Matt Andersen – Intentional Growth: Building a Business Buyers Want

One thing we do know for certain is AI is the worst it's ever

going to be right now. And when somebody's ready for a

full exit, we really kind of work with them on the proper

preparation to get to a premium valuation.

And that's really where, you know, we tend to shine as

helping companies better prepare for a transaction that they're

going to be truly proud of. It's important to continue to

personally develop along the way because in the end that's what

what makes them all worthwhile. Because as we create more value

in ourselves, that's going to translate to our business.

We're going to bring more value to our stakeholders like our

employees, etcetera, even our customers, vendors, suppliers.

And so that self education is really important.

Hey there and welcome to From the Ground Up Show, the show

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Today. I am pretty excited.

I have Matt Anderson joining me and Matt's background is a

little bit different than our typical guest.

He specializes in mergers and acquisitions, capitalization and

and growing businesses kind of for the purpose of exiting.

So Matt is a best selling author, A2 time best selling

author. He's an international speaker.

He's closed over $5 billion worth of M&A transactions and

works with many businesses, large and small to increase

enterprise value, prepare for that exit event and then walking

them through that. So Matt should be a wealth of

knowledge of how we can best grow our businesses, how we can

capitalize our businesses, and when the time comes, how we can

prepare for an exit. So, Matt, thanks for joining us.

Oh, glad to be here. Thanks for having me.

I'd also say I actually have had real operating experience.

Part of that collective history was I ran a division of a

publicly traded company and then I'm fortunate to be an operator

for my own business. So yeah, I've kind of full, full

cycle sort of speak. Awesome.

Well, I will be excited to hear about that and we might pick

your brain a little bit of leadership and insight from your

time running your own business as well.

So we like to start every show kind of going back to the

beginning and learning about the the life that got you to where

you are. So going clear back to the

beginning, do you mind telling us a little bit about your

childhood and kind of early education?

Yeah, happy to do it. So I was kind of born and raised

just outside of Chicago, so the western suburbs and spent kind

of my my early years there. For those that are Chicago

Blackhawks fan, if they saw Coach Q's house getting teepeed

when the Blackhawks won the Stanley Cups, that was the child

childhood house I grew up in. So it was a great, great

upbringing, great area that we lived on a pond.

We had a summer place kind of out in the kind of more rural

areas of Illinois. So really enjoyed a lot of kind

of both things that the city of Chicago had to offer, suburban

growing up and then kind of more rural areas where I kind of

found some of my passions in the sense of outside of work, things

that I did when I was younger. I still enjoy today riding

horses and things of that nature.

Fishing's a big passion of mine still to this day.

And so, yeah, it was a pretty well-rounded upbringing.

I played both golf and lacrosse on our high school team and I

showed horses actually competitively through kind of my

early 20s. But that's kind of where life

started for me, even though I I now live just outside of Austin,

TX. That's quite a diverse

background. There's probably not a lot of

Chicago kids that grew up showing horses.

So I might, you know, my aunt on my mom's side was very into it.

And, you know, having spent a lot of time kind of outside of

the city, you know, probably 2 1/2 hours outside of Chicago.

And when you get kind of that far, I mean, Illinois is fairly

rural outside of just the immediate Chicagoland area.

And so there was a lot of kind of that sort of activity going

on. But yeah, just a little for

outside of the city. And so and then when I was

going, you know what, when we were in the suburbs kind of, you

know, for school and things of that nature, yeah, there was

several riding stables nearby. And so I had the chance to kind

of continue. That's a great hobby and really

cool that you can share that with multiple generations there.

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incentive trips. So coming out of kind of your

primary education, did you pursue a college education?

What did education look like for you?

Yeah, I did. Although because of the first

part of my journey, I really wanted to go to school to become

a veterinarian. So about a year in and, and by

the way, I share this fairly. I do a lot of university talks

and sometimes the attendees are freshman and sophomore.

And so I share with them, if you're not 100% sure of what you

want to do, use my story as an example or case study for how

things can work out. It's OK not to know exactly what

you want to do at 18 or 19 years old.

So wanted to be a veterinarian. After a year of that though, I

realized seven more years of school and probably accumulating

some debt and then maybe working for not a lot of money for a

couple years after graduation wasn't probably the thing I

wanted to do. And So what I did was I kind of

went on a little bit of a soul searching journey and I attended

every talk that went on at my university.

If there was an outside speaker coming in, I went to it.

I did a series of internships. The last internship I had before

I picked a career in finance was a somewhat interesting one.

I did an internship for ACPA firm and it was amazing.

It was spring semester and there was, gosh, there was just a lot

of, you know, Gray kind of camaraderie around the office.

I would say in January and then sometime around April first I

noticed a little bit of a dark haze that developed around the

office. For those that may not be

familiar, that's tax time, which for Cpas is highly stressful,

especially back then when a lot there was a lot of manual items

going on. And so I really enjoyed the

internship, but I kind of came to grips that this may not be

for me altogether. And it was after tax season.

There was an office mixer. And it was at that office mixer

where I'd met somebody who was in the investment universe, if

you will, work for a very large AUS investment bank and

investment firm. And so I end up doing an

internship with that organization and from there my

career was kind of set forward. I, I started my career kind of

in institutional investments and kind of went on from there.

But it was that kind of soul searching experience that that

really kind of led to the career path.

I would say out of all the talks that I went to from having

outside speakers come to my university that attended,

there's there's one speaker in particular.

It was a gentleman who had scaled the business from kind of

a couple couple million to 100 million.

And again, this is, you know, 100 million, this is back in the

day, right? So this was like 100 million

was, was real money, you know, not, not inflation adjusted,

inflation adjusted. That's probably 1/4 billion

today. So, so you'd scale this business

up. And one of the things that he

said and stuck with me to this day was about journaling.

And that's something I took away from that talk that to this day,

I'm a very active journaler. But I'm really thankful for the

two experiences. I'd say that had a profound

impact on my life. Number one was that that talk

that I heard, There was more to it that I took away, but that

talk that I heard about journaling and then the

internship with the CPACPA firm that led to the internship with

the investment bank and investment firm, those were life

changing experiences for me. Oh, man, yeah, that's, that's

awesome that you can kind of roll back and have a few pivotal

moments that made such a high impact.

That's that's cool to be able to incorporate that into your

story. Yeah.

For sure. And so that's one thing like

whenever I'm talking with folks at universities, always

encouraging them to, you know, try the internships, listen to

the guest speakers, take notes. I've got a talk that I share

with universities that it's really called the 11 Tips for

finding Success in my career in Finance.

Mostly I give that talk to university associations that are

student LED. I've given a couple that are

organizationally led by the university, but most are going

to be like student LED organizations.

But it's one of the things I share with them is, is about

journaling and how important it is to kind of track progress

over time. And again, that goes back to

when I was 19, it was. Yesterday.

Yeah. Yeah, that's great.

That's a a practice I feel like I could have benefited from or

maybe should. Still, it was something I did

not do well, but I find it very helpful sometimes to to look

back and see where you came from and what you've come through as

you're facing the the next set of problems.

It's very helpful. Yeah, I think it's it's super

important and the one thing I share with somebody as they

close out a journals to read back through it and to take

forward the 10 best ideas from your previous journal into your

new journal. Oh, yeah, kind of give closure

to the old journal, but it also brings forward your best ideas

and your best to do's and the most ambitious things that you

want to accomplish forward into your new your new journal.

So that's something I yeah. Yeah, that's awesome.

Well, add somebody that has some college and is kind of in the

more white collar space. You brought up a couple things

there. You you didn't want to do 7

years of school and and take on the additional debt and postpone

your working career that much further.

Based on your own experience and kind of the way you look at the

world now, what advice would you have for a young person that's

coming to the end of their high school career or maybe just

rethinking things? Would you still push them into

some college? No college.

Does it depend on where they want to go, what they want to

do? What are your thoughts on

education? Yeah.

And you know, look, everyone's path is so unique.

I think especially today, it's very difficult to give up

probably A1 size fits all. But let me share just a few

maybe overarching thought processes that I might have

today if I was if somebody were to ask me.

And I guess number one is if somebody, you know, has the

opportunity to maybe scholastically, financially,

they're able to go to, you know, you know, university, I, I

definitely would not discourage them from that, but I would

prepare them well in the sense that it's going to be probably a

great experience, but they need to supplement that kind of core

curriculum with what I would call more alternative education

sources. So kind of getting a better

understanding of, you know, human psychology, probably

getting a better understanding of AI, probably getting more

time and focus on communications both verbally and non verbally.

I think those things are going to be really, really important,

especially in a, you know, in an age where you can kind of belly

up to a computer and there's a lot of questions that you can

now ask things like ChatGPT Claude, and you can get some

unbelievable responses to. And so I think in in that sense,

if you're going to go when you're going to go, it's

important to make sure you're supplementing maybe a

traditional education with other sources.

It's also really important to kind of, again, if there's

speakers coming go, if there's internship opportunities, take

them those extra add-ons around things that you can create

yourself, things that are brought to you through your

university that you can be a part of, and then things that

you seek outside of the university through kind of

internship programs. That combination is what will

make that a very productive 4 years.

I think for somebody who's maybe just, you know, kind of

struggling to get that university fit or there's going

to be a lot of debt associated with the university experience.

I probably would encourage to give some greater thought to how

they go about it. And I'm not suggesting that they

just bypass it all together, but maybe be more creative.

There's a lot of, you know, great colleges out there that

aren't super expensive. There's a lot of things that you

can supplement with online classes and some are they're

very low cost to speed up the process to go from starting to

graduation without kind of racking up a large amounts of

debt, kind of setting you back before you can get started.

And then for somebody who it's just not a pure option for, I

would just really be thoughtful about what it is that they're

going to go for. So if you're going from high

school directly in the workforce, I do think kind of

really preparing yourself there's so there's honestly

never been an easier time to self educate through alternative

education programs. And so really being thoughtful

about that, whether it's you're going to go into welding.

I mean, there you don't have to wait 15 years to be, you know,

skilled at welding. There's things that you can do

to supplement your knowledge base if you want to go to, to

work in an office setting, There's things that you can do

from an AI perspective to really, you know, increase your

skills or YouTube videos or podcasts like this one to really

kind of increase your, your work working knowledge.

And then if you wanted to start your own business in any one of

these stretches, I would just say it's never been easier to

start a business, but it's probably been it's getting, it's

going to be getting tougher and tougher to succeed.

And I do think kind of one of the cores around this, whether

you're going to go from high school straight in the workforce

or if you're going to go from high school into a traditional

for university, is making sure you're building the

accountability to outcomes in yourself.

And again, that's that's just one thing that I think that kind

of universal kind of three pronged view of of how to view

university life or or directly going to workforce all

underpinned with accountability to outcomes is, is guidance

said, I would probably say would be helpful to a lot of people

today. Oh, there's a lot of wisdom

there. And I really appreciate what you

were saying about the supplementing that education.

That's something we've not really discussed here on the

show. But, you know, I'm sure we all

know those people that are highly educated and very smart

but don't function very well. It's not effective education

because they don't know how to apply it.

And I think some of those soft skills, you're talking about

getting out into the world, interfacing with people,

developing those soft skills, going to seminars and talks and

getting to see different perspectives.

That's what's really going to make that education applicable

and make the difference between somebody that knows a lot and

somebody that's really successful.

So I appreciate that viewpoint. I think there's a lot of wisdom

there. Well, no and, and thank you for

the commentary. I agree.

And it's just one of these things over you think about a

traditional four year program and where technology is today

and where it's going to be 4 years from now, it's really

almost hard to say, but we can. One thing we do know for certain

is AI is the worst it's ever going to be right now.

And so the changes that are going to come are going to

continue to be fairly prolific, but things that won't change

are, you know, personal experience, the ability to

connect with somebody, your presence in front of somebody

else, specific knowledge that you have in terms of practical

application, you know, tangible skills.

Like you had mentioned, you had a very successful build, the

sale of a roofing company, you know, being a good roofer isn't

going to be replaced anytime soon.

So there are things that you can supplement your knowledge with

that I think will be really important to kind of mirror you

up with a traditional, even a non traditional education kind

of program post high school. Wonderful.

Well, let's transition a little bit.

You got your four year degree, started working in finance.

Can you walk us through maybe early career and up to a running

your own business? Sure.

So I got finished with college and went to went to work.

I spent kind of the 1st 15 years of my career working for three

different companies with kind of progressive increases in

responsibility. So I started my career with kind

of fixed income institutional sales to banks and insurance

companies and then I ran parts of companies that did that and

then ultimately was operating a division of a publicly traded

company. And that last role I was in for

about 7 years. That's a role that brought me

from Chicago to Central TX back in 2007.

And it was a great role. I really enjoyed it.

It was a company that had gone from 10 million in revenue back

in the late 90s to over 2 billion in revenue kind of

shortly after I had joined. And so it was a really exciting

journey. It was I learned a lot during

that seven years. It was something that kind of

left an imprint on me. And I think if I look back at

that first kind of 15 years of my career, the first three

companies I work for, I mean, one went from 14 million to 350

million revenue, it went public. The next one went from about 2

million in revenue to about 125 million in revenue.

And the last one went from about 10 million in revenue to about

2.1 billion. And you know, kind of at the

time when you're in the thick of it, I didn't totally appreciate,

you know, what those CE OS had done and what those management

teams had done and what I was doing to help create those

unique outcomes. And taking a step back all these

years later, I really appreciate those experiences and learned a

lot from what those companies did to achieve massive growth

over fairly short periods of time.

And it was, there were neat experiences to be a part of, but

with each one, I was able to kind of get successive layers of

management and responsibility. And then ultimately, when the

last company I was working for sold in 2013, about 10 months

later, I decided to do something different with my life, but

wanted to stay in Central Texas. And so that kind of ultimately

led me to joining Westlake Securities.

But those first 15 years were, were pretty impactful.

And I almost feel like in some ways, every year that's gone by,

they've been almost a greater impact on what I do today.

Yeah, that's, that's quite the impressive pedigree there.

And like you mentioned, that's to be in one company that blows

up on that scale would be quite an experience.

To have done it 3 or 4 times, that's quite an education in

itself. It, it is.

And one thing I share in a lot of my talks especially so I give

these talks kind of internationally to CEO groups

like WPOYPO, Vista, Geo, etcetera.

The alternative work. The the one thing I share in

those talks is you can have and you should want to have big

plans and those things can be achieved through big planning.

I would say if I learn anything from those first 15 years, it

was, you know, if you want to do something highly impactful with

your organization, with your career, with a company, it's

possible. I don't, I mean, I was working

around a lot of very smart people.

I would say very capable people, also very driven people.

But I would say the one kind of consistent through there was,

you know, they had big plans and they were willing to go through

big planning and also to take massive action on execution.

I mean it. You know, you can think big and

you can kind of plan, but you ultimately have to execute very

well. But those three things are just,

you know, fundamental ingredients I think to achieving

something like that. And it was very consistent

throughout all three companies. But other than that, I wouldn't

say that those organizations had like ultimately totally unique

angles on things. It's just they really did.

They walk the walk and talk the talk everyday, but their path

that they were on was, you know, fairly ambitious for sure.

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So for a young business owner, a small business owner, I'm

assuming probably the earlier the better, but at what point in

time do you start setting those big ambitious goals?

And, you know, I think a lot of especially blue collar business

owners, they they get into a trade, they're good at it.

They get frustrated with their job or maybe get get laid off,

see a better way to do something and they kind of start on their

own. And it's more of this transition

from practitioner to business owner.

At what point in time do they really need to get serious about

setting some goals and setting a plan of how do we get from or

where are we going and how do we get from here to there?

Yeah, so. Great question.

And we work with a lot of companies that I would say do

real things, right. So concrete, roofing,

electrical, I mean all those sorts of businesses are the

kinds of companies that we work with food manufacturing.

And so I would say there tends to be a crossover to where, like

you mentioned, you go from an individual kind of practitioner

or professional to having a business and that sometimes

occurs, You know, it looks like something where you know,

there's a few 100,000 of profit, you're starting to have multiple

employees. You've kind of gotten beyond

just yourself, one other person in a truck to you're really

having the crux of, you know, what's starting to look like a

business, maybe a physical presence, a website, etcetera.

And once that starts to occur, we usually kind of encourage

people to get to a certain level of success where in one way it's

feeling very easy and another way it's feeling very difficult.

And when you've hit that moment and it's a little different for

everybody, it's starting. It starts to be the time to

think about bigger pictures and planning.

And so the easy part tends to be like the business in and of

itself. So there was probably a part

where a lot of people that we've worked with, whether it was

roofing, electric, food, manufacturing, the actual kind

of product part, you know, pretty easy.

I mean, they get it. They understand how to put a

single on, they understand how to connect wires, they

understand how to make a tortilla.

But the business starts to become more complex.

And the reason tends to be for that is they're working maybe

too much in their business and not on their business.

And when that crossover starts to come about, that's really the

pivotal point for a lot of people to start engaging with

maybe the book I've got coming up called Intentional Growth to

start thinking about architecting what's next.

And there's different kind of life cycles and organization

where this concept I want to talk about makes sense.

But this is one another one kind of tends to be for larger

businesses that are maybe trying to go from, you know, a million

or two a profit to 3 to 5 million a profit and then from

10 to 25 and 25 to 50. So those are different kind of

pivotal points where I think something like intentional

growth can be really helpful. But one of the first concepts we

talk about in the book is this concept of reverse engineering

what you want to have happen. And we talk about it in two

different ways. One is time and one is financial

outcome. And so it could be that the IT

could be that the the business really should have a view

towards a three to seven-year time time window.

That's going to be a time window that we think is measurable from

the perspective of yeah, anything kind of less than three

years is difficult to kind of plan for.

Anything more than 7 starts to feel like, well, just kind of

too far out there. So 3 to 3, seven years, pretty

good. 5 being a a peg in the ground and then kind of picking

a financial outcome that would be impactful to the business.

So let's say you've got a business, you're getting

started, you're a million of revenue and you start to say,

hey, over the next kind of five years, I'd really like to take

the business from a million of revenue to 5 million of revenue.

That would be an ambitious kind of financial goal that you'd

set. And then what we start to do is

plan back all the things that have to happen over the next

five years for the business to get to 1 to 5 or from 5:00 to 10

or from 10 to 30, etcetera. And you can kind of keep going

that way. But that reverse engineering

course is really pivotal to setting both the timeline

expectation and a financial outcome that we can really start

planning from. And lastly on this topic, I'll

say that the biggest mistake people tend to make is either

not planning or planning in small increments.

You know, a lot of times we sound talk about something like

a maybe even a budgeting process.

They're really just kind of looking kind of what's out ahead

of them in terms of revenue or what's out ahead of them in

terms of maybe bring out another hire.

But what they're not doing is thinking about planning a budget

that's going to keep them on track with a five year goal or

ambition, and then working back through what would the business

have to become in order to hit that.

I can relate to all of that. I think you're kind of

describing all of the things I did wrong when I was in that

state. So you you brought us up in your

story through kind of working in in finance and the company you

were working for sold which was kind of the the next pivot

point, the next point in your career.

You mentioned from there you went to work for Wesley.

Can you tell us a little bit about that?

Yeah. So really at that point in time,

I knew I wanted to stay in Central Texas.

I had a friend who had founded Westlake Securities back in

2003. And so he said, well, hey,

you've been working with these large companies, helping them

acquire and integrate small, smaller businesses.

Why don't you come to Westlake and help us organize some

thoughts around helping our client companies raise capital

and and go through merger acquisition processes.

And so I originally joined Westlake as a managing director

in 2014 and then over time became a the CEO in about 2018

time period. And then I acquired the company

in 2019, but the company dated back to O3.

So we've been around for about 2324 years, but then I acquired

in 2019 have been, you know leading it as both owner and

operator since then. But it was a really fun journey

for me. There was an early transaction

where I had joined in 2014 kind of not totally knowing what to

expect. I was not a career, a career

kind of investment banker per SE.

I mean investments, finance, leadership, capital, M&A,

integration, operations, yes, all that.

But was a little bit of a career shift for me, not a career

change, but a career shift. And so when I came in and that

first transaction went through, kind of the rest was history.

It was a $52 million recapitalization of a restaurant

group. And after that, enjoy the

business everyday sense. I mean, I'm kind of one of those

people that like Warren Buffett says he skips into the office

every day. And for me, I really appreciate

and enjoy what we do every day. And in several different senses.

I love kind of giving back to companies, creating opportunity

for employees. It's been it's been a lot of fun

and fun journey. That's great.

So you got to go, got to go shopping in the beginning of

your career for smaller businesses for your employer to

buy and, and finally wound up buying one yourself and stepping

into that role. I'm sure that was an exciting

time, but also a little bit of a fearful time stepping into that

much liability, you know, kind of being the guy at the top.

Can you tell us a little bit about the thought process there,

some of the excitement, some of the fears?

Yeah. So it was interesting timing.

So that occurred I think around September, August of 2019.

And then you think about what happened just a few short months

later of March of 2020, right. So I would say in the beginning,

I was just so busy with all my ideas and thoughts that and and

excitement for what was next that I was just kind of busy

kind of in the in the trenches sort of speak for a few months.

But I will say shortly after, in April 2020, that's kind of when

it hit me in the sense of, oh golly, you know, sitting,

sitting there kind of 30 days into a giant question mark over,

you know, what was really going to happen and where things were

going to go. That was kind of one of those

really deeper soul searching moments.

I think for me it was kind of like around April 10th.

I was like, so now I understand all this stuff about, you know,

risk of being a business owner and what it really means and how

you may have to put back, you know, into your business before

you you get things out of it, etcetera.

So that was kind of definitely one of the more of those gut

check moments, although I would say it was pretty short lived.

You know, it was highly committed to what we were doing,

highly passionate about it. We really kind of doubled down

on activity. I would say one of the things

that kind of came out of that, you know, very brief moment of

maybe questioning life a little bit was throwing myself back

into, you know, creating value for others.

So we shortly after, around that time period, we were just

flooded with inbound inquiries from college folks who had their

internships canceled. And so one of the things that we

said, hey, we're going to, we're going to stay busy.

We're going to give back, we're going to be active.

We started a remote internship program and since 2020, we've

had five or 600 folks go through it from 5 different continents

and it's really been kind of an impactful give back for us.

So even in the kind of that brief kind of dark grey moment

sort of speak, I'm not going to call it black moment, but dark

grey moment, we tended to kind of find something that, you

know, kept us busy, kept us giving back and kept our name in

front of of the industry sort of speak.

So what was the most difficult step in that process of taking

over Westlake and and going from employee to owner and and being

the guy at the top, the guy in charge?

So I think the most difficult step was really just around

prioritization. I think whenever you step into a

entrepreneurial setting, there's so many things that you can

actually do with a company that it almost can be overwhelming

and can be confusing in the sense of what are the real

priorities. And so for me, that was

definitely a moment where I had to think through what I really

wanted the company to become and then how to, again, just using

this reverse engineering. I think one of the benefits, you

know, I had is I've been using this reverse engineering

strategy for years. And so I applied those tactics

to myself. We apply it still to this day in

terms of thinking through kind of what do I really want to see

happen and then what are the most kind of important elements

that really need to come out of that.

And so I didn't have a brief moment where it was always

overwhelmed with, you know, we can do the website, we could

raise money ourselves, we could go look for acquisitions, we

could hire people. There's all these different

levers of of growth started kind of flooding into myself and I

had to take a deep breath and say, OK, if we do them all, I'm

going to be fatigued, Our organization's going to be

fatigued and we're start failing on multiple levels.

And So what we did was really take a step back and prioritize.

We, we knew we wanted to build a brand.

And so that was something that we really doubled down and

reinvested in, in terms of building a brand and building a

real, you know, recognizable face to the company sort of

speak. We knew certain things about we

want to have a, a business that wasn't just about selling

companies, but also about helping companies grow.

And so today our business is kind of equally split between

those that are seeking growth and seeking liquidity.

And so a lot of the things that we are today kind of these years

later, seven years later, those little seeds and kernels were

started to form all the way back to 2019.

But I would say I, you know, I had my own moment of, of just

almost being overwhelmed by all the different directions you can

go in and meaning to kind of step back and, and that own kind

of reverse engineering path was actually helpful to me at that

time too. Yeah, you get a practice what

you preach and put it to work and it it appears like that

worked well for you. Yeah, I, I, I would say so.

You know a lot of the things that we set out to accomplish

over the first five years of the company, I'd say we did an

excellent job at. We have I reset our next five

year plan. Can I going forward about a year

ago where we've got even more ambition in terms of growth.

And you know, I think it's it's been exciting for our team.

We've done some things that are pretty cool late.

And so we've, you know, won an industry award in Houston for

deal of the year. Next book coming out.

We the speaking is kind of really mushroomed from where it

was three years ago compared to a year ago compared to right

now. And so just a lot of things that

have been organizationally exciting to to see.

And I think, you know, one of the reasons why that reverse

engineering is so important is, is and where I've seen it kind

of first hand is just kind of cultural excitement for what it

is you're doing. And it really doesn't matter if

again, you've got a plumbing business, roofing business,

electrical, food manufacturing, if you're making kind of

imprinted T-shirts, whatever it is that you're doing, retail

online, etcetera. Doesn't really, if you've got

people around, you've got employees, you know, having a

kind of a reverse engineered plan and then celebrating some

of the wins along the way, you'll see what ends up

happening is that your, your organizational culture will just

continue to blossom and you'll start to develop a culture of

winning. And I think that's one thing

that our team is really kind of excited about is like we, I

think we all like to win. We like to close transactions,

we like to bring on new clients, we like to set new milestones.

And so it's kind of organizationally fun for us when

we achieve, you know, one of those elements.

And again, I'll go back to 2019 early days.

That just seems so far off at that point.

But you know, if you map that course and you're just

consistent, it's just these things kind of tend to flywheel

and it's hard to describe, but but victory brings kind of more

victory in a lot of senses and just like a sports team, so to

speak. Yeah, people like to be winners.

They like to be on the winning team.

The the more you win, the more support you get, the more you

win, the more buy in you get. And it definitely has a a kind

of an immeasurable momentum. I think so.

Well that, yeah, that makes a great Segway.

We talked about kind of your early career and how you were

kind of uniquely trained to do what you're doing now with the

experiences you have buying and selling businesses for other

businesses and being part of some pretty phenomenal growth.

And then you got the opportunity to put that into practice

yourself as CEO with you at the helm buying a bit at buying and

growing a business. So now my understanding is that

is kind of exactly what you do for your clients.

Can you help us understand a little better?

I know there's a lot of financial jargon, liquidity and

exits and mergers and acquisitions, M&A, you know,

enterprise value, but kind of for the the layman in plain

terms, what are the services that you provide?

What do you do for your clients? So great question.

We do two things at its essence, but we have about half of our

clients are folks who are seeking what we call intentional

growth. So they're seeking to grow their

business over a measured period of time using a predictable

framework to do it. So that's about half of what we

do. And then the other half of what

we do is people that are, you know, ultimately seeking

intentional liquidity and that can come in either a smaller

chunk or minority deal or it can come from a larger kind of

either low majority all the way through a full full exit

scenario. And so that really makes up our

clients is again people that are interested in growth and people

that are interested in liquidity.

For people that are interested in growth, we really utilize the

framework from intentional growth to help them work through

a journey of getting from where they are to where they want to

be using kind of that three to seven-year time period and

achieving a financial outcome that would be motivational to

both them and their key stakeholders.

And so we do that with a combination of, you know,

advisory, consulting, potentially capital raising,

potentially buying other companies, growing their

business organically, maybe greenfielding new locations,

products or services. But we can't really help them

organize their thoughts around how they can best achieve a

great outcome, maybe an outcome that's far in excess of the

current trajectory of their their business.

So that's the growth side. The liquidity side really has to

do with when people are starting to think about, you know, what,

what, what, what does their business really start to

translate to them personally. And that may mean that

somebody's kind of mid career. And so rather than selling the

entirety of their business, they may want to look at selling a

third of their business to take some chips off the table or to

get some capital out of their business personally, but then

also to have more capital to reinvest in the business to

grow. And so sometimes a transaction

like that could be, you know, selling again, a third of their

business and taking half the capital for personal means and

then the other half to to go on balance sheet of the company, or

it may mean all the way through a full exit.

And when somebody's ready for a full exit, we really kind of

work with them on the proper preparation to get to a premium

valuation. And that's really where, you

know, we tend to shine as helping companies better prepare

for a transaction that they're going to be truly proud of.

And that's about half our, you know, half our practice.

And we've worked with a number of, we've been fortunate to work

with a number of really amazing companies over time that I've

had sensational, sensational kind of exits or majority

transactions. And so that part's really fun

for us too. So the whole life cycle for us

has really been fun, but we feel like each business has kind of a

unique kind of journey. And so generally speaking, our

growth journey is going to start maybe about halfway through

somebody's kind of entrepreneurial journey,

potentially just on average. And then our kind of intentional

liquidity is going to start maybe 3/4 or closer to the end

of somebody's kind of a career journey.

So I kind of call like we're back half of the career

services. So when Sony's got to build a

platform that's ready to scale, we can help them do it.

And when somebody's ready to take a scale platform and think

about what's next, we can do it. Oh, man, that's perfect.

Well, I know I want to spend a considerable amount of time here

talking about kind of preparing for exits and that kind of

thing. I think something that's

something that's really hot right now in the industries that

our relationship is probably made-up of.

But I want to roll back one more question kind of about the the

coaching or growth side of your business.

You know, you said you typically kind of take people in on the

the second-half of their entrepreneurial journey.

Your services are probably more on that that growth and

development, not getting the business initially started or

off the ground. What would be some key signs for

a business owner that they're ready for that next step that

they kind of have their business established, they're ready to

start focusing on growth or or maybe they need the type of

services that you offer? Sure.

So we're for us, we're typically starting to see kind of a

combination of people, process and system in place that you can

really say, hey, there's a, there's a real business there.

And so generally we're going to start to see some employees.

Generally, we're going to start to see multiple customers, we're

going to start to see multiple stakeholders.

We're going to start to see, you know, the beginnings of, you

know, an accounting system. We're going to see some of the

beginnings of, you know, employee processes, maybe a

little bit on training, things of that nature, so a little bit

of financial scale. So we're really going to start

to see that the business has achieved a certain level of

performance to where its existence isn't in total

question, right. You've you've already got, you

know, some things kind of working for you where you've got

people, process systems in place.

From there we we tend to scale up in terms of organizations.

That's about our starting place. But a lot of companies that

we're working with are really trying to get from that place to

being a plate at a place where they would be able to have an

institutional investor come in. And that typically starts to

move into 7 figures of profit. And then a lot of the times the

companies that we're working with are also companies that are

much deeper into their life cycle to where they're trying to

get from, you know, 3,000,000 a profit to 7 million or 7 million

to 12 million, 12 million to 25. And so we work with companies

kind of throughout that spectrum.

But for us in terms of working with an organization, we really

need to start to see some of the semblances of like a business

that's that's really trying to to get the scale.

Although I'll say, you know, the book and some of our online

materials and things that we have at our website will help

companies, you know, from day one, you know, in terms of

thinking through some of these topics.

But in terms of like where we can be helpful to organization

and start to interact with them one-on-one, we're starting to

see again some signs up like that, that the business kind of

really starting to look like a business as opposed to a sole,

sole, sole practitioner. And I would bet that, you know,

there's a fee associated with the type of assistance you guys

provide. And so there probably has to be

a level of success that kind of justifies that fee where you

guys are going to be able to provide the benefits that

outweigh that fee. Is there kind of a baseline

there that you would recommend when it really makes sense to

start paying for a coach, paying for help and growing your

business rather than, you know, grabbing?

I guess I don't have a better word than cheaper but more do it

yourself resources like reading a book or listening to podcast,

something that's more readily available.

Yeah, I think that's a great point.

And, and you know, when you're early in a business, the

competition for resources and your personal compensation is

pretty real. Yeah, most business start-ups

cash is tight. They don't have a lot of money

to spread around so. Yeah, cash is tight.

When cash is tight, when your resources and your compensation

are in competition for each other, you really have to take

advantage of all the things that are available like a podcast,

books, etcetera, things that are high value, low cost.

So then what happens is you get to a place to where the

businesses scale and again, you've got these people

processing systems to where all of a sudden you start to see a

little bit of a diminishing return for low cost elements or

value in it. Right.

There's always like I buy books. I mean, I'm the first one to go

to half price books and I'll buy a $7.00 book.

I'll, I'll go to, you know, Amazon or Barnes and Noble and

I'll get a $30 hardcover brand new.

And, you know, I'm the first one that will buy, you know, a book

and kind of use it to help grow on something that is really a

topic of interest to me at that time.

But at some point, there tends to be a little bit of

diminishing returns to that in the sense of at some point you

need, you know, a lot of entrepreneurial journeys,

someone who's been there and done that, who can help shortcut

getting from here to there. And and so, you know, a lot of

times kind of lower cost content is just not going to ultimately

get you there, may get you started in the thought process,

but it's not going to get you all the way there.

And so that tends to be where organizations like ours can kind

of start to play a role. I would also say CEO peer groups

can also play a role in that. There's some great, you know,

organizations out there that aren't terribly expensive, but

can give you a little bit of a peer network to start to grow.

But those sorts of things when all your financial resources

start to grow and you start to kind of place higher and higher

value on your time and you want to find short, shorter paths to

success, that's really where like CEO peer groups, firms like

ours, consultants, etcetera, coaches can really come into

play to help you, you know, short circuit kind of that that

growth path. And I know clearly with your

guys's background, your personal background experience, the

success you guys have seen, it appears you guys provide extreme

value, real value. But we we live in a time where

it seems like almost everyone that gets laid off or downsized

is all of a sudden a coach or a consultant, maybe without the

background and the experience. What advice would you have for

someone that is at that point where they need a little bit

more specific advice? They need some coaching, they

need that shortcut. How do they find in that a

coach, a consultant, a firm like yours that's going to provide

real value, rather than somebody that just decided being a coach

was better than finding a new job?

Yeah. So I that's a great point.

And I do think you have to be a little bit of careful where you

spend your time and money and in particular your time, especially

almost at any stage of business time's our greatest asset and

our our most expensive resource. So where I generally tend to

coach folks is you want to have kind of mentors, if you will, or

advisors, however you want to phrase it.

Somebody who's on your team kind of at three different levels and

each different level is going to be weighted towards where you're

at in your life cycle. So for three levels are theory,

next is witness, and last is the practitioner.

And so theory is somebody who you can learn from, who actually

has studied the topic, they have put books out on it, they may

have classes on it, but they they're teaching in theory,

meaning they've studied it. They may have even had some

relative experiences, but they've never actually probably

done it themselves. And this is going to be the type

of mentorship that's the access. And it's probably going to be

the least expensive, right? But it can be very helpful.

And, and that's available in different kind of formats all

the way from a traditional university all the way through

non traditional education. Then you have the witness.

And the witness is somebody who really has been close to

somebody who's done it. And so that person that maybe

got laid off, that started their own practice, who is CFO for an

organization or somebody who's an operating executive or

partner inside of an organization.

Maybe they weren't like the guy or girl, but they, they weren't,

you know, they're not far from it.

They kind of witnessed what happened.

That's another form of mentor advisor you can get and that's

going to probably ink up, you know, eke up a little bit and

and, you know, cost, but probably somebody who's a little

bit closer to what it takes. And then the last is the actual

practitioner of the person that's been there and done it.

And I really encourage people to anytime you're going to spend

time and money to think about where they fit in that spectrum

and to make sure you're allocating your time and

financial resources appropriately.

And so one of the biggest mistakes we tend to see people

make is to put too much time and money into mentors or advisors

that are theorists as opposed to, you know, actual

practitioners. You got to weight each one of

those things with time and money appropriately.

That's a good way to break that down.

I like that. And yeah, I can, I can relate to

those. I think I've benefited from all

three types of advisors, but I've never heard it broken down

like that. I'll.

Start for all this stuff, right? I love it, but I am going to

have a sharp lens for is this something that maybe I can

listen to on my own time when I'm working out or driving,

etcetera and you know, using that fashion or is it something

I'm going to actually take? I'm going to take an hour out of

my day to do something kind of an 8 to 5 realm.

It's got to be, you know, it, it's got to be somebody whom I

find impressive. You know, outside of those

hours, I'll kind of wait different ways, but that's kind

of how I guard my time and you know, financial wallet, if you

will. And that stuff is, if it's going

to enter my 9:00 to 5:00 or my 8:00 to 5:00, it's got to be,

you know, it's got to be somebody who's been someplace

and done something pretty important for me to dedicate an

hour during the day. Outside of that, I'm a little

bit more, you know, I'll take a little bit of risk in terms of

time, but you know, during that window in particular, I'm, I'm,

you know, it's, it's got to be important.

You got to have that value add and I, I love that while you're

driving, working out the podcast, the audiobooks, things

like that are, are awesome. Very little risk, very little

cost, but to give up time that could be spent growing your

business, making money that that's valuable and they better

give you some value there. Yeah, exactly.

I mean, I'll, I'll go to the education buffet, you know,

before and after work. But during the the main hours,

I, I, you know, I want a particular meal served a certain

way if I'm going to give up an hour.

That's meat and potatoes time, not salad time.

Oh man. Yeah that that steak medium and

frites, although they're French fries, I'm not sure why they

call them frites, but yeah that's that's well yeah, that's

that's the only meal I want to eat between 95 when it comes to

education so to. Speak.

Oh yeah, for sure. Well, I wanted to move into the

M&A side of things and talk about that half of your business

for the entrepreneur, the business owner that's out there

that is either ready to start looking at an exit or is just

trying to plan ahead that three to seven years ahead.

They know they're kind of getting ready for that entering

that market. What sort of things can they do

to best be preparing to to have a solid valuation and have a

business that is viable? So again, great question and I'm

going to give a couple different answers here.

So one time I was asked what time frame should I think about

if I want full liquidity for my business, both financially and

time wise. And I wanted to be thoughtful

and achieve a premium valuation. How should I think about that

timeline? And I took a deep breath, eight

years and I think the, the, the guy that asked you the question,

I was fainted. But, but it really is a long

journey in the sense of if you want full liquidity from your

business from a time and financial perspective and you

want to do it in a premium way. And there's all kinds of answers

that I'll I'll get to here that shorten this timeline.

But I want to give you the premium answer first.

So let's break that down. Eight years, you know, typically

one year for internal prep. So that's team, right?

Do we have the right people on the bus process, we have the

right systems in place, etcetera.

We want to make sure that we've got some of those things

buttoned up long before we ever go into a process.

So we got history in terms of them working.

Secondly, once we get through that first year of internal

prep, now we're thinking about external prep and transaction.

That's going to be finding an advisor, right, to help market

the business, help you get it sold.

That's going to be finding AM and a attorney who really

focuses on MNA work. And so again, I can share a

little bit about that, but it's really important to have

advisors that focus only on MNA and the type of MNA that you're

looking at doing. Tax, when it comes to

transactions tax is much different than just general

annual tax. Even for business owners, it can

be quite a bit different. So you want to assemble a team,

you want to go to market, you're actually going to transact.

So once you transact, now we're two years into this process for

most CE OS, they're going to end up kind of transitioning over a

two to three-year period, right? So either there's going to be an

internal candidate or an external candidate.

It's going to take some time to bring that person up to make

sure that they're going to succeed.

And then ultimately you start to see the first component of kind

of liquidity from time is maybe two to three years post

transaction. And then you're, you're going to

see so it when you transacted most for most people, they're

going to have some sort of contingent consideration largely

in the form of ruled equity. And so when you transact again,

sorry, I'm going to go back a little bit here.

You're probably, you may be asked to leave 10 to 30% of

equity on the table. You got that CEO transition.

So you've transitioned your role.

So your time's starting to drop off, but you may still own 10 to

30% of the business and the next transaction maybe five years

after your first transaction. And so let's kind of backtrack

here. We've got a year of prep

internal. We've got our team and

transaction. We've got three years of CEO

transition and probably two more years of kind of ultimate growth

readiness and final transaction. And you Add all that up and

it's, it's eight years start to finish to get a premium

transaction done. And a lot of times people, they

end up there, but they don't realize they're going to.

And so we try to preach a little bit of message of awareness is

start to think about that earlier so that you're not, you

know, tied up in your business kind of time wise and

financially wise, longer than you may otherwise want to be.

And look, we, we do transactions where, you know, somebody comes

in, says, Hey, I'm ready to sell and I'd like to be, you know,

I'd like to conclude a transaction.

You know, we even have that conversation going on right now

where that somebody would like to conclude, conclude a

transaction before year end. But it just whenever we're

limited on preparations that's going to potentially have some

sort of impact on ultimate valuation and how a process

goes. And they're still likely going

to be several months or even years of kind of financial and

time tied up in the business even post transaction, even if

we start today transact at the end of the year or so.

But it does it guess in the in short, it does take time to, you

know, thoughtfully transact. And the number of transactions

where we see people close and the next day they're, you know,

doing something else is pretty low.

There usually is some sort of transition period from

transaction to transition. I would imagine, you know, every

transaction is a negotiation. There's probably a trade off

with those two things. Is there kind of a generic

relationship there between the the trade off of valuation for

you know a two or three-year time commitment or that that

roll over equity or is that pretty unique to each

transaction? You know, again, great question.

You came well prepared today. So you know it's probably not a

sharp, you know immediate answer or kind of go to.

What I would say though is generally helpful is when we're

running a process, if somebody's willing to roll a little bit

equity and to stay on through a reasonable transition period,

what that do, what that's doing is it's reducing risk to the

buyer. And anytime we're reducing risk

for somebody, they're probably willing to be a little bit more

competitive in their offer compared to if somebody is not

willing to roll or or they want to walk away from the company

within a month after the close. What that is doing is

positioning more risk in a transit transaction because the

buyer knows that the seller no longer has any financial

incentives for the business to continue to succeed.

And they're not really willing to put in any time to ensure the

continued success of the business.

And so that actually heightens risk and probably lowers the

ability for that buyer to be competitive with their offer.

And so, and a lot of times it's not really the scene in the

sense of, you know, the buyer won't share with you, hey, if

you're willing to roll and stick around, we're going to give you

more. And if you're not, we're going

to give you less. It really is just almost implied

in the valuations. And I would say we see it and if

we feel it, but it's looking at kind of just pointing to a raw

data point is pretty difficult. But if I were to, and again,

this is all kind of gut feel, there's not like a lot of heart

data given that this may live forever.

And I do want to caveat this. If we were to say the

difference, I mean it can be as much as 50% difference in

valuation from somebody willing to roll equity and really hard

charge and transition well to somebody who's kind of coming to

the table saying kind of I'm tired and I just want my money

and I'm going to be, you know, out after the close.

It can be as much as 50% intuitively I would say.

Wow, I, I would not have guessed that much.

As you and I discussed earlier, we just recently concluded an

exit of our business and we negotiated and entertained a

number of offers. A few structured both ways with

some pretty considerable rollover and time commitment and

some that we're kind of just a check and walk away and, and a

few that had a, a balance somewhere in the middle and we

didn't see that quite that big of a split.

That's a a number that surprises me a little bit, but for, for

the owner that is in that, you know, maybe they've waited too

long, they're just done, they're over it, they're ready to get

out. Is there any hope to have a

successful transaction if they're unwilling to leave that

liquidity on the table or or that rollover equity or if

they're unwilling to give that time commitment?

Yes, there are things that can be done and well go back to one

kind of common you said with disparity.

So I would say that was kind of the widest range.

You know they can be narrower. So I think that's and every

process is unique. It also depends on scale and

buyer etcetera. And and so it also if you're

involving strategics, I mean sometimes a strategic in

particular. So if you're selling your

company into a company that's already doing what you do, there

may be kind of a reduced emphasis on the importance of

the owner, which can be helpful to somebody who's, you know,

wanting to kind of transition more quickly.

So again, those are some caveats, but it can be as wide

as 50%, it can be as narrow as you know, 0 or 10% to just

depends kind of across the board there.

So and then switching gears into your question, I think there are

a lot of things people can do. One of the things that we start,

all of our projects start off with a QVG assessment that's a

Westlake trademarked quality value growth or QVG assessment

where we really look at certain gaps inside of the business from

an investor's or a buyer's lens. And what we're trying to do kind

of in those early days when we're working with a company is

to take the buyer's lens or investors lens and really kind

of identify what they're going to see and to try to shore up

those gaps as quickly as possible.

And so one of the things that we could do if you're kind of been

at the business, we again, I'll take a case study.

We had somebody who is in those exact shoes.

They were at the in the business for a long time and kind of

getting tired, maybe had a little bit of health issues

starting to go on. And what we ended up kind of

doing is starting conversations with the number two person in

their company and very early in the process about potentially

kind of rising up to be president and then ultimately

CEO in the organization. And so by the time we got to

market, we actually had an identified leader of the

business who is a known quantity.

I think they had been there 17 or 18 years and so they had

built a lot of historical operating knowledge.

They had relationships with all the customers, employees

etcetera. They were kind of a natural go

to. And so we really were able to

tell a reduced risk story that even though our founder may be

going away shortly after the close, we actually had this next

person in line who is the natural leader that sort of

speak. And so there's things we can do

throughout the business to communicate reduced risks that.

You know, ideally we'd have more time, but if we don't, there's

still things that can be done to present a better story to a

potential buyer. That's great.

And my specific example, the one firm we were looking at that was

kind of their business model, they actually they would not

allow the owner to stay on. They, they ran an in house CEO

training organization. And so when they bought a

business, they had ACEO kind of waiting in the wings ready to

go. And the old owner stepped out,

the new owner came in and took over and and that was kind of

their business model. So I thought that was a unique

business model. That's not something you see all

the time, is it? No, you know, but again, the,

the wonderful thing about this environment today is the

universe for buyers has expanded so much that I would say 10

years ago rules of thumb were a little bit more applicable and

you could speak to maybe, you know, 85% instances.

I would say today a lot of times when we're speaking, we're kind

of, if we're giving a general generality, it's probably only

65%, you know, applicable. There's just another third of

the industry that's doing all sorts of different things that

maybe they weren't doing 10 years ago.

And so it's kind of an exciting time to be a seller because

there are a little lot of different flavors in the ice

cream shop of M&A sort of speak. It's not just vanilla and

chopping anymore. There's a, you know, pistachio

and coffee, nutmeg and all sorts of different flavors of ice

cream in the M&A ice cream shop sort of speak.

That's a great analogy and that's exactly what we found.

We negotiated offers with I think 5 different individuals or

firms and every one of them was extremely unique in the, the

structure of the deal, the payout, the time commitment,

rolled equity, you know, they were, they were all very unique.

It was eye opening to me that it wasn't just a a cut and clear

process or cut and clear formula, but it was like

everybody's just making it up as they went.

So I've heard the statistic that 75% of people that try to sell

their business are unsuccessful in that endeavor.

Could you speak to that statistic a little bit that that

sounds like an alarming statistic.

Is it something that's maybe misunderstood or what are the

pieces that really make the difference there?

Yeah, so I think that's probably right.

And I think couple things that I would recommend to increase

those probabilities #1 is having a strong intermediary on your

side can be hugely helpful. And so I do think that's

something that, you know, we generally advocate for is, is

having an intermediary with you, but making sure that they're

qualified. There's a lot of difference

between, you know, the, the upper and lower range of the,

the investment banking and then you go below that and you've got

business brokers, but there's a lot of difference between, you

know, firm to firm and individual to individual.

And so I would do a lot of betting before I selected

someone, but I would probably encourage you to have somebody

because what it will allow you to do is to have somebody who

you know, does transactions for a living on your side.

It's going to allow you to spend your time working on your

business as opposed to working on your business and your

transaction, even though at some point you'll also be working on

your transaction. But it can be a helpful kind of

time saver, a time leverage, if you will, those that that right

there in and of itself will increase your odds of getting a

transaction done. Going from there, though, what I

would say is, you know, being kind of thoughtful in terms of

preparation. Again, if you've selected

advisor that's giving you a prescriptive path to, you know,

being able to make it through a diligence process, follow it.

So one of the things that we like to, to encourage our

clients to do is to get some financial diligence done and out

of the way early on. Financial diligence is the

number one best contributor of all deals.

Meaning a person goes to market or a company goes to market,

their financials are not in line to go through a diligence

process and the buyer is just left with, you know, what do I

do with this? We, we, we can't get there.

And so the buyer will either walk away or they'll retrade the

seller, which oftentimes also leads to a bust.

And so I think two things if you get nothing out of this podcast

you can do to increase your odds is selecting a high quality

intermediary. OK?

Preferably if your business is doing over a million of profit,

you want somebody that has a securities license.

And there's all sorts of reasons for that.

But then #2 would be to make sure your, your organization,

your your company is, is diligence ready from a financial

perspective that's really, really important.

Again, that's going to that's going to increase your odds of

transacting immeasurably. That's some good advice there.

And I know we did have a an awesome broker kind of helping

us walk through it and we had a great M&A attorney on our side.

And that diligence process was still I, I had no idea that you

could go that deep into some of our records.

It was a eye opening experience for me and I think I would

willingly sign up for a number of prostate exams before I went

through that. Again, it was not a fun

experience. Yeah, it's like a it's like

having a procedure with no anesthesia at times.

Yeah, yeah. And at the time we were growing

and the reason we had caught the eye of some buyers was because

we were growing. So trying to keep running a

growing organization, trying to maintain growth and then also go

through that process. I was like working 3 full time

jobs at once. So it was not a fun experience

but. Well, and you were in such a,

you know, hot space roofing. There's just so much going on

there right now. It's and there has been for some

time. So it makes a ton of sense.

And you know the the other thing I would just say is like making

sure the business performance and the industry interest is

timed well. So again, kind of the internal,

external. So for instance, if your

business is growing well, that's going to be highly contributed

to getting a successful transaction done.

If your industry is very active in terms of M&A, that's going to

help. So conversely, if your business

is you know, underperforming or kind of sliding off and you can

kind of see it in the monthly numbers, just know that it's

going to be fairly difficult to transact or to transact that

sort of market multiple sort of speak.

And or if your industry is starting to see some declines in

interest kind of same thing. So you do, there are some things

that you can look at to say, you know, is this going to be a good

time or not? So if the business and industry

are going up, it's going to be a much better time than if the

business and industry are going down.

I mean, I know it sounds simple, but sometimes people like

overlook that or they think, you know, the business and industry

are going down and now's the time I'm going to sell and get a

premium multiple for their company.

And that that just, you know, really doesn't happen.

It's not probably realistic in a lot of instances.

Yeah, I think there's just a a lot of luck involved there of

kind of timing the the market, right, especially on the

industry side of things. You might be more in control of

the success of your business, but the the market activity and

your particular industry, there's just a lot of timing and

a little bit of luck involved on that side of things.

I know you, you and I were discussing previously that you

know, you mentioned roofing and kind of the the trades service

industry as a whole is extremely hot right now.

You mentioned maybe somewhat unprecedented the way that

industry is moving. What are you seeing kind of in

the market and how does that affect the M&A world right now?

So great question and I'll go back to, you know, the luck

commentary. I think, you know, that's

probably true in the bigger picture sense of like you're

lucky, we'll use your instance if that's OK you're an example.

So lucky to pick have picked roofing, but when it comes to

like specific industry activity, there's actually a lot of data

out there. And so one of the things I would

kind of encourage people to do is to, you know, find some good

data and just be aware of what's generally going on in their

industry. And you don't have to kind of

keep up with it monthly, but I do think like a check in every

quarter or six months to see what's going on with with

activity in your space is pretty important as a, you know,

founder and owner. Look, for a lot of us, we're

doing this entrepreneur entrepreneurial journey for a

number of reasons. But you know, financial outcome

is probably part of that, right? And so having a little bit of

wholesome on what's going on in your industry is important.

And there's several industries that are experiencing all time

20 year highs in terms of both activity and valuation.

So roofing, HVAC, anything with utility services, food

manufacturing, there's a number of industries and they're all

industries that are doing real things, but they're industries

that are seeing the real kind of renaissance in terms of

valuation and views of valuation.

The other one is, you know, asset management or wealth

management. That's another one that's seeing

kind of all time highs in terms of where valuations are.

And so for folks that own those sorts of companies, any ones I

mentioned and there's probably several others.

I mean, it really is kind of an interesting time to at least

understand what your company is worth and or potentially

consider, you know, how you might want to view the asset and

potential kind of turning that asset into liquid, liquid

capital. Because there are some cycles to

all this stuff. I mean, they in a lot of

instances evaluations don't just kind of keep going up.

They kind of cycle and then they kind of return to some sort of

mean and then cycle again and cycle again.

But those are some industries that are experiencing kind of 20

year all time highs. Yeah, I know that the data the

the roofing industry is very hot right now, but maybe even HVAC

is even far exceeding that. I'm talking to people and

hearing stories of you know, 12X13 X EBITDA exits.

As a someone that's maybe more on the investor side of thing

and looking at investments right now that just it, it seems

almost mind boggling to me to invest in something with that

much risk at that multiple. Could you help us understand why

that is? Why is that industry so hot

right now, and what justifies those multiples?

So there is some level of justification, although at

certain points in time I you know, tend to question a little

bit of the sanity of it, right. So it's it's hard not to to some

degree when in particular there's another industry I'm

thinking of right now, it's talking to a company that got an

unsolicited offer for 17 times EBITDA.

Now if you think about 17 times EBITDA and this is a different

industry than than HVAC, but it's another one that's kind of

peaking. You think about the number of

years after tax it would take to earn that purchase price back.

The individual would ask, you know, what should we do?

And I said, hey, you know, we always come from a position of

advising the way we'd want to be advised.

And so I'd love to run a process for you, but maybe we can just

help you get this, this exact unsolicited offer done.

I mean, at 17 times, you're really kind of taking enough

chips off the table to ensure family security, individual

security. You're probably kind of getting

pretty darn close to a peak multiple.

It's hard to kind of sit there and say you shouldn't just kind

of run at that. And so for HVAC, what's gone on

there is you've seen a number of kind of platforms that are

private equity owned. And as they've continued to

scale, their platforms are going up what we call the EBITDA

ladder in the sense of the platforms multiple kind of

continues to tick up. And so as the platforms multiple

continues to tick up, it allows them to pay more for companies

that they're acquiring into that platform.

And So what that means is if you've got a platform that you

think is worth 20 times EBITDA, if you're buying a company for

10 times EBITDA, it's kind of a no brainer, even if 10 times

seems expensive. And why is that?

So if my company is worth 20 times EBITDA, let's say my

platform HVAC company over here, I think it's worth 20 times

EBITDA. And I'm going to pay, I'm going

to buy somebody's company doing a million of EBITDA and I'm

going to pay them 10 times for it.

The moment I bring that million of EBITDA into my platform

company and it seasons a little bit, that million of EBITDA is

now worth $20 million. Yeah.

And so by doing a transaction for one million of EBITDA at 10X

and bringing that million of EBITDA into my platform company

that's worth 20 times EBITDA, I've actually made about $10

million as the owner of this larger organization at close.

And so that's kind of what we're seeing going on in the HVAC

spaces. You've got these large scale

platforms that have very large EBITDA multiples and they're

able to afford to pay more to bring in additional companies

into their platform through acquisition.

Gotcha. Yeah, I think that's what I was

seeing in roofing as well. Just, you know, I'm, I'm just a

lowly roofer here looking at what I see on the market, but

there's five or six, well really probably 3, three massive

national companies with two more kind of biting at their heels

that are competing over, you know, the, the largest spot in

the industry. And they're buying up, you know,

$100 million a year companies at a 12 or 13 X.

And so then you have these smaller companies or the private

equity that looks at that and goes, OK, well, if we go by five

$20 million companies at an 8X, now we've got $100 million

company we can sell at a 12X. And, and the next level of

investors down, the next level of private equity looks at that

and goes, OK, well, I can go buy 4 or $5,000,000 companies at a

6X and have a $20 million company to sell at an 8X.

And it, it just keeps laddering up like you were describing it.

Have you seen cycles like that? Have you seen that anomaly occur

previously in your career? How at some point in time that

has to come to an end? What does that look like?

So I definitely have seen this before and what I really refer

to this back to as the EBITDA ladder.

So let me kind of walk through that really quick and we'll talk

about how potentially this journey goes for these different

industries. So the EBITDA ladder basically

starts off at the bottom rung and the bottom rung is going to

be what we kind of call for, let's just say industries and

businesses that do real stuff. It's going to be two guys in a

truck, right, or two people in a truck.

And essentially that's going to be kind of a individual

practitioner or very small business.

And those tend to trade for maybe two to three times

profitability. And it's really even at that

point, it's not a total measure. It's really more of like seller

discretionary earnings or kind of profitability.

As you scale all the way up to the top of the ladder, you may

hit a publicly traded company with full share liquidity for

investors and that even a multiple maybe you know, 20

times, OK. And so you go from the bottom

rung of let's say 2 times to the top rung of 20 and everybody

else is slotting in the different rung along the way.

And so you might start to see, in this example, a business at 5

million of EBITDA is going to start to trade at 7 times and a

business at 25,000,000 of EBITDA may start to trade at 12 to 13

times. And then you may see something

even more scale at 15 times. And ultimately, you get to that

very large, maybe a brand that we'd even recognize kind of

trading at 20 times EBITDA, full liquidity on the New York Stock

Exchange. And so these organizations are

going along that journey of the EBITDA ladder.

And so where this kind of ends, if you will, will likely be with

several of these companies IP owing into the public markets so

that they ultimately achieve that top rung of the ladder.

And So what you've seen is kind of these platforms being pieced

together at four and five times EBITDA and then, you know, 8 to

10 times and then probably low teens.

And then ultimately those organizations are going to be

scaled to a point where they've got hundreds of millions of

EBITDA, if not a billion of EBITDA.

And then ultimately they'll IPO and probably trade it around 20

times and they'll continue acquiring.

And why is that? Because they're going to be

trading at 20 times, they're going to have full liquidity of

their shares and they're going to be able to pay maybe 8 to 12

times for companies that they buy.

And again, they're using that even a multiple arbitrage as a

way of increasing shareholder value.

OK, so this is not necessarily a cycle with a a dead end at the

end of the road it it may continue.

Well, so that's the good picture and there will be companies that

get to that. No doubt in my mind.

The tougher picture will be not everybody will get there and

unfortunately somebody will over leverage and under operate and

you'll see a flame out. And we've seen this in industry,

industry after industry time and time again.

Where is where somebody, I would call it over leverage and under

operate, meaning they borrowed too much money to build their

scale. And as they were building scale,

they were not putting in place the right people, systems and

process to keep everything growing in a uniform and healthy

way. And ultimately performance will

go down. Leverage is too high.

And you know, we'll see a flame out for sure.

And so I, I feel fully convinced we'll see a really wonderful

scenario or maybe multiple wonderful scenarios where you've

got these companies at IPO and create unique opportunities for

stakeholders along the way. And I feel pretty confident

we'll, we'll see, you know, an organization or two kind of

flame out and, and, you know, be some tougher stuff and have to

reorganize itself and it'll be some tougher times.

But those things are natural. It's part of the scaling

journey. And I will say though, overall,

it does create some really unique opportunities for

stakeholders across the board. It really does.

If you think about where valuations were for, you know,

roof electrical companies, you think about fence rental, you

think about a lot of these industries that have seen some

renaissance periods of, of valuation, you think about where

they were 10 years ago compared to today.

It's still, it's still pretty good times, you know, still,

still there's still been some benefits to this valuation

renaissance, if you will. Well, you just mentioned one of

my key questions I wanted to ask.

Is there kind of a, a rough generic valuation model that

people could apply to their businesses that transcends most

industries? I know, you know, as a business

owner, that's a huge question is what is my business worth?

What does exit look like and what, what does the future look

like as we plan for the next generation of retirement or that

kind of thing? Is there a rough generic model

that we could apply to get a rough idea of valuation?

So I'm going to give a very general answer to that and I'm

going to give a very specific answer to it.

So the general answer is think about that EBITDA ladder.

We spent some time kind of talking through that.

So a business that's maybe early or small.

So again, very, you know, owner centric, if you will, maybe two

employees not making a ton of money, let's call it low 6

figures, that business going to generally be two to three times

profitability. And again, that's assuming that

the business is diverse and it's actually got some underpinnings

of a real business. As you start to scale, let's say

you get to low 7 figures of profitability, you're going to

start to see that four to 5X range.

You get to more of an institutional level.

So we kind of call that around 3 million of profitability or

EBITDA. You're starting to become more

institutional in terms of private equity funds themselves

will buy you as a platform company and that's up probably a

whole hour in of in and of itself defining what a platform

company is. But you sure be more

institutional. That can be anywhere from 5 to 6

times, maybe even 7. And then when you get to 10

million of EBITDA, that's really when you start to see the high

single digits and depending on your industry, as we talked

about, maybe even low double digits.

And so for most of us, that's going to be kind of the path

that's most of, you know, most importance.

And then again, at the top end of the ladder, you've got

publicly traded companies that are, you know, in the mid teens,

high teens, if you will. But that's maybe a good way to

think about it from a broad perspective.

From a narrow perspective, you can dial that in in two ways.

Number one is the size and scale of the business and 2nd.

Is your industry multiple? And so there is quite a bit of a

difference between maybe being a roofer and maybe being a general

contractor, for instance. And so we can kind of narrow

those ranges down within a pretty good, you know, kind of

zip code, if you will, of valuation by having both

industry and range. And we publish a lot of data.

We just actually sent out an e-mail today for Q1 statistics

RN and so we actually published a lot of data of where multiples

are based on size and industry. And if you have those two

variables, you can get a pretty good sense for what your

business is worth. Things that will make it worth

more or less will vary from company to company, so they're

fairly obvious. So if you have $1,000,000

profit, three million $5,000,000 EBITDA business and you've got,

you know, half of the business is tied up with one customer,

your business is going to be worth less than some of you

who's got a lot of diversification of their

customer base. And so, and there's just some

kind of intuitive things that, you know, they're going to

strike you as, you know, being fairly self-explanatory as to

what would make a business be worth more or less.

But those sorts of things can impact kind of one layer deeper.

So size #1 industry #2 the actual business being kind of a

the third kind of dial in factor along the way.

OK. Well, thank you.

That's very helpful and answers a lot of questions for a lot of

business owners because that's kind of a key part of that, you

know, 8 year preparation and sales cycle and that three to

seven-year planning cycle is looking forward to that exit and

knowing what to expect so. Yeah, yeah, I know.

It's is, is it you have all important stuff.

And I think, and again, if you think about the reverse

engineering, one of the things that we do is actually take the

current valuation and the forward valuation so that we can

have a sense for what it is that we're really going after and how

important that is the individual.

A lot of times it's really that what motivates somebody is kind

of understanding what that forward value is too.

So not just today, but also thinking about, you know, if you

were to grow and succeed, what that forward value could be too

and what that would mean for, you know, yourself, your

employees, your investors, potentially family except.

Yeah. Well, I know you mentioned you

guys handle kind of two types of liquidity events, one 100%

liquidity or moving towards 100% liquidity, a major stake and the

second being just kind of taking some chips off the table.

You threw out, you know, selling 30% to get some capital liquid

personally as well as reinvestment in the business.

What what would motivate someone to do that second option?

Why? Why would someone want to sell

off a minority stake and and how would that help them eventually

reach their major goals? Yeah.

So there there's really 3 core reasons why they would want to

do it. Number one, they are desiring

some level of personal financial flexibility, but not wanting to

sell the company. And so a lot of times in those,

what we call them like minority recapitalizations or basically

just selling something less than 50% of your business #1 they're

going to want to see a little bit of personal liquidity.

And, and this is kind of common. I mean, a lot of times people

put 20 years into their business and they put a lot of financial

resources back into. And so getting something back

out but without selling can be a number one driving motivation #2

they want to have the opportunity to grow the

business, but again, not wanting to use their own capital.

And so if you think about taking some money out and putting some

money on balance sheet of the business, you're getting a bit

of a double whammy, OK. So you're, you're not only

getting some capital back out of the business, you're also not

putting money back in in order to grow it.

So a transaction that provides both opportunities can be, you

know, of interest to a lot of people.

And then lastly is you're typically you get a partner

who's been there and done that, who can kind of show you the

ropes a little bit And in the theater system of the capital

markets will actually be a credential to maybe when it

comes time to sell the business ultimately will be a credential

on that part of the journey. And so personal liquidity,

personal and balance sheet benefits.

And then lastly, is having a partner has maybe been there,

done that and again, not without, not without giving up

control. That makes a lot of sense.

Well, I know you mentioned just a moment ago you guys put out a

quarterly report with some great resources in it.

I know you're a multi time best selling author.

You have a book coming out, either just came out or is

coming out very soon. If someone wants to take

advantage of the resources that you have available or if someone

is interested is coming on board with you as a client, what's

going to be the best way to get a hold of those resources or get

in touch with you? Well, we welcome all the above

and we are really happy to provide a lot of data and

industry information that's available through our websites

at westlakesecurities.com. Our LinkedIn profile, which were

pretty easy to find both Westlake Securities and Matt

Anderson, Anderson's fellow me at the end, the two books that I

have Completing the Deal and Intentional Growth are available

on Amazon. Completing the deals a great

resource for those who want to learn more about transaction

activities and what transactions look like.

Preparing for preparing for a transaction, what may be

involved after a transaction is a great resource for that

Intentional growth, which is available for pre-order and will

come out October 20th. Another great resource for those

that want to grow and scale businesses of all different

sizes. I think it's a great resource

for anyone who's got a business from a million in revenue to,

you know, a billion in revenue. I think it's a if you want to

grow intentionally, there's going to be a great resource for

a much wider audience of a potential business owners out

there. And we give back a lot.

This is the books have been a major give back for me.

If you've studied anything about author royalties, you'll quickly

realize that there's not a lot of ways to get wealthy writing a

business book in particular. So for us, this is a bit of a

way to kind of get more information in the hands of

business owners and really to provide a give back.

I'll also give a number of talks, master classes.

We have a workshop. Our next workshop is coming up

towards the end of June, or you're actually be able to hear

from. It's very low cost way to hear

from people who are actually in the trenches doing this everyday

and to take your business and apply real life strategies and

tactics to help you get from where you are, where you want to

be. And so those are all great ways

to reach out and to get involved with what we're doing.

But we give back a lot, whether it's free data, whether it's low

cost books and low cost content or free content or low cost

workshops. We're doing like we're doing an

event at the University of Georgia next week.

We've got an afternoon plan with some great speakers.

The admission for that event is very low because it's in partner

with partnership with the University of Georgia.

It's going to be a $50 admit admission.

So we've got kind of elements that can range from free content

all the way to our full on consulting services, advisory

services and everywhere in between for kind of almost any

budget. But we really feel like after 27

years personally and 23 years of of personal and business

success, we want to give back to the business community.

And so we've got something, some piece of content or some piece

of advice that can be given across any budget.

Awesome. Well, I really appreciate that

as a a business owner and yeah, I know those that content that

can be very beneficial. So from all of us small business

owners, thank you. And I'll make sure we get all

those links in the show notes here, your LinkedIn profile,

Westlake, securities.com and the link to those books on Amazon.

So our listeners can just hit the show notes and click on

those links to get right to you. So.

Awesome. I'm really excited about

intentional growth. We've gotten quotes and feedback

from Salvatore Ferragamo Junior, who's the CEO Bill Boro Winery,

which is the Ferragamo family winery, Charlie Amato, who's one

of the owners of the San Antonio Spurs and chairman of SWBC, Abby

Milad, who's president and publisher for the Austin

Business Journal. I mean, I could keep going, but

we've had a number of just really, I'm almost like honored

as to the quotes we've gotten back from these industry leaders

that are in support of the book because it's really kind of

meant to provide an unlock and a proven guidance framework for

those that are on this business journey with us to have a better

path to growth. And so it's, again, just been an

honor to see some of the comments that we've gotten back

and quotes have gotten back from business leaders that have kind

of been there and done that, that have viewed the book and

said, hey, there's something here.

That's fantastic. Congratulations.

Well, this next question is a question I ask of every guest.

Are you a person of a particular faith tradition?

And if so, how has that affected your business journey and your

leadership? Yeah, so happy to share.

So I am definitely a a believer in in Christ.

I believe you is my Lord and Savior and so along the way, you

know that I think part of that is kind of keeping an open mind.

So we've had folks of all different kind of religious

beliefs and big believer that you know, people can and should

see you coming before long before you get there in terms of

your works, deeds and activities.

And that's kind of where we really focus from a day-to-day

business perspective is leading through example.

But when you think about our company in terms of advising the

way we want to be advised, being a relationship first firm, being

focused on outcomes and delivering results, toughing it

out when it needs to be toughed out.

All those things I think are kind of deeply rooted in some of

what I think are core tenets of my belief system.

But it's something that's, you know, been very important to me.

I've been, none of us is perfect and been a better practitioner

over some days and years versus others.

But if at the end of the core, at the end of the day, those are

things that really matter to me and I think they shine through

in the sense of we don't really go out there.

We're not very public. In fact, this is one of the few

public pieces where you'll hear me actually say that.

But you asked the question, so I'm going to answer it.

So we hope that what we do is able to be seen through our work

product and how we interact with people and that they would

understand that long before we, we, we answered the question in

terms of seeing kind of our, our good deeds, so to speak.

We're big believers in giving back.

We raised several $100,000 this year to help a homelessness

organization. We help all sorts of

organizations over the last kind of decade.

And it's a really important part to what we do in terms of our

purpose statement being delivering value that changes

lives. And so when you think about the

companies we work with, we've had some fantastic outcomes.

Our folks at work in our organization have had some

wonderful personal outcomes with their time with us at Westlake

all the way through our community in terms of give back.

And that whole cycle, I think is kind of reflective of a core

belief system that's important to, you know, myself and

probably a lot of folks, our organization.

Fantastic. Well, thank you for your

openness and vulnerability there.

I appreciate that. I know early on, but we talked

about podcast, we talked about going to the the discount

bookstore and getting books. You've talked about mentors and

and we had a discussion about coaching.

What have been the best resources to grow you as a

leader? So another great question.

I think a couple things I would really point to.

I've been a ferocious reader. I've consumed thousands of books

throughout my adult life. I've been a ferocious journaler,

which means accountability to outcomes in my mind.

And then alt light and not just business wise personal.

I've got things that I've kind of written down, I track over

time and I really try to hold myself accountable.

And that's all aspects of life. And again, not every day is

perfect, not every month's perfect, every year is perfect.

But I do think that those are two core areas that are hugely

helpful. I also really do prioritize.

Look, there's times I unplug and unwind this, that and the other.

But if you're on this business journey, I think the sacrifices

that we go through, you know, it's important to continue to

personally develop along the way because in the end, that's what

what makes them all worthwhile. Because as we create more value

in ourselves, that's going to translate to our business.

We're going to bring more value to our stakeholders, like our

employees, etcetera, even our customers, vendor suppliers.

And so that self education is really important.

I've gotten more into, you know, podcast audible, I've kind of

gone back and forth with over time, but I really like

podcasts. I'll listen to great.

Like I think this is a great podcast, man.

You've been there and done it, right?

You're bringing people that have been there and done it to to

your audience. And so this is a type of podcast

that I would listen to is I want to hear from somebody who's

actually been in the trenches on a particular topic that I have

interest in. And I want to get that knowledge

as best as I can. But I would say first and

foremost books, secondly, journal accountability to

outcomes personally and professionally.

And then lastly is probably consuming podcast content from

people that have been there and done that.

Oh man. Well, that's a, a great way to

wrap it up. I think just speaking with you,

the time that we have, I think we share a lot of similar values

and I, I could ask questions all afternoon, but I know we're kind

of up against the time limit because again, you outline the

three types of mentorship or the three types of coaches and you

fit into that third category. You're somebody that's getting

it done, doing it, and and you've got a meeting to close a

big deal this afternoon. So we want to honor your time

and make sure we get you to that on time.

So Matt, thank you so much for joining us.

I really appreciate your wisdom and your knowledge.

Like I said, we'll get those links in the show notes so our

listeners can get in touch with you or at least get a hold of

your resources. I really do appreciate the time.

Thank you. Well, thank you.

And as a quick reminder, intentional growth available on

Amazon for pre-order check out Westlake Securities.

I really appreciate the time we got to spend together this

afternoon. Thank you.

This has been fantastic and thank you guys for joining us

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