Building For A Successful Exit

Tom DuFore 0:01

Welcome to the Multiply Your Success podcast, where each week we help growth-minded entrepreneurs and franchise leaders take the next step in their expansion journey. I'm your host, Tom Dufour, CEO of Big Sky Franchise Team. And as we open today, I'm wondering have you thought about building your business for a successful exit? Maybe you want to grow through franchising and then sell it. I know a lot of prospects and clients we talk to have that vision in their mind. Well, our guest today is Nate Collins, and he shares with us how to avoid an unsuccessful exit. Now, Nate is a former CEO who managed a successful exit to a large PE-backed media company. He now works with a limited number of business owners, CEOs, and their families to help ensure they are achieving their financial goals. As a financial advisor and certified exit planning advisor, he provides in-depth exit and financial planning as well as investment management. Nate helps owners optimize the values of their businesses and transition into the next chapter. You're going to love this interview, so let's go ahead and jump right into it.

Nate Collins And His Exit

Nate Collins 1:09

Thank you so much for having me on your podcast. Very excited. I'm Nate Collins. I am a CFP, a certified exit planning advisor, and a financial advisor at Raymond James. That's a lot of acronyms. That's a lot there. Basically, what I do is I support business owners and entrepreneurs in their financial journey as they grow their companies and transition into their next chapters.

Tom DuFore 1:34

Thank you for sharing that. And we were talking pre-show a little bit about your own experiences that kind of led you to this point of helping others through this process. So I'd love for you to maybe share a little bit about your journey.

Nate Collins 1:48

Yeah, I guess what is most relevant is that I was a mid-market CEO for about 10 years. I took over a business in 2011. I sold it in 2019. It was a great mid-market business, mid-eight-figure revenue, 100 employees, headquartered in New York, offices in London and Los Angeles. It was a fantastic experience. I went in, it had been the company had been mismanaged for decades. So the first three years was I would say maybe five years or six years was complete. Just tear down, burn everything, rebuild, rebuild everything from the team to the technology, the entire operations to all of our relationships with clients and our customers. It was a fantastic experience. And we ended up selling in 2019 to the largest PE-backed music licensing company in the world. Their name is Concord Music. Fantastic organization run by fantastic people. And it was, you know, look for everybody that's listening to this, uh, whether it's you know now or a year from now, I just hope that you get to experience a successful transaction. If that's what you want, if you want to sell your business, I hope that you have a successful transaction. And the key to a successful transaction is just being prepared. A lot of people, myself included, I made so many mistakes. First of all, it was a very profitable transaction for me. So, you know, don't don't feel bad for me. But there are so many mistakes I made. I mean, just mistakes that people make when they don't do it all the time. And most people don't do it all the time. When you are selling a business, you are typically dealing with some somebody on the other side who does it all the time.

Tom DuFore 3:48

When you say on the other side of the table, you mean some investment group or private equity company, basically professional business purchasers. Exactly.

Nate Collins 3:56

And you know, I like to think I'm a pretty smart guy. I have an MBA. I worked for years before running this business in finance. And I worked in uh investment banks, I worked in private equity, but I did not have the skills that these people have because I just didn't do it all the time. And so anyway, just be prepared. Being preparing for an eventual transaction, selling to a third party or even passing it on to your employees or your management team requires a lot of planning, not just to optimize the value of the business, but also tax planning. So you can optimize your personal net worth. Like, who cares what the top line number is if you end up giving half of it away back to the U.S. government? Not that I have any problems paying taxes. I love paying taxes. It provides us with this incredible world. But I want to pay the taxes I have to pay, not taxes that I have to pay because I made a mistake. I didn't pay attention to the rules of the game. And then also prepare mentally. It is a big, right? Everybody here who has a business knows how much effort they put into the success of that business, how much effort they put into their team, how much the effort they put in growing their team. I mean, it is oftentimes entrepreneurs and executives will say, This is my baby or my third baby or another one of my children. At some point, you pass that child on to somebody else, and now you have no control over raising that child anymore, and you have to watch somebody else do it. And that is a very painful moment if you're not properly prepared.

Tom DuFore 5:42

Right before our interview, I was actually at a mastermind session speaking with other owners, one of which just he and I had a little heart-to-heart talking about our baby business, where we're the founder, we started, and the emotional connection that we have to that business. He was talking about maybe selling his. You could see his face change when he started talking about it because of that emotional connection to it. So I'd love for you to maybe talk through a little bit of that whole idea.

Nate Collins 6:10

Yeah, absolutely,

The Advisor Team That Protects You

Nate Collins 6:11

Tom. So first, I'd just like to add that I do a business exit planning workshop on a quarterly basis, free for everybody, because it is my purpose to ensure that entrepreneurs and executives are well prepared for a transaction and that they don't make the mistakes that I made. As again, I just made a lot of mistakes and I don't want to see other people to go through that. There are all things that can be that can be mitigated. So, number one, and this is probably the biggest thing, is make sure you have the right advisors. Don't jump over a dollar to save a nickel. Don't think you can do it by yourself. Because as I said, the other side, those buyers, they're professionals and they will take advantage of you. Working with a good advisor, an MA advisor, or maybe if you're if you're selling to your employees an Aesop advisor, maybe if you're selling to your family, a good family planning advisor, work with a real MA attorney, not a divorce attorney, not my cousin Vinny, which I just recently watched that show and still hilarious, that movie. You know, work with an accountant, not your bookkeeper, but I mean like a real accountant, a real CPA, work with a CFP like me, a certified financial planner who really understands what it's like to do tax strategy and asset protection planning, which is more important before somebody sells their business than the investment management, which is what people think of when they think of financial advisors, but tax planning, asset protection and work with your tax CPA, right? Tax planning. Before you sell a business, it's all about tax and protecting. So have those good advisors. So that's the number one thing. Have the right advisors and don't think of it as an expense. Think of it as an investment. And the return on that investment will be or can be so much larger because you made the investment. If you do not make the investment, there's a good chances that you're gonna end up paying taxes that you didn't have to pay. I ended up paying tax millions in taxes I could have avoided had I properly prepared. You are going to get retraded on your deal. They're gonna say, oh yeah, we're gonna give you five million dollars, and then you're gonna show them everything. They're like, well, maybe we're gonna give you four and a quarter. And you're already gonna be so deep into that transaction, you're gonna be like, okay, fine, here, just take it. Just have the right advisors.

How To Vet Each Advisor

Tom DuFore 8:53

Are there some attributes or you mentioned certifications that maybe help point someone in the right direction as they're starting to figure this out or some criteria they could look at?

Nate Collins 9:04

Yeah. So well, let's just start with the obvious an MA advisor, also known as a business broker or an investment banker, depending on you know their their scope of services and what size deals they do. Business brokers typically they work with deals that are, say, less than transaction values, less than $10 million. MA advisors typically only do MA work. Investment bankers do MA work. They also do fundraising and they do a variety of other investment banking services. But find somebody who has experience in your industry. And when you talk to them, say, what deals have you done within the last five years that are relevant to my business? And tell me about my industry. That is the number one thing that you can do when looking at an MA advisor. I would kind of say the same thing about an MA attorney, but not as important. The important thing about an MA attorney is that they are called an MA attorney. They say, we do and we do MA work, right? Not just like I'm a corporate attorney. Oh yeah, I can I can put together this agreement for you. But corporate attorneys, great, very important. But you just want somebody who is very experienced negotiating reps and warranties. Reps and warranties are we gonna reps and warranties are going to protect you from future liability. You do not want to be liable once you sell your business. An accountant, obviously, somebody who has experience. If you have a transaction that is going to be over, say $10 million, you might want to do a quality of earnings report that is different than an audit. So look for a transaction accountant, and you'll know that it's somebody who's an expert in that because they'll call themselves a transaction accountant. And then, of course, from the personal side, financial advisors, I'd say 99.9% of financial advisors just do investment management work. They're like, oh, sure, we're going to invest your money. But that's just one leg of the stool when it comes to financial planning. There's also tax strategy and there's also asset protection. And when you're talking to somebody, well, first you can look for the CFP designation, certified financial planner. And they'll they'll narrow your pool of options down quite a bit. But then ask them what their what their practice is like. And if if they start by saying, look, we are really interested in tax strategy and protecting your money, then you know you're in the right place. If they start with like, oh, you know what? We invest your money like this, then maybe they're not the right option. And and I'd interview multiple people. And a tax accountant, your tax CPA, is the person that does your taxes. Is that person proactively recommending tax strategies for you? Or are they just doing your taxes like an HR block representative? So go do it. That's the core, that's the core team right there.

Tom DuFore 12:16

As you're describing this, yeah, I think, okay, as you're starting to exit out of the business. Well, maybe I just need a lawyer to write the deal up, or maybe I just need a business broker or an MA advisor along the way from what you're describing. There are more pieces and parts involved where you want to have a team essentially there to help support and guide you through that.

Nate Collins 12:38

Yes, I would say that if you have a good set of advisors, if you have a good MA advisor, they will let you know if you need a stronger MA attorney and should let you know if you need a quality of earnings. If you have a good CFP or a good financial advisor who focuses on working with business owners and entrepreneurs like me, I will let you know if you need a better MA advisor. As I said before, I'm also a certified exit planning advisor. Like I will let you know if you need a better tax accountant. Say, look, your tax CPA is great at doing your taxes, but we need somebody who is a little bit more up to date on complex tax strategies. Because, right, I want to do a great job for you. I want to, it is my goal to make sure that you have as much money in your wallet at the end of your transaction as possible. So I want to make sure that you have the best people on your team and that again, it's not an expense, it's an investment. And you might be thinking, oh, well, this is a pretty big investment. Just remember, your tax CPA and your financial advisor or your certified financial planner, you need them anyway. They're already on your team. And they and you know what they cost. They don't really cost that much. And those other three people, the MA advisor, the MA attorney, and possibly the transaction accountant, you only need them if you're actually having a transaction. So it's just kind of the cost of doing business.

Tom DuFore 14:14

You mentioned getting prepared for this exit. And, you know, how even within your own exit, you weren't really prepared for it. You know, you had some background and had done great things as the CEO of the company, but you weren't quite prepared for that exit. So, what other things are you doing to help owners or advise on getting prepared for that?

The Liminal Period After Selling

Nate Collins 14:34

So the one success I had through selling my business was my company was very well prepared to optimize the value. We sold for a ridiculous multiple on Ebita that was twice as much as I thought the company was worth. That's why we sold it. It was a fantastically profitable transaction. However, and that's a big however, I failed miserably on the other elements. And the other elements are, and I'll go over these, I wasn't personally prepared and a mental mentally I was not prepared. And personally, financially, financially, I was not prepared. And those are two big things. So let's just start with the mental aspect of it. As we were talking about, this business that you built over years, decades is so close to you and has become your identity. It is your purpose. It has become your purpose in life. It is where you feel that you are you are adding value to the world, you're adding value to your employees. Without you, they would not have these jobs. And maybe they would not be as happy. These clients of yours, they would not be getting such great service. So that's your purpose. It's your community. You love the people that you work with, I hope. You love the community that you're in, your clients. And it's your identity. And that's, you know, I loved being a CEO. And I bet a lot of you out there love being business owners. It it feels great. And nobody's telling, nobody told me what to do, right? There was it was a stroke of the ego, but it also was just fulfilling, personally fulfilling. And then you sell that business. You sell that business on Monday, Tuesday, nobody's calling you. Nobody. I mean, maybe people will call you to say, congratulations, of course, but it's not the same. Nobody won't nobody's looking for your opinion on things. We're looking for you to make decisions. You are no longer relevant. You're no longer relevant. And that is a significant blow to the ego. Those people that you thought were close friends that are in the community, sure, maybe you'll still be friendly with them, but it's not the same. It's like trying to go back to your old school. You know, say three years after you graduated college, did you go back to your alumni events? Sure, but you didn't really know anybody and nobody really wanted to see you. Like they don't care that you that you lived in that dorm room, whatever. Right? That's how it is. So what does mentally prepared mean? Well, first, just recognizing that that happens. The second thing is finding personal well-being. Now, what is personal well-being? Personal well-being is what you had when you had the business, it is purpose. It's community and it's health. We're going to talk about that in a second. That's a little bit more complicated. But purpose and community. What do you do when after you sell your business if you no longer have your purpose and community? You have to go out and find it. And I'll tell you, it takes a long time to find that. There's a South African study that followed CEOs and found that after they leave their business, whether they're selling their business or they are retiring, they go through this period called the liminal period. Liminal between two stages. And that period is marked by feelings of worthlessness, confusion, uncertainty, doubt, regret. There was a PWC survey that found that 75% of business owners who sold their businesses profoundly regretted the transaction just one year later. And why is that? Well, it's because they're going through the liminal period. They did not properly prepare emotionally for the fallout. They no longer had their purpose, their community, their health. So let's just dive into each one of those in a second. But purpose, in the way that I define purpose, it is an activity, or it is a way that you spend your time in which you feel you are providing a benefit to other people. That without you, their lives would not be as good. You are now relevant to them. And those other people, they could be they're in need of something. That could be need of attention, or they could need, I guess, support of some way, monet monetary, or maybe emotional support, or they could need information or resources. They could be wealthy people, they could be people in poverty. You could be doing it on a nonprofit, or you could be doing it in a volunteer capacity, or you could be charging money for it. Whatever it is, you are providing value to other people. That is purpose. And for me, it was actually coming back and being a resource for entrepreneurs and executives and sharing my the lessons that I learned and helping people transition through their transaction and into their next chapters. That makes me feel really good. I love talking about this. And I love helping them find tax strategies that will that'll help them avoid the mistakes that I made. I love it. It's my purpose. And, you know, without this, I don't know what else I'll do because this is what I'm best at. So having a purpose, community, finding community outside of your business is very important. Who's going to be there after you sell your business, after you exit that industry? Who is that going to be? You know, obviously your family is going to be there. It's good to have good relationships with your family. Maybe you have other groups, support groups, like you were just part of a mastermind group, those those groups. There are a lot of groups for people who exited businesses. Maybe it's more of a spiritual group. Having those communities are very important. And then health. Health is not just physical health, but it's emotional health. And those are two incredibly important things. When you sell your business, you're going to very likely you're going to freak out the same way that I did. And it's because I you don't get a paycheck anymore. You won't have income coming from your business anymore because there won't be a business. Now you will have this big thing over in the side called an investment account, and it's going to have a lot of money in it. And you're not really going to understand what that type of money means. It's hard to empathize with that without actually being there. But I'll tell you, that's what happened. I had all this money, but I didn't know what that meant. And all I knew is every month I was taking money out of it. I was depleting it. And that's that's not from a business owner's standpoint, you're like, well, that's not sustainable. We can't do that forever. Well, how am I going to put money back into it? That's security. That's and security is a big part of mental health. So having a good financial plan, I know this is sounds self serving, but I'll tell you, I did not sleep for four years. And and I eventually got a good financial planner. I had looked I had a financial advisor and he'd just tell me that my stocks were up. That meant nothing to me. Of course, I could see that on my statements. I could see that on the screen. But a good financial planner that planned out my financial future, I finally was able to sleep. So having that will just put your mind at ease. That is security. That is security. So here's the so I'm talking about I'm talking about purpose, community, and health. Now here's the thing you don't have to wait till after you sell your business to start pursuing these elements of well-being, purpose, community health. There was a Dutch study that found that there's a direct correlation between an entrepreneur's self-reported prioritizing of personal well-being and the success of their business, where personal well-being was a greater predictor of success than the other way around. So if you want not just a more fulfilling life right now, while you're running your business, but a more profitable company, start pursuing personal well-being. Start looking for purpose outside of your business, building community outside of your business, prioritizing your mental and your physical health. And you will have more likely you will have a more profitable company.

Purpose Community And Health Planning

Tom DuFore 23:16

Those studies are really, really interesting. That makes a lot of sense as you describe that. And thanks for sharing this information. And Nate, you mentioned this quarterly session that you hold. And for someone who's tuning in that says, well, this sounds interesting. Maybe I'd like to have a chat. How can someone reach out or learn a little bit more about what you're doing?

Nate Collins 23:33

Sure. So the best way to find me is probably LinkedIn, which is the yellow pages of business these days. And I'm NateCollins at RaymondJames. I think I'm the only Nate Collins, or you can find me on Google, NateCollins at RaymondJames. But I think my LinkedIn handle is Nate-Collins. I live up in Connecticut. And so that's one way. Or you can just email me, NateCollins at RaymondJames.com.

Tom DuFore 24:00

Nate, this is a great time in the show. And we make a little transition. We ask every guest the same four questions before they go. And the first question we ask is have you had a miss or two on your journey and something you learned from it?

Nate Collins 24:12

So I'd definitely say the the greatest miss I had, not just from not being financially prepared and having to pay millions of dollars in taxes. Yes, that hurt, but the real miss was not being mentally prepared in that liminal period that I went through for years, years. I mean, I was I went through depression. I was, I just had this big hole in my life, and it really became my new identity. I always thought my identity was this successful CEO. Well, it was until I sold my business. And then my identity was a depressed former CEO who was highly emotional and erratic. And that's how the world started seeing me. And more importantly, that is how my children started seeing me. And that's when I knew I needed to, I needed to make a change. I needed to prioritize personal well-being.

Tom DuFore 25:07

Well, let's look on the other side of this. Let's talk about a make or a highlight or two.

Nate Collins 25:12

Yeah, you know, I feel so lucky to be where I am now because the silver lining to all of that was that I did find my purpose. And as I mentioned, I love it. I just I love talking to business owners, learning about their businesses, learning about their goals, relating to them, having walked in their shoes. I understand the challenges and helping them, helping them map out their successful journey through as they grow their business and as they transition out of it. It just completely fulfills me. There's nothing I'd rather be doing, I tell you.

Tom DuFore 25:52

Excellent. Well, the name of the show is Multiply Your Success. We always ask have you used a multiplier to grow yourself personally or professionally or organizations you've run?

Nate Collins 26:01

I definitely believe in the old adage, which is uh if you want to go fast, go alone. If you want to go far, go with others. And I'd say the multiplier for me is definitely working with other people, advisors, employees, friends, coaches, just the stuff that you can get by talking to other people. And no need to make your own mistakes. That was the mistake I made. I didn't talk to other people uh, you know, before I sold my business. I did have an M ⁇ A advisor. I had a great transaction team. It was it was my mistake. But yeah, you know, have a great team of advisors, have a great business coach, have great friends who can give you who can give you advice, know people who've done what you want to do, great mentors. I think they call those mentors, have great mentors. That is definitely the multiplier of life.

Tom DuFore 27:01

Well, and the final question we ask every guest is what does success mean to you?

Nate Collins 27:06

A lot of people talk about successful exits, and everybody has their own definition. And I think my definition of a successful exit is also my definition of a successful life, which is achieving your business, your personal, and your financial goals. So maybe a successful life, you can take out the business, just achieving your personal goals. Maybe it's just about achieving your personal goals. But yes, it's setting goals and achieving those.

Rapid Fire Questions And Closing

Nate Collins 27:36

That is what success means to me.

Tom DuFore 27:38

Wonderful. Well, as we bring this to a close, Nate, is there anything you're hoping to share or get across that you haven't had a chance to yet?

Nate Collins 27:46

Here's the the one thing I would say that I did not talk about, but is on my my business exit planning workshop, I do a whole section about people understanding who they want to sell their business to. So many of us end up selling a bit our businesses to somebody who just makes an offer. Or we we just think that we know who the buyer is, or we think that nobody will buy it. And the thing is, your goals should dictate who buys your business, not the other way around. So work with an advisor, identify your goals, and then understand who the best buyer fits would be.

Tom DuFore 28:29

Nate, thank you so much for a fantastic interview. And let's go ahead and jump into today's three key takeaways. So, takeaway number one is when he talked about the key to a successful transaction is being prepared. Pretty simple and straightforward, but I thought it's a great takeaway. Takeaway number two is when he talked about discerning a quality advisor from another. And he said there are lots of advisors that can be involved. Talk with the business transaction advisor, a business broker, MA advisor, and ask him what size transactions does the advisor work with? Find someone with experience in your industry or relevant experience. And he gave some suggestions on how to do that. Takeaway number three is when he talked about selling his business and some of the challenges that came up that he works with his clients now to work through and get prepared for. And he said when he sold his business, he did sell it at a high value, he maximized value. However, he was not prepared for the mental health aspect of it. And he was not prepared for his personal financial situation. And he said he lost his purpose. And what he learned along the way is that personal well-being is a key indicator to finding success in life. And so finding that personal well-being not only helps you physically, emotionally, mentally, but it also, as he described from what he said, it helps you build a more profitable business anyway. And now it's time for today's win-win. So today's win-win comes from the very tail end of the episode. And Nate said, before you sell your business, if you're going that direction, understand who you want to sell that business to. And he said, your goals should dictate who buys your business and understand which buyer or type of buyer is going to be the best fit for your business. And he said, that is going to make for a much better transition and transaction along the way. And I'm guessing it's also probably better for the buyer as well. And so that's the episode today, folks. Please make sure you subscribe to the podcast and give us a review. And remember, if you or anyone you know might be ready to franchise your business or take their franchise company to the next level, please connect with us at BigSkyFranchise Team.com. Thanks for tuning in, and we look forward to having you back next week.