Categories
Authentic Deal-Making Authentic Negotiating Deal-Driven Growth Podcast Guest

Curating Quality Investment Opportunities

Marcia Nelson is the Managing Director at ShareNett. This is a members only global network of professional investors offering curated, quality investment opportunities. In addition, Marcia is the founding partner of Triple C Advisory. She’s spent a great part of her career working with family offices as a Family Office Advisor. Also, Marcia has been a board member for multiple boards, including VentureCapital.org. She is the president of ACG-NY.  Marcia is also a speaker with a great passion for impact investing. She was recently named one of the 2020 Most Influential Women in Mid-Market M&A by Mergers & Acquisitions magazine.

You can listen to the full interview HERE.

Marcia Nelson’s Early Deal-Making Experiences

While growing up in Salt Lake City, Utah, Marcia would have never guessed she was going to end up in the deal-making world! Her initial degree was in education, and she did teach for a few years. When she moved to New York with her fiance she fell in love with the city. She hasn’t looked back since!

After an initial experience with Conde Naste and the fashion industry publishing, Marcia switched gears when the dot com boom appeared. At that point she went back to graduate school, where she earned her MBA. Returning to the business world after completing her degree kicked off her deal-making career. She’s stayed in the industry ever since!

Most of Marcia’s early deals were in the ESOP ring. She enjoyed learning more about how employee stocks worked, as well as how complicated they could be. This opened a whole new world to her, and she was able to work on many related deals during this time. Early on, she was intensely fascinated by UPS’s use of ESOPs in their business.

Boutique Investment Banking

ShareNett is a boutique investment bank. They do traditional investing, but their niche is finding deals from family offices. Once found, they then partner or club with other families. ShareNett sifts through a lot of “noise” so they can filter the best quality investment opportunities for their clients.

Marcia shares their deals typically start around 10 million. She finds ShareNett can be extremely helpful in the 10-100 million dollar range. She really enjoys working in the family office space, and most often finds herself working in the mid-market arena.

One commonality Marcia is seeing with family offices is having a second or third generation who are actively pushing hard for impact investing. This falls in many spheres, including green energy, sustainability, and other ethically-based fields. She also sees many family offices who have made their mark within a specific field or area; she finds they often prefer to continue working within those same spaces with investments moving forward. If branching out, it often occurs in conjunction with another family office that is more familiar with the space.

Outside of all the political wrangling, there seems to be a demographic shift in which younger generations are inheriting wealth and being given more control over where the money is going.

Marcia believes that investments and philanthropy are beginning to be less mismatched. Younger generations are seeking to decrease the mismatch between where the family office is investing and where they are donating. Quality investments that do good are of great interest.

Making money AND doing good, all without having to rely on investment cycles that tend to fluctuate, is a powerful direction that many businesses may be going. Rather than seeking to become a non-profit, it might become more popular to stay for-profit, but use a percentage of proceeds to fuel social movements.

You no longer have to accept lower returns in order to do good! In fact, you can do good and expect comparable returns.

Other Marketplace Trends & Investment Opportunities

Marcia also notes there seems to be an increased interest in bringing manufacturing back to the US. She attributes this to supply chain disruptions as a result of the pandemic. Covid-19 highlighted just how many products we rely on are being manufactured elsewhere and shipped in.

Many businesses are using repurposing to make this work. They’re finding with small shifts, they can manufacture more of what they need here. Although supply chain issues will never fully go away, adaptations can be made to decrease disruptions.

However, there may be a difference between various types of technology. For instance, there’s a huge difference between bringing steel back, versus producing technological components here. Marcia agrees, noting that manufacturing trends are more manufacturing focused. As a result, many quality investments will likely be made in the US manufacturing markets.

Game makers and recreational manufacturers are also seeing a boom right now, as a result of the pandemic. That might be a short term change, but could also be part of driving deals at the moment. Because people are looking for more ways to spend time outside or engage in private recreation, it won’t be surprising to see continued growth in this area. At least for the time being, recreation is growing!

I noted that Rha and I are in the process of looking around for non-metro-based housing for the future. Based on how things have been going, it seems like it might be a quality investment! We typically split our time between major metros in New York and California, and we’re starting to think somewhere in the mountains might be a better bet. Although that’s not something everyone can do, it may start to become more common in the future. This is especially true for those who are looking at purchasing new properties.

Multi-Generational Investing Families

Older generations may have a desire to make quality investments in businesses that have a solid track history and have been around for awhile. Most technology companies, however, have less of a long term history. Younger generations may often be more excited about making investments with new tech, especially as they often feel more comfortable with the tools. 

However, Marcia notes that if you’ve seen one family office….you’ve seen one family office. They tend to be very unique, and are always composed of individuals with their own interests, desires, and comfort with risk.

One of Marcia’s clients made a lot of money in the gas and oil industry. Although they are glad to have made their money, they are excited to pivot forward by turning their attention to green energy. Tthey recognize that gas and oil were brand new, generations ago, and that they did have many positive impacts in terms of growth and expansion. However, attitudes evolve and shift. Families do to, which is a key point to remember if working with a family office!

As families evolve in their thinking, Marcia also notes that it is vital to remain open to their growth and development. Giving them space to change, and working through what that means for their portfolios, is essential.

Marcia’s interview was incredible. To learn more about her role, including a note on ways in which her job sometimes makes her feel like a therapist, listen in today!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast..

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

 

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth Podcast Guest

Deals For Small Businesses

In this week’s solo-cast, I wanted to spend some time talking about deals for small businesses. If you’ve been a listener for a while, you know that one of our premises is that businesses of any size can do deals, whether you have capital or not. It’s a myth that deals can only be done by big companies with big money. While I do have guests who share about large deals involving large amounts of capital, it doesn’t mean that those are the only deals out there. I’ve also featured many guests who own or work with small businesses, and they are leveraging the power of deals (and experiencing great success!) as well. 

Ep. 3: Ramon Ray, with influencer and sponsorship deals.

Ramon is an influencer who has key connections with businesses and entrepreneurs. He doesn’t have millions of followers, but he has quality followers. He capitalizes on that quality following by creating deals between them and other companies.

Ep. 7: John Bly, with acquisition deals, including deals done without significant capital.

John has been able to attract deals by bringing things other than capital (like partnerships) to the table. Within his first 18 months of business he was leveraging his deal-making power to create growth for his business. Gradually he built up to bigger and bigger deals, eventually moving into a succession deal.

Ep. 34: Julia Pimsleur, with an early deal with PBS that she created out of nothing.

When Julia was first getting started with her children’s language learning company, she was looking for gaps in the market. At a trade show event she happened to realize that PBS had a lot of learning related programming, but nothing in her niche. With some planning, she crafted a pitch and signed a deal with them – no major capital needed!

Ep. 41: Ralph Peterson and I ended up having a brainstorming session on small business growth.

Ralph provides management training and other services. On our episode, we ended up having a full blown brainstorm session on the kind of deals he could potentially create. If you want to get your own small business deal creativity flowing, check this one out!

Ep. 42: Gary Kane, with deals in the lower-middle market.

As a founder, Gary knows all about starting with nothing and building up. He’s also an amazing deal creator. In our interview, we especially talked about the kinds of deals that can be done in the lower-middle market.

Ep. 43: Bill Cates, with leveraging intellectual property and licensing deals.

Bill is a speaker, but rather than depend solely on speaking fees, he’s proactively found other ways to make deals and create revenue. One lucrative (and often underutilized option) includes leveraging his intellectual property to create a successful business. From books to videos to workshops, entrepreneurs can look beyond a fee-for-services model and create deals around licensing!

Ep. 75: Jesse Cole, on using creativity to stand out and grow.

Jesse has built many amazing deals based on partnerships. He’s experienced an incredible amount of success in an industry that is often struggling to get by. More recently he’s been working on online subscriptions and followings as a result of pivoting due to Covid.

Increasing Small Business Sales Through Partnerships

If you’re a small business owner who isn’t necessarily looking to acquire other companies or make deals that require large amounts of capital, you’re not excluded from deal-making! Here are a few things to ask yourself as you consider how you might be making more small business deals:

  • How can you increase sales/growth organically through deal-driven growth?
  • How can you make applications to other companies, industries, or verticals by connecting with those who have access to your market?
  • What opportunities might you have to create deals with those you perceive as your competitors?
  • Who is selling complementary products or services to a client base (or demographic) you’d like to break into?

When you consider the client acquisition cost in building a new customer base, it’s worth it to consider creative strategies beyond marketing. Even though partnering with another organization as an affiliate means giving up a percentage of sales, if they are connecting you with a broader customer base and increasing business, it might be worth it. There is always a cost to customer acquisition; why not pay part of that out through commissions rather than via an ads budget?

Depending how you structure your partnership or affiliate deals, you may be able to upsell and cross sell other products without having to share that revenue. 

Just a reminder: these deals aren’t substitutes for other growth methods. They are, however, additional opportunities for small businesses to pursue.

(I also referenced Damon Gersh’s episode on becoming a dominant force in your industry!)

Licensing & Small Businesses

Licensing is highly lucrative, but often underutilized. If you’ve uniquely created something, however, there are a lot of opportunities here! If you offer speaking, training, or online courses, you can consider additional opportunities to license the content to clients.

Rather than paying per use, or you being paid for each individual delivery, you can use licensing to scale your small business.

You can also consider the “train-the-trainer” model, where you retain control of the content but certify trainers who can use your intellectual property. Often, they pay a licensing fee to continue using your content and resources.

Many small businesses underestimate the amount of intellectual property they have available for potential licensing; take inventory of what you have available, and see if you could leverage it for deal-making!

(I also referenced David Bach’s episode, where we discussed licensing as well!)

Building Collaborative Relationships

Consider using this downtime to get into alignment with other local businesses. 

You could create an association and use it as a platform for networking. You can also build either informal or formal strategies for creating collaborative relationships. Many deals can spring out of these kinds of groups!

I remember an area of New York in which related businesses in the home building/renovation space chose to work together to create a district for customers in need of their services. Even though some of these businesses were in competition with one another, by working together to become the “go to” place for their ideal clients, they increased traffic and business for every member.

Entrepreneurs and small business owners too often think they have to be a lone wolf to succeed. In reality, there are many lucrative opportunities to connect, collaborate, and build growth together. We need to get past our automatic assumptions that we can’t work with our competitors, because sometimes it really makes sense!

What Does it Take to Become a Deal Maker

For small businesses, becoming a deal-maker is about getting past the assumption that you’re too small for that to be a valid option. When your mindset is telling you that being a deal-maker isn’t on the table, you become blind to the options you have available!

Shifting your mentality and opening yourself to opportunities can really get your juices flowing and make you aware of what’s truly available.

Right now the economy has created a strong dichotomy; some businesses are flourishing, and others are really struggling. Take a look around; how might you tap into the markets and businesses seeing a lot of success right now? Or how might you bring extra talent into your organization right now as a result of some of the struggles we are facing today?

Covid has also been an invitation to get creative about deals. Contractual rights, ownership or partnership opportunities, and future profit shares are all on the table.

If you’re a smaller business looking to benefit from deal-making, you should take these three steps:

  1. Change your mindset and understand that you CAN be a deal-maker.
  2. Look at your business goals, and consider who you can partner with to achieve those objectives (don’t eliminate competitors).
  3. Focus on shared objectives, and go to a professional to help you sort out the actual structure and logistics of the actual deal.

To hear the full solo-cast, listen in here!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Authentic Leadership Authentic Negotiating

The Power of Feeling Worthy

Renee Reese is The Worthiness Queen. She helps leaders, entrepreneurs and professionals heal their relationship with money and success and finally experience the power of feeling worthy of their next-level dreams. She’s also a transformational writer, speaker, and teacher and an innovator in the personal development industry. 

In addition to all that, Renee is an attorney, certified success coach,  NLP practitioner, T.I.M.E. techniques practitioner and hypnotherapist. She speaks and teaches all around the world, focusing on mindset and personal development. She is a dynamic, in-demand speaker and audiences love her for her practical application and takeaways, transparency, and relatability. You can listen in to our full conversation here.

Childhood Joint Ventures

Growing up, Renee always wanted to write. Now, writing is a huge part of her platform and work (she has a book coming out soon)! She also had aspirations of being an actress, which didn’t materialize. Her speaking and teaching does put her on stage and in front of crowds frequently, however, which she enjoys.

The first deal Renee remembers was negotiating a sleep-over at a friend’s house. Her early strategy was to wait till her mom was in a great mood, and to then have her friend do the big ask, since her parents were less likely to say no to someone else! We might consider her a master of the strategic alliance, or even a joint venture!

As an adult, Renee now works with leaders, entrepreneurs, and more. She got started as an attorney, but found herself burnt out and exhausted early in that career, despite financial success. Unfortunately, she was noticing that a lot of technically successful people were lacking confidence, passion, and positive relationships with their money too. In her heart she knew: there has to be another way, because this can’t be all that success is.

If you’re healthy, with friends you love and money in the bank, but you’re lacking a sense of worthiness….none of it will feel good. All too often, high-performers go from one thing to the next, hitting goals yet feeling empty. Renee helps people create alignment so they can experience success both internally and externally.

As an entrepreneur myself, I know how powerful alignment and personal money relationships are!

Owning Your Worth

I know that owning your own worth is a huge part of successful negotiations. When you’re dealing with fear, scarcity, and lack — it’s almost impossible to create strong negotiations you can confidently bring to the table.

Renee has noticed that when people are struggling with worthiness, they often struggle to come to the table with clarity on their non-negotiables. It’s not about being aggressive, it’s about matter-of-factly knowing what you need, what you’re willing to compromise on, and what you plan to take away from a deal. When you’re not coming from a place of worthiness, you tend to feel a strong sense of urgency around forcing deals to go through. Why?

Because your sense of success and worth are tied to the outcome of every deal. When you KNOW you’re coming from a place of worthiness, you don’t have to feel that your own reputation, worth, ability, or success are tied up in the deal. You are empowered to hold firm to your own non-negotiables, and you know you can walk away if the deal isn’t a good fit for you.

This is easier said than done! Owning your value and knowing our worth are powerful….but often they are concepts we only understand intellectually. Living it is a whole different ball game. Renee shares that owning your own value starts with your relationship with yourself.

You have to know your own desires, know your own strengths, and know the outcomes you want. Renee literally tells herself: “Self, you can tell me anything.”

She knows her boundaries, she knows what she craves, and she defines herself on her terms. Rather than trying to escape and avoid feeling bad feelings, awkwardness, loneliness, or scarcity, we often try to run (and force things to happen). Instead, you can actually allow yourself to sit with yourself, feel those hard things, and know that you can trust yourself to listen to yourself, be with yourself, and show up for yourself.

Trust Building With Ourselves

In a romantic relationship, you expect to build trust slowly. The relationship with ourselves is the same. We have to start slowly, communicate openly, and demonstrate acceptance and care.

One way of building self-trust is to keep the promises you make to you. If you said you were going to make your bed every day….ask for the promotion…write the book….you can build trust by actually showing up and doing those things. Pay attention to the ways you show up for yourself, and also take note of the ways that you don’t show up. Actually listen to yourself: what’s happening when you don’t show up? Why won’t you keep your word to you? Be willing to listen, learn, and make changes as needed.

When it comes to achievement and growth, Renee says we can build trust in our ability to experience success as well.

She recommends writing down three things you’ve already succeeded in, and three things you’d like to succeed in. Just like you’ve succeeded before, your mind starts to see your new list as things that are possible as well. Whether we believe it or not, we are constantly creating in our own lives. The best way to tap into that power is to be intentional about creating the vision we actually desire.

We all carry subconscious beliefs about topics like money, achievement, power, and success. Everything in our world starts with belief.

Self-Belief and Deal-Making

If you walk into a negotiation with the belief that the other person at the table is better and smarter, or that they deserve more, of course you’ll be dissatisfied with the deal you make. You’ll sell yourself short, and make compromises.

When you believe in yourself as someone who is intelligent, deserving, and successful, you’ll show up at the table differently. 

I teach that being crystal clear on your objectives and outcomes is an essential part of deal making. What Renee is saying here is so true: if you come to the table with a lot of internal blocks and haven’t done core level work, it does impact your negotiating.

Self-worth also impacts the deals you’re willing to attempt to make. If you can’t get by your fundamental self-worth struggles, you deeply limit the rest of your life.

Building the Life You Deserve

Renee’s work centers on helping people overcome these internal struggles and limitations so they can truly experience alignment and success.

One of her favorite clients was experiencing some level of success, but also dealing with massive amounts of doubt and fear. People on the outside wouldn’t have known, based on how she showed up, but she was unhappy.

From her business structure to the way she was showing up….she knew she wasn’t owning her work or her worth. When Renee started working with her, she was going through a dry spell, which was a repeating pattern in her life.

She would hit new income goals, then go into a complete slump and have no money again. It was the feast or famine cycle, which many entrepreneurs are familiar with!

Renee used strategies and tools from her NLP training that helped the client go straight to the root of her money beliefs. Internalized beliefs about being secondary, not deserving, and less than had impacted this client since childhood, and when she understood what they were based on she was able to blast through them and experience transformation.

Clearing past beliefs opened up so many new doors for her, and it all started with the root. Renee’s clients find that clearing these blocks changes their lives and their businesses.

Externalization + Personal Value

I noted that our society sends us so many messages about what we need to have and how we need to look in order to be valuable or worthy. That deeply impacts our confidence and self-worth, which bleeds over into our businesses and deals.

Renee agreed, sharing that consumerism is a huge driving force for many of us. It fuels a more, More, MORE mentality that makes it impossible to understand the abundance that is available to us in the present moment. And the reality is….there is never going to be enough in the external world.

There will always be something new, something different, something bigger and better that tells us we aren’t enough. We cannot understand our own personal value and worthiness when we are constantly looking at external measurements for validation. 

When we are building our relationship with ourselves and our own self-trust, we have to be able to detach from external messaging and gain clarity about our own values and desires. That’s the only way to maintain an internal sense of value and confidence, regardless of external circumstances.

Another way of coming at this is to clarify our WHY. If we are pushing ourselves to achieve because we are measuring ourselves against what we “should” be doing, it’s not going to work. Growing for growth’s sake to fuel vanity isn’t going to serve you in the long run. Get real with yourself about what you truly desire, and why it matters to you. Those are the goals that matter – that’s what you need to pursue.

To hear more about Renee’s take on negotiations and worth, listen to the full episode here!

 

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast

.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

 

Categories
Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Internal Succession

Today’s guest, Michael Vann, is a highly motivated and driven Business & Transaction Advisor at the Vann Group. Michael has over 18 years of experience in both corporate and entrepreneurial settings. He has a passion for the growth and development of high impact companies. He’s also shown a proven ability to advise clients in a manner that results in growth and success. Using his knowledge and expertise, he is able to work with clients to develop strategies and solutions that build on a company’s existing foundation, unlocking its unrealized value. Ultimately, Michael also works with clients on succession deals, including internal succession.

Early Deal Making

Having grown up in an entrepreneurial family, Michael notes he always had a bug for business. Although M&A wasn’t on his radar early on, creating businesses and doing deals certainly was! The first big deal Michael was part of involved selling a coffee shop, which went quite well.

Now, Michael’s activities focus on serving as a trusted advisor to owners and leadership teams that require insight and execution of strategic initiatives and transactions. This includes areas like mergers & acquisitions; the development of joint ventures & strategic alliances; the acquisition of financing and capital; and the launch of new business models & divisions. As an industry agnostic, Michael has successfully worked in a wide range of industries, including insurance/financial services, industrial/business services, manufacturing, and food & hospitality.

Internal Succession Deals

Michael and his father, Kevin Vann, recently co-authored Buying Out the Boss: The Successor’s Guide to Succession Planning. (And back on Ep. 88, I did a solocast on internal succession deals and opportunities!) So I knew my discussion with Michael about internal succession deals would be a great follow-up.

First off, Michael notes that there are many moving pieces in a succession deal. Those moving parts are what attracts Michael to internal succession, as he finds them challenging and enjoyable to work on.

Small, local companies play a large role in the economy, as well as in their own communities. Internal succession deals are a way to keep them locally owned and operating, even when the original founder steps down or moves on. Another key component to succession? Maintaining company continuity and growth through a succession.

Michael notes a stat that over 50% of business owners don’t believe their successor was prepared. He works with business owners to help them build the support and systems needed for a healthy succession.

The Buyers Don’t Always Know What They’re Getting In To

At the start of the succession deal, Michael notes that buyers are often at quite a disadvantage. They don’t always know the ins and outs of everything they are getting into, and they are sometimes coming from the position of being an employee. Even if they know the business, that knowledge is usually constrained to a specific area.

Transitioning to being the full fledged owner and CEO of a business is a huge shift. It’s not just about taking on a new title. This may help us understand why only 6% of successions involve an existing employee.

Michael notes that not every employee has a desire to take over a business and become the CEO either. Just because an internal succession deal may seem desirable, he cautions business owners to remain aware that they may not have an employee who would truly make sense to take over.

If you know you’ll one day desire to transition out of your business, you need to know it can run without you! It’s tempting to remain heavily involved, but you can make yourself more attractive to both internal and external buyers if you can demonstrate that the business can remain stable without your constant oversight and presence.

Conversations with Owners

Michael notes that there is a difference between scale and value. Many people can find a way to scale, but not everyone can build long term value that lasts.

From the perspective of a potential buyer, long term value is much more important than the ability to scale. Business owners need to move beyond short term thinking and consider what parts of their business are saleable, or worthy of passing on to the next generation.

Unfortunately, family businesses tend to have low statistical success rates across the generations. Michael has seen that keeping the second generation vibrant and growing is key to their success. Beyond that, however, he tends to see a downward spiral in experience moving into the 3rd and 4th generations of family businesses. Sometimes later generations are coming into the business from a place of entitlement, and other times they are there out of obligation. Either way, it doesn’t tend to translate to success.

I noted a practical problem that also occurs is that most generations get successively larger. The math gets quite hard when ownership is splintered among 15+ people, as getting people on the same page can be quite hard and the business needs to support more people.

Family strife, differences in vision and direction, and willingness to take risks all come into play for multi-generational businesses.

Trends in the M&A Market

When Covid hit, Michael’s group saw three deals stop dead in their tracks. Eventually one moved forward, but the other two died. Around May, however, they saw things start moving again.

He attributes this to business owners who are accelerating their transition processes after having watched the way the market has been moving. Increased uncertainty has caused a number of owners to decide to get out now while they can, even if their numbers are a little lower than expected.

Michael did note that they haven’t seen any large valuation impacts yet. He’s encouraged clients not to panic, and has seen plenty of active buyers in addition to sellers. By making wise decisions from a calm place, most business owners should have the ability to make solid decisions regarding their futures despite challenging times.

For deals that are moving forward, there has been an uptick in clawback provisions. This creates a balance for both sides of the transaction, and may be worth considering if you enter a deal in the near future. As a structure, it protects both sides and creates a bit more deal security. I agreed, noting that our firm has seen a similar trend.

In Massachusetts where Michael is located, he notes they’re in a strong manufacturing market, with precision aerospace and medical devices especially. There is a great asset base there, and the deals tend to be quite solid.

Whether you’re looking to buy or sell, the market is solid and deals are getting done every day!

Listen in to Episode 94 to hear the full interview and get Michael’s take on some of the biggest mistakes people make while trying to get deals done.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast

.
If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Create and Transfer Business Value

Laurie Barkman is the CEO of SmallDotBig, where she works with entrepreneurs, private companies, and family businesses on innovation, transition, and growth strategies. All this is to help clients achieve their long-term goals. She also works with closely-held companies to grow the value of their business and prepare to transition ownership in 7-10 years. As the Host of the Succession Stories Podcast, Laurie speaks with CEOs and experts about how to create and transfer business value. Altogether, Laurie has more than 20 years of digital transformation, entrepreneurship, and intrapreneurship in tech, retail, logistics, and service industries — from startups to corporates. 

Laurie’s Early Start

As a young person, Laurie had no idea she’d go on to be a CEO. She did start to recognize pretty early, however, that she was a leader. As a student she was often in situations where she had a chance to make an impact, create change, and coordinate with other students. In fact, her mom thought she’d go into politics and be a diplomat!

When it came time to pick a school and major, however, Laurie still didn’t know what she wanted to do. As a result, she chose a school and area of study that she felt would serve her no matter what direction she ultimately went. Her first career move after graduation? HR!

Laurie considers her first deal-making experience to be selling Hickory Farms meat and cheese as part of a fundraising campaign. She sold so much she earned a prize, and she considers this her first confidence boost in the sales arena. 

As her career has evolved, Laurie notes she has been in a variety of different industries and companies. From startups to billion dollar traded companies, Laurie has found ways to be innovative and creative. Now, she looks back and sees that her journey is what brought her to where she is today.

Healthy Succession Planning

Laurie loves working with entrepreneurial families, in which the founding entrepreneur created something and future generations have grown it into something even larger. She shares about a 3rd generation family business she worked in during her career. The family had moved from horse and buggy delivery to larger transportation to reverse logistics.

Eventually, Laurie was involved in the company’s succession plan. This required understanding the potential of long-term strategy with multigenerational impact. Stakeholders mattered, but so did employees and customers. 

Companies who have this sort of long-term vision inspire Laurie, and she loves partnering with them to help them see the potential for healthy succession possibilities.

As we were talking, I realized that we haven’t had much podcast content focused on family businesses. I’d love to dig into this area even more because there is so much that can be said about family members running a long term business together. There are major partnership dynamics at play, as well as other factors. (Would you be the perfect guest for this? I’d love to hear from you!)

Family Businesses, Family Values

Laurie notes that family businesses are incredibly unique. Each one is a sort of “snowflake”, in that you’ll never find another exactly like it. That’s one of the things that makes them so much fun to work with!

She shared the concept of shirt sleeves to shirt sleeves in three generations. Essentially, the first generation invests and innovates to build something successful, but the second generation is fearful of “sinking the ship”. They are more likely to play things safe and fail to creatively expand and grow. The third generation may be able to turn things around, but it may also be too late. There may also be family conflict, or a family that has grown so quickly that the business cannot sustain them.

Other issues in family succession can be connected to lack of fit or ability to take a business on, or a lack of a successor because there are no family members left.

Building skill sets and creating a pipeline for next generation talent is a key part of succession, whether you want to keep your business in the family or not!

On her podcast, Succession Stories: Insights for Next Generation Entrepreneurs, Laurie has interviewed multiple CEO’s of family run businesses. She has noticed that family run companies tend to be incredibly value heavy. They understand where the values have come from, and how they play out in day to day life. These values are also attached to the history of the company, and it’s essential that they are written down.

She emphasizes that any business can benefit from having value clarity. Another of Laurie’s clients, not a family business, recently came to her without clearly established values. The start of their work together was to figure those out.

Top Down or Bottom Up

Laurie notes that a family board can be a really helpful method for families running a company together. This might be considered a “top down” system. She notes that these boards can include owners or higher level executives within the company in addition to family, but it is comprised heavily of family members. This board is in addition to an executive board, or advisory board. Family boards can help diffuse family tension and provide a forum for conversation.

On the other end, a “bottom up” approach may mean that family members start at the bottom of the business and work their way up. When it comes to family members working within the business, Laurie notes that it can’t be forced. If a family member doesn’t want a role or position, then it will never work.

Strengths, motivation, and fit are absolutely key “buckets”, in Laurie’s point of view.

A healthy succession means that a potential family member needs to have the necessary strengths, they need personal motivation and desire, and they must fit into the role that needs to be filled, which includes personality, organizational dynamics, and more.

Although any of those three buckets might not be 100% at the start, time can change and grow all things. Listen to the full episode to hear Laurie share about a family member who originally didn’t have great fit or motivation, but who later came to realize that running the business was his calling!

Family business or otherwise, healthy succession relies on the ability to create and transfer business value across time. Sometimes there is unnecessary drama and chaos because a business’s leaders don’t know who they would be outside of their company.Rather than let go and learn who they really are, they cling on in an attempt to retain a sense of self. This can be especially problematic in family run businesses, because there are the added pressures of the family name being attached to a certain way of being.

Create and Transfer Business Value

In the technology world, things move fast and the larger successful tech companies are comparatively new. There aren’t many multi-generational families who have been involved in the tech space, and even less with the ability to transfer business value!

Laurie notes that she got into digital marketing as a personal career pivot herself; it wasn’t her first path, as it wasn’t for many. As a result, she had an early look at what it means to have technology or tools, but no market. She also saw that start ups can appear really glossy from the outside, but can be really messy on the inside.

Because her role was connected to succession and going to market, she could see that internal mess was problematic. In another shift, Laurie moved into apparel retail at the start of the ecommerce boom. She considers that a corporate start up, in that it was an established company doing something brand new. Again, she was involved in structure, scaling, and marketing. Her career has allowed her to work with budgets of a hundred dollars, and a hundred million dollars.

As a result, Laurie knows how to assess a business and get to the root of what’s working and what is not. She has an eye for understanding fit, operational needs, and market, all while building value.

She also knows what it means to create and transfer business value. Rather than leave money on the table, Laurie helps businesses think through healthy succession based on the transfer of accrued value.

Now, Laurie loves working with small to medium privately owned companies in order to bring together a strategic planning process that creates momentum to move forward. When a team understands where they are going, they are aligned and empowered to grow. This brings a business to life; it’s creating the plan AND executing, which is key. (90% of strategies don’t get implemented….which renders them worthless!)

Listen in to Episode 93 to hear the full interview!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating

Deal-Making During The Covid Era

This week, let’s talk about deal-driven growth and Covid! In the past on the show we’ve talked about some of the opportunities that arise during challenging times. We’ve also discussed things to watch out for! Now that we’re over six months into this pandemic, let’s talk specifically about deal-making during the Covid era. 

Hard to Compare

First off, it’s hard to compare Covid with any other time in history. For one thing, there’s a dichotomy between industries that are doing incredibly well, and others that are failing and faltering. There are major questions about when things will turn around or come back. In addition, we’re all getting used to a “new normal”.

In the M&A market, in terms of bigger deals, most surveys have shown the market to be down about 30% in terms of deal volume. However, there are some exceptions. Transportation, food, and agriculture have started to come back up. In April/May most industries experienced a significant dip. But there has been a rebound in certain industries. On last week’s episode, David DeVoe noted that in the wealth management space there is a surge right now. As the stock market comes back up, deals continue to increase as well.

Honestly, 2020 has been a huge mixed bag. Technology, home exercise, delivery, and some others are seeing huge gains. As a result, they may be able to absorb some competitors or make other deals, while in verticals that are suffering, we are seeing fewer deals.

Deal-Making Isn’t Going Away

What I see is this: people are still optimistic about deals. There is capital available out there, and people don’t see the impact of Covid as a permanent situation. Deal-making isn’t going away, and there is an expectation that many industries will continue to grow, expand, and find ways to innovate.

Now, I recognize that there are many businesses, especially restaurants, gyms, and some retailers, that have gone bankrupt. However, even within that we’ll see reorganizations and reopenings, with many companies coming out with cleaner balance sheets and ready to do deals. 

Deal-making will continue, even as it may be done in new, creative ways we haven’t seen before. Even industries that are being hit hard now may find that they are better positioned for deal-making in the upcoming months than they ever have been before.

Creative Deal-Making Lessons and The Voice

There have also been someone-off, strange deals that have been fun to see. For example, I enjoy The Voice, and midway through last season they ended up going virtual. Honestly, it was clunky. Everyone was singing and judging from home, and there was no real audience.

This season, however, they’ve adjusted. They wanted to have the singers, hosts, and judges live, but also keep everyone safe. They created a “bubble” by renting out a Las Vegas hotel. This benefited the TV show, and I am sure also the hotel, which would have had decreased occupancy with Covid issues. The audience is shown on virtual screens to provide a greater sense of live engagement as well.

Now “The Voice bubble” is part of coming on the show, and enables quarantining and Covid safety measures that would be impossible with the old set up.

Sporting stadiums have also been working on creating bubbles and providing safe spaces for action! If you have real estate or a business with underutilized space, this is a great time to think about how you can use it creatively to engage in deal-making during the Covid era. How can you apply creativity to your business?

Back on Episode 25, Damon Gersh shared about the “choke point”. During 9/11 he controlled tons of contracts by locking up labor, which created opportunity. How can you create something similar in your business?

Covid Era Stats

In our law firm, we’re seeing the stats play out in the deals we’re making. Companies used to working and delivering results virtually are thriving overall. There is a lot of deal activity in that space! Financial services deals are very strong. As these are two significant industry segments for us, we have kept very busy.

Once you get into recession and values go down, there usually really are a lot of deal-making opportunities taking advantage of that downturn. So far, however, I haven’t seen much of that happening during Covid. Often, that stage happens 1-2 years into a recession, so it might still be headed our ways. However, we’re not in an across the board recession by any means at this time. This may still be somewhat temporary, in terms of overall impact. We just don’t know the full fall out yet.

As businesses adjust, people become more willing to get out there, and the government decreases their regulations as cases, hopefully, decrease over time, we may see an upward trend before we go too much deeper.

Of course some industries, like airlines and restaurants, may see much more long term impacts than some others. Bottom line, though: We’re not seeing mass scale fire sale deals yet!

Although those with capital may be a bit slower or more picky, the money certainly hasn’t dried up! About 88% of deals in M&A are strategic buyers, and during this time that makes sense. Shoring up your strengths and relationships are great things to focus on right now. The synergies that strategic buying creates are even more important in challenging times.

What Trends Have Impacted You?

I’d love to hear your experience within your own industry. What trends are you seeing? How have you been impacted? I’d love to connect with you on LinkedIn or Twitter and get a read on what you’re experiencing. You’re also invited to our monthly Deal Den calls, where we dive deeper to discuss specific challenges, opportunities and needs during this trying time.

To learn more about deal-making during the Covid era, listen in to the full show!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Navigating the M&A Industry

David DeVoe founded DeVoe & Company in 2011. The company supports wealth management companies with consulting, M&A industry guidance and valuation services. Since launch, they’ve assisted over 500 high-level companies. They were the most active investment bank for RIAs between $250MM and $3B in AUM in both 2018 and 2019. David’s previous positions include Schwab and American Express. David was named ‘RIA M&A Guru’ by Barron’s.

Interesting fact: David is my FIRST repeat guest! 90 shows ago, he was my first ever guest interview.

Early Deals (And Missed Opportunities)

David shares that, after starting a t-shirt business in college, he missed a deal opportunity. He had relationships with manufacturers and retail outlets, but when he transitioned he simply left the original business rather than selling it. I can share David’s pain here. I missed an early opportunity in deal-making as well when I didn’t sell a flyer delivery business I started at age 15. When I left for college two years later, I just gave it up. The issue? A lack of understanding enterprise value! I didn’t understand the financial power in contracts, cash flow, and existing infrastructure at the time.

As David matured, he realized that deal-making held huge potential for both business growth and relationship building. In fact, David had a meeting scheduled after this interview with a connection he made in his first ever deal he closed while running an M&A industry platform. That deal occurred over 17 years ago, and the connection is still serving both parties.

EP Wealth recently took on private equity, and as a result a reporter reached out to David. Why? Because about 17 years ago David’s second deal, while a part of Schwab, was connected to this company. By leveraging deals as a way of forming connections and creating relationships, David has come a long way since being the guy who missed his first deal-making opportunity.

M&A Industry Growth + Projections

The M&A industry is a complex field! 2019 was a healthy year in the RIA industry, and David would love to see that repeated in the future. In 2019, the field had about 30% deal growth. Overall it was in a good place, exhibiting strong and steady growth.

However, David notes that this industry will have hundreds and hundreds of advisors selling in the next couple years. This is partially because the average owner age is 62 years old. (The average adviser age is 53.) However, out of about 10,000 firms, only 30% have written succession plans.

With these numbers, David believes we should be seeing 300 transactions per year. Instead, we hardly see 100. With each year we don’t see a full 300, we see an increase in the backlog of transactions that will need to occur in the future. David would rather see a 30% year after year trajectory, rather than a flatline followed by a massive spike that overwhelms buying power.
I do note that everyone in the industry has expected more deals, faster. Listen in to the full show to hear David’s thoughts on that, as well as the extended age of retirement.

M&A Engagement Trends + Covid 19

David’s noticed that recently, advisors have been engaging with M&A not only as a retirement play, but as a scale play. Folks are realizing that the game continues to change, and are interested in perhaps becoming part of a mega-firm rather than staying smaller and growing more slowly.

Prior to Covid 19, David notes that January 2020 was an all time high of monthly activity. The year started with a bang! This was driven by valuations being at an all time high. Profitability and growth were unlocked, and everything was full steam ahead.

Deals began dropping, from an all time high to less than 50%, in February. By March, Covid’s impact was in full effect. David delineates a 3-phase process that the industry is moving through as a result. (For more numbers, I recommend the DeVoe RIA M&A Deal Books!)

Phase 1: Deals are getting done if they were already established or moving through the pipeline. Advisor’s are starting to look ahead a bit.

Phase 2: An overall lull of activity and a decrease in the initiation of new deals. Firms under a billion really slowed down; firms over one billion actually increased. Overall, this phase created a 4 month lull.

Phase 3: A surge of activity is common here, and is what we’re currently seeing. Many firms are back on track; David notes his firm had a record setting Q3. The surge from early in the year seems to be back, and ideally will be a V curve.

Covid is real, and is impacting deals and even as they pick back up deal structures. However, the market continues forward. David hopes the COVID 19 experience will inspire advisors and firm owners to mitigate risk by creating succession plans now that risks have unfortunately become all too real for some.

Next Generation Talent & Succession

Sometimes advisory firms don’t want to take a hard look for that upcoming talent in the next generation. This can be because they already have the sense that they don’t have the talent in place. On the other hand, sometimes they’ve waited too long, and they’ve reached a point where the firm’s size indicates an internal succession won’t be fiscally possible.

David’s question: If that’s the case, now what? If there isn’t someone in house who can afford a take over, what options does an advisory firm have?

A recent survey showed that 57% of advisors say that if they had to transfer ownership to G2 today, it would be bumpy at best. Many firms reported they don’t have a strong enough second generation in place to even consider that a feasible option. Only 10% said this transfer could lead to the company being run as well or better.

This could indicate firms can’t look within; however, David does encourage advisory firms to strongly consider the next generation when possible. He notes that this is a professional industry. Firms need to consider how they can train up leaders, and how they can migrate some responsibility so that the next generation WILL be capable of taking over. He also notes that this is beneficial for your clients. They want to know who will run their accounts, and they have more peace when they understand you have a viable succession plan in place.

Human Capital & Thoughts on the Future

Devoe & Company has been creating programs, like their coaching accelerator, to provide coaching and guidance to advisors. David finds that human capital is key to growth, and is passionate about providing ways for advisors to grow in their ability in order to strengthen the industry as a whole.

Because M&A is a dynamic industry, David expects to see additional activity and continued growth. Eventually, he expects to see the numbers return to around 30% growth per year. He also expects to see the emergence of mega-firms with private equity backing that will increase creativity within the field.

This will likely create diversion and diversification, which David expects to lead to greater value being offered to clients. David does note that the small, medium, and large will continue to exist, and expects to see growth on all fronts. This also includes the use of technology to drive growth directly, as well as to aid in creative delivery and data usage. The application of technology and intelligence will only increase, and those in the field should expect dynamic changes as time progresses.

To hear more about trends, listen in to the full episode here!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

DealQuest’s BEST OF: Company Founders

This week I’m pleased to bring you another round-up of the BEST OF DealQuest guests. Our category is Company Founders. You’ll hear from Niles Heron, Julia Pimsleur, Brian Smith, Damon Gersh, and Chris Wilkerson! If you’ve been a founder, are currently a founder, or would like to be a company founder one day, this one’s for you!

The Need for Organic Growth: Niles Heron

Niles Heron is the Co-Founder and Chief Strategy Officer at Popdog. This is a technology and services company focused on fixing core problems in the esports and live streaming industry. He firmly believes that entrepreneurship is about building good systems. For Niles, this means solving problems at scale. His work has taken him from Detroit to San Francisco and back to Detroit. He’s worked with companies in biotech, automotive, aerospace, technology, and entertainment.

Niles has an incredible perspective. He’s one of those guests who demonstrates that he truly understands what it takes to create a business that actually has traction. In addition, he truly gets how you can leverage that traction through deals. On the show, Niles really gets to the heart of what it means to show up fully in your business and engineer deals that take things to the next level.

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode. Or, you can listen to our full interview on Episode 33 of the DealQuest Podcast!

Million Dollar Women: Julia Pimsleur 

Julia Pimsleur is Founder & Chief Empowerista at the social venture Million Dollar Women (MDW). During her nine years as CEO, Pimsleur raised angel and venture capital to succeed. It was then that she discovered fewer than 3% of all women entrepreneurs reach $1M. Additionally, less than 4% of venture capital is invested in female founders. To help change those stats, she teaches women how to fundraise. This led to her authoring the best-seller, Million Dollar Women​: The Essential Guide for Female Founders Who Want to Go Big.

Julia shares that her current work is directly tied to her early experience as a founder. She had been exhausted and burnt out as a business owner and parent. After some time, she realized she desperately needed a new way of running things. She took what she learned, and turned it into an organization that empowers women to stop being solo octo-preneurs (with 8 arms going in every direction). Instead, she teaches them how to truly become empowered entrepreneurs. Her episode is a reminder you don’t need to be a huge company with large revenue numbers to make meaningful deals. Instead, you can grow your business from exactly where you are now!

You can listen to a snippet of her interview on this week’s Company Founders BEST OF episode to hear more, including an early deal Julia made with PBS that created a 6 figure sales difference! You can also listen to our full interview on Episode 34 of the DealQuest Podcast.

The Founder of UGG Boots: Brian Smith

Brian Smith has charted his own course to become one of the great entrepreneurial success stories of our time. In 1978, he imported six pairs of sheepskin boots from Australia. At the time, he had a dream to build a business where every American would eventually be wearing the product. And that’s how one of the world’s most recognizable brands began. Since then, sales of UGG products have exceeded a billion dollars in each of the past six years.

Brian shares how his own enthusiasm for his work garnered an early $20,000 investment (with no business plan or fancy pitch deck!). That early cash infusion is what helped the company get started. He also notes that UGG took years to take off. (For some reason, as many California retailers didn’t see the need for a sheepskin product!) Year one of sales only saw 28 pairs off the shelf, with retail buyers he had been counting on ultimately  turning the product down. 

By year three capital had run out, and sales were only at 20,000. After a beer with a friend, Brian recognized he had a messaging problem. By changing his marketing message, sales skyrocketed to 200,000 within a year. That marketing revamp turned everything around. (It also ran the company out of money — a whole new problem!)

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode. You can also choose to listen to our full interview on Episode 8 of the DealQuest Podcast!

Identifying Your Industry’s Choke Point: Damon Gersh

Damon Gersh is the President and CEO of Maxons Restorations, Inc., an innovative leader in the property damage restoration industry. Damon is a winner of the Ernst & Young Entrepreneur of the Year Award, the Fast Company Award for Leadership, and Inc. 500 and Inc. 5000 awards. Damon is also a Past President of the Entrepreneurs’ Organization New York City Chapter, the co-founder of the Gathering of Titans annual entrepreneurial conclave, and the co-founder and Past President of Restoration Affiliates, LLC.

He wants to know: do you know the “choke point” in your business? By identifying the restoration industry choke point, Damon was able to transform his market and take his business to the next level. He was also skilled at garnering loyalty and thinking BIG about how to lock up the labor market. As a result, he figured out how to make sure his firm got the job…even if they were technically the “second call” on new labor needs.

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode, or you can listen to our full interview on Episode 25 of the DealQuest Podcast!

Lifestyle By Design: Chris Wilkerson

Chris Wilkerson is the Founder and CEO of High Bar Capital, which specializes in funding, acquisition, and management of high-quality businesses in niche markets. It’s all done with the goal of growing businesses while also increasing their value. 

Chris shares important lessons he learned while doing deals of his own, and he offers specific scenarios and strategies that highlight why it is important to know who you’re dealing with and what they truly want. Part of this is understanding what the “other” side wants. It’s not enough to just know what works for you. You have to consider the desire on both sides of the aisle!

The ability to create a positive impact on everyone involved in a deal is his top priority when evaluating whether a deal is worthwhile. This also means considering his employees, his clients, and his family. Part of being an entrepreneur is creating the lifestyle that he desires. He shares his wife and himself call this their “lifestyle by design”, which involves considering long term deal impacts, which goes beyond just financial implications.

You can listen to a snippet of his interview on this week’s Company Founders BEST OF episode, or you can listen to our full interview on Episode 22 of the DealQuest Podcast!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Deal-Driven Growth

A Capital Raising Journey

Sherisse Hawkins is a multi-talented builder, learner, risk taker, motivator, rainmaker, and speaker. She has a strong engineering background. Beyond that, she is the creative minded CEO & founder of Pagedip. Sherisse also has a proven record of meeting impossible deadlines, delighting customers, and re-imagining how things can be done. She believes anything is possible in the digital world, and is passionate about driving innovative content. She’s appeared in Vanity Fair and on Shark Tank. In this interview she shares more about her capital raising journey and other business experiences.

Early Deal-Making Experiences

Sherisse notes that she didn’t think of deals or deal-making until she became an entrepreneur. In her earlier work experience she had thought of decisions and deals pertaining to technology usage as being more technical. You examined which systems were most sound and used those. Pretty clear cut!

Moving into the entrepreneurial world and becoming a founder & CEO revealed how many other factors come into play. There are so many factors beyond “by the book” choices. Even when dealing with the objective facts of technology and science, things weren’t as clear as they had once seemed.

Becoming an Entrepreneur 

Not everyone is cut out for entrepreneurship. This isn’t just about having the dream, or being financially set up for success. Instead, there is a necessary personal mindset shift that must be experienced. This shift is what allows some people to make entrepreneurship a reality. 

Having worked in very large organizations, such as Walt Disney Imagineers, Sherisse hadn’t had the experience of working in a small company prior to starting her own. She understood that there were going to be financial risks. But she also knew there were going to be risks of not following her dream. She recognized that she liked starting things, and enjoyed getting things into the state they needed to be. That might be connected to her engineering background.

Sherisse shared that, throughout her life, she’s found that it’s intensely satisfying to take things apart and put them back together. There is a sense of exhilaration when a set of code works, or something comes together for the first time.

She found that same exhilaration in entrepreneurship. Although she had a great title, a corner office, and a bonus system at her role, she had a pull within her heart. She knew she could not deny the call to entrepreneurship. The field of communication and the development of digital tools held huge potential, and Sherisse knew she could make an impact. Finally, she took the leap.

You often hear of people in their young 20’s and even late teens starting companies and becoming millionaires. However, the average entrepreneur starts their business in the 30’s, 40’s, and later. There is no real time in life that it’s too early OR too late to become an entrepreneur.

Seeking a Co-Founder 

With Pagedip, Sherisse shares that she feels they’ve created what Microsoft Word might have been if they had created a word processor in the time of the internet. Essentially, they’ve created an editor that allows the user to marry core content with other elements. This combination creates a narrative flow that compels the reader to actually use the content you create. (Unlike traditional documents or PowerPoints!) Additional information can be added into what you’re sharing, all while allowing readers to stay on one page. 

As a result, materials can be kept up to date. Analytics are possible, so you can see where readers spend the most time, and which addition information mattered to them. Best of all, everything can live in one place. Pagedips are interact-able, measurable, engaging, and secure documents that create experiences for their users.

In terms of raising capital, Sherisse shares that she initially started the company with her own money. She was hoping for a technical co-founder, but had a bit of trouble finding the perfect person. Many of her peers didn’t want to take the risk. Eventually, she found a new graduate who seemed like a good fit.

Shortly after, they headed to an accelerator in Australia to get things moving! (She learned of this from Jen Matthews, who she had connected with after hearing her speak.) With her co-founder, she was able to further incubate the idea and started to understand the role capital raising could play in getting the organization off the ground. Sherisse sees that bootstrapping likely makes sense in some instances. For Pagedip, however, it was clear that bringing in outside capital made the most sense.

Notes on Capital Raising

After their first pitch, there were a number of investors interested in their idea. Not surprisingly, since that initial pitch, Pagedips has pivoted, as most businesses do. That initial interest was a great early start!

Sherisse shares that if she had known everything she knew about how difficult fundraising can be, she might not have taken the leap. (So she’s glad she didn’t know!) Raising money can be really hard. It’s made even more difficult for women and people of color. When she looks back at those early experiences now, she sees that the data supports the experience she had.

The company has now had two rounds of seed investments. Sherisse notes that fundraising takes longer than you think. It really is a full time job. There is a tension between wanting to move the company forward and invest time there, and needing to devote a huge amount of time to actually fundraising.

Along the way she’s had feedback that the company is thinking too small. Some investors have said they should be aiming to be much bigger and larger. She’s also gotten feedback that the idea is too big. This advice is usually paired with a warning that they need to think more reasonably. Between the two, “too small” is most common. Investors want to invest in something that will earn them back the largest possible dividend. That means more income, more markets, and larger numbers. It means casting a bigger vision with more dollar signs.

Want to hear about Sherisse’s appearance on Shark Tank? Curious as to why many companies DON’T need to seek investors? Listen in to the full episode!

Capital Raising as a Woman, a Person of Color, and Engineer

Sherisse shares that she approached this journey as an entrepreneur, a woman, and a person of color. Those identities came into play throughout her business building and fundraising journey. Although you cannot know what your experience would be if you did not possess those identities, she did feel that there were still some stereotypes. This was especially true about what technologists and professionals in the space were expected to look like.

She knew that her company was changing how people would experience information sharing forevermore. That’s a bold statement and huge undertaking! In a five minute pitch for that level of technology, there’s not time to dig into your background, prowess, and ability to pull that off. (And still share about the actual idea you’re presenting).

You don’t have the opportunity to share about the relevant experience you’ve had throughout your 20+ year career. You don’t have time to combat stereotypes AND establish your ability to succeed with a new venture.

Somehow you have to find ways to convey that experience and expertise. You can do this through non-verbal communication to save time. In addition, Sherisse noted that it was essential to bring that background to the forefront. Sometimes that did mean spending a bit more time on those areas than others who more apparently fit the funded founder check-boxes might need to. (Which also means less time to spend on pitching the actual idea itself.)

Sherisse found it was vital that she was able to own the fact that she is a technologist and a visionary in her field. That ownership was a key element in her ability to create a compelling pitch with confidence.

Studies have shown that perceptions about gender and race create huge assumptions about a person’s ability and capability. Everything from music auditions (read about the impact of blind orchestra auditions here), being considered for a Ph.D. program  (read about the impact of name and gender here), to the weight that GPA, professional experience, race, and gender play in hiring (read about the impact of these and other factors here) can be impacted by a person’s perceived race and gender. Appearance can immediately play a role in whether you can even secure the opportunity to show what you’re capable of. (Not only “can”….studies show that it most definitely DOES.)

Personal Growth and the Internal Journey

Sherisse shares that she is tenacious to a fault. Something she’s grappled with in her journey is when (and if) there is a time to say, “This is enough.” She hasn’t found that place yet! Instead, she keeps on pushing forward and growing.

One thing that fuels her is the belief that if you can see it, you can be it. She knows that there aren’t a lot of women, or women of color, within her field. Years ago, Vanity Fair brought Sherisse, as well as other women of color who had raised over a million dollars in capital, together in one place. They all fit in a really small room. There just weren’t that many people in those categories to invite! As someone who knows what it is to be one of the first, Sherisse notes there can be a lot of doubt about what is possible.

She also shares that she would be remiss not to mention that there IS a little part of her brain always processing what is possible in our time and within her industry. There aren’t a lot of people who look like her who have experienced a large amount of success in her industry. That’s a big undertaking, and an interesting journey!

In general, founders raising capital are a small group of entrepreneurs. Capital raising and making over a million dollars, an even smaller group. Among these small groups, white men continue to make up a majority. This means we still have this picture of representation that validates that we belong in the space, and that we can succeed.

As someone who has benefited from some of those privileges and has been committed to use that privilege to promote equity, provide opportunities and stand for representation of people of all backgrounds, I appreciate Sherisse sharing her journey with authenticity. Her commitment and drive to overcome the challenges of not fitting the mold and breakthrough and reshape the mold for her own benefit and that of others inspires me. 

Learn More

To learn more about Sherisse, Pagedip, and the capital raising journey, listen in the full episode! You can connect with Sherisse directly by emailing [email protected].

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Authentic Leadership Authentic Negotiating

Internal Succession Deals

What is the likely time you’ll want to retire? What happens if circumstances force you to leave your business earlier than planned? Your retirement and ownership transfer may be on your own timing, or dictated by things you may not control. Either way, having as many options as possible is advisable. While you might be able to sell to an outside party, you should also consider having internal succession on the menu.

How to Best Position for an Internal Succession Deal

Depending upon the size of your company, grooming a successor and/or building a strong executive management team is crucial. Empowered, knowledgeable employees create a potential pool of buyers. These buyers might be excellent candidates for a buyout when you’re ready to retire or move on. The great thing about doing that is your company is more likely to be able to operate without you. As a result, even while you have full ownership you’re putting yourself in a strong position for an external sale as well.

An internal succession deal is essentially an opportunity for you to sell your company to your existing team or one key employee. This may occur upon your retirement, death, or permanent disability. Creating an internal succession plan and binding agreement in advance with the management team or key employee is an essential step toward a successful internal succession deal.

Advantages of Internal Succession Deals

One huge advantage of this kind of deal is that you’re working with someone who knows the company. They understand the company culture. They’re also familiar with the ideal clients and the “state of the union”, so to speak. They may not need to spend as much time doing their due diligence and understanding the company at its core. (Note: They also know your skeletons, so there is a lot of transparency in most internal succession deals!)

If you’ve built a great company with a great team, an internal deal can require less “selling” of the deal. Another advantage? Continuity! Relationships in business matter. Clients and customers are often more comfortable when they understand they’ll be able to continue working with the same team and philosophy. They are less likely to completely revisit the relationship when they feel they are still working with the same people.

Also, a majority of deals are done as asset sales. (As opposed to equity deals.) After all, the buyer doesn’t want to take on a huge liability risk. This is often the structure for an internal succession deal as well. However, there are possibly more opportunities to consider an equity deal when you’re dealing with someone who truly knows the ins and outs of the company. They are taking on less unseen risk. This may make an internal buyer more open to the potential heightened risk of an equity sale. This is a huge plus because equity sales can actually be smoother than asset sales.

(Listen to the full episode to hear more about assignment issues, consents, and a note on taxes!)

Finally, consider making it known to key employees that you’re willing to consider an internal succession deal when you reach retirement. You may be able to retain high-level employees who have a desire for ownership. When these employees know that they will have the option to gain majority control, or maybe even 100% ownership in the future, that may be the incentive for them to stay. Even if a larger company offers them more benefits or higher pay, ownership incentives (which can be set up in advance via legal agreements) will often outweigh other benefits and perks offered by larger companies.

Disadvantages of Internal Succession Deals

A possible downside to internal succession is lack of funds. There may not be an ability to pay the purchase price if the internal buyer can’t find the necessary capital. There can be limited funding options, and internal buyers sometimes want the owner to essentially fund the note and get paid over time. Although financial options are increasing in many industries, the lack of capital is sometimes an impediment to internal succession deals. One antidote is to plan in advance. Pre-planning increases the chances that an employee interested in buying the business out will have the ability to finance the deal.

When deals are done internally, there is often a lower valuation. This corresponds with a price discount — even if small. This can be because the deal is easier to get done. It may also be a result of working with people you trust, recognizing their contribution to the growth in value of the company over time, or other reasons. External buyers are often able and willing to pay a bit more for their own strategic reasons. However, they bring other issues and risks that may not exist for an internal sale.

Setting Up the Deal

There are a number of ways this may be done. For example, you may set this deal up where an internal buyer is able to buy the company over time. This could be at 5% a year, or some other breakdown that makes sense. You may also consider how much a buyer would need up front, how much they can pay over time, and whether this is a full buyout or if you’ll retain minority stock or equity in the company.

When you’re allowing employees to buy into a company over time, the owner often does not want to put themselves into a position in which they are still working in the company but now have a minority ownership. This can be remedied by creating legal agreements to ensure that you have control of decision making within the company until the point at which the buyout is going to be completely transitioned. For example, a structure at which the full out buyout occurs after ownership by the buyer reached 49% over time. So while the buyer might have been buying 5% – 10% a year over a period of year, for example, after reaching 49%, the next purchase is for the remaining 51%

Also, remember that you can divide ownership and voting control. So you can give up the majority of the economic benefit of equity ownership while still maintaining decision-making control.

Another consideration: what assets will be used as security for backend payments? In essence, if the buyers don’t pay you, will you be in position to take the company back? What recourse will you have? In reality, most people don’t want to be in a position in which they would be at risk of having to leave retirement in order to reenter the company. For that reason, you may consider other forms of security or protection.

Best of Both Worlds

There can be some frustration here. An employee making the purchase may be trying to have the best of both worlds by taking on ownership of a company without the risks of buying something unknown or starting something new. They may not want to offer a second mortgage on their home or other personal assets as collateral against possible failure. Or they may not have those things as an option.

Although internal succession deals can be wonderful for both parties, it is essential that there are protections in place to protect against worst case scenarios. Be clear about what you’re comfortable with when you show up to the deal table.

In an internal deal, you know who you’re dealing with.

You know if you’re passing the business into capable hands, and ideally you’ll know enough about their work ethic and way of thinking to know that they’ll carry the business forward. However, you don’t know what could happen with all sorts of factors: the economy, global pandemics, unexpected losses, and any number of potentialities could arise that complicate an otherwise solid business deal.

Finally, I would encourage you to truly spend some time pre-planning your own transfer and retirement. Do you have the right people in place? How will you preserve your legacy? Do you want a slow transition or a full stop when you’re ready to be done? Are you dealing with yourself as a single owner, or do you have business partners/founders whose views are important?

Listen in to the full episode for more strategic thinking on internal succession deals.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!