Getting Your Companies Sold With Mark Halma
Transcription
Bob
This is Bob Roark with business leaders podcast and today we have as a guest Mark helma. Mark is an Associate Broker at rain catcher. It's a business brokerage and m&a firm. Mark's passionate about helping business owners navigate the exit process, ensuring maximum value and return for all the hard work that they put in. He spent his time working for organizations across multiple industries in phases such as tech startups, fortune 100, consulting companies, and business brokerage firms. This array of experiences made Marc a savvy, business minded individual that enjoys working with organizations of all backgrounds and situations. He understands the value of a strong partnership, and has a track record of delivering successful outcomes for entrepreneurs and business owners like Mark, welcome to the show.
Mark
Thanks for having me, Bob. It's an honor, appreciate you allowing me onto this great podcast.
Bob
Thank you so much. Hey, Mark, give us a snapshot of your background and kind of how you got from there to here.
Mark
Certainly, certainly happy to run through that. So I've been in sales all my life. I've kind of always had that sales knack and interest in being involved as a sales professional and building my career around that. It's kind of a struggle sometimes when you're just getting into the sales world of where to start, what is the industry, what is the type of employment I'm looking for, and ended up starting off in more of a service based sales organization that was focused on project management and business analysis training. What I really enjoyed about this is it gave me the confidence to talk to CTOs and CIOs at very large fortune 1000 companies, you know, if you'd have asked a 19 year old mark, if he would be confident ever being in front of somebody like that, I would say You're crazy. But that really helped me gain the confidence required going forward as a sales professional to be able to talk to anyone without any sort of intimidation, or worry. And just be yourself and present what you have. So started in the service based world moved over to more of your product and widget space, working for a company that focused on IT infrastructure. This was back when solid state drives were really starting to make a big push within storage systems and infrastructures. That was with the startup, which is really, really exciting. I was actually the 99th employee to be hired by that company was there for about three years. And when I left there was over 500 employees in the business had successfully sold for $875 million. Love to that experience working with a younger company in that startup phase, where everybody's kind of running around with their, you know, like a chicken with their head cut off. But it's really controlled chaos with a common goal. Having everybody have some skin in the game, whether that was equity, or just the drive to build this company created a really positive and exciting environment, and really enjoyed the work there. from a cultural perspective, and having a product that you know, was so innovative and new and different, that you can really get get behind and feel passionate about when pitching to potential customers really enjoyed that experience. Due to the sale and some of the uncertainty that comes I'm sure we'll talk about that a little bit more when there is an acquisition like this, moved over to another company that focused more on the consulting service based side of things. What I found there is that corporate type of life maybe wasn't a best fit for me personally, and wanted to get into kind of a smaller size company, once again, not a company that has 45,000 employees, but wanted to be involved in a smaller organization. And that's what I got into the brokerage world. So the next business that I joined, focused on the senior housing and skilled nursing facility space, so brokering assisted living facilities, skilled nursing centers, basically anything involving residential healthcare types of residences, I should say. So that was really fun to kind of get my chops in brokerage and understand everything that goes into the brokerage world. Really enjoyed the experience there but wanted to broaden my horizons of it. I love brokerage but didn't want to be pigeonholed into just one industry or one type of sale. Certainly when it comes to these businesses. There's so much regulation and change going into it every year because you are dealing with people's health. You know, it's not like selling an apartment or those types of things. But there's a lot of layers and always regulatory changes. That can be a little bit frustrating. Knowing where I wanted to be in the future professionally and with aspirations of owning a business of my own someday I wanted to work across different industries from a broker's perspective and that's where I found rain catcher.
Bob
You know, I was thinking as you were talking about all the steps that you've made in your career, right from smaller companies, to larger companies to sales to an a growth company and then watching it get sold right? And then working in a highly regulated environment. And that's, you know, real estate based service based, recurring revenue based, I think about the developing the fabric of your experience. You know, before we move off of that, how do you think that fabric of experience helps you when you're talking to business owners now? Yeah,
Mark
you know, because I have that fabric of experience. And I've worked in so many different industries and types of businesses, you know, being able to relate to multiple business owners now based on what their industry may be, or the problems that they're facing, I've encountered so many problems and obstacles that business owners have ran into that wealth of experience across different industries, really helps you have that empathy that is required when working for business owners in the role that I'm in today. And I think lends itself well to say, Hey, you know, I've been through this with this company before, or Yeah, we've tackled that obstacle at this point in my career, bringing that kind of experience is very helpful as rain catcher does work industry wide, and we are industry, agnostic, helps bring that experience to various industries and various times that a business may be and you know, we're working with businesses that are just getting started, for the most part, and maybe are just looking for evaluation, a little bit of advising on how to build their business to be ready to sell down the road, some have been around for 3040 years, and are at the very end of their personal road with that business. And we have to navigate some obstacles there. So I think by taking the, you know, track of working across different businesses and organizations and industries, just continues to grow my knowledge base and not, you know, just be focused or hyper specialized in one area. And I find that to be an advantage.
Bob
Been there seen that right?
Mark
Yes, exactly. Yes.
Bob
So with that being said, so how did you and rain catcher run across each other? And what made you decide to work with rain catcher?
Mark
Yeah, sometimes timing can just be everything in this world. You know, I was at that previous brokerage firm and starting to really think in the back of my head. You know, I love brokerage, I like working with business owners, I want to try this out in different industries about that time, that started to look around a little bit. And that connected with Marlon on LinkedIn, had done a little bit of research into rain catcher and saw that they were in terms of being industry agnostic, the size and types of deals, that I was, you know, interested in working, not necessarily these giant m&a transactions, but more of your, you know, salt of the earth business owner, people that, you know, in my opinion, are a part of what really makes America great is the small business opportunity here. So being able to engage with those types of business over owners across multiple industries was a huge draw for me, as well as just Marla. In general, as, as a leader, she did a great job of not only giving me confidence in rain catcher and where they were headed. But now that I'm here day to day, her ability to you know, react quickly to changes or things that are said, as her brokerage team may be suggesting is amazing. And again, she just really instills confidence in the team in a positive way, of course, you know, as a CEO, she's got to make sure that the businesses continue to be profitable and growing. And that's what I've seen, since I've been here is that steady growth, in a pursuit to get into larger deals, bigger deals. So the opportunity to grow with the business during this phase was something that really was enticing. I mentioned it before, I really liked the idea of working with a company kind of in the early stages of growth. Brain catcher has been around for a little while. But once Marla took over as CEO, she really changed the vision of it changed the long term goals of the business. And that growth trajectory is something that excites me, I really like the idea of being a part of that journey in achieving those goals. And so far, I think it's been a very exciting journey, a very fun one. And again, being able to work across multiple industries has been incredibly enlightening, and very exciting when you're working on any given day, a concrete business and then, you know, a couple hours later, you're working on a cotton candy manufacturer, I'm constantly fascinated by the different ways people can make money in this country. So it's it's been a really exciting journey so far.
Bob
You know, I think about you know, in the podcast space when you talk to various and sundry business owners and they have insight into their niche, and you get tutored almost every time. And so I think about how much when you talk to all the business owners and the wealth of, of knowledge that comes from those discussions. You know, the more you talk to, you know, the various industry groups, you know, the more you see distinctions and commonalities, you know, between the business owners, you know, in in Marla in And talking to her was talking about their focus. But she's a huge fan of the business owner. And, you know, how do you see that basically played out within the organization?
Mark
Yeah, you know, I think we have a really unique organization in that many of us were previous business owners or have been working with business owners for quite a while. And we really are starting to understand the personality that is required to, in fact, be a business owner, I give anybody who's willing to start their own business tons of credit, just because it's, it's a challenge, it takes a lot of time, it takes a lot of guts. And the pressure and stress that they go through on the day to day is, is something that is very hard to deal with. So I've got the ultimate respect for these business owners. And you're exactly right, the opportunity to learn from their experience, get to know their industry, the way that they've tackled challenges and obstacles. It really is fascinating to me, some of my favorite parts of the process, or the early stages, when you're kind of doing that due diligence on the business, finding out what's worked, you know, talking through some better ideas, maybe they've tried to implement that didn't go so well. And then again, kind of be able to bring the experience I have to the table and talk through some of the changes that I may suggest. And of course, just how exciting it is, when you have that successful sale, and see a business owner who's put their blood, sweat and tears into something for so long, get the reward at the end that they thoroughly deserve.
Bob
I was thinking about going back to the healthcare space where it was a service business and a real estate business. You know, and I think about many business owners, and you know, they have the business, and they may also have the real estate component. You know, how do you find that past experience? Helping people that have both the real estate and the business component when you're talking with them?
Mark
Yeah, you're exactly right, when it came to senior housing and the healthcare component, you know, a lot of the value does sit in the real estate, some business owners had taken the opportunity to sell the real estate and just operate the business so that they wouldn't have to worry about that or get some cash flow to pump into the business through the sale of the real estate. What I would say, in general, just being in that industry, is the complexities involved in making those transactions are, you know, in my opinion, about as complex as you can get in this world. So if you can navigate those muddy waters and get through there, I'm under the impression that there's most industries you can get through. Once you've done a skilled nursing facility, for example, just a few rakes just just just a couple that are changing every other week.
Bob
You know, when when you're working with the business owner, you know, what's the most with if you were to distill down, what's the most important thing that you do that helps that business owner when they're beginning to look to sell?
Mark
Yeah, you know, I think it's so simple and basic, but just getting a business owner to wrap their mind around the process and what is involved, I think there are a lot of business owners out there who maybe aren't that forward thinking. So when they're ready to sell it's, you know, something that maybe they just thought of that day, and they want to get started tomorrow. And they don't really understand everything that is truly involved. So I think the most important thing that we can do for business owner, it's just sort of set the stage, of course, during the valuation forum, letting them know exactly what their business is worth in the market today, you know, through our opinion, the timing that is involved, I think there are some business owners that they Okay, I'm ready to sell, maybe in a month, I'll be out of here. And they don't realize that this is a very long winded transaction. Okay. It's not something that just happens overnight. And due to the robust nature of rain catcher services, it takes some time, right, we really put a lot of effort into the marketing materials, finding the right targeted buyers and running through the marketing process to bring buyers to the table. So I think just from the start is helping a business owner wrap their mind around what is involved in the sale of their business, because there's a lot you know, certainly some of the challenges that get involved with this include, you know, the emotional aspect of things, these business owners have put everything into the business a lot of the times, right, they've they've been through it all, and they have a very keen self awareness of everything that they have put into the business. When that happens, a lot of times valuations can be a little bit inflated, in terms of what the business owner may think their business is worth. Perhaps they think they are ready until you get close to being able to sell and then they start thinking Gosh, what am I going to do with my life now what is my identity, my identity has always been so attached to this business. So helping them with the emotional response is also a really, really important thing. I think during this process,
Bob
you know, I think about the potential buyer, actually telling the telling the business owner that their business is ugly. This is probably a criticism that's unwelcome. It's,
Mark
it's not fun when we get a lowball offer. And you know, part of our obligation is we're going to share every offer with you to let you know what the market saying, but it's not fun to share those ones and say, yeah, this guy thinks your business is worth about half what what we're thinking,
Bob
you know, and I was thinking about this. So let's say you have a business that's ready to sell today. And you had the opportunity to roll the clock back three to five years. What advice would you offer to that business owner that's trying to come to market today? Three to five years ago? Yeah, I
Mark
think that's a great question. And something that every business owner should think even on day one of them starting a business, they should already be in the back of their mind thinking a little bit of structuring the business in such a way that a potential buyer down the road would be interested in. So So one thing that I run into a lot, and one thing I would definitely recommend is for any owner, to start to relinquish some of their day to day responsibilities and really relinquish the dependence that their business may have on them. One of the first questions I always get from a buyer is, why are they selling? And what is their role? What is their influence on the business, oftentimes, business owners are the number one connection to their their biggest client base, and they're responsible for those relationships. That can be again, with clients that can be with suppliers and different vendors that they're using. But that's one of the most common problems that I run into is just so much owner dependence. And I actually think it's a fairly simple one to solve. on, you know, just from a on paper perspective, the challenge is, again, the emotional aspect of a business owner, being able to relinquish those responsibilities and have the confidence in faith to say, Yes, I trust this person to be able to handle what I was previously handling, or I trust this new process that we have implemented to take care of that same work that I was previously handling. So it's one of those things, it's a little bit easier said than done. But when you're really talking about it, you know, something as simple as hiring a general manager or some sort of management layer below you that gets to know everything that you know about the business, right, as a business owner, nobody knows, or cares more about the business than you do. And by trying to pass as much of that along as you can both, you know, not just from a knowledge base, but from an emotional base and caring and being passionate about it, I think is hugely important as well. You know, we've been through this situation many times where we've told a business owner, hey, maybe let's wait one year to sell your business within this year, let's hire another management layer, let's hire somebody below you that you can train up and you know, be able to do everything that you're doing today, maybe let's bring on some sort of software that can assist in this process that you're doing manually right now, again, that makes it easier for a business owner to come in and just already have that process done. That's not one other thing that they need to relearn. All of those things can can take time. And again, that, you know, we've talked about it before, but as soon as a business owner, you know, really gets started or at least has the smallest thought in the back of their mind that one day they may want to sell, started thinking about the different ways to structure your business to make it more attractive to a buyer. You know,
Bob
I think about that just as a broad commentary, you know, all these things that we talked about in the exit space, or when you build your business to sell, frankly, is just good business. I mean, if you get injured somewhere during your career, somebody can pick up the ball, you know, policies and procedures, you know, making sure the business is not dependent on one person, whether it's you or your lead salesman. All of those things are really just good business principles. Yeah,
Mark
I think some sometimes a business owner may be worried about the cash flow involved with making a new hire or changing your process a bit. But what's important to think about is, you know, you may be taken a small hit on your yearly p&l, but two years down the road when you sell your business for 20% more, because all the structure is there for a new buyer to come in. That's where you know, the payoff really comes in may not be right away, but the payoff will come down the road,
Bob
the focus on value creation. Yeah, absolutely. Absolutely. So, you know, as we talk about that, you know, there's a number of challenges in getting businesses sold, like we've been talking about, you know, and I think that within the industry, there's a fair amount of extra complaining about advisors and brokers, you know, and I think that they run like every other industry gamut from really good to less than good. Let's chat about that for a little bit of what a seller should take in to consideration when selecting someone to help them.
Mark
Yeah, certainly, you know, if, if, if I'm a business owner looking to sell, I'm putting tons of work into the due diligence of any brokerage firm or or any broker that I want to partner with. You know, there really is a wide gamut of options out there, both from you know, low low fee options that you're probably going to get what you pay for in those scenarios. A higher fee more robust options, where maybe you aren't getting a full brokerage firm or team behind you, as opposed to an individual broker, I think it's very important for anybody looking to this to do their due diligence, find referrals and find people who have had a positive experience with whatever group you decide to move forward with on the sale of your business. Just Just do the work beforehand. Again, it's one of those things that it's a pretty simple concept, but a lot of people fail to do it, maybe they just don't think they have the time. But it's important to put a lot of work into researching who you plan to partner with. Part of that is, again, this is a long process, when typically about six to nine months or so, you know, in a way, it's a long term relationship that you're entering into. And you want to have confidence and trust in that person or that group, that they're going to do everything required to make sure you get to a proper sale, something that we see a lot our brokers that you know, are very low fee, high volume is how I like to describe them. They're looking to get as many listings as they possibly can and just really flood their own listing page with volume, they'll offer very, very low fees to a business owner on the sale of their business, but they aren't really putting in the effort of the work that is generally required to get something sold, it's kind of get it listed, cross your fingers, hope somebody comes to you and is interested in seeks you out, but isn't really proactive in finding those, those buyers, I would say here at rain catcher, we're pretty well in line with industry standards on our fees, but you are getting that robust service that I mentioned. So it's not just one individual broker, you know, who's throwing some info on a website and hoping for the best. We've got a full marketing team, you know, we've got a full brokerage team that for every deal we take on, you essentially have three different team members working on that deal in conjunction together. So that if you know any broker would mention this, things get really busy sometimes, and you need somebody to pick up the slack, if you may be focused on another deal for that period of time. So having that team approach, I think is really, really important for any business owner who's looking for a brokerage firm, to help them with the sale, you know, I'll speak for myself and that I think people are very happy. Once they get down the road of the brand catcher sometimes again, it's the the business owner who hasn't thought too much about selling their business and you know, gets notified with a fee. And maybe they get a little bit of sticker shock, just because again, they haven't really thought too hard about this process yet, or everything that's involved in it. Or something else that happens a lot is there's just a lot of noise out there in the industry, there's so many different opinions, so many different advisors, that as a business owner, you're you know, catching info from so many different directions, and it can be challenging to know, you know, which is the best path for me and my situation. But again, yeah, I would just push really hard on any business owner to do your due diligence, do your homework and make sure the group that you're going to partner with during this long and strenuous transaction is one that you're comfortable and confident, is going to be working as hard as they can for you.
Bob
You guys also have, you know, I think one of the things that maybe a seller is not focused on is the inventory or database of potential buyers that you guys maintain.
Mark
And I think that's huge, you know, we have something over 10,000 different buyers within our database. Of course, not everybody's looking for the same thing. But over time, we've been able to build this great database based on key parameters of what a buyer may be looking for. So geographically speaking, of course purchase price, different iba does that they may be interested in, of course industries as well. So being able to create that database like we have over the years, we have great strategic buyer lists that were able to take deals to with confidence, knowing Hey, this is what you guys are looking for, you have told us this is a fit for you. Let's talk through this deal. I would say about 70% of our buyers end up coming from that database. So it's been very fruitful for us. Of course, you know, that is something that we're able to pass along for our sellers and say, hey, we've got this great buyer database here, I bet we can come up with a good 100 names in here, that from a high level are a good fit for your business,
Bob
you know, you know, in the seller space as a business owner. Do Can you draw the distinction between financial buyer and a strategic buyer?
Mark
Oh, yeah. So, you know, there's a lot of different industries that we work with, of course, and what we would say is a good strategic buyer as opposed to a financial buyer, you know, thinking through some examples here. You know, I talked about the cotton candy business before it's a cotton candy manufacturer. So we've been speaking to a lot of confectionaries different food manufacturing businesses that are you know, close in proximity to this specific seller, or even certain suppliers or other groups that are involved. In the industry that this could be a good bolt on, or save them some money by bringing that service in house. So those that are, you know, good strategic fit are oftentimes within the industry, or have a business that is closely related enough that this would be a really good, you know, synergies. But between the two, we often deal with financial players as well who they bring a lot of money to the table. But do plan on hiring, you know, either an operator that is experienced in that business or in that industry, but really what they're looking for is, is putting their money together and using that business owner or somebody within that industry, using their knowledge base to grow that money, maybe make a little quicker of an exit and, you know, five or six years as opposed to purchasing the business for long term ownership.
Bob
You know, as as as we think about the business owners mindset, do you guys get a lot of pushback from the business sellers on fees,
Mark
you know, that I feel like there's two very distinct groups on that there is the group that maybe they've tried to sell on their own, or they have been through the process on their own. And they have a little bit of experience in realizing that there's a lot that goes into it, it requires a lot of time, it's a challenge to continue to run the business, and keep performance going where it needs to be while also devoting so much time into the potential sale of the business. So there's certainly that group, that group sees our fees and sees what we put into it. They're like, thank you, thank you, please take this off my plate, find me a buyer. I've been through this process, it's, it's a huge challenge, not one that I'm ready to undertake right now. The second group is, is that group that's just getting started and kind of wrapping their head around? Maybe we do want to sell what all is involved? What are the fees involved? And who am I gonna have to pay and you know, there can be some sticker shock to that part of our job, when explaining our services is to really show them all the different successes that we've had, show them the level of detail, we're willing to, you know, put into our information memorandums, our marketing materials, all of those types of things. I think that's something that helps us quite a bit is when we share some samples of the marketing materials. And people say, Wow, okay, this is this is very legit. You guys are putting a lot of
Bob
effort. You guys are storytellers, you tell the story.
Mark
Exactly, exactly. And I think again, with all the noise that's out there, sometimes it's hard to kind of cut through the noise and realize what it is you have in front of you, with some of these other brokers, like I mentioned, that are just, you know, maybe charging very, very low fees, but just sort of throwing up a listing on a website, that can plant a seed in the mind of a business owner that it shouldn't, you know, cost as much. But I think you'll see a direct correlation to the success that we have, you know, our success rate verse, again, somebody who, who perhaps is coming in with a very, very low fee, but isn't putting in the time and effort required to have a successful exit?
Bob
You know, I think about the your comment earlier, versus, you know, let's say we're talking to the business owner, and you go, you know, what, if you would push off the sale timeframe, you know, 12 months out, hire a manager, and do this, do a number of steps, that would take and remove some of the doubt or anks, from a potential buyers eyes, you know, and you look at the value creation from that process. You know, I would imagine, that's a rare case where the sale price less fee is not taken care of, I've never had a good investment to do that kind of thing.
Mark
Yeah, it's a great point, I would say, you know, nine times out of 10, what you invested by partnering with a broker, you know, good strong broker, assuming you've done your homework, that's going to come back in the purchase price, you're going to get that and more in the overall purchase price. So it does end up being a very, very good investment. And, you know, I had mentioned this a little bit before, but just the time that is required to sell a business when a business owner maybe decides I'm going to try to take that on myself. They get through the process, things are going good. All of a sudden a buyer says Okay, can I see these last two months of financials? How have you guys been doing? You know, most recently, it's great to see this yearly, they start to see a downward trajectory, because this business owner has kind of taken his eye off the ball or is no longer devoting the required amount of time day to day on the business business performance starts to drop, the buyer starts to get a little bit shaky and a little bit uneasy as to what they're seeing and wondering if things are going in the wrong direction. And all of a sudden, you've put all this time into it that the buyer gets scared away, and you're kind of back at square one. So it's very important to be able to handle both to be able to put in the time that's required to sell the business by partnering with a good group that's going to help you and support you along the way. But also still maintaining the day to day business maintenance, if you will, to continue performance, an increasing clip.
Bob
Gotta keep that trajectory going.
Mark
You gotta
Bob
you know for rain, catch They don't specialize, as far as I can tell in any specific industry. Are there some industries right now they're selling or more attractive to buyers? Now?
Mark
Yes, certainly, you know, any, any industry or business that has some sort of recurring revenue component is, is going to be very, very highly sought after out in the market. People really like the assurances that come with that recurring revenue. You know, if you put yourself in the seat of a buyer, you want to purchase or acquire a business with pretty low risk, you don't want to come in and be really nervous about what next month's revenues are going to be like, or the following month. So when you find these businesses that have that strong recurring revenue, you know, pretty easy to think of software as a service types of businesses, property management is really, really big with this as well, just because you get that recurring revenue element to it. So those ones are one that we're seeing are really, really popular actually seeing a bit of a jump in restaurants as well, which I think is pretty interesting. Of course, anything ecommerce is going to be fairly strong, as long as you're showing the growth trajectory that, you know, buyer is going to be looking for something that I've been spoken about, or have been talked to quite frequently with buyers, now it's one of the first questions we get is, so how does this business handle an economic downturn? Right, what happens during the next recession? And there are a lot of businesses that you know, you really don't have a great answer for it. Because the the the proof is there, you can look at the p&l and say, Wow, that was a tough time for them as it was for a lot of people. The fact that we've been in this bullish economy for such a long time now, I think this is really in the back of the minds of a lot of buyers now. So some industries that become popular during these times are, you know, things that are a little bit more recession proof, if you will. So, repair and maintenance type businesses, I think are really big, you know, during those times buyers aren't, or I should say, consumers are not looking to buy something brand new, but say, okay, maybe we'll just fix this up and do some maintenance and keep it running. So any business related to, you know, auto repair is a good example, related to those kind of maintenance types of stuff usually does pretty well, right now, as we approach what a lot of people think, is a pending recession. And again, property management, I think, is really, really popular as well, because a lot of people will continue to rent as opposed to purchase new homes, during those economic downturns,
Bob
you know, I, you know, having a real property or to finding just anybody to come in, and help maintain a rental property anymore. I mean, so the companies that do that, you know, with some kind of reputation frequency, I can understand the revenue stream. Yeah, you know, with, with many of the business owners, you know, there, there's a disconnect between what I think they think their businesses worth. And then when they get ready to sell, they go, these two don't match up what I thought it was gonna sell and what you're bringing to the table, let's dig into that little bit.
Mark
It's hard, it's, it's a hard thing to navigate. Again, there's so much personal pride into a business that you know, somebody has put so much work into, that it can be a bit of a punch to the gut, when maybe you get a valuation, that isn't quite what you thought it would be. Or, you know, maybe we're on the same page and think that we have a really good business here. But the market is telling us, you know, what, maybe it's not worth what, what we had come up with as evaluation, there's so many different elements, variables and factors going into evaluation, as well as just a perspective, right, we've got to try to put ourselves in the buyers shoes as well, as a business owner, you're, again, so hyper self aware of what you've built, everything that has gone into building that business, you know, from a time and hardware perspective, a financial perspective, that a lot of times you can kind of inflate in your head, the quality of your business. Sometimes we just need to be realistic and say, You know what, this is what the market is telling us, I think we overvalued this a little bit. Either we go down this road at the value that the market is telling us or let's talk about some different changes you can make to your business to increase value. So some of those things we touched on before. You know, maybe we're a little bit early to the market. And if you have some time before you have to sell or there isn't that sense of urgency, you know, that says you have to do it today. Let's let's start looking at some of these different value drivers find out which ones are low unless start pushing the value up. Certainly a challenging conversation when dealing with that, especially if you're already on the market. Because at that point, you're, you know, kind of contemplating, do we take this off the market and go for another bite of the cherry down the road? What does that say to potential buyers? Are they worrying? So there's a lot of things that go into it. What I would say is it you know, just try to find those key areas of where value can be added and start working on those as soon as you can
Bob
you You know, to to formalize this, this scalability or valuation that you guys have some pretty unique tools that you bring to the table.
Mark
We do we do the scalability assessment is something that we have any of our partners go through prior to, you know, really even giving that valuation. So what goes into that saleability assessment? Of course, there's a certain financial portion of it that just looks at the numbers and says, Okay, what is your revenue? What are your profits, some of those more basic things, but I think what's so important about it is it touches on those key value drivers that we had mentioned before. So one of the big ones is concentration issues, we'll definitely ask some questions to try to get some more information related to customer concentration, supplier concentration, those are two really, really big ones that that will bring your value down quite a bit. For example, we were able to sell a software business earlier this year, where they have one client. So there one client was a specific state doing government work, they worked with multiple different divisions within the state, but they were getting a you know, a check from one entity that was their client. That made it a big challenge to figure out how do we value this? And how do we get this on the market and explain it in such a way that, you know, doesn't just scare people away when they say, Well, what happens if that one client is gone. But the fact that we identified that right away and use that salability assessment to appropriately value the business, you know, it probably took them down a bit 30 40% overall, because there's so much risk involved. But those are the kinds of things that that we're trying to figure out during that saleability assessment as any kind of red flag or obstacle that you know, may spook a buyer of it, let's let's address it, let's let's make sure we know how to properly tell that story. So that when we are sharing with with buyers, they understand what exactly they're they're getting themselves into. So I really love the saleability assessment for that reason, it gets to touch on so many different things that drive value outside of just what what the books look like.
Bob
You know, I think about that. So anything else? Let's say I'm the business owner out there right now, and and I said, based on your experience, what are a few of the things that I can focus on, that may help improve the value of my business or driving the value up? What would you tell him?
Mark
Yeah, so you know, touched on before, again, get rid of that owner dependency, make sure you have a business that can run, if you went on vacation for a month, or you got really, really sick, the business can can run without you that's, that's a huge one, have backups when it comes to vendors and your supply chain. Sometimes the business is, you know, completely predicated on an amazing supplier contract that you were able to put together. But if that supplier goes away, all of a sudden you lose 5% on your margins, and value is going the wrong direction. Certainly, you know, putting that strong management in place and allowing a buyer to connect with that management is something that I see is really important as well, there could be a fear of letting any employees now even if it's kind of your right hand, man, if you will, that you're looking to sell the business potentially, and there may be a new owner coming in, I think if you can create a sense of loyalty with that management layer, maybe let a few of them know and allow them to get in front of a buyer as well and show that hey, this this business runs with us. We don't necessarily need this business owner. I think that's something that drives value so much, you know, any anytime a business can get away from that owner dependence, it's it's very attractive. I can't tell you how many buyers come to the table to us. And yeah, I'm looking for something that's you know, owner absentee. Now, I don't think anything is 100% really owner absentee? I don't think that exists. And if it does, maybe you're not running the business that well. But that's something that constantly, you know, gets brought up by buyers is is you know, I'd like something that's semi owner absentee or owner absentee. And you have to have a strong management layer in place for that.
Bob
I think that's like an urban myth. I want some passive income. They don't have to do anything for it.
Mark
Yeah, exactly. It's a it's a unicorn to me, but yeah, it comes up all the time.
Bob
You know, for that business owner. You know, we talked about some of the things that they can do to try to enhance the value. What are some of the mistakes that you see them make? Maybe they should avoid?
Mark
Yeah. So, you know, it's really important to keep that trajectory going. I think some folks have 10 years of really great numbers, maybe the last couple are going in the wrong direction, and they want to sell based on those previous numbers. when things were doing really, really, really well. A lot of people want to sell based on potential, of course, every buyer is going to want to buy on historical performance. So I think it's important just to continue trying to grow, even if it's, you know, small growth, it's it's you know, 3% Something like that, it's still very important to show that the business is heading in the right direction, if you want to get a strong value on your business, the other one as well, in terms of what's going to bring it down is the opposite of what we just talked about having that strong management layer in place. You know, when somebody comes in and says, Okay, Mr. Owner, talk to me about your day to day and they say, yeah, I'm putting in 12 hours every day, six days a week. But business is doing amazing. And they think because the numbers are so great, and the profit is up, you know, 25% over the previous year, if they're not willing to really put in a lot of time on a transition effort, no, no buyer is going to be interested in that, because they realize those numbers are 100% dependent on that owner with without his presence there, those numbers wouldn't be there. So when they come in, they know the first couple of years are going to be a big struggle, and that's going to bring your value down quite a bit. Yeah, I can't harp on it enough that having no dependence on yourself as a business owner, and no dependence on one vendor supplier or one customer. That's going to be the biggest killers in terms of deal value.
Bob
So tricks you've learned along the way, what might they be to help get a business sold?
Mark
Yes. So something that, you know, it actually goes both ways. I'll tell the trick on on each side, one, don't be afraid to cut bait. There are times where maybe we're spending so much time on this one buyer. And they're kind of giving us indications that there's some interest, but you know, you really catch yourself being the one that's doing all the motivating and really selling very, very hard to get them interested. If a buyer isn't that interested and you know, over a couple of weeks time, they are showing much motivation, you should really be spending your time going for another buyer or focusing your efforts on bringing more buyers to the table. Now, on the other side of that coin, I think it's important to not give up easily either on potential buyers, being very relentless in trying to come up with creative structures, or ways that a deal can get done can be all the difference. I know, I've been on both sides where I think I'd maybe have left to deals too soon or didn't quite work out all the different ways that maybe we could have created a win win situation and made both parties happy when we're kind of at a end of the road here. And there's other times where we did exactly that. We just kept putting our heads together and saying, Okay, what if we, you know, had this seller note or create an urn out structure or, you know, have some sort of standby on when those loan payments are due for you so that their cash flow was good at the start? You know, it's important to have that positive mindset that there's always a solution. Because a lot of times there is but again, like I said at the start, if you're having that feeling that this buyer isn't your buyer, and they're not putting the same amount of effort into getting that deal done is you time to cut bait and find another buyer.
Bob
best piece of advice either you've received or you might offer.
Mark
Yeah, so something that, you know, was told to me by my dad a long time ago is happiness as a clear conscience. And I think that's something that can go, you know, across your personal life or your professional life. And certainly, in a role like this, there's a lot of responsibility. When a business owner who again has put so much time money and effort to build what they've been able to build comes to you and says, Hey, we want to partner with you to sell this business, we want to partner with you to ensure my retirement is as nice and cushy as I'd like it to be or we want to, you know hire you on for the responsibility of getting us the fruits of our labor over these past 20 years. It's a big responsibility. And I think having a clear conscience in this role is turning over every rock, making sure that we've thought of every single solution to get it sold. You know, you've reached out to every buyer that could possibly be interested in this deal. And knowing inside that you've done everything that you can think of to help push a deal along kind of brings you that that clear conscience and I think that's where happiness is derived.
Bob
But you know, for the folks out there and the potential business owners that are considering selling, how do they find you on social media?
Mark
Perfect, so you can find me mark Halma on LinkedIn, great way to find me. Another way is it's just an email, it's probably the quickest and fastest way to get ahold of me. I'm in my email all day that addresses mark at rain catcher calm.
Bob
You know, Mark, I, it's, you know, for me, I'm involved with business owners, I'm a business owner myself, I own a number of small businesses and, and you know, if you're that business owner, they're saying, you know, it's coming, or I'm thinking about it, you know, the best thing that they can do is to reach out to you. You know, the worst thing they can do is wait until an event takes them out whether industry change disruption or health event, you know, because we're all going to exit our businesses one way or another At some point, and so I would urge them to take in, reach out and have a conversation with you.
Mark
So I think that's great. And even, you know, if you don't think you're quite ready, we're not the type of group that's going to push anyone to sell that that isn't ready, because that's not advantageous to us for some of those reasons we touched on before. But we can start to plant some seeds in your mind of some small changes or things to start thinking about. As that date approaches, even if it's five years away, we'll be here when you're ready, we're happy to you know, lend some advice and do a little consulting for you to put you on the right path. So that down the road when you're ready, we've built that trusted relationship and you know where to turn.
Bob
And you guys have the tools that they can use as well to kind of see where they are
Mark
exactly. You know, there's there's multiple offerings that we're happy to provide for a business owner free of charge without charging high consulting rates or anything like that. For us, it's all about the relationship. We really want to build that trust and relationship with business owners, knowing that they may not be ready to sell, but it may be three years down the road that they're ready. But if they know that, gosh, we can come to rain catcher, they're going to give us honest advice, and put in the effort now that we're ready to sell. That's a group that I want to partner with. That's the ultimate goal for us.
Bob
Well, Mark, I can't tell you how much I appreciate you taking time out of your day to visit with us and appreciate all your insights into the process.
Mark
definitely appreciate it, Bob, it was a pleasure. And I hope we can do this again
Bob
sometime. Absolutely. We'll call it good. Thanks now
