Ep 4: Destination Checklist – An Exit Strategy for a Balanced Life

Welcome back to the podcast. My name is Doug Sandler from Turnkey Productions. This is episode number four, destination checklist and exit strategy for a balanced life. Wouldn't that be great? Balanced life and money in your pocket because you've exited a company.

They say all good things must come to an end, including your time as a business owner. The trick though is making sure your exit isn't as dramatic as the collapse, but more graceful as like a bow out, preferably with a cocktail in hand, maybe an old fashioned. Well, Ron Boxdaller is back one last time to talk about exit strategies or as I like to call it, how to leave without the whole thing going up in flames. Ron, let's do it. Welcome back to the podcast.

Doug, thanks for having me. Good to be back. So how many business owners wait way too long to think about this part? I know in my particular case, it was one of those things where I had it in my brain from the very beginning, but just making it materialized. So tell us what the problem is oftentimes.

Are we waiting too long? I would say 95% of business owners wait too long to actually start their planning for an exit. And I'll tell you, and I say that because how long in advance do you need to be planning for a successful exit? And I would argue five years, look five years out and say, okay, I think this is where I'm going to want to go. And then let's start working backwards and putting the plans together.

Like do you run your business like it's your personal piggy bank, right? I mean, you've been running for 20 years, it's been successful, you're the only owner and you're, it's a lifestyle business. It's been a great business, but is someone else going to want to buy that lifestyle business? So this is the time you got your five years out. Let's start bringing in that fractional CFO or full-time CFO or a business, a broker, a business broker to tell you what a buyer, a potential buyer is going to be looking for.

So you could start prepping your business. And then when you go to market, you've got a few years of solid financials and all the data that any potential owner is going to want to look at to make an offer on your business. And the more organized that is, the higher valuation you're going to get. I love your reference too. Are you using your business as a personal piggy bank?

And that is the kiss of death for anybody that is wanting to sell their business because the future owner is looking at the balance sheet or the profit and loss and saying, what's there to buy? There's nothing left at the end of the year. As a matter of fact, you show a loss every year. What do I want? What do I want this business for?

It's a, look, there's, there's, there's accounting experts out there that might tell you, okay, yeah, you want to minimize your tax burden, right? So in men manage your tax burden, you might have a negative loss, but at some point, somehow you've got to change that. So someone's coming to buy your business and five years gives you that opportunity to put your business in order so that you're going to maximize your dollar. And if you're looking at a multiple, when you're selling your business and that multiple could be anywhere from, I say, three to 10% or, you know, three X, and if you got a million dollar business, maybe you're going to get 10 million for that business. But if it's only a $500,000 business, well, you're going to get half that, right?

So every dollar spent five bucks, it just got to think of it in those terms, whatever it is for your business. Well, let's talk about it for just a second. Why should businesses? It sounds like you've just given me the answer, but I'd like a little bit more specific answer why business owners might want to think about an exit strategy right at the very beginning. I mean, I think that good habits die hard.

I mean, if you, if you start good habits in the beginning, those habits are going to carry their way right through the exit. Absolutely. It's like, it just goes back to that adage, you know, if you don't know where you're going, how do you know when you get there? So I start my business, but where do I want to take my business if, you know, we work a lot of law firms. I want to, if I'm a law firm and I'm just looking at some point when I just start, it's I'm the asset, I'm my knowledge.

But at some point, I want to grow my business to a level where I can actually sell it. So there's a value to sell it to someone else starting their practice without those process procedures and everything put in place, it's an operation now. It's not a saleable business. I go as far as actually was, there's a lot of things out there right now with the, in the legal industry and there's certain entities out there buying up certain types of law firms that actually have a big value, but it's only certain types of law firms that actually have that value where you can get a 5, 7, 10 percent, 10 times multiple versus the average law firm of no value. So once you're done, you just retire and you, unless you've saved a lot of money, that's really all you have.

You don't got anything to sell. And unfortunately, that's the case with many small mid-sized firms, organizations is they have nothing left to sell. So if you start from the beginning, knowing where you want to go and you're building that up, when you go to – we really think about this with baby boomers, right? We got so many baby boomers that own their own business and they would love to sell that because most of – most entrepreneurs have their wealth tied up in their house or their business. So you need to be able to sell it to get your retirement money out of that because you don't got that pension as, you know, maybe a government employee might have or at least they used to have.

So, I think you want to make sure as you're starting your business, be thinking about where you want it to go and what you want that end game to look like. And most of us don't want the end game to be we just die. We want it to be we sell and then we go travel the world or do whatever we had planned for it, whatever our ambitions are. I think about the ego of the early stage entrepreneur and the identity that they have wrapped up with their business in their own world, they can't separate their identity from the identity of their business. I mean, maybe can you share why that might be a mistake or maybe why that's a positive thing?

Well, I think it's a mistake just all in round that we maybe experienced more so in the United States than the rest of the world. I mean, it's – you go to Germany and they sit you with someone else or anywhere in Europe, they sit you at a table, maybe there's another couple and you might spend two hours talking to them and your business will not come up for those two hours. You do the same thing in the United States, although they rarely ever sit us with someone. But if they did, the first thing you talk about is what do you do for a living? So we associate ourselves with our business, which I think is a mistake because what happens if that business fails?

You know, it doesn't mean you're a failure, it means that individual business failed, right? You're a whole different identity than your business, so, you know, treat it that way. Let's talk about some of the telltale signs when you know it's time to step away from your business. Is there a time when you know, you know, I call it the symptoms, how do I know that it's time for me to get help because I've experienced these symptoms and my I want to end up selling, but I'm too sick. I got these symptoms going on.

How do I know? Yeah, I think, you know, if you love what you do when you start to get that point where you're not loving it as much, you're not getting up early in the morning or whatever what you used to do when you started you, that excitement, that drive that was there, you probably reached that point where it's time to do something else. I like to look at life in 20 year segments, you know, you got your first 20 year kind of a kid, you're growing up, you're having a lot of fun, you do some schooling, the next 20, you're working really hard, maybe it's at 40 when you feel you got the experience and maybe the capital to start your own business, now you're going from 40 to 60 and you're running your own business, but then you're at 60 and you're thinking, hmm, is this what I want to continue doing? And did you do a really good job in that 20 year segment to be able to walk away and not have to work for that, you know, 60 to 80 segment of your life? Right.

Kind of one way. I look at it, but I think there's a couple things is if you're not loving what you do, you don't get the feel for it, you start to let things – you start to let things go, right? You're not keeping your pulse on maybe the business, maybe it's kind of running itself and not going so well. You just look at little telltale signs that maybe you're not continuing to do what you used to do. That's when you need to really be thinking about, I need to get out.

And if you plan your exit strategy, then you're going to get the most as you're exiting your company. So, the idea of creating a business that can run without me or in the case of an entrepreneur without that business running without them, is there a way that you can create systems and processes or characteristics within that business to make that happen? And how do you do that? Yeah, I mean, I look at it and there's experts out there, you know, there's operating systems, there's the OES system, there's Pinnacle, there's several others. Implement those into your business so that you run it with structure.

And as you're – if those are running with structure and you're going to market your business to the budding entrepreneur or a VC company or anyone that wants to put capital, give you capital for that asset, you're going to get a lot more money if there's structure because then they feel comfortable that that business is going to continue to run without you. Like, you make yourself unneeded in your business and that makes you more money. It's kind of counter thinking to many of us think like, no, I need to be involved because I am the business, well, as long as you're the business, no one's going to want to pay money for that business because when they buy it, you're gone, right? So you need to be very – you need to be disposable, you need to be able to create a disposable person in yourself to allow your business to run and then someone's really going to want to buy it. If you talk about the perfect work-life balance, you know, you think about somebody making a transition from being a business owner to the next chapter of their life which may be selling the business or exiting.

How do you actually do that? Is there a process in place that will allow you to do that? Are there brokers? Are there people that help you design that? What happens next?

Yeah, there's a whole budding industry, the exit industry out there where there's a group of individuals, companies, organizations that can assist a business owner with an exit from their business, a successful exit from their business. Majority, I'm going to tell you to start three to five years out and then we're going to walk you through that process over the next three to five years and then at that end they're going to be right there to assist you on that sale and of course they're going to take the brokerage commissions out of what you're doing but it's worth every penny because hopefully they're going to get you five to seven times what you would have got otherwise. So yeah, there's a whole budding industry, the exit industry that's full of resources. How do you know when you're financially ready to exit and how can somebody ensure that they're financially prepared and getting the right dollar amount when it's time to exit? I think, well, how do you know when you're financially ready to exit, boy?

Are we ever? Is anyone ever? I mean, financially you think through, well, here's number one, if you had goals written down and you have goals written down for what you want to do after you retire, good friend of mine Rex had a Chevy dealership and I remember sitting down in Florida with him, he was head of second home down there. He was getting ready to retire and the question came to the table and said, Rex, what was your number? I was a little surprised that a young gentleman asked the question but Rex was pretty open about it.

He says three million was my number. Very specific. Three million dollars was his number to exit because he knew at three million dollars he could live the rest of his life the way he wanted to live it and I was like, wow, that's a great – now I gotta think through that. What's my number? What do I need to have?

So, you know, build that in. Think about it now before you're ready to exit so you know when you do exit, you know what you need to get. You're going to work towards that goal, it's kind of working backwards. It's very similar to how much money is enough to retire and then you have to figure out one of the variables in there is, well, how long are you going to live? That's always the hard part about it.

It can go as long as you possibly can. Very true. So talk about where your brain needs to be, your mindset as you start to make the shift to successfully exiting a business because I know in my particular case, if I was to think about it, I want to hang on until the very last moment that I could. I love working in the business. I guess when people are experiencing those symptoms that you mentioned earlier, maybe it is time to exit.

So talk about mindset as it relates to exiting a business. So I think you're going to have to have that mindset that first of all, you set your business up and you set yourself up to exit and not necessarily financially, but you set yourself up mentally to exit your business. So you know what you want to do next. Too many business owners have that great successful exit financially from their business. And then they're sitting there going, what am I going to do now?

Because they didn't really think through, you know, that's that, you know, I talk about it early in the book when I talk about having a balanced life and you're planning out your non-business life and you're budgeting scheduling time. And if you've been doing that, it's going to be a fairly easy transition when you don't have that business life there because you're used to budgeting your time, scheduling what you're going to be doing. So you're staying busy with non-business items versus all of a sudden, boom, you're no longer in charge of something. Good friend of mine, Danny retired, that's by 18 months now and he said, Ron, the biggest thing I miss is not being important. Like, wow, Danny, you're still very important.

He goes, no, no, no. No one relies on me anymore and that's been really hard for me. And so Danny didn't really think through his retirement, he just, I got there, right? I'm successful. I'm still alive and I'm here.

I'm retiring. I'm successful. I got the money to live on. But what am I doing? And we've had a lot of conversations just talking about, well, let's think like when you were in business, what did you do?

So plan things out. Let's put things out there. That's going to be, what's it mean to you if it's charity? It's helping out. He's doing some helping out other people with some home projects, things that now he's got some things going that he feels like he's getting up in the morning and he has a reason to get up.

I, I think about, I think about, you know, the fact that you've written a book on this, you are very conscious of this and that work-life balance is so important in this, in this chapter, this episode of this podcast is about exiting. Is there anything that you, if you were to think back to the early stages of you planning, even if this is a part of your, your daily now, are there anything, is there anything that you would be doing differently in your own exit planning? Boy, I mean, and definitely not perfect. So I think there's probably a lot of things I would have done looking back different, which is maybe, maybe that's what made me an expert to write a book is like, okay, well, went through this. I think in, in the way I looked at things, I started from a very, from the beginning, I knew that I didn't want to just work.

I was trying to not be a workaholic. I was like the, so many people start the business because they want to make money and I started my business because I wanted to access more time. Something to me was, you know, time. How do I create more time and I can't create it, but you make more available for me, for my family, for the things that I want to do that's not work related. So that's kind of how I started my business and it's just permeated.

So here we are 23 years later and I've been extremely successful in being able to have more time to do so many more things. And I'm, as I look, you know, five years down the road when I will be, have exited my business, like, okay, I'm already laying out my plans for what that next 20 year segment looks like and what I'm going to be doing. And I can tell you, I'm going to be just as busy then as I am now. So I don't think it's going to be, it won't be a big change for me. It'll be, okay, now we're moved on to something else and, and I still know I'll feel important or at least feel busy that I have things I want to accomplish because I'm very goal oriented.

So I've already got goals of what I want to accomplish when I get to that point. And Ron, as we, as we wrap up this episode, is there a final piece of advice that you could give to business owners who, who are looking for both success and balance in their life and you are the expert at this. So you have the final word on saying what that would be. I'm going to go back and I've, I know I said this before, but as you're taking, you know, maybe a two day session of just writing down and thinking, thinking through your objectives for your business, do the same thing for your objectives, for your life, for that non time that you budget that out there and write those things down. Also make that just as important as your business plan.

You got a life plan, put that down and then follow that plan. So you're actually scheduling time, a daughter, I got a daughter in Vermont, so I schedule time that I'm going to go spend with her, right? But I also got a son that actually is still lives with me. So I schedule time with him also. So that's just as important to me as scheduling this podcast or scheduling another business meeting and I look at it the same way.

So I would say that's probably the one thing I want people to think about. Write those things down, make them just as important as that business meeting that day. I know you're writing down and I know you're not missing, right? Yeah. Don't give everybody the leftovers, give them the primary and save the leftovers for work.

Absolutely. Ron, I really appreciate you sharing your expertise and your wisdom and the book. Thanks for being here. And again, looking forward to hearing much more about this and the expertise that you bring out to the table. Thanks for being here, Ron.

Absolutely. Doug, great talking to you. If you want to dive deeper, grab a copy of Ron's book, Don't Lose Your Balance, Live Life or Build a Business, do both. It's packed with real world advice, practical steps, and a few hard earned lessons that you won't want to miss. If you enjoy this episode, don't forget to subscribe, leave a review, and share it with a friend who really needs some work-life balance in their life.

Thanks again for listening. We'll catch you next time. (upbeat music)