This is summarized from David King’s “Selling Your Business” podcast featuring Lamar Rutherford from Excellens Solutions: Preparing for Business after the Sale. I think business owners need to be more prepared to exit the business effectively.
I started Excellens Solutions to help sellers do a more effective job of preparing their business for sale.
I was a CPA for Arthur Anderson on the audit side. Then I decided to start my own business. I started a bagel shop when I was 24. It was interesting to take the concept from large accounting firms and then try and apply it to your own business. I started a business with the intent of getting the experience for when I went to grad school. Then I got my MBA at Dartmouth’s Tuck School of Management.
After grad school, I worked at Nestle in the candy division doing brand management and marketing. Then I worked at Disney. I got recruited away to work for a fast-growing internet startup. We opened nine cities and grew from 150 to 650 people in one year. But it was a little too crazy. I didn’t want to work 24/7, so I left to open yoga studios. I had a bad partner so eventually sold those.
In 2010, I was asked to teach entrepreneurship at the Rady School of Management at UCSD, and that's when I started to get into business brokering and mergers and acquisitions (M&A) work.
One of my friends was trying to buy a business, and he asked me to help him. I got into brokering and have done over a hundred transactions and worked with a lot of business owners.
So, I have a diverse background and learned what it really takes to run a business – and what it takes to sell one. We help business owners get their company ready for sale, so they can maximize their value.
Looking at your business the way a buyer would We see your business through the lens of a buyer to maximize your value. One of the reasons I went out on my own is I saw so many business owners leaving so much money on the table -- or not deciding to go through with the transaction because they just weren't emotionally prepared or weren't ready financially.
I want to help business owners prepare, so they can get more of that value and have a happier end result. A lot of business owners -- I think up to 95% -- often regret the sales transaction after they go through it. That rate is much lower for the business owners I work with. If I can help to change that with even more owners, I’d like to try.
A lot of business owners will hesitate right before the sale is about to close, thinking, ‘Can I really go through with this?’ And they don't see life after because they are so deep in their business. I think the most common thing they typically regret after they close the sale is just the way that the transaction went So, I try to help prepare not only the business, but the owners as well, for what the sale will entail. I help them to plan for life after the sale, for what we often call their ‘third act,’ whether that’s more time for loved ones, travel, giving back, or just more time for golf.
Financials first Owners can do a lot of preparation in advance for the financial reality when they sell, because the amount you get as a price and the amount you actually get in your pocket can be quite different.
We do an after-tax calculation in advance to prepare the business owner for that piece that tends to go to the government, as well as any fees or other expenses. We want owners to understand what their after-tax cash could be and also try to educate them on ways they can minimize some of those taxes in advance. Often, if you set things up in advance, you can cut down that tax burden.
And you have to be prepared emotionally as well Part of the challenge of selling is the emotional aspect. The company is your baby and selling is letting go. Owners may often find other reasons why a deal failed – but frequently, it’s simply hard for them to adjust to life without the business as their north star.
You want to emotionally prepare for what we call the ‘third act’ -- what are you going to do after the sale.
I've had business owners that just didn't know what they would do the day after they sell. Some of that's a transition period, and some of that is having plans for what you want to do next.
As a business owner, you may have people asking you for advice or looking for your guidance. And once you leave your company, that may be a big gap in your world. If you can get involved in other charities or have other interests, that helps.
The best M&A advisors will ask the right questions to make sure you know what you need.
Through the process, I try to prepare the owner that once you leave -- even if you're there for the training period and the transition period – you should refer to the new owner when employees or customers have questions. That will help both you and the new owner with the transition. Everyone will start to refer to the new owner instead of you for the answers, letting them take over and truly freeing you from your responsibilities. That doesn't mean you shouldn’t try to guide the new owner. Share any insights you have but leave the ball in their court.
The SBA, when they give the buyer a loan to purchase a business, has a rule that the seller has to leave after the first year. They want to make sure the buyer has fully taken over and is running the business within a year.
It is important to know the steps in preparing your business after the sale. To learn more, view the entire podcast at: https://youtu.be/HlpO3qS0opc
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