273 Ryan Tansom - AUDIO DESCRIPT
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Corey Kupfer: [00:00:00] Ryan Tansom played a pivotal role in reviving his company's 21 million business and facilitating its eight figure sale to a competitor in 2014. He leveraged his experiences to found Arcona. Creating the Intentional Growth Network framework to help entrepreneurs view and run their businesses as financial assets via educational training and fractional CFO services.
He is on a mission to help entrepreneurs enjoy work, create wealth, and make an impact, all of those things. I love the impact part. Ryan has personally guided over 400 entrepreneurs through the in Intentional Growth Academy and is involved and has been involved in numerous transactions. He is a sought after speaker at industry conferences and CEO masterminds, including Vistage Worldwide and Entrepreneurs Organization.
Additionally, Ryan hosts a popular intentional growth podcast with over 380 episodes, 520k downloads, and featuring well known guests like [00:01:00] Geno Whitman, ITR Economics, John Warlow, and the editors of Inc. Magazine and HBR. Welcome to the podcast.
Ryan Tansom: What's up, Corey? How are you, man?
Corey Kupfer: I'll tell you that it's great.
We, we did a fun pre call getting to know each other. And you're another podcaster and obviously this eight figure exit experience and how and how you help people do deals now, it's going to be all a lot of fun to talk about, but before we get to all of that, I want to take you back to when you were a little kid growing up, maybe 10, 12 years old what did you want to be?
Because my guess is it's probably not. Providing, coaching, mentoring, CFO services and selling businesses at that age, but you tell me.
Ryan Tansom: I'm
laughing because I actually around that age, I took a, like a career assessment or whatever the heck you do when you're that age. And it was like a bricklayer actually, I will never forget that.
But actually it was right around that age when my dad actually started the business and. He would, it was zero employees. He mortgaged our house by a couple hundred grand worth of old Panasonic copiers with no plan [00:02:00] other than that. And he started, he worked all day and he'd come back at nine o'clock at night and I'd stay up late and just hear the play by play.
I remember when he got the Canon license. I remember when he launched a second location and that's when it became my sport, man, business anyways, and. No idea what I wanted to be, but my dad, I was never really good at school. So the fact that I teach now is just hilarious to me. And, but he always said, as long as you can provide value, be nice.
And as long as you can sell stuff, you'll be just fine. And because that was his way of I think, giving himself the validation because he barely graduated high school. So it was a little bit of talking about his health through,
through me.
Corey Kupfer: Love it.
There's this saying around the entrepreneurial community that the A students end up working for the C students. .
Ryan Tansom: Well, honestly, man I, I see it because, like I, Corey, for the first, like I, probably 50 to a hundred episodes I'd ask people like, how did you decide to become an entrepreneur?
And no one said, I never decided to be . So it was always this accident. So I quit asking people why they decided to be. It was like, so yeah, I think it just kinda, people fall into it, man.
Corey Kupfer: That's funny. One more question. Looking [00:03:00] back, what was your first deal of any type? It could be something small when you were a kid or early in your career.
Anything comes to mind that was a
deal.
I was slinging and selling lawnmowing business. I was cutting grass by the age of eight or nine or something like
Ryan Tansom: that.
Corey Kupfer: Love it. Love it. All right. So listen, let's talk about this experience. It's mentioned in your bio about When you came in to your dad's company, let's talk a little bit about more where that was and obviously, the safe figure exit we talked about where it was, we talked about where it ended up in the bio, but obviously there's a journey in between that, to create that enterprise value. So I definitely want to hear
more about that.
Ryan Tansom: What part do you want to dive into? Because I'll give you the kind of the container on a core and we can pull whatever string you want.
Corey Kupfer: I love the personal story of what got you involved and then, and in terms of its growth.
Was, was there an intention to create enterprise value and sell it, or is it just what happened? What was that journey? There's the, before we get into the deal aspects, just this, what's the journey? What's the story?
Ryan Tansom: Yeah.
You tell me to stop or slow down. But I cause I do quite a bit.
And so I sometimes [00:04:00] be like that's a lot, but it all. So I watched my dad, at the nine o'clock at night, I watched him scale the company. He was a hustler, man. He was the typical copy salesperson, like just 400 phone calls, 15 appointments, eight net news, five proposals, three closes, 50 grand in revenue, and it worked.
I watched him do that. You named the job, Corey. I did it. Yeah. Moving the buildings when he was moving to taking out the trash, doing meter reads before they actually plugged into the internet and calling people to get Hey, by the way, Corey, what's the page count? And I'm like, wait a second.
I have to go do something that's inconvenient. So you can build me hang up. And so I was 16 doing that sort of drowning in my drowning in that. My suit selling copiers when I was 19 and so did a bunch of interns throughout college sore on my absolute living grave. I'd never go work for him because but he went through this whole personal journey where he was distant from the company while I was in college diverse with my mom, a bunch of other stuff and, what happened was when I graduated college in 09 and everybody knows what [00:05:00] happened then. And the, I was the only one of my friends that had any job offers because I was a salesperson. I had 15 job offers. I'm like, yeah, I wanted to work for a thousand bucks a month. Everybody's sure. Come work for us.
My dad's GM convinced me because I don't want to sell copiers. They're not fun. They're not technology. They are still blinded. Like it's, you could duplicate your way into productivity. But so I got convinced to go join in oh nine. What happened was my, because my dad had been distant, there was so much cashflow Corey in that business on a 20 million in revenue ish.
When I started 21 million, 8 million is equipment. And then 12 million was services, really high profit margin on services, like in the whole thing at inverse with the equipment. So we were essentially giving shit away to then get the the service contracts, but we're sitting in the bank in the CPA meeting.
So I'm in the bullpen. I got to outsell everybody because everybody thinks I'm gonna be entitled person that, the second generation, that kid. And so I crush it. I absolutely crush it. And again, I can say that because in [00:06:00] sales, there was no subjectivity. It was very objective. You either do or don't sell something, but we're sitting in the bank meeting, the CPA meeting, my dad pulls me into everything, all the meetings.
Which I really enjoyed, but like I'm pulling him into deals. So he's getting reinvigorated back in the business. We're sitting there in December, right around this time in 2009, we found out we lost 940, 000 bucks on 21 million in revenue. Wow. And given the fact that my dad was a copier sales guy with not a financial background or even a college background, He, when he scaled so fast, Corey, he was, he actually funded the company for 12 years by financing receivables.
And I can go on to the yeah, dude, I could go on to this for two days, two days, but we had no line of credit. So we had to turn the business around for six years without a line of credit. So we ended up selling two branches for cash. I built out the managed it service offering the software automation side, and then we rebranded so we could be a B2B tech player.
So we got to this point where it's really healthy of a business just incorrectly capitalized. I was [00:07:00] running the company that the operations, he was still dealing with like the bank and the CPA. And then we could never get alignment on what, cause he's I want more money. I want my distributions.
I don't want to talk about copiers anymore. And so like we went through a year and a half of him wanting to sell in the whiplash for the executive me. It's you can't steer a ship if you don't know where you want to go. Are we selling? I'm not selling you. Taking distributions. Not. Long story short, after a year and a half of talking to every CPA banker in Vistage, no one could, no one sat us down and said, Ryan, Corey, what do you guys want?
How do we get the business as a vehicle to get you there? And to your question of we were solving for annual cashflow, Corey. So like the K 1, how much in cash through salary, perks, and distribution can we suck out of this company instead of, if we invest over here, This is the return.
Corey Kupfer: Got it.
Ryan Tansom: Long story short, pin up three local competitors, sold it to the highest purchase price, and I had to fire 60 out of my 90 employees, pay 53 percent in taxes, pay off a couple million dollars in debt.
And [00:08:00] then 10 years ago, I was like what the heck was that? So that is how and why I'm here.
Corey Kupfer: Wow.
Wow. Yeah. Listen, there is most entrepreneurs are running their businesses that way, right? They're trying to minimize taxes. They're trying to maximize distributions. They try, and they don't, and they don't realize the impact.
And listen, it's fine if it's a conscious choice, right? That you're going to run it, that way it is fine. Not everybody's going to scale and build enterprise value. There's no I actually think sometimes there's pressure to do that in ways that cause. Band incentives but but it's the fact that so many entrepreneurs, it's not even, they don't even make it a choice, a choice from options, right?
They don't even know, Oh, wait a second. If I did this differently,
Ryan Tansom: I think it's like a good marriage. It's like the matrix.
Corey Kupfer: I could build enterprise value.
Ryan Tansom: Corey, like the way I like describe it, it's like when you see the matrix, it's like you're finally unplugged. And like, when I say when you're plugged in.
It's you're solving for revenue, optimizing for gross profit, whatever, whatever the margins are, and just hoping that there's gonna be cash in the checking account when you need to, hit payroll [00:09:00] and when you want your distributions, but there's no like unified plan. Which is why everybody's solving for the cash flow and the tax.
Now, because like. How would you expect anybody to make a conscious choice , I spend, we can go through all the things that I did to help turn it around, but we spent 300 and some thousand bucks on the new ERP system. And then think about this, like the mindset of growing equity value long term versus solving for cash.
And I'll think about this, I always joke, I'm like, can you imagine the enterprise sales rep of Hey, Ryan and Corey. It's 300, 000 to build this ERP system, and you're going to lose half your admin department because they're going to hate it so much. You're not going to have any visibility into your clients for 18 months.
It's going to take twice as long, twice as expensive, and all the while it's going to cost you 300 grand. And you're like, wait a second, how about I just keep the 300 grand and we don't do that. Versus now flip the equation and say, Hey, Ryan and Corey. If you invest 300 grand, it's an add back, so it's a use of cash, but we're looking at normalized EBITDA as one of the two numbers that [00:10:00] we value companies on, not net income.
We're not valuing a company based on net income, so why, that's for the taxes, so it's an add back on EBITDA, and it's going to grow your multiple, which is the second number. Then it's a whole I'm absolutely convinced, Corey, that entrepreneurs are willing to do hard work. If they can see the outcome of that, but if you can't see the outcome, why the hell would you do it?
Corey Kupfer: That's
right. That's a hundred percent. So listen we have listeners on this podcast who are super sophisticated ideals, and we have some new folks, who are learning about deals. So when we talk about normalized, talk to us a little bit about normalized EBITDA and what, and what that means in the context of a deal.
Ryan Tansom: So I'll talk about from our experience, reduce net income. So you don't pay taxes. And then most of the time it's the horrible gift of around this time of the holidays for Hey, by the way, you owe 400 grand with no cash in the bank. It's so instead of net income, like what I always say when I'm doing my keynotes or my workshops is if we pulled out everybody's net income, you know what that tells me about the business?
Nothing. BeCause it's what happens, Corey, [00:11:00] over the last decade, I am absolutely convinced that business owners. And entrepreneurs can tell an amazing story of where have they been, where are they and where they want to go. Net income can't reflect the story. So then what we say, okay let's let, if we have two numbers that value a company normalized EBITDA, which is a, so I'll break this down.
So it's a proxy for annual cashflow. So we have one number, which is the, and we need to figure out whoever owns this asset, what is the annual cashflow that's coming out? It's available to anybody. And then we're going to take in times that by what everybody calls the multiple, which in the simplest way is the number of years of cashflow that normalize EBITDA that a buyer investors willing to give.
Based on the risk of that cashflow. So I always like to say, so Corey, if you say to me, Ryan, I'm willing to give, if intentional growth is doing a million dollars in cashflow and Corey says, Hey, I'm going to give you a three, Ryan, you're saying, I really believe your story of years one, [00:12:00] two, and three, but years four or five, man, I don't get it.
But if you give me, is someone else willing to give me a four or five, they're believing that story and they're willing to wait five years for that cashflow. The normalized EBITDA has all. It eliminates all the noise of that ERP system ad back or the boats and cars and cabins my dad had or severances or all that stuff.
So we can get to the clean number the 1 or 2 numbers. So let's pay attention to it.
Corey Kupfer: Yeah, and it's interesting, just to jump in for folks who who are less experienced No, it's even it can, go one of two directions. In other words, sometimes there's, expenses that an owner is going to put through the business that right will come out when when they're gone.
So that, that'll be a positive ad back. But on the flip side, sometimes the buyer will come in and say, wow, your compliance or your financial systems or your whatever are really weak. And, so it's going to cost us more money to, to run that. So we're going to be putting in an expense factor that's not in European health currently, right?
Because you're not doing this well enough and [00:13:00] we need to do it right. It can cut either way, which is why it's very different than a. . Then that income, especially if you're running the business much more like Ryan was talking about, and many entrepreneurs do like his father was now, obviously, if you're 1 of those rare company, that is companies that is actually running the business in a way that a, that a buyer, to build enterprise value and to take account all these things and not to.
Just save taxes and maximize distributions. I've got a globalization that normally has to
happen.
Ryan Tansom: 100% Corey and Corey, I can shoot you a PDF. I've got a cool exercise that I do in all the business workshops of positive, negative, or neutral ad backs so that we can get to that million bucks.
So I'll show you the PDF
and you can put that in show notes.
Corey Kupfer: That's great. Yeah, that's great. We'll look at that. That's excellent. Yeah, because it's that's an important point that some people don't understand. All right. So let's go back to the case study of your, of your father's business and your business.
Because. There was a shift there, right? And a lot of companies can't make that shift, right? A lot of companies just don't do that well. And sometimes that provides an opportunity to buy [00:14:00] them on the cheap or they're just not saleable at all. So what are so many other things that you did to move this from what some people refer to as a lifestyle business, I actually don't love that.
Term for it, because I actually think every business should be a lifestyle business, meaning that even if you want a big scale, it should support your lifestyle, family,
Ryan Tansom: family offices, buy companies for their lifestyle so they can clip the distributions. Yeah, yeah, it's if it's an asset, it should be providing for you wealth.
Why is an impact wise at whatever it should satisfy the ownership's groups, goals, what ESOP have different goals in private equity, have different goals and family offices have different goals and partners. And so I just, I want to be very clear for you and the listeners too. We had no idea what the hell we were doing the whole time.
So like in the whole six years, like the one thing that actually helped Corey is that we had a bank with a gun to our head. thEy were under an FDIC covenant. They had a bunch of crap loans. So they were making 750, 000 a year off of fees off of us. So they actually couldn't cancel us.
So they [00:15:00] needed the financing, the receivables income to get turned around. So it was literally a race to who can get better. But why I say that is because Most privately held business owners don't have a mandate of a timeline, private equity. It's like internal rate of return over seven years. And every single day I would need to know the trailing 12 months of EBITDA because we have an internal rate of return for some company.
Corey Kupfer: Yep.
Ryan Tansom: I say that because. That's why I'm such a proponent of come up with your target equity valuation at a point in time, regardless of what you want to do, because it'll give you the timeline and the discipline. So when I say we had no idea what the hell we want to do, but I know I needed to hit 240, 000 in payroll every other Thursday and like that was it.
And I needed to pay all of our family bills and my dad had a lot of stuff. With the bank, with the timeline and the mandate, it forced the discipline, but I still never understood that valuation until after the fact. So I'll go explain to some of the stuff that I did that actually was [00:16:00] valued, even though it wasn't intentional, which is why promoting intentionality now.
Corey Kupfer: Yes.
It was a copy or declining industry. Like the margins of the equipment disappeared. We were literally having to sell stuff for negative margin. We were in order to get the 50%. Equipment fine or the equipment maintenance. So then it was like, okay we got telecom companies coming in.
Ryan Tansom: We got cloud hosting companies coming in. I T company. So I had to diversify our product offering. So I, we were, I was going for profit per customer instead of just equipment sale margin. So like the Minnesota wild is one of my favorite examples. It was like from a, like a creative structure. Like we were the full technology provider, the Minnesota wild.
So I bundled in. Office equipment, staff with our print center, cloud hosting, all their workflow, document management services. We co branded and we actually had a managed IT help desk system where they had their tier one help desk with their people. And then they would, we would be their tier two, tier three, bundled it in on a multimillion dollar contract, financed the [00:17:00] CapEx, wrapped it in on a 48 month equipment lease.
We're the equipment financing where every single of the 330 employees we knew every Corey works for the Minnesota, it's another 300 bucks a month. And we added to the lease. So it took the buyer, a couple appointment, a couple of meetings with 10 people to understand how that contract was built.
No one can steal the client. And when we sold, we literally took our couple of thousand clients or like 3000 clients and said. Here you go. Cause it was like a CSV download from our ERP system and said we know that there's value because they can't cancel. It's all bundled in and protected. We wanted to have a moat around that client and we didn't want a telecom company to take it.
We didn't want it. So there was all that stuff that made sense. And then we had to build the operations to get there while the gun to our head from the bank was there. So there was like this, and I think this is why I go back to the innate nature of entrepreneurs. People know what their clients want generally, and then they, it's how do you organize those products or services [00:18:00] around that client to make it sustainable, predictable, and transferable cashflow into the future to increase that normalized EBITDA and de risk it and therefore increase that multiple?
Corey Kupfer: Yeah, and that's,
so I want you to say that last statement again, more slowly and break it down because that was gold right there. By the way. I want to make sure people caught that.
Ryan Tansom: I
had one of my buddies, he goes, your podcast is the only one I don't have to listen to on 1. 5. So I wanted to like, I'll say.
What I did by my nature by just common sense was do what everything I just said, which is I wanted to protect my, I wanted to enhance my client's experience while also making our business better. And I think everybody listening and probably knows ideas on how to do that, but what actually is also the benefit is by protecting that and building that.
Client related experience, I wanted to create sustainable, predictable and transferable [00:19:00] cashflow into the future. So that way,
Corey Kupfer: predictable and
transferable cashflow. That was the phrase that I really want to focus on.
Ryan Tansom: And what it does to the value is if we take that million dollars in normalized EBITDA.
So let's say it's a million dollars in cashflow. By doing everything we just talked about, it could go from a three. To a five multiple because Cory's willing to believe my story that says, Hey, Cory, do you want this contract? That's 3 million and you can take that cashflow. I call it like the baton. Cory, you want my company?
Here it is. And you take that, that million dollar baton, that cashflow baton, and you can run with it without me, no earn out, no job, no escrow. And then we get into the whole deal structure where then all cash is ideal, but like every single thing that is risky with that future cashflow reflects in the multiple and the deal structure.
And I know you know that, cause that's what you're talking about all the time, but like I lived it in the crazy part is it was all by accident. [00:20:00] Thank you. But just wait but I don't want to discredit too much because. We knew it, but I just didn't understand how to justify with financial metrics and valuations.
And I think a lot
of people can relate to that.
Corey Kupfer: It's right business moves to make, but to relate it to, what you later about, no, I totally get it. It's interesting because I've been joking a lot with my, we have a lot of clients in the wealth management space. And it's a great contrast to the example of this versus I always joke with them that we largely provide a very similar service, right?
We provide as law, especially the kind of law I do, right? Working with, corporate deals and stuff like that, that working with sophisticated high end clients to provide them with high end customized advice on important things in their lives, right? What do wealth management people do?
They work with clients, fiscated people, right? To help them, achieve high end, things in their life. The significant money is saying it's very similar. But the investment advisors have a way better model than we do as lawyers, right? And it's because of exactly what you said, right?
As lawyers, we bill, a lot of us bill hourly, or we bill fixed fees, or things like that. And there are reasons [00:21:00] for it. And I won't, get too much in the business model. And I'm not asking anybody for, to cry for me, because I've done very well. I'm very happy. But I'm talking about in terms of business model, and that's what I joke with my clients about because what they have is they get paid a percentage of assets under management, it's recurring revenue, it's paid in advance quarterly, and it's pulled automatically out of a custodial account.
They get paid out of Schwab or Fidelity.
Ryan Tansom: And their clients don't even see it usually, I
mean,
Corey Kupfer: yeah, and it just comes off right out of the investment amount. The biggest difference, because essentially, we're providing the same type of high level customized service to, to successful people.
The difference is their business model has that repeatable, right? Sustainable, predictable cash flow. Law firms. Generally you'll hear expressed in terms of revenue multiples. If you know anything about multiples, you never want to do it. So if I back to normal multiples on a law firm, you're looking about maybe 4 to 5 times EBITDA on a law firm, if they're well, if they're well run, could [00:22:00] be lower.
and the deals we're doing in the wealth management space, they get whoa, right now, twelves, right?
Ryan Tansom: Yeah.
Corey Kupfer: And even, so you're not talking about one or two terms. You're talking about double a tri, you're talking about significantly different multipliers on that. I gotta, yeah.
Yeah. Only 'cause of the difference in the business model.
Ryan Tansom: I got a comment on this too. Amen to everything you said. And I'm seeing the same thing because I got a couple of buddies in wealth management that owns some firms and I'm seeing the teens right now. And but I think what's interesting.
So as all these kind of light bulbs have gone off over the last decade, since I went through that, I was at this MNA conference in Chicago. It's where I met a bunch of people from, Oh my gosh, what the heck was the association? M& A Alliance. You probably know a bunch of these people. Anyways, it doesn't matter.
I was sitting in this, there was like probably 400 people in this conference and I'm sitting in this private equity breakout. Corey, this got six, seven, maybe even longer than that. Anyways, I'm watching these five private equity people sit on the stage and they're talking about [00:23:00] asset classes. And they're talking about services, healthcare, energy, manufacturing, SaaS, e commerce.
And I'm sitting there going, well, they're like playing a four dimensional chess game while I was playing checkers because they're sitting there talking about my business while that I worked my entire life at for 80 hours a week. I like an asset class while they're sitting there going we're going to just deploy money over here, deploying money over here.
And they didn't do all that hard work. I just described and I'm like, who gets it? And but why I brought this up based on your comment, I liked it in my workshops. I always like to say to people like put her investor hat on. If you, if Corey and I have a million dollars to invest, and this is why I do the buildup to get people to understand weighted average cost of capital, because it's if you and I have a million dollars.
If we put it into a CPA firm, all those people have to stay there and there's no contracts, or we could put it in a SAS company where it's reoccurring. [00:24:00] Like everybody, I think gets this in their soul, but like we get it blinded because it's our professional identity, but it's but as an investor, it's should we put it here?
Should we put it there? Should we put it there? Cause we want more than a million dollars. And what kind of risk are we willing to take? And then you can stick back and say what industry and business model. And that's why I, when I interviewed the Craig from the Pepperdine Capital market study on my podcast, we break down.
Like he's got that study that they do once a year where they break down industries and sizes and the multiples because it has to do with risk.
Corey Kupfer: .
Love it.
So let's talk about you've alluded to some of the principles and we know some of them come outta that experience of your dad's business is selling it and what you learned there.
So tell us a little bit more specifically about what the Intentional Growth Academy is and and the work you do there and how that works, and who and who are the clients.
Ryan Tansom: All of this stemmed from when I got out, Corey, like I'm young enough where I firstly didn't become financially free.
A lot of people are [00:25:00] blind and by the way, you and I both wouldn't know what net proceeds are and that's what matters. Yeah. And so and I wasn't the majority owner of the company. And so my father retired and I had to go essentially figure this out. But one thing that I didn't want to do right off the bat is I didn't want to become part of the problem.
Like I was sitting there going like, how in God's name did that happen to us? We were in this stage, we're 21 million in revenue. I have the top CPA, attorney, bank, all these people. I really didn't have the people like you. There was no podcast back then. You know what I mean? So I didn't have exposure to this stuff.
And I'm like, I had a couple of offers from like private equity, investment banking. Once you go through that, you get the scars. You're like, come work for us. And I'm like, But then so I'm going to go take advantage of people that don't know this stuff. And so I'm just this from redesigning comp plans my whole life.
I, one of my intense passions is understanding alignment of incentives. Yes. And so like when I spent 10 years trying to figure out like how. Can, I didn't want to go monetize the business owner who are [00:26:00] my peers in a way that felt gross. I wanted to be able to look myself in the face in the mirror. And so where that led me to was I want to teach people how to fish so that they can get empowered.
And I just built the material that I wish I would have known Corey. And so it started off as me synthesizing a bunch of material. And then it came, I landed on these five principles and I call it a framework. And these five principles and the content are in this online academy or in a bootcamp. And I call it a framework because As a business owner, I didn't want to be told what to do.
I wanted to have a question and say, okay, Corey, should I hire a president for 250 grand? Or should I buy that company? Should I take a distribution by that building? And I want to know what it means to me. And I don't want you to tell me, but I want you to help me go from the legal perspective. What does this mean for the deal structure?
But I want to take that power back. So I took these five principles that we can dive into, but I took these five principles and I created a training program for middle market entrepreneurs. So when I, and I like how you said lifestyle is a weird word to like, essentially the people that there's now been [00:27:00] 600 people that have been through it and it's not people backed by private equity or venture capital.
These are people like my dad and I, which is. Founders, multi generational, but it's usually a few partners or a few owners that haven't had the injection of the mindset of the asset value, like we're talking about. And so I spent the last 10 years essentially building out this material and what the market has told me is very digestible and very.
I have people that own marketing agencies going, I understand weighted average cost of capital. And, but then at the same time, I have other people that have done multiple, there's one guy went through 14 roll ups and sold the that one IPO. And he was like, Oh my God, I learned a lot. And my point is it's this slow drip through these five principles and it started up.
So it's five principles. It's online. So we have an online academy. Cause I started the actual Arcona and intentional growth in 28 2019 as an in person bootcamp and March 13th, 2020, my business model [00:28:00] evaporated. So I had to digitize it. So now I've got an online in person, I've got people that will buy a private bootcamp for I got a client right now that they're looking at four families or buying a private bootcamp for the four family shareholders.
Or we had a couple of weeks ago, we had 35 business owners between a couple million in revenue and 300 million in revenue in the. But the common theme was What's this? How do I figure out what is my target equity valuation? How does all this stuff work and how do I get there making the right decisions in the right timeline?
Corey Kupfer: Love it. Love it. And see, you said there's a middle market entrepreneurs generally, founders, things like that. What do you find? So I often talk about mindset on the podcast. Let's start at the mindset level, right? you can agree or disagree, but I think everything's lots of mindset, right?
No matter what information you're going to teach them, anything new information that they have, whatever, if they don't have the right mindset around it, then what use is it going to be? So what are some of the mindset things that come up or other things that may block folks from really, being able to [00:29:00] do limiting beliefs, anything like that.
Because us humans get in our own way sometimes,
Ryan Tansom: Oh, amen. I've lived it. And so as I go into this, I want people to know that I learned this all the really hard way. And so I'll, a couple of comments is. So the five principles, the first one starts with your vision what do you want and why, because we can, you and I both know we could build a three financial models to something, but if we don't know where we're going, so here's how I start the academy, the workshops, my keynotes is I actually, Corey, I pull up a picture of a cabin on a river because it's, that's my goal.
I live over in Stillwater, Minnesota. I want to have a big house on the river and I go, should I buy this? What does everybody think? Yeah. Yeah. And I'm like, what if I can't afford it? What if my wife doesn't want to do that? I'm like context matters. And so I say that we have to know what we want and we have to understand where we're going.
And the thing is if we don't, that's why Bo Burlingham, his book finished big is what set me on my entire [00:30:00] journey. He's been on my podcast a couple of times. I was the keynote at the small giants conferences here. It was a personal. Personal really cool experience because it's full circle. I say that because three out of four people regret the sale, even though it doesn't matter about the money because they didn't know why they were doing this.
And people could, and there's a whole lot of, why is it cultures and legacies that money there's a bit so multidimensional. But what I say is that the goal really matters. So then I say if we want to go, I'm in Minnesota. If I want to go to Florida, I want to ask the entrepreneurs, what's your goal?
When people go I want to, here's my goal. And it's always revenue. Say, I want to go from 5 million to 10 million, 10 million to 25 million. And then I immediately cut that out and say my father and I owned a 21 million business that lost 940, 000 in 09. And if we would have sold the company in 2009, we would have owed the bank two and a half million bucks.
Who cares? And so like we had 115 employees. So what we could do is we can go to Vistage and go. We do 21 million in revenue and have [00:31:00] 115 employees, but if we shift our mindset, boom, back to your word and we say, I want a 12 million equity valuation in 2030. Now we have the right goal because now if we think about the goal and when I said, I'm a fanatic about incentives because I'd built out a comp plan for 24 salespeople that sell copiers and I can watch if you have the wrong comp plan, you could, that really sucks.
And so everybody that's running EOS puts their VTO of all the revenue or it's so then we can have horrible growth that doesn't create value that's pisses money away. So if we take the target equity valuation and the timeline. We can reverse engineer the three financial statements and we can say, okay because there are three levers we can pull, how do we increase that normalized EBITDA?
How do we then decrease the risk of that cash flow by creating sustainable, predictable, transferable cash flow, therefore increase in the multiple. So increase [00:32:00] the EBITDA, increase the multiple and pay down debt. Those three, if those are our KPIs, we can get to that point B, do an ESOP, do private equity, internal transfer, gift it to your kids.
I had this one guy go, I want 360 degrees of options when I get to point B. And I said, great. But he and it's not just if I say, if you say, I want to go to Florida, it's okay, that's a big state. You go into a motel, you go into a hospice, you go into a five star resort, who you want to be with.
We have to think about that whole goal. And if the target equity valuation is the goal, we know that we're going to have the options instead, like when my father and I went to sell and this is, there's a lot behind this, but I had three offers, Corey, the only offer that satisfied our financial targets is the one that we took.
And I had to go back to my office. And I had to fire 60 out of my 90 employees and they were my college friends, my family, and they gutted everything I said about [00:33:00] the Minnesota wild. They every, they would, they got it in our entire company so we could hit our financial targets in the timeline. The other two offers were on the cashflow valuation and it didn't satisfy the timeline.
So if I would have had to have the cashflow valuation, I would have had to wait another five years. And now we were trapped. I didn't know any of this stuff, but so long story, long way of saying target equity valuation at a point in time. So that way you, it's based on the cashflow valuation and then you have all the options in the world to do whatever you want.
Corey Kupfer: Love it. All right.
Let's run through quickly the other four principles.
Ryan Tansom: So the first one is your vision. What do you want out in that? There's a key component. This one is separate your job, your W 2 paycheck that you get an actual paycheck from your ownership role. You have to separate those two because people say I want out and they don't even know if they want out of their ass or their job.
So your vision, what do you want from your job, your culture, everything? The second one is your financial [00:34:00] targets. So what is your target equity valuation and the desired distributions on the way there? So if you want distributions on the way to that target equity valuation, let's think about it because then we can't reinvest in the company.
So your vision, financial targets, third one is your exit options. And there's five of them that we we cover, but it's internal transfers, ESOPs, acquisition entrepreneurs, private equity, and strategics. Every one of those, the different deal structure, I know you talk about those a lot, will impact your legacy, your role.
It'll impact the first two principles. So then once those, so those first three, my definition of intentional growth is purposeful action towards a very clearly identified outcome. So those first three. Clarify that clearly that identified outcome. So then principle four is grow value. Now, with that goal in mind, let's invest in the areas in the business that de risk the cash flow so we get a return on our money.
And then principle number five is hire the right team of advisors, like [00:35:00] everybody listening in. And you, Corey, and the wealth managers. I make a joke at the keynotes. I say, you know what most entrepreneurs do? And this guy included, I'm pointing to myself, I would bring in our advisors. And I'll be like most entrepreneurs do, it's like hiring a travel agent and refusing to tell them where you want to go and getting pissed that they don't understand.
So if you flip that and say, okay, here's where I want to go. Think if I said to you, I want to go from a million dollars to normalize EBITDA to 2 million over the next six years, I want to go from a five multiple. So a 5 million valuation to then a six multiple, so a 12 million valuation in the next six years.
And my goal, my first ideal goal, Corey, would be to do an ESOP. If I can't do that, then I'd like to transfer a part of it to my managers and my kids. And then what I can do then is then hire all my team of advisors and say, okay, how about tax plan, estate plan, deal structure? All that stuff can wrap around the goal [00:36:00] because that's wildly different than maximizing purchase price to a strategic buyer that's in your industry.
Corey Kupfer: Yeah, no that's powerful. And it's something that I, I always joke that I asked some questions that a lot of lawyers don't often ask, I, when somebody comes to me with a deal, often my question to them is, okay why are you doing the deal? Now, I love it as I,
that's a question that a lot of my colleagues don't ask. I'm not looking to criticize anybody, but it's just, most lawyers, you're hired clients as they want to do a deal,
Ryan Tansom: get the paperwork and they start doing their work.
Corey Kupfer: Do you have a term sheet yet? What's the deal terms? Let's, let's draft the documents.
But I have that kind of, strategic consulting relationship with my clients, and. And so I want to know why. First of all, to tell you the truth, even just to draft and implement the deal, the why is important because it tells me what's important in the negotiation, what I emphasize in the drafting, whatever.
But even on a deeper level, I want to make sure my clients are doing deals for the right reasons. And even though I do deals every day and I preached a deal, deal driven growth on this podcast It's not always right to do a deal and it's and it might be right time to do a deal, but not that deal.[00:37:00]
And I'm not talking about, the lawyers who are deal killers who slow things down because they don't understand that deals have to have a rhythm. They got to balance opportunity and risk. I'm talking about much more so from the point of view of the client and what's their motivation to do the deal.
And some folks still, they say they're saying to me, similar to what you're talking about. Yeah, I want to add revenue. Okay. Why ?
Ryan Tansom: And you know what and you know what I, what? I a hundred percent agree with you, Corey. And what I think, and the reason I like what I do is because I want people to understand how freaking lucky they are to find you.
What happens is 98% of advisors are just looking to pay the bills and like it takes a lot of guts to potentially derail a client engagement because you're saying, you know what, this is probably not gonna make you happy. And and by the way, you probably make a lot of money on a transaction, but you might be able to say, no, this is not right for you.
I want people like when they empower, when they're empowered by understanding this, then they can find the right people with you like [00:38:00] you and then they know why they're working with you. And it's, and it just makes everything more fluid. It's just, it's the amount of stuff that they called the deal train, right?
It leaves the station and everybody's looking at the pocketbooks and I'm like, it takes a lot of momentum. It takes a lot of I don't even know what you want to call it to stop that inertia. And for most people, I have 380 podcasts where people have been on the podcast where they're like, I'm worth a hundred million that or a billion or whatever.
And they're miserable because they're Charles Schwab ETF portfolio that is colorful and no one needs them anymore. And they have no purpose and no identity afterwards. It's like after the five or 10 million bucks, what are you actually solving for? And people haven't usually thought about it.
Corey Kupfer: Yeah, it's so powerful.
We've had some folks on the show in the past talking about, even folks and you alluded to it earlier, it was to sell their business. And if they don't have a vision, the goal, the purpose of what's going to happen after that, usually they'll regret it. And then they'll dabble around, maybe investing in other people's businesses that will be very [00:39:00] satisfying.
And maybe they're not very good at it. So it's, yeah, it's really fascinating. Yeah. So I'm a big, I'm a big internal, make sure that everything we do in business, whether it's deals, whether it's starting a business, whether it's growing business, what's hiring people, whatever is aligned.
Like, why are we, I just see too many entrepreneurs. Who there's the old joke, right? That, an entrepreneur is somebody who will work 80 hours for themselves to avoid working 40 hours for someone else. And there's some truth to that,
Ryan Tansom: including me. Yeah.
Corey Kupfer: Especially there's some truth, especially in the beginning when you're building whatever and that does show a mentality, which I do believe in, but at the same time.
I think the ideal, the best entrepreneurs, talk about the vision and the goal in mind, even outside the context of deals can help you get there. They're, I'm always looking at, Hey, how do I create my ideal life now? And how do my businesses support me to do that? And by the way, we need to grow and serve clients to do a great job while doing that part of that is systems and teams and building great people and putting in the right, all that stuff, but but too many people get lost in they're not [00:40:00] related to how their business growth impacts their life.
And a lot of times they'll get to a certain point later on. They're like, why have I worked this way? This crazy and look what I've given up my life. And, I'll not submit it in any way.
Ryan Tansom: It's the definite, it's actually insane in my opinion. It's and again, this all goes back to my childhood.
Why? I was a horrible student. I got a D in accounting. This is my worst grade in college. Cause I'm like, why is this a matter of because debits and credits blue book. And I'm like, I need to know the why. And I watched my dad have more material stuff than he could ever use and he was literally trying to buy a hole in his heart.
The good news is for all the listeners, my dad and I are unbelievably close. He moved four minutes down the road from me. He's hanging out with my kids, my grand, his grandkids all the time. And it's how do we have to go through that much crap to figure that out? It's so ridiculous. And then the cool part is if you can figure out and measure the value, the intrinsic value of your cashflow valuation while you own it, private equity firms and ESAPs do it all the time.
And what if you're financially free, it's just illiquid, then you're like. [00:41:00] It designed the entire life around the business, but don't just hope that your company's worth what you need it to be worth. So it's a, it's the both, it's the both end, right? Like we have to live in all of this because I don't know, man, like I just watch these people in my podcast and that's my biggest blessing.
I'm like, wow, you're 30 years old. You're miserable. No one likes you and you have all this money. Yeah, it's what,
what's the point?
Corey Kupfer: So true. Listen, I feel like we can talk for hours, but we're coming to the end of our time here. If people want to find out more, and I'm sure they will, because, what you're providing here, Ryan, in terms of your, intentional growth Academy, the work you do, is so crucial and important.
And to have people like you and your dad, when you first came in not, listen, you were 1 of the, when I say lucky ones, I don't want to. Yeah. Even though you didn't know what you're aiming for, you worked hard. You make
Ryan Tansom: it was lucky, man. It's even more there's a lot.
Corey Kupfer: I want to say it was.
Oh, my God. It just showed up because I know that's not what you're saying. But the point is, there are a lot of people who actually are in your situation and trying to work hard to get out of it without this [00:42:00] knowledge and they don't get there. You got there, right? But sometimes they don't get there.
So what you're teaching is absolutely crucial. So where can people find out more about all the various things you have going
on?
The podcast is on all the podcast players. So intentional growth you can have the show notes are Kona. io is where the podcast is. And we, and I'll put a link in and you're, so you can put in the show notes, the intention or go starter kit is a great way
Ryan Tansom: to free.
What I did is essentially I plucked out the top videos from the curriculum. So what is intentional growth? The first video of each of the five principles, and then actually I have. A case study that I, where I project out the value of a company using all three financial statements in an Excel spreadsheet.
So that way there's no hocus pocus. I didn't invent any of this stuff. I just organized in the way that makes sense. So that intentional starter kit and the podcast are the best way to just start. You're not going to figure it all out tomorrow. And I think that's the biggest thing, like just understanding you.
I think you said the word that is one of the most important parts. What's the mindset? What are you trying to solve? And what's the mindset and the starter kit and the podcast should help people.
Corey Kupfer: Love
that. Love that. [00:43:00] So my final question of the podcast, Ryan is always about my highest value in life, which is freedom.
And for me, that means everything from freedom around the world for all people from oppression to why I've been an entrepreneur and haven't had a boss for decades. What does freedom mean to you and how does it impact your life in business?
Ryan Tansom: I've gravitated to door towards Dan Sullivan's for freedoms from strategic coach, freedom of time, freedom of money, freedom of relationships and freedom of purpose and like it's multidimensional because it's not just time like I like my time is finite, but then I want to make sure I'm not dealing with people I don't want to deal with.
And if I can learn and do the things I want to do because I'm not constrained by it, then I can get to that, you had mentioned impact at the very beginning. And I think that's like the, that's the word people want to get to, but we have to cover some of our bases before we get there.
Corey Kupfer: Love it.
Love it. Love it. Ryan Tansom, thank you for being such a great guest on the DealQuest podcast.
Corey, thanks for having me. I appreciate the questions and I appreciate the enthusiasm. It's a lot of fun.
