Exit Planning: Steps to Prepare to Sell Your Business, with Jason Somerville

Today’s topic is exit planning, and all of the steps you can take as a business owner to help you prepare to sell your business. We all want to sell for the highest possible price at the highest multiple.

So what do we need to do to get there? And what are some potential pitfalls that could affect the sale of your business that you can avoid?

Our guest is Jason Somerville, founder of GW Partners and South Col.

This episode of Deal Closers is hosted by Izach Porter, brought to you by WebsiteClosers.com, and is produced by Earfluence.

Transcript

Jason Somervlle – 00:00:05:

 

Have three or four people who form an advisory board. I don’t care if you have a two or three or $4 million company, It’s still worth it. And there’s a lot of ways to put those together. And anything that’s forcing you to kind of pick your head up, look at the landscape, think a little more strategically is going to be very helpful. And if you’re not doing that consistently, usually what happens is, again, you just didn’t see that thing that all of a sudden smacks you in the face. That happens all the time.

 

Izach Porter – 00:00:42:

 

All right, you’re listening to the The Deal Closers Podcast brought to you by WebsiteClosers.com, a show about how to build your e-commerce business to be profitable, scalable, and one day even sellable. I’m Izach Porter, and on today’s episode, we’re talking about exit planning and all of the steps you can take as a business owner to help you prepare to sell your business. Steps that will add value to help you sell for the highest possible price at the highest multiple, as well as some potential pitfalls that could affect the sale of your business that you can avoid with property. Today we’re talking to Jason Somerville, founder of GW Partners and Southcall. Hey, Jason, welcome to the The Deal Closers Podcast.

 

Jason – 00:01:25:

 

Thanks, Isaac. Thanks for having me, man. Good to be here.

 

Izach – 00:01:27:

 

Yeah, great to have you. And Happy New Year as well.

 

Jason – 00:01:30:

 

Yeah, same to you.

 

Izach – 00:01:32:

 

Jason, I mentioned in the lead-in, you’re the founding partner of GW Partners as well as Southcall. Can you share a little bit about what your businesses do?

 

Jason – 00:01:42:

 

Sure. Yeah, absolutely. I’ll start with Southcall. I think it’s the, you know, of the two, maybe slightly less complex to explain. I mean, what Southcall is, is effectively an accelerator fund for, I’d say, young-ish consumer product businesses that tend to have an e-commerce focus. So, you know, it’s something we started last year. We have a really good capital partner in Seller Spy. And, you know, they provided US $50 million to go out and to do deals. And, you know, the kinds of deals we do there, we come in, we take minority stakes in brands, and we become part of their board. And we become an active participant in their development and growth over about a two-year period. And then the plan is always kind of after a two-year time horizon to sell the businesses, you know, hopefully in a great transaction. And, you know, given that we tend to engage with brands that have between, I’d say, $10 and $30 million of top-line revenue whenever we engage. And we’re kind of shooting for a two to three times revenue growth while we kind of are involved. So we tend to get a lot of value appreciation and, you know, looking for good strategic deals on the backside. And then GW Partners is actually really, I think of it as a business consulting firm and kind of an M&A advisory practice sandwiched together is really the best way to think about it. So, you know, my background long before this was I was in institutional investment banking at Bank of America. And ran capital markets for a $30 billion hedge fund in Miami. And then found my way to the e-commerce world, helping founders, you know, think about, plan for, and execute on sales of their businesses. So we’ve kind of evolved over these last six years being in the space to a point where what we really do at GW Partners is we try to engage with brands early in their, call it, exit journey. With, you know, where founders kind of, it’s almost like they have a dream. That dream is probably. One to two years away. What do they want their companies to look like? And who do they ultimately want to buy them? We kind of come alongside of them and really put in a good strategic planning and execution process to do that. And then lead them through an M&A sale process that, you know, I think for those out there that kind of have some experience with the space, it feels very kind of middle market-y in terms of our process. That’s probably mostly my fault because I just come from that institutional world. Right. So that’s kind of how I tend to want to do deals. And yeah, so we love to, again, engage with brands, similar kind of stage. They tend to be in that eight to 15 million top line when we start working with them. And they tend to be 20 to 40 when we’re done.

 

Izach – 00:04:27:

 

Awesome. All right, man. I want to unpack a couple of things there because I’m kind of like salivating to talk to you. We’ve got a very similar background. I’ve been doing M&A my whole career. I was in commercial banking, doing acquisition financing and deal structure for 20 years. And then I’ve been for the last about seven years just focused on e-commerce and technology. So I’m really excited about what you’re doing. So relative to Southcall, what does the structure of your typical deal look like? You’re taking a minority equity position. Are you also providing debt capital? What’s your kind of target check size? What’s the sweet spot for you guys?

 

Jason – 00:05:00:

 

Yeah, good questions. Normally, although we have some flexibility around structure, normally our structure looks very much call it it’s it’s venture debt ish in terms of how we structure the capital. So what we do is we come in and it’s usually three year money to begin with. It’s usually interest only, you know, for that period of time. So we’re really trying not to burden the cash of the business with, you know, interest payments or principal payments. And then in exchange, what we’re doing is, you know, for tax structuring, we’re usually structuring it as a profits interest in the business. So, you know, there’s no gnarly tax bill kind of in the near term. And then, you know, we have different hurdles. And those of your audience and yourself that are familiar with those structures, you tend to have hurdles and catch ups involved there. So really, the idea, though, behind it is if you have a $10 million company today, our job is to come and make it into a $30 million company. So, you know, where we win is when we do that. And on the backside, when we sell for $30, our share of the pie is based on that upside that we’ve built into the formula. So our normal check sizes are $1 to $4 million is usually what we’re coming in at. And as far as stakes go, depending on structure, anywhere from 15% to 25% usually of that upside is usually where we’re at.

 

Izach – 00:06:26:

 

And you said your target deal size. Are companies between $10 to $30 million in revenue? And what about in terms of, you know, EBITDA or free cash flow? Do you have a focus there?

 

Jason – 00:06:38:

 

Yeah, I mean, I would say it’s a little bit industry specific, right? But I would say in general, I mean, we like to see double digit EBITDA margins, preferably high teens to 20 plus. But there are certain industries like we have a portfolio company right now that they’re in the food space and margins in their sector, you’re just not going to get to 20%. And that’s okay because those food companies, the way that they trade, it’s fine. If it’s an 11% EBITDA company, it’s actually still a good performer for the sector. So there’s nuances like that. But I’d say double digits, preferably closer to 20 is what we like.

 

Izach – 00:07:16:

 

And then what’s a growth plan look like? I mean, how do you execute on, you know, a double or triple in the size of the business? Are you providing operational expertise? Are you kind of going in and looking at what… The key performance indicators are of this business when you get there and then how to move it from point A to point B or what does that roadmap kind of look like?

 

Jason – 00:07:36:

 

Yeah, how much time you got, man? It’s a lot. The way I think about it, and I think you’ll appreciate this, is think about almost by functional area within the business, right? So let’s start with, let’s say, finances and analytics as an example. So first of all, there’s some blocking and tackling where we want to put into place a high level of sophisticated financial reporting into the business. And we also want to really uplevel the ability to bring in data, analyze data, and drive insights off of that data. So what we’ll do is we’ll lead the charge for restructuring how they do their finances, restructuring how they build their reporting, install analytics tools. A lot of these companies, given the size and stage, they’re not going to have an analytics department. We become the analytics department. Where we’re helping these owners look at their data, understand those KPIs, and not only kind of those first order, but second, third, fourth order, where we can then turn that information into actionable steps and insights moving forward of how to improve the business. So that’s a good example of one functional area. I’d say another one would be obviously when you think about performance marketing and marketing overall. You know, one of the things that I think we’re pretty proud of, in addition to our own capabilities, is, and you guys probably have done something similar over the years, is when you’ve been in this space a long time and you come into contact with lots of different providers of different services, you start to figure out who the good ones are and who the not so good ones are. And I think we’ve really kind of mined a great roster of resources. So, for example, we may look at who’s their digital marketing firm, how are they performing, helping them understand maybe how to better manage that relationship. And maybe if it’s necessary, bring in someone else to perform that function. And US having those trusted resources is kind of another way that we impact the business. Another one would be, you know, something that sounds fairly simple. But is actually quite impactful. That’s putting in like a real… Board structure and also, you know, kind of a reporting cadence where, you know, you’re really doing kind of traditional quarterly board meetings and the founder owners who are the leaders of these companies are kind of being forced almost to start to think about things differently, more strategically. How would you report to a board and tell them about the state of your company and also what our plans are for the future? It’s forcing strategic thinking. And then like, for example, we’ll have a seat on those boards. We won’t be the only ones on the board. So we’ll often help those founders do all the preparing and thinking through that as well. It’s kind of another example, right? So, but as you go down in every functional area, supply chain, legal, you know, all that, we’re kind of coming in and figuring out where can we be impactful here in a positive way. So you don’t end up with a cookie cutter situation because every business is different weaknesses and strengths. It’s a different, but we try to, I always say it’s a cheesy thing, but I say it anyway, is the Bruce Lee saying of be water, right? We try to flow into the areas where these companies could use the support and the founders need it the most and kind of work to build that strategic plan together and then go execute on it. There’s a lot more detail I could throw in there, but I’ll pause for that for the moment.

 

Izach – 00:11:15:

 

Yeah, that’s a really helpful overview. So GW Partners,this consulting advisory agency, and is GW Partners then taking an advisory role in your investments through Southcall every time or?

 

Jason – 00:11:29:

 

Yeah, they are. And we are, I think also another way to think about it, you know, when you look at Southcall and you say, well, what are the legs to the stool of Southcall, right? So you’ve got, GW Partners is kind of one leg of the stool. Another leg of the stool is actually a firm that is known in the space. It’s kind of a double. There’s two firms called Escala and MultiplyMe. So Escala is the second leg. So what Escala does is a lot of operational, you know, call it operational process consulting. So they have a lot of X, E, Y, you know, people on their staff and kind of very much that, you know, how do we build out processes that within the business that are much more efficient, let’s say, than how they’re currently run. And then MultiplyMe is a it’s an outsource outsource staffing agency focused in the Philippines. So we’ve actually brought human resources to bear there. And then the third leg, the third leg of the South Call stool is the capital provider seller’s buy. Right. So that’s kind of the three legs. Whereas GW Partners has its own process. And then the fourth leg is a practice where a lot of these activities are actually quite similar. But those other two legs of the stool are not there.

 

Izach – 00:12:48:

 

All right. So that’s a lot of information. So what is what is kind of a premium client that you’d be looking for from the advisory side? Give me a situation of, you know, an example of somebody who was able to kind of use these services to their highest and best use.

 

Jason – 00:13:04:

 

Yeah, perfect one. So we have a beauty client currently that we’re going to be taking to market to sell probably second quarter of 2024. So we engaged with them about a year and a half ago. At the time, we engaged with them They were about an $8 million business per year. They were growing, but they were… Wanting to build their team. They’re wanting to obviously grow their revenue. They’re actually wanting to grow their profitability. They had a lot of plans and they ultimately wanted to get to at least 30 million in top line before kind of going to market originally. So I think this year, this past year, you know, we’re at 14 and projecting 20 this year. So I think these guys have decided to go ahead and go to market at the current rate and not wait for 30 million. But in our kind of under our, we’ll say under on our watch, the business will have grown from eight to 20 million in revenue, right before we’ve taken it to market. So along the way, you know, we’ve really gotten involved in every area of their company. We restructured all their accounting and financial reporting, restructured all of their analytics and KPI and data analysis, helped them hire a number of key senior people at the business, helped them shore up their intellectual property, helped them find and negotiate better terms with new suppliers. And list goes on and on, help them really get a better digital marketing agency. And now a kind of final step, which is great related to timing, is they’re now going to be going into brick and mortar retail, right, with a big beauty chain. So that’s a good example of, OK, so all these things happened, great things for the company over, say, a year and a half period, which has now built this into a really, really interesting acquisition target. And then as we take them to market, we’re extremely excited and confident you’re just going to have a lot of people who want to buy that company.

 

Izach – 00:15:03:

 

One of the patterns that I’ve seen again and again in working with founders is, we’ll talk to somebody who has founded a business. They’ve been very successful. Maybe they’ve got a business partner. And the business has grown to a point where, again, They need to start to professionalize, you know, and it happens, I think, somewhere around eight to $10 million in revenue where they can’t wear all the hats themselves. And so one choice is to sell their business entirely, look for a majority sale transaction. But I talked to a lot of founders who say, I know this could be a 30 or 50 or $100 million business, but I don’t know how to get it there myself. And so I’m really interested in ideas and solutions that can help bring that expertise to some of these founders who are looking for somebody who’s already been there and done that. You know, they might have a great product idea. They might have built a good core business with a solid foundation, but taking it into that, you know, from being a small business into kind of that middle market space, there’s a lot of things. You don’t know what you don’t know. And so… I think what you’re saying is you can provide a solution to help companies get themselves to that next level without going through a majority sale transaction, retain as much equity as possible so they can recognize the value of that upside growth in a couple more years. What do you think some of the lowest hanging fruit opportunities are for people, for founders who are looking to grow, who’ve already achieved success, but know there’s still a lot more road for them to cover in the growth story, but they don’t necessarily know how to execute? What do you usually see as the lowest hanging fruit opportunities that they need to be able to execute on?

 

Jason – 00:16:53:

 

Those are good questions. And I agree with your assessment, by the way. I mean, I think it tends to happen around the same time frame from a revenue standpoint. And I think, you know, what we often see is if we kind of go back to this idea of professionalizing and kind of what does that mean? And as you kind of alluded to, not every situation calls for it. I mean, there may be plenty of founders that the right thing for them to do is actually not to keep going on the ride. It’s actually to go ahead and sell. It just makes the most sense. But I think that if you have a company and it feels like this is a company that has momentum, you know, this isn’t a company that has stalled out, but it’s got some momentum behind it. And the founders, they don’t quite know how to think about the business strategically. So and we’ll get more specific about that here in a minute. But we usually find that making that switch is the most important thing going from kind of in your business, just very tactical to starting to be much more strategic about how you’re thinking about and planning, you know, the future. Of your company. And a lot of times we all know, I mean, I’ve been a founder of multiple companies. Sounds like you have to, you know, a lot of times you’re wearing 50 hats and you’re trying to just keep things moving on a day to day basis. Right. And you don’t have time to be strategic with with how you’re thinking. One of the lowest pieces of hanging fruit, which is not necessarily easy, but I would say is actually achievable with the right guidance and the right mindset, is how do we make that switch and pull a founder out of doing a bunch of day-to-day tasks that are taking up that bandwidth to be able to really drive and lead the company from a strategic standpoint? So, a lot of times what we’re doing, some of the first things we’re doing is not looking at financial performance of the business. It’s looking at the structure of the business. It’s looking at the organizational structure and the human resources structure and saying, is this company in a position to scale? Or if you start trying, is it just going to break because you have the wrong organizational structure? You don’t have people in the right seats. And a lot of times that involves identifying, let’s say, roles that are currently being filled by the founder that need to be off-boarded. It also involves maybe changing who might be performing certain roles. So I’d say, first and foremost, usually we’re dealing with a little bit of an organizational structure evolution more than anything. That happens quite a bit.

 

Izach – 00:19:34:

 

How hard is it in your experience to convince founders to give up the reins on some of the tasks that they’ve been doing for a long time and focus more on vision and strategy?

 

Jason – 00:19:47:

 

Well, it’s funny, I’d say that it’s a little chicken and egg for US, because I think founders that are really closed minded to that often are not going to be great fits for, you know, what we’re trying to do. The short answer is a lot of founders are reluctant. To let go of the reins. But I think the ones we work with almost, you know, because we’re self-selecting into those are, are usually, I would classify them as they’re open-minded, but they’re not really sure how to do it or how to think about going about it. And the other thing I’ve, I’ve said this before, but, and you probably run into this all the time, I feel like founders are often starved for really good, just, you know, trusted people that they can talk to about their company to help them think through growing and building and strategically developing their business. It’s usually it’s not going to be their spouse. You know, it’s not going to be anyone who works at the firm. I think a lot of times that’s why you see a lot of founders join, you know, masterminds and groups like that. But at the same time, it’s different than, you know, if you’re at a conference and you’re talking to another owner, you might be able to relate to some similar problems. But that owner is not going to get inside your business and help become part of a strategic team with you to think through the future. I think founders are starved for it. So when they get it, it’s like oxygen to a fireman. They just they really tend to take to it as long as they’re coming into it with that open mind of saying, hey, I want to do this. I’m just not. I’m not sure how.

 

Izach – 00:21:23:

 

Yeah, let’s talk about the mastermind. Let’s talk about the difference between mastermind and advisory and consulting, because a lot of the clients that I work with, they’re part of masterminds. I go to masterminds regularly, speak at masterminds. I think masterminds are great for sharing ideas, maybe new marketing strategies, what trends are evolving, what challenges that Google algorithm changes are presenting and how people are kind of working around that. For example, what I don’t think masterminds do is help you execute on the tactical parts of how to actually get from point A to point B, right? You get a bunch of good ideas and there’s absolutely value in masterminds, but I think consulting and advisory work can fill a gap that a mastermind group just isn’t ever going to fill. How would you think about that? What is the difference between the two?

 

Jason – 00:22:16:

 

Yeah, I mean, I think an example I would give is I think you can go into a mastermind event or talk to other people in a group and get a lot of interesting ideas, say, about, you hey, this is how I’m now structuring my Facebook ad campaigns because this seems to have worked. So you can get general interesting ideas and potentially points that you can use in your business. But then taking that and trying to apply it specifically to what you’re doing inside of your company, that’s where there’s the gap, right? You’re saying, oh, well, at the mastermind, I picked up this piece of information or that piece of information, but now it’s on me to try to figure out how to specifically apply that in my company. And anyone who’s worked in consumer products, e-commerce, et cetera, understands every business is nuanced, right? There’s no two businesses that are the same. And I think also even masterminds that I’ve been a part of where people have a pretty tight relationship, It’s still not the same as someone who is spending their time as a dedicated resource and advisor to you and your company. It’s just the motivations just aren’t the same. Right. And the intentions, I would say, aren’t the same. And so you’re just never going to get a level of detail and focus from a mastermind or people in a mastermind that you’re going to get from someone who’s dedicating their time and energy to helping you and your company. It’s not going to be the same.

 

Izach – 00:23:42:

 

And by the way, I don’t think of that as any kind of a criticism of masterminds. I’m just pointing out that there’s a different skill set and a different kind of use case for both scenarios.

 

Jason – 00:23:51:

 

I think there are two different tools in a toolbox. They’re just different. And there’s a lot of value to both. I agree. I think for multiple reasons, including the same reason, which is being a founder owner can often be a bit of a lonely sort of isolating thing. A mastermind is another way to connect with people who can empathize and understand what you’re going through. And you can have interesting discussions and not only learn a lot, but just connect with people who are like you. So I think it’s got a lot of benefits for sure. 

 

Izach – 00:24:23:

 

All right. So let’s talk about risks and some pitfalls. So I’m sure you’ve kind of pitched and explained your services to a lot of clients. What are some of the risks of somebody kind of not engaging? What are some of the, you know, kind of you have a horror story or an example of somebody that maybe didn’t fall in place and kind of how that worked out? And what’s the other side of the coin?

 

Jason – 00:24:47:

 

Well, I think there’s a few, right? I think that one of the things that, and it doesn’t necessarily, you know, obviously we think we’re great, of course, and think we’re really good at what we do. But it’s more of the idea of what we do that I think is important here. I think that I’ve seen a lot of e-commerce entrepreneurs who thought they had it all figured out only to just hit a brick wall, you know, that was right around a corner that they didn’t see coming, right? And the reason they didn’t see it coming is because they never picked up their head long enough. To try to view the landscape of what was going on around them in their market. They really understood the day-to-day and they were really in the weeds. And all of a sudden they’re like, well, wait a minute. Why is my CAC up 50% in the last month? Why is my repeat order rate down 20% in the last two months? Why is my HeroSkew plateauing and now actually seemingly to be contracting? Oh, by the way, why did I just get hit with this patent infringement claim? It’s things like that that I would say it’s the things you don’t see because you’re too busy just focused on executing day-to-day. I’d say that from a high-level perspective is the biggest concern. Not going through the kind of exercise that we take people through and not having that as part of your core function. One of the things we tell everyone, whether they work with us or not, is you need to have an advisory board. Like it’s just really have three or four people who form an advisory board. I don’t care if you have a two or three or four million dollar company. It’s still worth it. And there’s a lot of ways to put those together. And anything that’s forcing you to kind of pick your head up, look at the landscape, think a little more strategically is going to be very helpful. And if you’re not doing that consistently, usually what happens is, again, you just didn’t see. That thing that all of a sudden smacks you in the face. That happens all the time. In some of our email correspondence, we were talking a little bit about more on the legal side. And that’s one. You know, we do a lot in beauty. We do a lot in juvenile. We do a lot in markets that are pretty heavily regulated. And I’ve seen more scenarios than I can count where the product testing programs are not compliant. There are a lot of standards that you’re either not testing for. Or you’re not doing it. Or you’re out of compliance with. But you don’t know that because you don’t have the right structure in place. Those are big ones, too. And even also in a deal context, which I’m sure you guys have run into this before, too, is even something as simple as kind of like media releases. Right. When you use someone’s, you know, someone writes a blog for you or someone takes a product photo for you. And. You have to get the rights to those things fully released to you. I’ve had, again, unfortunately, a few deals where… It was these releases of media rights that held a deal up and either caused it to close three, four weeks later or, uh, eventually became a real issue to the point where the buyer tried to use it as leverage, right, to reduce the valuation. So, you know, things like that are other ones that I think, especially if you’re in a market where there’s a lot of regulation, I think a lot of, again, small companies, smaller business entrepreneurs, they often overlook some of those things. They think they’ve got it all right, but, oh, it was the one or two things you missed is the things that ultimately came back to bite you.

 

Izach – 00:28:30:

 

Yeah. One of the things I talk a lot about with my clients is how do we reduce friction or potential friction when we go through the due diligence process? Because those are the type of issues that are going to come up with a buyer, especially a sophisticated buyer, when you go through due diligence. And roadblocks come up all the time in due diligence and almost always work through them. But it slows the transaction down. It… Creates a distraction for the buyer. And if there’s enough of those distractions, eventually you get a deal that gets retraded. And so it might not kill the deal, but it could potentially change the valuation. And so the more you can head those off at the pass, right. And make sure that your, you know, your sales tax practices are compliant. Your, your media releases are compliant. You’ve got the right, we’ve got a client right now that we’re just taking a market and we’re trying to make sure their U.S. Environmental Protection Agency (EPA) compliance regulatory issue that we’re working through with their US sales. And we want that to be all cleaned up before we go to market, because that’s the kind of thing that it’s at a minimum would slow a deal down and potentially could derail it or change the valuation when we go through. And so we want to, we want to reduce all those friction points before we get into the due diligence process. We want to anticipate those challenges and just eliminate them before they become challenges.

 

Jason – 00:29:52:

 

Yeah, absolutely. And I think another one, I mean, a big part of what we do when we first engage with a client, you know, when we kind of are looking for, we kind of do a financial health check that goes about as deep as you can go. And I’ll give you another good example of places where I think people get tripped up is. Being able to understand something like, for example, let’s say that you’re a company that has two or three SKUs that are driving a lot of your growth. But as you deep dive into those SKUs, let’s say, and let’s say there’s a particular channel, let’s say it’s Amazon, for example, where you’re getting a lot of that growth on Amazon from two or three SKUs. But when you look at that and you start to dive in to the margins, you know, specifically around those two or three SKUs on that channel, the margins aren’t, say one, not very good, or two, they’re actually eroding over time. So that’s a good example of something where it’s almost like going down to the kind of the bone marrow to do the health check. Is also important. And a lot of guys aren’t doing that level of analysis and what’s going to happen. And unfortunately, I’ve seen it more times than I’d like where you don’t want a buyer to figure those things out. You want to identify that up front and either look at it and say, hey, we’ve got to improve this part of your business. Otherwise, I think most buyers are going to be like, you know, not excited. Or at the very least, we have to know going in. All right, look. When we look, if we’re being honest and being objective, here are the things buyers are going to love. Here are the things they’re not going to like so much. And let’s make sure that, you know, if we’re able to explain those things that they are not going to like so much, hopefully in a way that, you know, is mitigating any risk that they see there. So that’s another good example of just, you know, it’s worth that level of exercise a lot of times. So that the buyer is not the one discovering things about the company. If they’re the ones discovering it and it’s not good, that’s going to add friction exactly in the way that you’re talking about. Like if in the middle of a new deal, say, hey, Isaac, did you know that X, Y, Z? And you’re like, no, I didn’t know that. A founder, did you know? And like, no, I didn’t know that. And then you’re like, well, when we look at this, this is giving US a lot of problems and concerns. And you want to avoid those scenarios.

 

Izach – 00:32:16:

 

Absolutely. How are most of your clients finding you currently, Jason?

 

Jason – 00:32:21:

 

A lot of it’s referral. To be frank. So, you know, We have a lot of different people we work with in the industry who send people our way. I’d say the majority of our clients come that way. We do some outreach. Obviously, we’re out there in the public and podcasts like this. People hear US and say, hey, that sounds interesting. It sounds like it might be a fit for me. Let’s talk further. So yeah, that’s normally how it goes.

 

Izach – 00:32:49:

 

Yeah. Interestingly, it’s the same for US as well. What haven’t I asked you that maybe is important for our listeners to hear?

 

Jason – 00:32:59:

 

I think one thing that’s important, and I think you’ll, you’ll agree with this. There’s no one size fits all scenario for founders. I think that there are oftentimes when founders will come to US and say, what do you think? You know, this is what I’d like to be able to do. This is kind of what my dream is, my hope is. And sometimes in our effort to just be objective and give the best advice possible, we’ll often say, look, I don’t know that you should be focused so much on an exit at this point. I think what you should really be focused on is cash flowing this business or, you know, tightening up, you know, a few things in the company, And then, you know, maybe go do that first and then maybe come back, you know, in a year or two. And then I think it will be a good time to start thinking about this. Right. So we try not to be, you know, the old saying, if all you have is a hammer, everything looks like a nail. Right. We try to kind of assess things as objectively as possible. And not every not every founder and not every business should ultimately make selling their number one priority or a main priority. Like, in fact, I think we all know the statistics. I mean, the overwhelming number of businesses that are created, including successful ones. Will not sell. The percentages of businesses that ultimately sell is a relatively small number. It’s probably between 10% and 20% at the most. I think that, number one, being really objective about what your business is and what its future can be. What’s the best future for the company so you can focus your energy in the right place and not get distracted? I think that’s one thing that I always try to pass along. I think the other thing too, and we mentioned it earlier, which is that owner of the $10 million business that says, okay, I really would love to grow this to $30, $40, or $50 million. But when they sit down with us or someone like us and start to think through what it’s going to take, they sometimes just come to the conclusion of, you know what? I don’t think I want to do that. You know what? I have a successful business. I think there would be plenty of buyers for it now. And I think I’m not the right person to take that to the next level. I think someone else is the right person. And so understanding or coming to that conclusion is really important. So that, again, you’re doing what’s right for you, your life, your family, etc., And you’re not going down a path that isn’t a good fit. There’s a lot of different ways to go. And I think a lot of times I’ve seen it before where… Founders get exit FOMO, right? And because of course, I mean, it’s great. Like having a successful exit, usually it’s one of the biggest, if not the biggest financial transaction of a founder’s life. There’s a lot of really good reasons to get excited about it. But sometimes exit FOMO can like distract you and not have you focus your energy where it should be. And I think that’s worth mentioning. And I think, again, what we try really hard to do is give the best advice possible, even if that advice is, you shouldn’t work with us on an exit right now. You should go do some other things first.

 

Izach – 00:36:11:

 

Yeah, that’s interesting. I think the other interesting thing is helping the founders quantify when to exit and putting together that roadmap and then being realistic about the work it’s going to take to get from point A to point B. And that can also then inform the decision of when should I exit? Do I want to go through that process? Do I want to apply the effort needed to double or triple the business? And maybe the answer is unequivocally yes, but maybe it’s not. Maybe that doesn’t fit with where they’re at in their life or what they want to do or their next step. So. I think that’s really valuable information to help people think about is what the path to growth looks like, what’s involved to get there, and then deciding when the right time is to exit if they want to go down that path.

 

Jason – 00:36:58:

 

Yeah, and I think, I mean, I’m glad you brought up timing. I think another way to think about it is if selling the company is a realistic goal in the not too distant future, you know, let’s say even inside of five years. The foundational work that you will do in trying to think through, again, we always say we try to help people understand what the acquirer is going to look at the world through their eyes, right? And what is the acquisition world going to see about your business? What are they going to say about your business? And you’re almost reverse engineering in a little bit of a way. But all that foundational work that you’re doing is going to have value even if you decide, hey, you know what? I just spent four or five months really focused on how to kind of transform my business strategically so that would be an even more attractive acquisition target. But you know what? I’m going to wait a while, though. I don’t know now that I’ve done this work, maybe, maybe I’m going to wait another two, three years, but all of that work and then call it that, that mindset shift will still prove to be very valuable. And then because you’ve done a lot of that and you’re kind of more ready to you can time the market a little bit better, right? I mean, it’s really hard to time the market perfectly. Everyone at M&A knows that. But you can at least do it where you’re like, all right, wow, valuations are really expanding here. Now might be a good time to go ahead and think about exiting. Because of all that work you’ve done, you’re going to be able to go ahead and do that efficiently as compared to someone who just all of a sudden sees that valuations are going up and tries to scramble real quick and take advantage.

 

Izach – 00:38:37:

 

Yeah, that’s a great point because you’ve positioned yourself so you’re ready to sell when the timing is right. Optimal. And you’re also paying attention to the market so that you know that it’s better than it was before. You never know if it’s going to continue to get better in the future or going to get worse, but you certainly will know that it’s better than it was six or 12 months ago. And I think actually I’m excited about this year because last year was a pretty slow year for M&A in general. We had big ramp up in interest rates, a lot of buyers on the sideline. I’ve seen Q4 was really strong for us and we’ve got a lot of transactions coming to market and I’ve seen a lot of buyer interest. I think there’s some kind of dry powders that was on the sideline and I’m expecting there to be pretty good activity for 2024, especially the first half once we get into election season. I don’t know if we’re going to have a good time frame, TBD, but I’m excited about Q1 2023, Q2 this year. Man, so interesting. I really enjoyed the conversation, Jason. What’s the best way for our listeners to connect with you?

 

Jason – 00:39:41:

 

They can either email me. I’m @jasonatgw.partnersonot.com it’. Partners or they can call me 704-771-2921. And we can chat.

 

Izach – 00:39:58:

 

That was Jason Somerville. And again, you can reach him at GW.partners. Thanks, everyone, for listening to this episode of the The Deal Closers Podcast brought to you by WebsiteClosers.com. If you like the show, be sure to rate US, write a review, press the follow button, share it with your network. And, of course, if you’re looking for help selling your e-commerce business, be sure to visit us at WebsiteClosers.com. This episode was edited and produced by Earfluence. I’m Izach Porter. Follow me on LinkedIn, and we’ll see you next time on the The Deal Closers Podcast.