Oftentimes what we see is a business owner trying to save money, but they ended up doing more and more and more, which tends to get pretty negative pretty fast. The moment that that owner can make that transition to building a team at their specific craft, that owner is going to be a lot happier and their business is going to be worth a lot more.
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Welcome to the wealth flow. My guest today is Chris younger, Chris is the founder or co founder of class six in 2005 with a mission to empower the entrepreneurial spirit, sharing a passion for what entrepreneurship means to our community. And then Chris felt class six could do a better job for business owners by integrating personal and business planning and taking a holistic view of the entrepreneurs journey. Chris, welcome to the show.
Thanks so much. Kay, thanks for having me.
Yeah. So before we dive into your classics, and all of that, Chris, we're really where I like to start with everybody is just where did you grow up? And what got you into entrepreneurship?
Well, I grew up in Ohio go Buckeyes, just I don't know if you watch the Notre Dame game, but pretty exciting. Yeah. And then I went to college in Ohio. And then I went to law school out east, and then was a lawyer for a couple years. And I wasn't very good at it. So I decided I probably should do something different. And then decided to work for an investor group out of South Dakota of all places, and help them invest some capital into couple of consolidation strategies, one of which I was pretty deeply involved with a company called expert nets, which did, we became the nation's largest value added reseller communications equipment, so thick phone systems, data networks, that type of thing into the small and medium sized business market. I started off as the deal guy, like I said, I practice law for a couple years and jumped off the kind of law partner track. And we did 27 acquisitions over about 24 months. And so it was a lot of deals. And you do in that many deals that quickly, you learn pretty fast, and you learn quite a bit about what makes for good deals and what makes for bad deals. And then we built that company, I ultimately became the president of that business. And we sold it to Avaya, which is a big communications company, in 2003, tried to retire for a couple years, my wife decided that I needed to find a hobby, I think she and I both wanted to stay married. So I needed to get out of the house. And definitely too young to retire. And then with my business partner, we founded class six under a different name back then. But it was really we were going to do that as a hobby, just to do a couple of deals a year we loved, loved working with entrepreneurs. And so today the business has gotten a lot bigger. We have about 50 people today. And we do kind of three types of business, we have a piece of our business that is the investment bank, so that basically manages transactions for entrepreneurs who are looking to sell their company. We have a consulting group that helps businesses get ready a year to five years ahead of time. And then we've got a family office that helps the entrepreneurs on the back end manage the money once they've sold their company. And so we've had a really, really good run. We've got a super talented team. As I think Warren Buffett says I tap dance into work every day because I get to work with entrepreneurs everyday. It's awesome.
Yeah. Do you specialize in a certain type of business? Or what does that look like with
class six is a generalist firm meaning we work with businesses in a variety of different industries. That said, we've done a lot of deals in the software space. We've done a lot of deals in consumer products, manufacturing, distribution and b2b services. But we were a generalist firm, there are certain industries where we're just not equipped to do much work oil and gas is one or biotech ones that require pretty specific expertise or understanding that we're just not smart enough to do so.
Yeah. And you mentioned that you work with companies and entrepreneurs five years before and I assume five years before they intend to sell correct? And if so, what are some of the biggest things that you don't see in place that you'd like to see in place that makes it a more saleable business? Yeah,
there's a lot that goes into it. The first thing for any business that we start with is what's the industry? What are the tailwinds in the industry? And is that going to make selling the business harder or easier? There are certainly some industries that enjoy really good interest levels from investors, any industry or business model that's recurring revenue that is relatively high margin, that's high growth, those are all going to help the valuation of a business. But then when you look at a company, individually, I like to try to keep things simple for myself, it boils down to one is how credible is that growth plan of that business? Meaning, how believable is it when you think about what they've got to accomplish to hit their growth targets. And the second piece is, what are all the things that are going to get in the way of that growth, we call them risks. And we've identified about 100 different risks that can make it harder for an investor to get comfortable with an acquisition of a company. And we've developed all kinds of tools and assessments to help business owners understand how is a third party professional investor going to look at your business. And with that knowledge, hopefully, they can take some steps today that make their business a lot more valuable. When they do go to market, the biggest ones that we see are, you know, the business is way too dependent on the business owner, they may be the primary salesperson or the primary operations person, the one who does all the product development creative. And those businesses are inherently risky, because I think most sophisticated investors know that once an entrepreneur has liquidity, their motivations change. And they may or may not be interested in staying with the business. And so that makes those businesses really, really risky. The other ones that we see are, I think a lot of small to medium sized businesses lack great financial controls, that are basically I don't know if they'll necessarily drive increased value in the company. But they definitely paint the business in a good light, when investors are looking at it, that will give investors a really positive impression to the business that they've got their act together. And that can shorten due diligence periods in particular, right, a lot of businesses are way too dependent on a single or a few customers. And that's typically a point of disagreement, or a lot of our clients don't understand why that's a big deal. But once you walk them through, typically those customers are there because of some relationship. And again, if you as the owner disappear or management changes, those customer relationships could be in jeopardy, which could put the business in jeopardy.
Right. Okay. Yeah, interesting. And what size businesses are you typically working with? And I guess, who are we selling them to? Is that selling them to another entrepreneur that says, I want to have this business or selling them to a bigger conglomerate? Or what what does that look like? Yeah, our
typical deal size is about $70 million. So these are typically institutions. So that could be a private equity firm buying them or a larger business, in when interest rates were at zero for the Fed rate, we saw private equity, being very aggressive on valuations. And you know, they won most of the processes that we ran on behalf of our clients. Today that starting to shift back a little bit, we're seeing more what we call strategic buyers, these are larger companies that, you know, might be a public company might be a large, private company. They're winning more of the processes that we're running today. And so, again, for smaller businesses, maybe a deal less than 10 million, or less than 5 million, those typically would be sold to another entrepreneur. Okay, another individual, but that's typically not where we play. We just don't have that base of potential buyers there like we do at the larger size. Yeah.
Okay. And so what are some of the, I guess, more popular type business, as you said, you did a lot in software and technology. But where's the market right
now, lots of interest, again, any business model where there's recurring, predictable revenue that is relatively protected during a recession? Those businesses are very attractive now. We're doing a deal right now that is in basically they provide analytics and capabilities for hospitals, schools, nursing facilities to help screen candidates. And that business during the last couple of recessions has been just fine. Right? The end markets tend to do pretty well. We just did another deal that was in the software space for the government. That Another area which is again, fairly predictable, that's typically going to do well during the recession, pretty sticky relationships with customers. And so those high quality businesses in today's market are really attractive. Typically, when the market starts to tighten up a little bit, you get what we call a flight to quality, which means that really well run profitable, nice growth businesses, those are going to attract premium, just because there's going to be a lot more interest in those companies, given the nature of the economy and what people might expect in the next year or two.
Okay. And as far as when you're selling these businesses, I know you said millions of dollars here, but like, as far as the size of the company, generally, how many employees? Is it the original founder that still kind of running the show or just kind of varies?
In most cases, we are representing the founder, okay. Typically, it's a founder led business that they've owned for 10 to 30 years, they've, you know, in terms of employees, that varies pretty significantly, but somewhere in the 25 to 250, employee range, revenue ranges, typically 10 to 15 million and north in terms of revenues up to we've sold a couple of businesses that were three or 400 million in revenues. And those, they tend to have a lot more people as well, those are 250 300 people. Yeah.
Okay. Interesting. And so tell me a little bit about classics. And, you know, obviously, beyond just the helping people in advance of selling their business and kind of putting all the pieces in place, what else does class 60?
Yeah, once we've worked with that business owner, at some point, the timing is gonna be right for them both personally with respect to their business, and hopefully, the markets cooperating, then they transition over to we have an investment bank, it's a broker dealer, that would take that business to market. So they package up the story, they identify the bidders to reach out to, and then they'll take that company to market present the story to the these investors, and then run what we call an auction process where we're getting hopefully multiple bids, and then coordinating the negotiation of those bids and due diligence, and so forth, and then you know, managing those to closure. So that's really the job of our investment bank, they'll manage from 15 to 20 deals a year. And then on the back end, we have a family office, which is a registered investment advisor. And that team typically will get involved with the entrepreneur well, before they're going to sell. There's lots of opportunities for tax, both estate and income tax planning, that we can have an impact on how our clients do on an after tax basis with respect to these transactions, and then we'll manage money for them, we have about a billion dollars in assets under management with respect to those clients. And for us, one of our three core values are hustle, humility, and relationships. And the family office really allows us to keep relationships front and center. And we get to have that relationship with that entrepreneur, and hopefully for the rest of their life and hopefully their family's lives.
Yeah, yeah, for sure. And as far as investment advice, when it comes to the family office, are they investing in other businesses? Or are they helping to kind of put these prior owners money to work in other categories, real estate, something
like that? Yeah, typically, I mean, a good chunk of it, as I like to say, our clients, as business owners have taken a lot of risk in their life. And so part of our job on the family office is to reduce their risk profile so that they never have to work again, right. So we're typically going to be invested in, you know, a fair number of public securities, both debt and equity, then we may have them in different private equity funds or different real estate funds. They'll come to us often with, Hey, I'm looking at an investment a private investment in this particular company, you know, what do you think? And we'll help them think through that. But in general, again, they've gone from highly concentrated, pretty risky asset to a much more diversified portfolio where, you know, we're really managing to make reasonable returns, but also to make sure that they never have to go back to work.
Yeah, makes sense. That's neat. And then as far as geographically, are you pretty well, all over the US? Yeah, we
have clients all the way from East Coast to the West Coast, down south, up north, everywhere,
and what's the business environment? Like it right now? It seems, you know, at least what I keep hearing is, it sounds like a firm like yours would be in huge demand. Right now. You've got a lot of baby boomers and people that are getting to that retirement age that have built these businesses, and now are ready to sell. Yeah,
there is a look just demographically, the baby boomers are retiring. And a lot of I think I read that baby boomers control about, I don't know, six or $7 trillion worth of private company value. And so obviously, that value is going to transact at some level. Obviously, some of those businesses won't be sold, they'll probably be given, you know, transferred to their kids or maybe to their employees, but a lot of those will get sold. And we've certainly seen a lot of deal activity. We had our The busiest first half of the year I think we've ever had this year, even in spite of the market. And so again, in this market where there's a flight to quality, we've been pretty fortunate by having really, really good clients to take to market. And that's kept us pretty busy. So we're enjoying what we're seeing.
Yeah. Okay. And so what are some of the other things that you're seeing out there in the marketplace and kind of tell us a little bit about what you're doing with companies?
Yeah, it's really comes down to for our clients, right, the ones that start with our consulting arm, we call it Pathfinder, it's really just helping them optimize and identify here, the different risks or issues that we see with the company, here are the things that you could do to try to address that. Let's prioritize those and get to work on those while we're still growing the business and growing revenues and profits and all that. And then it's really a we've got to make sure that as we're telling your story to the market, that the growth that we're going to be forecasting for your business is highly believable. And that takes some work. Most business owners that least that show up at our door, don't necessarily have a detailed plan for what's going to come next year, let alone the next three or four years, right. And so there's a lot of work that goes into what's that growth plan really look like? Who are the customers? How are you going to get to them? How much is that going to cost? Have the infrastructure necessary to support it? Do you have the people necessary to support it, and to go through that analysis with them is usually pretty illuminating for them. And it just helps us build a much more compelling story when we do go talk to investors to give them again, a story that they can really absorb and believe and sign off on, which hopefully allows them to pay more money for our client. Yeah.
And so Chris, are you working with any companies maybe at the very infancy stages of building the business in order for them to ultimately sell or you primarily working with some that have already kind of built the business, but now it's just taking it to the next level and getting it to a spot where it is saleable?
Yeah, we'll hit both of them within our Pathfinder Consulting Group. There are there are several different ways that we can get engaged, we definitely have clients that are fairly early in their lifecycle. Who are they're just looking for big picture advice on how should I structure this business? Or how should I think about different revenue opportunities or customer opportunities? And how should they think about building my team, and then we certainly have more mature businesses that they might be a year or two away from wanting to go to market. And they just want to tidy everything up and make sure that the package is well put together before they do go to market?
Okay. What is one of the things that maybe you see fairly often with a company where it's maybe something that is making it less marketable, that you'd need to change? Yeah, the
biggest one that we see, Keith is that, again, it's back to this, you know, the owners doing too much. And the team's not very deep. If you as an owner can invest the time and the energy to build a really, really talented team. Not only is your business going to ultimately grow faster and be more scalable, you as an owner are just going to be a lot happier. Because ideally, delegating those tasks that either you don't like or you're not very good at. And you're able to focus more of your time on what made the business successful to begin with. Because oftentimes, what we see is a business owner, trying to save money, yeah, but they end up doing more and more and more, which just from a quality of life perspective tends to get pretty negative pretty fast, you're working 90 or 100 hours a week, you're doing a bunch of tasks, you don't like doing, probably doing a lot of stuff that you're not very good at. But you feel like you have to the moment that that owner can make that transition to building a team and hiring people who are much better than they are at their specific craft or their profession, that owner is going to be a lot happier, and their business is going to be worth a lot more. Again, what we typically see is for a lot of our Pathfinder clients coming in is hey, we've got to go solve that equation, we've got to solve this people equation. And that takes some energy and takes some time and expertise. And it takes some forethought and planning on the part of that business owner, because a lot of them aren't used to delegating. They're not used to having a team. And so there's a lot of coaching on our end involved of Alright, here are the things that you need to be thoughtful about as you're building this team and bringing these folks on board to make sure that they're going to be successful, both in their roles, but also as a team because that takes some magic.
Yeah, no, that makes total sense. And I can see how an owner could get in a spot where they're just handling too much what is one of the bigger or the first hires or is it specific to that particular business? But what would somebody need to hire first to kind of tread a little bit of distance between themselves and their daily operations?
You know, some of it will depend on the business itself in terms of what's going to be most valuable to that business, but typically He depends on how complex the businesses but in a lot of cases, we're talking to that CEO about hiring a really good finance person, which sounds totally counterintuitive. They're not related to revenue, they're not related to delivery. But a good finance person is going to know what it takes to actually have a scalable infrastructure, both systems and people. And they're hopefully going to be able to help that business owner forecast, here's the type of capital that I'm going to need to get this business into the shape that it needs to be in, in order to scale in order to grow. And oftentimes, business owners will get the cart in front of the horse and invest too far ahead of the revenues or end up finding themselves really, really short on cash. And so I've had this conversation with I can't tell you how many CEOs where, because this position, again, is not revenue generating, they have a hard time seeing the value. But once they hire the person, they usually call and ask why they didn't do that sooner, right, because they can add a lot of value. The next one, I would say is some type of Chief Operating Officer, again, a typical entrepreneur, you know, two thirds of them are going to be there because they're either great at sales, or they're great at product development. And for those CEOs, in particular, having a skill set that complements them in a CEO who can really help make the trains run on time and can institute process and get Institute systems, that's going to be hugely valuable for that business, and will allow that business owner to go do what they do best, which is either come up with new products that we can sell or go sell the next, you know, 10 customers so that we can grow the business faster. And then after that, sometimes, hey, they need a head of sales, or they need a head of operations or a head of product development. A lot of that will just depend on what skills are we trying to compliment from that business owner so that we can get that business owner into a position where they're spending most of their time on stuff that they're really good at and that they enjoy is going to add a lot of value to the business. Okay. And
what are maybe some of the other things, you know, you mentioned earlier, not having a plan ahead of time, a lot of times people just get kind of in the weeds a little bit. I mean, they're doing the daily stuff needed. And despite their selves, they're growing in some cases, right. But what are some of the things that you work with him one, as far as putting together a plan? And do you find that any of them I know, we just did a vivid vision for our company. And I found the exercise really enlightening. And it really helps you kind of crystallize, you know what direction you're trying to go?
Well, particularly if you have a team, you need to get alignment, you've got to get people rowing in the same direction focused on the same objectives clear on what they need to do, right, what their role is, in helping the company achieve its goals and mission. In order to be able to do that you have to look out a little bit, that's really the job of a CEO is thinking a year to three years out and longer about where's this business going? Where should it be headed? And then backing up and determining Well, what do we need to be doing, you know, this year, this quarter, or this month, this week, in order to make all that happen, and then coming up with the scoreboard or the dashboard or the KPIs that are going to give you particularly advanced warning of what's coming? Are you achieving the things that you need to achieve today, in order to make the tomorrow that you've envisioned possible. And so that work to the experience that you just had, should be really illuminating for folks in terms of kind of being able to see a little bit of the bigger picture, being able to see more about how their role contributes to the success of the organization and what their individual goals contribute to the overall goals. And so that whole process of kind of getting aligned around what we're all trying to accomplish, orienting around what that means in three years or two years or one year, this quarter, and then starting to figure out how do we quantify success? How do we know if we're winning all that work, we find to be hugely valuable for companies. And again, oftentimes entrepreneurs are successful because their muscle in the company through to success versus having something that's more systematic, process driven and team oriented. To the point that you're just raising, it'd be very gratifying and fun to do. And the added benefit is you're getting people oriented around that vision and that goal,
Yeah, makes sense. When it comes to talent and putting people into the right roles. Does your company work with certain talent agencies that have tried to find the right person for the job? Or do you assist at all with that aspect?
Yeah, through our Pathfinder program, we've got a number of different partners who specialized in recruiting or placement. And so depending on the position and the industry, one of those partners would be a great fit for our clients in terms of needing to find whether it's a temporary person, a part time person or a full time hire. those companies are expert at going out and locating those candidates and you want to find somebody who routinely deals with this type of dynamic, because it's not like hiring a vice president for Bank of America, where they're going to be going into a system and an infrastructure that's already established, right? These are people that are going into an environment that historically has been handheld by that entrepreneur. And there's a whole lot of dynamics that go into making that transition successful. And the last thing you want to do is introduce somebody into the company, only to find that there's organ donor rejection, because the entrepreneurs just they don't have the desire or the energy or the willpower, or the skills to be able to delegate. And that's something that you have to spend some time on first is to really help that entrepreneur understand just how important it is to them to be able to delegate and trust and team and strategy.
Yeah, seems like that could be something that would hold people back quite a bit is that any dialogue that happens before you take them on as a customer to just ensure that they can, in fact, delegate?
Yeah, we're testing for that we're testing for coachability, we're testing for values fit with us as an organization. We love working with entrepreneurs that are high integrity, that where their team means a lot to them, where their community means a lot to them, that tends to overlap really well with our values. And that makes the work just a lot easier and a lot more rewarding for us in our team. The last thing we want to do is waste our time and our clients money, giving them counsel and advice where they're just not going to listen or pay any attention, right? You know, we call the smartest guy in the room syndrome, right? If we have somebody that we're talking to where that's the attitude that, hey, there's nothing that we can teach them, we're very quick to let them know, Hey, we're not going to be a great fit, we do our best work when we're collaborating with our clients, you know, we're never going to know their business or their industry as well as they do. But we definitely know, the transaction game and the exit preparation game. And so it's really how do you combine those two knowledge bases most effectively for them to achieve what they want to achieve?
Okay, and tell me a little bit maybe about as you're working with some of your clients? Do you ever have situations where you're taking an outside view of the business and you're saying, I don't know, you guys are spending a ton of time in this area, or maybe even with this product, but the revenues and everything that we're getting are over here and kind of having to sometimes a business can grow more from subtract, subtracting some piece of it, you know, and really doubling down on the parts that are growing it. Brett,
before this podcast, I was on a call with exactly that conversation. Look entrepreneurs, particularly product entrepreneurs, they've been successful, because they have innovated, they have come up with new products to go to market. And like any of us would be we're gonna go to the playbook that has served us well. Right, right, we are going to go to the strategies that we've deployed in the past that have served us well. And for them, it becomes much more around focusing, right? Where are we going to get the best return on our time and energy and money. And a lot of times, it's not necessarily a new product, it's taking that existing product and really supercharging sales. So we move from being purely a product company to being a more of a sales and marketing company and support company. And so that's exactly right. We call it slowing down to speed up, hey, let's just make sure we're taking a pause and being very intentional around who are the customers, we're going to deal with products that we're going to sell to them? And how do we narrow our focus to such a point where we truly can be effective, I like to say, as a business starts to get near 10 million, 12 million 15 million in revenues. If you're not very focused, you'll kill the team. Because there's going to be so many workarounds and issues that come up because you're trying to do too much. Yeah. And a lot of times, it's much better for them to do less and do it really well.
Yeah, makes sense. What about on the sales side? You mentioned sales a couple different times. And that being sometimes a spot where it's not quite operating the way it should be? Maybe there needs to be some sales management in place. What are some of the levers that you're able to pull out when it comes to sales and helping them?
You know, it's interesting when we see companies, the DNA of a company is largely driven by the DNA of the founder or founders, right? If you have a founder or founders who have been really, really successful in sales, and that is their strength, I can almost predict, hey, they're not going to have sales challenges. They're going to have operations and quality control challenges. All right, right. So you can almost predict where the risks are gonna be in that particular business. So if you have somebody who is a product person, right, they're very innovative, they're coming up with new products. Oftentimes, hey, you may have operational problems or sales problems. They're sometimes the folks that assume that if I make a good product if you sell itself and so on, A lot of times it's companies when they show up to our door, they just need some guidance on, hey, how should we think about what the next phase of growth in this business looks like? And what's required to do that. And so then it's, for example, if it's an operations person, that's their DNA, again, their quality control and service levels are probably going to be great, their growth is probably going to be less attractive. And so it really comes down to helping them understand that if you really want to hit the targets that you've set for yourself, we're going to have to bolster these other areas of the business where we may not have as much strength and find the very, very best people available to manage those. And again, as an owner, you got to be comfortable delegating and ceding some authority to them so that they can do their job. Well,
yeah. So you've kind of got the whole process. So typically, you said, is it a five year window from when you start working with them? Or does that vary as well? I mean, are there some businesses that you come into, and it's a we could actually get this packaged up and sold in two years instead of five? Or
oh, yeah, yeah, all depends on what the owner is trying to accomplish. We're working on a deal right now, where we signed them up in our Pathfinder consulting program a year ago. And they said, Hey, we've got this target, we want to sell for 35 or 40 minute or whatever the number was. And we sat down and said, Okay, based on where you are today, and what your trajectory looks like, looks like that'll be three or four years, great. We'll start to work on things. Well, we got in we started working with them. They ended up growing faster, and they're now at market. So a year later, oh, wow, we think they'll more than hit their target. And it's interesting. More often than not, we see that happen. Mostly just because the business owner is much more intentional around growth, they're much more intentional around value creation. And when that happens, that accelerates that timeline, typically. But we've also had clients for we just did a deal last year, that was about a half a billion dollars. And we worked with them for about seven years. So
okay, so it's kind of all over the map all over the map. Yeah. Yeah. Makes sense. Yep. How about operationally, you mentioned, sometimes, if the founders strong and sales, there may be lacking some things on the operation side? What are some of the things that you see that are kind of preventing folks from being truly marketable on the operation side? Maybe they just haven't put something into place?
Yeah, I mean, you can identify operations challenges in a business depends on the type of business. But if we're having product or customer issues, that usually is a reflection of, hey, we've got some processes that are broken, or not well defined. And again, up to a certain point in the lifecycle of a business, the business owner can muscle their way through that they can just by sheer force of will, they can make those customers happy or make the processes work. But as they start to scale that becomes less and less doable. It's very difficult to manage at scale. And so we'll see those issues, right, when you're doing customer net promoter scores, or customer sat surveys, or returns, or, Hey, we've got quality issues in the field. All of that is usually evidence of, hey, our systems and processes are either broken or not as well defined as they need to be. And then it's really just identifying, hey, what's the specific type of resource that we need to get into place, sometimes that might be a consultant just to come in and help them define and either productize or standardize their processes. Other times, it may be, hey, we need to bring in a chief operating officer who's got a lot of experience building and scaling operations in that particular industry or that particular type of business. My old mentor used to say there's a finite universe of common business problems, the more you see them, the easier they are to diagnose, and it's easy to design what the prescription ought to be. Yeah, that's very true.
How about record keeping and like accounting and stuff? Are there some times when you're going into work with an entrepreneur and you're like, Okay, we got to clean this up.
Yeah, almost always Keith. Okay. Okay. By the way, every entrepreneur tells us, oh, our books are the cleanest you'll ever see right? Is it going to be the best books and records you've ever seen? And by and large Look, they're probably fine for their purposes, right to run the operations of the business, they've clearly designed their financials and accounting to help them do what they need to do to run the business. Unfortunately, in most cases, that's different sometimes from GAAP, right general accepted accounting principles, right. And it's probably different from what a buyer is going to need to see in terms of evaluating the company. And so for almost every client, we're recommending that they bring in an outside firm to assess their accounting to fix any issues that we see in the accounting, get those ironed out, prepare what we call a seller's quality of earnings report. So we're really digging deep into the financials and presenting the financials in a way that we know buyers will be able to digest and understand. But that takes some convincing as well again, because those are dollars that are not invested in product development or operations or sales. Right. That's all just making things cleaner. But literally every business that we deal with requires some level of fixing with respect to their financials. Yeah,
makes sense. Makes sense. I do real estate. It's the same thing. I mean, oftentimes when somebody goes to sell something you're like, wait a minute. Yeah, yeah, what you're reporting as being your net operating income doesn't really seem to jive with what I'm seeing here. Yeah. So yeah, you got to follow the cash. That's right, exactly. Well, are there any other services that you provide that you feel like the entrepreneurs can benefit from working with you and your firm?
Yeah, it really comes down to what we've tried to do in our business is really just surround that entrepreneur with what we know based on experience and haven't done this 100 times, hey, this is going to be most useful for that entrepreneur in this journey of kind of planning, executing, and then ultimately harvesting value from their business. And we're a second set of eyes that's got a lot of experience, knowing what the end of that movie looks like, right? And so it's really just given them the test ahead of time so that they can practice a little bit before we go live, and start talking to real money and try to maximize what they get out of their process.
How about exit, as far as the exit itself? are oftentimes is the owner having to stay on for X amount of time? What are some options when it comes to that, and I would assume that there's at least from time to time, somebody that maybe they don't need to take all the capital from the business and from the sale, and it almost be better for them not to from a tax liability standpoint,
yeah, this goes back to what's the owner trying to accomplish, what I would tell an owner, if they wanted to be retired in five years, they should plan to sell their business and three. And the reason is, you want to be able to with credibility and integrity, tell the buyer of that business that you're around at least for a couple years to help them effect, really good transition. And I firmly believe that as a business owner, you want to do that. Because if you care about your team, you care about your customers, you care about your reputation, being deeply involved in that transition, and helping to orchestrate a really smooth transition is in your best interest. I think the other reason is, it will definitely increase the perceived value of the business to an outsider, because if a business owner communicates to buyers that, hey, as soon as I sell the business, I'm out. Yeah, that creates a lot of risk in the minds of an investor, which is going to equate to a lower valuation for that business. And so again, I think it's in our clients best interest to be willing to stick around. It's not to say that they will stick around for two years, but they need to be willing to do that credibly, and again, with integrity. But it's quite possible that in a year, the transition has been affected, it's gone. Well, they can go to their new partner or buyer and say, Hey, I think it's time for me to transition. As I like to tell clients, as long as there's no flash cuts or big surprises, you can manage anything. Yeah, I don't think it's fair to a buyer just to show up one day and say, Hey, I'm out. That's not going to do you any favors them any favors your team any favors that business any favors. And so being thoughtful about it, right, kind of the golden rule in terms of how would you like to be managed if you were in their shoes, but for a lot of our clients, again, if they want to retire in five years, they plan to sell in three years, which means you probably start planning now.
Okay? And what about as far as the sale itself and the capital that they receive from it? Is that usually a clean sale here, here's what you were expecting, or their owner finance terms or stock options, or Yeah,
it'll vary, okay, if it's a big public company, for example, that's buying the company, typically, they'll just pay all cash, they might hold some back for escrow claims or breaches of a rep or warranty and the purchase agreement. If it's a private equity firm, they're typically going to ask that business owner to roll some of their equity into the new entity. So that, Hey, before the deal, the business owner might own 100%, after the deal, they might own 30% of the business, and work with this new partner of a private equity firm, we try as best we can to stay away from any owner financing or big earnout components, we're trying very, very hard. And when you run a competitive process, you typically get deals that don't have any contingent payments. For the most part, you might have, you know, a small amount, but generally what our advice to our clients is, if the cash at closing is not enough to meet your stated desires and needs, don't do that deal, right? You know, the rest of that stuff is much more speculative and harder to wrap your arms around. And the last thing you want to do is sell your company only to have to go back to work at some point because it didn't work out. Yeah. Yeah. Makes sense. All right, Chris,
let me ask you this. How can people find out more about you and if they'd like to work with you? What is that process like? Sure,
yeah, our website www dot class six Class V i revenue Row six partners.com www dot class six partners.com or Chris at class six partners.com is my email address. And we do a lot of pro bono work for entrepreneurs just because we believe so much and what they mean to our communities. And so we're always happy to help entrepreneurs even if they're not going to become a client.
Okay, okay, or at least maybe even take a look at what they've got and how you can be of assistance? Sure. Makes sense, of course. And then when you're not busy working with entrepreneurs, Chris, what do you do outside of work? Oh, I
live in Colorado. So mountain bike and cross country ski and fat bike in the snow and played a little golf. Yeah, but yeah, we live in a great state and lots of sunshine here. So it's easy to get outdoors? Yeah,
for sure. Okay. Well, I got two more questions for you that I asked everybody. So no, good. We'll put a slight twist to this one. Typically, I'll ask somebody that starting their real estate investment journey or investment journey. But how about somebody that maybe they're a new entrepreneur, what are some of the things that they should put in place at the very beginning, in order to get where they're trying to go the quickest.
I'm a big believer in surrounding yourself with objective advice. And so that doesn't need to be a consultant or a firm like ours. But I'm a big believer in Vistage, which is a CEO group that is around the country. But having folks that you can turn to for some unbiased, completely objective feedback, because it's lonely being an entrepreneur, and you're gonna have to make a ton of decisions, but having people that you could turn to and don't have an agenda other than just giving you their unvarnished opinions, that can be super helpful, particularly people that have been there, finding a mentor, who's been there and done it, that can help you think through some of the challenges that you're going to face. And then I'm a big reader. And I think a lot of entrepreneurs are their lifelong learners. And that's one of the reasons why we love them. But hey, being thoughtful shoring up areas where you think you might have some exposure, but those are the, in terms of advice to a new entrepreneur is, hey, just make sure you've got folks around you that can help you think through these things.
Yeah, I think that's really good advice. I'm a firm believer in that as well, and member of various masterminds and me, even if it's somebody that's not in the same industry, but like you said, another CEO, oh, yeah, there's certain things they're doing when problems that they've had to overcome that are going to be the same that you're going to have to overcome,
I would say, it's almost impossible. That a challenge that you're facing as an entrepreneur, someone you know, in a group of 10 CEOs hasn't already faced, right.
That's right. Exactly. All right. Well, so you're gonna like my last question here, just because you said you're a big reader. So how about a book recommendation, anything that an entrepreneur should read, or just a book recommendation in general?
Well, one that I have given to all my kids, I think, is now out of print. So it's a little more expensive to find on Amazon. But I'm a huge fan of Charlie Munger, who is Warren Buffett's business partner. And there's a book called poor Charlie's almanac by a guy named Peter Kaufman, who basically summarized a lot of his speeches and talks around the country. It is full of really, really good life advice. And I highly, highly recommend it. I usually read it once every other year. So really,
okay. All right, cool. I'll have to look that one up, because that's a new one for me. So good. Well, Chris, I've enjoyed our time together and really appreciate you taking some time to be on the wealth flow. And I think you brought a ton of value to our listeners. So thanks so much.
Well, thanks for having me, Keith. Appreciate it. And thanks for doing what you're doing. Appreciate you.
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