Are you prepared to unlock the door to financial freedom and real estate success? Picture this: a life where you're in control of your finances, ready to empower your community through financial literacy. It's not a dream – it's a journey we're embarking on today.
Joining us in this episode is the exceptional Laurie Barkman, the business transition sherpa. She’s the CEO of Small Dot Big, and the best-selling author of The Business Transition Handbook. Recently featured in Forbes, Laurie is the expert you need to guide you towards making sound financial decisions and securing your future.
Laurie shares her extensive knowledge on preparing your business for a successful exit. She emphasizes the significance of early planning, and she's here to guide you through the common pitfalls to avoid, tying it all back to the core principles of financial literacy.
From the importance of maintaining clean financials to understanding the value of recurring revenue, Laurie offers valuable insights into making informed decisions for your business. You'll learn how to achieve the freedom and success you desire as a business owner while still leaving a lasting impact on your community.
Laurie's book, The Business Transition Handbook, serves as a comprehensive guide for business owners looking to transition or sell their businesses. The book offers exercises and a digital toolkit that can aid you in your transition journey.
Key Takeaways:
03:22 The mindset you need for a successful business transition.
10:15 The pitfalls to avoid in the exit strategy process.
18:45 The importance of clean financials.
27:10 How recurring revenue can transform your business.
35:50 Strategies to secure your legacy and make an impact.
Connect with Laurie
@:Website: https://smalldotbig.com/
Podcast: https://thebusinesstransitionsherpa.com/succession-stories-podcast/
The Business Transition Handbook: https://a.co/d/6HEY3Ap
Email: lbarkman@smalldotbig.com
Connect with Corwyn@:
Contact Number: 843-619-3005
Email: corwyn@corwynmelette.com
Instagram: https://www.instagram.com/exitstrategiesradioshow/
Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
Linkedin: https://www.linkedin.com/in/cmelette/
Shoutout to our Sponsor: MEME EUBANKS
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CORWYN:
So good morning good morning and great morning guys. Welcome to another fabulous episode of Exit Strategies Radio Show. Hey, I am your host, Corwyn J Melette. Broker and owner of Exit Realty Lowcountry group in beautiful North Charleston, South Carolina. So hey, if this is your first time listening to this show you sir or ma’am are in for a treat. Because our mission is very simple that is to empower our community, through financial literacy and real estate education guys, we are legacy building. That is what we do. So guys, look, we’ve been on this fantastic voyage, so to speak. I think some of y’all may have just gone back to the song on that Come Along for Our Fantastic Voyage because that’s where we’re going. That’s what we’re doing, guys. I’m excited and super stoked. been all around the state traveling this past week. And in turn, I am out because I’ve been with some great people and we have an amazing person on the show with us to date. We have and look, I gotta take a lot of this. And hopefully, you will too. We have none other with us today than Laurie Barkman. She is the CEO of smalldotbig. I love that. That tickles me right there. She is a business transition expert and certified in acquisitions and mergers. Laurie, how are you doing today?
LAURIE
Corwyn? I am awesome. It’s great to be with you. Thanks for having me.
CORWYN:
Well, thank you. So, as I was, prepping for today’s show. So I’m gonna say this, but you got to give us kind of a high level of who you are. But I was prepping for today’s show. All I could hear in my mind was an exit strategy. That’s it as I was prepping for today’s show. So if you don’t mind, you being in the business transition Sherpa that you are, tell us who you are, and where you came from. And what do you do?
LAURIE:
Thanks so much for having me on. And for this opportunity. I am the business transition Sherpa. I work with business owners from transition to transaction, from creating value to letting go. Easy to say, hard to do, right? And a lot of these topics are like, Oh, we can’t talk about that. I’m gonna retire someday, let’s not talk about it. I might sell my business, I can’t talk about that. Or gee, I really fear what it’s like to not be part of my company. I have my identities not gonna say it this way. But the emotional side, we don’t talk about it until it’s time to talk about it. And when time is on your side, you can create more valuable exit options and be able to be satisfied and happy in your next so that’s my mission as a business transition advisor and mergers and acquisitions advisor transition to transaction right that’s the whole continuum. And I wrote this book that’s pictured behind me if people are watching this on Stream yard you’ll see it it’s called The Business Transition Handbook. So I’m excited to talk with you today
CORWYN:
So for our listeners guys in my giddiness hopefully, I won’t be able to manage this today because I’m super giddy about this. Because there are different mindsets, there are mindsets, Laurie that people they build it and they try to build it forever, building a business is hard, let’s start with that, that is hard. And that’s an investor that is real estate that is fortune five any company that you build, it is difficult to build. And most times we don’t plan to ever stop. I have this running joke and I’m gonna say this Laurie and come back with a question. I have this running joke as relates to real estate that a lot of real estate professionals will, they’ll fall over at the closing table trying to get that one last deal done. That’d be the final one. That’s a resting spot. And in turn, because we don’t plan to get out we build a company, we build a brand, we build a client base, but we don’t put a succession plan in place. So you name your book, The Transit, the business transition handbook on how to avoid succession. Because there has to be something after pitfalls and creating valuable exit options. Don’t get hung up on exit. So tell us if you don’t mind, what was the catalyst for this book for you?
LAURIE:
So many stories, so many stories of where things go wrong. And my mission with the book is to help business owners not fall into those traps. Every chapter is essentially a pitfall to avoid. That’s why I structured it the way it did. I was writing it. And I was building on a lot of stories from my podcast, which is called succession stories. And a lot of times, business owners come on the show, and they’re looking in the rearview mirror. And they’re sharing things that they didn’t know, problems that they had, things that went wrong. And we learn a lot from those stories. They’re incredible. I find fewer of the, hey, here’s what went right. And I use these stories as an opportunity to educate. Of course, there’s content in every chapter, and we learn from the chapters. Then I weave in these case studies. And I also make each chapter actionable. Every chapter ends with summary takeaways and a table of well, what’s your intention? What are you going to do? And I tell everybody how to use the book, start, in the beginning, read it all the way through, I’ve organized the chapters that way on purpose, core when you use the word mindsets, that’s exactly where I start, I started it with talking about a transition mindset. If we are participating fully, do we think we’re gonna get a better outcome? Probably, right? Or if we’re resistant, we don’t want to do it. We’re throwing up all kinds of obstacles, and reasons why this won’t work. But what do we think’s going to happen? And the real trap comes when we don’t have time, or we don’t have options. So example case in point, every business owner is going to leave their business one day period, every business owner is. That’s just human nature, we are going to leave, are you going to leave horizontally or vertically? That’s sort of the tongue-in-cheek question. But let’s unpack it a little bit. Do you have a contingency plan for what happens if you are whether you’ve died or you’re incapacitated, and you’re no longer able to serve and you’re in your current role, many business owners do not plan for that. And by the way, we don’t control that do we? So I would call emergency contingency planning and of course, death is an extreme example of that. But we also see it with divorce. And it causes a rift in the business. In the business, we also see it with things like COVID-19, where it created a tremendous disruption. And we see it could be a physical disaster. So there’s that what we call the five DS, no one likes the Bs, and the Ds are horrible. We want to avoid them. But we need to plan for them. And what happens? So that’s the contingency exit side that we don’t control. But when we do control, when we’re purposeful about it, we have intention. That’s the word succession. Do you use it a couple of times? And yeah, it’s in the title of my book. But I want to talk about succession in two ways. succession of ownership, and succession of management, are different. Yeah. And my book is largely about the succession of ownership. However, it’s tightly tied in, let’s take one of the pitfalls. As an example. A major pitfall for many business owners is, is if the business cannot thrive without them, they have a very owner-dependent business. And a dependency can show in a couple of ways. It could be sales and marketing, product or service delivery, a good check-in is, what percent of revenue has come from you, the owner, right? If it’s more than 40%? Take a step back and look at that. And if it’s 60 – 80%, well, that’s dependent on you. And you take a vacation, when’s the last time you took one? Did you unplug? Did you check your email? Do you check your phone? , check in on these things. Do you have people around you whether they’re full-time or contractors that know your processes or have your processes documented? You get the idea, right? What are those things that we can identify? Does that point us to having only a dependent business? If we can identify these things and be honest about them, then we can work on them and we can solve them. I don’t wanna say it’s easy, but it’s one of the easier pitfalls we control we can mitigate.
CORWYN:
So, Laurie, I’m gonna jump in right there, but we got to keep going. But jokingly, with a degree of seriousness? I just felt attacked.
LAURIE:
You couldn’t vacation but you were working. So I don’t know, but yeah
CORWYN:
Exactly. I just felt attacked. Because is in, unfortunately, we find ourselves in this, and for our listeners, I need you to look at this open-mindedly. Some of you as listeners have businesses, some of you are aspirational to have a business, and some of you have no aspiration, but succession is not just in business, succession is also in life. So this is how to you who this law use this feel free. This is how you probate how you are set up, set your business up for probate. That’s what you’re doing. That’s what you’re doing? What’s going to happen here? But in your book chapters, you’ve touched on specific pitfalls, one of which is not, not first of all, not even having a mindset of planning leave. I look I’ve been I’ve been quitting and retiring about every year for like the last 10 years. Every year. And so what does that look like? So, give our listeners like, other potential pitfalls that you’ve encountered, as you have been leading people through these transitions.
LAURIE:
The biggest thing I think you can do to recognize potential pitfalls is to look at your business from an outside perspective, if a buyer were going to look at your financials, would they see the consistency of expense categories year over year? Would they see a mess? Are I, I’m a fan of QuickBooks, don’t get me wrong, it’s okay to have online bookkeeping services and keep it real tight. That’s fine. I’m not saying everybody has to go get quality earnings, financially hire a big accounting firm, and send 30 grand, I’m not saying that. What I do advocate for is to have clean books. And that way, you’re not going back to all his prior years and having to find and hunt and pick out Oh, yeah. When did we spend that? And here’s where it matters. When it comes to financial recasting. A potential buyer is going to look at your financials, they were in a lot the last three years of tax returns. And with COVID, I’m seeing people requesting 2019 also. So it’s more than three years of financials, they do want to see what happened in 2020. They want to see if you’ve come back after debt, and what is the years, 22- 23? What is that looking like? So that’s important. Also, when someone like myself is going to do a business valuation, one of the things we do is identify what one-time costs might be, that a new buyer might not take on. That might be it’s not it could be recurring, it doesn’t have to be just one time, but what are expenses that a new buyer would not continue? And where might they cut some things from the budget? And how can we identify that for them, we call those attacks? Also, on the revenue side, if it’s a big big client, that’s not going to repeat, we should take that out too. So it can be revenue or expenses, and in particular, owners’ expenses. So this is a bit of work that I would say it’s good to work with someone like myself whose work does valuations. And we take an objective look at that we recast your financials to get to an adjusted profit number. That number is the number we’re going to use with a multiplier to say this is what we believe a range of value is. So the cleaner your books are the user that can be. So for example, I had a client who is a construction, they do residential construction, and he built himself a barn, they had landscaping services, and they had snow removal, but all of those costs were bundled into the main expenses of the business. They were personal, but they were bundled in. And again I’m not saying companies shouldn’t make those decisions for tax savings. But just remember the big picture is if we can’t identify them later, you might be saving 30 cents on $1. But you might be costing yourself $3. So financials is a good place to start.
CORWYN:
Okay, so you made mention of QuickBooks, so basically, you need essentially you need an accounting. So you need accounting software, needs something, someone some way to track expenses revenue too, so you can get down to quote-unquote every month, or periodically profit and loss, what does that look like? So you can show your progression, if you will, your profit, over whatever period that you want to analyze year over year, quarter over quarter, etc. Some businesses ebb and flow, is that correct?
LAURIE:
That’s correct. That’s correct. Another pitfall, if I have time to share with you, many companies want to sell past their peak, and it’s difficult to time the market, it’s very difficult. But imagine the value that a buyer would perceive if they perceive your business as having a lot of growth potential, as opposed to being on the other side of that curve. So I’ve had folks come on my show and talk about that. And there are well-documented books from founders who have timed the market wrong and made what they’ll call a bad decision. And they have a lot of regrets about it. Yeah,
CORWYN:
So what I just heard, I’m sorry, not to cut you off. But to kind of give our listeners a metaphor for this. You want you want to sell the bulls when you got Michael Jordan? Not after he doesn’t go on to the wizards.
LAURIE:
That’s right. You are still winning NBA titles. That’s when you want to sell.
There are so many stories for when you just feel for these people. , there’s one gentleman who came on my show, and it was a Y2K-related software company. And man was their value on the rise before the year 2000. Right. But as you got closer and closer and closer to the year 2000. What happened? That’s right. [And then it began to decline.] That’s right. And eventually, there was no market for the company. And you have to declare bankruptcy. He did get a divorce. He did go into depression. And, it’s sad. It’s really sad. So I do want to talk about regret for a second too, your sports analogy. So Wayne Gretzky, hockey Great. Wayne Gretzky said you miss 100% of the shots you don’t take. And it’s true with regret, you can either regret the things that you do, maybe you made the wrong decision or the things you don’t do. I didn’t do this. I didn’t do that. I didn’t know in the context of this conversation. I didn’t prepare soon enough. That is the number one thing I hear from people on my show if they could do anything differently, what would they do? They would say they would start transition planning sooner. Everybody says it. And here’s, here’s the secret.
CORWYN:
Go ahead. What’s that?
LAURIE
You work on all the things that I’ve identified in my book, and they’re gonna have a more profitable, more enjoyable business to run, it’s all good. It’s all goodness, it’s good stuff. Don’t wait till the end. It’s like when you’re going to sell your house and you renovate your bathroom, the year before you’re selling like, Damn, I should have renovated my bathroom 10 years ago, yes, you should have enjoyed it.
CORWYN:
I’ve renovated now and now I’m going to get rid of it. So I wanted to get a chance to enjoy, that hot tub, I put it in the backyard swimming pool I put in, I’ve only been in it once and that was when it first went in, I didn’t get a chance to enjoy it, because I sold out so you’re exactly right about that. So, most people that I know that endeavor and entrepreneurship or have the desire to have a business they two things, one, they believe that they can do a particular thing better, whether it be service or product, that they can do a particular thing better. And the next piece of it is most of them desire to have control over a more controlling their life. So they desire the freedom to decide to do this or not to do that. We know as entrepreneurs that that perception of freedom often isn’t doesn’t match what it is about the business, whatever it is, you’re in entrepreneurial, desire that that business that you start is going to require more attention and more time than you may have imagined in the very beginning. However, when you get it balanced and when you grow when you leverage because you got to leverage yourself into the business by hiring people, expanding growth, all that stuff. When you get leverage, then you can begin to begin to take some of your time back, so to speak. Most people again do it quote-unquote, for freedom. Most people don’t think beyond Well, I want to I want to be free from it in the future. I want the business to continue. But I don’t want to have to be here every day running it. That is every time I go out of town. Seems like no one other than my phone. Like leading up to everybody wants everything like right being and while I’m going I’m trying to figure out how to get it all done that they asked me Well, before I left, and I went, I’m here. It’s not necessarily quiet. But it ain’t ringing as much as it is when I’m about to leave town. Everybody wants something when I’m about to go out of town, and still manage we leveraged with helping people to get it done. But what about when you want to take a vacation and go around the world? What does that look like? What does the plan look like? Who’s going to run your business? Who’s going to do this? Is that one of the things that you kind of cover and talk about in your book?
LAURIE:
Yeah, absolutely. Heavy is the head that wears the crown. Right. And that’s one of the things when he talked about freedom, we create our business because we want independence. And that’s a very powerful desire. But then as time goes on, like you said, even if you’re Tim Ferriss, and you created a four-hour workweek, Tim Ferriss sells his supplements company. As for that saying, heavy is the head that wears the crown, it was always on his mind. And also, I think that it’s powerful for us to distinguish business owners from owners of the business. If you’re more arm’s length. If you’re a business owner, that is part of your identity. Another example is, let’s say your name is on the door. So you certainly have identity with that if it’s rain if you are the founder. Identity is a really important part of it because it’s more difficult to separate some people from building a business to sell it, they have that intention from the beginning, Built to Sell is a great book by John Warrillow, on the certified value builder, advisor, which is his company, so I drink from that or sing from that same song sheet, that if we have the intention from the beginning, to create an asset, right, our business is an asset. If we think of our business, as an asset, not just a JLB, right, it’s not just a job. I’m not finding fault here, anyone who does have their business their job, that’s okay. But we’re gonna have different expectations. On the other side, that’s all. And many businesses that intend to sell in the very, very low cost, the lower middle market, or even another, quote, common term is named Street businesses that are under a million in revenue, many of those businesses will close because it is a job because it is a lifestyle business. But if we can find buyers out there great, and there are marketplaces for those types of companies, the larger your company gets 1,000,000, 2 million, 5 million 10 million. And the longer you have timeline-wise, it’s not a startup, it’s a proven entity, and it can transition to another owner successfully, it will have more value. So inherently more mature companies can benefit from over time if they put things in place to have a transition. If you’re if you think I’m talking about a startup that’s venture-backed and has all this recurring revenue, I’m not. I’m not talking about them at all, that’s not covered in my book. The one area I will say though is recurring revenue versus one-time revenue will have a higher impact on your valuation than just the one time that we can’t count on that you go into some fair amount of detail in the book. Yeah, now it’s a complicated topic or when there’s there’s a lot of reasons why we can have a business that’s worth less than we think it is.
CORWYN:
So, I appreciate what you just said about business owners and owners of a business. So I have that scenario of having an interest in another and another entity, another company. In that situation, I am the owner of the business. So, I’m not engrossed by it on a day to day my partner in that is however, over here, I am the business owner, so I am engrossed in it. And I am working on this side because I see the comparison and I’m working on this side to be to try to duplicate if you will, the role that I have there which is to become more of the owner of the business and less engaged in this, this, this. Where everything seems to center as a business owner, sometimes nearly everything centers on you as a coach of mine said John told me over the last year, you want to become the center, everything comes into you. You need to be able to remove Have yourself from that. And in everything still work. So that’s a hard thing to do when you’re in the middle, so you got to figure out how you can get yourself out so
LAURIE:
Yeah, that we call that a hub in business. And that is another pitfall I have I have some ebooks on my website that are great resources for people if they want to start to unpack this a little bit more, and start to think about solutions. A is detection, right? Identify? Are we in this situation? And then the second part of it is, well, what do we do about it? So if they want to go to my website, , more than happy they can, they can download them for free, if you’d like me to share.
CORWYN:
So if you are perfect, this is the perfect place. Laurie, give people your contact where they can reach you, I just hit the website, but I’m not gonna steal your thunder, I want you to tell people how they can reach you and get in contact with you. Because there’s a lot more here to discuss and for them to unpack.
LAURIE:
Yeah, absolutely. They can go to the businesstransitionsherpa.com They can get my podcasts, they can get the book, buy it on Amazon, you can click from there to Amazon. And there are ebooks. So there’s a whole resources section transition resources. And that page has, I don’t know, probably a dozen ebooks on it. Like I said, feel free to download those. The other thing I want to mention is the handbook, the business transition handbook has exercises throughout. And what I did Corwyn is I took all of them. And I put them in a separate PDF that people can download for free. So if you get the Kindle version, and you still want to have something to markup, go to my site, and download that PDF, so that you get all the exercises, it’s a digital toolkit that goes along with the book. So you can track your goals and work on them.
CORWYN:
That is awesome. That is awesome. Laurie, thank you so much. So, Laurie, I’m going to I call this a mic drop question. And it may require you to think back a little bit. Because you’ve been doing this a while you are the master the guru, and helping people to transition from, okay, I’m doing this all the time so I don’t want to do this, or I’m ready to sell this off. And what does my life look like after? So to get to what the dream is, if that makes any sense. But my mic drop question is if there was this thing that either you or something you could have told someone, like a long time ago, in the very beginning of whatever it is they endeavor to do, that would have completely changed their trajectory, meaning that they would have arrived at the destination much sooner. What is that?
LAURIE:
Think about being honest about their goals. Okay, I think there’s a level of self-reflection that people don’t have time for, or just keep pushing off. It’s the important not urgent thing to do to, really think about what’s important for you, as you’re building your business, and why you’re doing it. And you might find that you’re compromising your goals at some point. And you’re saying, Oh, wait, that was important to me, now, I’m going to change my mind. But if you’ve never written them down in the first place, then what makes you think we’re going to accomplish them?
CORWYN:
I like that. I like that. Um, because, what I thought about is for every when you get into business, the dream, the ambition, the I want to do this. And then, most times you think, well, I want to do it this way, I want to make sure that this is the experience that I’m giving, this is how people feel, or whatever it may be I want to have, as I say often, the impact was was was a significant word to me last year. And it is still a significant word this year, I want to have an impact on the people that I serve, I want to help them I want to have an impact on, and in turn, there are times when a result, we lose sight of having the impact. We’re so intent on getting to the result that we miss the opportunity in the service to give, provide, to be instrumental, to impact people. So Laurie, thank you so much for that. Welcome. So we have quickly gotten to the end of the show for our listeners. You know what I’m about to do. So I need y’all to go ahead and get your minds and your hearts prepared for that. But Laurie, I want to say to you one more time, thank you so much for being on our show today and for taking time out of your very busy schedule to drop these jewels and these nuggets on our listeners. So from the bottom of my heart again, thank you for being with us today.
LAURIE:
Thanks, Corwyn, it’s been my pleasure
CORWYN:
For our listeners. Guys, y’all got it. Y’all need to take it. Y’all need to do something with it. And the next thing y’all need to do is tell somebody else about it. Y’all know how I feel. Y’all know what I say? I always put the two of those things together and I say it to you this way, which is, I love you. I love you. I love you. And we gon’ see you guys out there on the streets.
