Ep. 1 The Deal Team Left. The Work Just Started. Featuring: Sean Hutchinson

Bob Roark: This is the Exit Series. I’m Bob Rourke. This is for founders, brokers, and attorneys, the people who are in the room when the deal closed, talking about what happens next. This is the conversation nobody else is having. For the first episode of the Exit Series, my guest today is Sean Hutchinson. He and I’ve been breaking bread over this conversation for years, particularly cinnamon rolls. He’s founded five companies, all of them with partners, some more successful than others. And led a fast growing global company which became the largest firm of its kind in the world. He’s third generation, a sixty seven year old family business and a board member. He’s been in the room when the wire hits, and he knows what happens after the deal team moves on. The business readiness gets handled, the financial readiness gets handled. The part where the founder figures out who they are without the company, that gets skipped. Sean spent twenty five years working that gap. If you’re a founder approaching an exit. or an advisor sending one into it, this is a conversation that nobody’s having early enough. Sean, thanks for taking time and being on the show again.

Sean: Yeah, good to see you.

Bob Roark: You bet. So here we go. Sean, you and I have been having this conversation literally over breakfast for years. What’s the exit planning industry getting wrong?

Sean: You know, a few things stand out after, you know, twenty years ⁓ doing this work, probably longer than that. First, I think now, finally, in a certain way, the baby boomer tidal wave, the silver tsunami that folks have been talking about for a long time, I think it’s it’s kind of finely cresting. It’s taken a while. You know, this was spar supposed to start about two thousand and eight, and here we are in two thousand twenty five, still kind of waiting for it to start, honestly. We’ll talk a little bit more about that ⁓ You know, in the future, in the later in the interview, but I I think that the industry, our profession, and the profession that everybody that you mentioned, the lawyers and the accountants who are working with business owners, I don’t think we’re necessarily scaled up for it. That’s that’s point number one. I don’t know that we’re really, really well prepared for it. Second, I don’t think there’s enough talk about risk in the conversation with business owners. And I think there’s too much maybe emphasis on the business and the value of the business. You talked about three legs of the stool and that importance of personal readiness, the sort of life after business picture. I personally think that the conversation is starting with business and moving from there. I think it ought to start from the other end. It should be personal readiness and then move back towards the business with all the stuff that’s in between. So I think we kind of have the sequence moving in the wrong direction. And it would benefit from prioritizing the conversation about personal readiness with the with the owner. You know, the business that the business plays a part, right? It’s 80 to 90 percent of both most business owners’ net worth. So there’s a huge amount at stake. They’re they’re crazy concentrated in one completely illiquid stock, which is just a you know awful investment strategy. We we have to manage the downside in so many ways. And a lot of the conversation is about. The upside, the growth, the profit, you know, optimistically, all those good things that can happen out there. And I just don’t think risk is enough of the conversation. Third, I think the industry still treats exit as the primary motivation for owners. When a lot of owners, especially family business owners, treat legacy and relationships and identity really more importantly than the exit of their business. Right. So and keep in mind. The majority of privately held businesses in the United States are family owned. So this is a big segment of the marketplace. I think we’re in some ways having the wrong conversation with them, and we’re kind of, you know, flying by each other. And then finally, I think exit’s probably the wrong word in many cases to use in these situations. It implies kind of a finish line. And I don’t think that’s what we’re talking about. I think we’re talking about a life transition at that point where they might transition ownership in their business. And I think that framing. The change in the framing from exit to a life transition really matters. I think it opens up the conversation. Now, for all of that, it’s worth adding that, you know, our ability to interact with business owners is actually improving. So the most recent version of the Exit Planning Institute survey, the state of owner readiness for transition, showed that Fo business owners that are seeking outside advice has increased from thirty-eight percent in twenty thirteen to sixty-eight percent in two thousand twenty-three. But the majority of those were in the younger generations. Baby boomer business owners still resist outside advice. That has always been an issue. So the baby boomer business owners pretty much think they’ve got it nailed and they don’t. Because they’re not we’re not actually talking about three dimensions of preparing for transition. In many cases, they’re just focused really on the business and to some extent some the extent on the financial planning. it’s also worth me mentioning there that seventy-eight percent, I think, of the people who were surveyed said they preferred to transition their businesses internally rather than sell them to a third party. So that’s a big thing. And ESOPS have seen a four hundred percent uptick over the past few years. So there’s a huge interest in employee ownership.

Bob Roark: Why do you think that is?

Sean: Structural moves in the marketplace recently that I think are important to acknowledge.

Bob Roark: Is it just knowledge and people getting out there talking about it? What do you think the ESOP movement is?

Sean: I think that’s part of it. I think you have a lot more advisors who maybe are certified exit planning advisors, for instance. There’s nine or ten thousand of them out there. A lot of people have been talking about exit planning. I think honestly, it’s almost become faddish to talk about exit planning. And I think there’s there needs to be kind of a new vocabulary around it one way or another. but all that said, I do think there is a richer deeper conversation going on at the national level around this than there was ten years ago, no doubt. And I think it’s accelerated over the last five. But interestingly enough, I think the majority of that conversation is with ⁓ Gen X and millennial business owners, not necessarily the baby boomers, even though the baby boomers are gonna be first out. Time, you know, father time always wins. So

Bob Roark: You know, I I I saw a term the other day, it said transaction to transition. And I really think that’s a a reasonable, you know, way to phrase what they’re doing. And you know, in my sense of things is that the owner that transacts and exits ha doesn’t have a good idea of what’s coming. I just don’t think at least it’s been my experience.

Sean: I think that’s true. And and ⁓ you know, it’s interesting. I I I feel like they should, honestly, because in the business owner community, typically the people that they spend a lot of time with are other business owners in the same generation. So and baby boomers have accumulated some wealth, they often, you know, join the country club or whatever it may be, they have other business owners that are in inside of their circle of influence. And a lot of those business owners at one point or another exit. So so they ought to have a community people who are talking about it and sharing their experiences. But I think also it’s such a hard thing to prepare for and go through that when owners share their exper experience, it’s not always a positive representation. So what Owners who have not been through it here is that doesn’t sound like very much fun. I think I’ll just put that off. Right? I know it’s coming, but I think I’ll put that off as long as I can because that did not sound like a fun experience at all. And we’ll talk about it, even though a lot of those, you know, transitioning business owners may have walked away with a number with real wealth in their pocket as a result of that. The the sort of narrative that surrounds that transactional piece. Is very different than just I got a check and I’m happy with it. There’s so much more to it. And I think our discussion today is going to reveal a lot of that.

Bob Roark: Yeah, you know, and and thinking about that, so you’re third generation with your family business and sixty-seven years, I didn’t even know that number on the manufacturing side. so for you, you know, a lot of folks think, well, where did you learn a lot of this? Well, you’ve lived a lot of this, so it’s not textbook for you. And when you sit across another family business owner, what do you typically hear that an outside advisor just plainly misses? In that conversation.

Sean: Well, I don’t know that the outside advisor advisor always misses it. They may in fact see things that are really valuable, but they may not know what to do about it when they do. Right. So the conversation then it kind of hits a wall. It’s kind of like, well, we’ll just push that aside because you know, I call it that you know, that that it’s almost like the business itself when they’re when, for instance, a financial advisor is in a meeting with the business owner and they know that the business is going to be so crucial. In the financial planning, the long-term life, right, that that owner and their family is going to live after whatever happens. But they kind of don’t know what to do with that kind of asset. So they put it in the corner of the room and they pull the potted planet in front of it. They know it’s over there, but they just are not really seeing it. They’re missing things because they don’t know exactly how to deal with it. And that so that’s always been a bit of a challenge is getting everybody to spin up. if you will, around this unusual private business. These are not easy things to deal with. They don’t just monetize. They’re really, really hard. So so I think that there may be a struggle around if I see it, what do I do with it? And if I don’t know what to do with it, then maybe I’m just gonna kind of let it lie, right? But but there’s another thing about family business businesses. And I think if you’re gonna really think about family business, you gotta lean into the complexity that’s inherent in these things. So family businesses throw off sparks, unlike any other kind of enterprise. Honestly, it’s a multi generational partnership where only a few people own something and all dozens can have a stake in it. Right? They’ve got something to say about the business, even though they don’t ⁓ own it and it and it they may have a stake in it emotionally, financially, personally, right? Maybe a part of the legacy, the way that they see themselves. That dynamic can be quite invisible to advisors who have never really worked in the family business area. I also think what we call knowledge atrophy is a massive and underappreciated risk in in family businesses. Each generation carries things in their head that have enormous value, but they never get written down. So th those could be customer relationships, institutional memory, the way that decisions actually get made, the decision trees, a lot of owners just know that stuff. They can go through a decision tree like that, like this way, that way, and they just do it. But other people in the company don’t have that capability because they they just don’t, they’re not It’s not their orientation necessarily. I haven’t been around that long. By the way, I think our family business is seventy years old now. I think it was found founded in yeah. So now we we moved into a new, you know, a new decade, I guess. So so you know, when that first generation exits the business, let’s say that they move on in one way or another, that knowledge that’s so valuable, which is a big piece of the goodwill in a business, is knowledge, it’s the human capital. drives a lot of value, it can walk right out the door with them. Right. So knowledge management is a big deal. And I think it’s particularly important in family businesses because it’s the way that they ⁓ see themselves as a family through the through the generations. It’s also just kind of top of mind for a lot of older business owners. They’re they’re just kind of at that point in their life where they know things are going to change.

Bob Roark: Yeah.

Sean: Right. They may be backing off the sort of drawing back from some of their business management responsibilities. They’re seeing kids, maybe multiple generations, come online and perhaps ⁓ get involved in the business. So they’re they’re thinking change, they’re dealing with it all the time. It’s a big threshold coming up, but it doesn’t really work its way into the business strategy or operations, right? They don’t think about what the effect on the business. would be and that it creates this weird little emotional brew, I think. So it’s a combination of confidence and anxiety. It’s what I would call doubtful optimism about the business and the family and its future. They absolutely believe in the business. There’s no question. Yeah. Right? If you ask them about the health of the business, they are proud of it and they want to talk about it. And there’s a lot to talk about that’s good. They’re just not sure that they’ll get the transition right. So they believe in the business, but they’re not sure about the transition. But this thing is 80 to 90% of their net worth. So they don’t have an option. This transition better be right. I think the last thing I would say about it is next generation voices are often absent, silent, or in the worst case situation, silenced at the time where these conversations matter the most. And that’s that’s a structural failure, by the way. And it compounds over time. The more it happens, the worse the situation gets as it as it moves on.

Bob Roark: You know, my my sense of things, and we’ve talked about this in in podcasts before, is being able to transfer the owner IP is is challenging. And I think for some of the folks that are working with these owners, if they’ve not been a business owner before, and a lot of it’s just a different vocabulary and it’s a different experience to be a business owner, you know, and and you know, and and what to do. But you know, with you know, when when we think about you know, segue into another thought, you know, what is not ready actually look like? You know, when when someone’s sitting in front of you and you know the deal machines going and deal fatigue’s going and all the records and blood samples and everything else is going on. What do you everything? What are what are you seeing through that fog? What sticks out in your mind when you’re in that process?

Sean: I can just display everything. Well, look, I mean fog is a good word for it. The fog of war in a way, right? We could call it the fog of due diligence. So deal due diligence is unlike anything that owners have ever experienced, honestly. It’s it’s ⁓ you know, their their life’s work, their family’s work in some cases gets picked apart by people they’ve never met and probably won’t, and don’t particularly care how hard it was to build this thing, right? Their job is to come in and find the things that might get in the way of the buyer’s success, not necessarily find the things that have enabled the seller’s success. It can feel really offensive to business owners, deeply offensive to them, to go from successful entrepreneur to a financial risk on paper as part of a due diligence report. Because that’s what’s happening. This whole thing, decades perhaps, is going to be boiled down into a report. That the due diligence representatives hand to the investment committee or to the buyer and they say, this is what we found. And most of it, most likely, is going to be without preparation, is going to be negative and it’s going to drive the value down and it’s going to drive negative terms. So it moves really, really fast. I I I I can’t describe to a business owner who’s been hasn’t been through it just exactly how many questions are coming through at any given time. Document requests, hundreds of questions. Hitting in a very short period of time. And they’re still trying to run their business, by the way. So deal fatigue is really weird, is is real. It’s it’s emotionally exhausting. It’s physically exhausting. So, you know, the line I hear the most often actually is kind of after the fact. Sometimes it’s during the due diligence process. And it it it basically is I wish I had listened to you. I wish that we had gotten more ready for this. You tried to tell me. what it was gonna take, and I couldn’t get it. And I have said for years, I do we do the best we can to prepare people for the experience, but it’s really, really difficult. I’ve said sometimes that ⁓ I wish I had I could film the due diligence process for a client that’s going through it and then share that with other business owners so that they can just kind of see the way that it works. But I think it would probably be too profane. To share with other people.

Bob Roark: It’s kinda like jumping out of an airplane. You could describe it. Yeah, you know, there’s nothing like standing in the door for sure. Yeah. You know, in i in that process, you know, there’s there’s a ⁓ there’s a gap between what the business is worth and what the owner needs for their life post sale. You know, how often is there a gap

Sean: Yeah. Very true. Yeah.

Bob Roark: And what happens when somebody finds out at the closing table that that is that gap and not in the two to three year pre planning process time frame?

Sean: Yeah. Well, I mean, we don’t really have any research on how often there is a wealth gap, right? So I can speak anecdotally for myself, and it’s it’s really di it can be different by generation, honestly. I mean younger generations always have a wealth gap, right? Older generations they may have saved outside of the business and made good investments, but the business value really usually scales faster. if it’s going well, then outside investments that may grow really quickly, but also, you know, they’re it’s just not as big a number, right? There aren’t as many assets in terms of value there. So to go back to finding out at the closing table, honestly, I think it’s a disaster. It can be a tragedy. And it it’s exactly what a good value acceleration and planning process is designed to prevent. If if that if if we do our jobs right, Finding out in the closing table that you have a a wealth gap just shouldn’t be an issue, right? Because you’ve got the right team. So so in my experience, there there’s a wealth gap, you know, a material difference, I guess, between what the business will yield and what the owner or their family actually needs. ⁓ and ⁓ maybe 60 or 70% of the time. I mean, that’s pretty high. But we also find that not enough owners have done. complex financial planning or even basic financial planning. So we can’t really know if the wealth gap exists, right? And therefore know if there’s a value gap that we have to cover with the business. If the owner doesn’t have a financial advisor and doesn’t have an updated financial plan. It it tends to be less prevalent, as I said, in older owners who’ve saved and invested well over time. They may have a plan. Whether it’s updated, whether it’s good is another question. But at least they’ve grappled with and answered some of those questions. But without a plan, you’re absolutely guessing. And the mantra of planning should be no guessing, right? How much data you can’t argue against data. So do everything you can to get data that helps the client and helps you do a good job. Let’s talk about the math for a minute. If people aren’t familiar with it, right? So there’s some danger in this math. You’ll know this well. You’re on the financial advisory side. So let’s say that an owner sells for 20 million and we use the rule of four, a withdrawal rate on that twenty million annually, you’re gonna have eight thousand eight hundred thousand a year to work with, but capital gains taxes are gonna take a bite out of that twenty million. So maybe you’re down to sixteen, you know, depending on whatever your basis is in the business, which by the way is almost never well tracked in private businesses. So, you know, now you’re drawing down on the four percent six hundred and forty thousand. How’s that going to be taxed as it comes out of that, you know, out of that pool? Does it replace the income that you were earning from the business before you exited? Maybe it does, maybe it doesn’t. What about rising healthcare costs, right? Lifestyles that you want to live, second homes that you want to buy, so to speak. I I I was in a situation the other day, the other day, and I don’t know that it’s all that unusual. The owner needs $100,000 a month. To live like they live today. Their business throws off a lot of cash, right? Now they could sell their business for a lot of money and they could probably cover that. But if you took sixteen million at a four percent withdrawal rate and you need a hundred thousand a month, the real number that you need after tax is thirty million to cover that. Now, sixteen million to a lot of people sounds like a lot of money, and it is. It’s adult money. But in those cases it may not be near enough, and you don’t want to find out. That you’re 50% short of the number at closing. You can’t, that can’t happen. So, what’s the lesson? Get a financial plan right now, if you don’t have one, completed by a qualified professional, maybe a CFP, maybe not a CFP, but somebody knows who knows what they’re doing. Share it. Share it with your entire advisory team. Share it with your attorney. Share it with your accountant. Make sure that they have the data that they need. To really round out this holistic picture. Everybody on that team needs to understand what the number is and needs to under that ⁓ understand the stakes if it doesn’t materialize.

Bob Roark: You know, y you’re in the steep and deep in the business of preparing the owner. I mean, this is this is your world, right? And so you’ve got the owner prepared, and you’ve got the broker that markets the business and the attorney that closes the deal and the wealth manager that takes the money. And somewhere in that whole process, you’ve got the business owner that’s deer in the headlights after deal fatigue. And is you know, and he’s waking up the next day and maybe the phone’s not ringing and they’re going, I’m the former owner of whatever they fall through the cracks. Do you do you think that happens frequently?

Sean: I do. I do. I think I I I don’t know that it happens every time, but I do think it happens frequently. And I think it’s a failure of process and I think it’s a failure of the professional team to cover the full ground necessary to make this work for the owner. Okay. I think to a certain extent, it’s on us to make sure that this happens. Now the owner may be resistant to some of this stuff. I’ve had plenty of owner of owners say to me, We’ll work out the financial plan once I sell the business, right? I’ll talk about life after business and my personal plan, my personal readiness. Just get me the money and then we’ll figure that out. Absolutely terrible way to do it. And that’s why I say that the team, right, needs to be brought together early. And I think we should start with that personal planning because it should be a North Star that guides all of the other things that we’re doing. So so what’s going on? So when that when that happens, when the owner falls through the crack, the first problem really is timing. And what I mean by that is the team that’s going to help them with that needs to be assembled early, not as each of these distinct roles starts to be relevant to the process. Right. So now sometimes on the transactional side, you don’t need a broker, you don’t need an investment banker until the owner makes a decision about, hey, I think I want to run a process and sell my company to an outside buyer. But you need somebody on call who can also sort of begin to get involved in the conversation so that. They they don’t take a full just a solely transactional view of what’s happening. So it really needs to be collaborative, I think, but you know, from day one, with everyone looking through the same lens at the same owner, the same goals, and the same emotional picture that we’re dealing with. The second problem is that we’re losing the owner at the center of the process. Right. So we and we need to have a conversation with them about that. We need to be constantly asking them. And ourselves, how is the owner experiencing the process? What’s their emotional state? How do they process change? Because there’s going to be an enormous amount of it. I I honestly, I have watched owners have genuine nervous breakdowns in the middle of this process. It’s a real it’s that’s how emotional it gets. That’s how much stress there is. And we’re asking these folks to make some of the biggest d decisions of their life. Under extremely stressful compressed circumstances. And I don’t think very many people, very many people can do that. You and I had an interesting conversation about this. When I ask you, how does the military, you were in the military, how does the military train young people who have never really been in a super stressful, potentially deadly theater? How does the military make that work when these folks are 17, 18, 19 years old, right? And some of the things that you told me were we have structures, right? We have structured debriefs. We learn from one another. We have buddy systems. We have graduated exposure. We don’t just throw them out there until they’re really ready. there’s explicit emotional preparation before the hardest moments hit, right? ⁓ you said there was kind of a process to that, but we don’t have anything like that when we’re dealing in high stress business transitions. We don’t have anything like that. We send people.

Bob Roark: You

Sean: honestly into one of the most identity disrupting experiences of their lives, backed by a legal team and basically looking for a wire transfer. That’s the definition of success, if we’re not careful. So in addition to that, language matters, words matter, the way that we talk matters. So we’re technicians. Tech techno speak is Right in our wheelhouse. We’re very comfortable with that. For most owners, it’s gibberish. Right? Techno speak alienates people from one another. It doesn’t connect people and it alienates us at exactly the moment when an owner needs to feel understood the most. Right? So one of the things that we use around here is just a simple phrase connect before content. Always.

Bob Roark: Yeah, it I I think, you know, the what is it the the stats are on the ⁓ the the owner regret of sale within the first year? I think it’s seventy five, seventy six, it’s somewhere in that seventy five percent arena. And you know, you see it from your side. You know, do you really think that’s a true number? Do you think it’s about the deal? Or do you think it’s because the guys had and gals never had an idea of what was coming on the other side of the

Sean: I think the number is real. I think the I think the science behind the surveys where these numbers keep cropping up is pretty sound, honestly. And it’s been consistent across many years. It’s not just a spot check. So EPI exit planning institute’s been tracking this really pretty regularly since 2013. Pricewaterhouse Coopers does ⁓ you know, a significant survey of business owners around this issue. And that number, 70 to 75 percent, just keeps cropping up. Right. I don’t think the regret is about the deal. I don’t think it’s about the money. I don’t think it’s about the structure. Although there can be a lot of frustration on the part of the business owner, this this to a certain extent a myth that they’re just going to get a check at closing and not have to, you know, continue to work in the business for a while or maybe accept an earnout, which none of us ever recommend if we’re on the owner side of the table. that kind of risk shifting from the buyer back to the seller happens all the time. So, you know, that’s where good preparation and good education can help sort of s set realistic expectations around what it’s gonna what it’s gonna be at the end of the day. But I think it’s not the deal. It’s it’s on the other side of it, right? So it’s what happens after the transaction is complete. That that same kind of research that shows that 70 says 75% ⁓ regret also showed that about 60% of owners who reported regret had no formal personal plan for what came after. So there is definitely a link between the two. There is a correlation. You have to imagine these people spend months, maybe years, preparing the business for sale and zero time preparing themselves. Right? All of that attention has been on the business. Very little. On themselves. I would argue for a lot of entrepreneurs who are working really hard, have been head down, right, for a long time. I don’t think that’s unusual. We probably believe that we’re gonna I’m a business owner. I believe that working on my business all the time. Do I stop and say, How’s it like, am I taking care of myself? Am I really, you know, thinking about all the issues? Probably not enough, honestly. So this You’re right to point out the shift from being a business owner and usually a community leader. There’s some presence and visibility there to going to nobody calling anymore is deeply shocking. Honestly, without a plan. I mean, it can be really, you know. So so at the end of the day, I don’t know that the regret is about selling necessarily. I think it’s about, you know people can find real meaning and purpose after they exit. ⁓ those that find it quickly are usually doing a little bit better and most can find it if they’re given enough time, right, to really do it. But I you know, if if you can’t do it pretty rapidly after the transaction, if you’re not ready to sort of move into a new way of living, then we’ve we’ve seen people end up in really hard places. So divorce, substance abuse, really destructive behaviors and recovery from those things is really difficult, right? So the prep is the key. I I don’t think it’s just financial literacy. It’s really emotional literacy as well. But you need financial capacity and literacy and emotional capacity and literacy literacy. And and I think the team can help them explicitly develop these things before the wire hits. That moment when the wire hits, by the way, there’s going to be you know, another factor that hasn’t been present before and that’s a lot of money. And that changes people.

Bob Roark: Yeah. You you know, it’s there’s that old joke I would married you for better or worse, but not for lunch. Yeah you know, and you go like there’s there’s that dynamic. You know, and you know, you’ve you’ve been there after the close. You know, when the the owner, you know, the the noise settles down. I was at a conference here not long in Den not long ago in Denver and they had a panel up there of business owners that had sold. And so what was the next day like? And he said No parade?

Sean: Yeah. No bad.

Bob Roark: I went right back to work and you know, like like getting pulled through a knothole and I’m back at it. Or in you know, some of the owners, it’s just like leaning into the wind and the wind quits blowing. You know, and in your experience, you know, in and maybe a story without revealing anybody’s name, what’s like the most profound poorly executed next day that you can that you have in your memory bank is like I’ll never do it that way. Hmm. Well

Sean: All of our all of our clients have been wildly successful, so I don’t I don’t have ⁓ a negative story that I can tell. What I can say though is that and that was kind of a joke, by the way. But

Bob Roark: Well I was thinking, but I know you and I know what you guys do and there’s a reason ⁓ the discussion is had. That’s why.

Sean: Yeah. Well I think you know there there is there is an after effect, right? There’s something there’s there you you bring up a good point. Let me put it this way. So after the transaction, right, there is a lot of money in the bank account, right? Potentially. So they’re literally holding digital bags of money. possibly in amounts that they never imagined before. But ironically, their world has gotten smaller at the same time that their bank account has gotten bigger. Right. And that that ⁓ there’s a weird cognitive dissonance to that. Without preparation, I’m saying it doesn’t doesn’t happen to everybody. And that advisory team that’s been orbiting them, right, for months, maybe even years, that they’ve been working with It it they just kind of go silent overnight. I mean, every once in a while you may get a phone call from somebody that says, Hey, I just want to check in and see how you’re doing. But for the most part, their team is done. And there’s no real protocol for that kind of transition, right? There’s no offboarding, there’s no check-in at 90 days. It’s done. The support system of a sort just disappears. And I think The owner actually can have advisor withdrawal syndrome, right? It’s kinda like, ⁓ these ⁓ these people really helped me out and they become my friend and now they’re gone. And I think family and friends can step in where they can, but as you said earlier, I don’t think anyone really understands ⁓ the weight of what just happened for the business owner. It it’s quite lonely. in a way and and it’s hard to explain to somebody who hasn’t been there. And and that that can lead to a kind of isolation that can lead to a bad story. ⁓ and I I I did I I ⁓ have a colleague who went through something, they were it was a farm family, it was an agricultural family where there were I think three siblings, maybe four. And one of them had worked, it was his son, ⁓ middle son, I think, and he had worked on the farm his entire life. So, but the other three had gone off to other careers and they didn’t live they didn’t live on the farm or anything. So dad dies, and he’s really been the scion, right, of the farm, and the other three kids show up and they decide that the best way for them to get something out of the farm is to sell it. So here you have and he’s outvoted, right? It’s like three to one, and they’re gonna sell the land and sand sell the farming operation, and you know, everybody’s gonna walk off with some cash and fairly substantial amount, including that middle son who’s worked there his entire life. But he didn’t have anything beyond that, right? So he’s lost the relationship with his father who we worked with daily. He’s lost his sense of purpose because the job’s gone, right? He ended up moving to another city, he ended up divorcing, cutting ties with the family, and he became an alcoholic.

Bob Roark: Yeah.

Sean: Right. So so it can happen. That might be extreme, but I don’t I I I think it’s a risk that it could happen in a lot of cases, but it doesn’t have to happen. This is entirely preventable. Entirely with good planning.

Bob Roark: You know, it you mentioned the three legs of the stool earlier, you know, the readiness, which you’re steeped and deep in, you know, the personal readiness, which you address and talk to talk to folks, the financial readiness, you know, where you recommend and there’s a percentage that do and there’s a percentage that doesn’t. You know, we kinda have an idea who which one gets skipped in that crowd. You know, if you would you know, if if you could talk to the founder that’s listening right now and who thinks they’re ready because they cleaned up their Ibata and hired an attorney. What are they missing? What’s the chief thing that they think they’ve got handled but they don’t?

Sean: Well, you’re right. I mean, we’ve been signaling it throughout the conversation that the leg of the stool that gets missed is that personal leg, which is why I’m advocating for starting with it to make sure that it doesn’t get shoved over to the side. And we we’ve been harp I I can’t tell I’ve been harping on this for a decade. And I don’t I can’t tell if it’s improving, and I probably, you know, I wouldn’t be talking about it if it was. I do think there is some evidence that it’s getting better. You know, for a in in terms of readiness, business business readiness is concrete, right? You can you can put it on a spreadsheet in a sense. You can see it. It’s it’s tangible. Financial readiness, once you have a plan, it’s at least measurable. Right? So we have data points, but personal readiness asks the owner to sit with a level of uncertainty about who they are without the business in their life. And that’s a pretty uncomfortable conversation, and most advisors don’t. are trained for it so it gets avoided. Right. I mean, living in living in that sort of inside the mind, so to speak, is not it’s that’s that’s complex. And and what a founder is missing in those cases is the planning complexity that comes with a tro truly holistic process. And it and I know that doesn’t sound very appealing to embrace complexity in that way. But when you lean into that complexity, it’s actually an opportunity to shape what your life looks like on the other side in meaningful ways, right? So if you don’t lean into the complexity, you never really get to the point where you can address these profoundly important issues that allow you to pursue a trajectory that makes sense for you and your family and allows you to live out a purposeful, meaningful life. Instead of going around the complexity, you actually have to go. You just they’re the only way is through. Right. So it you have to get a complete team, first of all, that can cover this. It’s ⁓ you gotta make sure that they understand all three legs, that they could work together. I personally believe that a CEPA credentialed team is gonna be really helpful if you can get it, because they’re people who have been trained in the three legs of the still, they understand holistic planning, they can look at the whole picture and collaborate, not just on their on their piece of it.

Bob Roark: You know, we we’re talking about, you know, the the interaction with the transaction folks, you know, and and I have this image of was it ⁓ one of the Charlie Brown characters that had all the stuff swirling around him all the time. ⁓ yeah. Yeah. A lot of things going on. And so they finally check the box and the advisors move on. You know, in your mind there’s probably a business owner event when it clicked and they went, ⁓

Sean: Yeah yeah. Pig tin.

Bob Roark: I get all the pieces now, right? I understand. Walk me through what you think that looks like or what you saw when that owner got there. Well

Sean: What I think what you see is something ⁓ you see them transformed, honestly. And I think a good planning process ought to be transformational. You know, not not many people really love change, and as I mentioned, there’s a lot of change in this process, right? And the in general, genuine transformation, I think requires the conversation to get really personal, deeply personal, right? So what I see When it works, is a kind of gratitude. And it’s not necessarily for the advice. That’s not it exactly. It’s because the owner appreciates being seen, honestly, in this whole process for having someone ask the questions that don’t appear on the checklist. Right. And and transactional conversations are easily forgotten. Transformational conversations stay with people. There’s behavioral science behind it, right? People remember. How something made them feel far longer than they remember what was actually said. That’s the difference between a transactional checklist conversation and a transformational process. One, the first transactional, is completely forgettable, and the other one changes life’s trajectory in some really interesting ways. So, you know, I I’ll bet you if you talk to a business owner who had sold their business, for instance, gone through a transaction process of any kind. 10 years later, how how did that work? Like what were the mechanics of it? They probably couldn’t tell you anything about it. They will have forgotten it entirely. And the transactional advisors, honestly, they probably couldn’t even come up with their name. But the one the where the transformational things were happening, they’re gonna remember that forever. And I think those conversations are gonna be the ones where the owner will say to another owner. You’re gonna have to go through this. I was lucky enough to have a good team and do the planning. So let me tell you what that felt like. It wasn’t all pluses, but there were not as many minuses. And it actually turned out to be ⁓ life-changing for me. Which is what it’s gonna be, one way or another. It’s gonna be life-changing.

Bob Roark: Yeah, yeah, I’d say. You know, we we we we’ve talked about you know, all of the kind of the the challenges and indoor problems, you know, and there are success stories out out there where the owner did the work, you know, and they’re past it and you know ⁓ and they’re they’re thriving. What comes to your mind when you think about one of those individual owners that really executed well and are thriving? What would you say comes to mind?

Sean: Well, I’ll I’ll kind of take you through what I think is ⁓ a consistent formula for this, the things that show up often when you see that thriving ⁓ afterwards, and I’ll tell you a story. So I think the formula ⁓ it’s pretty consistent in and when it works, right? So there’s a good advisory team, there are there’s a good leadership team in the business that they can lean on. They’ve done their holes holistic planning across all three legs, they started early. They didn’t try to rush it in at the very end. And they prepared explicitly for that emotional reality of a of that life transformation that’s gonna happen. And they had a personal support system in place before the transaction closes. Right. So I don’t I don’t think everyone really skips every piece of that. I think there are always things that are are fine. But skipping some of those seems to be kind of the norm, right? You get a every case you look at, you’re like, well, it wasn’t perfect, but it was pretty good, or it was a disaster, and it’s because all this stuff was missing. So I think the owners who genuinely thrive after exit are probably the most personally ready. And they know they’re personally ready. So it’s not that just they are personally ready, they know it. They have confidence in it, right? And it’s that confidence not in the not in the deal, but in themselves, is what carries them through that period. So we had a client, longtime client, ⁓ probably worked with him for 10 years. He had a lot of businesses, so we were we worked with him for a long time because it was pretty complex situations and structurally and otherwise. So, you know, he was very intentional about reducing the dependency of the businesses on him. He recruited and empowered A great leadership team. He gave him room to run. He trusted him, right? He he still remained involved. He wanted to help guide them. He was a unlike a lot of owners who struggle in the area of managing a leadership team, he was a phenomenal communicator. And he was able to strike that balance of, yes, I’m the owner. And so some things I’m the final decision maker. But he was always able to not come down hard on the leadership team and allow them to develop and take ownership. for what they were doing. And he really challenged them to change the direct trajectory of the company. Right. And rewarded them for doing so. He was kind of late with his financial planning. I bugged him for years to get started on it and to find a good team. He finally, as he got closer to the time that it became clear that these two businesses, he he exited them simultaneously, literally like back to back closings. he finally realized he was going to have to get on it. Right. And we were able to get him a good complex planning team, bring him in ⁓ on short notice and really get him started on this. So they because it was short notice, unfortunately they weren’t able to do everything that they normally would have done, but they they’ve been able to do a lot. So his personal planning has gone from incomplete to to good and he has a multi generational perspective. So this the conversation started really around how do I get this wealth from my generation, owner generation to the next generation. So he has four kids and he was really working on that. And of course he’s married. So he’s working on what the how to manage the risk for he and his wife. So but it shifted as he went through planning to a multi-generational perspective that was rooted in their family values, very strong family values. ⁓ and they wanted money to be treated as a family advantage but also charitable, you know They didn’t want any of the kids or grandkids or even beyond that. I mean, he’s playing four generations out. So he didn’t want anybody to be ruined by wealth. And ⁓ but you know, this is not giant, but it’s two hundred million dollars. So that’s you know, that’s real money for sure. And it’s gonna grow across generations if it goes well. So he’s able he’s been able to kind of see three legs of the stool in action. Wasn’t perfect because quite frankly, there were things that he resisted. Personal financial planning being one of them, he was pretty good on imagining that life after he exited the business and he started to get a sense of hey, I’ve been working, you know, 80 hours a week for 25 years, what’s gonna happen to me? But he did a good job as he moved through the process of sort of letting himself warm up to that, not just making quick decisions. Very thoughtful guy. ⁓ and the process probably saved him, by the way, 25 million in taxes. I don’t know what he’s invested in, you know, estate planning and tax planning, but it wasn’t 25 million, so he’s gotten a decent return on that. But it’s taken two years. But here’s the at here’s the aspect I think of someone who’s thriving on the other side is that that not only have they had a plan, but when they look back on all of that stuff that’s happened, they’re 100% at peace with how it went.

Bob Roark: Back.

Sean: And where they’ve ended up. They knew there were a lot of paths that they could walk here, right? They had a lot of choices. There are a lot of ways that they could go. But wherever they ended up, when they look back on it, they think everybody’s going to be okay. I’m going to be okay. The business is going to be okay. The people who still work in the business are going to be okay. In fact, they may be better off than I ever could have gotten it to for them because now they’re with a bigger company or whatever it may be. But they know that they did the work. And they’re at peace with it. And that’s what we want to see on the back end of this book.

Bob Roark: You know, that that segues nicely into this question and this is your playground. If you could grab a a founder a couple of years, two, three years before they exit it, you know, not to necessarily improve the deal, which is truly where you excel and focus, but to prepare them for life after. What’s the one thing you would tell ⁓ to start doing now?

Sean: I’d I’d start with a framing question, what we call a framing question, which always starts with what would it look like if that’s the way that a framing question starts. And I and I’d a I’d ask and I’d I’d ask them to kind of sit with it, not to answer right away, right? But so the question that I I would ask them two or three years in advance is what would it look like if you felt a profound sense of self worth and meaning completely apart from the business? Take the business out of the picture. What would that look like for you? And I think that question honestly tends to lead one of two places: either to clarity about what that future needs to look like, or reveals a vacuum of some sort, right? And both are actually useful. If if there’s clarity, the clarity gives you a destination, right? I it may not have every piece, every step. right along the way, but at least gives you a flag in the ground. That’s r pretty well defined. If there’s a vacuum, it’s a f it’s an early warning system, right? Gives you fair warning that there’s still work to do before the wire is going to hit your bank account. So how many do you think

Bob Roark: Clear. How many do you think are clear versus not?

Sean: Yeah. It takes a lot of Well, that’s why I want ⁓ to sit with it, honestly, because I think a lot of people when you ask a question that way, they’re kinda like, Okay, well, I don’t really know the answer to that. And the point is not to know the answer, but to grapple with the core question, which is we take the business away, what gives purpose and meaning? Right? Is that profound sense of self worth and meaning?

Bob Roark: What

Sean: We often talk about purpose and meaning, right? But I think that self-worth is a really important part of the conversation because a lot of owners find worth, self-worth, in their position as a business owner, in earning a lot of money potentially, in being but proud of what they’ve created. All good. I agree. But if it’s all tied up in the business, if that whole self worth is tied up in the business, that doesn’t transfer, by the way. It’s not like, ⁓ I’ll just pick it up and move it somewhere else. When I walk out the door, my self worth May or may not walk with me. When it walks with you, it’s because you have a plan. When it leaves behind and you’re floating around out there trying to find, trying to anchor your self worth to something, it’s because you didn’t.

Bob Roark: You know, for if you were to craft, you know, the the perfect relationship and this is, you know, not the deal team, you know, and so on, but if you had a human support team, you know, and what would that look like and do you think that exists t today in any great measure?

Sean: So the perfect advisory team, in addition to all the p the technical people that we’ve been talking about who are absolutely necessary, would include what I call a counselor with genuine expertise working with the business owner facing a major life transition like this, facing this level of change. I don’t think they’re a therapist necessarily in the traditional sense of the word. I think they’re someone who understands the specific identity and purpose disruption that comes with exiting a business you’ve built over potentially decades. So I see their role as kind of a an emotional co-pilot, if you will, for the owner throughout the entire process, not a referral. When things have ended, like the transaction is done, and then you know, things ⁓ thing things are already hard, so to speak. And then you go talk to this person. I think they’re on the team from day one, really setting the owner up for for emotional success. It’s it’s really someone whose only job. is to help the owner navigate the human side of what’s happening in real time. Right. So you to your question, that role does not formally exist today. I know some people who are working on that side of the mall and trying to create some systems around it. And they come from various backgrounds. There’s no credential for it. There’s no established referral pathway. There’s no standard place in the deal structure for it. It’s a genuine market gap. And I think, you know, it may be the most important work. Honestly, that still needs to happen in the field.

Bob Roark: You know, there there’s, you know, some of the financial advisors, attorneys and CPAs and brokers that are listening to this episode. And you teach a lot of those folks. Do what one thing they need to change about how they work with a founder approaching exit. If you didn’t have to sugarcoat it, what would you tell ⁓

Sean: ⁓ boy. Well, this is gonna be a hard thing for transactional folks to hear, but jettison transactional thinking. Get rid of it. Embrace transformation. Right? So, and get really good at embracing it, by the way. Don’t just do it kind of like, ⁓ I guess I have to embrace transa transformation today. No, get really good. Understand it. So the demand for transformational processes is already there. Right. Owners know they need more than transactional ⁓ results from this process. Research shows that 81% of business owners who recently sold wish they had spent more time preparing for the sale. That comes right from UBS, by the way, UBS Investor Watch in 2023. That’s a market signal for all of us right there. There’s 81% of the folks out there who wanted to do, who wish they’d done more planning. So they’re telling us what they want, and they’re also telling us. what they’re not getting as they go through it. So I think the advisors who build the capacity to meet owners at a human level, where they are as a human, not just a technical one. We can all do that pretty well. Will be the ones, those folks who who can meet the owners at that human level, they’re gonna be the ones who define what this profession looks like in the next decade. My I will have already laid down my sword by them right. So I genuinely hope it will happen because it’s it’s absolutely necessary.

Bob Roark: You know, for you know, looking out over the next ten years or so, you know, with the boomer exits are gonna come one way or another, you know, do you think that the current generation of advisors, whether the CEPAs or others, are prepared? Do you think they’re gonna be caught flat footed?

Sean: Well, I certainly think we’re more ready than we were ten years ago. Had it happened, say in two thousand eight through two thousand thirteen, like folks thought it was gonna happen originally, I don’t think we would have been able to handle it at all. But I I think when you’re talking about baby boomers or just generally ownership transition, no matter who what generation is doing it, it’s pretty difficult in the United States to fully understand the scale of that. Right. So baby boomers right now, rough they used to own maybe seventy or seventy five percent. Of the operating concerns in this co in this country in the USA. Now only about 41%. They’ve been supplanted, their majority has been supplanted by the combination of Gen X, mostly Gen X, and then millennials. But the baby boomers still own 12 million businesses in this country and they employ 25 million people. Right? Because their businesses have been around longer, they’re generally weighted more heavily in the total value that’s changing hands, which is in the trillions of dollars. I would say. Just in baby boomers alone, we’re probably in the ten trillion dollar neighborhood, maybe higher. So so there’s a lot at stake. what’s interesting to me, I don’t think it’s just about b boomers transitioning out of their businesses. Because Gen X and millennials are ⁓ a big part of the mix now, it’s the entire ownership ecosystem in the United States that’s being reshaped at the same time. So when when this many businesses, twelve million businesses, are staring some type of transition in the face over the next five years, say that’s what owners report they want to do and they’re surveyed. You can imagine the restructuring of the economy that’s going to take place as a result of that. So a lot is going to be in motion. Now, I’m not sure that the challenge is entirely just the volume. Of transactions that may take place or or equity transitions. I think it’s it’s compression to a certain extent, time compression, right? So as I mentioned, we’ve been talking about this wave for years, and now all of a sudden it’s got to go. Right. There’s just it can’t stay there, there can’t be so much pent up in the pipeline anymore. It’s got to go through. Time, you know, father time always wins. It’s gonna go. So so I don’t think the industry is there. I don’t think our capacity is there to scale thoughtfully around that to a certain extent. I think we just I don’t have enough people or our systems are not scalable enough to handle such a large volume, which means a lot of people are gonna be left behind, by the way. I mean there is gonna be some carnage, no question. So that that thoughtful scaling in a compressed time is really the test. Right, of whether this is going to go well. Now, I will say this. AI is going to change the conversation significantly, already is. I’m I’m seeing it reshape how advisors do research, assess readiness, and scale capacity. I’m an optimist when it comes to AI. I believe it’s absolutely going to lead to some great places, but I also understand talk about change management. I also understand that it’s going to completely rewrite. like the hard drive of how we are used to doing business and will do business in the future. But as an advisor, it makes my work far more scalable than it was even a year ago. And and I think that’s gonna matter.

Bob Roark: You know, you you and I have been I don’t even know how long ago I met you, but you know, you you’ve been doing this for three da decades plus, you know, and you help folks get ready for what’s ready for next. Where did it come from? Came from there. You know, and you and I’ve talked about, you know, there’s more to do than you have. You there’s not enough of you to go around. How hard is it for you to step away from serving everybody else? And serving yourself. You know, like you know, like the proverbial thing about the cobblers’ kids running around with holes in their shoes. How hard is it for you to step back and work on your needs and your exit?

Sean: Well, I don’t have any kids, but that’s definitely the case that the cobbler is making his own shoes and sometimes walking around with holes in him. No question. If I’m the cobbler, I do go barefoot, hopefully on the beach sometimes. But serio seriously, the work this work is constant on my side, right? So I’m fifty-nine. I’ve set a goal to retire at no older than 70. I would like it to be earlier. my personal financial ⁓ planning is in good shape. I have a real plan, what I consider to be a real plan for my, you know, for what comes after I exit my businesses. that, you know, there are some assumptions. My health holds up, family caregiving goes as planned. I you know, there are so many factors. You’d you’d like to believe that you just get that kind of clean break and now you’re gonna do what it was that you planned. But there are so many different versions of it and you need scenarios in order to manage this, right? So I think about it a I think about it a lot. The hardest part, because of the business that we’re in, the hardest part for me that I’m still really working on is figuring out a way to scale this business effectively to the point where it’s completely independent of me. Right. And that that’s a tough one. Owner dependency is in fact the thing that we help our clients solve for, right? That’s at the core of our business, is helping our clients be Have a business that’s less dependent on the owner, the founder, or key people, right? And manage that knowledge that I was talking about, that knowledge transfer. But it’s also the thing that I really have to solve for myself at the end of the day. And we’re we’re starting to do that. It’s a work in process, but you know, I’m honest about it. I know I know what we’re up against.

Bob Roark: You know, it’s it’s it’s a funny thing, you know we we have our favorite breakfast place up in Castle Rock, you know. Yeah, yeah. Yeah, y you know, and I think about today’s conversation and so much of this conversation we’ve had one way or another many different times in the past. You know, and you know, you have owner dependency issues, I have owner dependency issues, you know, you’re a former business owner, I am too. You know, and you and you look at the challenges of trying to serve the folks that you need and trying to serve your family at the same time. You know, and and yeah, there’s answers, you know, but you don’t get there by hoping to get there. You know, system discipline process to execute to get there is certainly one of the things. But, you know, I I really appreciate you taking the time for us to take in and actually get this on the record, you know, and so I I hope, you know, that it It helps others that are listening to to take in and take steps and you know get organized and get busy. So, you know, with that being said, Sean, thanks again for your time. This is the Exit Series. I’m Bob Rourke. And if you know of a founder who’s sold a broker who’s seen it, or an attorney who’s been across that table, send them this episode. Subscribe wherever you listen and see you next time. Sean, thanks again.

Sean: You brick. Take care.