BerryDunn’s Seth Webber discusses how and when to start the process of selling a business, the importance of seller due diligence, and how BerryDunn’s Value Acceleration program helps address these questions.
Read more about BerryDunn's Value Acceleration Program here.
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Episode 93 Transcript
Bitsy McCann: 00:03 Welcome to The EO podcast where we amplify and celebrate all forms of employee ownership.
Bret Keisling: 00:12 Hello my friends. Thanks for listening. My name is Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. Did you know that 78% of businesses fail to sell the first time they're put on the market? Or that 50% of business transitions are caused by an event outside of the control of the selling shareholder? I didn't realize those statistics were that high until I recently caught up with Seth Webber of BerryDunn. In this episode, Seth discusses the importance of establishing goals and timing for a transaction and how a business owner can get in front of a transition. Regardless of whether a business owner is considering employee ownership or not, support such as BerryDunn's Value Acceleration program provides a blueprint for sell side due diligence, including what questions a business owner should ask when considering an exit strategy. As he's done on previous podcasts, Seth has a wonderful way of discussing complicated topics in an easy to understand way. Certainly, as with all of our episodes, we'd love it if business owners listen to this episode and chose to follow a path to employee ownership, but frankly whether they're considering employee ownership or not, we believe this episode is going to provide good guidance to business owners and also to those advisors who consider business owners to be prospects for employee ownership. We'll be back in just a moment with the interview with Seth Webber, but first, here's how you can help contribute to The ESOP Podcast.
Bitsy McCann: 01:49 Are you interested in sharing your passion on The EO Podcast and ESOP Mini-cast? We're looking for correspondents to tell us their great stories of employee ownership. These one to four minute long segments can be recorded remotely over the internet or by telephone. If this sounds like something you'd be interested in, please reach out. You'll hear contact information at the end of this episode.
Bret Keisling: 02:12 We are joined here by our friend from BerryDunn, Seth Webber. Seth, how are you today?
Seth Webber: 02:16 I'm great, Bret. Thanks for having me back on the podcast.
Bret Keisling: 02:19 Very happy to have you back. And I was doing a little math and it's not scientific, but I think this is your sixth or seventh appearance on one of the podcasts rivaling only our friend Mike Shuey for a number of [appearances]; with round tables, with personal discussions with various stuff, dude, you're a regular, we appreciate you coming back.
Seth Webber: 02:35 Does that mean I get one of those cool five timer jackets like they have for the guys on Saturday Night Live?
Bret Keisling: 02:40 No. What we're going to send you, Seth is a picture of one of those people wearing their five timer jacket and we think that will, you'll take satisfaction from that!
Seth Webber: 02:49 Smaller, but it'll still be [laughter] satisfaction nonetheless.
Bret Keisling: 02:52 Well, you can take the picture anyway.
Seth Webber: 02:54 That's right.
Bret Keisling: 02:54 If you had the jacket, you'd have limitations. So you'll be able to have that. So Seth really appreciate coming on board. We're going to have a conversation today that basically I'll sum up this way and we'll take it wherever you want to go. Everybody understands that ESOPs are a great opportunity for baby boomers who have built a business and are looking for exit strategies. But it seems that you and I share the view that ESOPs are not known well enough or not considered enough by the baby boomers. So we want to talk about how a baby boomer can start gathering some information, but am I, am I sending it up right?
Seth Webber: 03:29 Yeah. Well, and I love the way that you phrase that, Bret, because I think that oftentimes within the ESOP community, we all think that everybody knows about ESOPs and how they work and what they are. And the reality is that outside of the ESOP community ESOP as a succession tool or planning tool is not that well known or well understood. We are doing, in our valuation practice at BerryDunn, are doing more and more work on both exit planning and what we're calling value acceleration. And in the course of doing that work it's fascinating because it dovetails very nicely with what the ESOP community is seeing right now. And what the ESOP community is seeing and spending a lot of time talking about is that there seems to be an unprecedented opportunity in front of us as an ESOP community in terms of bringing more companies into the fold.
Bret Keisling: 04:32 And it should be an opportunity that in my view, and just speaking for myself, we haven't done a very good job of maximizing. There's a very unique conceit in the ESOP community, if you will, that the environment is really robust right now for transactions and that the vibe feels very active, like there's a lot of activity. But as you and I discussed offline, factually, we have a hundred fewer ESOPs today than we did in 1996. The number is roughly about 6,500 according to NCEO, if we even know that. So for us it's, boy, why isn't there traction for what you and I know to be very important reasons why an ESOP would be a good fit for many companies -- doesn't even seem to be on the radar.
Seth Webber: 05:17 Right. And so let's, let's unpack that a little bit because why does it seem like there's such a good vibe and so much opportunity right now? It's the gray wave or the silver tsunami or whatever your favorite phrase is, which are all clever code words for baby boomers are retiring in droves.
Bret Keisling: 05:39 And let me tell you that I enjoyed both the gold wave or the silver tsunami, the phrases that you used a lot more when I was 15 years younger and not in my mid-fifties, where now it's like it seems like they're picking on old folks. But the reality is we're approaching retirement age.
Seth Webber: 05:57 That is the reality. And even now there are 10,000 baby boomers retiring daily across the nation, which is a pretty amazing statistic. And if we couple that with the fact that 63% of private businesses are owned by baby boomers, there are a whole lot of people trying to understand how they convert their business into liquidity to fund retirement. Now why do I put it that way? We know that the typical business owner has 80% of their wealth tied up in their closely held business and that 90% of those business owners are planning on some liquidity from the business to fund retirement. Yet 70 to 80% of businesses put on the market don't sell. Now what's interesting and where it ties into why this podcast, why The ESOP Association, why NCEO are such critical resources is that we know that 65% of closely held business owners when surveyed tell us that they do not understand all of their exit options. And one of those exit options includes forming an ESOP.
Bret Keisling: 07:15 So Seth, let's broaden this a little bit and for this segment of the podcast, let us be speaking to the business owners or even upper management at the companies as opposed some of the podcasts we talk to professional advisors or rank and file employee owners. Let us talk and for, to make your job a little easier on the podcast, let us say that I am the founder and CEO and sole shareholder just to make it easy of a, let's say a $10 million company. Does it matter to you whether it's S Corp, C Corp, doesn't really matter?
Seth Webber: 07:48 S Corp would be easier, 'cause it's what we tend to run into more often. A C Corp has some other planning opportunities, but those are wrinkles for a different podcast.
Bret Keisling: 07:57 So, and let's just say since I'm doing podcasts now and that sort of thing, that it's a media company, you know, that might have newspapers or radio or, or that sort of thing. And for anybody who may or may not be eventual beneficiaries of my will, there's really not a $10 million company that I own [laughter], but let's say that just to set it Seth, so that's it. So I'm going to reach out to you. Are you likely to already, is BerryDunn already providing service to me? Or have I come across you in ESOP? Like, what's making me call you?
Seth Webber: 08:27 Yes. So Bret, you might be an existing client of ours either, you know, for financial statements or tax services or you could be a call that comes in from another service provider. So another accounting firm or lawyer that does not specialize in valuation of closely held businesses. In fact, I had two of those phone calls already this morning that were referrals in from, from other accounting firms. So why you call tends to be you want to understand what your business is worth and what your options might be.
Bret Keisling: 09:07 And so very broadly, Seth, the point being is you'd be happy to take - field - phone calls from business owners or their accountants who are interested. If their accountant is not in the ESOP space they can talk to BerryDunn about ESOP options and you'll do the education for the wealth managers, the business planners. You want to help educate everybody.
Seth Webber: 09:30 Absolutely. educating people is very core to what our firm does. And so we run a number of education series over the course of the year to help with just that, but we're happy to field calls from whomever. And if we're not the right fit at a bare minimum, at least we can get you one step closer to somebody who is.
Bret Keisling: 09:52 And so now with that, I've reached out to you and I think we've got a $10 million value of the company, but I'm not sure if that's revenue. In other words, I don't know what I don't know. So even though that I run it, I call you up, Hey, I'm going to call it a $10 million company. I know I want to retire, let's say in six years when I'm 62. Seth, where's the conversation going?
Seth Webber: 10:14 Yeah, so great question, Bret. What we tend to start with, and it may be because we're a valuation group, but what we tend to start with is trying to understand what is the value of that privately held company that you have. And very specifically, we want to value that company using fair market value because we want to set a reference number or plane or starting point for any of those discussions.
Bret Keisling: 10:42 And this is before we've even talked -- now clearly this is The ESOP Podcast, we focus on employee ownership, but we're not, the premise just to remind our listeners is I want to sell my company. I don't, I might not have even heard, we'll even say I haven't heard of ESOPs. So when you're talking about the valuation, am I phrasing it correctly when I say before you can give advice, you have to know what it is you're giving advice on.
Seth Webber: 11:05 Absolutely. Because one of the things that we find, and is again what's motivating people to want to sell their business is to fund retirement or to have some liquidity for whatever the next phase or next stage that they have envisioned is. And so our first question is do they have a sense of what it's going to take to run that next phase of their life? And that's where the wealth managers come in and do a much better job of that than we do on the valuation firm side.
Bret Keisling: 11:35 So you're not trying to replace other advisors, you've said, hey, in certain terms of lifestyle, in your golden years, you need the wealth advisors, you need the, the managing the residual revenues or that sort of thing that is different from your role. Your role is to figure out how much you can put in the basket from the sale of the company.
Seth Webber: 11:56 Our goal is to augment the existing team of advisors.
Bret Keisling: 12:00 Okay.
Seth Webber: 12:01 And so it -- but if you have a $10 million business but you don't have a wealth manager on board, we're probably going to identify that and arrange some introductions because on the eventual sale of your business, you're probably going to need some help on how to manage that money, particularly if you're using it for retirement. So our goal is really to augment the existing team. One of the reasons why we want to work with that existing team is what your retirement needs are might dictate what the exit plan looks like. So let's say you said you had a $10 million company, we'll go with that for now. Let's say it turns out that in retirement you need $15 million from that company to make everything work the right way.
Seth Webber: 12:53 That 50% premium over fair market value is not going to be an ESOP today. If it needs to be a $15 million value and you have a long time frame before you want to sell the company, then we might have the time to drive, to build the value up, to drive the metrics the right way to make sure that you have a $15 million company that you could then sell to an ESOP.
Bret Keisling: 13:21 And is this a continuation of what BerryDunn does with the valuation acceleration?
Seth Webber: 13:28 That's exactly it. That would be the value acceleration. So we would start with a baseline, say your $10 million. And if the goal was to have a $15 million company at some point down the road, try to understand what the key drivers would be to get it there. And so it's a mixture of valuation, corporate finance, strategic planning and maybe some tactical like on the grounds consulting as well to help get all the pieces and parts lined up the right way.
Bret Keisling: 14:08 You'll start with valuation and come through with the fair market value. And I happen to know, not from my hypothetical here, but from my days as a trustee, that fair market value is integral in ESOP valuations but it's not necessarily, I guess what I'm trying to...
Seth Webber: 14:29 So let me, let me help you out here. So as a trustee, with ESOPs, you could pay no more than adequate consideration, which was fair market value.
Bret Keisling: 14:41 Correct.
Seth Webber: 14:42 And when we're talking with people about exit options, when we're talking with business owners about exit options, imagine a continuum. And so on the low end of the scale, so as far below fair market value, you have a value that's kind of a friends and family rate, or what an internal family transfer might look like. Stepping up from that, you might have a management buyout where it still represents a good chunk of the overall value but in my experience still represents somewhat of a discount to what fair market value might be. And the rational around that's typically, like that's the management team that helped drive the success...
Bret Keisling: 15:28 We're rewarding them or we rather have our friends do it and we got to help them to make it possible if they don't have the resources. All of the personal reasons to a selling shareholder that are theirs to make, if they want to...
Seth Webber: 15:39 Correct.
Bret Keisling: 15:39 ...but not obligated to.
Seth Webber: 15:39 Then you've got fair market value, which is where an ESOP transaction might happen. It might be a little bit below that number. That's also the number at which you might start to see financial buyers or financially motivated buyers like a private equity firms. Now private equity firm might also bid up if it's a business that's already in a space that they are playing in.
Bret Keisling: 16:02 Strategic acquisition.
Seth Webber: 16:03 Strategic acquisition or platform acquisition. And then you may have somebody who's willing to pay a strategic premium even over and above that. And so I just want to be clear both for ESOP purposes and for exit planning purposes that you know, if you're thinking about those premium situations, you're not doing an ESOP transaction. And if you need a premium, you shouldn't be thinking about selling to your management team or your kids. And still, you're still working through some issues from their teenage years.
Bret Keisling: 16:37 So it really is honing in on your goals, but then fine tuning what the goals is. And ultimately, you know, for example, if you like the legacy stuff regarding ESOPs or you like the, you know, jobs that are likely to stay in your community and stuff we talked about.
Seth Webber: 16:53 Right.
Bret Keisling: 16:53 There's going to come at a cost of giving up, you know, the absolute top dollar. Because, Seth, me as a trustee back when I wore that hat, I can only pay fair market value, or not in excess of fair market value, which means generally the accounting concept of goodwill kind of goes away a little bit. Difficult for the trustee. Whereas if I'm buying it as a sole buyer, I can pay a million dollars for someone's goodwill just like that. I don't have to answer to anybody.
Seth Webber: 17:19 Well, and that definitely enters in. And the other is yeah, there are the trade offs, but the trade offs usually even while there's legacy and community aspects and the other, is it's important to always keep in mind what the economic impact might be. And so, you know, we had a conversation a few weeks ago with a business owner and the business represents only 20% of his, his total personal worth. And so the flexibility that he has with what he might be able to do with that business is very different than somebody who has 90% of their personal net worth wrapped up in the business. And so, you know, and that also becomes part an important consideration around timeframe. If you come in, like you posed earlier in the conversation and said, hey, I've got like an eight or ten year runway left that gives us eight or 10 years to start to pull value out and, and not have your wealth so concentrated in the business, which may make it so that you could lower that target. So now you don't need $15 million to fund retirement the way you thought you did. You know, with enough time and proper planning, maybe you only need ten or eight. And then we're having a totally different set of discussions.
Bret Keisling: 18:43 And by the way, I hate to be cynical, but I don't own a $10 million company in reality. So it may be the business owners got to find a way to make do on $6 million. That, oh, I want to live on $15 million may not... but that gives you the expertise.
Seth Webber: 18:59 That's right.
Bret Keisling: 19:00 Seth, you put out a statistic that I found fascinating because I don't think it occurred to me that it could possibly have been that high, but did you say 70 to 80% of businesses put on the market do not sell?
Seth Webber: 19:13 That is what the statistic is. So the first time, first time that the businesses are put on market, 70 to 80% of them don't sell. And part of that is I think it's driven a lot by timeframe and lack of doing the upfront prep work or homework. And so it's business owners who are saying, I need to get out and they're putting their business up with a business broker without really ever having any consideration to what is it that I'm selling? And is my business even transferable?
Bret Keisling: 19:48 So a simple analogy, Seth, would be that we all popularly understand that if you're going to put your house on the market, you may paint, you may get new carpet, you may do certain things that I'll say to freshen up. And you might even do work on the foundation if it's serious enough for that sort of thing. And in the business context we don't necessarily, again, in the space that I'm in or talking on the podcast thing that it really is freshening up the business or looking at how deep would you go? You know, well we've been doing this 30 years, maybe it's a good way to change a procedure prior to a sell?
Seth Webber: 20:24 Well, and that's where we're seeing a lot more effort, both I think in and outside of the ESOP community, when businesses are thinking about going to market, we're seeing more and more effort put into what's being called sell side due diligence. And so that is having a team come in, kind of like before you would put your on the market, having a couple of realtors come through the house and kind of giving you all their observations in terms of what are going to be the challenges of getting this property to move. So if you extend that analogy out, that's essentially what sell side due diligence is. You have accountants and some, you know, valuation folks or similar come through and kind of start kicking some of the tires around a little bit to see what shakes loose. And then it's a question of how much effort do you want to put into shoring up those weaknesses or at least just kind of lay them bare and have a narrative around why those issues may not be the issues that the buyer thinks they are.
Bret Keisling: 21:38 How do I know what questions to ask Seth? If it's like, hey, I want to sell my business and I am focused on the amount of money that I may need in retirement and that sort of thing. So that is looking at it from the financial nature, but what questions am I asking? Like if I've never heard of an ESOP, is it just hit or miss if there's not been an ESOP advisor or?
Seth Webber: 22:03 Well, to be candid it may be, it may be hit or miss.
Bret Keisling: 22:10 Because right now I don't think we're doing a good job. It's more likely to be "miss" in ESOP world, because part of our context is I don't think enough people know about ESOPs as a viable option.
Seth Webber: 22:19 Right. There's a growing movement that is looking at exit planning as a multidisciplinary approach. So bringing in valuation professionals, bringing in accounting firms, bringing in lawyers, bringing in the wealth managers to all work as an integrated team. Those programs that are out there, that discipline that is out there, all of the programs that I've seen definitely include ESOP education as part of the overall program because it is a valid and very tax efficient exit planning strategy. So that would be one way place to start is looking for people who specialize in multidisciplinary exit planning. The other part of it that's related to that is when we start working with somebody and start thinking about it from an exit planning context, there are kind of three legs to the stool that we're thinking of. One is what's the business value? Because we're valuation groups. That's what we do very well. The second is what does the rest of the personal financial statement and personal balance sheet look like? So what other assets are there? How important is the sale of the business to the overall success of the plan? And then very importantly, the third leg are the personal goals. So what is the intent of the business owner? We're rarely lucky to have the sole shareholder. So usually we have competing personal goals, competing visions, competing ideas. But it's important to get all that information on the table and then craft an answer, a solution that is an optimal one for as many stakeholders as possible. But that's where, you know, ESOP often enters back into the conversation. I mean, I have had business owners come in who you know, literally stepped into the equity position because these were turnaround situations and said that they wanted to give the company away to their employees. Now there's a whole long string of tax cases that make it practically difficult to give the company away to the employees without generating a compensation event, but...
Bret Keisling: 24:47 Which would cause a problem for the employees, you're hurting the people that you're trying to help.
Seth Webber: 24:51 Absolutely. And, so just to be crystal clear, the compensation event ends up being personal income tax that the employees pick up. And so you're trying to reward the employees and instead burdening them with tax that they didn't know or didn't expect was coming.
Bret Keisling: 25:07 Right.
Seth Webber: 25:08 And so that's where planning around an ESOP or some other tax advantaged situation, you know, might make a whole lot of sense. But it's really keyed off of the personal goals of the owners.
Bret Keisling: 25:25 So Seth, I maybe over-designed the analogy a little bit where I said, Hey, I want to leave in eight years, you know, based on my age and that sort of thing. Let me know back up where I've built this business, it's successful, it's still the $10 million company -- imaginary -- that we're talking about. And I come to you and say, Hey, haven't really done much of the exit strategy, exit planning. I know I need to, what kind of time frame? Would you be saying, hey Bret, you want to take five years, three years, one year? And I know it varies, but...
Seth Webber: 25:59 Well it definitely varies. When I started doing valuations full time in 2007 which used to seem like not that long ago, oftentimes, you know, we would talk with business owners and we'd say, Hey, when are you planning on a transition o your business? And they would tell us five years because they knew that that was our typical planning horizon and they figured that by telling us five years that was kicking the can far enough down the road that they didn't have to worry about it.
Bret Keisling: 26:26 They wouldn't even have to have preliminary conversations.
Seth Webber: 26:29 Right. Based on how developed your management team is, how well-developed your depth chart if you will in your organization is developed. Based on whether or not you're planning on an internal transfer or just a straight up outright sale. Let's say you're planning on an internal transfer. It's becoming painfully aware to me that five years might be just the right amount of time. And so that if you're telling yourself that I want to do something five years down the road, it's actually a very good time to get started. And the reason it's a good time to get started is it's a good time to take stock of everything kind of as is, where is. So to do some benchmarking, to understand how does my cost structure really line up compared to my competitors. To understand who my competitors are. To understand what business am I really in. We have a number of companies that kind of straddle a couple of different industries and then it's always a question of, well, depending on what kind of exit you're looking to do, which industry pays better in the end? So it gives you time to get that narrative built and to get the supporting evidence for that narrative assembled and to have an overall package and story around the company, that really makes a whole lot of sense. It doesn't, does it have to be five years? No, it could be faster than that. But if somebody came to me and said, hey, I want to be out and not be participating in a company anymore inside of 12 months, that probably is going to look more like an outright sale rather than some kind of an internal transfer.
Bret Keisling: 28:22 And if they say six months, it might look more like a fire sale and a certain, hey, just sell it and we got to sell it. Right? So time a gives you flexibility presumably where you can at least look at different options. But also with the time it has the ability to give the company the time to implement the valuation strategies that you're laying out.
Seth Webber: 28:46 That's right.
Bret Keisling: 28:46 Seth, let me ask this because one of the things that has always struck me a little bit, and I might be overgeneralizing and it might be a little bit unfair, but we hear these companies say, hey, let's get ready for sale. Just like the homeowner analogy where we did, where they're putting carpet on, they're putting, you know, painting, whatever. If we are just kind of superficially freshening things up and that's not what you're talking about doing it, but why isn't that being done today for better company management, if that's the value. In other words, why are we having this conversation when there's a selling event or a potential event? Why aren't we just in our regular course of business trying to do the things that would accelerate value?
Seth Webber: 29:29 Well that's actually gets to the foundation of why we like that value acceleration framework that we've been using because it turns out that that type of deep work and analysis, if you're holding onto the company or prepping the sell the company is still great work to do because it is all focused on building a stronger foundation and trying to understand your company better and manage it more effectively and drive more cash flow and more value. So whether that's for a sale or whether that's to let's fix it up and keep it ourselves like you still have an improved business. One of the things we hear from people is well I'm planning on leaving the business to my kids. Well, why should I bother with all this kind of activity? Well, wouldn't you want to leave your kids in the best possible position? So again, that gets back to, let's have a really strong strategy in place, have a really good multiyear plan in place. Let's work the multiyear plan and leave everybody in a much better position than they would have been otherwise. So I think that this is work that you should be doing regardless of how you're looking to exit. I do think it might help you understand when you'd be looking to exit but as you get in and start doing some of this blocking and tackling and putting some of these pieces together, it also gives you a very good sense of what timing is realistic. We were having a conversation earlier this week with a former shareholder who's still a key employee at a ESOP company, but he's come to realize over the past year that his energy but not his enthusiasm is starting to wane a little bit. And so in April of this past year, they started a whole restructuring of their company leadership so that they can have the right parts and pieces in place to allow him to step aside and still have the beneficiaries benefit from a much stronger corporate structure than they would have otherwise.
Bret Keisling: 31:54 He benefits from just as you described him as some of the stuff that took the energy maybe is sent in a different direction, but the stuff that he still has the passion about.. .
Seth Webber: 32:04 That still going to be there.
Bret Keisling: 32:05 He stays in that there.
Seth Webber: 32:05 Absolutely.
Bret Keisling: 32:06 And what seemed to me, Seth, as you're doing this deep dive of value and let's just say that I was like I'm 56 in my analogy and know that I've got to move on at some point down the road and that generates the phone call to you. But you come up with the value acceleration strategy for my firm and I may find under that the compelling reason to sell maybe disappears a little bit that you know, you're either you're increasing the value or me saying suddenly, boy, the way this has been tweaked a little bit, I can actually go do my thing for a few years. In other words, flexibility to the owner in terms of what they end up doing. You're just giving them more options.
Seth Webber: 32:48 Well, and that's exactly it. The more options you have, the better. And what we're trying to do is put owners in a position of control so that they understand both what they have and what their options are. And with that control comes a lot of power. And it's the power to make intentional decisions of what they would like to see happen with the business. The one step we didn't touch on earlier is the unfortunate statistic, which is there's a 50% likelihood that the transition out of a business for a business owner is through an event not of their choosing. So it's death, disability, divorce you know, something along those lines. And so again, it's doing all the planning and having the parts and pieces in place so that those events wouldn't be catastrophic to either your family or your business.
Bret Keisling: 33:47 Well, hopefully your passing would be catastrophic to somebody! [Laughter.].
Seth Webber: 33:53 True. [Dang] it we have to rephrase that one!
Bret Keisling: 33:56 I've just got to bring it into the human nature, Seth, from a financial. No, to your point, but also, it's kind of like the attorney who doesn't do a will for themselves, or frankly just about anybody who doesn't have a living will or a healthcare power of attorney or a directive and that sort of thing. We are all going to pass. And the question becomes do you want to pass with all of your ducks lined up as it were? Or just kind of take what comes. So if somebody passes unexpectedly, maybe they've started the value acceleration process but only got halfway through or even if they got all the way done but didn't do a transaction and they pass unexpectedly, you still created more value for them in that time. In other words, getting on the path now, there's not a downside.
Seth Webber: 34:48 Well, and, let's take that analogy a little further. So you know, this process that we're talking about, we call value acceleration because what if as the business owner your intention, Bret, was to not retire? Was to just keep working? And that's great. But at some point there will be an end to Bret Keisling's work life. And what happens to the business at that point? So even if the intent is to keep working, it's a question of, well, what happens when the owner's no longer in the ownership seat? And it's the owner's responsibility to figure out what that plan is, what the disposition of that business or those assets are. So what I like about the framework is it doesn't presuppose that there has to be a transaction. You can get into this and say, but I'm just going to continue to work until the day I die. That's fine. We just want to make sure there's a plan in place for the day after.
Bret Keisling: 36:01 As you've created this value or worked with them and got their operations in order and that sort of thing. Again, it comes back to, in my mind, what's the beauty of what you're doing... Is look for any of us, I can say to you, hey, my plan is to retirement in five or eight years, but I don't know how I'm going to feel in two years. So again, if you're doing that work, you are, and we've already said this and I apologize, it's just to me such an important point. You're just providing options and opportunities and the selling shareholders, in my experience as a fiduciary, is a lot of business founders tend to think a.) They're going to live forever; b.) They are so used to being the boss that and being in charge and being very good at what they're doing -- it's not a criticism -- that they assume that because they have been the masters of the HVAC space just for an example, that they're going to be masters of creating value for selling the business. And that's not the same skill set.
Seth Webber: 36:55 No, it's a different skill set. Most of the businesses we work with, there's no way you would want me running those businesses. The folks running those businesses know far more about those businesses and the industries they play in. And you know, the intuitive gut that they develop around those industries is amazing. We're here to help facilitate what the value looks like and what the transaction process may or may not look like. And to provide opportunities, resources, and assistance around education so that people understand what their options are and what the impacts of those options might be.
Bret Keisling: 37:41 Well, Seth, look, we only really scratched the surface on something that literally could and should take hours and hours to go through. It's that important. So we got, just kind of chatted it around a little bit, but I think the important message to me coming from our conversation is that if you're a business owner, and we were talking about $10 million, but whether it's a couple of million or significantly higher that behave like you probably did in other aspects of your business, get out in front of the question, you know, the sale of the business or transfer of the equity I should say is going to happen one way or the other. So you're just saying, get in front of it and get educated.
Seth Webber: 38:22 That's right. And you know, information is power. My first career, as I like to joke too often, was in engineering. And we had this great phrase, "In God, we trust, everybody else brings data."
Bret Keisling: 38:35 [Laughter.]
Seth Webber: 38:35 So you know, get the information, get the education, find the professionals that can help you explore all of your options and have a roadmap that provides you options, flexibility, and accomplishes the goals that you as the business owner are seeking to accomplish. That would be my message to the business owners.
Bret Keisling: 39:05 Seth, that is great advice and with that I want to thank you for once again spending your time and your expertise with the podcast and our listeners. We have had you on lots of times covering forecasting and important transitional issues. BerryDunn actually facilitated the roundtables for us last year that it was just sitting with you and your colleagues that we started doing those. So I just want to thank you for once again sharing your time and your expertise with us.
Seth Webber: 39:30 Our pleasure, Bret. Thanks for having us on and we look forward to many more conversations in the years to come.
Bret Keisling: 39:35 Excellent buddy. Thanks.
Seth Webber: 39:36 Thanks.
Bret Keisling: 39:37 I really appreciate Seth Webber sitting down with me and giving his expertise. I hope you found this episode helpful. If you go to theESOPpodcast.com, theESOPpodcast.com, you can use the search tool there to find all of the episodes that Seth Webber or his colleagues from BerryDunn have been on as well as search for all of the content that we've had in the more than two years of producing The ESOP Podcast. If there's a topic you'd like discussed on a future episode of the podcast, please drop us a line. Bitsy McCann is going to tell you how to contact us and with that folks, thank you so much for listening. My name is Bret Keisling and I appreciate your time. Have a great day.
Bitsy McCann: 40:24 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email Bret@KEISOP.com, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling, and I'm Bitsy McCann.
Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.