh software firm that actually took yeah yeah you know

all of a sudden the spindles were disappearing and you're talking about you're

talking about operational nightmare getting people who years had done this and for

culture comes in play right and all of a sudden they're like dispatching like you

know what I mean I gotta press this button instead of pushing down the so yeah but

I don't think people understand sometimes they really are those those are I would

call them the sacred cows of business like we've never done it like that before and

that won't work and I it's one of the hardest deals business owners have sometimes

is to see those changes come about when they are when they are selling their

business and it's really, really an emotional, it's an emotional thing. I think

that's the other thing that we really have to help them understand is that this is

gonna be one of the biggest emotional journeys you've ever been on. And having lived

through that now with several companies, some of these companies we had, I think our

longest one we owned was 13 years and what, these guys are like family and they

were a family to us. And we watched kids grow up and we watched, you know, all

these different things happened and it was really this emotional journey. We weren't

really, we talked to people about it, but we ourselves weren't prepared for it. So

these things we have to help. I think there's, again, there's more of a,

there's more of an affinity for people to think that things are just going to

continue to be the same. Or we can just kind of let them know that that may or

may not be the case and to be prepared for it then I think we're certain people

will. Yeah that's a that's an interesting thing because I wonder how often is it

when a seller says that they they don't want anything to change. They want they

want to have a buyer come in and just keep everything the same because you know

that's it's the way that they built the business and so Yeah, how often does that

happen? - You know, in reality, that doesn't happen a whole lot as much anymore. And

the reason is because when you, you know, as you know, we deal with a lot of

businesses that are now on, you know, second, maybe third generation, maybe it's just

a long time, first generation, decades. You know, they realize maybe they haven't

kept up with technology. And so, you know, most of the buyers out there, a lot

more sophisticated, they're gonna bring in some technology to out. In some cases,

they walk in and go, "Why would we touch it? Let's just let it live in the live

in the rockage just because that's working really well." But, you know, most of them

aren't holding so fast onto that until they start seeing the changes. And I think

that's where we have to help them see it as they're not thinking a whole lot about

that until they until it starts happening, if they're still around, if they're still

involved with the business. And that's where you're going to see a lot of friction

between a new ownership and the past ownership and the past ownership sticking around

and working together. It's when this new thing, I mean, because, you know, seven

deadly words of growth of a company or we've never done it that way before.

It's been good.

We've never done it like that before. Seven deadly words of just growth of any

organization. And look guys, you know, there's two, And look, guys, there's a

generation between us, if not two, and it's harder when you start seeing change

going on. The same thing with the business. For sure. Hey, Dave, I think what's

interesting is that you and Grant have been on the advisor side,

but you've also owned and sold companies. So what were some of the things that were

important to you when you were selling, just to give our business owners that are

listening to the podcast, some of the things that they need to be looking out for

and considering? - You know, I think I've played that card a little bit already by

talking about selling.

So there were, the things that were important us, number one, to be real honest,

every time we sold a company, I mean, oftentimes this is a conversation that Grant

and I would have, "Hey, Grant, what would it take for you to walk away?" That's a

different question than, "How much are we going to sell the company for? What would

it take for you to walk away?" And then what are the parameters around that?

And so we had to start with, you know, what would be, What would be the net?

Because typically in a lot of our businesses, we had maybe partnership or financial

partners that were involved with us.

We always kept majority for sure. So we always kept control. But what would that

be? And then the next question is, but what would we do with everyone? How does

this affect not you and me because we're going to continue on, but how does this

affect the people that have been working with us? How does this affect the other

partners, number one? And then how would we go about making that transition the best

we could for the people involved? Fortunately, in a lot of those cases, we were

able to keep our upper -level management in place. Typically, we operated a little

bit more from a governance standpoint. We weren't necessarily the weeds on all the

businesses on a day -to -day basis. We wouldn't be missed by the people so much, but

boy, I tell you what, we had to really make sure we preserved the upper -level

management in those companies. - Well, I think that talking about what is important

to a seller is important, right? It's, I mean, we represent sellers most of the

time, and so we know We have that conversation a lot and it's going to be,

it's always good to hone in about it. So really excited to talk about the next

topic, what's important to a buyer, but we will see you guys next time. Thanks for

joining us.

- And that wraps up another episode of Integrated Insights with ICCG. Be sure to

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