Ownership Transition Does Not Happen Overnight

Episode with guests: Tom DeSimone and Hillary Hughes

Directors at Prairie Capital Advisors

(This episode was recorded in November 2021)

Key Episode Take-Aways:

1. Even if ownership transition is not near, it's good to have a plan because chance favors the prepared. (click to jump to this topic below)  So, when you consider that you have supply chain challenges, labor force challenges, but really advantageous pricing as an owner, it becomes kind of hard to ignore that. So, it really might be something that you're faced with. But also, as you're looking at the planning process, um, chance favors the prepared.

2. There will be many issues if the person or persons are not on board with the transition strategy. (click to jump to this topic below)  do they know you want to do an ESOP and they were they okay with it? And it kind of got a laugh in the room like, well, why not? That's what we're doing. And the reality is, is because the owners are stuck with the majority owners decision, right. So, we have to make sure that the folks that can handle the transition post close are on board with the transition so that they can handle it, you know, if they're not on board with it, you're going to have a whole host of issues. And this goes for non-ESOP transitions as well.

3. Brainstorm and plan what your objectives of the business are going to be your transition or just your business. (click to jump to this topic below)  I think when we talk to business owners, we often just ask them to put a list together what your objectives are, don't you don't need to order him yet just put a list together, brainstorm of what your objectives of your business is going to be your transition or just your business. You could put two different columns if you'd like. But think about periods of time, what does it look like three years from now, five years from now, 10 years from now.

Continue scrolling to read the full episode transcription.

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Announcer 0:43

Welcome to the "Change the Game" Podcast, where we share stories of open book management and highlight capitalism at its best. Thank you for tuning in to this episode of the “Change the Game” Podcast with special guests, Tom DeSimone and Hillary Hughes. In this episode, Rich, Steve, Tom, and Hillary discuss ways to transition ownership of a business to the employees, the signs that it might be time to start thinking about transitioning, and when is the best time to start planning. Here's your hosts Rich Armstrong and Steve Baker.

Steve Baker 1:16

Welcome to the "Change the Game" Podcast where we are changing The Game by doing business differently and highlighting stories of capitalism at its best. I'm Steve Baker, and with me is Rich Armstrong, president of the Great Game of Business and co-author of our new book Get in the Game, How to Create Rapid Financial Results and Lasting Cultural Change. Hello, Rich.

Rich Armstrong 1:38

Hi Steve, how are you today?

Steve Baker 1:40

Rich I am really excited. I am so excited today because of our special guests. We've got Tom DeSimone and Hilary Hughes from Prairie Capital Advisors. Tom is a frequent speaker in various forums, including the National Center for Employee Ownership, ESOP Association, the Illinois CPA and of course at the Great Game of Business Conference. He also sits on the board of directors of a company that provides cyber research and development services to the federal government. Hmm, sounds interesting. Now Hillary Hughes is also a director at Prairie and a shareholder and provides strategic insights to assist business owners and boards of directors to address long term ownership transition goals. Now, Hillary is also a board member of a large distributor, as well as serving on other boards in other capacities, and also a frequent speaker in the employee ownership world, Tom, and Hillary, how are you today?

Tom DeSimone 2:39

Great, Steve. Really good. Thanks for having us. Hey, Rich, how are you?

Hillary Hughes 2:43

Good morning, very excited to be joining you guys.

Steve Baker 2:47

We got some good stuff to cover today. To begin with Prairie Capital Advisors has been a longtime partner and friend of the game. More than that you're consistently recognized for your contributions to the ESOP and M&A fields. For those that aren't familiar with your organization, can you share just a little bit about what types of services you offer your clients?

Tom DeSimone 3:12

Yeah, I'd be happy to Steve. You know, Prairie started 25 years ago, going on 26. Really, to help business owners transition ownership, the whole idea was how do we educate the market, in the ability to transition their business to whoever they want to transition it to? We really started in the ESOP space. But the whole idea was, you know, there's lots of ways to transition ownership. So now 25 years later, maybe about 60% of our firm is in ESOP related business and the 40% is in other forms of ownership, transition, mergers, acquisitions, capital raises, etc. But within the ESOP world, and a lot of what people know prairie for when we're one of the largest, if not the largest firm out there free stop advisory do about 300 valuations a year, 50 transactions a year. But more importantly, I think we are an educator in the ownership, employee ownership space. And we spend a lot of time helping educate just like we're doing today. And your ability as a business owner to transition your business and what options you have.

Hillary Hughes 4:18

Just one other thing that makes us unique, our founders, As Tom mentioned, we've been around for over 25 years. They took their own advice and reflecting on their transition. Prairie Capital is now 60%, owned by our own ESOP, and next year marks 10 years on that journey.

Steve Baker 4:38

That's awesome.

Rich Armstrong 4:39

Great. That's great. Well, Hillary, there's no question that ownership transition right now is a very hot topic, right? So, what why is it such a hot topic right now and why is it important to be proactive and discussing and planning an ownership transition?

Hillary Hughes 4:57

Great question. Rich. I mean, there's nothing like, a global pandemic supply chain interruptions and changes in the labor force to really make you stop and reflect on what's important. Where are you going? And as a business owner, really, what are your goals? And where do you want to see the business go? Those are questions, business owners should always be asking themselves, but a lot of people are finding themselves at this inflection point. And I would just encourage that, you know, these are questions whether you're at that inflection point or not to think about, because so many people are not aware of maybe all of the options they have. Or they might come with a preconceived notion that they're not going to be able to achieve all of their goals, whether that's financial, family, legacy, community or employee related. So just really having a broad understanding of what's available to you, as a business owner, really comes from how are you going to plan and learn about your transition options?

Steve Baker 6:01

It seems like when we talk to large groups, it'll always come up, we always say, you know, you're either in transition, or you're in denial. And people start scratching their head, looking around at their employees and their homeboy. So, to help your clients know when to begin the conversation, you have developed these five common inflection points or signs that it's time to start thinking about the process. We would love it if you could share those with our listeners. And let's start with the first inflection point.

Tom DeSimone 6:34

Yeah, let's go through them. So, the first one is somewhat of an obvious inflection point but holds a lot of bearing on the conversation itself, see that the first one is the age of the company owner or owners. Age really does either open the door to many alternatives of ownership transition, or it shrinks it and says, look, this is the fastest way I can get out and deal with whatever circumstances I'm dealing with. And the conversation is even more complicated. If you have multiple owners, you may have an owner, that is past retirement age, and maybe it was the mentality, I'm just going to work, work, and so I can't work anymore. But the reality of that is, you have really two options, you can transition your business, or you could shut your doors. And that that's really what you're going to be left with at the end of the day. And most people don't want to just shut their doors, because they have employees and other families or community or what have you, that are all tied to that business. So, understanding where the age lies, and the ownership group will help start the conversation of what we can do think of it this way, ownership transition doesn't happen overnight. It is, as you just pointed out, Steve, it is something you're constantly working on, and what that transition plan might be. Many times, we're telling our business owners that it might take nine months, once you start the official process, it might take you know up to nine months to fully get everything underway and you as an owner out, not to mention, if when you sell your business, you help finance it, maybe you take back a period of time that you're earning your payout. So, imagine if you're well past retirement age, you're ready just to be done. But yet, it's going to take you five years or seven years to get your money. So, the age discussion is a critical component of the start of ownership transition conversation, that my final point I should have said is on the multiple owner topic. Sometimes you might have an owner that is in the example that I just put out there well past retirement age, the partner is 35 years old or 40 years old and says look, I want to work another 25 years. So, I don't want to sell the business. I don't want to I just want to exit so that opens the door to a different ownership transition conversation. How do we transition one owner out while leaving the other owner in and make it work for everybody?

Steve Baker 9:00

Well, for a first step that seems obvious, and you brought out a lot of things that bet became very concerning and confounding for a lot of owners as they begin the conversation.

Tom DeSimone 9:13

Oh, yeah. and, you know what, it's always your it always seems like we're too late. You know, it's I should have done this three years ago. I should have done this five years ago. So, to previous points, you should always be thinking about transition. You don't have to transition. But know what your plan is work on your plan. So, when you're ready to execute it, you have a blueprint, right up in front of yah.

Rich Armstrong 9:36

Well, Hillary, we alluded to it earlier that the current we're kind of currently in the middle of a very hot external market. Is that one of the inflection points?

Hillary Hughes 9:46

It sure is it takes us right to our second inflection point. Sometimes whether owners are ready to consider transition or not. Really the condition of the market might be bringing transition to them, or really just from industry pressures caused them to consider it. Certainly, we've seen this in the past through a number of industries. One that's a little bit fun to watch right now, if anyone has tried to buy a vehicle, in the past year or two, certainly, we're hearing of the chip-demic. And what it's done on this is we're on record to see the greatest number of auto dealerships transfer ever in this year. And really, the prices are up.

1. Even if ownership transition is not near, it's good to have a plan because chance favors the prepared.

So, when you consider that you have supply chain challenges, labor force challenges, but really advantageous pricing as an owner, it becomes kind of hard to ignore that. So, it really might be something that you're faced with. But also, as you're looking at the planning process, um, chance favors the prepared. So, if you are starting your process, and you find that your industry or market is maybe going through consolidation, it has a significant amount of investment coming from private investors, it might be a good opportunity to accelerate plans, because when we see these high multiples, it means there's a lot of buyers in the market and fewer sellers. So, from the standpoint, it's always good to have options, if you are looking at external transfer of Who do you want to transfer to, you might have the opportunity to entertain more offers or find someone who's more culturally aligned with you. Because there are more buyers in the market. Where is that other times you might find there's a lot of businesses looking to exit, but maybe not a lot of buyers, so sellers to really exceed the demand for the businesses. So, you know, it's something that it's really hard to predict. If you're if you have a succession event that's four or five years in the future, it's really hard to predict that's going to be the right industry timing but being able to take advantage of that of maybe accelerating or pausing plans to take advantage of those dynamics.

Tom DeSimone 12:13

You know, I'm sorry, Steve, just one thought there. You know, the markets ebb and flow. You know, right now, we are on a very long run of a pretty positive economic movements since the great recession. And, you know, a lot of business owners think about, Do I want to go through another downturn in the market, you know, another, maybe it's not the great recession, but something similar, you know, where it takes a little bit of time to get back to the balance that Hillary's talking about. So again, just trying to move in that first inflection point, you really got to start considering what that ownership transition plan is, so you can react the right way to how the markets are moving.

Steve Baker 12:53

Awesome. I was going to say, Hillary, my question was going to be you would definitely call it a seller's market right now, I would assume?

Hillary Hughes 13:00
Yes, we were definitely seeing this. I mean, right now, we have very low interest rates, certainly the Fed is signaling, there's going to be increases in the future. But as Tom pointed out, we've actually had the amount of capital, that private investors are looking to outlay and businesses has far exceeded the supply of businesses coming to market, we have seen the number of transactions tick up. So certainly, more businesses are transacting this year. But it's still very favorable multiples and in many industries. And I think from a buyer's perspective, people are, you know, we're further along from a pandemic standpoint, a lot of businesses have normalized in terms of this is just where we're at and where we're operating. And so, they're ready to move forward with transactions.

Steve Baker 13:54

I imagine you guys are swamped with requests right now, just buried in them.

Rich Armstrong 14:03

Tom, I think that what you mentioned is very important for our listeners, as well. And just to remind our listeners that when we had the folks from ITR, and Alan Beaulieu come to our conferences past year is that, you know, we're looking further out into the marketplace. And you know, 2026, 2027 is one of those, I guess inflection points of, you know, the market changing quite a bit and it could be slowing down and for owners to understand what that next five to 10 years looks like. And they're thinking about transition is very important. So, it's great point, Tom, is that this is the time to at least think about those options, right?

Tom DeSimone 14:42

Absolutely. Absolutely.

Steve Baker 14:45

So, let's talk about the people side of it. And, you know, we're big believers in succession planning. It's a huge part of high involvement planning. Why is this another opportunity to begin having those discussions around transition?

Tom DeSimone 15:01

Well, if you just think how transition is the word transition implies you have to have succession and some sort, right you use, the business is moving somewhere, and somebody has got to take that. But, you know, it's interesting, maybe a quick story to help illustrate the point, we just closed on an ESOP transaction, just in the last month or so. And that business had nine shareholders in the shareholder group range from about 30 years old of the 65 years old. So, with varying degrees of objectives in the discussion. And when we first kicked off the conversation, the majority owner was suggesting that he wanted to do an ESOP. And our discussion was around well, who's going to take over the business when you exit the majority owners ready to exit? And his comment was, well, I have a whole host of shareholders, we have eight other shareholders, many of them are much younger than me that can take over the business. The following question was, well, do they know you want to do an ESOP and they were they okay with it? And it kind of got a laugh in the room like, well, why not? That's what we're doing. And the reality is, is because the owners are stuck with the majority owners decision, right.

2. There will be many issues if the person or persons are not on board with the transition strategy.

So, we have to make sure that the folks that can handle the transition post close are on board with the transition so that they can handle it, you know, if they're not on board with it, you're going to have a whole host of issues. And this goes for non-ESOP transitions as well. If you're looking at a third-party sale, the first set of questions the buyer is going to ask you as well, where's the owner going, and do they have a replacement because that they are buying a company that was built, presumably by the owner, and we need to make sure there is a continuity of what has been going on? Pre transaction. So, the ownership succession, or excuse me, the management succession discussion is a critical component of ownership transition. My final example to that is think of it this way, if you had a single owner, and that owner said, immediately post transaction, I'm heading down to the Florida Keys, I'm sitting up on the beach, and I'm gone, you can't call me you can't get ahold of me. And by the way, I have nobody to run it after me. Your options for ownership transition are extremely limited. Really, your only course of action is to sell it to a third party that already a strategic buyer, a buyer that's already in the business that has the ability to just swallow your organization, they have people there running it, that's your really your only hope, at transacting versus the flip side of that coin is if you have a transition plan in place. You have ESOP management buyout, third party sale strategic partner, you know, you start opening the door to a whole host of transition options.

Steve Baker 17:59

I'm just trying to picture myself just vision that whole I'm walking away and don't call me I'm in the keys. Let me just let me be than that for a minute.

Rich Armstrong 18:09

So true. So true. You know, as Steve talked about earlier, Tom, is that, you know, succession planning is a big part of what we do. But I was just curious, this little side conversation here is that what, from you and Hillary's experience? How common is it for companies to be looking at management succession, and having a process behind that you see that as common or not so common?

Tom DeSimone 18:39

I will respond as well; I think it's getting more common. Rich, I think that it's not as common as it needs to be and there is still a lot of education needs to go on in the marketplace. You know, people get busy, and they get very busy in their own business. And they're focused on operations and push that business score, they forget about transition until it's, you're forced to think about it. And so, it's just a little bit harder to prioritize that on the list, but it is becoming more common. Hillary, what do you think?

Hillary Hughes 19:14

I would say we've seen certainly larger privately held companies do have a comprehensive succession plan or, and even small companies. One of the things is if you are using bank financing, it's something your lender asks you about. I mean, they're just looking at the risk of, hey, if something happens to the founder if he decides to go to the keys and not answer his cell phone, who do we have next in line that's going to keep this business running? That being said, certainly, as Tom said, there is exceptions to that. We've seen large family-owned businesses that it's really a generational thing. There's a lot of implied assumptions around it. But when you start talking to the individuals It's as Tom said earlier, it's just really who owns the most shares, they're just hoping and wishing a certain decision is going to happen there. There may not be a comprehensive plan. So, it's certainly a best practice. But smaller organizations, we tend to see limited planning because that founder or that owner, or maybe the entrepreneur group, is still wearing so many hats and really working in the business rather than on the business.

Steve Baker 20:31

Right. And, Hillary, you, you mentioned hoping and wishing I assume that's not the fourth inflection point.

Hillary Hughes 20:40

Hoping and wishing yes, certainly, you know, it's a great fairy tale, that you're just going to have this knight in shining armor, ride in on a white horse, and they're going to take care of your business and pay you all sorts of money. And you can go to the Florida Keys All right away. And it is forever more beautiful. But um, yeah, that's hoping and wishing it's really not reality. And so, the fourth inflection point is actually linked closely to the session, or maybe the lack of it is one thing that we tend to see. And it's hard to see this as an owner. But maybe you can reflect with some other trusted advisors to ask if they've seen this within your organization, is really career anxiety for other senior leaders in your business, who are not shareholders, or maybe they're a minority shareholder. And they don't know what the plan is. And so unintentionally, I mean, these are typically dedicated people who've been with the organization. This does not come out of Mal intent, but it really comes out of a lack of planning, a lack of information or communication around what is the succession plan, but also, what is the ownership Transition Plan, maybe you do have a comprehensive succession plan. But that individual who's next in line is looking at the reality to say, okay, the sole owner, or group of owners is now well past retirement age, I don't know who my real boss is going to be in the future. And they're going to start filling that in with a variety of answers. Maybe it's what they've seen happen to other businesses in their industry, or what other fellow leaders in their community or network have experienced. You also may have people say, I'm not sure, if there is a future for me, maybe I'm not a family member in a family business. But this is a great leader, someone who's important to your organization, if they don't feel comfortable voicing that, they'll voice it by leaving the organization. And certainly, right now, there's a number of opportunities for top talent. So, thinking about your inflection point, it not only affects you, but it's going to affect your employers or employees, and certainly leaders in your organization, whether you intend it to or not.

Steve Baker 23:08

That's a big deal. I mean, we've got to look at the whole organization, because that is what people are buying, right? As Jack has always said, the company is only as good as its people. So pretty a pretty huge deal.

Hillary Hughes 23:21

And I would say as an owner, if you receive this question, understand, like, it is an uncomfortable, they know, it's a sensitive question to be asking. But a lot of times, they're really asking for the right reasons. They're trying to understand what is the future, but also, they may be getting questions from other members of their team as well, just observing what's really going to happen to the business. If you are playing the game, they are engaged. They certainly find value in what they're helping create and build, but they just really want to know, then what's going to happen to it in the future.

Steve Baker 24:02

There's a real kind of dynamic to I mean, a lot of people's feelings around transition are so personal, that they keep things very close to the vest. And that makes it even more uncomfortable for everyone else because I know something's going on. But I don't know what it is and what's going to happen to me. And I totally get that it's really an emotional thing as well as a financial transition.

Hillary Hughes 24:24

It certainly is. And I think in answering that question, understand like one coming from a place of honesty, but also being able to communicate just in a very friendly way that you may not share all of your plans. Just simply say, I have started planning or maybe I haven't started planning but it's something I'm looking at things that are important to me are legacy or continuity of the team but really be able to give an answer that is not a I'm planning to do this, you know, consider an ESOP, do a feasibility talk to me, like that's more than what they're looking for. They're really just looking for reinsurance of what's important, or is there a timeframe?

Steve Baker 25:14

That makes sense?

Rich Armstrong 25:15

That kind of brings us to this final inflection point of observing value protection mode. What do you mean by this?

Tom DeSimone 25:25

Yeah, you know, Rich, when you are, in your, business, you think you're starting to talk about the things you're talking about today, but you're not yet really ready to transition. And you're saying it's three years down the road, or four years down the road, you can't stop working on that transition. That's what we mean by this value protection, while we're trying to figure out a way to not experience a decline in company value. And there's so many things that can cause value to decline. They're coming at you from every, every which direction, some of them are internal, based, where you can actually control it, and others are external base, we talked about the market earlier. But you know, coming out of the Great Recession, there are a lot of business owners who are saying I don't want to do that, again, I can't go through that anymore. I finally be levered, or I've gotten to a point in the business where I feel very comfortable. And I'm just going to hold that value. The problem, or the challenge with that mentality, is what I was just referencing, if you are not taking advantage of new opportunities in the marketplace, somebody else is, maybe they're taking away market share, or your competitors are just getting stronger, they're adding on new services. And all those things, even if you're saying, look, I'm still the same revenue and profit that I was three years ago, I've held that value, others are likely growing around you, which is going when you get into a transition discussion, that could start compressing your value that is out there in the marketplace. So, value protection mode is not just looking at how do I hold the line, but how do I push that line forward, so that when I am ultimately ready to exit, I can still meet my objectives, whether those are financial nature or more intangible in nature.

Rich Armstrong 27:22

I think that's so interesting. I mean, if you kind of align it to the way Jack stack and SRC Holdings has coached, Steve and I over the years is that you may not be in a position where you want to sell your business tomorrow but run your business like you're going to sell it tomorrow. A lot of the need to be aligned in that in that mode. And I think that makes a lot of sense for owners.

Tom DeSimone 27:45

When we go through the process of ownership transition, whether that be ESOP or M&A, you know, there's a lot of things to do to prep the company for sale. And that, you know, getting financial records in order the succession planning in order and so many other things. But by the end of it, most business owners, it's not any it's not about the transition anymore. They're saying we are such a better company now that we went through this process. Yeah, I wish I would have done something a long time ago, because it really would propel the business forward. So, you’re exactly right, which you have to work on the business as if you're getting it ready for sale. Because remember, it's only as valuable to the person that wants to buy it. So, if you can't find anyone to buy it, there's not a lot of value there. You got to continually work on the business so it's ready to go and you're ready to go.

Hillary Hughes 28:34

What's really interesting, we've seen this in multi-generational family businesses looking at maybe why they succeed or don't succeed and was talking with a fourth-generation owner and he had actually sold to the ESOP. But he was reflecting on what he thought was some of their success. And each generation as they were leaving really had the mentality, they wanted to leave the business better than when they came in. So, they actually focused very heavy investment in modernization and technology in their facilities so that the next generation was on a strong footing. And that's very different from as Tom said, value preservation mode might be, let's run it as efficiently as we can. And I'm going to take out as much cash as I can to kind of maybe stockpile that and then I'm going to sell the business is really thinking about it from how and how am I perpetuating that really puts you in the better position whether that's a family transferred a management team, or to the sale keeping that mentality of run it like you're going to sell it, it just leaves you with so many more options and the business is typically just in a more healthy state.

Rich Armstrong 29:50

Very good point. Very good point.

Steve Baker 29:53

Do you have any other insights for us I mean, these five inflection points are pretty great start, is there anything else that you can think of that our listeners would be benefiting from when you think about transition?

Tom DeSimone 30:10

You know, Steve,

3. Brainstorm and plan what your objectives of the business are going to be your transition or just your business.

I think when we talk to business owners, we often just ask them to put a list together what your objectives are, don't you don't need to order him yet just put a list together, brainstorm of what your objectives of your business is going to be your transition or just your business. You could put two different columns if you'd like. But think about periods of time, what does it look like three years from now, five years from now, 10 years from now. And then as you put that list together, review it, and then start prioritizing what they are. When you go through that process, you're going to start to realize were the transition kind of realm that you're falling into, you know, is it a third-party sale is an internal buyout is it now or is it in the future, you'll start to see just by listing out objectives, where this ownership transition fits in. It's like buying a house a little bit, you know, when you when you're searching for a house, you probably have a list of whatever eight or 10 things that you the house must have. In reality, the first five things are the must haves, the last five things are I'd love to have it, but I'll get over it if I time. But the nice house, right. So that's a little bit of the same exercise. And the reasoning you go through that is not only to figure out this game plan, but once you start the process, those are the objectives you're going after, and you're going to have, you're going to kind of have the deal Doer list and the deal killer list. And your advisors that are helping you through the transition, they really need a lot those lists are so that they can guide you through the process effectively and efficiently. So, to recap, if I were a business owner, and I'm thinking about transacting my business, either near term, or five or 10 years from now, the place to start is a list of objectives and maintain that list over time.

Hillary Hughes 31:57

And the only thing I would add that to that is if you are not the sole owner, do as Tom mentioned, but also then share it with your other owners. And it's not a right or wrong, it's not meant that you all lied. But just so that you can see Where are areas that you align and don't align, if you're a sole owner, maybe share this with your spouse. And as Tom said, you can do this exercise at any point in your transition, you do not have to be at an immediate point. But reflect back on this list. Maybe it's an annual exercise before you do budgeting, as is to pull this list back up. Because just realize the list and the priorities may change, we're going to have life events or maybe business events that cause you to reprioritize that list, and that of your other shareholders. If you have other shareholders, their list may change too. So, it's not been etched in stone, but it's just a good point to really mark and reflect on what's important and where you would like to go.

Rich Armstrong 33:03

Very good. Well, Hillary Tom, we'd like to wrap up the podcast by asking one last question. And that is just simply what's one question we should be asking you right now, what have we missed?

Hillary Hughes 33:18

One that I think about is, is it too early to start planning, I mean, we've talked about age is the first inflection point. But certainly, I hope for those listening to the podcast, you know, if you find yourself in your 40s, this is still a good exercise to think about. And it really may align where you want to strategically position the company over your next couple decades of ownership of it. It doesn't mean that you have to enter into a formal process, but just educating yourself and giving yourself time to really understand and vision of where you can see the future of your business and future ownership.

Tom DeSimone 33:59

Well Rich I think of your advisors, you know, your advisors are so critical to your business, currently or through a transition. And so, one of the questions that I think about and ask our business owner friends is have you outgrown your advisors, and particularly when you're going through a transition process, you need to surround yourself with advisors that have done it before that are well versed in the language. And it's not to insult your existing advisors that just and there may be a place for them. It's just you need to realize that this is a big event, you're you are transacting on your business. And you will you'll go off the rails if you don't have the right people honing in and keeping everything going effectively and efficiently. We're working on a transaction right now where the business owners friend, his lawyer, his attorney, and he doesn't have a whole lot have M&A experience, but they wanted to use his friend to do the work. And it's going fine, but it's just going not as efficiently as you'd hoped. And we're a little bit educating as we go, which is fine. It's just not ideal. So, you run into that frequently, particularly when you're a small business growing to a much larger business, you don't want to leave your advisors behind a little bit. But I would pause, take a think about it. And ask yourself, Do I need to supplement my advisory staff.

Steve Baker 35:28

We're only as good as the people we surround ourselves with, right? So, this is a whole new arena. And you need to surround yourself with really smart people that have more experienced I love it how Jack stack always says I like to be the dumbest guy in the room, it took me a long time to understand what that meant. Because I've been the dumbest guy in the room most of my life, he means it in a much more intelligent way. That's great, Tom, thank you for that. So, guys, I always like to try to make notes while we're talking. Because I want to wrap it up for everyone. And just tell me if I got close with these points here. So, there are a lot of ways to transition ownership of a business. And it doesn't happen overnight. So, make sure that you're making plans and taking steps it could take up to nine months. You should be working on your transition plan even if you're not ready to transition. And Hillary I love the quote you used a chance favors the prepared, I think that's something we could all live by the five inflection points, these are signs that it may be time to start thinking about a transition. So, number one age of the company owner, you've got two choices, transition or shut your doors. Number two condition of the market and the industry. Go for your high multiples and your choice of buyer, especially in hot markets. Number three succession planning, make sure the folks who are next in line are on board with your decisions. Number four, career anxiety. Do your people feel secure enough to stay? Who will my new boss be? Well, I want to stay is there a future for me here give your people a sense of security around your transition. Because in the absence of information, this is just my own thought that void gets filled with misinformation, rumor and gossip. And that's not what you need. Right. So, number five value protection mode. The owner wants to protect the value they've created over time, but a defensive posture could compress your value in a future transition. Did I capture the five appropriately?

Hillary Hughes 37:24

Great job dude.

Steve Baker 37:25

Okay, so then the last little bits here, just things that you guys said that we picked up. I think that are worth noting. Put a list of your objectives together over time and prioritize it. If you're not the sole owner, share the list with each other. Is it ever too early to start planning? No. And is it possible? you've outgrown your advisors? Big deal. And then the big one to take away folks is hoping and wishing is not a transition strategy. So, there you have it. Well, Tom, and Hillary, as always, it's great to see you again and wonderful to have your expertise on the show. So, thanks for being with us on the podcast. Yeah,

Hillary Hughes 38:07

Thank you.

Tom DeSimone 38:08

Thank you, Rich.

Steve Baker 38:10

Folks let's keep the conversation going. Send us your questions, your stories, your best practices, your ideas, your challenges, and of course your victories because that is capitalism at its best. Thanks for joining us, and we'll see you next time.

Announcer 38:24

The "Change the Game" Podcast is produced by the Great Game of Business. To learn more, visit greatgame.com