Exit-Ready: Profit Strategies & Valuation Growth with Darryl Bates-Brownsword

0:01 We are live, ladies and gentlemen, you once again welcome to the Kingdom's podcast. And today I have with me fighting out of our light Australia by way of Oxford, United Kingdom make welcome the undefeated Dario Bates bronzer. How are you, Darrell? Well, I'm not sure I can live up to that hype, but that's a knockout introduction, isn't it? But we'll give it a go and see what happens. Thanks, Adam.

0:34 Ola and you know. Your name. Your name is a weapon. So you still live up to the name at least. OK, OK, OK. But yeah, it is what it is. It is what it is. So aside from the fact that your name is a weapon, you are also a weapon to businesses, you know? Well, we like to help them get what they're aiming for, that's for sure.

1:05 And especially when it comes to their the time where, where business owners are getting to the stage where they're thinking about their next chapter. We want to get involved and help make sure that that goes to plan or goes to their desire by helping them put a plan in place. Because the reality is of if you've been running and owning an entrepreneurial or or owner managed business for, for 5/10/20 years and you've built some value in it, you want to exit it. And, and you want to make sure that you get the most from that value and, and get the, the most from the work and energy you've put into it.

1:39 And only one in five actually get to do that successfully. So we do our best to to see if we can influence that stat. But you know, you have helped a lot of founders to build skill and of course, exit, right? And of course, that has been across continents. But what was your first entrepreneurial spark? I didn't have one, I, I wouldn't consider myself an entrepreneur at all.

2:08 I'm, I'm a, grew up my, my father was a career soldier and so therefore, you know, worked for, for the government his whole life. So therefore, very conservative upbringing. My first job I worked for a business owner and in a bike shop and I saw how hard he worked and I thought there's no way I want to do that, that that's way too hard. So I ended up doing mechanical engineering at uni, worked for the government and yeah, as an employee, but got bored with, with how slow things were and, and wasn't real good at the details.

2:37 So after 10 years I went went and joined a management consulting organization, again as an employee. I worked with them for a while and, and just, you know, again, at seemed all very going through the motions, if you like. And, and I did my MBA and focused on marketing and said, look, we can, we can be targeting SMEs.

3:00 A lot of the work that we do we take for granted, but it's, it's really useful and valuable information to SMA business owners. We should be focusing on them. They said to me, you don't know what you're talking about. They can't afford it. That'll never work. Being young and dumb and in my 30s, I thought, well, I don't want to die wondering let's let's have a crack.

3:20 I'll give myself a year and if it doesn't work out, I'll go get a real job again. So I kind of fell into it, but yeah, that's yeah in 25 years ago. Just like I'd like to know, you know, you said your father was a soldier and, you know, I guess that's name that is weaponized, you know, just fits in properly. Look maybe back look rumor has a family rumor and and an urban myth is that the name goes back to the Battle of Hastings. So if any, any aristocracy that may have been part of the name is long gone so.

4:03 That's just, yeah, you see how the genes passed on. I don't know. And then of course, you know, you, you also do at heart and you're a mechanical engineer. That's, you know, quite an interesting background. I love engineers a lot because engineers always have the mentality and the methodology of offering practical solutions to real life problems. Yeah, we're problem solvers, that's for sure. And, and very logical and sequential. Yeah, I, I guess the downside is we like to understand how things work and, and we like to, you know, piece the puzzle together. So I do that with businesses in how they're designed and how they're structured and build logical structures and understand and model things how

4:54 businesses scale. And what are the next problems that are going to be coming up for business owners and go, well, look, let's get on the front foot and solve this problem before it really starts to hurt. And and that's always been an approach and always having a methodology to solve each of the problems that we know are coming out. Because, you know, engineers are process oriented and they are all this methodological in terms of their approach. And they have this advantage of the empirical or would I say, yeah, the the empirical method basically in terms of the approach to solving problems.

5:36 And it helps them to strip things down and build things up. So with that being said, how do you think that has actually influenced your leadership style and. My leadership style, I'm probably a rubbish leader if, if you are the people around me. But look, I am empirical, you're right. I, I look for patterns and I see patterns in, in behaviors and processes and and workflows and help people to structure their business around those patterns.

6:05 And when the patterns aren't followed, you tend to see mistakes. So, yeah, I've got to, I've got to stick with the strengths. You know, as an engineer, you're probably not the best communicator and, and, and a little quiet around those things. I, I don't know. But yeah, I, I, I can't, I haven't got anything at the tip of my tongue that says here's how my engineering strengths and, and my problem solving and has translated into a better leader.

6:32 But I know I'm, I'm fairly visionary and I, I help paint the picture for, for where we need to go or where the client needs to go. I help them understand the picture and using questions and, and guidance and prompting rather than telling to, to help them come up and inspire them to, of what's possible and arrive at their own conclusions.

6:51 And I think that's, you know, if you just try and tell someone, here's the answer, they don't have any ownership of it. But if you help them find the answer and you know through your experience and guidance and and methodologies and frameworks you're using, then they'll arrive at the solution, the plan that they own, and they'll be more inspired and motivated to want to implement it. Interesting.

7:10 SO in terms of that educational background that you have in engineering, how is that translated in the way you approach Internet controls within businesses and of course providing solutions to deficiencies in the Internet controls that exists in the SME's that you can solve for? So in terms of internal controls, my translation to that is I was exposed to internal audit and process control and governance in in the corporate space.

7:43 What I know in most SMEs is they often don't have that. They overlook it. Decisions are made from memory and and a lot of instincts. Yeah. And by instincts. And a lot of the controls and processes reside in the owner's heads, which when it comes to value business valuation is just not transferable.

8:06 So what we do is, you know, one of the roles we play is we go, well, what we need to do if you want to, if you want to exit your business and if you want to maximize the valuation of your business, we need to unpack your head. All the stuff that you go is just intuitive and instinctive. It's not. You're following a process subconsciously, you're asking yourself a whole lot of questions. Yes, no, yes, no, yes, no.

8:30 And we need to document that process that you're following. So we need to slow down the process next time it happens so that we can start to document it and capture a workflow. So we want to know how decisions are made in your business. What makes your business special? Well, just the culture, which is decision making is part of culture is a big part of that. So let's capture that.

8:50 Let's capture the structure of your business. Let's capture how people know what decisions they can make and, and which decisions they need to refer to a higher authority or, or, or up the tree, you know, and, and what's the framework each person has to make decisions in their role in the business. Once we start to document that, we start to have a framework. And I'm not even talking about just workflow processes yet. This is just decision making when it comes to systemizing the business.

9:18 We need a lot of that, excuse me, we need to systemize the workflows so that there's no rework and so that everyone's doing it the same way. And that way it'll be consistent, repeatable and reliable. And then we want to apply that same methodology that that thinking process to the way the business is run, IE how the business plans are set and budgets are set every year.

9:41 And how do we keep the leadership team accountable to achieving those budgets so that it's not just a fluke. So yeah, I guess I'm very structured in the way I do things, but the way you apply structure to a small business is you don't need reams and reams of paper and tight controls like you would have in a corporate. What we want to do is go look what's the right level of structure for this business at this stage of development so that it's going to be a help rather than a burden, you know, because if it's a burden to the business, it'll just slow it down and, and people won't want to be involved and they won't follow the process or the structure. That's actually very, very correct. Only 10 to 40% of businesses

10:25 that go to the markets actually are able to sell. One in one in 520% will get a successful exit. And let me let me update that. 20% will agree a deal. So they'll they'll they'll get an exit. How successful it is is yeah, up for debate. But you know, most of those that actually get an exit have to agree some sort of terms of earn out and work through an earn out arrangement and those often fail.

10:58 So, you know, I'd say it's more likely 10% get a successful exit. So you're on the lower end of the range. Yeah, interested. You want to prepare, you've got to set your business up and I don't want to. Yeah, I don't think you can overstate this. You really need to prepare your business if you know, and set it up specifically more than just, you know, running good operations if you want to get a successful exit. And the key to that is if you're a business owner and listening to this today and you're thinking, I want to sell my business one day, Well, then my encouragement to you is right from today, instead of thinking about profit growth, like everyone is giving you advice and accountants and, and maybe this is advice that you've given

11:43 in the past, but instead of thinking, you know, profit growth and every year on you, we need to increase our profit. I want to encourage people to start looking at the valuation of your business, get some work and go, OK, so what's the valuation of my business and let me start thinking of my business year on year valuation growth because there's so much more to increasing the valuation than just the profit.

12:08 The profit are just the items that appear on the financial statements and the balance sheet, but the things that increase the valuation are your intangible assets. How much does your culture influence valuation? Your staff turnover, your staff retention, your client retention, your pricing model, your, your education, your systems, your IP, your brand? How much do those things influence your valuation? And you don't see any of those on any of your financial statements.

12:36 So that's why I'm saying think about the valuation of your business year on year and you'll, you'll be halfway along to setting yourself up to getting exit ready or getting exitable. And if you make that mindset shift, you've got half a chance. You've got to do better. Than half. So what exactly actually makes businesses attractive to to buyers?

12:59 Well, buyers, when a buyer looks at your business, right, they're going, hey, look, I want to buy this asset from you. So if you're going to buy a house, you would assess the risk to your capital on that house. You go, is it in a good street? Is it going to flood? Is it going to be subject to landslides, cyclones or what have you?

13:17 Where is it on the street? Is it the best house on the street? Is it the worst house on the street? Worst house? Great, I've got some potential. What's the neighborhood like? Is it close to schools? Is it close to shops? What's the public transport connections like? You're assessing all of these things when you're going to buy a house and and you're going, OK, that's good, that's bad, that's got great potential. I'd pay more for that and I'm going to pay less for that. It's the same when you buy a business, buyers are looking at your business and they're going, what are the risk factors They're going, this business has grown by, I don't know 20% for the last five years.

13:49 What are the chances that that's going to keep growing at 20% when the ownership changes? So if, if the ownership, if the business is highly dependent on the owners of the business, the key shareholders in generating that 20% growth year on year and then they want to leave the business, then that's hugely risky. Like there's, there's a really low chance that that number's going to continue under new ownership. So I'm not going to pay a lot for that business if the owners can demonstrate to me that, well, look, all of our business comes to us because of the brand of the business. It's got nothing to do with me.

14:24 I, I'm just steering it. I'm not the chief sales person. I, I'm not involved in delivery and the business runs pretty well without me. I've got the management team, you have a look, they're running it. I'm just, you know, acting as a mentor and a guide. They put all the plans in place, they implement the strategies, they do all the sales, they do all the delivery, they do all the recruitment, they find new deals.

14:44 They're they're doing all the work themselves. This business basically runs without me. Then from a purchase acquiring the business perspective that's hugely attractive if it's had all that growth and all that growth happens without the owner's involvement and you've got reliable cash flow and and the the future revenue is is pretty well locked in. All these things start to re reduce the risk of that cash flow changing or that cash flow growth or that that finance trend changing.

15:14 And the lower the risk, the higher the valuation. So things to look out, you know, did you have high staff turnover? Do you have low staff turnover? You know, there's a risk. It's like, you know, you know, did you have to make separate sales every time you sell something? Or do you have people on subscription to extremes there? You know, what's your revenue look like? Do you have IP that people have to come to you because you're the only access point for the IP? Or are people coming because certain people work there and are they coming to the person or they're coming for the product? All these things influence the valuation. Interesting.

15:53 So why are you speaking about these things? Being an accountant myself, a chartered accountant that has been in public practice and also worked with two of the global beefal firms, what comes to my mind is the accounting standard or an business combinations, which is IFRS 3. So that actually speaks to the process of business combinations and mergers. Acquisitions are forms of business combinations. And of course the sellout to you talking about here relates to acquisitions.

16:31 And then there's this other standard, IFRS 10, which is consolidation, right? So if you acquire the business, IFRS 3 is the reporting standard that relates to that. But IFRS 10 you know, now covers the point of consolidating that business that you've acquired. Of course, you've bought the equity in that business and it's now it's now a part of the group, right? It is now a subsidiary to the parent entity that is buying it. So when you're accounting for the new company or the company that has actually been bought, right? So you need to compute the net assets, right? And then you compare the net assets to the purchase concentration.

17:25 So the purchase concentration is what you're paying for that company. So they're usually 2 scenarios. It's either the purchase consideration is higher than the net assets, right? So if it's higher than the net assets, it means that you're actually paying a premium for that business that you're buying and that relates to the intangible assets. No, you're not.

17:52 And that premium is actually referred to as goodwill. Yeah, but it's not a premium, is it? It's, it's pretty much a premium, right? It's a. Premium from an accounting perspective and you said you wanted a conversation, so it's a premium from an accounting perspective. From an accounting perspective, right?

18:08 And you know when. Evaluation. When you actually pay less than the the value of the net assets of that company that you're acquiring, which is called the the acqui. Is it acquiry? Yeah, the acquiry, right, Because the acquire is the buyer. The acquiry is, you know, the company that has been sold. It's called a gain on banking purchase. Yeah.

18:37 Because you're purchasing that business at a banking. So from you looking at things from the lens of the business seller? Right, I'm looking through a commercial lens. I'm looking at things from the lens of the business buyer, you know, I'm the current company. You're also looking at it from an accounting perspective, which I'm going to argue is irrelevant.

19:03 Why? So if let's just take it to the most basic level, OK of value, who determines value, the buyer or the seller? You're going to go buy a new pair of jeans, right? The buy absolutely. You're going to go buy a new pair of jeans. There's a branded pair with designer label jeans for 200 pounds, $200, whatever it is. And and you can get another pair of jeans possibly made in the same factory with no designer label on them. So very similar from a functional perspective for £10 or $10 that you can get in Asda or or Walmart or wherever you are, two almost identical items, different brand. So the cost to produce them possibly similar. Now there's marketing costs, a whole lot of marketing costs to one that that that's inflatable

19:57 increased, I won't say inflated, but increase the, the cost. So and they sell them for a higher price. Now you might, one person might come along and go look 1. You know, why would I pay $200 for a pair of jeans where I can pay 10? That's just no value at all. That's RIP off. Someone else will go $200 for for this pair of jeans. That's fantastic value.

20:18 So as you say, it's the buyer that determines value. I did not say the buyer, I said the markets because I remember my first degrees in economics. You know the price. The price of any item, why you look at it from a holistic perspective is actually determined by the market forces of demand and supply. That the price is the price.

20:40 The buyer determines if it's value and they'll pay for it. But then you're looking at it in it. Tells us the average. Yeah, the market tells us the average, right? And remember, it's not all the time that you just have a single beader. Sometimes you have multiple beads for the same company and you're probably selling to the highest beader.

20:59 Well, depending on what we're selling, but yeah. And it depends, depends on how much competition there is. Yeah. So I'm, I'm not coming from an accounting perspective at all. I'm, you know, I'm just coming as, as someone who runs business and looks at business and go look, you know, everyone else, you know, all of your competitors are selling. I don't know, let's say you're selling a service and they're selling for $200.00 an hour.

21:21 There's always someone out here who's selling for $1000 an hour. And we can go, well, the markets 200. Well, how is this guy doing it for 1000? That, that shouldn't be possible in the market because the market rate is 200. Well, that's what niching is and, and that's what the intangible assets are.

21:37 And that, that's a good example of brand value and positioning in the market and, and sales skills. And now if, if you've got a rubbish product and you're selling 200 a £1000 an hour, then you're going to get found out and you won't get many resales and you'll lose your reputation. But if you deliver a really good product and you're charging 1000 hour, 1000 an hour, the market will come to the point where it's expensive but worth it.

22:02 Bit like was it L'Oreal? The, the shampoo, they will go. There's always room in the market for a whole range and a whole spectrum. And you don't want to be in the middle because in the middle you get lost and you disappear. And in either ends of the spectrum, you stand out and you can differentiate yourself. To me, that's commercial and, and it's not a, it's not a spreadsheet evaluation.

22:21 It's just a commercial how things work in the in the reality of the market. OK, so. So if we go back to the to the valuation of a company 30-40, maybe even 50 years ago, businesses were sold based on their asset value from their balance sheet and they would start, so back in the 70s they would start to be a little bit of, you know, oh, hang on a SEC, the business sold for more than that, the value of the assets or even the depreciated assets.

22:48 How do we account for this in accounting terms? That's goodwill. We'll have to call it goodwill, absolutely. And back then goodwill was like 10% above of the the the asset valuation of the business. If you have a look at it in today's terms, how many businesses sell for 10%, you know goodwill, the goodwill is more like 90% now. It depends.

23:11 It depends on on the situation basically. But if we're looking for averages and why is it, why is the goodwill value so high now? Well, the reason being is, and I think, you know, the example is, you know, Bethany, I think it was Bethlehem Steel that the, the case study and the example where I, I took my learnings is all the plant and equipment was, you know, worthless. But you have to know what to do with the plant and equipment and how to use it and how to market the product that you're producing with the plant and equipment, which is where the real value is.

23:46 If I liquidate my business, I'll be lucky to get scrap value for my, my plant and equipment. Well, no one's going to sell a going concern for that. So, so if you have a look and and I know we can always find exceptions to the rule, but on the whole businesses sell for a whole lot more than 10%. No business valuation, sure, we'll find some.

24:04 But on the whole valuations aren't based on asset value. It's a multiple of the profits, which is how most businesses are valued today, profit times or an EBITDA times a multiple. That's got nothing to do with assets. It's how you use the assets. It's how you're leveraging the assets that determines the valuation of the business.

24:24 And in my experience. OK. I appreciate the conversation though. Yeah, definitely. I am very much off flowing with you. But it seems like you probably think I'm countering your argument, but I am just bringing like different lenses, you know in other two. Yeah, yeah, shed light on on this, right.

24:44 So the accounting perspective, right, is about the recognition of the value basically, you know accounting basically it's about recognition, measurements, presentation and disclosure. Those are the guidance that accounting standards give you. So in terms of the real substance over form of these transactions, you would have to look at it from an economical perspective and also a commercial perspective like yourself. So fortunately for me, I am both an economist and an accountant, right?

25:27 So in terms of that recognition of that value, you're talking about the goodwill. So it's that invisible that intangible assets, right, which is you don't like, you don't like the concept, but unfortunately it's is actually a premium, right, Because if you were to strip those assets apart, right and send sell them individually, you would sell them for that less amount, right.

25:55 You agree You'd. Fill the asset, sure. And that's. Yeah. Because they're bundled right within that business, we're able to sell it for higher than what their market price is. It's only because you've got a whole lot of employees who know what to do with the assets, and that's what we're selling.

26:14 We're not selling all of the plant and equipment together because that's how accountants treat it. They're going, hey, how do we, how do we bundle this? Well, we're just looking at the physical assets. The accounting industry haven't hasn't caught up and figured out how to value well the intangible assets.

26:30 So the accounting standards don't account for that. There is a whole accounting standard on intangible assets. I think that's IS38. But you can't account for brand until you've paid for a brand, right? If you bought a brand, if you bought a business and you go, hey, look, we paid this much for the brand, well then you can put it on your balance. Sheet.

26:51 Yes, exactly, if you've got. A business yourself and you've built up and you've created a brand value and you can demonstrate that all your customers are coming to you because of your brand. You can't account for that. On the way. Do you know why? You know what that is in accounting, right? So there is a concept in accounting called the prudence concept or also known as conservate.

27:16 Is it conservatism? Yeah. Basically it's about you taking caution in terms of the valuation of your assets and your liabilities, right. So from an accounting perspective, it is actually favorable for you to under undervalue the assets than overvalue them because there is a risk of misrepresentation when you overvalue your assets, right and when you overstate revenue, right. So they would rather would I say, err on the side of caution, right?

27:56 Yeah. So. If you, if you allow people to start going about, you know, valuing the brands, do you know what kind of, you know, astronomical figures will be flying around in the air on financial statements? And it's worth noting that the businesses that we work with are privately held businesses. They're not corporate. They're not listed.

28:16 They're not, you know, large corporate organizations that have a whole lot of shareholders that they need to report to. I'm talking about privately held businesses that you know, that, that you know, all the shareholders are known to each other generally and they're working together and, and they don't have public reporting and, and accounting and auditing that they need and standards that they need to adhere to.

28:39 So I appreciate that there's differences there and there's an element of governance and diligence that is required for fairness and for people to make it. Well, from decisions. Yeah. But from a commercial perspective running the business, most business owners almost couldn't care less, you know, as long as they're making a profit and their business is growing and they're acquiring more clients.

29:05 They, they, they, they, a lot of them just leave it to their accountant to go look, we need to get this, this new, we need to buy this new plant. Can we afford it? How do we pay for it? If, if you write it off in the asset value of it, we couldn't care less because we're just using it and just let us know when we need to replace it.

29:23 You know, we'll let you know when we need to replace it because it's no longer productive or we found a new one that's so much more efficient. And the value of the plant, they're not even looking at, right, because they're just running their business, building their business from a commercial perspective. They are.

29:41 Yeah. They want to know that they're compliant. They're legally compliant, and they're paying all the right taxes. And they're, as I say, they're legally compliant. But at the end of the day, you know, these are not the things they're focusing on from a day-to-day basis because they've got an accountant who who looks after that and ensures that they're, they're, they're, they're compliant and paying the right taxes. OK.

30:04 So basically I understand that you are worried about a traditional financial accounting not taking into account the value of our brands and the value of internally generated intangible assets, right. So that is not permitted in traditional financial reporting. And of course that is why we have management accounting, right?

30:27 Yeah. And in terms of the management accounting, management accounting reports are used for internal consumption, internal consumption, for internal decision making. So you could bring the value evaluation experts, you know, and to value the brand, to value the intangible assets, internally generated intangible assets off, you know, an entity and put that in the management report and nobody is going to arrest you for that, right?

30:57 So for yeah, entities that are forward-looking that are proactive and are commercially driven, they are allowed to do that, right. And that is separate from the financial statements, which is the traditional financial reports that are governed by the rules, Yeah, of the financial reports and standards. So, yeah, look, I think yeah, so and I, I want to make sure that I'm not dismissing financial reports. I think every business should have a financial controller and a CFO at the right stage.

31:34 And we're big fans of getting them in and using the financials to help business owners make better informed decisions and know what's affordable. And CFOs can do some really clever stuff. And interestingly, the guy on the last episode was actually a fraction of CFO. Right. And we work with a lot of fractional CFOs. And I know that, you know, and I've worked a lot with the CFO center and, and they have taught me a hell of a lot around the clever stuff that CFOs can do in leveraging the money and getting the debt equity, but ratios right and, and the right level of funding.

32:06 And yeah. And what's available because without what business, what many business owners tend to want to do by default is I go, well, we haven't got any debt, so we're doing much better. Whereas, and you get ACFO in and they'll go, well, no, let's get some debt in place because we can really leverage the business up and accelerate the growth.

32:24 And it's a good thing to do. Whereas the default mindset is debt is bad. So don't get me wrong, I'm not against good financial reporting and financial controls. I'm just saying my suggestion is that valuing a business based on assets is, is not a real reflection of the market valuation of, of what a business is.

32:42 And the the goodwill factor is, is it's almost it's meaningless and or it's not meaningless, but it's not helpful, I don't think compared to a market based valuation. And then you know to throw more confusion in, you get strategic buyers who'll come in and they'll go well, I value the business a whole lot higher because I can buy that business as a going concern, plug it into our operations.

33:11 And if I plug this business into our operations, I'm up and running so much quicker then it would take me to build a business of that scale and size because it would take me years to get up there. So there's an opportunity cost. If I plug it into my business and then use their operations and put my product through their operations, I'm going to make so much more money from a value perspective.

33:33 They'll go, that's worth more to me. So they'll pay more than perhaps a trade buyer would or a financial buyer would for that business. And so, so that's why we're saying before value is in the eyes, it's the buyer who determines the value of any sale. I believe that's from what I see in the marketplace. OK.

33:54 We've got a little bit off track, haven't we? Yeah. But then I think I, I would partially disagree with you on the part where you say the buyer is the determinant, right? Because I believe that is partially correct. And I would actually would I say, try to expertise on that. Interestingly, I am going to be at UFC London tomorrow and the UFC is a brand that is very, very dear to my heart. The White and the Fatito brothers. They bought the UFC in 2001 and you know it was just the UFC logo and an old ragged and ratchet Octagon. They bought the UFC for $2,000,000 and there was a company that had the right.

34:44 What was the asset value? They what'd you say? They bought it for 2 million. Yes, the value for 2. Million. What was the asset value of, you know, on the balance sheet at the time of that transaction? What was the asset value? It was pretty much Neil, pretty much rubbish because basically they just had some fighter contracts and an Octagon that was not even in proper shape, but they saw the value. Right potential, Right potential over credential is what they saw.

35:11 So the buyer determined that it was worth 2 mil. Right. What's the marketplace? It was the buyer who said if we pay 2 mil for this, we can turn it into this. And that's our opportunity. Because they had no assets, they had a brand, they had a reputation, they had a contact list, and they had a bit of a history. And they've gone, yeah, the history's not gone the way we want.

35:32 We reckon we can leverage it and through our contacts and our networks we get an amazing return. You know, at the time, you know, it was called human cock fighting. And of course you saw the likes of Senator John McCain as strongly advocating against, you know, the UFC in America. They were finding it difficult to get sanctioned, you know, across different states in in America, but they had to put in that work to get it to very easy day. And it's.

36:00 Not a world I know, but I'm just sort of trying to apply some commercial logic as as to. Yeah. So it I think you wrote something. In 2016, they were able to sell that brand to, I think it's a Zoofer, so they sold it to Zoo for $4 billion. And how many? What was the balance sheet value then? I I'm not close to the details.

36:29 We could find out, but I'm not close to the details. But the balance sheet value is probably all cash in the bank or or the balance, I don't know, no. Definitely as a 2016, definitely they had, you know, like lots of land and property. You know, they have the UFC Apex in Las Vegas, they have the UFCPI.

36:47 So definitely they already had like solid tangible assets, right, But they store. Properties. Definitely yes, yes, definitely. Did they have property to their name right? But the properties that wouldn't have been, what'd you say it sold for 2 billion? I don't think it's up to 2 billion, right. And that is? There's a whole lot of goodwill there isn't. There, that's the intangible asset, right? Because you see, you see how big the UFC brand is right now, right?

37:15 Yes, huge brand, huge brand value. Very, very, very huge brand value, right. But you see the thing with traditional accounting area on the side of caution, right? That's what you need them to do. Yeah. It doesn't mean that it is irrelevant, right, Because it is just an aspect, you know of reporting. And remember what I told you about traditional financial reporting, It is about four things, recognition, measurements, presentation and disclosure, those four things, right?

37:54 And, and maybe you misunderstood, I didn't mean to say traditional accountants were irrelevant. OK. And I hope that didn't. Come across now we're convergence. Yeah, I think some of the report like, and as I say, I'm a big fan. Look, everyone needs to get their financials in order. They need to know what they can afford because most businesses, you know, if they don't get their cash flow right, they'll grow and and cripple themselves with growth because they'll grow too fast, they can grow too fast. So yeah, I'm a big fan of getting the numbers right. I just don't think the the traditional, the old style ways of valuing a business is very helpful in a modern marketplace. I don't think of an asset based

38:33 valuation model is the right model in most situations. I'm sure we'll find a we can find a way to go look at an asset based valuation is the right way to value a business. I think it's more the exception than the rule today. I agree with you on that. An asset based valuation is, let me say a net asset based valuation, right is not always the correct way to value a business.

38:56 That is absolutely correct, right? Because the business is beyond just the physical assets, right? And that is why there is a whole accounting standard aesthetic that addresses intangible assets, right? However, the constraint, you know, when it comes to the financial reporting side is the fact that it does not allow you to value those assets until a buyer has put a value to that asset, right? And let's not come to the aspect where we talk about the buyer determining the value, right?

39:34 And of course, I think that is partially correct, right? Why is that partially correct? Because the market forces of demand and supply is what actually determines the value. You know, we you are probably adopting A simplistic model wherein you have just one buyer, right? But it's not in all cases wherein there's just one buyer.

39:56 Sometimes, you know, a brand is so is so attractive that it has multiple buyers. And of course you know you would probably have beads and in the process of beading. The brand to the business would actually go to the highest bidder. And of course that's where your economics comes in, right? Of course you have macro economics, you have micro economics.

40:20 And of course you know there are economic factors, right that determine the price of a business. So for example, the price of a business pre COVID is probably higher of most businesses actually was actually higher than what it was as at the COVID era. And the brand of certain would I say tech companies right pre COVID, right grew astronomically after COVID.

40:50 So basically the market forces of demand and supply is what truly determines the price are. You referring to stock prices? And not stock prices. I'm talking about the valuation, right? You know, valuation actually changes over time, so sometimes you have an increase in valuation, right at a point in time and due to certain circumstances, right, you could have also a fall in that valuation. You have gains and losses in valuation. But that's only visible for a listed business. It's not visible in a private business unless they are getting evaluation that is not.

41:29 Visible. Well, unless they're getting evaluation every year from a consistent source because because their their accounts aren't published and then they don't have a liquid marketplace for buying and share buying and selling of their the business through shares. Most, like private businesses, the the market for their shares is closed. Yes, that that is very true.

41:55 But the fact that a valuation is not done does not mean that a valuation does not exist. Do you agree? No, no, that's what I just said. It's not visible unless they're getting a valuation through the same source, the same consistent source of valuation year on year. Exactly. Which I've never seen happen is very rarely they. Really happens.

42:17 We're private businesses, right? Yeah, that's what, yeah. And and that's, and I'm just wondering if we're getting confused by comparing listed businesses where, where they have full transparency and they have to comply with a whole lot more accounting regulations so that we can equalize things and compare them similarly to small businesses that, that are privately owned or or I should just say privately owned businesses where they don't have those obligations or requirements placed on them. They've got some requirements that they need to comply with obviously, but their valuation is is just not readily visible. OK.

42:55 Unless they're, they're selling shares. You know, an exception that I'm familiar with, which that I'm seeing is, is if there's a market, an internal market within the business where employees are buying shares for, through an employee share ownership plan, which is becoming more popular and, and, and big advocate of that, by the way. But again, you know, every year we, we'd, we'd look at the financials, we, we might compare evaluation then and you'd, you'd have a look at what the valuation is and hopefully the valuation's grown and then all the employees can see, well, the shares we bought last year have increased in valuation. I'm keen to go again, buy some more. And then the founders are

43:34 gradually selling down through this mechanism, this internally created market that they've stimulated which wouldn't normally exist otherwise. OK. So I think in some way we've actually reached a London, right. So I sort of agree with you, right, that the buyer does determine the price, right, but does not independently determine the price, right?

44:02 Because the price that a buyer would actually throw at a business or for a business is actually informed by certain factors, right? And what actually informs that buyer to put or to peg a particular price on that business? Look, I might be being pedantic here, but and it could be a language piece.

44:29 So the price is like we go back to the pair of jeans example, the price that the seller determines the price, whether it's $10.00 for the jeans at Walmart, Asda or if it's $200 for a pair of jeans with a designer label, The seller said I'm going to sell them for $200. The buyer can then come along and say I think it's worth $200. I'll buy it or they'll go, I'm not paying $200 for a pair of jeans.

44:54 That's ridiculous. I don't see value in that. They won't buy it. So that's what I mean when I say look, the seller sets the price and determines the price. The buyer determines if that, if they think that price is valuable when it comes to selling a business, it's a bit more of a negotiation as as you were alluding to earlier.

45:14 And it's, you know, it's a one off business. You've only got 1 business that looks like this. We've got to come to agreement. Well, I'm happy to sell it for this price and you've got to make an offer and I'll go Yeah. And we'll, we'll do a bit of horse trading in between and and, and I really like your point of we really want to get the business to a point where it's attractive to more than one buyer because if you've got more than one buyer or more than one person. Interested.

45:38 You have that invisible hand in action. Yeah, yeah, you get some competitive tension, which though it's more likely they will spend or they'll pay their true valuation because they'll have done, they'll, they'll look at all of your, they'll do due diligence on your business and they'll look at all that, they'll pick it all over.

45:56 They'll really want to understand your business and I need to be able to learn about your business by pulling your financials apart. So you absolutely need good financial record keeping to to the standards and, and they'll want to have a look at your accounts and they'll go based on this and the opportunity that we see of buying this business, it's worth this much to us. We're, it's a bit like an auction, I guess. They'll go, we're prepared to pay this much for the business 10/20/50 mil, whatever it is.

46:26 We're prepared to pay this much. We're not prepared to pay anymore. And if the seller says I'm not going to sell it for that much, then they won't achieve a deal. If the seller says, yeah, you're going to give me that much, Yeah, that's, that's with what I think it's worth. I want to sell it for that much. And and then there's a chance that they'll they'll, they'll agree a deal and they'll, you know, the seller thinks it's good value and the buyer thinks it's good value. And when you achieve that harmony, you know, you'll get a deal and everyone will walk away happy. But there's a lot more tension and chewing and froing when you're selling a business compared to a nice simple example of a pair of jeans.

47:04 But that never. I'm just trying to explain where we're hoping, where, where I guess our perspectives are slightly different, which is we are actually. Converging right now and of course, I love what you just said, right? Because you are just alluding and corroborating with the market forces of demand and supply, right? The buy, the seller set a price, the buyer sees it and says whether he agrees with that or not, right. Market forces of demand and supply simple in action, right? Even in the situation where you have just one buyer, right, it's still the market forces of demand and supply because. And they definitely if it's.

47:50 Just one buyer. It means that it's not attractive enough to the other to other buyers. For sure. Yeah, yeah, yeah. Still market forces of demand and supply. OK. You see, we should landed. I'm not I'm not sure we we have finally used to landed. You get it, you know, it's economics, you know, in commerce playing out. Basically it's the invisible hand. If a business is is attractive enough, right, there will be multiple buyers beaten and of course that final value that they would even arrive at is still worth that equilibrium price, which is decided by the market forces of demand and and supply.

48:38 So let's talk about, you know, the risk in you often talk about the risk in the deal. So what are the biggest risks you know buyers see in founder LED businesses? Well, I think we've touched on them, but to to recap, so the risks are what are the likelihood of the revenue pattern. So a buyer will look at the revenue pattern from the last few years and go what's the likelihood of that revenue pattern continuing under new ownership? So the biggest risks is how much involvement do the current owners have in that revenue generation pattern or that profit generation pattern.

49:16 So there's the biggest risks and then the things that influence that, that that outcome, that pattern, the management team, how robust and how strong is the management team? And what's the likelihood of that management team playing staying in place after a change of ownership? How was your revenue constructed?

49:35 Is it is it one off purchases? Is it subscriptions? Is it contracts? What's the nature of your revenue, your staff turnover? How how skilled and, and how loyal are your staff? How long do they stay? And what's the culture of the organization? Are they all motivated and aligned and incentivized to the same outcomes? Have you got any IP?

49:56 Are you known for anything in the marketplace? Are people being attracted to your business because of your people, specific people in the business? Or are they attracted to the brand or the IP, the intellectual property that you've got in your business? So, so there's a, a quick, you know, rundown of, of some of the key influences to to have that valuation will will stick and attract attract people to want to keep talking and and perhaps find a deal. So talking about the N outs, right? So why do so many business owners end up regretting them? And of course, like how can they avoid being stock post exits? OK.

50:37 So I guess we need to clarify the difference between an earn out and a deferred payment. So a deferred payment is locked in and it just will get paid over time assuming everyone's credible, but they're they're not contractually at risk. An earn out is when we go, hey look, you want to sell your business for this number, I think it's worth a lesser number. But if you stay and help achieve these these goals over the next couple of years, the next two or three years is a common period. Then we will pay you these sort of bonus payments that will get you up closer to the number you think. Now the problem is that most business owners have and the struggles where these occur is, is they fall into two camps. Really.

51:24 The first camp is that the owner is no longer the owner. They're now an employee working for someone else. And they don't agree with the direction or the way that the new leadership team, the new ownership are handling and running the business. And they can no longer call the shots. They're used to, you know, being in control and running the business themselves.

51:41 They can no longer call the shots on how, you know, decisions are made in the business. And they get frustrated with that and they'll, they'll walk away and leave money on the table. That's one way they get frustrated. The other big area, the other area that that can be risky for business owners who agree to an earn out is they go, they don't get clarity around what the earn out terms are.

52:06 They're just vague, open promises. And, and the problem with that is there's no clarity and the new owners can move the goal posts, they can change the way they're running the business, which is totally within their right, which then ends up making it impossible or very difficult for the old owners. The founders to achieve the targets that that they had to try and achieve to get their achieve the earn out payments. And so that's the second area that the rules of the game have changed effectively.

52:33 And so again, if we're an earn out, all the risk is on the founders of the business and they very rarely are successful. So are you are being an expert in helping businesses? You know the founders with the exits process, but there has to be a mindset shift where you are switching from running a business to preparing it for sale.

53:00 So what are the mindset shifts that these entrepreneurs have to take on? So the first one is, is the one we've touched on already where they need to make that shift from. And this is the big one, you know, from thinking about profit growth to valuation growth. And the only way that happens is if they are getting regular valuations from a third party, an independent valuation specialist who does valuations all the time and and they're using a consistent approach. So they're reliable experts.

53:34 So they're doing it from a valuation performance perspective rather than a taxation perspective, for example, and to try to create that market valuation through a buyer's lens. Now, if they're doing that regularly, then they can see the valuation growth each year and then they'll start looking at all of the things that the business owners need to do to be working on their business rather than working in the business. And it's, it's all the things we've already discussed. It's going how do I build a brand? How do I build some intellectual property and process methodology that people will be attracted to that rather than coming to the people in the business because Tom, Dick or Harry work in my business?

54:12 How do I build the culture of the organization so that I get people performing at a higher level and, and being more loyal and staying longer? How do I, what are the things I need to do to improve my marketing so that I get a better flow of clients who are ready to do business with me because they know what's special about my business and they want to do a business with me rather than just shopping around and and comparing prices. So all of the things that improve brand and improve cash flow, reliability and retention are all the sort of things we're looking at and and things and eliminating owner dependence. So basically, Ward separates those owners who walk away satisfied from the deal and

54:54 those owners who end up being disappointed. I think the ones who walk away satisfied have prepared their business. They've done some preparation. They have a realistic perspective of how their business will be valued from an external perspective rather than from their perspective. And they know they've they've done some education and they've learned what's required to go through an exit transition. So they know what's coming, They know how long it's going to, and they know they've prepared the business to minimize their earn out and ongoing obligations, so they're more likely to have their expectations met.

55:29 They'll be happy. Those that are unhappy are the ones who have done no preparation. They just get to a .1 day and they go right, I want to sell my business. They'll find a broker, a corporate finance, MA specialist and they'll just put their business on the market. They've done no preparation, so everything that happens is a bit of a surprise and they'll they'll go through the process. It'll be quite a painful process because they haven't done any work in preparing it and and they are unlikely to, because their expectations are unreasonable. They'll be unlikely to achieve a deal that they expect to happen. So they'll they'll end up feeling disappointed. But there's something a lot of

56:09 business owners who want to make an exit like to say, and that is exiting on your own terms. So, in your own words, or your own definition, or your own experience, what does it truly mean to exit on your own terms? To exit on your terms is, is that former that we just discussed. It's when you've done the preparation, so you know what's coming. So you set the time frame.

56:36 You know, you've prepared your business. Your business is exit ready. You're ready for exit. You know what? You're gonna move on to it. You, you, you've got a plan. You've got a vision for what you're gonna do next in your next chapter. You're you're not just gonna be sitting on the beach drinking pina coladas because you'll get bored with that after a couple of weeks. You know what's happening after that and you've got a realistic valuation of the numbers.

56:59 So the numbers are going to work for you because you've done some personal financial planning, you've probably spoken to a wealth manager and you know what, how much investments you need to live the lifestyle you want. After you exit the business, you've transferred the assets, you've got a plan in place. You know it's on your terms.

57:18 If you do no preparation, that's when you're selling your business to someone who's likely bought businesses before, you've unlikely sold a business before. And so therefore, if you're selling it to someone who's bought many, they know the tricks of the trade. And, and if you're not prepared, you'll get pushed around somewhat.

57:38 If you haven't done your homework, you get pushed around, you get bullied and and you're you're going to be doing it on their terms more so than your terms. So they're calling the. Shots. So, so from your experience, are you able to share like a real life case where a founder was able to transform their business from an unsellable brand to something that is highly desirable and they had a good exit?

58:04 Yeah. So, so there's one in particular that I can think of and obviously I can't give you any names. And no names required. Please anonymity. And they, they were, they were pretty much as I'll say they're a service business. They, they, they work with people and, and placing expertise, but they had no brand recognition that the owners were, were living from hand to mouth and taking money out of the business and then as much as they could as regularly as they could. So they didn't have any control of the finances. So one of the first things we did is we said right, we need to get the business to the point where we've got control of the cash flow.

58:41 So you know, you've got a visible runway of what's happening with the cash flow. So we bought that under control. We we got them caught up with their tax payments because they were getting behind with those because they they were spending the cash flow and that they were just spending the money by gut feel. So they now had a runway of the cash flow based on the contracts and the work they were getting.

59:01 We got in a dedicated MD type of person who facilitated. So he and the fractional finance person were running the business from a controlled perspective and producing regular reports, both financial and operational reports to the shareholders were who were involved on the board. And we really got the business operating functionally and from a controlled perspective.

59:25 So it was no longer being run from memory and from gut feel. Everything was through reports and plans and, and informed perspective that enabled them to create budgets and keep the, the MD accountable to the budgets and set plans because he knew he had the cash flow available on what he could do and how he could run the business. And that business, I think we've got like a like it was a fairly small business to start with, but over three years they tripled in size from a revenue perspective and their valuation went up four times.

59:56 That's yes. That's the mandate of controls in place. That is really tremendous. But you know, have you ever seen a business that is deemed too late in its life cycle to salvage for a good exit? Oh yeah, all the time we get often we get approached by business owners you go, hey, I want, I want to help prepare my business for exit. And we go great, what's your timeline? What's your, your runway look like? Oh, we want to sell it this year and you go good luck because you know to get exit ready.

1:00:27 Yeah. Look, we can, we can work with an accountant and tidy up your financials or a CFO. You can get your financials tidied up and and they can make some adjustments, but and that'll tweak your profitability. You're not going to get any opportunity to tweak the multiplier that will be applied to evaluation because the multiple on your profitability is, is a factor. It's a measure assessment of risk and your business, if you're involved in the business, it's too dependent on you. Everything's in your head.

1:00:57 You're doing it from memory. When you go, all that history disappears with it. So you know the new owner doesn't have a handbook, so to say, speak to go here's how I run the business. So if you buy a new iPhone, you get an owner's manual with it and a quick start guide. So you know, for new users, you know how to you know what you need to do quickly to get up and running and if you want to learn the advanced features. So you've got a complete owner's manual there. Too many business owners are actually trying to exit their business without providing a quick start guide or an owner's manual.

1:01:29 And and that's detrimental to the valuation of their business. They'll they'll end up leaving because they they haven't captured the value because it's just too risky for a new owner. Speaking of a quick start guide, I would like for you to provide us some advice to young business owners and of course you know early stage founders before you leave.

1:01:53 So for those kind of individuals that are listening or watching us today, what are three things they can start doing today to ensure their business becomes a valuable asset tomorrow? Create a structure, a functional structure for your business that captures everything that needs to happen. And that's going to be the same functions for many businesses.

1:02:19 You're going to have accounting and finance, you're going to have HR, you're going to have systems, you're going to have all of your operations. You want your sales, your marketing, your onboarding of new clients, your, your how do you deliver clients? How do you keep them happy? What's your marketing look like? What's your recruitment look like? What's your training look like?

1:02:36 And then what's your business planning look like? You know, what's your vision, your, your culture and your products strategy. If you start to structure all of those things on a chart and identify what needs to happen, you might not have a number of people to fill those boxes yet, but all the boxes won't change as your business grows.

1:02:54 As your business grows, you'll just spend more time in each box and therefore you'll need more people in each box. So that's let's call that a functional structure for your business. There's, there's Step 1 towards documenting your business. Then you want to document your workflow practices. How does workflow, what's your standard operational workflow? Your primary workflow is what I call it from from marketing all the way through to client fulfillment, delivery, whatever you call it in your business, document that workflow as your primary workflow as your first point to ensure consistency and reduce rework and so that everyone knows how to do the job.

1:03:30 And so what's the third thing I would say, depending on the size of your business, get a fractional CFO. They'll make a huge difference into into your business. And now you're making me happy. And of course, you're making that the last guest on the show happy because he is a really, really solid fractional CFO. But how about those founders who are probably considering selling within the next 12 months to two years? So what should they be doing now? So if they haven't done those things we just talked about, get them done because it's, you know, the sooner you get that done and then document everything that happens in your business.

1:04:10 So there's that. OK, make sure. OK, you wanted to give them additional advice. OK, Yeah, I'm getting there. Then the next thing you want to do is, is document your marketing machine. What are your various routes to market? How do you, how do you leverage that? So let's call that a talent machine and sorry, a marketing machine. So we'll get all of our various channels because we, we don't want our clients coming from just one source. We want to demonstrate that we've got three or four sources, 3 or 4 routes to market where our clients come from that we're able to target.

1:04:45 We know who our ideal clients are. We know where to find them and how to find them. And we know how to message them that engages with them and that they they want to be be interested in in having continuing conversations with us and learn about how we can solve their problems. So there's the marketing machine. The next one is we need to balance up, you know, going back to earlier part of our conversation, but within our own business, supply and demand within our own business. So the whole idea of the marketing machine is to create demand out in the marketplace for our solution, our product to whatever it is the problem we're solving. We want to create demand for that. Now if we keep creating demand

1:05:28 and we don't have enough capacity to fulfill it, we're in trouble. So we need to build a talent machine, which is identifying new talent that can help us recruit that talent, get them on board in our organization, train them in our ways of doing things and make sure we've got enough capacity to meet the demand that we're creating.

1:05:47 And if we can get that imbalance in harmony, we've, we've really hit the jackpot because we've, we've, we've mastered that. So the talent machine and the marketing machine. So they've got those two systemized systems happening now. And the next one, the third one that I would be looking at is if I've got a management team in place, I would set up what I call an agile management system.

1:06:11 But it's, it's similar to, well, it's the agile management system is where my leadership team go. Hey, we understand the vision that the owners have set. The owners want the business to look like this and head in this direction. Let's take that vision and the strategy that they've set and the strategy being the product, the market, the, the position in the market, the pricing and package approach and position and how do we reach them. Let's take those strategic elements and go right, what can we achieve this year to drive us in the direction of that vision using that strategy And we'll put our goals in place. So we will systemize our leadership approach to achieving those goals, you know, so

1:06:52 budgets and goals and business plans and then have a systemized approach that keep the management team accountable. And, and we've got the right sort of reporting and back mechanisms in place to keep us on track to achieving those goals. Because if we don't do that, it tends to just be, well, we'll set a budget this year and we just run the business for a year.

1:07:14 And then we look back and go, oh, look, how about that? We, we hit it or we didn't, how about that? It becomes haphazard. So I really want to, you know, the third thing is let's get the agile management system in place that keeps the leadership team accountable for driving business towards division. I think that is actually a very, very robust recommendation and I very, very much appreciate that.

1:07:38 So it is always hard to say goodbye, but I would find a reason to keep you for a little bit longer. I'm going to play a quick game with you. It's called the rapid fire section. And I'll ask you a few questions and he just give very brief quick fire answers. Are you ready to rumble? Well, hopefully it won't be a knockout.

1:08:02 OK, Yeah, well, come on, it can't be a knockout, especially with a man whose name ends with a cert. You are up to it. So let's go number one. What role does intellectual property play in boosting business value? I'm good. What role does it play in in in business valuation? A boosting, Yeah, a boosting of these.

1:08:27 Yeah, it's a significant role. Whether it be. I reckon there's two types of IP. You might like this. You might think I'm an idiot. The first type of IP is KFC. I call it KFC IP. Wow, I did eat. KFC yesterday, so I guess that's the reason why you call it. Right, so KFC has a secret recipe right? No one knows the exact recipe, but they are known for their recipe for how they do chicken and it's that southern style fried chicken.

1:08:57 Cocolor as well, you know. Yeah, and, and it's fantastic, right. So that's, that's one type of IP. It's a secret formula. It's protected, it's locked away, and only a few people have access to it. The other type of IP I call Subway IP, as in the Subway sandwich. So it's Subway sandwich. It's just a salad sandwich, right? There's nothing special about it except for the way they put it together.

1:09:21 And, and, and what you're buying there is the process because you know when you get a Subway sandwich, you know exactly what you're getting. You design it. The experience is exactly the same in every restaurant you go to. And it eliminates the risk of going to a local deli that you've never been to before and you're never sure what you're going to get.

1:09:39 So if you go to a new place and you go, I'm hungry, I need some lunch, I need to, what do I do? Well, there's a subway there, I know what I'm going to get. Or there's a deli there, it looks independent. I'm not sure what it's going to get. And there's not much of A queue there. So I'm a bit cautious.

1:09:53 So it doesn't matter what type of IP you've got, as long as the marketplace knows about your IP and they know the value of of that IP to them, then then it's a significant part in the valuation. Interesting. So how much does leadership succession matter in exit planning? Again, significant because if you've got the leadership team in place and people know how to come through the business and you can demonstrate that you've got the next leaders in place and that the the current leadership team are actually driving and running the business and the owners have a steering role.

1:10:28 Only then your business is going to be worth so much more than if you're involved and you're a key person in the business and business relies on you every day. Interesting. So next one, is it possible to sell a business without stepping away immediately? Sure, sure you can. Now the dream scenario that I think is that you sell the equity in the business and then you do a separate role where or you might not sell all the equity because you could sell it to a PE and do a nice deal that way. But you can sell some of the equity in the business and you go, right, OK, that deal is secured. We've sold, sold that amount of equity. I've got this money for the equity. There's nothing contingent on

1:11:07 that. I've got my money. Now you've put some money in the business as well. Okay, now I'm an employee in the business, but we're now in partnership. Let's keep going and I'll operate as an employee. And that's how PE often works. Or you could just act, even if it's just a small private deal. You could act as a consultant to the business where you go, hey, look, I'm on the tools now the leadership team are running, but I'm, I've sold my equity, but I'm happy to keep playing and participating for a while. Let's do a separate deal, an employment deal now on, on how that's going to work.

1:11:42 It's it's definitely possible to to sell the business and stay in the business and do it successfully. Interesting. So when should business owners ideally start preparing for exits? The day they start. I love that answer. I love that answer. So I think my final question to you would be, it's not business related.

1:12:05 Don't worry. If you were to go on a date with our business leader, dead or alive, who would it be and why? I've. Learned a hell of a lot from Warren Buffett. I like the way he approaches and understands business and does his research. He's very methodical, so there's that. Michael Gerber would be fun as well.

1:12:27 I reckon I'd learn a lot from Michael Gerber, so there's a couple of options. OK, interesting. So I guess I have no reason to keep you any longer. You know, this is hard to say goodbye, but you know, I think we've had a really. Really insightful conversation today. We've had a lot of in depth and thought provoking conversations. You know, it's full of insights, hindsight and of course, our foresights.

1:13:04 They say the SI you need of measuring life is time. And of course, if somebody shares their time with you, they have shared their life with you. And of course, for me, I always love to say that gratitude is good attitude. And for me, to you, it's a love and respect to you. Thank you very, very much for sharing your time and your life with me. And of course, my wonderful audience today. I very, very much appreciate you. And before you leave, do you want to leave us with where the audience can catch up with you, ask you questions, patronize you, and do you want to leave a shout out for anybody? The best way to find me and I've really enjoyed the conversation, Adam Ola So the best way to find

1:13:49 me is is my name's on the screen. There's only one of me in the planet with that name, so. Don't worry, it's it's going to be the discussion. It's going to be the discussion on YouTube. And that is Daniel the. Best way to find me is on LinkedIn that's where I spend my time in terms of social but succession dot plus is the website.

1:14:12 But find me on LinkedIn, that's the best way to get in touch. OK, fantastic. A shout out. Are you leaving a shout out for anybody? Just the team that I work with is a session plus they support us and it's not just me, it's a whole team that bring everything that we do to help business owners prepare for exit, make sure the business is exit ready when the owners are ready to exit and with the numbers that are going to work for them.

1:14:38 So it's a team effort. Teamwork makes the dream work. Wow. Sure. And. Of course, you know you guys, if you have come to the end of today's episode, what are you waiting for? Please go like, subscribe, share surest love support, join the channel. And of course, I will keep working tirelessly to bring in fantastic individuals like Daryl on the show to educate us, to inspire us. And of course, I have would like to still Darrell's time again so that we can have another debate very still in the future. Thank you very much guys.

1:15:15 And of course, thank you very much, Darrell. I very, very much appreciate you. God bless you. Cheers. Whoa.