Simon Bedard is the Founder and CEO of Exit Advisory Group, a boutique M&A firm in Australia, that also provides a range of advisory services focused on exit strategies and maximizing company value.
Simon’s experience spans over 20 years in the...
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Ronald Skelton 0:06
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling.
Hello, and welcome to the how to exit Podcast. I'm here today with Simon Bedard. And he's the founder and CEO of exit advisory group, a boutique m&a firm in Australia. This also provides a range of advisory services focused on exit strategies and maximizing customer company value. Simon's experience spans over 20 years in the finance, investment, energy and technology sectors. As an entrepreneur Simon has started by and exited companies, he has also had significant experience in the corporate sector, including one of Australia's largest banks, in their institutional banking and global markets division. Simon is also the host of buy, grow, sell the podcast for entrepreneurs looking to acquire grow or exit of business. Welcome to the show. I'm glad to have you here, Simon.
Simon Bedard 1:22
Oh, thanks for having me. It's a pleasure.
Ronald Skelton 1:23
Cool. Well, you know, I always start off, if you've heard my show, all my listeners know, I want to know your background story, kind of who is Simon? What got you into this industry? You know, why are you here today? You know, tell us, tell us a little bit about kind of how you got here.
Simon Bedard 1:37
Yeah, cool. So we'll, I'll try to give you the abridged version here. So I started my career, my business life, I guess, certainly in the corporate space, but in the investment world. You know, as you mentioned, their work to institutional banking, very large, high net worth clients helping them invest. I think the principle of what I was doing, though, you know, is really focused on this, you know, if you want to put $1 into something and you want to get $2 out later, like, something's actually got to happen in the middle there for this to eventuate. Right. So I think I always was focused on this idea of building value. And so I finished up my time there. The big recession back in 2008, went off. And, you know, what do you do when you're, you know, you've got a young boy was six months pregnant, you're no longer working in your job, because you took redundancy? Well, of course, you start a business, right? Because, you know, you might as well take on more risk and more concern. And so we did that. And we went into a completely different space, because we were run, not just looking for something to be, you know, to pay the bills, we wanted to do something that we can believe in and be passionate about. And so we went into the renewable energy and sort of environmental space. You know, I guess, early kind of adopters of that whole area. And you know, back in the day when a tiny solar system cost you 20 grand. So we started a business, we ended up buying into another business to help us grow and expand quickly. And we sort of built that up a bit and sold out sold off a couple of years later, I did actually end up back in corporate for a little while, but basically running a division here for a multinational. And, you know, about three years into that I decided I really needed to get out and do my own thing. Again, I think, you know, once you I think for anybody who 's really kind of run a business for themselves, it it's a very addictive thing. And it's it's kind of hard to roll with corporate politics after that, when you've kind of had the ability to shed all that in your past. So. So we started on a bit of a journey, to go and buy a business and my wife and I had sort of chatted about it, and agreed that startups were way too hard. Like, let's not go down that path again. And so we started on this 18 month journey of looking for a business to buy. And so it was, it was a new new thing for us, really, I mean, we'd bought into another business, we'd never gone on the hunt to find something new, it was kind of that was previous deal was in our own space. So and I guess that 18 month journey, you know, I guess our approach to that was very much around. We didn't have a specific industry we were looking for we were kind of industry agnostic, it was more about well, what's the right model? And how do we get into the right kind of business for us? And, and it was that journey, you know, this journey of trying to avoid doing startups where we actually found our next startups. So, um, you know, as life often has it, so. You know, really, I guess the next is for the business. We're even came from that journey, because we, look, we engage with a lot of business brokers, and we talked to a lot of advisors out there and look, you know, without wanting to be sort of negative here. I mean, I guess we found there was, we weren't a little bit underwhelmed, shall we say with a lot of the things that we saw going on in the market. And I guess what right really struck me about all of that was that I kept thinking about the business owners, the people who own the businesses that were being sold. And it really, I guess, it really worried me. And maybe it's my background in banking and whatever else where I knew the kind of hoops we'd have to jump through to be able to help a client and men help manage their funds, you know, and it was, you know, there's a lot of responsibility around that. And, and I guess, when I see business owners, in many cases, their business was probably their largest asset. And that asset was not being represented to the standards that I believe they should have been. I just was outraged. To be frank, I just saw, there's something really wrong with what was going on in the market.
You know, I think business owners deserve better than that, um, you know, I don't know, call me call me old school here. But I'm one of those people that believes that entrepreneurs are the ones who truly change the world. You know, they're the ones who actually see things in society that aren't working as well as they should, or there's an injustice around it, and they, they actually get off their backsides and do something about it, you know, often investing huge amounts of time and money, taking a lot of risk. And sure, you know, a lot of them are very successful and earn because of that, you know, they took that risk, and they were successful. But, yeah, I just think, you know, for a lot of the business owners who go through this journey, they deserve to finish well. And, and I guess, I just saw that a lot of these business owners too, were, you know, they run a marathon, it's the equivalent of running a marathon, you can see the finish line. And that's when you're not looking at what you're doing, and you trip over and break your leg. I mean, what a horrible thing to do, after all that time and energy. And so, you know, spending some time looking at all this stuff, it really dawned on me that there's so much information out there about how to start a business and how to grow a business. But there wasn't enough people talking about how to how to finish and how to exit well. And so that really became the nexus for our business exit advisory group. And so, I look, I didn't end up finding a business to buy. If I'm truly honest with you, I actually found some great businesses, but I think perhaps I got a little bit too cute. And maybe thought I was better at negotiating than I was and never, never got a deal down, right, because I was probably trying to be too tough on the whole situation. And, and look, maybe that's the universe sort of just telling me that I perhaps wasn't meant to go down that path. But in the end, I, I actually didn't rush off and start exit advisory group. I do remember my wife walking into our office one day, and I'd hung up from somebody who I can't remember who they were now, but they, I was really frustrated with their lack of professionalism. And I looked up and my wife and I said, look, you know, if you're willing to do another startup, I found this industry, we can totally disrupt it, which was an emails and kind of don't be a dick, you know, like it's
Ronald Skelton 7:57
actually resigned to people, right?
Simon Bedard 8:00
That's right. I know, treat people with respect and try to understand what their needs are, and focus on that rather than just what you want out of the situation. And, you know, I guess what I saw going on Ron in the in the broking world is, well, I'm sure you've probably heard and your listeners have heard this expression, you know, if all you've got is a hammer, you treat everything like a nail. Well, if I only get paid when you take a deal, well, good, bad or indifferent, this is the deal you've got, you should just accept it. And I just saw a massive injustice in that. And pretty much I was on a mission to change it. So. So look, we didn't rush off. I told my wife that I'm ready to, you know, we could start this business. She looked at me and said, Don't be an idiot. We're not doing any more startups and walked out. That was, that was the end of 2014. We ended up actually, I quit my job, I finished my MBA, I pulled my kids out of school, rented my house out and we kind of went traveling around Asia for a year. How I convinced my wife to do that is a whole another podcast. But we spent a year traveling I did a bit of consulting and really the idea for what is now exit advisory really fermented and, you know, look, we got back back to Australia at the end of 2015, beginning of 2016. Got started that agreed to give it a go. I got licensed as a broker, we started running around trying to talk to everybody because of course, we're a startup we you know, you need to start earning money. So hey, we can almost do everything for anyone. And of course, you realize, like most businesses that you can't actually, please everybody all the time and you start to you know, really need to focus on what is your core service and what is your core offering. And I guess in those early years, we, yeah, of course, your license, you start selling businesses. That's the first thing we did. But, but I guess what we really noticed early on was that we'd have business owners coming to us saying, Hey Simon, can you help I'm ready to sell, can you help me? And of course, you'd look under the hood of the business and realize very quickly that while that made a decision that they were ready to sell, their business wasn't really ready to sell. And in a lot of cases, even they personally weren't ready to sell, you know, that they hadn't done the things that they needed to do to get across the finish line properly. And so that was, this whole experience over those years came ringing home to me that we've got to find a solution to this problem, we need to get way out in front of this much earlier, and be talking to business owners about how to use the runway they've got, to be able to, you know, make the jet, make the jump, you know, if you're going to cross that gap, you've got to get enough speed up, right? So, so very quickly, our business evolved from doing the transactions to which we still do those, but the advisory side of our business was really born. And I guess if I could sort of give you an analogy, I mean, at the most simple terms of what that advisory looks like is that it's kind of like Google Maps, actually, like if you pull up Google Maps on your phone. I mean, there's two core things you see on Google Maps, right? It tells you where you are today, you punch in where you want to go. And then it usually gives you a couple of different routes on how to get there. Right? Well, our advisory practices exactly like that. I mean, you know, we do, where are you today is what's your business valuation, it's benchmarking, it's all the reasons that sort of triangulate where you are. Then we go through a process of Exit Planning, where we find out where they actually want to go. Now, that's, that's kind of where some of the real gold sense because a lot of business owners actually don't know where they want to go, I mean, maybe done a bit of a calculation on the back of the napkin and says, Oh, I think I need 5 million bucks. But there's not enough science behind that. And, you know, there's a lot more to thinking about exiting than just money. And we can we can unpack that a little bit in the show, if you like, but fundamentally, where do they want to be? And, you know, ultimately, though, the pathways, your strategic planning, guidance, coaching, mentoring, all that sort of stuff is how you get from point A to point B, right? And I guess, just like Google Maps, right? Like, the options are, you know, hey, you can take the fast route, but you're going to have to invest in pay the tolls, or you can take the more scenic route and you know, take a bit more time. So
Ronald Skelton 12:22
And just like Google Maps, it'll tell you how long this will take you to get there. I get people all the time, like, well, I'm thinking about some business, how long do you think that's going to take? Like, you just started thinking about it today. And they said, Yeah, and I was like, usually two to three years. And I don't get it, they don't get it. Like, there's a lot to do to make your bid like if you want a sellable business, and that appeals to buyers, you can't, they can't run it the way you've always run it like as the sole operator, you know. And that's just a lot of the smaller guys that you're in the business networking and the different things you run into. And they'll say, well, here you buy it. So businesses, I'm thinking about selling my what would it look like to sell, like, usually two to three years is what I tell
Simon Bedard 13:00
Yeah, and you're spot on. I mean, I think there's a lot of businesses out there that are fundamentally just a really a job, you know, they're too small to be defined almost as a business that can be sold, because once that person leaves, there is no business. So I think there's obviously different scales here. Typically, in our business, we tend to deal with clients that are turning over, kind of at least a couple of mil, up to really about 100 mil. But if you look at the shape of the market, you know, obviously, the bigger they get, the less of them that there are, and let's be honest, the more attractive they are to the big end of town. So, you know, you turn over 100 million, often, you're, you know, you've got Deloitte and KPMG, or whoever it might be, you know, chasing after you. So we certainly don't need to bash heads with those guys. I mean, we just, we are really comfortable in that space. You know, most of our clients fit in that two to 50. category. But, but Yeah, and look, you know, different different types of problems for different kinds of businesses,
Ronald Skelton 13:56
there's a lot of service industries out there pushing close to or at that 1 million, that are still, you know, kind of owner operated. So I bumped it up just because there's got it, there's a threshold where it just doesn't make sense for them to maintain it. And for the industries I'm looking at, I think it's a little higher. So I'm going to try to look at that. So what's your experience in that realm? Where's the threshold where like, they start to get their act together, like as a business owner, by default starts to get their act together at a certain level? What what do you think that level is?
Simon Bedard 14:23
You know, I don't think that I mean, there are always kind of some rules of thumb around this sort of stuff I find but generally speaking, they also for every rule, there's there's also exceptions to the rules. So it's, I don't know if it's the the maybe the exception is the norm, but I've got clients who are in that kind of 30 to 40 million turnover space who still don't have a CRM and still don't have basics in place. And I'm like, You guys are kind of successful in spite of yourself. You know, so it's, it really is funny, you know, and then you'll see come across little businesses sometimes and they are just so super organized and systemized and So, I think, you know, back to the the original kind of point here about, you know, if you do want to sell, you got to kind of start asking yourself, well, what is it that I'm selling? And what am I trying to get out of this experience? And, you know, if I can, if I can take that even further up, you know, to 40,000 feet? I actually, I think business owners are often asking themselves the wrong questions. You know, usually, they're talking about how do I grow? How do I go? Well, you know, if I'm going to sell what I'm, what can I get for it? The question should actually be well, what do you want? You know, what do you need? And I actually don't think that's a business question. I think that's a human question. So I couldn't find the mute button there. So you're good. But I think the real question here is, look, I don't think any of us are actually born to do business. Business is, just this construct that evolve because of the way we live, live our lives. So the important question here is, what kind of life do you want? And that pertains to how do you spend your time? What do you do? You know, family priorities, you know, you know, once you work that out, well, then we can build a business, you know, to deliver on that promise, right? You know, business, a business should be a vehicle for delivering you the life you want. So work out your life first. After that, we can reverse engineer right. And I think that's, that's where the Exit Planning comes in. That's where you're saying like, what kind of money do I need to live the life I want? What sort of things should I be doing with my time? What kind of legacy do I want to leave on the business? The world around me, my family? You know, they're, they're the, they're the big questions to answer. Because, you know, business, as long as you I think you're adding value to the world, and you're, you know, you you, you understand what you do? Yeah, you can find ways to grow businesses.
Ronald Skelton 16:54
You know, a lot of entrepreneurs, I refer to them as accidental entrepreneurs. They either saw, like you they didn't intend on doing a start up, but they seen a wrong and wanted to set a right, right, that they'd seen something they can improve in the world. Or they were really good at something. They had a friend that wanted to do it, you know, hey, do that for me, too. Right? Like marketing's a lot of times they hear this, I was really good at it. I helped my brother grow his business, and all sudden his friend needed help. And next thing, you know, had 15 clients, and I'm gonna market it agency. 20 years later, I'm ready to sell it. Right. I call them accidental entrepreneurs. But sometimes those are the best ones. And then they're your guys, you've got guys. My natural thing is solving problems and wanting to build stuff. So it's hard for me not just like, oh, I'll just create the next thing, right. But there's a huge advantage to take it like you said, the marathon. You mentioned a marathon earlier that you know that business is a marathon. I like to think of it more kind of like a relay races, if you don't have to run the whole race to win a business, you can grab that baton at the last 100 yards. Right, it takes something that's well run, well planned, you know, there's a good strategy and just carry it, you'll carry it to the next finish line. And that's how I see this acquisition, entrepreneurship is an opportunity for people or you know, good with business. If you've never run a business before, I think yeah, to get a little help before you go out and buy something. There's some mentors out there teaching how to teach how to buy something like yeah, what are they going to do with it when they buy it? But just because you have money doesn't mean you should spend it on a business. Yeah, that said, there's this is a, it's, it's gaining speed. I think in the United States alone, there's something like somebody was saying $31 trillion worth of businesses that'll change hands over the next 15, 20 years, it's just gonna be crazy. So there's an opportunity. And no, in this space, if somebody doesn't step up and take those, somebody doesn't like you work with those business owners and get them ready to hand over to the next generation. And then somebody like myself, and a lot of our listeners don't take that, that baton and run with it. Those businesses go away all that that legacy, that energy in that time was that was took to get them there, just kind of dissipates, it's gone. And yeah, that's in my in my space. That's that's a wrong in the world. Right.
Simon Bedard 19:17
So it's interesting you say that, because it's, you know, the statistics that we've seen around is that, you know, only about 45% of businesses these days, even go from gen one to gen two, only about eight or 9% make it to Gen three. And it's logical, I think, in a lot of ways in that, you know, we're more educated than we've ever been as a society right. Now, the couple who emigrated to Australia or America and, you know, build some business out of nothing, and, you know, just happen to be more successful than the others and turn it into a multimillion sort of turnover business. I think in a lot of cases, those people saying, well, I'm going to educate my kids. I'm going to give them all the things I never had and you know, the kids will push off to be doctors and lawyers and you know, whatever else, but you know, they don't, they don't necessarily want to come back to the business that happened to make it all possible in the first place. So there's this sort of disconnect, I think, between, you know, what drives actual value into family and intergenerational wealth and this perceived idea of what I should be doing with my life. So, yeah, but then look and everything, I think, in a lot of ways, that's good, too. It's nice to have options. And it's good that people can pursue their passions, right? They don't just have to follow in their mother and father's footsteps. But, but you're right, there is this legacy thing here of good quality businesses that are actually doing good in the world, like what's happening to them, you know, because you certainly don't want to see that stuff, you know, fall by the wayside.
Ronald Skelton 20:45
And so, you know, went to the military, got a college degree and never looked back. I know, that's what's happening to a lot of these, you know, small business owners and stuff. I have a good friend of mine, his he's gone now he passed away, of heart attack, his dad and his grandfather created a tech play. It's a technology company. And they do, it's, they do analytical reports, they actually report on the industry, second generation. And the son, he actually was funny thing was, he didn't want anything to do with it, right? So much so that he actually he always, like, I'm bad at math. I'm horrible at math. Because in their analysis, it was a lot, you know, a lot of industry and economics and stuff at the chip industry and stuff. It's always like, you know, economics and math. So you can kind of develop the story about how bad did Matthew was. And before he had his heart attack, he was a diesel crane operator is a diesel mechanic, a license diesel mechanic and a heavy crane operator, he would climb up like these skyscrapers and run trains. But you know, nothing to do dad, dad drives Ferraris and electric Porsches and runs a, you know, a multimillion dollar empire that he would have handed over to his son. And it sounds like he's just not interested.
Simon Bedard 22:02
So just doesn't float my boat? Yeah. He isn't. I mean, he's question about how people get into the businesses that they're in. And I agree with your your sort of examples that you gave earlier. You know, I do see a lot of business owners out there who the accidental entrepreneur or the people who kind of stumbled into their business, you know, I worked for somebody, I was kind of good at this thing. And I got sick of working for them. So I went out and started something and was good at it. Although what we do find a lot of is that those people were maybe very, very good at that thing they do, but they're not necessarily great at knowing how to build businesses. And, you know, as, as I'm sure everybody listening to this show, will will know and appreciate is that you know, there's so much involved in in running a business and doing it successfully, it's great to be good at what you do. And maybe if you're good at it, you're probably good at selling what you do, then because you can talk about it. Even if even if you don't consider yourself a salesperson, you know, you're just the expert, you talk about what you do people buy into you. But, you know, you get over some of these thresholds that, you know, we're sort of touching on earlier. And the problems for that company change. You know, like running a $2 million businesses very different to how you're going to be running as a startup. You know, and I think once again, you get up to sort of 5, 6, even 10 mil, then, you know, the business has changed fundamentally again, and, you know, one of the most common things I hear from a lot of entrepreneurs business owners is that I spent all my time actually like, you know, counseling people, and you know, dealing with people problems, as opposed to the things I used to do, which I enjoyed. And in actual fact, one of the things I kind of admire is seeing those business owners who have enough emotional intelligence, to be able to acknowledge, and maybe not so much in the ego column, where they sort of go, you know, I actually don't want to be the man, I don't want to be the guy running this place. I don't enjoy that. I had one chapter he was in, in sort of technical audio space soon, he said, Look, I just like nerding out on my equipment. And I'll talk, I like talking to clients about this stuff. Yeah, fix the solution, recommend stuff, you know, install things. He goes, I love playing with that sort of stuff. So he hired a CEO, he just had my ear, like all that stuff, go do it. I'll be over here in the backroom tinkering with my toys.
Ronald Skelton 24:28
And I actually had a, a young lady here in town that actually owned a business networking company. And I won't say the name. Unfortunately, she's gone to now but she got really mad at me one day because she asked me where I see her business in four years. And I said exactly where it's at right now. And she said what, you know, she was very coaching, like she always likes to coach others. And I said, you asked me a direct question, and I answered it directly. And then she said, Why do you think it's worth it'd be right now, I said, because you don't have the capacity to Take it to the next level, you won't let the reins loose. And you know you're at that threshold where you're going to hit, you know a certain number. And you're just not going to go past that. Right? It takes a different individual to create a Starbucks startups do the shoestring budget, raise money, do all that stuff in tough it out that it is to take you don't take that company to the first million. And then I don't know, millions exact number, but there's a number somewhere in there that it actually shifts gears, you end up being a CEO, a coach and advisor to your staff. That's a different human being. And you if you watch how the VC capital, the venture capitalists do it, they switch these people out the guy that shoestrings it raises the money does the official thing, isn't the same guy that takes it from 5 million to 10 million, and then the different guy from 10, but it's a different set of skill set. And often that needs to be a different individual. And a lot of these small businesses, even if they've made that $5 million, it was painful for them, because they want to go back to doing what they were good at. And I liked your guy there that says, you know, he'd hired a CEO stuff, because that's exactly. You know, the right thing to do you figure out what your wheelhouse is, you stay inside of your wheelhouse and you bring other people you could still own the place. But yeah, a lot of people don't ever have the foresight to or the, I guess you would say the ego, you know, the, their ego gets in their way to to be told what to do by somebody else in the company that they own. Right.
Simon Bedard 26:27
Yeah and you know, look, yeah, I think it's a brave CEO who starts trying to boss the guy who owns the business around too much. But I actually just think, when I say ego, I, it might be a little bit harsh, but it's it's more that people kind of struggle to let go, they struggle to not be seen as the guy who has, you know, I'm the owner, and everyone looks to me, well, I need to kind of keep being this guy who's making the decisions and doing everything, and you know, they don't, or they simply perceive that nobody else can do the job better than them. And you know, boy, is that, boy is that kidding yourself? Right? Like there's always somebody better.
Ronald Skelton 27:04
Always, always, always, there's only one number one, and I'm pretty sure you're not it.
Simon Bedard 27:10
Yeah, I've always hated by kids, you know, like, it's the same lessons. It's funny how these sort of things translate, but there's always somebody who's going to be bigger, stronger and faster. So if you're, if you're going to try and play on those those merits, like we say, in business, there's always going to be somebody who's cheaper than you. So if you want to just play on price, you're gonna get hurt. So you got to think about how to be different, you got to think about how to find that niche, how to play your hand to the best of your ability. And I think, look to that end, I mean, you know, don't assume that you have all the answers, don't assume that you should have all the answers. Now, that's, that's why the entire coaching world exists. That's why we work in teams, right? It's, you're going to be good at some stuff, and you're going to suck at some things. So work that out, and you know, stick to your knitting.
Ronald Skelton 27:57
Awesome. So let's jump right into, like, we've talked about a little bit about like, what it takes to be an entrepreneur, what it takes to like start that business, that kind of that cycle, the mentality of a starting versus buying, you bought it, your your is growing, and you've made the decision, and you're starting to lean towards making the decision that you would like an exit for one reason or another want to retire, want the windfall. You're looking you're looking to do something else, right? What what would be the some of the questions you ask the seller when like, they call you say, Hey, I'm thinking about selling my business? You know, where do you start? You know, you're the Google map, right that you are here. How do you determine where they're at?
Simon Bedard 28:38
Yeah, look, I think a lot of it starts with a question of, you know, why you're thinking of selling, of course, and you know, but really, what do you want to be doing next you know? If you look, sometimes it's, people are just burnt out, they're just tired. They haven't thought about what they want to do next. That's a bit of a red flag for me. You know, I use the example of my father in law here, who, who I love dearly, he's a beautiful man and one of the most generous and caring people I know. And he's a doctor. He's always been a doctor. He comes from India, he worked his way out of the village. They had nothing he fought his way into university got qualified kangaroo, Australia, and has built an extraordinarily beautiful and successful life. But the guy's doesn't know how to do anything else other than being a doctor. Like it's his hobby. It's his life. It's his other family. And he's, he's literally talking about retiring, he's still practicing. He's 82 years old. And he's and he can't let go. Right. So And the big question for him is he doesn't know what he's going to do if he stops. And that that is a red flag like you if you get I guess if you're your business life and your personal persona, your perception of yourself become too intertwined and intermeshed. What does that I found that people can sometimes be questioning their sense of self worth, if they no longer are attached to that role in that business. And that's, that's not a good mental health, you know, healthy place to be mentally.
Ronald Skelton 29:21
But a lot a lot of people identify as entrepreneur, like, there's a lot of entrepreneurs, part of our identity is what we're up to. Right? Yeah, if you ask somebody who are you, you know, like, you know, I'm a podcaster, and acquisition entrepreneur, you know. I might, it depends on if it was a business setting or personal setting, I tell you, I'm a father, and a husband. And then like, you know, but a lot of it's, it's natural for us to tie a lot of our identity too. I mean, we spent a lot of hours inside of these business, they become our babies kind of thing, just another one of kids. So, you know, there is something like that I've got a business owner here in town right now has a beautiful soap company, I'd like to have my hands on, his wife wants him to sell his friends want him to sell, he's in his 70s, he just had a stent put in a vein in his neck, because he didn't want to have a stroke, he had a blockage, right. And I asked him, So what's stopping you from selling the company and just spending some time at that brand new lake house you built right over that beautiful lake house you just built with your wife, that's what she wants. He goes, he just blatantly told me said all my friends that sold their businesses retired, died within a few months, I'm not ready to die. He honestly, you know, relates to once he's done with this, he doesn't have a purpose. And so you know, got some good ideas on how to do that maybe keep him involved a couple days a week or something like that. I'm going to reproach the topic. But, you know, people really do tie their identity to a sense of purpose and almost sense of self worth, to what they've created. And so how do you address that inside of your like, you've got an advisory service? You must have to address that somehow?
Simon Bedard 31:42
Yeah, look, absolutely. And and obviously, there's different routes for different people, depending on you know, we're all we're obviously unique situations are unique, even though many of the problems are the same. You know, I think I think there's a couple of different ways to approach that too. First of all, you know, back to what we were saying earlier about the the amount of time it can take to actually exit and exit properly. You know, if I valued your business today, and it met your financial goals, okay, well, great, well, then, you know, you are in a position to start engaging a sale process, right. But I always say to my clients, to run the process, you told me to start to now, you've got to give me 12 months. Now, okay, there's a possibility, I might sell it in six to nine, but at the end of the day, allow for 12, because I've sold them in two months, but I've sold them in 18 months, and somewhere in the middle is probably what happens on an average, right? So so allowing your mind that there's a 12 month process of selling. Now, if the deal we get requires you to hang around for a little while, and, you know, hopefully there's no earn out. But if there is an earn out, you might be stuck in that business for another one to three years. So all of a sudden, this this ramp here of all this, this actual exit point where you are no longer engaged in the day to day could be four years long, that's a fair amount of time to start thinking about what else you want to do with your life. Now, of course, if your valuation doesn't meet your expectations, well, then we need even more time to make those changes, right. And classically, by the way, you know, we talked to a lot of people about whether in that situation, seven years, you know. You actually need if you're going to do a strategic shift in your business, you need three years, a year a year to evolve it and start implementing it a year to get the traction and get the runs on the board, and then usually a year to get the returns on that. Right. So, you know, there's a lot of stuff there that people need to consider and a lot of time that it can take. Of course, the other part to this, Ron is is it's it's important to get to the heart of what they actually love about what they do. And, you know, I find invariably, that there is an element of, they're helping other people in some way, shape or form. Right. And so I think once they can start to narrow down, you know, a, what is it that actually gives me that positive energy feeling? And you know, be what is the actual mechanics around that as to what I'm doing, you can start to say, well, you know, you can get that doing these other stuff over here. Right, and which is why I think you see so many entrepreneurs who do exit, going on to doing coaching and mentoring and volunteering on boards and stuff like that, you know, boards aren't for everybody, especially formal boards these days. I mean, I've sat on formal boards and you know, it's kind of sometimes feels I can take the fun out of business. You know, and I think there's an entire cottage industry these days about boards and governance and you know, people over cooking how to do things on that front if you ask me, but you know, if you enjoy helping people, but God help people, and you know what, if you sell this business properly thrown it further right kind of returns, maybe money is not such a pressure on you for a year or two. And, you know, you can give your skills away, give your time away, volunteer at a few things and just go and help a few other people. It's it will change your perspective. It'll It'll give you that kind of sense of purpose that we need to feel fulfilled. So that's a big part of it.
Ronald Skelton 35:08
So you've talked to the business owner, you figured out that they're, you're trying to figure out what moves the needle for them, right? What excites them, you start looking at that and trying to find find things for them to do. What's the next thing you got to look at? Now? You know, they're gearing towards, okay, they've got a purpose for selling. They've got something to do afterwards. Yeah, what what's the next?
Simon Bedard 35:29
Well, timing, of course, is a big factor in this and I know sort of their into its intermeshed with that whole valuation piece. But you know, it's funny, because I've had clients who say to me, I must finish on this date in one year, 18 months, two years, whatever. But if I don't finish on that day, my wife will kill me. So I'm, you know, so there is a hard drop, you know, as you may say, but for other people, you know, of course, time is a little bit more fluid because it's more value driven. But how long do you want to keep doing what you're doing is the big critical question, how long do you want to keep owning this asset is another one. One of the one of the things I hear a bit, Ron is because it means different things to different people, right, you could exit by selling, but you could exit the day to day management of the business and start doing more succession and hang on to the asset, which can work for some people. But in a lot of cases, too. Yeah, the amount of times I've heard on my accountant thinks I'm mad for wanting to sell this, this thing's a cash cow. And it's so great. And the accountant thinks it's brilliant, and bla bla bla bla bla, that's time. Absolutely right. So we're looking. Yeah. And what kind of tips them over a little bit is that when you scratch below the surface, and you realize that that business represents 70% of their entire net worth, you know, any, when here's the old investment advisor, and me coming out again, but you know, any basic investment advisor who just got out of university will tell you, diversification is pretty damn important. You know, you don't want 70% of your wealth tied to one asset. You know, so so you've got to think about, well, if it is tied to that asset, do I really want to step out and just hand that responsibility to somebody else? Do I even feel confident those people can run it as well as me? Well, there goes that ego thing again. So there's, there's a lot of fundamental questions there. And I think business owners start to see their business as that, you know, as an asset, not them. And start to have a very different perspective on how some of that stuff should be managed. So, so yeah, so look, you know, valuation timing, you know, we touched a little bit on legacy, the beginning of the show here, you know, legacy to me, you know, used to mean, it's Bedard and sons, you know, our names on the door, and, you know, I'm worried if I sell this company, what are they going to be doing in my name, you know, but that doesn't happen as much these days, it does a little bit, but I kind of think modern day legacy is more about, you know, what do people kind of say, and think about you, and you've left the room. And, and, you know, typically, if we look around us, you know, who are the people that are important to us, we're usually the people we spend the most time with, so that that actually might be some of our key suppliers. It could be some key customers, it certainly could be some employees, you've got your friends and other people around you as well. You know, it's thinking about what kind of legacy you're leaving as you start to exit, can be and has been, for some of my clients, the most important driver, to the point where I had one client who accepted the lowest of three offers, because he felt the buyer respected, the legacy would continue to run the business in a way they thought was appropriate, and taking it in the right direction.
Ronald Skelton 38:40
I've interviewed quite a few people for the podcast, but we were involved in a pretty good sized roll up and interviewed over 200 business owners inside of that some of them had already exited. And I'll tell you right now, when I hear somebody is exited, I always ask well, did you take the highest and best offer? And I would say less than 5%? Say? Yes. Usually they take the offer that, you know, one of them was here's a great one. One of them, he inherited his father's business, he knew he didn't want to run it. He kept it going long enough to clean up some things and sell it. And he was more concerned. His father, I think it was like his second or third generation businesses, his grandfather might have created it. But they had employees there that have been there, like the second generation there, their father worked there, and now that kid works there. And he was more concerned about that legacy. How are my people going to be taken care of, then he was in know about that. And he actually selected the lowest of three bidders, because the guy was willing to put 50% of the company or 49% of the company in employee stock option plan, give it you know, put it into the employees and have them drive it. And I thought that was brilliant because I honestly think there's um, this is just rough numbers what I've seen so far, I would imagine that the dollar figure is less important to me. jority of small to medium business owners if you're not trying to sell the private equity if you're not above the $10 million and have a board, right? Where you have people to answer to, you're probably going to sell to who's going to take care of your employees who's going to take care of the brand and, and the customers and the suppliers who all count on you, right? You built this kind of environment or ecosystem where people are counting on you to feed their families to pay their medical bills, to do everything, not just your employees, their suppliers, employees, your customers, a lot of these companies are manufacturers, or they're creating something that goes into another guy's product. So that whole company is dependent upon it. There's a, you know, I talked to acquisition entrepreneurs all the time, like, Well, how do I get the loan? And what's the how do I negotiate the number I was like, if you focus on that, you'll lose more deals than anything, focus on the human being hear their story, figure it out what it is they want. And I promise if you don't take the conversation coming back to Money on your own, if you just listen to him, chances are you're gonna get a better deal than just saying, hey, how much do you want and see if he can get you there? Right? So
Simon Bedard 41:04
well, I'm willing, and you never know. I mean, if you actually form enough of a connection, then the seller might actually even offer you some vendor finance for a while and help you out because they really want to sell that company to you. So you know, you're spot on focus on the people first. I think this is an interesting topic, because you know, money, money is a motivator, right? We all we all understand that. But But kind of in a funny way. Because, you know, I there's a great TED Talk by a guy, Dan Pink, if people haven't heard of Dan Pink, what does it say? Something about strange motivations of human behavior or something like that. It's, it's fascinating. You know, it basically, you know, money, money motivates to a point. But once people actually have enough money, that they can take money off the table as a major issue. Actually, it drops down the ranks of priorities massively. You know, after that, this sense of legacy and purpose and things like that are far more important to people. And by the way, that's for your employees as well, right? So you know, employees value autonomy, they value, you know, things like Master getting better at things and feeling like they're improving and adding value. And fundamentally, they're part of something that's bigger than themselves, right? You tick all those boxes, you're gonna have an amazing team that's going to drive a hell of a lot more value into your business, too.
Ronald Skelton 42:18
Yeah, I've also, you know, there's some jobs out there that you couldn't pay me to do. I mean, there's just you couldn't, right? I'm getting like, you couldn't, you couldn't pay me a million dollars a year to shovel hot asphalt in the hot sun. I'm old. And you know, I don't think that lasts long enough to use the money, right? So people know, or when people say everybody's money motivated, and I agree with what you say, to a limit, right? There's a spot where you go lease anybody who's sane, if you look at it, and go, You know what, you know, I'm not, you know, I'm 50 years old, I'm not you, you couldn't pay me a million dollars to join the frontline of the Marine Corps, right? Because those guys get shot at. And I'm old enough that I know what happens when you get shot at especially big fat guy like me, I get hit, right? Not interested in that job at all. And I respect and love the people who are, but it's not me. So if you look at, you know, this, the entire industry, the you know, of buying and selling companies, here's an interesting thing you probably agree with, there's tears here, right? There's the tears that are probably too small that you don't know, where you start working with people, but your sole operator you're making, I don't know, six figures, not, you know, million dollars or less. And if you leave if you're in trouble, and they're not making quite enough to hire the replacement, right? Those need to push through to grow to the point where they have enough employees that somebody else can run it. And then there's a tear, where you're probably in that 1 million sided probably five, six $7 million range where you got team you got process, you're doing good, you could probably bring in a CEO, watch what they're doing. And then you get a spot where, you know, you get into above that 10 to $15 million mark, you starting to attract private equity strategic purchases. Now money becomes more of a factor because you've distanced yourself further back. So when I talk to those guys, they're more interested in because because they have boards and they have shareholder, you know, people on their team own equity and stuff, the numbers start to become a lot more important. The higher up you go. And I would say after you get probably past the 25 million in revenue Mark, you're you're negotiating, you know, quite a bit of on the number side as as much as you would be on the legacy and team side.
Simon Bedard 44:31
yeah, look, absolutely and, you know, one of my clients, they, they're up in that sort of 25, 30 turnover space. Finally, you know, you talk about the people and the relationships, like they were struggling to make changes in the business because in and I'm paraphrasing, but you know, words to the effect of how am I meant to go and change the way like, half the people in this building have worked with us for 2030 years. They came to my wedding. How am I meant to start turned to sort of putting KPIs and stuff around the You know, it's just a different, it's just a different relationship. Now I feel like I'm going too far down this path. And I get that right, there's change, change can be difficult. But, you know, to your point about money and the different types of people coming in. I mean, it's, I think one thing when you get to businesses of that size is that you tend to scale brings value. All right? You can have two companies that do exactly the same thing. One turns over 2,000,001 turns over 20 million, the 20 million companies getting a better better offer, right? It's not just because you're multiplying a bigger profit number, put the profit aside, what's the multiple of that profit, the bigger company gets a better multiple, because scale matters.
Ronald Skelton 45:44
And you've, you've attracted institutional money at that scale, right? They're getting a higher multiple, because they're getting a price to earnings ratio of 30 or something. So paying you 12x Isn't unheard of, where you know, if you're in that one to $5 million, revenue, less than a million and a half in EBITDA, you're probably in that, depending on I guess the industry met matters, but between one and a half to three x's kind of overall standard here, United States. And unless you're a software as a service, and there's a few outliers, there's some crazy industries out there, right?
Simon Bedard 46:16
Yeah. Look, don't get me started on SAAS, I'm still trying to understand how anybody makes money buying a business that you know, 12 times revenue.
Ronald Skelton 46:22
I had somebody asked the other day for 30. You want a 30 times revenue. And he's like, Well, I'm growing, I'm growing at 30%, year over year do like, and I've got, you know, this and that. And like, I'm not putting my money into anything that I if I leave it the way it is, it takes me 30 years to get my money back. I'm 50, right?
Simon Bedard 46:39
And that's revenue, not profit.
Ronald Skelton 46:43
Exactly, exactly. And I was like, you know, that's what is just insane what some of the stuff is. But we're at we're at the that about the 50 minute mark, I want to make sure that people if you're listening here, we've got his, his contact information on the screen, it'll be in the show notes, notes. But on LinkedIn, you can find him it's actually the LinkedIn address is linkedin.com/in/business-sells-sydney. So it's business dash, or hyphen, sales, dash, Sydney. And that's how you find him as the direct link. It'll be in the show notes. You also he also runs a great show, I listened to a little bit of it myself, couple of them just to say, funny is when my team said, Hey, let's put this guy on here. I think I don't do brokers advisors very often, because like you said earlier, not all of them are like, the sort of listening. No, he's passionate about this. And he's in here for a reason. So I jumped on board pretty quickly when they told me no, you know, they've listened and my team was like, No, we've listened to some of the stuff he's passionate about it. He, he he's out there making a difference. He's not your average broker just wondering the listing fee. So but you actually have the podcast buy, grow, sell. And that's buygrowsell.com. I'm happy to send listeners over there to listen to your stuff to, um. Before we wrap this up, I know you have another meeting you got to get to and stuff. What would be like your top three, like points, you want to make sure that people know if you're, you're looking at selling a business to thinking about hiring an advisor such as yourself, you know, what are the three? If you could pick three key key takeaways for them to head start that path right, what would they be?
Simon Bedard 48:24
Yeah, yeah. Look, if anyone's listened to Simon Sinek, you know, he talks a lot about your why, right? You know, this, this existence, ideal state you want to be in is your why. Right. So think deeply about what's important to you get that part, right, because you may not be able to say I want to exit my business on the 25th of November, and this year with this amount of money, like it's very hard to be that specific. But man, if you don't know whether you should be heading north or south, you've got a problem, right? Like there's some serious direction will kind of things to start start high level, make sure your nose is pointed in the right direction, and then you start you'll start refining as you go through your journey. So that's, that's a really important thing to start with. And it's got nothing to do with the way you're running your business today. Once you understand kind of where you want to end, then we start working backwards right? Now if you need to grow, and you need to grow significantly, well, there is another really fundamentally easy kind of thing to get your head around. There's only two things you can do to grow, you either build or you buy. Now, there's another whole podcast around why buying is is can make a lot more sense than building certainly right now and the environment we're in at the moment the entire world feels like it's shifted towards buying at the moment because you know, I can spend a lot of money bashing my head against competitors and having to drop my prices and compete and maybe I win business or I will just spend the money up front and take them out and reduce competitiveness and improve my pricing and improve my positioning. So you know well there's there's the one on one lesson on why you buy over build but No, get where you end game we understand your end game, then we create a strategy to get there, right. And look, ultimately, if you do decide to sell this is this is one thing if if people listening to this are thinking of selling a business one day, if you all you remember is one thing from my talk, please remember this. Don't run with the first guy who comes and taps you on the shoulder, right? The first person that comes and taps you on the shoulder. Typically speaking, they do this a lot. If you're selling your first business, trust me, you are playing for the under 13 soccer team, and you've just run out for a World Cup match, you are not going to be able to compete. And you know what? Often it comes along as a I know this guy, you know, I've known this guy for the industry or through these groups. Yeah, we kind of know each other. He's a nice guy, or he's a nice girl, you know, whatever it might be. Yeah, no, this is this is this is friend? Oh, well, let's explore it. You know, first of all, there goes the ego. Again, somebody's interested in buying my business. Don't I feel way fabulous. And this feels good man. People, people want me undesirable. And so they start going down this process of, oh, well, let's have a bit of a chat. Or maybe, Could you could you send me a few financials and I won't, let's sign an NDA. But send me some stuff. And I'll have a bit of a look. And then we can have a chat. And then they have a bit more of a chat. And they have a bit more of a chat. And they keep asking for more information. And then listen, I want to bring somebody in my team and you're going well, this is making progress, you're getting people involved, this is starting to happen, you know. And somewhere deep in the back of your mind, you're starting to spend that money, it's done to feel real good, right. And then, unfortunately, what happens in many, many cases, is that you will wake up one day, it's now nine to 12 months down the track, you're sitting in a room with a bunch of people who you don't actually recognize and there's lawyers and accountants and there's all this stuff. And that lovely person, by the way that reached out to you that you felt that human connection with like, they don't even actually really in the process anymore. They're kind of off doing their thing. But you know, you're getting squeezed in every possible different direction, you're tired, you're over it, you just want to get the deal done. And that's when the lowball offer comes. No, this is corporate m&a, one on one. And the fundamental lesson here is, if you want to sell your business, you better have a nice, solid, robust process that you put buyers through. Because if you don't put them through your process, they will put you through this, which is fundamentally designed to get them a better outcome.
Ronald Skelton 52:31
I promise you acquisition all entrepreneurs out there have a process, right? I have a checklist process on an Asana board that walks people through things, we have a team, right? I have team members I can pull in that are accountants, I have forensic accountants, if your books look my mess, bonus for me, if I still like your business, because I have a forensic accountant, you know, a forensic CPA, they can look through it and tell me she can put it back together. If she says she can put it back together, I'm still interested, you're gonna get a lower price, right? You know, we put together teams, that's how we do this, if you don't, I agree with you 100%. If you're thinking about selling it, you don't build a team around you on preparing your business to sell and representing you in that process. I'm not a vulture, because I just turned the guy down the other day, because he's just not ready to sell. But there are guys out there, they're going to take advantage of you. Just I told a $3 million, you know, company. Two, three weeks ago, I was like, Look, you say you want to sell your business, you're just frustrated, you're going through divorce, you're going through a lot of financial stuff. You know, you need to go work on that first. And I think when you do, you're gonna realize that you got something you you wish you hadn't wish it hadn't sold. Right? Yeah. Plus, it was really wrapped around him six employees, he was the only sales guy kind of thing. But uh, you know, I, I seen him as a serial entrepreneur. And the reason I didn't do it, you know, there's a reason I looked, I played the long game all the time. When he sells me that I had, this is the third business he created. I'm wanting to go create the next one, raise it up to four or $5 million. And when he's bored is that I want him to bring it to me. I can't do that if I burned him on the last one right now.
Simon Bedard 54:05
Exactly. Right. And I should say, right, like not every acquisition goes, lots of people have been tapped on the shoulder and they do do a successful transaction and it goes very well. But there is also a lot of people that just get put through the wringer. And, you know, like, like us sitting here. I'm like, I mean, I'd be absolutely comfortable to do business with you. Because I know that fundamentally, you're a good human right? Like, it's the issue is, is that without being able to go out and get to know the world out there. The best way you mitigate risks and factors is to have structure, to have a process to have advisors, put yourself in the best position to be able to screen things as they're coming through. And look once again, I mean, I still think if you really are serious about selling, then set up a process and run the process. Don't Don't just wait for chance or wait for the proverbial tap on the shoulder because it may not come and if it does come it may not be the tap you want. So, you know, take take control, take ownership of it, create a plan, get the right team around and try and aim for it. You might not land where you want to land. You're right. No, no plan ever survives the first day of battle, right? But at the end of the day, if you're not planning not working towards it, then you're just leaving things to chance. And that's not a way to run a business. Certainly not a way to finish your marathon or relay that we call life and business.
Ronald Skelton 55:18
I think the famous quote, I'm gonna butcher it. So if you listen to this, please don't punch me. Mike Tyson said, Yeah, everybody has a plan until you hit him in the face, right? So
Simon Bedard 55:29
wait until they get punched in the nose.
Ronald Skelton 55:30
Everybody's gonna play. I taught martial arts and hand to hand combat for years I've been in the ring a few times everybody's got a plan until somebody rattles your cage. And, and you go back to your corner go, hey, the plan isn't working. We got to we got to do something here. So, hey, we're at we're at the top of the hour, I do want to represent you know, you know, keep our listeners to be able to you know, if you got your hour commute, I want you to be able to listen to this on the on the on the way. I appreciate everything you said, I think you and I could talk for hours on this subject. Is there any parting questions or any parting statements you want to give real quick?
Simon Bedard 56:05
Look, you know, I think we've probably tried to sort of wax lyrical here about a few things that are what I would say is if you're anything like me, you'll probably have more questions down the track when you're having a glass of wine or something like that. Feel free to reach out like LinkedIn is your friend here, please feel free to reach out and connect with me. I certainly invite connections from people. Do me a favor, though, and please don't just send a connection request, send me a little message in there and just say that you actually heard me on this podcast because I'll have a little bit of context and that just helps us like connect and actually you know, form some kind of connection relationship there so that I would be very appreciative of otherwise you know, if you've just got a question you want to fire something over to me I will come happy to help after that.
Ronald Skelton 56:48
Awesome, man. I appreciate it. Well, that's the show guys. Thank you for being on here. Simon hang out for a second we'll we'll finish this up. The investors and entrepreneur roles professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduced first in Napoleon Hills famous book Thinking Grow Rich, with accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale blow past roadblocks and achieve success faster than you might think is possible. I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind