302 - Laurie Barkman - ENHANCED VIDEO
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Corey Kupfer: [00:00:00] Laurie Barkman guides business owners how to dramatically increase enterprise value and build with their exit in mind. Laurie is the former CEO of a hundred million dollar revenue company that was acquired by a fortune 50. So just a little credibility there. Capitalizing on her succession experience, Laurie founded the business transition Sherpa, providing transition advisory and coaching to entrepreneurs.
She's also a certified mergers and acquisitions advisor with Stony Hill specializing in valuations. Sell side and acquisition services for companies in the lower middle market. Laurie is an adjunct professor of entrepreneurship at Carnegie Mellon University, teaching a master's capstone on innovation, on corporate innovation, and as a speaker on the topics of business transition, succession, entrepreneurship, and M& A.
In addition, she is the Amazon bestselling author of the Business Transition Handbook and offers an online masterclass called the Endgame Entrepreneurship, to create a sellable asset. She's [00:01:00] been featured in all kinds of press and she does great work for various, companies and families. I won't read the whole bio, and Laurie is a returning, a rare returning guest to the DealQuest podcast.
Laurie, welcome back.
Laurie Barkman: Oh, Corey, it's so fun to be back with you. We were reminiscing before we got on air how long we've known each other now and the evolution of your show, the growth of your show is amazing. So exciting. I'm so appreciative that you're having me back.
Corey Kupfer: Well, it's great. Listen, you know, as regular listeners know, we've rarely had a return guest and in part it's because we've been fortunate enough to have the, Podcasts be popular enough that we get a lot of incoming, you know guests But laurie was such a great guest back all the way back on episode 93 Which was like three and a half four years ago, that we aired that company It'll be close to four years by the time this airs And so many of you didn't hear her back then but also there's some new stuff going on, right?
The book is new the course is new And of course, the M& A market is very different than what it was, you know, [00:02:00] four years ago. So I'm excited. So Laurie, as opposed to my, normal opening questions, which you answered the last time around, you know, about what'd you want to be when you wanted to grow up and what was your first deal and folks, you can always go back to episode 93 and listen to that one too.
If you want to hear those answers. I'm going to ask you a different question starting out. Did you always know you wanted to be an entrepreneur? Like was there a background in your family? Like I know for me, I had no entrepreneurial background at all, but some, for some reason I was called to it. Did you always want to know you want to be an entrepreneur?
Absolutely
Laurie Barkman: not. No, I didn't. And there's some entrepreneurial genes in my family, but not in my immediate family. My family, my parents were, employed by the state of New York and the county of Albany, right? You can't get more conservative than those government jobs. And I, and it's funny in retrospect I see Bill Gates, right?
And think back to Bill Gates and how he was so savvy to figure out that this, these computer thing, this computer software thing was a thing. And he jumped on it. What did I do? My dad was a computer [00:03:00] programmer. from the seventies and I completely ignored it. So it was staring at me in the face. I ignored it.
I didn't have the risk profile or the big idea to start my own business. So I didn't go that path. And it was when I was getting my MBA. That I was really exposed to entrepreneurship and thought, Oh, yeah, this sounds really cool. Really amazing. But again, I didn't have a big idea. I didn't have the risk profile and ultimately I had some debt.
I had to repay from this NBA degree and I was pretty nervous about that. I figured for me, you know, when people go to Vegas and they gamble, they leave feeling like they spent their money on good time for me. I would always say, no, I'd rather go shopping because I know I'll leave with a sweater and I'll be happy with that.
And I think entrepreneurship is a little bit, you got to have the risk profile. What I realized years later, Is that there's many different flavors of entrepreneurship. The one that I was getting most familiar with in business school was the venture side. And there, there is obviously high stakes there when you're bringing in venture [00:04:00] capitalists.
And yeah, it wasn't a fit for me. But to your question, how did I figure it out? I mean, that's for me and my story, as you shared my bio, going through an exit, going through that experience and on the other side of it, realizing. I really like deals. And that's what you and I talked about, on that episode all those years ago.
We talked about how I discovered I really am a deal junkie. And the manifestation of my entrepreneurship has come together in the support of entrepreneurs in their next journey as an entrepreneur. And building with the exit in mind was something you mentioned in the introduction. Absolutely.
And I'm building some infrastructure, building a platform for that to support entrepreneurs and it's really fun. You know, I'm really enjoying it. And, I'm in that phase of my career too, where it, this is all gravy and I'm really, it doesn't feel like work. And I think a lot of entrepreneurs have told me that when they're really in their flow and their group, it doesn't feel like a job.
It feels like. You know, whether it's an investment or a job is up to, the eye is up to [00:05:00] the beholder. But for me, it feels like an investment and I'm investing in something and investing in myself. And I've just been having a ball with it.
Corey Kupfer: I love it. So, am I correct in assuming that, let me not even ask you.
I can just say it straight out. So when you were younger or did you ever think you would be an author and a course, you know, online course provider? Or did, was that also a, even more recent development?
Laurie Barkman: Yeah. No, no vision for that whatsoever. I think I've always been a pretty decent writer.
And thought at one point I might go into journalism or might write a book and then for some reason I got this fear of getting writer's block. I never had writer's block, but the fear of writer's block prevented me from going down that path. And it was only after I've had the podcast, my podcast called Succession Stories, I had it for a couple of years.
And someone said to me, Hey, I think you've got something here. You've got a lot of content. You've got some experience pulling some things together. I think you should write a book. And I said, you're crazy. [00:06:00] Just like they said, when they said to me, Oh, you should have a podcast. I said, no, you know, now here we are, you know, in a, over episode one 70 on my side, and it's funny.
Life takes these turns, but I. I don't, I can't really say, Corey, that I had this, you know, this grand plan and this manifestation of marketing coming out this way. I've been a marketer a long time, but I never really thought of myself as a content creator. And I think the other thing that's really interesting that's coming out of my experience, even, you know, as I'm reflecting back on what you shared in my bio, educator sort of stands out, right?
Adjunct professor, writing a book, creating a course, there's something innate in marketing. If we do a good job at marketing, we're educating and get educating. To the sense that we want to find a match of the product or service with the buyer. And ultimately that's what I'm trying to do with what I'm offering.
And so that's an interesting, you know, part of this challenge.
Corey Kupfer: Love it. I love it. You know, it's interesting. We won't get too deep into the mechanics of it. I want to get into the deal side of things. But, you know, I wrote my authentic [00:07:00] negotiating book and I will tell you that.
I mean, I was always a reader. I was appreciated authors. You know, I was always like, but you know, it's like anything else once you do it, I mean, I was like, I got an even deeper appreciation for like really good authors because you know what it takes. I mean, listen, I had some help, I went with a business, you know, a business hybrid publisher, which is by the way, I mean, , we're not going to spend a lot of time on book deals.
That's not the, that's not the topic of this, but it is a deal subject. We've covered a little bit in the past, you know, major publisher deal, a hybrid publish self publishing, you know, they're all different deals on that. And, for me, frankly, a lot of people out there who go the hybrid route where you get somebody who helps you write it, and, you know, they do a quick review on it, put it out, you know, I had somebody help take content that I was already delivering in workshops or whatever, and, you know, give me a first draft of a book, but then I spent a year like doing two major rewrites of it because I just, to me, it had to be great.
It had to be much more than a calling card. We had a thing in, it goes around entrepreneurs organization, a joke that most business books should be an article. You know, they have about an article's [00:08:00] worth of content and then 150 pages on top of that. And I never wanted people to say that to me. So I don't, I guess before we get into the M& A side, I don't know about you, but like I got an even deeper respect for people who write really good books cause it takes something.
Laurie Barkman: Yeah, it sure does. And I'll be honest. I hated my first draft. Yeah. I People say, well, how long did it take you to write it? And I'm pretty honest about it. And they say that, you know, end to end, it took a year and a half, but that's because I lost six months and I did a rewrite. And, it was really important to do the rewrite, I think.
And what I ended up doing was saying, okay, who is my reader? What do I think they care about? And after that, everything just flowed. The chapters pretty much fell into place because I realized that when People are interested in the topic I'm talking about. There's two aspects. One is pain and one is gain.
And I can't just take one. I gotta do both. And so that's the subtitle, right? How to and how to avoid, you know, [00:09:00] succession pitfalls, how to create valuable exit options. And the chapters of the book became pitfalls to avoid. You want to do these things because you don't want to step into this, you know, this or that.
So let's dive in. And each chapter just manifested in a float. And, I'm really, yeah, I became really proud of it. And I think that's The main thing is that whatever I put out, out there, it doesn't have to be the biggest bestseller. It did do well in its initial pop on Amazon and that's really exciting.
And the people who've read it have shared wonderful reviews and that's amazing. But at the end of the day, it's what people do with it. You know, I'm encouraging people to make action. That's why I'm called it a handbook. And I even tell you in the very first chapter, here's how to, here's how to hack the book dog ear it right in it.
Make it your own. And every chapter ends with an action table. What are you going to do? And key takeaways. And it was very purposeful in that mindset of don't just read this and say, Oh, that sounds great. You know, actually make an intention and do [00:10:00] something.
Corey Kupfer: Love it. So let's just keep going down that, that route.
So obviously, you know, we're not going to, You have everything people should go buy and read the book, but, you know, give us a couple of the bigger points in the book what are some of these pitfalls that you, address one or two of the big ones and, you know, and then how does they impact enterprise value or even getting a deal done?
Laurie Barkman: Yeah, absolutely. I kick off with the softer side. You might be surprised at that, but I kick off with the softer side and I talk about the importance of having a transition mindset and being able to focus on what's important to you for your personal transition. It's Avoiding kicking the can too much on some of these things, the personal readiness, the personal transition is kick cannibal, if that's a word, it's just too easy to say, Oh I'll figure that out later.
Well, guess what? People never do. And then it is one of the some of the major causes. I think there's a lot of lots of issues why, yeah. The data shows that many, a high [00:11:00] percentage, like 75 percent of business owners are unhappy. They express unhappiness one year after the sale. And there's not just one reason, as you can imagine, but how we personally identify with the business, especially if our name is on the door or if it's a family business where you have a lot of friends and social relationships.
And imagine it just feels like a cold water bath when you got to step away from that. It can feel very lonely. It can feel, that you've had a total change of identity and you're wandering a little bit aimlessly. And so there's a proactivity and thinking around personal readiness that I'm advising on in the very, very first section of the book.
Corey Kupfer: I love that. And I want to take it even a little one step further because I love that stat that 70, I don't love the stat, but I love being, making people aware of the stat that 70, you know, up to 75 percent of the, Folks, you know, are unhappy or have issues, you know, after they transition. And I will tell you, because I want to [00:12:00] give light on this, and I mentioned it before a little bit, but I really do.
There is a, some percentage of the 75 percent actually even go into very deep depression, right? Like, unhappy is one thing, but like clinically depressed, right, is another thing, and it's something that's not talked about. And I'm personally aware of some folks in this situation, and by the way, some of these folks are folks who exited with more money than they ever, than they and their kids and their grandkids probably ever need, right?
So it's not a matter, it's not like, oh, they exited and they, whatever, they got, you know, half a million or a million dollars and it's not, they still gotta figure out what to do. I'm talking about people who got tens or even hundreds of millions of dollars, right? And they literally, you know, depressed.
And, it's a topic that I really care about because I'm very interested in like one of the things I talk about generally is, you know, and I'm actually about to record a solo cast on and what specifically is about, you know, this growth for growth, six mentality and like anything where people think this is the end of it.
And then they get there and there's this illusion, right? Like, why are we doing [00:13:00] this? If that's going to happen. And, the last thing I'll mention, I want you to delve a little more into this, you know, on how you avoid this, how you prepare, right? How you work with people to do that. But, it is a reason why the kickoff, I'm running a conference in, in, in Austin, September 11th to the 14th for entrepreneurs, organization members, and they guess, on it, you know, it's a deals conference, not just M& A, raising capital, M& A, joint ventures, strategic alliance, that kind of stuff.
And our kickoff speaker, who has a not, it's, we're kicking off 9 11, he has a 9 11 business story that connects people. But the other thing about him is that he was a friend and client of mine, and he, he was hesitant to exit because he knew somebody very, very well who went through exactly this. Huge exit, literal, you know, clinically depressed after that.
And, Damon's a guy, Damon Gersh is a guy who actually, you know, did well, you know, you train people on because he took an extra year, year and a half to figure out how he does this in a way where he's going to be happy and motivated and excited. And it's over three years later and he's [00:14:00] did that successfully.
So we're actually having him address this specific point from stage in Austin at the deal exchange conference for EO. Yeah so give us some tips. Sour. How do folks, like, first of all, there's the recognition, right, that this is a risk and you should know about it. And then, you know, what do folks need to do to try to avoid this big issue?
Laurie Barkman: Well, I think of it as a spectrum. You have on one side, well, things that I call pull factors, and then the other side, you have things that are called push factors, and then there's middle space. So I'll cover all three. Pull factors are positive things. If you want to kind of think about at a high level, things that are Pulling you in a positive way to your next thing, whatever that next thing is.
So for example, I mean, I have a long list of things in my masterclass that I give as examples and in the book, but it can include things like being a grandparent, right? You want to be a grandparent full time, or it could be starting another company. It could be, traveling on the, around the world on a sailboat, you know, all of these are real [00:15:00] examples, and you're shaking your head so you may know some people who fall into those buckets.
There's an infinite list of things that can make us excited for our next thing, right? There's, you just have to contemplate what those could be. It might be becoming a craftsperson and learning craft, you know, maybe you've always wanted to be a woodworker or, and so on, or fishing. So all of those things, and relationships, it's what you do, it's who you do it with, it's where you do it, all of those things can become positive, pull factors.
On the other side of the spectrum, we have things that are push factors. So what that means is it feels like you're being pushed out. Yeah. Very commonly, Corey, these are negative, very negative things that we don't like to talk about. death, divorce, dissolution of a business, departure of a partner, disaster.
You know, if you think about, natural disasters, but also COVID was a pretty big disaster. And you could also throw disruption as another D in there. So the D's. We don't like to talk about the Ds, they sometimes feel like taboo, but [00:16:00] these are the negative things that if we're not prepared can really, sink, sink a business and really feel like you're ready to get pushed out or you want to get, you want to leave because it's so stressful.
And so there's the middle space and the middle space is an okay place to be, right? Because by the way, There's a correlation with business value. Let's say it's under 10%, but it's there. It might be stronger on the negative, but certainly on the positive. If there's been some studies done this, but if you are positive and working towards your next thing and positive thinking about it, right?
Head, heart, wallet is a framework I like to talk about. So if we're in alignment on those things. What's going to happen? Your body will follow. You will put work into it. You will roll up your sleeves and you'll go in that direction. If there's the negative things, what are you going to try to do? You're going to kick the can, you're going to avoid it, you're going to have to, you know, go down that path.
And this middle place is a watch out zone, because what can happen in the middle is [00:17:00] complacency. So you might say, Well, what about retirement? Well, retirement isn't complacency. Retirement is just retirement. And, it doesn't necessarily make it, from a correlation standpoint on value, positive or negative, it can be in the middle.
The watch out is if you are taking your foot off the gas towards the end of your run, which, again, might be It might be, again, based on your age or life stage. It could be a retirement and you're taking your foot off the gas. You're not reinvesting in the business. I was leading a webinar a couple months ago and, after the webinar kind of did a hot seat round table of folks in the audience, the group was about 10 people.
And the first guy, you know, said, okay, tell me about your business. What are you thinking in terms of an exit timeline? You said about 10 years. I said, Oh, okay. And then as the questions unfolded, I found out he's not reinvesting in the business. He's not doing business development. He's the one responsible for his business development.
And I said, Hey, red flag, red flag. Yeah, right flag. You got to see what I'm [00:18:00] seeing here. And I think I scared him a little bit. Hopefully, you know, it's almost like what the doctor ordered is you got to get a dose of, of the bad news. So, you know, he had good news for him 10 years. He can change course here.
But you don't want to be waking up 10 years from now going, okay. I'm ready to sell now and then all your competitors are totally outgunned you. And your business isn't going to be worth nearly what you think it's going to be. And there, and therein, Corey goes into that back to the, why do we have exit regrets, right?
Sometimes we just don't double down and reinvest. We're exiting in a negative tone and, you know, we don't feel good about it.
Corey Kupfer: Yeah. Yeah, this is such an important topic to me as I said, because. Yeah the exit isn't the ultimate goal, right? What's the purpose of the exit, right?
Like, you know, why, why stop working at your company? Why sell it? Why have all that money? Why, whatever. And if you can't answer that question, there's nothing that, you know, that tries, especially, you know, and you alluded to it, even though you didn't say it, but you alluded to it, like, especially because [00:19:00] part of the entrepreneurial journey for a lot of folks is that.
And this is not necessarily great, but it's just what happens for a lot of folks that they so get, they so identify with their businesses in terms of their own identity and their own worth and their own, who they even just, you know, if you ask a business owner, who are you without your company and your title and what you, you know, whatever, especially an entrepreneur, a lot of them are gonna have trouble answering that question.
You know, I've thought about it. So I have other parts of their lives. But you know, especially this classic entrepreneurial hustle culture. you know, all in, it often becomes an identity for people, right?
Laurie Barkman: Oh, yeah, absolutely.
Corey Kupfer: All right, maybe just give us, is there one more you want to highlight out of all the things in the book, in terms of the pitfalls?
Laurie Barkman: Yeah, and I think I'll share just kind of the overall framework so it makes sense in context. There's three aspects that I encourage people to be spending time and thinking about and aligning overall, creating a strategic transition plan and to break it down into [00:20:00] three core pillars. The first one is what I mentioned, which is personal readiness.
The second one is financial readiness, and the third is business readiness. And all three of those aspects for business owners need to be in alignment. And what I think is really cool if people, certainly want to dive in and learn more, you know, I think it'll all start to make a lot of sense when you do these exercises.
I'm leading you down a path. to explore all three of these through the book and of course through the masterclass. I've got all kinds of exercises and it's almost like I'm leading you in a workshop, right, in these videos and everything. So it's very easy to consume and very doable to do these exercises.
The key thing, Corey, is that people have to make the time for it. It's just like another part of being a entrepreneur and owner is making that time. So yeah, the framework overall is business, personal, financial. And how do we get things to align and how do we give ourselves enough runway [00:21:00] so that they can align, and when you have a business.
Operational plan I'll call that is different than this plan is just for you. You might want to not want to have your team eyes on it. You're not ready for that, but you might want to share some of the things on the business strategy that they need to help you implement. And so that is really a really key intersection point, that I discuss is, you know, you gotta be looking at your business from the 40, 000 foot down, and then you gotta work with your team to help you execute, kind of the bottom up plan.
And this book's gonna give you all kinds of ideas to identify what potential risks there are, whether it's on the personal side, but from the business side, you know, the big categories of things to look at are the attractiveness of the business, the transferability of the business and the risk inherent risk factors in the business and if those risk factors can be mitigated or any of those other aspects can be built up [00:22:00] or not.
And the answer sometimes is no, they can and it is what it is. And sometimes it is. Yeah, absolutely. We can. We just need to invest in it and that's the alignment piece.
Corey Kupfer: So, you know, that leads me to, I admit is a bit of a softball question here, because I know that, you know, but I do want to discuss the make a point.
So, you know, in light of the fact that, there are these aspects of your book that say, okay, Hey, listen, these are the things you could do and need to do to, You know, value as a sale and, you know, maximize enterprise value, all that kind of stuff. When should people going to your book, your course, because a lot of folks like the default people that are no better and say, oh, business transition handbook, I'll read that when I'm ready to do a business transition.
Right? So. I admit it's a supple question, but please,
Laurie Barkman: yeah, and I think that's part of the fallacy, right? You can't do exit planning when you're exiting is just too late. And I think the most common answer and the answer that I would probably, emphasize is five to seven years. And people who say to me, Oh, [00:23:00] I'm one to three away.
Well, here's the translation. You actually need to start right now. You're already late. And the people that say 10 years, that's awesome. Great. Love it. Fantastic. And any longer than that, absolutely on board with it. So I think five to seven is kind of the sweet spot. There's a growing percentage query of entrepreneurs who are saying that they intend to exit their company within the next five years.
Some of that is baby boomer age related. Some of it is life stage and kind of getting burned out related, right. They've survived a number of these entrepreneurs that have been through, a number of economic crisis, COVID. I mean, they're just worn out. So some of there's some of those things too, that are influencing that number.
Those people probably need to get started right now. So with the course, what I'm trying to do. Is reach entrepreneurs earlier in their journey. And what I'm saying with end game entrepreneurship is building with the exit in mind. And so these are for companies that aren't necessarily day one startups, but I'd [00:24:00] love for the day two or, you know, week one.
And I'm being facetious, but when the time is right, I don't think a company that's under three years, you know, I would say, no, don't read my book. I mean, it's all, all goodness, right? If you want to build value in your business and you're building with an exit in mind, the book, the course. Is all goodness for you.
And, you know, why is it that venture backed startups, when they were going through a pitch deck process, know inherently that the venture capitalists are going to ask them about their exit plan? Why is it that no other entrepreneur takes that to heart as part of what they should be considering and doing?
And so that's another big aspect of the book is reverse engineering your exit, building with the exit in mind so that where you have an understanding of who Be the best fit buyer for us one day and reverse engineer and when time is on your side you can create more options and you can create more pathways.
And so that's the other big why.
Corey Kupfer: I love it. So before I shift gears, I want to talk a little bit broad on what's going on in [00:25:00] the M& A market, maybe, you know, what's changed in the four years almost that we haven't talked, talk to me a little bit more about the book and the course, like, I think people have a general idea, but like, you know, who's the ideal, target.
Is there, I mean, Is there anything industry specific? Is it geographic specific? I'm assuming not. I mean, it sounds like this could be for any business that's looking to grow and exit, right? But is there, you know, and you mentioned a little bit, that, especially this idea of building the exit, you know, early on, but is there anything more specific on like who this is already really targeted to?
Laurie Barkman: I think it's the two to 20 million lower middle market, a company that's been around a couple of years, you know, at least a couple of years that's found its way towards product market fit. If they don't have product market or product service fit they probably will feel distracted.
I know entrepreneurs enough to know that's probably the case and that's okay. Right. At some point, and I don't know what that is, if it's five years out, if it's 10 years out and they're on a runway. Some at some point on that runway, [00:26:00] you know, they're going to start to think about their exit and it's not always age, right?
It's not always age. It's life stage and it's kind of where you are. So my book's trying to meet you where you are and the course is really meant for meeting people where they are because the nice thing about an asynchronous course And self paced people can pick up and come back to these video.
These are short videos. There's over 70 of them, right? And the order it follows the book chapters. And so it just flows nicely if they're following the book and that were, you know, they don't have to read the book, but it's kind of a nice accompaniment. And with all the exercises, they might find themselves jumping around, which is totally fine.
And, but at least knowing what that content is, it Corey, that it's, The masterclass, I chose that word because I was pretty thoughtful about it. I said, you know what, you could go get an MBA or you could take this. And this is not an MBA, right? This is a recognition that you're busy. You're an entrepreneur who's going to kind of consume it on your own time, but The level of information is kind of MBA worthy, [00:27:00] okay?
And then the other part of it is there's a practical case study kind of, you know, tangible understanding. This isn't just some esoteric math. This is like real math and real numbers and why they're important to you. And then all these marketing concepts and sales concepts, all this stuff kind of blended into one.
And it's, I think a great investment, you know, people who have a million dollar revenue business, if they invest 1%, that's 10, 000, I'd be hard pressed if someone says, I won't get an ROI from that, I will challenge them and say, yes, you will. You just got to put the money and they're not the money, but you got to put the time in for the ideas.
So it's kind of like. this exponential ROI when you work on the enterprise value of your business. And that is like the biggest best kept secret, right? If we are truly investing in the enterprise value, what's 10, 000? You know what I mean? So, and, the other thing in addition to the learning side is support.
You know, I call myself the [00:28:00] business transition Sherpa for a reason. It's support. It's being with you on your journey. And when I created the masterclass, I thought, Oh my God. I'm with them, but I'm not. And I know they're going to have questions. People are going to have questions and I don't want to just leave them.
So I wrapped a couple of things with it that I think are really important and make it unique. One is a community in and of itself, it's not unique. However, the way we're doing it, I think is unique because we are tacking on a one year complimentary. It's included, with the price is group advisory.
So you'll get access to, business transition experts and ask questions and go through chapters and hopefully, you know, connect with other entrepreneurs from a peer to peer perspective, but we'll be facilitating those ask anything sessions and so on. And so that's my chance to sort of say to the communities, look, we're here to support you.
You know, this is content that you can consume on your own, but I know. That left to entrepreneurs own devices, they're going to get really into it for five minutes and then [00:29:00] walk away. So this is a way to hold everybody accountable to it. And you mentioned EO and, you know, there's Vistage and groups. This is a perfect way that EO forums, you know, if everybody in the forum gets access to the course, they can hold each other accountable.
And I've been talking to some EO groups about that. And so that's the other thing that makes me excited is, you know, so who's this best for? I think it's great for companies that aren't day one, but are, you know, at least three years old, they're between two to 20 million revenue. It's a U. S.
focused approach. However, if your company is in Canada or if you're in another country, I guarantee you'll get value from it. But it is definitely a kind of a U. S. focused, you know, some specifics on tax and stuff like that.
Corey Kupfer: Right. All right. So let's jump out. So, you know, when we spoke last, at least on air, it was November of 2020.
Right. So, I guess that means we're in the pandemic. Okay. As I think about the timing on that, we're recording this in July of [00:30:00] 2024, it'll probably air in August or September, right? So we almost four years. It's three and a half plus three, whatever, years now. Let's talk a little bit about, I mean, a lot has happened in that time, right, generally in the world, a lot has happened, in the deal market, let's talk a little bit about like, what are some of the differences?
What are the trends? What have you been seeing compared to the last time you and I were together?
Laurie Barkman: Yeah, I think, you know, there was still a lot of deal activity happening. It hadn't totally closed off in the pandemic. So I think when you and I met, you know, there was still a fair amount going on, but there was a lot of uncertainty building.
And so you had this combination of private equity groups, with Dry powder to continue to invest and looking everybody's looking for quote unquote the right deals Strategics were focused on supply chain issues and trying to keep the lights on So I think on the strategic side it was pretty challenging and I think it remained challenging for a while You know more recently with the rising [00:31:00] interest rates.
It's been a little bit it's put some pressure on prices, and transaction value. So some would say that makes it a buyer's market. But I think for the buyers, you know, the lending markets are tricky and they really have to be able to service the debt. So yes, that could put some pressure on the price paid for these businesses.
The other thing that I'm seeing is that the private equity firms who are looking for deals are moving down the into the down market into the lower middle market, which I'll describe as under 50 million. You know, there's different definitions of that. But what the way I kind of look at the lower middle market is if a investment bank says the company is too small or the deal is too small, that's lower middle market.
So it could be 75 million in revenue or what have you. So I think that's also a trend. I see a lot of, private equity firms have two investment thesis. One is focused on the platform and, you know, of course that's going to be a larger investment. And the other is, you know, [00:32:00] more of that tuck in and add on.
And so where I focus is in that lower middle market. So I've had, you know, more conversations with PEs, who are interested in those add on areas. I think the rollup trend is still continuing and it will. the pockets of where people have interest is developing and will continue to develop for strategic advantage.
And then the other type of financial buyer that we really don't see a lot in the news, it's not the sexy PE, everybody knows the PE group kind of moniker, but these groups are also financial buyers and they are in it for a longer term than comparatively. You know, they are family offices now. Not all family offices do investing and do and have a buy and hold strategy.
But if a family office is doing investing, most likely they will have a buy and hold strategy and comparing it to a private equity firm who has more like a five to seven year kind of. Transcribed hold and sell time horizon. And so if you're, looking to sell your business and you're looking for fit, you know, one of the things I talk about in the book [00:33:00] is who's known your business after you.
And I go through the different types of buyers, right? Strategic, financial and related. And so when it comes to this segment, which we're focused on here, which is financial buyers, there, there are more financial buyers than you might be aware of, right? So the first of course is the P second that I've mentioned.
You know, here's the family office. And the other one that I think has developed, quite a bit over the last five years are the acquisition entrepreneurs. And these might be, small search funds, people who are being compensated by potential investors to go find a business. They're typically approaching baby boomers who do not have a succession plan.
And there are, they're all over the country. They're all over the country saying, Hey, I want to buy your business. So it's been really, really interesting as an M& A advisor talking to potential sellers and I say to them, Hey, have you been approached? And they're like, yeah, I circular file those or yeah, I don't know what to do with them.
And that's where I can be helpful. And also, you know, in representing on buy side or sell side, representing an [00:34:00] intermediary role to say, look, you know, a lot of times those companies, the sellers aren't ready. And the other realization, for both the book and the course, a big takeaway is that buyers buy on their time, not yours.
And so when it comes to the market trends, I think that will still always now and forever, you know, be a truism, buyers buy on their time, not yours. And it's an, it creates that imperative that we need to be thinking about who's the best fit buyer. What motivations do they have? What problems does our business solve for them?
Are business ready so that it can be sold at any time, so that if you're approached by any of these, you know, strategics or financial buyers, that you are ready to have a conversation. You're ready to engage. And so, Corey, in a nutshell, you know, those are some of the things I'm seeing.
Corey Kupfer: Yeah, that's great.
And definitely we're seeing a lot of the same trends. I mean, you know, one of the things you mentioned, family offices. And, I think, you know, there's definitely been a trend we've seen where more of them are getting into, having outside investment [00:35:00] arms that are focused on long, you know, and again, not always, but more of the long term holes.
And you know, it's a very different kind of capital. In fact, I just, I won't see him in the industry or whatever, because it's in the press. You know, now, like we have a new client who, in his prior business had PE back money, and, let's just say he's no longer at that firm.
And this time around that his new venture, he's got family office money very intentionally because of the difference because of his experience and the difference in terms of the, you know, what he wants. You know, so we're definitely, yeah, we're definitely seeing that. And then,
Yeah it's interesting. So the ability to understand, I mean, even like start with the difference between a financial buyer and a strategic buyer, and then even within, I mean, I love the fact that with even within financial buyers, you, you know, broke it down into three segments.
And obviously it's even more than once than that, right. You know, in terms of, I mean, Yeah, I put
Laurie Barkman: ESOP under financial buyers too. But of course that can spill over into the related category depending on how you view it, but it's a bank transaction most often.
Corey Kupfer: Right. So yeah, we're [00:36:00] definitely seeing this trends and then, yeah, I mean, certainly in, for example, financial services and, you know, we do a lot of wealth management and the, the PE in the last five years, like in the time period that we're talking about last four years, let's call it.
I mean, there's been a huge shift in PE money coming into that space and doing exactly what you're talking about, right? Finding a anchor investment and then, you know, funding all the tuck ins and the expansion. And there are firms in that industry that are doing 20, you know, 20 tuck in deals a year, you know?
I mean, that's a lot. Yeah, it's a lot. And, you're in an industry where you didn't even have any money to speak up more than five or seven years ago at all. Right. And now it's all over the place and the rate of acquisition has gone up significantly. And they did. And it's one of those industries that didn't except for one month where the stock market dropped during COVID.
But then it came back up. Like it pretty much did not like no deal got killed even that time that just delayed for like 30 or 45 days and then kicked up again. So. [00:37:00] This is an industry for that, that didn't even largely didn't miss a bean kept growing through COVID and as it's kept coming. Yeah, so it's really interesting in that way.
So listen, there are so many factors here you know, and it's impossible to have a crystal ball. So I'm not asking you to guarantee that, whatever. But, you know, obviously one of the things we all do as advisors is to try to guide people where we're planning in the future.
And one of the things I, before I go, one of the things I love that you said is sort of being ready to, you know, to sell, right. Cause you don't want, you know, when the buyer's ready. And I've definitely, for example, in the wealth management space had a lot of clients that were, not looking to sell but have because the multiples have gone crazy comparatively because the B money has come in and they, I remember I had one guy who was, you know, I spoke to him a year before and he said, yeah, five to seven, I got a five to seven year runway.
I can continue to build this thing. And then we'll look at it. And a year later, he called me up and said, okay which banker should I use to, like, I thought you were, you know, he said, Corey I'm seeing these multiples that they're almost triple what they used to be. Like I don't know how I can, I don't know how long this is going to last.
And I [00:38:00] don't know how I can pass up, you know, this kind of money. So what do you, you know, I mean, we got interest rate factors, which, you know, study about it. We got inflation that's coming down. We, there's politics, there's so many things, you know, so many factors that could change things, tax policy, you name it.
Other than just generally saying, be prepared, right. It's a shell. You know, I'm sure you get these questions, right? As somebody who is, you know, putting out content, whether it's sort of, you know, and then in, in your direct consulting practice, like, how do you address people's question? I guess the big bug would be like, how do I plan with all these factors that create uncertainty and also.
That unlike what, you know, some of the talking heads, say like, I always joke about, I love when they say, Oh, the stock market went down today because of X, Y, Z. You have no idea the stock market is so complex to add to predict it on what actually caused something on a day to day basis.
Like you have no, like you're making that up. You're just attributing it to some factor, any case. How do you address people when there's so many complex factors and when you don't have [00:39:00] a crystal ball for the future to help sort of plan in the best way they can?
Laurie Barkman: Well, as you mentioned, I do work with clients one on one in an advisory capacity, and if it's in a pre M& A capacity and they've got a bit of time, I'm for preparation, that's ideal, right?
So how long, how much time do we need? It depends, but let's say one to two years at a minimum. And, one of the very first things we're going to do, Corey, is we're going to do a number of different assessments to baseline where we are. And, a big one is a business estimate of value. It's going to put us in a way that we can have conversations about, well, why might the multiple go up or why might the multiple go down?
Because doing valuations is an art and a science. And I have access to databases and we can look at things and we can have conversation about risk factors. We can have conversations about value drivers and make comparison on benchmarks in your industry. And that's a great place to start because in doing that, you know, obviously we collectively are learning, but also we are determining where priorities should be.
Yeah. And so that [00:40:00] focus, if we like to think in 90 day chunks, you know, in EOS, we're using rocks, big rocks. What are the big rocks? And where should we be focusing? And so that is the approach that I use with clients in an advisory capacity in an ongoing basis. The other way I work with clients and use that approach to baseline is not only the business.
But it's the personal readiness. I have a personal readiness assessment. There's a financial diagnostic where we can talk with them about what kinds of, what's the magic number? Why do we think that is? What do you need to be reaching? And do we have a gap? And I have some excellent, calculator sheets that we use to say, okay, well, let's work backwards.
And what growth rate do we need to be hitting or, and, or how much time do we have? And we can do some math on that. And that data is really, really interesting because then we're, we're not guessing anymore. Right. Or we can have some, we can kind of lock in that we can always change and modify those numbers are written pencil, so to speak, but it gives us a starting point.
Because if there's a value gap, you have to understand whether or not you can close that gap. For some [00:41:00] companies, they say, well, I'm going to acquire businesses. I've done what I can through organic growth. It's time for acquisitive growth. And because I'm an M and a advisor, I can support them on the buy side.
I had one client, just had a closing yesterday, which was really exciting. And I had worked with him and his wife for nine months to develop their strategic transition plan. And what was pretty cool about it is that. The husband and wife team didn't know that they were going to sell to a third party.
They wanted to explore other options. And so that's how we approached it. And their strategic plan kind of laid out, you know, those options. Now that they've sold the business, I want to do, I do want to kind of go back to them and say, look, there's some personal readiness and transition things that I still want you to be mindful and thinking about now, even now that the business is sold.
And so I think that's the power of the process is if we can work together proactively for, again, a year or longer to help you get ready, to help your business get ready. And then when that little bluebird comes a calling, which it did for them, they [00:42:00] were ready, you know, and they were mentally kind of ready in that place and felt like, yes, now it's time.
We weren't ready three, four years ago. We're ready now.
Corey Kupfer: Yeah. And I love that little point you made about how, you know, you can actually use deals. I mean, so, I mentioned this once or twice, where I did a talk, I was in Singapore for the global leadership conference for entrepreneurs organization.
I did actually, that would do three times, three workshops. And, the theme of it was, there's a deal for that. Meaning that any business frustration, challenge, or opportunity you're looking to take care of, like, you can do it through a deal, whether it's an acquisition, joint venture, strategic alliance, whatever.
Not that you should, it just should be a tool in your toolbox. You're having trouble hiring people, you can recruit, you can get bonuses, you can put lists on sites, you can hire recruiters, but you can also acquire, do an acquire, right? Okay. So in this case as well, talking about the gaps that you were talking about, hey, you know, you're thinking about exiting, especially if you are that five or seven or 10 years out.
Okay, well, if we want to fill that gap, we can fill it organically. We can [00:43:00] build that capacity organically in a house. We can hire people, we can build that process of system or try to expand the product line into a new market or whatever it is. But we could also potentially do a deal to get there. And You know, it's interesting because the, you know, the roll ups understand the conversation of multiple arbitrage, right?
And it gets, you know, at an extreme, it gets a bad name and it should, like if the roll ups who are not adding any other value and are just, you know, lining the stuff up just to get multiple arbitrage, you know, the market goes bad, whatever, and they're overpaying, you know, because someone else would pay, you know, a 5x.
EBITDA or whatever it is on, you know, for the company and that, and they're gonna pay an eight because they're gonna get a 12 or a 15 and then the market changes, or that doesn't work and they haven't added any value, they've overpaid. Right? So there, there's a problem with that, but there's also a real, add value multiple arbitrage where companies get, not only do you get a multiple on a higher base, but you get a higher multiple because you're bigger.
Right. And there's a legitimate way to do that. So I love this idea that you pointed out about. You know, potentially doing deals with its [00:44:00] acquisitions or others to fill the gaps. I want to highlight that so that you can then be more valuable to someone else. So you don't have to be, a roll up to do that.
You know, one or two of those deals that can make a big difference.
Laurie Barkman: Absolutely. Yeah, there's a potential client of mine. We're in conversations about a buy side And he's in the transportation industry. I had met him. I did a workshop, vistage workshop, I guess Well more than a year ago and lo and behold he reached out and he said yeah, you know, we're considering growing acquiring you know, kind of the baby boomer strategy, right?
They don't have successors. We want to start to, to roll up a few things in our geography. Can you help us with that? And so in that way, I'm kind of like they're outsourced, Corp dev department and, you know, they've never done this before. And so there's that side of it. So I'm pretty excited about that opportunity.
I do more sell side than buy side, but I think strategically buy side is pretty fun.
Corey Kupfer: Yeah. Yeah. We're the same. We're doing a lot more and more like we traditionally done most sell side [00:45:00] as well. But we're doing more and more by side these and we've always done some by side, but we did like the ratio is going up on the by side and it's fun.
All right, well, listen, we can talk for another hour, but we're running out of time here. So, let's go to my, the final two questions. One is, just where can people find out more about? All the things you have going on, you serve as the book, the course, the whatever, I assume there's a hub place.
They can go for all of this, right?
Laurie Barkman: Yeah. Corey, the best place is the business transition Sherpa. com. It's got my book, my course, the podcast, my advisory services, and absolutely, if people want to get in touch with me, you know, please do connect, and then there's even some free. resources, some business transition resources that are available to you.
If you're interested to take some of those assessments that I've mentioned, they're available on the site too.
Corey Kupfer: Love it. All right. And listen, my final question is usually about my highest value in life, which is freedom. And I asked people what does freedom mean to them, but you covered that on the last, episode.
So I'm going to, I'm going to make it a little more specific here. And I'll show my bias because I, obviously freedom is a big value. [00:46:00] But how important is, you know, like the conversation of freedom when people are looking to exit. Does that come up for them?
Like, you know, where is that in the conversation of, of what you do for entrepreneurs and business owners who are thinking about exit?
Laurie Barkman: Yeah, it's so important because people do see their role in their life in a different way. You know, when you start to talk about a pretty big change or pretty big transition, And, you know, for some people they are seeking a little more freedom, heavy is the head that wears the crown, right?
And so you're always going to bed every night worrying about payroll or you're worrying about this client or you're worrying about something. And I think some people more than that, I mean, freedom ties in with it. Freedom is a desire to choose how and who and where you work and things like that and how much you work.
So I do feel like freedom, you know, kind of fits into things. But I think for the, Just that weight lifting, you know, off your shoulders. I don't know what the one word would be But I do think that that feeling of freedom [00:47:00] is first when you feel free of those encumberments and it was funny I can't remember who I was talking to Oh It was one gentleman who came on my show and he had sold his business and it got to about 150 million revenue It was pretty big company And he talked about that feeling that being an entrepreneur is like being in prison.
I was like, Oh my God, that just sounds horrible, right, where you're just so tethered. And I think that freedom comes when you feel untethered and you can make choices. And for him, he wanted to, you know, travel, he want to spend more time with his family. He's created another business, but it's more mission oriented, like how to help other entrepreneurs.
I see that a lot from. Successful entrepreneurs kind of doing their next thing. They don't want to just put their feet up on the desk or go to the beach. They get bored after a day. And so it's something that is freeing in that, you know, you've got food on the table. You can turn the lights on. You don't have to have, you know, a six figure, seven figure income, whatever it is, you can be happy with whatever it is and feel fulfilled.
in a [00:48:00] different way because you're unencumbered from the financial dollar.
Corey Kupfer: Love iLaurierie Barkman, thanks for being such a great guest on the DealQuest podcast.
Laurie Barkman: Oh, Laurie, thanks again for having me on again, two times, I'm so honored. Two times.
Corey Kupfer: All right, folks.
