Selling Your Business And Reaping The Benefits Of Your Hard Work With Jason Thomas

Transcription

This is Bob Roark with the business leaders podcast. And today our guest is Jason Thomas. Jason is the Vice President of brokerage and co-owner of Raincatcher, a business brokerage and M&A firm and partners with entrepreneurs and business owners help source the best Win-Win deal for all parties. After spending nearly a decade in the real estate sales and development industry, Jason knows what it truly takes to get a large transaction through to the finish line, hard work, communication, and the ability to connect with your clients. Jason is a licensed business intermediary and real estate broker. As an owner in multiple businesses, Jason knows the challenges that small business owners face on the day-to-day and cherishes the ability to help them reap the benefits of all their hard work through the sale of their company. Jason, welcome to the show.

Thanks, Bob. appreciate you having me. Absolutely. Well, Jason,

Give us a little background or snapshot of how you got here.


Well, it's a long journey. But, you know, I started my career in real estate, as you had mentioned. But I think more importantly, I come from, you know, an entrepreneurial family, my dad was a small business owner, my mom was a small business owner. And I think that's ingrained. And in my roots, I remember the first experience I had as an owning a business was in Hilton Head, South Carolina, as a young child actually sold golf balls back to two golfers I would go on the ponds and fish them out and set up a little table on the side of the golf course and, and sell these golf balls back to these guys for you know, 50 cents apiece, or a buck apiece. I remember that so clearly. And that's kind of through my life. So where I am now, you know, I thought my career was going to be in real estate for a long time, until I went back to to get my master's degree in business administration. And during that process, I really started to think about opportunities that were out there for me and my experience in sales and real estate and how I can help small business owners, right during that same time, my dad was in the process of selling his insurance company. And he had sold his insurance company to this investment bank. And in that process, just realized that it wasn't the right fit and ended up buying his business back from the bank a couple years later. So that was the world kind of aligned at that point. And that was right around the time that I met Raincatcher and was introduced to Raincatcher and decided that this was the career path that I really wanted to go down.

You know, I think about, you know, we're kind of the fabric of our past and what we bring to the table. You know, my first question is getting golf balls, there weren't gators in South Carolina at that time were there?

No, there were gators, that was a scary part of it, we would wait and dive into these ponds. And you know, we had definitely had some encounters with some alligators, not too big ones. But they were there for sure.

Well, that puts a risk premium on the golf ball price. I'm thinking

That's why it was you know, one, one for $1 or three for five.

You know, I think about that. And I think there's a whole industry around that now, you know, getting the golf balls out, you know, and, and when when you watch your dad and talk to your dad, post sale, you know, and he left that business. And then he went on to whatever was next, what experience? What did you remember or note after that departure?

You know, he tells me a story about he started the business 30 years ago as an insurance business in South Carolina. And he was the CEO and president and the founder of the company, and he sold to this bank and part of the requirement of sale was for him to stay on post closing, which is very similar to a lot of our business owners. And he said it was it was the day that he needed staples. And he he asked in typically he'd say I need staples, hey, you know, ask the secretary, could you give me I need more staples? You know, can we order some more? And he had to fill out she's like, Oh, I can't order staples, you have to fill out an expense report. And, you know, this is a guy that's been running this business for 30 years. Now he's having to, you know, this is just one small example. Now he has to actually fill out expense reports justify why he needs to have staples, and it's a need that, you know, obviously a small business has and this was a very successful insurance company. And that was just one example of the the waterfall of kind of expectations that he had, it just didn't come to fruition like he wanted and how they were driving the future of the business just, you know, for him, he wanted his company to go in a different direction and he lost that control once he sold and that was ultimately what drove him to bind it back.

You know, I think about that, you know and and you know You've got this tapestry of experience in, you know, the entrepreneurial gene for lack of a better term. You know, so for you when when you were looking at it, how did you find Raincatcher? And what was it in the rain cow catcher culture that drew you in?

Yeah, it's an interesting story. You know, it's interesting how fate kind of aligned sometimes. And, you know, like I mentioned before, I was really kind of thinking that real estate, real estate development was my my career path. And I was introduced. This was shortly after I finished up my MBA, I was introduced to the original founder of Raincatcher, and now my partner Monte Carlo, through a actually a fly fishing Expo, I'm an avid fly fisherman, I, one of my early 20s, I used to be a fly fishing guide. And they, Marla and the original founder of Raincatcher, actually another business called boulder boat works, which is a drift boat manufacturing company here in Colorado, and that I've been introduced to them through through an associate through a friend, is it Hey, should you talk to these guys, they've got a great fishing company, you'd really be great for you to learn more about it. And so I went to this Expo to really talk about fishing, which I can easily do and started talking to them. And the conversation quickly shifted to their other business, which was they were just launching, which was a business brokerage company. And after hearing, not that they that they just wanted to sell businesses, it was it was really around the fabric of why they had chosen to be in the business brokerage space and why they were trying to be there, that I really started falling over the concept. And you know, what that was to them was that they truly at the heart of the culture of the business, they want to help small business owners, they believe that small business owners deserve better representation with the industry as a whole lacks professionalism. And then there's really, there's really good opportunity to bring really nice processes and best practices to this market. And kind of leverage that through digital technology. And, and I heard this, and it's like this light went off in my head. And literally within 30 days, I quit my current job. I was doing real estate in Denver, and I enjoyed Raincatcher. And from there, it's just it's history. It's been a great, great ride so far.

You know, it's you know, we've talked some and I do have a really interesting question. You're from South Carolina. How is it that you're not a bass fisherman? And how did you get wrapped around fly fishing as opposed to bass fishing?

I am a bass fisherman.

Oh

Yeah, I actually learned how to fly fish for bass in Hilton Head, South Carolina. And it's grown to trout, and to permit and tarpan and saltwater species as well. So it it swims off fish for it. You know, I'm and I'm not a purist, Bob I regular ride, you know, regular tackle. I'm not a purist. But I do love fly fishing.

You know, it's Yeah, I grew up in the deep south bass fishing. In fact, I just got off the Rodman impoundment down in Florida not that long ago. And you know, and then I fly fish down in the in south of Cancun as well, I'm much more dangerous, or as the guy says, You're a good monkey Hunter. So fly fishing is not something I think I can make a living doing. But, you know, as you look at rain kit, Catcher in the culture, you know, so you had the original nucleus of you and Marla, you know, and then in the business starts to grow. And you guys have my think, what, six brokers and associate brokers or did it just grow to eight?

Yeah, so we have, we're just at eight brokers now, including myself,

You know, I think about the culture of a smaller firm. And then as you start to expand the firm, how do you guys take in teach and or transfer the culture that you guys envision to the folks that because you have a distributed group of folks, how do you transmit that culture?

You know, one of the first things we ask, the people that we're bringing onto our team is, you know, why, why, why do you want to join Raincatcher? Why do you want to be a business broker? Why do you want to be in this industry? And there's all sorts of answers, you know, I don't want to make money, I want to have flexibility, you know, but at the core of what we're looking for, is for someone to say, I want to help small business owners. And that is fundamentally what we do. And everything else falls into place. Obviously, there's a lot of hard work and process and stuff that's put behind it. But if I think if you have that that core mission that you want to help a small business owner is not just about the transaction, that that's what that's why we bring people in our team. And that's what Marla and I stress over and over and over again. And I think it shows with our messaging, I think it shows with the way that we interact with clients and you can see it as the business grows, that people are receptive to that message.

I think The small business owner, you know, in in for me, I got, I serve a lot of business owners in the business I have. And I'm also a small business owner outside of this current business. And the lack of I mean, I think all small business owners don't know what they don't know, when it comes to selling their business. You know, and when you think about your past experience with your dad, not only selling his company by going in and buying it back, and then being in the commercial real estate, does that do you think that gives you a particular insight that you bring forward, when you're working with other business owners?

It does, I think that not only my past experience, but my my current experience, as an owner of Raincatcher, and the previous businesses that I've owned, I understand what it means to do try to figure out how to pay payroll, you know, I the stress that you know, that the actual people that you're paying payroll to don't really understand, you know, where's that next check gonna come from, you know, that those are real, real challenges that unless you're in the trenches as a business owner, you just don't quite understand. And so I think I can relate in that way. I've been through, really what it means to try and build and grow a business. And I've made a lot of sacrifices. And I've seen a lot of sacrifices from my parents, as they run their businesses. And those are those are, you know, those are really challenging decisions that you have to make. And, you know, I think I can relate to a lot of business owners because of that.

Well, you know, I think about empathy and the emotional response, you know, in talking to a business owner, this getting ready, like your father, you know, he probably spent more time with his business than he did with his family.

Yeah, yes. Yeah. Unfortunately, that that's definitely the case, you know,

And so you end up, you're selling one of your children, effectively.

You didn't want to do that at one time or another with? No, it's, it's true. This is what's I think important to note for us in Raincatcher 95% of businesses that we work with our original owners, original founders, first time business sellers, and this is a lifetime event. I mean, this is not just a business transaction, not just like you're going out and selling a house, this is people's identity, in a lot of regards. This is their, their life. And so respecting that being empathetic to that, and understanding what they're going through is one of our largest responsibilities as a broker in it for us. It's not just about getting the deal done, it's figuring out is now the right time to sell. Yeah, realistically, I know you want to sell and I know you want to exit but is now right, is the right, is that the right time? You know, or what are your goals afterwards? You know, what are you going to do once you do get that check? And once you are out of the business? Are you ready for that, you know, you can only play so much golf, people say that, but I could probably fish for the rest of my life. So, you know, but I hear for a lot of people that you know, post sale, you know, you can only do so many hobbies, and you need something to be involved in. And I think that's genuine, I think people specially successful entrepreneurs need that, you know that, that next thing or need to be involved in something. So there's also an emotional side post sale that people struggle with. So for us, that's kind of navigating those waters and trying to provide guidance and putting the right team together to help them be successful, prior to sale and also post sale.

You know, when you're working with a business owner, what do you think is the most important thing that you do, and that helps that business owner and looking to sell?

I think that, you know, our role is to help them be kind of level headed. It's to be one to help them prepare to just be level headed about the transaction and help them understand what to expect and understand what their expectations are. There's a lot of I think misinformation out there. And sometimes the expectations are set that may not be realistic. So we really have to work hard with the sellers to give them a clear roadmap of what this process looks like from A to Z and guide them along the way and kind of ground them in that process so that they don't get distracted and or disappointed when they have an expectation that may not be delivered in the process.

You know, I think about that that entire sales process and pre framing the challenges. You know, you can say you know, the buyers can either you know one type or another buyer and the buyer could be coming in and going like well you know your kid is not nearly as attractive as you think your kid is. You know and and the business owner in many cases I think would be highly offended if you call their business in the slightest bit ugly

Everyone's babies The prettiest for sure.

Having seen some, you know, kind of no grow into it, you know, but you know, I think about, you know, as you drill down and look at the challenges, and then you know that you have a number of sellers out there that have talked about the process, and it goes less than fun, you know, in some of the advisors and brokers were not exactly helpful. What are some of the things that that affect, you know, the track record of selling, or your reputation as a business broker and a business owner?

Yeah, I think one of the most important things that a business owner can do is prepare. Visitors spend so much time building their business, they don't spend a lot of time preparing to exit their business. And so oftentimes, we'll get a seller that will come to us and say, I'm ready to sell. And I want to sell now. And we're like, Well, okay, and they have certain expectations, and it's not always the best time right now to sell. So there's, there's a lot of things that business owners can do to prepare their company for sale. And so I think that's one of the biggest risks to go rushing the process. And also, one of the things that a lot of sellers Don't think about and don't do, they just think that they're ready. And so now's the time, where I think a business owner can really, you know, prepare their business or make their business more presentable is doing some some work ahead of time. And that can be all sorts of things. And that's one of the things that we do as a company is we, we kind of analyze a company when they come in to us, and we start having those initial conversations, fundamentally, is now the best time or are there are items that we can work on, to help improve the likelihood of your business selling, or the likelihood of a buyer saying, well, this is a great business, instead of trying to beat it up or telling you that it's not pretty. When you rush the process, sometimes those red flags become a little bit more prevalent, because you didn't kind of think through it and prepare and get it ready. It's like staging a home before you go to the market. even putting a fresh coat of paint on the walls goes a long way.

No, I think about, you know, one of the questions I always think, man, if I could have talked to you, five years ago, before you got to here today, where you're ready to sell the company, if you had the opportunity to offer advice to the business owner, five years before they arrive at your door, what are the top one or two things you would suggest to them that they might do to improve the value?

Yeah, I think one of the biggest things that a small business owner can do is to separate themselves from the business, I think the natural inclination for small business owners is they need to have their hands and everything. And they're that important to the vitality of the business. And without them it would fail. Well, that's the, that's the truth. If you're, if you're that entrenched in the business, it's very difficult to pass that on to the buyer. So really working hard to, you know, separate yourself, put key management and key processes in place to where you're not important. And that's really hard for a business owner to accept, they're not in control anymore. Obviously, strategically, you can be in control, and you can guide the direction of the business, but you don't need to be in the trenches, and you don't need to be on the day to day involved in the decision making of a company. And that's, that's one of the biggest things that I could recommend. Secondly, is your financials have to be clean. And you really need to spend the time and have the, you know, clean and really reconciled financials. So we have a saying it's like, you know, the way that you put financials in the system or input data, you know, garbage in, garbage out, you really want to make sure that the financials are clean, and the numbers that you're representing, in your facility, your business are, are true and verifiable. I think sometimes small business owners get a little sloppy on how books are done. And that's something that can be detrimental in the sale process.

You know, I think about so I'm the business owner standing out there and going like, What do you mean, not clean financials? What are some of the more egregious things that you see in financials that would raise a flag for a buyer?

No. So part of what we do on business transactions is we look at what we call sellers discretionary income. Now, what is the true income of the business when you look at add backs and add backs are typically, you know, personal or discretionary expenses that are run through the company? I mean, we understand that small business owners run a lot of discretionary expenses through through their business, but that would be one area where you know, a business owner could clean that up, you know, stop running, you know, your personal expenses to your company, most people do it to shelter your tax obligations, but to make your business more sellable, that's something that you probably want to limit. Another area where we see that there's a challenges, both on reconciliations, you know, not reconciling your books every month, he maybe they do it once a year, maybe they don't do it at all. And that can really be hard to sell a company that doesn't have reconciled financials. And then sometimes you get a very massive discrepancy between, say, your QuickBooks accounts and your tax returns, if you will always say, Well, yeah, well, I beat up my tax return, and so I don't have to pay money to Uncle Sam. Well, that's great. But you know, also, it really limits your ability to, for the buyer to get financing, it limits, really, what are the true financials for the business? So that would be another area that I would, you know, just add caution, or just as clean as possible.

You know, as you guys have dealt with in Raincatcher's history, God knows how many companies that you guys have talked with or sold, you know, and and if you'd looked across that inventory, and there's some where the sale failed, for one reason or another, you know, what would you say, outside of Raincatcher, the failure rate on sales might be out there when a business owner is thinking about selling?

Yeah, so it's somewhere around, you know, a quarter to a third of the businesses that go onto the market actually sell. So we're talking 25 to 33%, of businesses that actually go out to market are actually going to close. So it's a high failure rate.

You know, it's for me, that's just a stunning number. You know, there was a statistic I saw that said, two thirds of all jobs created in the United States after the crash of Oh, eight, were by small business owners. And so you think about, well, if the small business owner goes to sell the company, and three out of four don't sell what happens to the families and employees that depend? Yeah, business?

Yeah, absolutely. I mean, so the business doesn't sell, and they have to close the doors, which is the worst thing ever. I mean, it absolutely gives me heartburn. When I drive through areas I see, you know, going out of business, signs on storefronts, I mean, retail is hard enough, but then you see the storefronts are closing. And I think about it as like, Well, you know, did they have the opportunity to sell that business? You know, did they have the right representation? Did they even know how to sell a business? And were there any resources available to that, you know, that business owner, and that that hurts, I mean, see that someone has to just sell their inventory and close the doors.

You know, I think about all the years of all the years, right, you know, and, and the struggle and all these triumphs and challenges of a business owner. And then you come to the tail end, where it's 80% of your net worth, and it doesn't transact? You know, and I think that's the statistic small business owners, about 80% of their net worth is in their business. And I think, you know, there's the viewpoint you got the seller's viewpoint of his business, and then you got the buyer's viewpoint. What are the types of buyers out there? And what types of things do you find that sellers don't really recognize from a buyer's perspective?

Yeah, that's it. That's a good question. So to answer your question about buyers, so there are all sorts of buyers out there, I think you can kind of break them down in a few categories. You have your, your financial buyers, so people that just look on straight cash flow, that want to buy a good business, they don't really care too much about the industry, but they want steady cash flow and maybe a good management team, and they buy it more as an investment. And you're going to look at, you know, institutional buyers, you know, look at private equity or banks or more structured firms that buy businesses for their investors, and then you have strategic buyers, buyers that are in the same industry that buy a good business as an add on to their existing business line. I think sometimes sellers don't really acknowledge the risk that buyers are taking by you buying their business. It's not a business is a living breathing organism is not just a house, right? There are so many different moving parts. There are so many different things that can go wrong. A key employee leaves, you know, there's a rise in the cost of goods. I mean, there's the, you know, the relationships that the owner had. Don't transfer over to the buyer.

There's a tariff that's instituted.

That is interesting enough. I mean, you look at manufacturing the beginning of this year, it was one of the hottest industries And within a quick period of time, you know, manufacturing is has slowed down in this country. And there's a lot of headwinds facing that industry. So deals that may have been worth 30 million in the are 3 million, whatever the number is, and beginning of 19, and you know, now are having a hard time selling to that same multiple. So things can change quickly, I think sometimes sellers don't acknowledge that there are those risks out there. And the buyer is taking the full brunt of those risks.

In your experience in working with sellers, you know, many of the sellers, they arrive with a thought process of I think my business is worth x. All right. And in your experience, where do you think those buyers get that valuation? judgment from? And where do you guys get your valuation? estimates from?

Yeah, so that's, that's a great question. I hope that we start, we're pulling some of the same resources. And I think that's one thing that I think we do well, as a company, we really look at a multiple of different resources to try and understand what the true value of a company is. So from our standpoint, we typically will look at the earnings of a company, and then we'll try and benchmark the business against other businesses within that industry. And we look at much similar, very similar to you look at comparable market sales for real estate, you do the same thing for businesses, you'll look at all right, what have businesses and this size range in this industry sold for historically, and we use comp sources, much like you would see in real estate, and then we apply a multiple to the earnings. And that kind of gives you a valuation. Really evaluation range, because there's always a high or a low multiple, in where you fall in that multiple range really depends on the the nuances of your business, how much customer concentration is there, how much owner dependences are is there. So there's different levers that you look at to determine where that multiple actually falls?

It you know, my my sense of in talking to a number of business owners, I'll say, so what are you going to do next after this? You go, Oh, really not sure. And I says, well, what's your business worth? They go? Well, I don't really know. And I said, if you looked at any trade journals, have you talked? I mean, have you gathered any information of any kind to really try this as well? I think it's worth x. And you go, Whoa, how did you arrive at that number? And, you know, for me, I have a real challenge when I talked to the business owner, to try to figure out what frame of reference they're using. You know, and for you guys, you know, when you're you have the resources, you have the experience, and one of the things we haven't talked about that Raincatcher has, is they have a really good inventory of buyers.

We do. Yeah, we we've worked really hard. We work on the sell side. So we represent sellers, and that's our core business. But I think one of the values that we bring is our buyer database. So we are representing sellers, but we're also out there nurturing buyers. And what I mean by that is that we set up buyer calls we've that buyers, we add them to our database, we have conversations and trainers and what they're looking for what industries are attractive to buyers at this time. And we segment out our database that way. So we know we take a deal with the market. And we have 500 buyers looking for a manufacturing company between you know, 500 and a million dollars. And that's really important. Because those buyers have committed capital, they're ready to move. And if you have a good group of buyers, ready and willing, you can often get multiple offers for a deal at one time.

Well, you guys have been recognized to nationally for the skill set that you guys bring to the table.

We have, yeah, we have is, you know, I'm so thrilled with the success we've had so far and where we're going. But we got recognized by Inc magazine as the best business broker in the US. We just got recognized in Denver as the best business broker of 2019. So we're, you know, our core goal is to disrupt the business brokerage space, we want to redefine what it means to be a Business Brokers, we really want to be bringing kind of the the best practices that you see that these fortune 500 companies get with representation. We want to bring those back best practices down to the small business market, there's no reason that a business selling for 3 million shouldn't get the same representation as a business selling for 100 million. That's our true goals to try and bring that down to the space.

You know, I think about that effort in, you know, the transmission of culture recognition that you guys have. And when you talk to a new business owner there's there's some level of pushback That you get on either the fees or their perception of the value that the fees represent.

Yeah, no, it's it. It's a, it's a challenging process. And I think part of it is educating the business owner of everything that we do. And all the value that we add. And what I try and tell people is that look, the fees will only back up, our fee is our success based. So we make our money when the business owner makes their money. And so we align our our objectives completely with the business owner. And I look at as a partnership, you know, we're going side by side, we're on the same side of the table, and we're driving to the same goal, and that's to sell your business for the most amount of money possible in the quickest amount of time. That's not easy, though. I mean, that's easy, easy to say, yeah, say, but there's all sorts of challenges along the way. And the reason why we are, our fees are what they are, is because we take the risk with the business owner. And we think that their reward should be commensurate with the risk that we take the front load costs, we spend hours and months of time on the deal, only to get paid when they get paid

You know, I think about it in a number of discussions, you know, if you're looking at a particular business, and they say we're looking for this, this sale price, and you go, you know, we don't think you're there, you know, after you go through the due diligence process, but I think you guys are also in the world of making recommendations to the business owners, just but if you do A, B, C, and D, or, you know, this recommended group says you know, and and postpone you know that the business may get closer to the target you're looking for. So you do that as well.

We do, you know, I think what differentiates us and I think whether a business owner is talking to me, or Raincatcher, or anyone else, you really need to figure out, and I mentioned this earlier is now the right time to sell. So we start talking to business owners, we take a very holistic view, we're not a volume brokerage, we're not trying to just list a company, we truly believe in what's best for the business owner. So we'll talk to someone and we'll we typically have them take an assessment, the assessment is valued, it gives you eight key drivers to be able to sell your company, and it gives us a score. So it's it's a rating system. And based on where that score, falls, it gives us a good idea is now the right time to sell your company. And if it's not, we have that discussion with them. And if there's things that we identify that they can do to improve the value of their company, we have a great affiliate program, and will recommend that they work with one of our advisors to work on those issues. And again, you know, I mentioned a couple of days that could be over dependence on the owner, you know, how do you separate yourself from the daily grind of the business. And there's ways to do that we work with a great group that works on a system called Eos. You know, maybe it's just your financials need to be cleaned up. And you needed to have a part time CFO. So we work with the business owners to do that, too. And the way that we look at it, it may take longer to get them on the market, but it's gonna be a much better business and our success rate is going to be much higher.

No, I think about you were talking previously, there could be one industry or your business for sale in an industry. And it could sell from one into the multiple range to the other. You know, and my assumption in the assessment tool is that you have a lower number and a higher number than higher the number, the more likely that your multiple expansion will occur.

Correct. Yeah, the closer you are to 100, the more likely you're going to get a higher multiple for the business.

You know, and you know, and I think about the perception of the potential buyer. I don't have to fix this. I don't have to fix that. You know, and there's no surprises in the process.

Yeah, you bring up a good point. It's, I think there's a lot of information out there that all right, businesses trade for three times earnings, right. But is it three times earnings, in that multiple could be two times earnings based on the risks that are associated with the business? So you know, I think these business hours are a lot of business owners get expectations in their head by the information that's readily available online. But it's not just about your financial performance. It's not just about how much profit you're generating. There's all these other risks associated with the business that play in the in the minds of a buyer, you know, are all your customers, you know, are all your sales part of, you know, a few customers, you have a customer concentration issue. Those are the things that we really need to think about before you take a business to market,

You know, and I think about your background, you know, you got the business side, then you got the real estate side, you know, in a great number of the businesses aren't just a simple business only transaction. It's the business and the real estate. And so you guys bring that to the table as well.

We do yeah. So, depending on the state, you know, for Colorado, absolutely, I'm the Managing broker for our firm, we have our real estate license got commercial real estate experience. And so we will do the commercial real estate transaction along with the business. Now, I'll say that, but sometimes we get into a transaction where there's an overly complex real estate situation. And that's one thing that we're really good at. And I think any business broker should be acknowledged where their expertise is, sometimes we'll bring in a pure commercial real estate adviser that can recommend and help us transact that real estate part of the deal. Because, you know, we can't be everything to everyone, you've got to be really good at one thing, and for us, you know, that's selling businesses. But if there's a simple real estate transaction involved, we'll handle that as well.

You know, I think about that business owner, that's, you know, you know, I'm really smart. Obviously, I've got a successful business. And you know, I've done a typical entrepreneurial persona, and go, Well, I can do this by myself, you know, when you see the business owner, that decides to go down the path by himself. And there's a potential buyer, that having multiple requests, what do you typically see occur for both the business owner and their underlying business? When they're entertaining? entertaining buyers?

Yeah, so there's a couple of things, I think that typically they'll leave money on the table. Um, I also think that, oftentimes, that situation, the business owner gets distracted, and they focus more on the prize and less on the business. And so you start seeing the detrimental impact to the business sales going down, profit going down. And really what a buyer, and I've seen this strategy before a buyer will make Oh, yeah, we're interested in your business. And they just keep dragging it out and dragging it out. And there's no one there controlling the process. And there's no one there being that advocate. And so those transactions, you know, typically are far less, not that they can't get done, you know, I, there are a lot of transactions that can't get done. But they're typically for less, they typically take longer. And it's typically way more frustrating for the business owner, because, you know, he's not in control. And I think that's one role of the business broker does play is you've got to control the transaction. And it's better to have the control the sell side and on the buy side.

Well, you know, there's, you know, I've heard it a number of times from folks, and they'll say, the business deal between here and there dies a number of times along the way. That's true. You know, and I think about for the business owner, highs and lows, highs and lows, highs and lows through the process, and you guys see, hundreds of transactions go by and the business owner may have seen, there's one only.

Lifetime event most time this is the first business that a lot of these business owners will sell or the second or the third, one or two transactions that you don't see the full gamut of what can happen. And I think that's a great point that you kind of bring up there is that it's, it's important for the business owner to consider the whole team. And we're just a part of that. It's not just about the broker, you know, it's about having the right attorney, it's about having the right CPA throughout about having the right wealth advisor, financial advisor post close, what are you going to do with your money? You know, you're going to put it in a bank account, you know, there's, there's these types of things that sometimes are overlooked. And one of our roles, and I think we do a really good job is forming that right team and making sure that the right advisors, telling the owner the right message are on the team.

You know, I think about it, and I'll talk to business owners frequently that have sold their company. And I'll say so on the Monday following the close. What did you do? You know, in your former military guy like me, you'd see a general officer retire and he went from step and fetch to carry his own luggage. You know, and you think about the business owner on Monday goes well, hmm, I've got nowhere to go. So I think this, you know, you bring up a very valid point is that post sale planning side I think gets little attention from business owners without it being drawn drawn to their attention.

Yeah, no, I agree with you. And that's one thing we're trying to do ahead of time is rec make recommendations for these business owners? Like, what what are you going to do with this money? What are your plans emotionally? After sale? We actually do an assessment prior to taking on a client. It's called a pre scores done by value builder. It's an emotional assessment. Are you ready to sell your company, you know, and are you mentally ready to take that next step? And that's a big part of it. We want to make sure that business incentives are committed to the process. And they do have good plans, you know, post close.

You know, it's funny, you know, for me, I've gone through a designation for exit planning. And I was driven there by an event that happened, a friend of mine and his business didn't transact, and it was a really unfortunate event. But in, in looking at the folks that are getting ready to sell their business, I think they think exit is a thing in and of itself, I think having a business to be ready for purchase at any time is frankly, good business. You know, you don't have customer concentration. You don't have owner dependency, you have policies and procedures, you know, you have intellectual property protected. And, you know, maybe that's something to comment on, when you look at the value of a company, intellectual property they kind of the special sauce a company has, do the owners understand that they should protect that?

Um, oftentimes, no, I don't think that they take the steps necessary to protect their IP. So that that's definitely an area that I think that business owners can improve. It's, it's a topic that's not discussed as much as no financials, or you know, the profit of the business. And it's one that I think as we get to the time of the security breaches and the internet, you know, be more prevalent, a lot of these businesses, that it's something that is definitely going to need to be protected more.

But you know, I think about a business where, let's say they have a very proprietary process that really is the mechanism or discipline that has propelled their company. And they go, what's the take, you know, what's to prohibit one of their key employees from walking off with all the secret sauce on how they do things, and forming a competitor? And I don't think that's well covered, or, or protected for many of the business owners?

No, I don't think so either. And I that's something that if you're entrenched in the business on the day to day, and you're the guy out selling product, or you're the guy out there helping on the line, or whatever facet of the business that you're entrenched in, you can't step back and work on the business and work from a strategic level and pay attention to the things like, you know, is there risk for for IP? Is there risk of someone spinning off of, you know, the same product that we're working on?

When you're in it, and you're working in the business, and you can't be working on the business? You know, I was talking earlier with another peer of yours, that that's in rain captured? And you'll always think about the customer as concentration risk. And he brought up well, what about supplier risk? You know, and if if you have a sole supplier, and that's interrupted, was that to your business valuation?

Yeah, absolutely. That that is, it's detrimental. I mean, if you if, if you're the best time to sell a business is on on the up, it says probably, it says profits revenue are increasing, you can always, I think the natural inclination is to always try and get to that next level, and but you're always going to have something ahead of you. So you know, if you can sell a company as it's growing, and you're, you know, a buyer sees future growth and future potential, that's the best time to sell. But if you have a supplier risk, and you're on that trajectory, and the supplier, you lose your supplier, and data start to decline, it's gonna be really, really hard to sell your business on a negative trajectory.

You can't run fast enough.

You cannot run fast enough. And we see this all the time. I mean, we see business owners to come to us, everything looks great. We're very excited about selling the business. And when we start the process, and then something happens, they take their eye off the ball. Maybe they didn't identify this problem upfront. And you know, there's a negative impact on the business. And it's amazing how quickly the buyers dry up. When you start to have a negative negative path on a business relative to revenue or profit.

You know, we talk on many different parts of the business. How you know, for you guys, you'll see business owner that's electively coming to the table to sell. What do you How frequently do you see the business owner that shows up that's had a health event that no longer has a choice and has to sell? You know, what are your thoughts when you run across that client?

It's very challenging. We actually were working with a client recently that, you know, ran into an issue like that and it's, it makes it very difficult one to sell back to the comment about a negative path and a negative trajectory on income or revenue. But then you lose all leverage. I mean, if you if you have to sell, you're really going to lose the leverage in the transaction. And we've, we really are processes built around creating leverage in a transaction and creating buyer attention and multiple buyers at the table. And when we were desperate, and we have to sell, or the seller has to sell, he really can't create that leverage. So you're, you're stuck with? No, probably, you know, an outcome is not too desirable.

You know, I think about the business owner, that's listening, right. And, you know, like, I think I'm bulletproof. And I'm obviously not, but I think I am. And you kind of go live got time, you know, and I'll put off doing the strategic Look, I'll put off looking at all these issues that you talk about our value creators for a business. And if you're a business owner listening, you know, we don't know what the future holds. But everybody's going to exit their business one way or another, you know, either voluntarily or at death. And hopefully, you know, this episode will be the spark that will cause you to step back from your business in and look at those key drivers, and start doing it now. So if you haven't been announced by the shows up, you get a call and go, Hey, somebody wants to buy your business, that would be a good thing. So I'm a business owner. And I got a call unsolicited by a firm that wants to buy my business. What might you recommend?

Call me!

Yes. Yeah.

No, I mean, I think that that's, you know, that happens all the time, there's firms out there that all they do is cold call and try and source deals. I mean, there, there are buyers, and we talked to them, they're calling us as well to help them source deals. But it's not rare at all, for a business owner to get a call from someone who's looking to buy their business, whether it's a financial buyer, a strategic buyer, I go back to your your comment about everyone's going to exit a business one way or another, whether it's by choice or by death. I mean, that's an unfortunate truth that, you know, what happens if you can't sell your business? Do you continue to work and work and work and ultimately, you know, unfortunately, that does happen, and quality of life, and you know, we're good. Balance is obviously important. And having someone find that exit is, is is even more important. My recommendation to a business owner, if they do get a call out of the blue is to make sure that they verify who they're speaking with, make sure that it is a legitimate group. Unfortunately, there are people out there that try and take advantage of the information that they get, you know, whether it's through a business broker, or whether it's through an attorney, to make sure that you're protected with a nondisclosure agreement before you actually have conversations with someone, and make sure that you're really that they are really sincere, and are capitalized to be able to make a purchase before you start sharing information with them.

Well, yeah, I think about that comment. And so because that sounds like a really good offer. Because, you know, in my answer would be compared to what? Yep. I mean, so, you know,

Great point, we actually got a new client that we've been working with lately that, you know, they got a great offer, someone called them up and they said, We love your business, we'll give you $8 million for your business. And they were like, well, this is everything we've ever wanted. And they started down the path and they stopped and they started thinking about, they're like, Okay, well, what if, what if we had someone on our team that was out there? And we had multiple people looking at this business? Know, and we went out to the market? Could we get more, and we're going down the path with them? And yeah, I absolutely think we can get more, I think that that is a great business, and we can probably get 50% more. And so they're gonna net what they probably will, would sell to this other group.

So that's how I think about that, you know, you kind of going well, it's the first time and the buyer may have done this multiple times you're doing it, you know, as an owner, maybe one time. And I think it's it's one of those things as if, you know, for a business owner listening, I said, What's, what's the harm in calling, there isn't a harm for them to call and say I have an unsolicited offer from my business. But I think that also plays into the part. If you've got all the leavers in place, and you're doing all the things correctly, and you know, you've de risked your business. And then you kind of go you have some general notion of where you stand in the market if you've done all that properly.

Yep, you do. I think it's important for the business owners to surround themselves with the right advisors. And just because, you know, they may have an attorney or they may have a CPA, those may not be the best advisors, because there are industry specialists, there are people that focus on transactions that know the levers to pull and know the value of certain things that maybe a generalist is not. And that's a that's an important part for business owners to take into consideration.

You know, I think about the analogy, we all see it in the healthcare field, right? And you're going to your family practitioner and says, you know, you need a valve replaced in your heart. And you go, Well, do you do that on Saturdays, you get? Well, no. Well, you know, did you send them to the cardiovascular surgeon? Yeah, that's my first time. No, that's not the guy you want. You know, that's not the lady that you want, you want somebody that that's what they do. And I think folks stumble over what they perceive is the cost, where I really think down the road, if they step back and look post sale, it's really an expense that they'd cost them at the end.

Absolutely. And that applies to a broker that applies to an attorney, it's across the board across the board. You know, I say this to a lot of our clients, and we get kickback on on our costs and our fees. And I think they're in par with the industry. But, you know, we look at what we do as a revenue generator, we're driving more value than we are an expense. So if someone can go out with a, you know, a broker or do it on their own, or they can, you know, sell it for $1, you know, we're going to be able to go out and leverage our process and our buyer pool and sell it for a buck and a quarter. It's really a 25% more and pay for ourselves.

And, you know, I think about the auction bid your auction process. I've got three buyers that want to buy your company now and the other buyers No way. Yep. Are they gonna bring their sharp pencil or not?

Yeah, absolutely. Yeah, yeah, definitely leverage the the multiple people while looking at a business at one time, that is how you is not just price. Now another thing we haven't talked about, and I think that a lot of business owners don't realize is that many people, most most buyers are not going to come to the table and write you a check for 100% of the purchase price. It's just it just doesn't happen. And it's getting less and less common. So, okay, what does that mean? You know, what are the contingencies of the rest of your money. And so not only you may have three of buyers at the table, and they may be all offering the same price, but the turret the deal terms are going to be better, maybe one or the other. And so you can really leverage that when you have multiple people at the table.

You know, I think about one of the things that I understand about Raincatcher is you guys are storytellers too. Because you know, for the business owner, you know, you can have the numbers. What you mean that fish that was? Clearly you come from for a long time to storytellers that the fishing world. But you know, I think about when you guys put the offering memorandum and stuff together, and that you guys tell the story of the business. And I think you do that, from what I understand really well.

We do know our roots. As a company, we really were founded as a digital marketing company that does business brokerage. Now we've evolved into a very refined business brokerage company. But our foundation is the way that we market. And I mean that the way that we go out and tell the story tell that tell our brand to tell our message, I think is one part of it. The other part is telling the story about the business, and the reasons why this is a wonderful business and the reasons why you should be buying it. So yeah, when we work with a client, we put together a very comprehensive, Sim, confident confidential information memorandum, it's kind of hard to say, but we put that together. And it's it's robust. I mean, it tells the story about the history of the business, about the buying motives, you know, we don't shy away from the risk. So we talked about the risk of buying the business is something that's very real. And the buyers, you know, are going to do the research on their own. And so we put that into our our packages, talk about industry and financials. And we have interviews with the owner. And sometimes we do videos that we attach. And those are all the way that you present the business and you only get one opportunity at this one is you your first impressions are so important. And so we never rush a business to the market. We try and move quickly. But we do a lot of prep work and we do a lot of research so that we know we go to the market, we have that one shot to make a good first impression is the best one.

You know, I you know, I've been wearing you out for quite some time, you know, in in, you know, I'm a fan of business owners love talking to him. And I'm always amazed that you go you did what and that made a living doing what you know. So I'm always fascinated by the business owner. And of course, the podcast is all about business owners and the folks that serve that marketplace, you know, for you and you know, in looking over the time that you've been working in this industry, you know, what are the tricks or techniques that you use that helped get businesses sold?

Yeah, that's that's a great question. Um, I think it's important to and we talked about this a little bit, create leverage in the process. It's important to control the process. And if not, you don't want to just throw a business out on the market and wait and see what happens. So the trick to getting the deal done is, is having a very refined process, to where you're casting a very wide net, you're getting very good exposure. And that can be a multiple pronged attack from, you know, your own database to different listing platforms, you know, cooperating with other brokers and Investment Partners. But driving that process to a certain point, a decision point for buyers that you attract, and I think a mistake was often made is that people just see what let's see what happens. Let's throw it on the market and and see what happens. And then we don't work that way. We just the spaghetti approach. Yeah, it is. So you know, we so for all the deals that we work on, we have a very specific deadline for all offers. So we'll put it out on the market, and our different marketing channels. And we'll tell all the buyers that here's the deadline, if you want to be involved in the process to buy this business, here's the deadline that you have to submit an offer to us. And here's the expectation of what that offer looks like. We tell them what we want. And if you don't make an offer under these terms, you're you're not conforming to our process. And and that'll be looked upon negatively. And it works, it definitely works to help control the process set very specific deadlines. So we can, you know, move the process along. That's one of the you know, one of the things that I think really helps, and you don't see it a lot in the size range, the types of businesses that we're working with.

You know, for the, for the business owner that's out there and goes you know, I'm in a particular industry, you know, I don't know if Raincatcher works in my industry is is there specific industries you guys concentrate on?

Uh, you know, we are we're fairly agnostic on specific industries that we work with, we know what we don't like, we know what we do, like we have some good experience in property management, vacation biz, vacation, rental businesses, construction, niche type businesses, manufacturing, b2b services. But for me, what I when I really look at small business sales is not specific to the industry, it's specific to the process, how do you take that process? How do you take that business and move it from A to Z, and control it all the way through, and all the techniques that you use to get that deal closed? And if you don't have a process, if you, you know, recommend this to a business owner, if you're talking to a broker, ask them what is your process? You know, how do you handle diligence? How do you handle you know, the the information, the data that we give you? How do you handle closing? And if if someone can't clearly articulate exactly what their processes, they're probably don't have one. And they're winging it. And that's something that we do we have a process for everything. And we really know how to do business through that cycle. So it doesn't it transcends industry, in my opinion, because we do enough research upfront, to really understand that industry and know how to get to deal with closing.

And you guys have, as I understand it, some rather unique tools on your website that's available to the business owner that's considering selling.

Correct. Yeah, we talked a little bit about the value builder score, the pre assessment, the pre score, which is kind of the emotional score. Those are complimentary, we work with business owners, really to earn their trust in their business. So we do free valuations. They can take the assessment, get the 27 page report, from value builder, they can take the pre score and get that report as well. And those are just intro tools that we use just to kind of set the basis for conversation. Again, we're not, you know, if you're wanting to sell tomorrow, we're not the brokerage firm. We're not we're not we're not going to throw a deal on the market, we really try and understand that if this is the right time, the right fit. And, you know, the right opportunity for both sides.

You know, for the business owner says, you know, geez, I need to reach out to Jason, how do they find you on social media?

On social media, you can go to LinkedIn is probably a great way to to find me, Jason Thomas Denver. And you know, also through our website, there's a way it's Raincatcher calm. It's a great way just to go to our about US team page, and you can see my smiling face and you reach out to me directly from there.

Are there any pictures on any fish on there?

You can go to my Facebook page. It's loaded. It's either my children or pinches of fish or elk on my face.

Well, you know, you know, with all this being said, you know, we'll close with perhaps Either the best advice that you ever received or advice you might offer to the business owner that's thinking about selling.

Yeah. You know, I, my father in law is a is a contractor and one of the he's ingrain. This in my brain, it's, you know, measured twice, cut once. And I think that applies to a lot of different things. It's not just carpentry, it's not just cutting wood, you know, you really need to think about what you're doing before you act, you really need to take the time to talk to the right people formulate the right plan before you jump into to sell in your business. So think about, you know, measure twice, talk to multiple brokers, talk to multiple attorneys, you know, think about the different levers that are in your business that can drive value or detract value before you move forward with selling your company. And that's probably the biggest advice. Look, we're in the business of selling businesses, but we don't want business owners to fail in that process. And so there's a lot of work that can be done up front. And, you know, give us a call, we can talk about it. There's a lot of options out there.

Well, Jason, you know, I suppose we could talk about fishing for some time now. But you know, I really appreciate you taking the time and sharing your experience and knowledge. And you know, your philosophy about helping the business owner and, but I sincerely appreciate your time.

Yeah, thanks, Bob. It's been a it's been a great time. I really appreciate it.

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