Category: Authentic Leadership

Categories
Authentic Deal-Making Authentic Leadership Deal-Driven Growth

Genius Visionary Deal-Making

Genius Visionary Deal-Making

Krishna Mohan is an entrepreneur, business coach, speaker, and number one best-selling author. You may have seen him on Fox TV or other media outlets. He’s the president of Genius Visionary, and specializes in scaling businesses by doubling their revenues within 18 months. Manufacturing, telecom, data centers and more: Krishna has worked in many industries and truly understands business!

Early Deal-Making with Krishna Mohan

An early deal of interest that Krishna remembers involved an IT company. It had been founded and had a strong client base, but the owners weren’t especially active. They weren’t clear on the value of the client base they had built, and were thinking of simply closing the business rather than selling it!

Sensing an opportunity, Krishna stepped in. After asking how they planned to leverage their clientele and contracts, he suggested they do one of two things. Either hire him to maximize their options, or let the business go by selling it to him.

They sold it, and within two years Krishna turned it into a million dollar company. He attributes this to his business acumen and his ability to create profit and opportunity.

One thing he reminds listeners: You don’t know where the deal is going to come from. It is vital to keep your eyes open and be watching for options!

For example, there are thousands of companies in the IT space. Which ones are worth considering acquiring? Which ones are just a dime-a-dozen that might not be worth investing in? Krishna has seen that smaller companies often do well in their niche, but they don’t always see as clearly how to scale and grow.

When you understand the value of the service a small company provides and can look ahead to consider how that might be leveraged in greater ways, you have the potential of finding a gold mine. Krishna shares that you have to be able to look for a wide range of options.

Career Building Moves

Krishan shares that he dreamt of becoming a doctor when he was a boy. As a teenager, however, he realized he was much more interested in the money and opportunities to be found in business. This propelled him into the SAAS space, and then into corporate industries. 

He has worked in management and sales positions in a variety of private and government industries, but he found that there was always something that bothered him. Bureaucracy, being a “needle in a haystack”, and red tape were pretty typical in large businesses. As a result, he pivoted into smaller businesses, hoping to find something more. Although this was more satisfying, Krishna eventually realized that the natural progression of his career seemed to be leading towards entrepreneurship.

After founding a tech company that he went on to sell for over seven figures, Krishna founded Genius Visionary. His work here was based on patterns and problems he was noticing in the industry. The solution for the problems he found? Genius Visionary! Now, the company provides everything from group and DIY business coaching to financing assistance and acquisition advice.

Passively Looking for Deals All the Time

Krishna says he is passively looking for deals at all times. 

From products he sells to businesses he works with, he’s always looking for potential. He’s asking himself questions like: Where could this go? How could this be leveraged? What opportunities are hidden within this?

He tries to sense how business is going, and what’s happening behind the scenes. As he interacts with business owners, he seeks to understand why they are in business and what they are trying to accomplish.

After years in the game, he feels he can “sense” when an opportunity is ripe.

One thing that plays a role: looking for motivated sellers. If the owner doesn’t want to exit, then the deal isn’t going to happen. Whatever their WHY might be….you have to be able to find it and communicate to them in order to navigate a deal you’ll both benefit from.

Mapping Accounts to Increase Deal-Making Potential

Krishna recommends always mapping accounts. You must understand who is involved, what is happening within the account, and what potential an account has for expansion. Also, know what goals the account holder has, as well as what goals your business/organization has for the account.

This allows you to know how you can achieve success. This is success for every business and person involved. For example, building additional projects and services out of existing accounts increases profits and grows your business. 

Having a high-awareness of an account’s needs and potentials also enables you to “speak their language”. When you do this, you build trust and likability, both of which are key to growth and future deal-making. This is key, because it’s not all about dollars and cents. People need to see that you care, that you understand their business, and that you have their best interest in mind.

Genius Visionary Deal-Making

Krishna knows how to preach value in ways that companies understand. Doing this allows him to get in the door and start creating value. 

Creating these opportunities is key. If you want to grow your business, make deals, or improve your business, you have to get clear about your purpose and start looking to find the options available to you.

There is no “ready to go” deal. It’s never that simple! There will always be behind-the-scenes work necessary to get people to the point of being ready for a deal. By being prepared and expecting deals to happen, you can pave the way towards successful deals. 

Smaller companies are often ripe for deal-making! Why? Well, for one reason, 85% of businesses do not qualify for traditional lending. This happens for several reasons, but ultimately means that non-traditional funding and creative deal-making is necessary in the business space!

Listen in to hear more about the difference between using your FICO score for financing your business, versus building business credit! Krishna offers great advice on using credit options like this to open doors to growth.

Krishna notes that his company, Genius Visionary, works hard to help companies prepare for success on a variety of levels. This includes small group advising, DIY business coaching, financial advice, and more. By building strong foundations, businesses can better equip themselves for growth and deal-making. This is a strong position that enables expansion beyond what many small business owners dream of!

Listen in to learn more about credit, debt, and growth!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast..

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Discovering Your Distinct Advantage

Discovering Your Distinct Advantage

Dave Sanderson is the president of Dave Sanderson Speaks International. On January 15, 2009, Dave was one of the last passengers off the plane that crashed into the Hudson River, an event best known as The Miracle on the Hudson. He has built a career as a motivational speaker, mentor and author. Recently named one of the top 100 Leadership Speakers in Inc.com, Dave averages over 80 speeches a year for major corporations across the world. His book, Moments Matter, details the lessons learned from the Miracle on the Hudson. He truly understands how one defining moment can create a lifetime of purpose!

Dave also works with established and emerging leaders to help them find their distinct advantage. Once that’s established, clients align with their purpose through employing leadership skills. They’re also able to ignite their performance through focused execution, resourcefulness, and gratitude.

The Miracle on the Hudson

I saw Dave speak many years ago at an EO event. There, he was sharing his story of The Miracle on the Hudson, an event I actually saw live from my New York office. I love that he shared a bit more about that extraordinary event during our interview!

For starters, Dave noted that he wasn’t supposed to be on that plane. Usually, his flights were at the very end of the day. It just so happened, however, that Dave’s work finished early that day, and he had felt super lucky to get moved to an earlier flight. As luck would have it, his new flight just so happens to have had to make an emergency landing in the Hudson.

When the captian instructed passengers to “brace for landing”, it was clear that this was going to be a flight like no other. After saying his final prayers, Dave started putting his game plan together. He knew that if he survived the crash, he wouldn’t be in the clear yet. There would still be the matter of getting to land, which was clearly going to involve dealing with the icy water of the Hudson.

Although his personal mantra had been “Aisle up, out. Aisle up, out.”, when it came time to move, Dave found himself off course. Instead of focusing on his own escape, he could hear his mother in his head, reminding him that doing the right thing was the most important thing.

If you’d like to hear more about this amazing story, you can listen in to the full interview here.

Lessons Learned

The day after the emergency landing, Dave stopped in at his office to let everyone know he was alright. One of the first questions asked was if he was still heading to Michigan for their planned work trip. Even though the VP let him know he didn’t have to go, he did. But the exchange got him thinking. Ultimately, he realized that he had a greater mission in life than just selling software.

Using what he called the Zig Ziglar approach, Dave gave his first 50-75 talks for free. He continued working in software sales as he grew his expertise and ability. Eventually, he was able to transition into his own business, which he continues to run today. In this time, it became more and more clear to him that revenue only considerations are no way to live your life.

Even though he was the top producing sales person in his company and was incredibly successful, he knew he couldn’t stay. This was partially because of leadership changes that created limitations he hadn’t felt before. (Listen in to hear what his new manager said when he handed him his $63,000 bonus check.)

This exchange got me thinking about the fundamental deal-based exchanges that occur between employers and employees. Years ago those relationships weren’t necessarily thought of as deals. In today’s world, however, increased employee mobility and options have shifted the balance. Now, these relationships are the result of deal-making and negotiations more than ever before. People choose not to stay in situations that don’t work for their lives, needs, desires, or personalities. A paycheck for your time is not enough to keep you with a business, and a deal-makers mindset is necessary to increase employee retention.

Discovering Your Distinct Advantage

Dave has become a firm believer that every single person has a distinct advantage. In his book and keynote addresses, he shares how our gifts and passions come together to form that advantage. He also notes that we each have a point in time that changes everything. 

Through his own life experiences, Dave helps others understand how they can tap into their skills, gifts, and passions. In order to make an impact and live a life of fulfillment, it’s key that you learn how to access these parts of your life.

After Dave graduated college, his dad told him he had 30 days to get out of the house. In order to pay his bills, he got a restaurant/hotel job to pay the bills and get started. He was working 2nd and 3rd shift as he learned the business. Fortunately for him, a frequent customer, Bill,  happened to be called “the Sam Walton of Charlotte” because of his prosperity and business success, took an interest in Dave, and worked with him to change his mindset around wealth and money.

This mentorship provided Dave with the opportunity to change his life and grow in ways he could have never imagined. It also inspired him to put those teachings into a book in order to keep them alive long past his own life. 

To hear more from Dave (and to hear about his massive deal-making lesson from Coke & Pepsi), listen to the full interview here.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast..

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Deals For Small Businesses

deals for small businesses: a glass shop door with a black and blue "Open" sign hanging from it.

In this week’s solo-cast, I wanted to spend some time talking about deals for small businesses. If you’ve been a listener for a while, you know that one of our premises is that businesses of any size can do deals, whether you have capital or not. It’s a myth that deals can only be done by big companies with big money. While I do have guests who share about large deals involving large amounts of capital, it doesn’t mean that those are the only deals out there. I’ve also featured many guests who own or work with small businesses, and they are leveraging the power of deals (and experiencing great success!) as well. 

Ep. 3: Ramon Ray, with influencer and sponsorship deals.

Ramon is an influencer who has key connections with businesses and entrepreneurs. He doesn’t have millions of followers, but he has quality followers. He capitalizes on that quality following by creating deals between them and other companies.

Ep. 7: John Bly, with acquisition deals, including deals done without significant capital.

John has been able to attract deals by bringing things other than capital (like partnerships) to the table. Within his first 18 months of business he was leveraging his deal-making power to create growth for his business. Gradually he built up to bigger and bigger deals, eventually moving into a succession deal.

Ep. 34: Julia Pimsleur, with an early deal with PBS that she created out of nothing.

When Julia was first getting started with her children’s language learning company, she was looking for gaps in the market. At a trade show event she happened to realize that PBS had a lot of learning related programming, but nothing in her niche. With some planning, she crafted a pitch and signed a deal with them – no major capital needed!

Ep. 41: Ralph Peterson and I ended up having a brainstorming session on small business growth.

Ralph provides management training and other services. On our episode, we ended up having a full blown brainstorm session on the kind of deals he could potentially create. If you want to get your own small business deal creativity flowing, check this one out!

Ep. 42: Gary Kane, with deals in the lower-middle market.

As a founder, Gary knows all about starting with nothing and building up. He’s also an amazing deal creator. In our interview, we especially talked about the kinds of deals that can be done in the lower-middle market.

Ep. 43: Bill Cates, with leveraging intellectual property and licensing deals.

Bill is a speaker, but rather than depend solely on speaking fees, he’s proactively found other ways to make deals and create revenue. One lucrative (and often underutilized option) includes leveraging his intellectual property to create a successful business. From books to videos to workshops, entrepreneurs can look beyond a fee-for-services model and create deals around licensing!

Ep. 75: Jesse Cole, on using creativity to stand out and grow.

Jesse has built many amazing deals based on partnerships. He’s experienced an incredible amount of success in an industry that is often struggling to get by. More recently he’s been working on online subscriptions and followings as a result of pivoting due to Covid.

Increasing Small Business Sales Through Partnerships

If you’re a small business owner who isn’t necessarily looking to acquire other companies or make deals that require large amounts of capital, you’re not excluded from deal-making! Here are a few things to ask yourself as you consider how you might be making more small business deals:

  • How can you increase sales/growth organically through deal-driven growth?
  • How can you make applications to other companies, industries, or verticals by connecting with those who have access to your market?
  • What opportunities might you have to create deals with those you perceive as your competitors?
  • Who is selling complementary products or services to a client base (or demographic) you’d like to break into?

When you consider the client acquisition cost in building a new customer base, it’s worth it to consider creative strategies beyond marketing. Even though partnering with another organization as an affiliate means giving up a percentage of sales, if they are connecting you with a broader customer base and increasing business, it might be worth it. There is always a cost to customer acquisition; why not pay part of that out through commissions rather than via an ads budget?

Depending how you structure your partnership or affiliate deals, you may be able to upsell and cross sell other products without having to share that revenue. 

Just a reminder: these deals aren’t substitutes for other growth methods. They are, however, additional opportunities for small businesses to pursue.

(I also referenced Damon Gersh’s episode on becoming a dominant force in your industry!)

Licensing & Small Businesses

Licensing is highly lucrative, but often underutilized. If you’ve uniquely created something, however, there are a lot of opportunities here! If you offer speaking, training, or online courses, you can consider additional opportunities to license the content to clients.

Rather than paying per use, or you being paid for each individual delivery, you can use licensing to scale your small business.

You can also consider the “train-the-trainer” model, where you retain control of the content but certify trainers who can use your intellectual property. Often, they pay a licensing fee to continue using your content and resources.

Many small businesses underestimate the amount of intellectual property they have available for potential licensing; take inventory of what you have available, and see if you could leverage it for deal-making!

(I also referenced David Bach’s episode, where we discussed licensing as well!)

Building Collaborative Relationships

Consider using this downtime to get into alignment with other local businesses. 

You could create an association and use it as a platform for networking. You can also build either informal or formal strategies for creating collaborative relationships. Many deals can spring out of these kinds of groups!

I remember an area of New York in which related businesses in the home building/renovation space chose to work together to create a district for customers in need of their services. Even though some of these businesses were in competition with one another, by working together to become the “go to” place for their ideal clients, they increased traffic and business for every member.

Entrepreneurs and small business owners too often think they have to be a lone wolf to succeed. In reality, there are many lucrative opportunities to connect, collaborate, and build growth together. We need to get past our automatic assumptions that we can’t work with our competitors, because sometimes it really makes sense!

What Does it Take to Become a Deal Maker

For small businesses, becoming a deal-maker is about getting past the assumption that you’re too small for that to be a valid option. When your mindset is telling you that being a deal-maker isn’t on the table, you become blind to the options you have available!

Shifting your mentality and opening yourself to opportunities can really get your juices flowing and make you aware of what’s truly available.

Right now the economy has created a strong dichotomy; some businesses are flourishing, and others are really struggling. Take a look around; how might you tap into the markets and businesses seeing a lot of success right now? Or how might you bring extra talent into your organization right now as a result of some of the struggles we are facing today?

Covid has also been an invitation to get creative about deals. Contractual rights, ownership or partnership opportunities, and future profit shares are all on the table.

If you’re a smaller business looking to benefit from deal-making, you should take these three steps:

  1. Change your mindset and understand that you CAN be a deal-maker.
  2. Look at your business goals, and consider who you can partner with to achieve those objectives (don’t eliminate competitors).
  3. Focus on shared objectives, and go to a professional to help you sort out the actual structure and logistics of the actual deal.

To hear the full solo-cast, listen in here!

https://shows.acast.com/coreykupfer/episodes/episode-96-deals-for-small-businesses-with-corey-kupfer

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Authentic Leadership Authentic Negotiating

The Power of Feeling Worthy

the power of feeling worthy: General Motors electric box showing high voltage

Renee Reese is The Worthiness Queen. She helps leaders, entrepreneurs and professionals heal their relationship with money and success and finally experience the power of feeling worthy of their next-level dreams. She’s also a transformational writer, speaker, and teacher and an innovator in the personal development industry. 

In addition to all that, Renee is an attorney, certified success coach,  NLP practitioner, T.I.M.E. techniques practitioner and hypnotherapist. She speaks and teaches all around the world, focusing on mindset and personal development. She is a dynamic, in-demand speaker and audiences love her for her practical application and takeaways, transparency, and relatability. You can listen in to our full conversation here.

Childhood Joint Ventures

Growing up, Renee always wanted to write. Now, writing is a huge part of her platform and work (she has a book coming out soon)! She also had aspirations of being an actress, which didn’t materialize. Her speaking and teaching does put her on stage and in front of crowds frequently, however, which she enjoys.

The first deal Renee remembers was negotiating a sleep-over at a friend’s house. Her early strategy was to wait till her mom was in a great mood, and to then have her friend do the big ask, since her parents were less likely to say no to someone else! We might consider her a master of the strategic alliance, or even a joint venture!

As an adult, Renee now works with leaders, entrepreneurs, and more. She got started as an attorney, but found herself burnt out and exhausted early in that career, despite financial success. Unfortunately, she was noticing that a lot of technically successful people were lacking confidence, passion, and positive relationships with their money too. In her heart she knew: there has to be another way, because this can’t be all that success is.

If you’re healthy, with friends you love and money in the bank, but you’re lacking a sense of worthiness….none of it will feel good. All too often, high-performers go from one thing to the next, hitting goals yet feeling empty. Renee helps people create alignment so they can experience success both internally and externally.

As an entrepreneur myself, I know how powerful alignment and personal money relationships are!

Owning Your Worth

I know that owning your own worth is a huge part of successful negotiations. When you’re dealing with fear, scarcity, and lack — it’s almost impossible to create strong negotiations you can confidently bring to the table.

Renee has noticed that when people are struggling with worthiness, they often struggle to come to the table with clarity on their non-negotiables. It’s not about being aggressive, it’s about matter-of-factly knowing what you need, what you’re willing to compromise on, and what you plan to take away from a deal. When you’re not coming from a place of worthiness, you tend to feel a strong sense of urgency around forcing deals to go through. Why?

Because your sense of success and worth are tied to the outcome of every deal. When you KNOW you’re coming from a place of worthiness, you don’t have to feel that your own reputation, worth, ability, or success are tied up in the deal. You are empowered to hold firm to your own non-negotiables, and you know you can walk away if the deal isn’t a good fit for you.

This is easier said than done! Owning your value and knowing our worth are powerful….but often they are concepts we only understand intellectually. Living it is a whole different ball game. Renee shares that owning your own value starts with your relationship with yourself.

You have to know your own desires, know your own strengths, and know the outcomes you want. Renee literally tells herself: “Self, you can tell me anything.”

She knows her boundaries, she knows what she craves, and she defines herself on her terms. Rather than trying to escape and avoid feeling bad feelings, awkwardness, loneliness, or scarcity, we often try to run (and force things to happen). Instead, you can actually allow yourself to sit with yourself, feel those hard things, and know that you can trust yourself to listen to yourself, be with yourself, and show up for yourself.

Trust Building With Ourselves

In a romantic relationship, you expect to build trust slowly. The relationship with ourselves is the same. We have to start slowly, communicate openly, and demonstrate acceptance and care.

One way of building self-trust is to keep the promises you make to you. If you said you were going to make your bed every day….ask for the promotion…write the book….you can build trust by actually showing up and doing those things. Pay attention to the ways you show up for yourself, and also take note of the ways that you don’t show up. Actually listen to yourself: what’s happening when you don’t show up? Why won’t you keep your word to you? Be willing to listen, learn, and make changes as needed.

When it comes to achievement and growth, Renee says we can build trust in our ability to experience success as well.

She recommends writing down three things you’ve already succeeded in, and three things you’d like to succeed in. Just like you’ve succeeded before, your mind starts to see your new list as things that are possible as well. Whether we believe it or not, we are constantly creating in our own lives. The best way to tap into that power is to be intentional about creating the vision we actually desire.

We all carry subconscious beliefs about topics like money, achievement, power, and success. Everything in our world starts with belief.

Self-Belief and Deal-Making

If you walk into a negotiation with the belief that the other person at the table is better and smarter, or that they deserve more, of course you’ll be dissatisfied with the deal you make. You’ll sell yourself short, and make compromises.

When you believe in yourself as someone who is intelligent, deserving, and successful, you’ll show up at the table differently. 

I teach that being crystal clear on your objectives and outcomes is an essential part of deal making. What Renee is saying here is so true: if you come to the table with a lot of internal blocks and haven’t done core level work, it does impact your negotiating.

Self-worth also impacts the deals you’re willing to attempt to make. If you can’t get by your fundamental self-worth struggles, you deeply limit the rest of your life.

Building the Life You Deserve

Renee’s work centers on helping people overcome these internal struggles and limitations so they can truly experience alignment and success.

One of her favorite clients was experiencing some level of success, but also dealing with massive amounts of doubt and fear. People on the outside wouldn’t have known, based on how she showed up, but she was unhappy.

From her business structure to the way she was showing up….she knew she wasn’t owning her work or her worth. When Renee started working with her, she was going through a dry spell, which was a repeating pattern in her life.

She would hit new income goals, then go into a complete slump and have no money again. It was the feast or famine cycle, which many entrepreneurs are familiar with!

Renee used strategies and tools from her NLP training that helped the client go straight to the root of her money beliefs. Internalized beliefs about being secondary, not deserving, and less than had impacted this client since childhood, and when she understood what they were based on she was able to blast through them and experience transformation.

Clearing past beliefs opened up so many new doors for her, and it all started with the root. Renee’s clients find that clearing these blocks changes their lives and their businesses.

Externalization + Personal Value

I noted that our society sends us so many messages about what we need to have and how we need to look in order to be valuable or worthy. That deeply impacts our confidence and self-worth, which bleeds over into our businesses and deals.

Renee agreed, sharing that consumerism is a huge driving force for many of us. It fuels a more, More, MORE mentality that makes it impossible to understand the abundance that is available to us in the present moment. And the reality is….there is never going to be enough in the external world.

There will always be something new, something different, something bigger and better that tells us we aren’t enough. We cannot understand our own personal value and worthiness when we are constantly looking at external measurements for validation. 

When we are building our relationship with ourselves and our own self-trust, we have to be able to detach from external messaging and gain clarity about our own values and desires. That’s the only way to maintain an internal sense of value and confidence, regardless of external circumstances.

Another way of coming at this is to clarify our WHY. If we are pushing ourselves to achieve because we are measuring ourselves against what we “should” be doing, it’s not going to work. Growing for growth’s sake to fuel vanity isn’t going to serve you in the long run. Get real with yourself about what you truly desire, and why it matters to you. Those are the goals that matter – that’s what you need to pursue.

To hear more about Renee’s take on negotiations and worth, listen to the full episode here!

 

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast

.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

 

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Create and Transfer Business Value

Transfer Business Value

Laurie Barkman is the CEO of SmallDotBig, where she works with entrepreneurs, private companies, and family businesses on innovation, transition, and growth strategies. All this is to help clients achieve their long-term goals. She also works with closely-held companies to grow the value of their business and prepare to transition ownership in 7-10 years. As the Host of the Succession Stories Podcast, Laurie speaks with CEOs and experts about how to create and transfer business value. Altogether, Laurie has more than 20 years of digital transformation, entrepreneurship, and intrapreneurship in tech, retail, logistics, and service industries — from startups to corporates. 

Laurie’s Early Start

As a young person, Laurie had no idea she’d go on to be a CEO. She did start to recognize pretty early, however, that she was a leader. As a student she was often in situations where she had a chance to make an impact, create change, and coordinate with other students. In fact, her mom thought she’d go into politics and be a diplomat!

When it came time to pick a school and major, however, Laurie still didn’t know what she wanted to do. As a result, she chose a school and area of study that she felt would serve her no matter what direction she ultimately went. Her first career move after graduation? HR!

Laurie considers her first deal-making experience to be selling Hickory Farms meat and cheese as part of a fundraising campaign. She sold so much she earned a prize, and she considers this her first confidence boost in the sales arena. 

As her career has evolved, Laurie notes she has been in a variety of different industries and companies. From startups to billion dollar traded companies, Laurie has found ways to be innovative and creative. Now, she looks back and sees that her journey is what brought her to where she is today.

Healthy Succession Planning

Laurie loves working with entrepreneurial families, in which the founding entrepreneur created something and future generations have grown it into something even larger. She shares about a 3rd generation family business she worked in during her career. The family had moved from horse and buggy delivery to larger transportation to reverse logistics.

Eventually, Laurie was involved in the company’s succession plan. This required understanding the potential of long-term strategy with multigenerational impact. Stakeholders mattered, but so did employees and customers. 

Companies who have this sort of long-term vision inspire Laurie, and she loves partnering with them to help them see the potential for healthy succession possibilities.

As we were talking, I realized that we haven’t had much podcast content focused on family businesses. I’d love to dig into this area even more because there is so much that can be said about family members running a long term business together. There are major partnership dynamics at play, as well as other factors. (Would you be the perfect guest for this? I’d love to hear from you!)

Family Businesses, Family Values

Laurie notes that family businesses are incredibly unique. Each one is a sort of “snowflake”, in that you’ll never find another exactly like it. That’s one of the things that makes them so much fun to work with!

She shared the concept of shirt sleeves to shirt sleeves in three generations. Essentially, the first generation invests and innovates to build something successful, but the second generation is fearful of “sinking the ship”. They are more likely to play things safe and fail to creatively expand and grow. The third generation may be able to turn things around, but it may also be too late. There may also be family conflict, or a family that has grown so quickly that the business cannot sustain them.

Other issues in family succession can be connected to lack of fit or ability to take a business on, or a lack of a successor because there are no family members left.

Building skill sets and creating a pipeline for next generation talent is a key part of succession, whether you want to keep your business in the family or not!

On her podcast, Succession Stories: Insights for Next Generation Entrepreneurs, Laurie has interviewed multiple CEO’s of family run businesses. She has noticed that family run companies tend to be incredibly value heavy. They understand where the values have come from, and how they play out in day to day life. These values are also attached to the history of the company, and it’s essential that they are written down.

She emphasizes that any business can benefit from having value clarity. Another of Laurie’s clients, not a family business, recently came to her without clearly established values. The start of their work together was to figure those out.

Top Down or Bottom Up

Laurie notes that a family board can be a really helpful method for families running a company together. This might be considered a “top down” system. She notes that these boards can include owners or higher level executives within the company in addition to family, but it is comprised heavily of family members. This board is in addition to an executive board, or advisory board. Family boards can help diffuse family tension and provide a forum for conversation.

On the other end, a “bottom up” approach may mean that family members start at the bottom of the business and work their way up. When it comes to family members working within the business, Laurie notes that it can’t be forced. If a family member doesn’t want a role or position, then it will never work.

Strengths, motivation, and fit are absolutely key “buckets”, in Laurie’s point of view.

A healthy succession means that a potential family member needs to have the necessary strengths, they need personal motivation and desire, and they must fit into the role that needs to be filled, which includes personality, organizational dynamics, and more.

Although any of those three buckets might not be 100% at the start, time can change and grow all things. Listen to the full episode to hear Laurie share about a family member who originally didn’t have great fit or motivation, but who later came to realize that running the business was his calling!

Family business or otherwise, healthy succession relies on the ability to create and transfer business value across time. Sometimes there is unnecessary drama and chaos because a business’s leaders don’t know who they would be outside of their company.Rather than let go and learn who they really are, they cling on in an attempt to retain a sense of self. This can be especially problematic in family run businesses, because there are the added pressures of the family name being attached to a certain way of being.

Create and Transfer Business Value

In the technology world, things move fast and the larger successful tech companies are comparatively new. There aren’t many multi-generational families who have been involved in the tech space, and even less with the ability to transfer business value!

Laurie notes that she got into digital marketing as a personal career pivot herself; it wasn’t her first path, as it wasn’t for many. As a result, she had an early look at what it means to have technology or tools, but no market. She also saw that start ups can appear really glossy from the outside, but can be really messy on the inside.

Because her role was connected to succession and going to market, she could see that internal mess was problematic. In another shift, Laurie moved into apparel retail at the start of the ecommerce boom. She considers that a corporate start up, in that it was an established company doing something brand new. Again, she was involved in structure, scaling, and marketing. Her career has allowed her to work with budgets of a hundred dollars, and a hundred million dollars.

As a result, Laurie knows how to assess a business and get to the root of what’s working and what is not. She has an eye for understanding fit, operational needs, and market, all while building value.

She also knows what it means to create and transfer business value. Rather than leave money on the table, Laurie helps businesses think through healthy succession based on the transfer of accrued value.

Now, Laurie loves working with small to medium privately owned companies in order to bring together a strategic planning process that creates momentum to move forward. When a team understands where they are going, they are aligned and empowered to grow. This brings a business to life; it’s creating the plan AND executing, which is key. (90% of strategies don’t get implemented….which renders them worthless!)

Listen in to Episode 93 to hear the full interview!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating

Deal-Making During The Covid Era

The Covid Era

This week, let’s talk about deal-driven growth and Covid! In the past on the show we’ve talked about some of the opportunities that arise during challenging times. We’ve also discussed things to watch out for! Now that we’re over six months into this pandemic, let’s talk specifically about deal-making during the Covid era. 

Hard to Compare

First off, it’s hard to compare Covid with any other time in history. For one thing, there’s a dichotomy between industries that are doing incredibly well, and others that are failing and faltering. There are major questions about when things will turn around or come back. In addition, we’re all getting used to a “new normal”.

In the M&A market, in terms of bigger deals, most surveys have shown the market to be down about 30% in terms of deal volume. However, there are some exceptions. Transportation, food, and agriculture have started to come back up. In April/May most industries experienced a significant dip. But there has been a rebound in certain industries. On last week’s episode, David DeVoe noted that in the wealth management space there is a surge right now. As the stock market comes back up, deals continue to increase as well.

Honestly, 2020 has been a huge mixed bag. Technology, home exercise, delivery, and some others are seeing huge gains. As a result, they may be able to absorb some competitors or make other deals, while in verticals that are suffering, we are seeing fewer deals.

Deal-Making Isn’t Going Away

What I see is this: people are still optimistic about deals. There is capital available out there, and people don’t see the impact of Covid as a permanent situation. Deal-making isn’t going away, and there is an expectation that many industries will continue to grow, expand, and find ways to innovate.

Now, I recognize that there are many businesses, especially restaurants, gyms, and some retailers, that have gone bankrupt. However, even within that we’ll see reorganizations and reopenings, with many companies coming out with cleaner balance sheets and ready to do deals. 

Deal-making will continue, even as it may be done in new, creative ways we haven’t seen before. Even industries that are being hit hard now may find that they are better positioned for deal-making in the upcoming months than they ever have been before.

Creative Deal-Making Lessons and The Voice

There have also been someone-off, strange deals that have been fun to see. For example, I enjoy The Voice, and midway through last season they ended up going virtual. Honestly, it was clunky. Everyone was singing and judging from home, and there was no real audience.

This season, however, they’ve adjusted. They wanted to have the singers, hosts, and judges live, but also keep everyone safe. They created a “bubble” by renting out a Las Vegas hotel. This benefited the TV show, and I am sure also the hotel, which would have had decreased occupancy with Covid issues. The audience is shown on virtual screens to provide a greater sense of live engagement as well.

Now “The Voice bubble” is part of coming on the show, and enables quarantining and Covid safety measures that would be impossible with the old set up.

Sporting stadiums have also been working on creating bubbles and providing safe spaces for action! If you have real estate or a business with underutilized space, this is a great time to think about how you can use it creatively to engage in deal-making during the Covid era. How can you apply creativity to your business?

Back on Episode 25, Damon Gersh shared about the “choke point”. During 9/11 he controlled tons of contracts by locking up labor, which created opportunity. How can you create something similar in your business?

Covid Era Stats

In our law firm, we’re seeing the stats play out in the deals we’re making. Companies used to working and delivering results virtually are thriving overall. There is a lot of deal activity in that space! Financial services deals are very strong. As these are two significant industry segments for us, we have kept very busy.

Once you get into recession and values go down, there usually really are a lot of deal-making opportunities taking advantage of that downturn. So far, however, I haven’t seen much of that happening during Covid. Often, that stage happens 1-2 years into a recession, so it might still be headed our ways. However, we’re not in an across the board recession by any means at this time. This may still be somewhat temporary, in terms of overall impact. We just don’t know the full fall out yet.

As businesses adjust, people become more willing to get out there, and the government decreases their regulations as cases, hopefully, decrease over time, we may see an upward trend before we go too much deeper.

Of course some industries, like airlines and restaurants, may see much more long term impacts than some others. Bottom line, though: We’re not seeing mass scale fire sale deals yet!

Although those with capital may be a bit slower or more picky, the money certainly hasn’t dried up! About 88% of deals in M&A are strategic buyers, and during this time that makes sense. Shoring up your strengths and relationships are great things to focus on right now. The synergies that strategic buying creates are even more important in challenging times.

What Trends Have Impacted You?

I’d love to hear your experience within your own industry. What trends are you seeing? How have you been impacted? I’d love to connect with you on LinkedIn or Twitter and get a read on what you’re experiencing. You’re also invited to our monthly Deal Den calls, where we dive deeper to discuss specific challenges, opportunities and needs during this trying time.

To learn more about deal-making during the Covid era, listen in to the full show!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Navigating the M&A Industry

M&A navigation: compass leaning against wooden beam.

David DeVoe founded DeVoe & Company in 2011. The company supports wealth management companies with consulting, M&A industry guidance and valuation services. Since launch, they’ve assisted over 500 high-level companies. They were the most active investment bank for RIAs between $250MM and $3B in AUM in both 2018 and 2019. David’s previous positions include Schwab and American Express. David was named ‘RIA M&A Guru’ by Barron’s.

Interesting fact: David is my FIRST repeat guest! 90 shows ago, he was my first ever guest interview.

Early Deals (And Missed Opportunities)

David shares that, after starting a t-shirt business in college, he missed a deal opportunity. He had relationships with manufacturers and retail outlets, but when he transitioned he simply left the original business rather than selling it. I can share David’s pain here. I missed an early opportunity in deal-making as well when I didn’t sell a flyer delivery business I started at age 15. When I left for college two years later, I just gave it up. The issue? A lack of understanding enterprise value! I didn’t understand the financial power in contracts, cash flow, and existing infrastructure at the time.

As David matured, he realized that deal-making held huge potential for both business growth and relationship building. In fact, David had a meeting scheduled after this interview with a connection he made in his first ever deal he closed while running an M&A industry platform. That deal occurred over 17 years ago, and the connection is still serving both parties.

EP Wealth recently took on private equity, and as a result a reporter reached out to David. Why? Because about 17 years ago David’s second deal, while a part of Schwab, was connected to this company. By leveraging deals as a way of forming connections and creating relationships, David has come a long way since being the guy who missed his first deal-making opportunity.

M&A Industry Growth + Projections

The M&A industry is a complex field! 2019 was a healthy year in the RIA industry, and David would love to see that repeated in the future. In 2019, the field had about 30% deal growth. Overall it was in a good place, exhibiting strong and steady growth.

However, David notes that this industry will have hundreds and hundreds of advisors selling in the next couple years. This is partially because the average owner age is 62 years old. (The average adviser age is 53.) However, out of about 10,000 firms, only 30% have written succession plans.

With these numbers, David believes we should be seeing 300 transactions per year. Instead, we hardly see 100. With each year we don’t see a full 300, we see an increase in the backlog of transactions that will need to occur in the future. David would rather see a 30% year after year trajectory, rather than a flatline followed by a massive spike that overwhelms buying power.
I do note that everyone in the industry has expected more deals, faster. Listen in to the full show to hear David’s thoughts on that, as well as the extended age of retirement.

M&A Engagement Trends + Covid 19

David’s noticed that recently, advisors have been engaging with M&A not only as a retirement play, but as a scale play. Folks are realizing that the game continues to change, and are interested in perhaps becoming part of a mega-firm rather than staying smaller and growing more slowly.

Prior to Covid 19, David notes that January 2020 was an all time high of monthly activity. The year started with a bang! This was driven by valuations being at an all time high. Profitability and growth were unlocked, and everything was full steam ahead.

Deals began dropping, from an all time high to less than 50%, in February. By March, Covid’s impact was in full effect. David delineates a 3-phase process that the industry is moving through as a result. (For more numbers, I recommend the DeVoe RIA M&A Deal Books!)

Phase 1: Deals are getting done if they were already established or moving through the pipeline. Advisor’s are starting to look ahead a bit.

Phase 2: An overall lull of activity and a decrease in the initiation of new deals. Firms under a billion really slowed down; firms over one billion actually increased. Overall, this phase created a 4 month lull.

Phase 3: A surge of activity is common here, and is what we’re currently seeing. Many firms are back on track; David notes his firm had a record setting Q3. The surge from early in the year seems to be back, and ideally will be a V curve.

Covid is real, and is impacting deals and even as they pick back up deal structures. However, the market continues forward. David hopes the COVID 19 experience will inspire advisors and firm owners to mitigate risk by creating succession plans now that risks have unfortunately become all too real for some.

Next Generation Talent & Succession

Sometimes advisory firms don’t want to take a hard look for that upcoming talent in the next generation. This can be because they already have the sense that they don’t have the talent in place. On the other hand, sometimes they’ve waited too long, and they’ve reached a point where the firm’s size indicates an internal succession won’t be fiscally possible.

David’s question: If that’s the case, now what? If there isn’t someone in house who can afford a take over, what options does an advisory firm have?

A recent survey showed that 57% of advisors say that if they had to transfer ownership to G2 today, it would be bumpy at best. Many firms reported they don’t have a strong enough second generation in place to even consider that a feasible option. Only 10% said this transfer could lead to the company being run as well or better.

This could indicate firms can’t look within; however, David does encourage advisory firms to strongly consider the next generation when possible. He notes that this is a professional industry. Firms need to consider how they can train up leaders, and how they can migrate some responsibility so that the next generation WILL be capable of taking over. He also notes that this is beneficial for your clients. They want to know who will run their accounts, and they have more peace when they understand you have a viable succession plan in place.

Human Capital & Thoughts on the Future

Devoe & Company has been creating programs, like their coaching accelerator, to provide coaching and guidance to advisors. David finds that human capital is key to growth, and is passionate about providing ways for advisors to grow in their ability in order to strengthen the industry as a whole.

Because M&A is a dynamic industry, David expects to see additional activity and continued growth. Eventually, he expects to see the numbers return to around 30% growth per year. He also expects to see the emergence of mega-firms with private equity backing that will increase creativity within the field.

This will likely create diversion and diversification, which David expects to lead to greater value being offered to clients. David does note that the small, medium, and large will continue to exist, and expects to see growth on all fronts. This also includes the use of technology to drive growth directly, as well as to aid in creative delivery and data usage. The application of technology and intelligence will only increase, and those in the field should expect dynamic changes as time progresses.

To hear more about trends, listen in to the full episode here!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

DealQuest’s BEST OF: Company Founders

company founders

This week I’m pleased to bring you another round-up of the BEST OF DealQuest guests. Our category is Company Founders. You’ll hear from Niles Heron, Julia Pimsleur, Brian Smith, Damon Gersh, and Chris Wilkerson! If you’ve been a founder, are currently a founder, or would like to be a company founder one day, this one’s for you!

The Need for Organic Growth: Niles Heron

Niles Heron is the Co-Founder and Chief Strategy Officer at Popdog. This is a technology and services company focused on fixing core problems in the esports and live streaming industry. He firmly believes that entrepreneurship is about building good systems. For Niles, this means solving problems at scale. His work has taken him from Detroit to San Francisco and back to Detroit. He’s worked with companies in biotech, automotive, aerospace, technology, and entertainment.

Niles has an incredible perspective. He’s one of those guests who demonstrates that he truly understands what it takes to create a business that actually has traction. In addition, he truly gets how you can leverage that traction through deals. On the show, Niles really gets to the heart of what it means to show up fully in your business and engineer deals that take things to the next level.

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode. Or, you can listen to our full interview on Episode 33 of the DealQuest Podcast!

Million Dollar Women: Julia Pimsleur 

Julia Pimsleur is Founder & Chief Empowerista at the social venture Million Dollar Women (MDW). During her nine years as CEO, Pimsleur raised angel and venture capital to succeed. It was then that she discovered fewer than 3% of all women entrepreneurs reach $1M. Additionally, less than 4% of venture capital is invested in female founders. To help change those stats, she teaches women how to fundraise. This led to her authoring the best-seller, Million Dollar Women​: The Essential Guide for Female Founders Who Want to Go Big.

Julia shares that her current work is directly tied to her early experience as a founder. She had been exhausted and burnt out as a business owner and parent. After some time, she realized she desperately needed a new way of running things. She took what she learned, and turned it into an organization that empowers women to stop being solo octo-preneurs (with 8 arms going in every direction). Instead, she teaches them how to truly become empowered entrepreneurs. Her episode is a reminder you don’t need to be a huge company with large revenue numbers to make meaningful deals. Instead, you can grow your business from exactly where you are now!

You can listen to a snippet of her interview on this week’s Company Founders BEST OF episode to hear more, including an early deal Julia made with PBS that created a 6 figure sales difference! You can also listen to our full interview on Episode 34 of the DealQuest Podcast.

The Founder of UGG Boots: Brian Smith

Brian Smith has charted his own course to become one of the great entrepreneurial success stories of our time. In 1978, he imported six pairs of sheepskin boots from Australia. At the time, he had a dream to build a business where every American would eventually be wearing the product. And that’s how one of the world’s most recognizable brands began. Since then, sales of UGG products have exceeded a billion dollars in each of the past six years.

Brian shares how his own enthusiasm for his work garnered an early $20,000 investment (with no business plan or fancy pitch deck!). That early cash infusion is what helped the company get started. He also notes that UGG took years to take off. (For some reason, as many California retailers didn’t see the need for a sheepskin product!) Year one of sales only saw 28 pairs off the shelf, with retail buyers he had been counting on ultimately  turning the product down. 

By year three capital had run out, and sales were only at 20,000. After a beer with a friend, Brian recognized he had a messaging problem. By changing his marketing message, sales skyrocketed to 200,000 within a year. That marketing revamp turned everything around. (It also ran the company out of money — a whole new problem!)

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode. You can also choose to listen to our full interview on Episode 8 of the DealQuest Podcast!

Identifying Your Industry’s Choke Point: Damon Gersh

Damon Gersh is the President and CEO of Maxons Restorations, Inc., an innovative leader in the property damage restoration industry. Damon is a winner of the Ernst & Young Entrepreneur of the Year Award, the Fast Company Award for Leadership, and Inc. 500 and Inc. 5000 awards. Damon is also a Past President of the Entrepreneurs’ Organization New York City Chapter, the co-founder of the Gathering of Titans annual entrepreneurial conclave, and the co-founder and Past President of Restoration Affiliates, LLC.

He wants to know: do you know the “choke point” in your business? By identifying the restoration industry choke point, Damon was able to transform his market and take his business to the next level. He was also skilled at garnering loyalty and thinking BIG about how to lock up the labor market. As a result, he figured out how to make sure his firm got the job…even if they were technically the “second call” on new labor needs.

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode, or you can listen to our full interview on Episode 25 of the DealQuest Podcast!

Lifestyle By Design: Chris Wilkerson

Chris Wilkerson is the Founder and CEO of High Bar Capital, which specializes in funding, acquisition, and management of high-quality businesses in niche markets. It’s all done with the goal of growing businesses while also increasing their value. 

Chris shares important lessons he learned while doing deals of his own, and he offers specific scenarios and strategies that highlight why it is important to know who you’re dealing with and what they truly want. Part of this is understanding what the “other” side wants. It’s not enough to just know what works for you. You have to consider the desire on both sides of the aisle!

The ability to create a positive impact on everyone involved in a deal is his top priority when evaluating whether a deal is worthwhile. This also means considering his employees, his clients, and his family. Part of being an entrepreneur is creating the lifestyle that he desires. He shares his wife and himself call this their “lifestyle by design”, which involves considering long term deal impacts, which goes beyond just financial implications.

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode, or you can listen to our full interview on Episode 22 of the DealQuest Podcast!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Authentic Leadership Authentic Negotiating

Internal Succession Deals

Internal Succession Deals

What is the likely time you’ll want to retire? What happens if circumstances force you to leave your business earlier than planned? Your retirement and ownership transfer may be on your own timing, or dictated by things you may not control. Either way, having as many options as possible is advisable. While you might be able to sell to an outside party, you should also consider having internal succession on the menu.

How to Best Position for an Internal Succession Deal

Depending upon the size of your company, grooming a successor and/or building a strong executive management team is crucial. Empowered, knowledgeable employees create a potential pool of buyers. These buyers might be excellent candidates for a buyout when you’re ready to retire or move on. The great thing about doing that is your company is more likely to be able to operate without you. As a result, even while you have full ownership you’re putting yourself in a strong position for an external sale as well.

An internal succession deal is essentially an opportunity for you to sell your company to your existing team or one key employee. This may occur upon your retirement, death, or permanent disability. Creating an internal succession plan and binding agreement in advance with the management team or key employee is an essential step toward a successful internal succession deal.

Advantages of Internal Succession Deals

One huge advantage of this kind of deal is that you’re working with someone who knows the company. They understand the company culture. They’re also familiar with the ideal clients and the “state of the union”, so to speak. They may not need to spend as much time doing their due diligence and understanding the company at its core. (Note: They also know your skeletons, so there is a lot of transparency in most internal succession deals!)

If you’ve built a great company with a great team, an internal deal can require less “selling” of the deal. Another advantage? Continuity! Relationships in business matter. Clients and customers are often more comfortable when they understand they’ll be able to continue working with the same team and philosophy. They are less likely to completely revisit the relationship when they feel they are still working with the same people.

Also, a majority of deals are done as asset sales. (As opposed to equity deals.) After all, the buyer doesn’t want to take on a huge liability risk. This is often the structure for an internal succession deal as well. However, there are possibly more opportunities to consider an equity deal when you’re dealing with someone who truly knows the ins and outs of the company. They are taking on less unseen risk. This may make an internal buyer more open to the potential heightened risk of an equity sale. This is a huge plus because equity sales can actually be smoother than asset sales.

(Listen to the full episode to hear more about assignment issues, consents, and a note on taxes!)

Finally, consider making it known to key employees that you’re willing to consider an internal succession deal when you reach retirement. You may be able to retain high-level employees who have a desire for ownership. When these employees know that they will have the option to gain majority control, or maybe even 100% ownership in the future, that may be the incentive for them to stay. Even if a larger company offers them more benefits or higher pay, ownership incentives (which can be set up in advance via legal agreements) will often outweigh other benefits and perks offered by larger companies.

Disadvantages of Internal Succession Deals

A possible downside to internal succession is lack of funds. There may not be an ability to pay the purchase price if the internal buyer can’t find the necessary capital. There can be limited funding options, and internal buyers sometimes want the owner to essentially fund the note and get paid over time. Although financial options are increasing in many industries, the lack of capital is sometimes an impediment to internal succession deals. One antidote is to plan in advance. Pre-planning increases the chances that an employee interested in buying the business out will have the ability to finance the deal.

When deals are done internally, there is often a lower valuation. This corresponds with a price discount — even if small. This can be because the deal is easier to get done. It may also be a result of working with people you trust, recognizing their contribution to the growth in value of the company over time, or other reasons. External buyers are often able and willing to pay a bit more for their own strategic reasons. However, they bring other issues and risks that may not exist for an internal sale.

Setting Up the Deal

There are a number of ways this may be done. For example, you may set this deal up where an internal buyer is able to buy the company over time. This could be at 5% a year, or some other breakdown that makes sense. You may also consider how much a buyer would need up front, how much they can pay over time, and whether this is a full buyout or if you’ll retain minority stock or equity in the company.

When you’re allowing employees to buy into a company over time, the owner often does not want to put themselves into a position in which they are still working in the company but now have a minority ownership. This can be remedied by creating legal agreements to ensure that you have control of decision making within the company until the point at which the buyout is going to be completely transitioned. For example, a structure at which the full out buyout occurs after ownership by the buyer reached 49% over time. So while the buyer might have been buying 5% – 10% a year over a period of year, for example, after reaching 49%, the next purchase is for the remaining 51%

Also, remember that you can divide ownership and voting control. So you can give up the majority of the economic benefit of equity ownership while still maintaining decision-making control.

Another consideration: what assets will be used as security for backend payments? In essence, if the buyers don’t pay you, will you be in position to take the company back? What recourse will you have? In reality, most people don’t want to be in a position in which they would be at risk of having to leave retirement in order to reenter the company. For that reason, you may consider other forms of security or protection.

Best of Both Worlds

There can be some frustration here. An employee making the purchase may be trying to have the best of both worlds by taking on ownership of a company without the risks of buying something unknown or starting something new. They may not want to offer a second mortgage on their home or other personal assets as collateral against possible failure. Or they may not have those things as an option.

Although internal succession deals can be wonderful for both parties, it is essential that there are protections in place to protect against worst case scenarios. Be clear about what you’re comfortable with when you show up to the deal table.

In an internal deal, you know who you’re dealing with.

You know if you’re passing the business into capable hands, and ideally you’ll know enough about their work ethic and way of thinking to know that they’ll carry the business forward. However, you don’t know what could happen with all sorts of factors: the economy, global pandemics, unexpected losses, and any number of potentialities could arise that complicate an otherwise solid business deal.

Finally, I would encourage you to truly spend some time pre-planning your own transfer and retirement. Do you have the right people in place? How will you preserve your legacy? Do you want a slow transition or a full stop when you’re ready to be done? Are you dealing with yourself as a single owner, or do you have business partners/founders whose views are important?

Listen in to the full episode for more strategic thinking on internal succession deals.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

A Deal-Maker’s Paradigm Shift

Paradigm shift

Jeff Dennis is the trusted advisor to the CEOs of fast growth companies, where he provides strategic and financial advice. He is a lawyer, serial entrepreneur, best selling author, and public speaker.His book, Lessons from the Edge, is a collection of stories by 50 entrepreneurs who share their biggest mistakes in business and the lessons that they have learned. He’s a sought after public speaker for audiences across the world. Here, he shares about the deal-maker’s paradigm shift that has helped him grow throughout his career.

Creative Problem Solving as an Entrepreneur in Residence

Jeff shares that, early on, he expected to take over the family business. After circumstances changed, however, he had to reinvent himself. This reinvention is what ultimately brought Jeff into the entrepreneurial space. 

Now, Jeff is an “Entrepreneur in Residence” with Fasken Law, one of Canada’s largest law firms. He helps them answer the question: How does a big law firm do business with these new tech companies?

These startups often have vast legal needs, but often few resources early in. Although some of them turn out to be unicorns that achieve wild success, many don’t. It’s clear, however, that they have legal needs. Part of Jeff’s role is to enable Fasken Law to meet those needs creatively. He considers himself to be part intreprenuer, as he’s building a small business inside of an institution. He’s part business advisor, as he does quite a bit of coaching and consulting within his work. And he’s part lawyer too, as a licensed legal professional! His journey certainly has been a “typical” lawyer’s journey, but he’s enjoyed his alternate career path.

Some of Jeff’s creative ability comes from a unique deal he crafted early in his professional life. It involved his family’s restaurant business, a massive theater complex raining debris on their patio, and a revenue guarantee that enabled them to sell at a profit. (Curious about the details? Listen HERE to get the whole story!)

Discovering a Deal-Maker’s Paradigm Shift

Prior to Fasken Law, Jeff went through multiple iterations of business. First, he thought of himself as a real estate guy. He was registered with the Ontario Securities Commission as a limited market dealer, and was syndicating real estate.

And then the market crashed. It seemed like everything Jeff was involved with was connected to real estate, and suddenly that was nothing but bad news. Rather than throw in the towel, Jeff set to work reenvisioning himself.

His realization? He was a deal-maker. This paradigm shift allowed him to see that real estate had been a commodity that he was making deals around. Rather than fixate on the commodity (real estate), his world opened up when he realized he could create deals in any sector, with any commodity.

Jeff has since done deals in mining, cosmetics, insurance, stocks & bonds, TV productions, franchises, and more.

If you’d like to hear more about Jeff’s thoughts on the “pound of flesh” required to take investor money in these types of deals, listen to the full episode here!

Always Growing

As he branched into deals, Jeff also worked hard to network and grow professionally. He joined EO (Entrepreneur’s Organization) and worked his way from local leadership to the international board. He wrote Lessons From the Edge, which became a bestseller and launched his speaking career. And he’s since traveled the world, speaking globally.

By using his deal-making skills as a springboard, Jeff has advanced personally and professionally throughout his career.

As he was writing and speaking, he also transitioned into angel investing. During this stage, he worked with early stage companies on commercialization and capital raising. Later, this experience would assist Jeff as he began crafting fixed-fee deals aligned with startup values and needs.

Creating Services & Products That Work

When Jeff talked about how a big law firm tends to deal with tech companies, the only word that came to my mind was “poorly”. Ultimately, law firms expected to operate with large hourly fees. And startups and entrepreneurs that were building tech companies couldn’t afford that.

There was an entire underserved market that was having to forgo legal representation, or deal with minimal legal counsel because it was out of range of their budgets. Jeff brought his deal-making experience to bear. Working within Fasken Law, he developed a concept for a fixed fee model that he knew would attract tech companies.

This creative solution required a great deal of negotiation. As a traditional law firm, they had to let go of “how it was always done” in order to try something innovative and new. From incorporating the company to creating shareholder agreements, creating employee contracts, and building employee stock option plans; Fasken Law became startup friendly.

Jeff shares that hundreds of companies from every sector came through these programs. Because they were structured as fixed-fee offerings that could be customized as needed, they were highly attractive to the startup market.

Ultimately, the deal-maker’s paradigm shift Jeff encountered early in his career has shaped his professional life ever since. There is power in making deals!

Listen to the full episode here!

 

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!