Ep. 11 Handing Them The Keys Featuring: David Whipple

Bob Roark: This is the Exit series. I’m Bob Rourke. This is for the founders, brokers, and attorneys. The people who are in the room on the deal close are before talking about what happens next. This is the conversation that fewer having. On this episode, we have David Whipple. He is a business value strategist, mentor, author of the 14 Immutable Laws of Business Value.

David: This is the Exit series. I’m Rob Rourke. This is for the founders, brokers, and attorneys. People who are in the room with the deal closed talking about what happens next. This is the conversation that fewer having. On this episode, we have David Whipple. He is a business value strategist, mentor, author of the 14 Immutable Laws of Business Value, Facilitator and Entrepreneur.

Bob Roark: Facilitator and entrepreneur. David, welcome.

David: David, welcome. Hello.

Bob Roark: Good morning. You bet. Well, David, walk me through how you got into business value strategy. Your background includes time at Idaho College Law. Does the legal training change what you see in closing that other brokers miss?

David: Thank you. You bet. Well, David, walk me through how you got into business value strategy. Your background includes time at Idaho College Law. Does the legal training change what you see in closing that other brokers miss? Well, before I went to law

Bob Roark: Yeah.

David: school, I was out selling businesses. Right after I graduated from the University of Utah, I went out selling businesses. And I was asked many times before law school, how do we increase the value of our business? So I knew what Business owners wanted before law school. Well, I still remember the first business I brought to my broker or the manager Ralph, and I showed him a business and he looked at it and he kind of laughed

Bob Roark: Yeah.

David: at it. And I go, hey, this is a great business, Ralph. This it’s profitable, it has great sales. You know, it’s really good. And he’s just laughing and he says, No, it’s not valuable, though. And I was just going, but it’s profitable. And he’s going, No, it’s not valuable. And I started taking notes from Ralph and learning about business value and how it really works with a business. This is way before law school. And eventually I was voted on the presidential committee for the most transactions, most quality transactions. And I sold more in the best quality transactions of all the agents. There were over thirty-six agents at that time. But I remember You know, going you know, going back and looking back. That when I actually went to law school, and what I learned in law school was really different than what it was kind of off the mark from what I needed in maximizing a company’s value. And after 20 years, I wrote the book 14 Immutable Laws of Business Value. Based on communication theory that I had learned at the University of Utah. And of course, it had a legal style on it. I didn’t forget everything I learned in law school, but it was based on communication. And I did learn one thing in law school that you don’t argue with lawyers. Okay. And with the principles and laws of business value we found in the book, and that I wrote in the book, and a machine learning tool, we go into a business and we identify the intangible value pillars and drivers that really create the value of a business. That’s what really makes us different. We’re working with businesses valued at five million and under. A lot of them are mom and pops, and we’re helping them with documenting and realizing the value, this intangible value that they have. There you go. There you go. Well, when you take on a new client, you know, what’s the first thing you evaluate in the owner? Not necessarily in the business, but the owner across the table.

Bob Roark: There you go. Well, when you take on a new client, you know, what’s the first thing you evaluate in the owner? Not necessarily in the business, but the owner across the table. No.

David: Well, we’re looking for honesty and integrity throughout the whole process. That’s what any business transactions are based on. You can have the best contract in the world, and it just won’t work if the right people aren’t in in there with honesty. you know, that want to make things work for their company and that have a good vision of what they’re doing or somewhat of a vision and we help them bring that out, of course, but that’s what we’re looking for in the owner. before we actually look

Bob Roark: Okay.

David: at the business. And that comes out. It

Bob Roark: You know, you work with a luna.

David: comes out. You don’t really know if someone’s honest or has integrity right at first, but we’re watching the signs. We’re looking at the signs.

Bob Roark: You work with a lot of manufacturing operators, deli bakeries, and people who’ve built something physical. Those are the you know, the owners that built it with their hands and product. What’s different about working with someone like that versus a software?

David: You work with a lot of manufacturing operators, selling bakeries, and people who built some people. What’s different about working with someone like that versus the software found? Okay. Now with this question, when you get to the real core of software development, you’re putting pieces together, you’re putting code together. I’ve developed a lot of software and it is a manufacturing business, okay? But the equipment’s different and every every business owner knows their business, okay? But we understand

Bob Roark: Mm-hmm.

David: business models, the intangibles that create the value,

Bob Roark: Mm-hmm.

David: the organization. That’s what we’re looking at. And it’s like accounting. You know, the every business uses accounting principles and laws, but it’s the same thing with value. Every business uses value principles and laws too, but they’re just not looking at them. They’re underneath what’s really going on in the business. And that’s where we’re the experts. That’s why we can help a business. Walk me through the day before closing. What are you doing and what are you watching for in that selling system?

Bob Roark: Walk me through the day before closing. What are you doing and what are you watching for in that selling business?

David: I’m trying to keep my mind off the deal since the stewardship manual is already in place. Okay, that’s in place for the new owner and for the seller. Now, earlier we’ve surveyed both the buyer. And the seller to see their differences and have been working on that to close that

Bob Roark: Yeah.

David: gap and providing the guidance guidance, but the broker is the one that does the deal and the lawyer. Okay. What we’re looking at are the operations. Okay. So at the handoff, at the closing, we’re really We’ve really already done our work. But afterwards our work begins with the new owner again with the stewardship manual. You know, at the closing itself, the wire confirm lands, what do you typically see in the stellar space at that moment?

Bob Roark: You know, at the closing itself, the wire confirm lands, what do you typically see in the seller’s face in that moment?

David: Well, early on when I was selling and buying businesses, they’re really apprehensive. Now, this was many years ago, okay. they were really apprehensive because they didn’t know the buyer. They didn’t understand really what was going on. And so it was the brokers or my job to kind of explain that of here’s what’s going on in this transaction. That’s what we do now in the stewardship manual. We prepare them for the closing so they’re not so you know uptight or apprehensive about really what’s going on because they’re handing over their baby, what they’ve been working on for 20 years to this person, this other buyer that sometimes they’ve never met. And you know, or just once or twice. And so that’s what we’re trying to do is close that gap

Bob Roark: Yeah.

David: between the buyer and seller as early as we can so that apprehension’s not there. You you know, you’ve got the law agreement that we talked about, huh? And you’ve structured deals. What moment in the closing surprises? Even the ones who thought they were prepared.

Bob Roark: You you know, you’ve got the laundry that we talked about and you’ve structured deals. What moment in a closing surprises the most? Even the ones who thought they were prepared.

David: Now I have to clarify that I went to one year of law school and found that law was not getting to what I needed to help a real small business. Okay. They

Bob Roark: Okay.

David: they don’t they need more. than what a law degree offers. And since I’d already been out in the real world and asked been asked many times, how do we increase the value of our business, David, I knew what they wanted. So what what I was looking at is to mitigate, to to slow down or to soften. The closing, and we all know that 65 to 85 percent of the businesses fail after the closing. Okay, so what they’re doing right now

Bob Roark: Mm-hmm.

David: isn’t working. What they’re doing right now isn’t working, and so I started looking in deeper what do businesses really need, you know, during this time. And that’s where the stewardship manual started evolving and coming up and and bringing that forth to help business owners understand you know what their stewardship is, what they want to hand off to the new buyer, and also the new owner, what their job would be and what their vision. So what what surprises Are at the close? Not

Bob Roark: Mm-hmm.

David: much. When when I worked with right with the seller with the closing, not there were not too many surprises. One time the buyer said, Hey, we’re bankrupt right on the closing table. And that shocked him a little bit. So the business broker. integrated that question into their questions. See what business brokers do is a template

Bob Roark: Yeah.

David: or a boilerplate of what lawyers do. And now business sellers can go out on the internet and get the buy-sell agreement and put their own you know own deal together with the boilerplate templates right now. And I would suggest every one of you do that. You’re going to save 12%. Okay. Now, business brokers do come in handy

Bob Roark: Mm-hmm.

David: in a larger transaction when you start getting a million, two million, three million. I would suggest getting a third party in there. Okay. But on the smaller transactions, You know, the asset sales, it’s pretty boilerplate. And someone can handle that pretty good. But do that along with the do

Bob Roark: Yeah.

David: that along with a stewardship manual and a transaction transition equilibrium point, which shows the difference between the seller and the buyer so they can work on it with a third party and br come closer together so after the close the business succeeds. You know, David, when you take in engaged with a new client and you first have a discussion with them about your process, do you think the process that you offer to them is different than what they might have anticipated?

Bob Roark: You know, David, when you take in engage with a new client and you first have a discussion with them about your process, do you think the process that you offer to them is different than what they might have been anticipating?

David: Yes. Yes. There’s a typical way that they do now which She’s boilerplate, you know. But they put together the buy-sell agreement. They’re just worried about the closing. Okay. They’re not really thinking about their stewardship and the operations and how to hand that off to the new owner and how the new owner’s going to run. I’ve seen hundreds of times where new owners get that baby, get that new business. And just run it into the ground. And that’s the

Bob Roark: Mm-hmm.

David: problem. That is, and it happens time after time after time. And that’s the way of the thinking now is just get the buy sell agreement and sell it. But if

Bob Roark: Mm-hmm.

David: they finance any of it, they’re going to have it back in their lap in, you know, six months. and going to a lawyer for 400 bucks an hour to try and get anything back that they can. You know, you call it transactional transition. Walk me through what that actually means for you and for the client. And what that looked like in the first 30 to 90 days after the wire clear.

Bob Roark: You know, you you call it transactional transition assistance. Walk me through what that actually means for you and for the client. And what does that look like in the first thirty to ninety days after the wire clear?

David: Now this starts way before the close. We’re doing a equilibrium point. And understand the difference between the buyer and seller. But before that, we’re doing the stewardship manual where the owner has been working with us already, doing a business value plan and planning for this time. And then we’re creating this stewardship manual where more of the operations are involved. More of the how to is involved. At first, it’s more the why and where they’re going, but then we get into the how-to. How are they

Bob Roark: Well.

David: doing this? What are they doing actually? And that’s what’s critical when the buyer picks it up, you know, after the close. They want to know the how-to. They don’t want to know really the why of things. They want to know. you know, how do we do this? They want to be introduced to the vendors, they want to be know how to sell. They want to know how the equipment runs. Those kind of things. So I go ahead. I’m sorry, go ahead. Yeah, ideally, how far ahead of exit do you like to engage with your

Bob Roark: Yeah, idea I’m sorry, go ahead. Yeah, ideally, how far ahead of exit do you like to engage with your

David: run that buy again? Said ideally, how far ahead of exit do you like to engage with that client?

Bob Roark: Said ideally, how far ahead of exit do you like to engage with that client to get already?

David: To work with them after the exit? Both before and after.

Bob Roark: Both before and after.

David: a year. A year before and a year after. Now that’s just You know, it can change a little bit. Okay, but a year is you know what we need really. What somebody needs to prepare to sell their business and then afterwards to get it really running how they want it to run. It doesn’t happen in the first thirty days. We suggest in the first, you know, three months they learn and listen. They’re learning from their team, you know, their new team and listening what to do and documenting that and seeing how it coincides with what they’re doing and wanna do. And do entrim go ahead. When you first started selling, you know, early on, did you engage with the selling owner much after the exit?

Bob Roark: When you first started selling businesses, you know, early on, did you engage with the selling owner much after the exit?

David: No. See, that’s the problem. You know, the current brokers right now, they just hand them the keys. You know, the seller. They just hear the keys, go ahead and do it. Now I got a few callbacks from sellers and they were positive. And that’s how I won because of the quality of transactions that I did and I built word of mouth. Okay, but I was focused on that. Where other brokers are not, they just want to sell the business. They’re like a real estate agent. See, that’s the difference between Somebody that really cares about the transaction and somebody that just wants to sell and give them the keys and and take off. That’s different. It could be from the transaction to pre-imposed stewardship with your clients. Was there one particular instance that really

Bob Roark: Y you know, d there was I I suspect either an accumulation or pivotal point that took you from the transaction to preimpose stewardship with your clients. Was there one particular instance that really started to get you pointed that way?

David: Yeah, two point. Well, think of it. You know, I’m being asked by these sellers, hey, how do I increase the value? How do I take care of my business? I really love my employees, you know,

Bob Roark: Right.

David: and then I come to a close where, you know, they’ve never really met the buyer, but maybe one time in a tour. Okay. And I’m looking at the buyer, checking out the buyer, going, well, I wouldn’t want to sell my business to that guy, you know, or a woman. You know, I wonder what they’re really like. And I think a lot of sellers are like that. Here they are, you know, they haven’t met the buyer, and they’re wondering about their stewardship. And after many closings, after seeing many sellers caring about their business, I started wondering, you know, what about this system? Is it really, you know, for the seller? And so that’s when I began contemplating what I can do for that. handoff or that transition period there and afterwards to to make the business survive. When I saw those numbers, you know, 60 to 85% of businesses fail after the sale, you know, within two years. When I saw those numbers, I

Bob Roark: Mm-hmm.

David: just I couldn’t believe it. But it’s true. That’s it’s scary. And I had to do something, you know. I I thought I had to do something for these sellers because you know, they’re financing these people. And yeah. You know, I I’m thinking of the the the different nature of the call to the broker that does transaction and what you’re doing in the both sides of the transaction. What’s the typical question you get after the close?

Bob Roark: You know, I I’m thinking of the the the different nature of the call to the broker that does transaction work and what you’re doing in the both sides of the transaction. What’s the typical question you get after the close

David: From your business owner that just

Bob Roark: from your business owner that just

David: Well From the buyer, you mean? From from the new owner? No, from the seller. From the seller after the close and they’ll call you afterwards. What do they typically call you?

Bob Roark: No, from the seller. From the seller after the close and they’ll call you afterwards. What do they typically call you?

David: They’re if ninety percent of the calls are because the business failed and they haven’t got their payment. Okay. Now I would get good calls. I got calls I remember from a seller that Everything was going smooth and he wanted to thank me. But I heard the other calls. I knew what the other calls were coming in from either a lawyer or they were wondering, what who’s this buyer? You know, who’s this buyer? He hasn’t paid me. What do I do to get the business back? You know, those kind of questions. Those are most of the kind of questions that a seller will call back to a broker.

Bob Roark: You know, if y your process is clearly different. And if you were to look, you know, the stats are whatever the failure rate is of the buyer in in your market, what do you think the stats are if both the seller and buyer embrace your process as far as the mitigation of that that failure number?

David: You know, y your process is clearly different. And if you were to look, you know, the stats are whatever the failure rate is of the buyer in in your market. What do you think the stats are if both the seller and buyer embraced your process as far as the mitigation of that that failure? Hey, this isn’t a perfect system, but you know, it’s going to be more around twenty, you know, thirty percent instead of sixty or eighty percent of failure. You know, I

Bob Roark: Mm-hmm.

David: I can tell you that much. And we hold their hand. We hold the new buyer’s hand so that you know things work and It’s we I focus on the seller side, right? And what’s the reaction of the buyer side when they embrace

Bob Roark: You know, we we I focus on on the seller side, right? And what’s the reaction of the buyer side when they embrace your process?

David: Well, they love it. They’re going, what what have I done without this? You know what I mean? I don’t I don’t know a broker that does this. You know, they put a paragraph

Bob Roark: Yeah.

David: or two about the business and sell it, you know, and I know the asset list they put together. Here are the assets that you’re getting. And They hand him the keys and say go ahead. But there’s so much to a business.

Bob Roark: Yeah.

David: There there’s so much that’s underlying in a business that’s missed during this time. And that’s what came to my mind, you know, after doing it time after time after time, I’m just going, something’s wrong with this. You know, so something’s missing. You know. Because it was like closed doors to the seller. The the broker would not l let the buyer go into the business and learn about the business. They would tour it. You know what I mean? One tour and that’s it. It was all sold on emotion. That’s it. You know, for you many examples, what about that seller whose post closed year really went well they have in place in their student execution that made the difference?

Bob Roark: You know, for you many examples. What about that seller whose post closed year really went well they have in place and their attitude and execution that made the difference?

David: On some of the deals that I did, that what really made the difference? It’s the business.

Bob Roark: Mm-hmm.

David: It’s a simple business. Complex businesses don’t make it. Okay? So it’s the complexity of the business more and the underlying business model than. The actual what’s handed off, you know. And some people say, well, you know, what’s a complex business? Well, look at some of the internet sites now, the e-commerce sites. And also look at some of the things that they’re doing with CRMs, data collection, those kind of things that you know, with sales and marketing nowadays, those aren’t easily. Hand it off. And so it’s the complexity of the business. That’s what’s going to make or break the business.

Bob Roark: You know, you know, looking at the other side of all these equations without naming anybody in particular, whose post year went sideways and what were the early signs that you noticed saying, this is not going right?

David: You know, you know, looking at the other side of all these equations without naming anybody in particular, whose first year went highway and what were the early signs that you notice saying, that’s not going right. Okay, now repeat that question again. So you you’ve got a cellar and it’s closed and you’ve got fire in place, but looking at things going sideways. The first indication.

Bob Roark: So y you’ve got a cellar and their closed and you’ve got the fire in place, but you start looking at everything’s going sideways. What were the first few indications that

David: I wasn’t properly.

Bob Roark: it wasn’t working properly?

David: Okay. you don’t know. There’s a lot of dishonest people out there. Okay, so when you’re a broker, you don’t know that. Okay, you’re just selling the assets, and the person isn’t going along with it. So when something goes sideways, you hear from the buyer. That’s that’s where you’re going to hear whether the deal’s gone bad or not. And if the sometimes the broker is only on one side of the deal, see. So there could be different brokers, there could be different agents. So sometimes you never hear about that business and when it goes sideways. So That that’s the problem with you know business brokerage today. You know, that’s another problem with it, you know. They just sell it. They’re just selling that business like a home, you know, and giving the keys, and then that’s it. And

Bob Roark: Mm-hmm.

David: you don’t know if what’s happened to that business until the debt service stopped. You know, that that buyer that new buyer is not going to call up the owner. They don’t call up the owner. They just stop paying. They don’t they don’t call up the old seller of the business and say, Hey, can you come over and help me with this? I’ve had several friends that have sold businesses and they don’t get a call. They just don’t get the check. Now think about that. Think about Now there’s some closing or contracts where the owner sticks with the business maybe for a year or six months and helps out the new owner, which is not a bad idea sometimes. Depends on the business. Okay. But the seller is not hearing from the buyer, you know, they’re not calling the buyer. The new buyer isn’t calling up the owner and hey, how do we do this and how do we do that? Especially in a construction business.

Bob Roark: That would be good.

David: In the construction industry, whether it’s roofing, whether it’s painting, they don’t call. I know that for a fact. Now some other business some other business

Bob Roark: That that would seem to be logical. Yeah.

David: they might call up and say, Hey, what’s the password or what’s this or hey you know they might have some conversation, but it’s a standoff deal. When brokers get together, it’s a standoff deal between the seller and the buyer. They want to keep them apart.

Bob Roark: Example.

David: They don’t want to bring them together

Bob Roark: No.

David: because too many problems, too many questions arise. Okay. You’re building out growth content right now and you’re hiring. What’s the thing you’re trying to build? What does it look like?

Bob Roark: Okay. You’re building out growth concepts right now and you’re hiring. What’s the thing you’re trying to build and what does it look like five years from now?

David: I’m trying to build a business that will turn into a nonprofit eventually and help out millions of small business owners. The small guy, the middle class, the bourgeois, the what America’s built on. I’m all about

Bob Roark: Mm-hmm.

David: freedom. And we get our freedom by Going out and being independent, making our own way, making our own choices without the government. And if a small business survives, that’s happening. You know, that’s what’s happening when small businesses survive. Is our freedom survives, our communities survive and thrive. Okay, so that’s I think what America’s built on is small businesses. And that’s why I’m doing this. And that’s what I can see. And so I’m looking for people that not only have that vision, but they’re good with business owners. They’ve had previous experience in a business. They’re honest. They have good integrity. If they say they’re going to do something, they do it. And build something and we give them that chance those

Bob Roark: We do.

David: people to build their own executive consultancy when they come aboard growth concepts so we give them the tools so they can build their own executive consultancy and expand what I’m doing. So the more people that do this the and win then I’ll win. So that’s really what I’m looking for is a win-win situation. So I give of what I do. I have a give model, and there’s no upfront cost and there’s no charge to learn what I’m doing. It’s just you have to apply it and go work with it and run with it. And I’m here to support you do to do that. Okay. You know, if if someone’s listening into a manufacturing business or you’re down from accident taking the shape off, how do they find you, David?

Bob Roark: Okay. You know, if if someone’s listening in a manufacturing business or down from exit and taking the shape positive, how do they find you, David?

David: The best way is on LinkedIn. David C Whipple on growthconcepts.org. Growthconcepts.org on the website. There’s a way to contact me. But LinkedIn is probably the best way. I’m on Facebook too. David C. Whipple. I’m really

Bob Roark: Mm-hmm.

David: transparent there. You can see how much I like to fish and and be involved in the community that I’m in. David, if you were to look back over the last couple of years, what’s do you have like a concentration very specific business type that you started?

Bob Roark: David, if you were to look back over the past couple of years, what’s do you have like a concentration very specific business types that you serve?

David: I didn’t you were breaking up a little too much. Yeah. It for the past two years, is there a concentration of business types that you’re serving now?

Bob Roark: Yeah, it for the past few years, is there a concentration of business types that you’re serving now?

David: the businesses that we’re serving now, they’re small partnerships, proprietors, you know, in all different types of businesses. I’ve been in over forty-four different industries. Right now we’re working with five different types of businesses from salons to manufacturing companies to a new startup. I I have a book that I just released called 10 immutable laws of business ideation, which every startup should read. So we like to work with startups. It it’s like a 10-gate process that they must go through before they launch their product. Okay, so we work with 14 immutable laws of business value with established businesses, but we’re also

Bob Roark: Okay.

David: geared towards new startups. And the software works with either situation. We custom tailor the proprietary value metrics for that individual business model so we can identify what’s the best business model for this new business. Or what’s the optimal business value for an established business? So the software is the key component

Bob Roark: What’s the

David: of what we’re doing. It’s sure it’s built on the principles and laws of business value that I learned over 20 years, but without the software, you just can’t go in and identify what you know. Traditional financial ratios will not look at. And so we go in really in depth and look at that. Well David, I think you’re serving a part of the project post that I don’t think very many people have been into. So you know appreciation and congratulations doing that. You know, I I really appreciate your insight and time today. We’ve got this done a couple of times. And so hopefully the folks find that your approach

Bob Roark: Well well David, I think you know you’re serving a part of the project post close that I don’t think very many people have entered into. So you know appreciation and congratulations for doing that. You know, I I really appreciate your insight and time today. We’ve got you get this done a couple of times. And so hopefully the folks find that your approach

David: It’s interesting, it will reach out to you for the pre and post-exit professionals. this is the exit series. If you know a founder about that, our broker senior attorney’s been across the board and s and subscribe to this podcast and tell them to take a look. And David, we appreciate your time sincerely and making this happen.

Bob Roark: It’s interesting and we’ll reach out to you for the pre and post exit professional. this is the exit series. If you know a founder is about to, or broker senior attorney’s been across the table and s and subscribe to this podcast and tell them to take a listen. And David, we appreciate your time sincerely and making this

David: All right, thank you so much. And I hope You bet. I hope thousands and

Bob Roark: Exactly.

David: thousands of businesses that are selling really think about what they’re doing. And especially to maintain their stewardship after this podcast. I really do. Thank you again, Rob, for inviting me here. All right. You bet, David. Thanks for your patience.

Bob Roark: You bet, David. Thanks for your patience.

David: Have a good day.