Ep. 2 The Math Nobody Does For You Featuring: Aaron McCambridge
Aaron McCambridge has closed deals in the Colorado lower middle market for 15 years. The businesses he sells aren’t assets — they’re adult lives. And after hundreds of closings, he’s learned that the hardest part of the process has nothing to do with the financials.
Aaron walks Bob through what actually happens when the wire clears, why the valuation gap conversation is the most important one nobody wants to have, and what it looks like when a seller calls months after the close — not about the deal, but because he’s the only person who really knows what they went through.
He also breaks down the math of timing that most sellers get completely wrong — and why the owner who thinks they’re two years out is probably three and a half years out before they’re truly free.
Straight talk from inside the deal stack.
The Exit Series is produced for general informational and educational purposes only and is not investment, legal, or tax advice. Views expressed are those of the host and guests and do not necessarily reflect those of any affiliated firm. The host is associated with an SEC-registered investment adviser; nothing herein constitutes an offer or solicitation of advisory services. Guests are not necessarily clients.”
speaker-1: You bet. ⁓ well, thanks for having me, first of all. so Citadel ⁓ was founded in two thousand two. the I’ve been part of the firm for fifteen years as well as my business partner ⁓ about the same amount of time. as you said, we focus primarily on industrial services, ⁓ services as a whole, transportation, ⁓ lumber building materials, and like I said, all things blue collar. So ⁓ really we kind of focus on, you know, meat and potatoes type businesses as I would call them. manufacturing and distribution in there as well. ⁓ we tend to service kind of anything with a within kind of a three hour flight of Denver. and, you know, transaction size kind of low end about three million up to about a hundred.
speaker-0: Okay. Well, excellent. Well then I think we’ll just go ahead and jump right in. Aaron, out of every deal you’ve closed, not the biggest, not the cleanest, which seller do you think about? You know, if you wake up in the middle of the night around two o’clock and you go, What did that one particular deal or seller teach you about what this work actually does to or four people?
speaker-1: think the you know there’s there are a few but the one that stands out we were on a project ⁓ had gone into a a situation ⁓ where it was there were two partners ⁓ they had audited financials and we went in and you know in our world audits are gold right or treated as gold ⁓ so we kind of trusted those, kinda went straight to market. ⁓ in the early stages of due diligence, discovered that ⁓ there were questions in there that we couldn’t answer. ⁓ this has been ten ish years ago. ⁓ there were questions in there that we couldn’t answer, just questions from the investor at the time. and we couldn’t answer it, the client couldn’t answer it, their CFO couldn’t answer it. ⁓ their CPA couldn’t answer it. ⁓ so we opted to pull it off the market. ⁓ and I spent the better part of six to eight months on the road at their facility. ⁓ it was outside of Colorado every other week ⁓ for a long time just digging into their financials, trying to understand, you know, how they accounted for things. ⁓ there was one specific account that ⁓ was kind of a catch all ⁓ that that was the the crux of the of the problem. ⁓ what we discovered was ⁓ the audits were misstated and and that one kind of catch all account was not overlooked but just kind of swept under the rug and and the necessary diligence to uncover the true kind of accounting ⁓ process relating to that one account ⁓ didn’t come through and and what happened was we we ended up proving out that the audits were incorrect ⁓ to the tune of if I remember right it was close to four million bucks ⁓ over two years on the bottom line. So ⁓ that obviously affected our process and affected you know the client ⁓ we had good news and bad news. The good news was, you know, we were able to kind of capture that and discover it. ⁓ the bad news was it created a taxable event for them. but, you know, in the end we got the deal done. Client was super happy. We’re still you know, friends with them, close to them, ⁓ and they were very thankful. So ⁓ it was a lot of additional work, but I think the that’s what jumps out at me. It was one of the the larger kind of learning experiences that I had in terms of knowing what to dig for and knowing what to look at ⁓ when it comes to financials and and asking the right questions and you know you get burned we’ve been burned a handful of times, right? But you the good part about that is you learn the lesson once, hopefully, ⁓ and you don’t make the make the same mistake again.
speaker-0: Well, it sure lets you frame that kind of experience both in your mind and when you’re talking to a potential client. Says we we don’t want to do this thing. Right. Right. Yeah. Yeah. You know, when when you or your firm put a number on someone’s business or their life’s work, you know, what happens in that room when the market numbers don’t match what the owner thinks the company and by extension their life’s work is worth?
speaker-1: Yeah. ⁓ I I I think what you’re w alluding to is kind of the valuation gap, right? you know, on the front end and and I mean, I was just asked this question this morning on a separate call, you know, about our process and the steps involved and so forth. On the front end we’re looking at financials, we’re trying to understand the operation. ⁓ we’re asking all the the questions about you know, what’s buried in the financials, you know, how what are their accounting processes like, all of those things. ⁓ but really to try to kind of understand, okay, what is the true profitability of of the operation? ⁓ once we dig dig into that, ⁓ we have a pretty good idea on where multiples fall, ⁓ what those ranges look like depending on size. I mean, it depends on a number of things, right? ⁓ size w dollars wise, employee wise. management structure, geographic reach, customer concentration, you know, products and services offered, ⁓ if there’s any IP associated, all of those things come into play. ⁓ so i it’s in in any case ⁓ they’re all unique. ⁓ and that’s one thing that’s tough for for some people to understand is ⁓ you know they might have a great business but ⁓ but they’re a hundred percent project based and in a cyclical industry, right? ⁓ but because they’ve heard the stories of, well, my buddy, you know, sold his company y four years ago for some astronomical number or big multiple and whether it’s accurate or not, it’s kinda like big fish stories, right? but the market is always changing too. I mean it’s changing based on you know everything interest level, ⁓ just economic cycles of certain industries, interest rates, you name it, right? ⁓ and and certain industries go in and out of favor a a lot of times. so you kinda have to stay up on that. And ⁓ I feel like we do a pretty good job of that. We also are pretty well connected in the in the investor space, the buyer space. So we have conversations daily ⁓ with folks just about w what they’re seeing, what’s going on in the market. ⁓ I at fr that’s all kind of background information to get to your question, which is what happens i when ⁓ the the valuation expectations are are different. And you know, we we’re very upfront with folks in terms of ⁓ you know, our take on the market and where we think valuation falls. In every case, we want them to maximize their value, right? In every case. That only helps us. We’re 100% success speed driven. So ⁓ it helps everybody involved. But we also we’re big on setting expectations throughout the process. And and we’re not gonna tell somebody that you know it’s worth you know seven times when it’s worth four times or or whatever. ⁓ so it it’s it’s having that frank conversation and then and and truly trying to educate them as to why, right? All of those pieces that come into valuation ⁓ that I mentioned, ⁓ a lot of folks just don’t ⁓ understand or appreciate the all the nuance that comes into that. So ⁓ but y it’s it’s about the education piece and sometimes i you get people that are that are agreeable to that and and sometimes ⁓ you get people that are pissed off and they leave and want to go to the next guy who’s gonna tell ⁓ it’s worth seven times when arguably it’s worth four. And and ideally, right, it’s we’ll give ⁓ a range, right? It’s you know, it’s somewhere between four and a half and, you know, five and a half or four and a half and six or something like that. But ⁓ but here’s why and here’s here’s where it’s gonna be four and a half and here’s where it could be six. I don’t think it could get to seven, but ⁓ if it does, that’s great. But are you okay in this range? ⁓ and that’s really kind of how it’s framed. And and oftentimes, you know, folks understand that and and in other times mm they’d rather get told a higher number and and go on. But it’s it also depends on the goals. Like every deal is different, right? So depends on the goals of the of the business owner, ⁓ what they’re looking to do. Some are looking for the highest dollars, some are looking to you know, find the best partner to help ⁓ grow. Some are looking to ⁓ you know, protect their employees at any at any and all costs. ⁓ and you know, and the dollars are usually close, but but some looking for the highest dollar might not be the best partner. And we’ve certainly seen that over the years too. So it’s a it’s a there’s a lot of nuance with it.
speaker-0: You know, it’s I think it’s hard for the business owner to view their business through a buyer’s eyes. I think it’s often difficult.
speaker-1: Sure. Yeah. It i it it’s it’s stuff that you don’t wanna see, right? It’s like it’s like anybody you know, judging you personally or me personally from the outside. It’s it’s i it it may be right on point, right? But sometimes it’s tough to hear, you know, but that’s the old saying, the truth hurts, right? So
speaker-0: You know, for for you and and through the years, you know, have you ever walked away from an engagement because you know, maybe the company was sellable, but maybe the owner wasn’t. You know, what did you see in that circumstance if it occurred? And what, if anything, could you do about it?
speaker-1: Yeah, ⁓ we have. It it hasn’t happened very often. I mean, I can count the time the number of times on on one hand and arguably probably ⁓ you know, three fingers or less. ⁓ in those in those instances it’s it’s really it’s a matter of of ⁓ the owner e either being just kind of overly difficult or and that could be anything, like we just can’t obtain the information or they’re they’re not communicative or ⁓ they’re very argumentative or you know any of those things. ⁓ and so ⁓ unfortunately we’ve had to kind of draw the line and say, look, I you know, I don’t think this is something that that’s gonna work for for both of us. ⁓ you know, best of luck to you. ⁓ you know, and that’s and that’s okay, right? But ⁓ but that’s the reality of of some of those situations. But like I said, that doesn’t happen very often.
speaker-0: Yeah, that’s fortunate that it’s a rare occurrence, for sure. Yep. You know, for for you when ⁓ you know you get up to ⁓ the closing day. Walk me through the closing day from your seat. You know, you’ve been working on the deal for a year or so, you know, the wire clears. You know, what happens in the next forty eight hours for you and for the seller?
speaker-1: Yeah. good question. There’s you know, it’s the there’s a big sigh of relief, of course. leading up to closing and kind of the last I don’t know three weeks and especially especially the last week or maybe three to four days it’s it’s pretty exhausting on everybody involved ⁓ but but once you get there and it’s and it’s finally done there is a sigh of relief. I can speak from from our side or certainly from my side I tend to, you know, just kind of do my best to decompress. There was there’s been certain times where I remember one specifically on a deal that we closed about five years ago, and it was done and I w just went to go play golf and I went by myself and and nobody it was you know, it was the middle of the day and a weekday, nobody was out there and I was playing barefoot and it was one of the most enjoyable situations just kind of relaxing, you know, just like a a ⁓ feeling of accomplishment, you know, that kind of thing. ⁓ I will tell you that while certainly the money, you know, there’s a financial aspect of it and the money can be good. It’s not always great, but ⁓ but it can be good and but it’s I will tell you it is rarely I rarely think about the money after that. It’s more about got the deal done, the client is happy. we got another tombstone. ⁓ it’s kind of another, you know, another one in our our quiver, if you will. ⁓ and they all have their unique situations in throughout the deal. So there’s a a sigh of relief for a number of reasons ⁓ on our end. And then honestly, and then it’s I’m not kidding and my wife will will say the same thing and give me a hard time and you know the founder of Citadel, Chris, ⁓ he was always the same way and I totally understand. And he ⁓ you know, it’s like when a deal’s done, it’s like, okay, enjoy it for twenty-four hours, go play golf barefoot or whatever you’re gonna do. And I’m not kidding, two days later it’s where’s the next one? What are we doing? What else are we working on? And then you’re back at it. So it’s not a I’m gonna take a month off or a week or whatever. It’s never been that. So it’s it’s back on, and what else do we have to work on? ⁓ from a from a client standpoint, ⁓ I I can I can say just from what I’ve observed, there’s certainly that the oftentimes there’s that relief ⁓ of the process. ⁓ I’d say probably seven and a half, maybe eight out of ten times the exiting owner is still involved in the business at some level for my for a transition period, right? ⁓ and so they’re kind of they’re kind of back at it. They might have a couple of days and then they’re back at it. Now they’re working with, you know, the new team on integration stuff and and everything else. But but I think they’re their reliefs. Some of those that are, you know, kind of completely out. definitely a sigh of relief. The but the feeling but also a feeling of shoot, what am I gonna do now? that takes a little bit, I think, to get there. But ⁓ but that absolutely comes with with many of them. And, you know, they’ll start something else or get into a different business or you know, start you know, investing in real estate or whatever. Not everybody just, you know, sells and now they’re sitting on a pile of money and they’re like, okay, I’m gonna go play golf every day or go fishing or, you know, buy a boat and, you know, sail to the Caymans or whatever. that doesn’t happen very often. It’s ’cause if you think about it, all these folks are operators, right? They’ve they’ve built their worlds and their personalities and their i just everything. They’re a lot of times just their ego and self worth and and not in every case, but in a lot of cases. And and so it’s very it’s a difficult ⁓ it’s it’s a difficult process to go through. It’s a relieving one and at the same point it comes with a different set of set of ⁓ challenges.
speaker-0: You know, it in in thinking back, you know, have you ever had a seller call you weeks or months after the close, you know, not about the details, not about the earnout or any of that stuff, but because they were having challenges unraveling and you were the only person that was really familiar with what they’d been through.
speaker-1: Yes. Yep. I’ve I’ve had conversations like that recently, which is to say in the last couple of years. And and it varies, right? But I’ve had multiple conversations like that and it’s it’s ⁓ man, I’m just struggling with this or that, or trying to wrap my head around this, or what do you think about you know, I’m contemplating getting into something else and you know, that sort of thing. So Y yeah, and and to be perfectly honest, oftentimes, you know, we remain ⁓ friends or, you know, certainly friendly and close with a lot of our clients and that’s just you know, I I’ve I feel like that’s a ⁓ w one of the biggest compliments that we can get, right? To to maintain those relationships post close years after where we’re getting Christmas cards and sharing Christmas cards with y you know, folks that that we helped, you know, ten years ago. Right. So, ⁓ that’s a that’s a meaningful piece of it too.
speaker-0: You know, and it you know, to that end, you know, you’re the closest confidant to that owner for six to twelve months. You know, and they tell you things that they may not have even shared with their family, you know, their attorney or their CPA. You know, typically if they’re confiding, what do you typically hear or what do they reveal to you about how they’re experiencing that transition?
speaker-1: ⁓ the transition during the process or post?
speaker-0: ⁓
speaker-1: Or just kind of throughout the whole thing.
speaker-0: Yeah, I’d say just during the journey.
speaker-1: ⁓ it’s I mean, it’s an emotional roller coaster and anybody that tells you different is lying to you. ⁓ especially for these you know, founders, owner operators that have spent decades in their business building it up. ⁓ the it is extremely emotional. It’s like you know, selling off their kid, which of course they would never do, but but in this case they are doing it to some degree and ⁓ it’s ⁓ I mean you’ve I’ve seen people that that ⁓ get skittish ⁓ and and at various stages right of of the process. and honestly it it all comes down to like look at the end of the day, we’re not gonna press on it. We want to help them navigate it as best we can, but but it’s their decision. And And all we can do is be a resource for and and kinda bring ⁓ back to, okay, when we first sat down two years ago talking about doing this, w what what were the reasons why? Right? What was important to you then and what’s changed? And because stuff does change. ⁓ but ⁓ but let’s get back to that. You know, was it risk? Was it I need to spend more time with my wife and kids? Was it, you know, I want to travel more or ⁓ you know, health isn’t w where it needs to be or or whatever, right? ⁓ and things change along the way, ⁓ but more often than not, coming back to that kind of realization of, yeah, that is why we were doing it and and they just need assurance that no, you’re you’re on the right path and you are doing this and there was a reason and you can’t you can’t listen. Everybody’s gonna have an opinion, right? If they’re talking to other people or they’re talking to other There’s I. e. like CPA, financial, what have you. Everybody has an opinion about it. And especially when you’re talking about a large transaction or or any transaction. It could be it’s not necessarily large. I’m not talking, you know, it doesn’t have to be you know, large for somebody might be three and a half million bucks, large for the next person might be eighty million bucks. So it it’s it’s all relative, but ⁓ but it’s but it’s a big deal. for them. And so it’s really just kind of trying to recenter them back to why they went down the path to begin with. And sometimes and and sometimes they bail, right? At the at the end. I mean we’ve had we’ve had that happen too. Eleventh hour, no, we’re not doing it. And that that’s that’s frustrating to say the least. But ⁓ but at the end of the day it’s their decision and and you can’t fault them for that.
speaker-0: You know, along those lines, you know, is there a seller that, you know, that that’s creeps up periodically in the back of your mind, not because the deal went south, but you wonder what happened to those folks, you know, after did they drop off the map and you just go, Jeez, I wonder.
speaker-1: Yeah. I mean there there are certainly plenty of those that you know, that we’ve helped through, you know, transaction and and that we don’t stay in touch with anymore and not necessarily on purpose, but it’s just you know, they go on to live their lives and ⁓ we’re doing the same and you know, ⁓ that’s just life. it there are certainly a few that that kind of jump out that, you know, we had a really good ⁓ relationship or or a long relationship, right? Deals that that take that took years. I think the the longest deal that that that I was a part of anyway took us five and a half years to get to closing. And that’s five and a half years with tons of travel, tons of everything, lots of back and forth. We saw them through ERP conversion, you know, cycles in the market, ⁓ and ⁓ but so so like situations like that, you you get to know people really well over five and a half years and and really kind of working through them and ⁓ but patience is is the key and and we’ve always said, and this was something that Chris had always said, like we’re very patient people and we have to be. We can’t be in a rush. And And honestly, sometimes the market, well not sometimes, the market drives ⁓ the activity level, right? And when I said some things go in and out of favor because of cyclicality or otherwise, ⁓ you know, that’s that’s real. And so the the owners, you know, have to understand that. So and but we’re very upfront with that, you know, and we talk about it a lot and that’s part of our early stage process. making sure that they understand what it looks like, what it could look like, that sort of thing.
speaker-0: You know, if if ⁓ every seller that hired you guys was already prepared, but not for the deal, but for the life after, what do you think that that preparation would look like? And what would those sellers understand that many of the sellers that don’t do that work don’t understand?
speaker-1: You know, I think it would it would make the process I think it would help the process by making it easier for them, right? it just emotionally more than anything. ⁓ but also ⁓ it also helps in the marketability, right? I mean when when you’re talking to when we’re talking to ⁓ a prospective investor ⁓ and and we get on an initial call or have an initial meeting with with the client and the investor. all of those things, right? They they know kind of where they’re they can already kind of put the vision there. They know where they’re gonna be. They just they’re not there yet. they’ll get there and and not a ⁓ not a dollars thing, not a a necessarily a timing thing. They just know that they will be there at some point and they’ve prepared themselves for it. And so it it it absolutely helps ⁓ it just improves clarity all the way through.
speaker-0: You know, you you’ve seen we we’ve talked about a number of the issues in the close ⁓ and and transactions. Tell me about the best post exit outcome that you’ve watched. Close clean, transition well, seller adjusted well on the other side. What made that particular transaction different, do you think?
speaker-1: I mean it’s hard to pick one. There are it ’cause there are there are unique circumstances in every single deal. ⁓ but ⁓ I think ⁓ I’ll just pick one. ⁓ I think the expectations were set for them, right? This is this is a a gr family business. part of the family remained ⁓ with the company post close. ⁓ the patriarch exited. ⁓ but ⁓ but the expectations were set and everybody was on board and everybody was happy and everybody was happy with the result and they were they were happy with the partner and but were there still challenges? Absolutely because it’s new, right? You don’t own it anymore. ⁓ so so that’s a that’s always a challenge. But but I think in the end everybody was happy it met the goal. ⁓ of the collective.
speaker-0: You know, and some of those sellers, you know, when when they close and you can see that they need help. It’s not the legal, not the tax, but some kind of help with life after. Where do they usually turn to for support to help ⁓
speaker-1: that’s a great question. I don’t honestly I don’t know that I can answer that. ⁓ I mean, I know that that I’ve had plenty of conversations with ⁓ with clients post close. ⁓ but ⁓ you know, and kinda going back to your earlier point about, you know, we were so close for so long, talking daily for a year, right? And certainly talking da multiple times a day for the last month kind of leading up. so understanding that challenge, it you know, yeah, we stay in touch with them, but in terms of their own, you know, outside of you know, business relationship, that kind of thing, I mean I think it’s it’s it’s friends and family, spouses and ⁓ you know, other, you know, coharts, you know, friends that have exited or just retired or or whatever, right? ⁓ That’s tough to say. I mean, I would I’d be
speaker-0: Yeah, I I think there’s Yeah, there’s a gap in that world. You know, and you know, part of it I don’t think the owner necessarily knows that they might need some help. And two, I think they go, I need some help and I don’t know where to go. You know. I think that’s maybe a gap in in in what’s out there. ⁓
speaker-1: You know, it’s interesting because actually when I started at the firm, we had that person ⁓ who it was is an amazing person. and and that was her primary role was to kind of she had kind of an HR ish background, just like human capital background, right? and And so she would she would kinda help on the front end with transition and kind of helping them talk through that help on the back end with integration and follow up and you know the equivalent of like an exit interview kind of thing. ⁓ so so we used to have somebody on staff that actually did that. ⁓ but you know, I don’t know all the details as to kind of what happened or if it just kind of fell out of favor or or what, but but no, I I absolutely think it’s a it’s a it’s a necessary role. At least having the option, right?
speaker-0: Yeah. Yeah, my sense of that is, you know, what kind of skill sets do you need to have in order to be qualified to have the conversation? You know, if they’re not really involved in the deal flow, they really don’t I don’t think they’re in intimately familiar with some of the challenges internally, you know, to to resonate with that owner. And you like you keep saying, every owner’s different. And some may receive it well and some may not receive it at all. And so I think that gap continues. ⁓ You know, f for you, you’ve been doing this a long time and and you have God knows how many hours of in the trench experience. And so you’ll know things about the process that most sellers or many sellers won’t know until it’s too late. So if you could take and grab every first time seller, you know, and say one thing that nobody in the deal stack would say, what would it be?
speaker-1: That nobody would say. ⁓ I don’t know that I can say that because I I think there are a lot of good advisors out there that that would prep folks properly, right? There are also a lot that don’t. there are a couple of things. I would say the biggest thing is cleaning up financials as best you can, just making sure that they’re you know, ⁓ everybody wants them to be, you know, gap compliant and And we all know that you know, the lower middle market, ⁓ sometimes they’re not, right? And at the same point it’s it’s hard to argue with because you have business owners that that will want to ⁓ you know, that utilize their their business for you know, tax advantages, right? which is which is perfectly fine and that’s we well in their ⁓ you know, reasoning to do so. but understanding how to how to account for that, separate that stuff out, just making sure that numbers are clear, being able to report down to a gross profit level at a minimum, if you can report all the way to the bottom line by division or by product or by service or what have you, that’s that’s gonna be very helpful. ⁓ I I think the you know, along the same lines, financials is understanding ⁓ working capital and and what that looks like. And if you’re not talking about working capital on the front end of a deal and I’m talking like pre-LOI, it it could be actually, you know, when you’ve received indications or maybe you have an ⁓ you know, a couple of LOIs, you know, kinda on the table, whatever. ⁓ that’s something that we always push for, right? Is a definition of working capital on the front end. So let’s let’s agree to this because that is the number one thing that sneaks up in the end in the eleventh hour when you’re trying to get it closed. And it’s this back and forth push-pull situation where ⁓ you know working capital is a is a big negotiating ⁓ piece. And so establishing that it again, it’s setting expectations, right? If you set it properly on the front end, you don’t have to you don’t have to worry about it ⁓ on the back end. But But that’s also why I think it’s important to have an advisor in your corner because they can help you walk through that. What does that mean? A lot of people don’t even they’ve never even heard of working capital, right? And they don’t know how how that’s part of it. ⁓ the other piece unrelated to financial is that we will tell folks kind of early on or if we’re doing a a talk or you know, whatever, is You have a lot of people that want to sell and they think that they think that it’s like selling a house, right? ⁓ well somebody’s gonna list my business on XYZ website and you know, there’s this pool, like an MLS pool, and people are just in there choosing. Now there are those, of course, we know w what those services are. We don’t typically use those. but the the important thing to understand is timing. So if you’re if a business owner is is looking to be retired in say two years, say they’re two years out, that’s always the pushback, right? It’s it’s the ⁓ I’m I’m a year out, I’m two years out, whatever. Okay. Well let’s back into this really quick. We’re gonna start talking. It’s gonna take us no less than two months if we’re moving pretty quick. to get material to where we can actually go to market. And then you go to market and that marketing process can take anywhere from sixty days to years, again, depending on the market. But on average, call it sixty to one hundred and twenty days. From there, then you’re b you’re dealing with ⁓ indications, offers coming in, you know, negotiating LOIs, picking your horse, doing management meetings, trying to find the right partner. That process takes two to three weeks minimum, so call it a month. ⁓ now we’re we’re already in before we’ve even gotten to assigned LOI, you know, we’re in six months, right? And at kind of at a minimum. And then you’ve got, you know, no less than sixty, probably ninety days in due diligence. ⁓ that’s quality of earnings, that’s legal, that’s going through all the stuff, ⁓ before you’re at closing. So you’re already at a year. ⁓ and by the way, you will likely have to stay on for a period of time. I I mean, I’d say on the low end, sometimes it’s a clean exit, sometimes it is. But I would say that’s, you know. maybe fifteen percent of the time. But they’ll likely have to stay on for no less than ninety days, maybe it’s somewhere between ninety days and six months. ⁓ and oftentimes it’s a year, could be two years, if they’re if they’re kinda key to the business, right? So you think about that, you’re a year in the process, no less than nine months, say nine to twelve, nine to fifteen months in the process, and then you gotta stay for another six to twelve months minimum, you’re already past two years today. So y y to be d to be done, right? Like feet up on the boat or play golf every day or whatever.
speaker-0: You know, i I’m I’ve been an enduring fan of business owners. I’m a business owner, you are too. You know, and and they’re really good at what they do. You know, just niche down, they’re good at it. But the things that you just described on backing into the exit time frame, I I think there’s a fairly large gap in expectation or knowledge or pre framing. I just don’t think they know. You know.
speaker-1: Yeah. Yeah. That’s that’s massive.
speaker-0: Yeah.
speaker-1: They they don’t know and it’s and it’s really difficult. It and number one, why would they, right? Unless they have somebody kind of coaching them through that, or they’re very forward thinking, right? But unless they have somebody coaching them through that or ⁓ or I should say and and when they’re not aware of that and they think like, okay, I know it’s gonna take some time, but I can I can last six months. So Going back to your original question about if somebody were prepared, right, for their exit, how how much easier would it make the process? This this timing discussion is exactly that. Because imagine how much easier it would it would be if they already know they’re gonna be here and they’re comfortable with it, you know, at X point in the future. ⁓ I we’re not there yet, but then they’re then they’re comfortable with the process. Right. If they just think that they can sell this thing in six months and be out, they’re gonna be ⁓ extremely emotional and and likely very volatile. And naturally, right? I mean, I think anybody would if you have this expectation and it’s not gonna get met, you know, it it’s gonna be very frustrating.
speaker-0: ⁓ yeah. It’s framed raw. Yeah. Yeah. You know, it a as you look back over the years and you know, ⁓ no need to name the folks, is there a seller that you closed years ago that you’d like to pick up the phone and just check in and see how they’re doing?
speaker-1: Yeah, absolutely. Sure. I I do it all the time.
speaker-0: What do you typically talk about when you do that?
speaker-1: ⁓ I mean nothing. How are ya? How are things? What are you doing? Where are you traveling? How’s the family? ⁓ how’s the business going? Right? It might still have kids involved or ⁓ y you know, whatever, just all the what what are you doing with your time? When are we gonna see you next? Can we get together to play golf? You know, are you coming through Colorado? You know, whatever.
speaker-0: Yeah, you know, it’s it’s you know, for all of this, ⁓ you know, I I I hope that the founders and business owners and so on, one can use this as a resource, you know, because I appreciate your candidness, you know, and your insights into the process and you know, clearly your experience. And you know, there’s so much lopsided ⁓ focus, I think, on the on the pre transaction pre wire time frame. And, you know, there’s an an emerging recognition of the gap on the other side, which we’ve referenced in here. You know, and so, you know, I think these conversations really have value. You know, I hope the business owner, you know, that may run across this pre exit. I hope they find this useful. You know, the transaction’s kind of the finish line or close to a finish line. You know, the transition that happens, you know, at that time frame, ⁓ that’s not exactly a finish line. That’s that has some duration to it. You know So, you know, I I’m I appreciate ⁓ your time s Aaron, if somebody would like to reach out to you, you know, where and how do they find ya?
speaker-1: Yeah. ⁓ the easiest way is d the website probably, which is citadeladvisory dot com. ⁓ they can check us out. Our you know, we have tombstones listed on there, kinda walk through, you know, basic website stuff. ⁓ but on the contact page you can book an appointment. ⁓ you know, there you can call me or numbers are on there, emails are on there. So yeah, absolutely. We’re and we’re pretty, you know, we we try to answer the phone. You know, we’re we’re we’re still old school, which is, you know, yes, we can respond via text and the whole deal and will, but you know, it’s the the the age of Zoom, I was having a conversation with somebody yesterday, ⁓ who’s not in Colorado. And the age of Zoom, while super convenient, ⁓ the there’s a lot missing and there’s so much more ⁓ in person and just like there’s so much more via discussion on the phone rather than text, email, what have you. But no, we’re we’re easily accessible through through the website.
speaker-0: Well super you know, it I think about the body language that you pick up when you’re there versus the body language you don’t pick up when you’re not there. And yeah, I you know like you said, post COVID, yeah, Zoom’s kind of the thing and yeah convenient. But ⁓ or they could go to the golf course and look for the guy playing golf barefooted.
speaker-1: Right. That’s right. That’s right. Could do that. Although that doesn’t happen very often. It ⁓ might happen a couple of times a year.
speaker-0: Yeah. Well, you know, I I guess we’ll sign off here. ⁓ this is the Exit Series. I’m Bob Roke with my guest Aaron McCambridge, managing director of the Citadel Advisory Group. You know, if you’ve if you know of a founder that’s sold, or a broker who’s seen it, or an attorney that’s been across the table, send ⁓ the episode, subscribe wherever you listen, and we’ll see you next time. Aaron, appreciate your time.
speaker-1: Thank you, Bob. Happy to be here.