March 4, 2026

What 18 Months Before Your Exit Should Actually Look Like

Most business owners are leaving money on the table — not because they're running a bad business, but because they can't prove how good it is. In this episode, we break down exactly what buyers look for and how to build a business that commands top dollar. Joshua Wilson sits down with Mark Sims, a former Chief Information Officer and Head of Strategy & M&A at Scott's Miracle-Gro ($4B company), who now helps businesses transact, transition, and transform through his consulting firm Con...

Show Notes
Transcript

Joshua Wilson sits down with Mark Sims, a former Chief Information Officer and Head of Strategy & M&A at Scott's Miracle-Gro ($4B company), who now helps businesses transact, transition, and transform through his consulting firm Consult MSG. Mark brings a rare generalist perspective — spanning Fortune 1000 consulting, corporate M&A, and private equity due diligence — to help middle market business owners understand how buyers really evaluate their businesses.

Mark introduces his Five C's of Value Creation framework and breaks down the most common gaps he sees in businesses preparing for a sale. From clean financials to vendor contracts to AI implementation, this episode is a practical roadmap for founders who want to maximize exit value — whether they're 18 months out or just starting to think about it.

Topics covered:

How buyers calculate EBITDA multiples and what moves the needle from 6x to 8x
The Five C's: Competitive Positioning, Cash Conversion Cycle, Clean Financials, Concentration Proof, and Capabilities
Why most small businesses struggle most with clean and trusted financials
How to identify which divisions, geographies, or products are actually profitable
The difference between "run the business" and "manage the business" technology
Why disorganized data elongates deals and erodes buyer interest
How SOPs and vendor contracts expand your buyer pool
Practical AI use cases for small and mid-size businesses
The "parking lot report" AI technique for high-impact client prep
Why being a generalist consultant is a competitive advantage

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WEBVTT

00:00:02.609 --> 00:00:03.390
Good day, everybody.

00:00:03.390 --> 00:00:04.980
Welcome to The Deal Podcast.

00:00:04.980 --> 00:00:11.310
Now, today we're gonna have a conversation of almost like pre pe, like what do you do when you're building your business?

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You've been in family business for a long time, and you're, and you're thinking about one day maybe having a, a conversation with pe, but you don't know.

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Even how to have those conversations.

00:00:20.160 --> 00:00:30.300
So I'm bringing in a friend of mine, mark, who's gonna talk to us about how to boost the value in your, in your business and, and maybe how to have, start thinking like PE private equity groups.

00:00:30.480 --> 00:00:33.780
So you maybe one day if that deal happens, you can make that transition.

00:00:33.780 --> 00:00:36.570
So Mark, welcome to To the Deal podcast.

00:00:37.170 --> 00:00:37.890
Hey, thanks.

00:00:39.255 --> 00:00:40.125
So happy to be here.

00:00:40.365 --> 00:00:48.284
Yeah, man, I'm, I'm glad to have you too Now, uh, conversations in the past that, that we've had around, um, you know, valuation and, and how to grow value.

00:00:48.524 --> 00:00:53.204
You know, you, you mentioned just, I think a lot of people just need to get to the basics of things, right?

00:00:53.204 --> 00:00:55.335
And you, you, you really try to keep things simple.

00:00:55.484 --> 00:01:00.643
So kind of given an idea of, you know, who you are and what do you do, uh, for work.

00:01:01.304 --> 00:01:01.664
Sure.

00:01:01.723 --> 00:01:01.965
Yeah.

00:01:01.965 --> 00:01:04.560
Mark Sims so had a, a kind of a unique.

00:01:05.879 --> 00:01:07.469
Perspective on, on business.

00:01:07.469 --> 00:01:15.239
Spent, uh, first half of my career in consulting, mainly doing kinda large transformational project for fortune thousand companies.

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Went to work for one of my clients.

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Uh, Scott's Miracle Grower.

00:01:18.614 --> 00:01:19.965
I had a bunch of different roles.

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I was the Chief Information Officer, so I got kind of a, a broad perspective on how to run, uh, information technology for a large company.

00:01:28.305 --> 00:01:38.234
Uh, and then I also was the head of strategy in m and a. Uh, so when we were doing a bunch of acquisitions, so you have a strategic buying, a lot of small private businesses have that perspective.

00:01:38.534 --> 00:01:45.135
Uh, and then I transitioned out of Scott's, got back into consulting, uh, and now I work for a firm, uh, consult, MSG.

00:01:45.644 --> 00:01:52.515
And the way I like to say that we help companies, um, transact transition, transact transition and transform.

00:01:52.875 --> 00:01:56.414
So what you're talking about is the transact side of things.

00:01:56.745 --> 00:01:58.004
Uh, kinda on the front end.

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It could be sell side advisory where we help companies how do they position themselves for max value, uh, or it could be buy side.

00:02:05.204 --> 00:02:14.504
So we work with a lot of private equity firms to help them, uh, you know, perform due diligence to make sure the asset they think they're buying is the one that they're actually buying.

00:02:14.729 --> 00:02:23.879
Where are any, you know, challenges, where would they need to invest money, uh, in, in areas that, uh, may or may not impact the overall purchase price?

00:02:24.389 --> 00:02:28.649
And then, you know, the, the transition and transform is really kind of post-acquisition.

00:02:28.649 --> 00:02:41.729
How do you, uh, run your, you know, uh, run the plays to, uh, maximize value and, and, and either scale it out, uh, through acquisitions or scale it up through, uh, just organic revenue growth?

00:02:42.330 --> 00:02:42.870
For sure.

00:02:43.349 --> 00:02:56.944
Well, talk to us about, you know, what are those things that you know are on the person's mind, the, the business owner's mind when they're, you know, building a business and, and maybe what are some things that they need to be thinking through in order to one day have that exit?

00:02:58.455 --> 00:02:58.724
Sure.

00:02:58.724 --> 00:03:04.514
I, you know, I, I think that the easiest way to kind of step back and just think about it is the way someone's gonna value your business.

00:03:04.754 --> 00:03:11.685
Um, us, you know, typically they're gonna be, you know, looking at, you know, what are the future cash flows that I'm gonna generate from this business?

00:03:11.835 --> 00:03:16.395
The, you know, shorthand way that people do this, um, is, you know.

00:03:16.794 --> 00:03:26.064
They may build that DCF model, but the shorthand way typically people talk about it, is they look at the EBITDA of the business and then they apply some multiple.

00:03:26.064 --> 00:03:34.284
That's could be an industry multiple, uh, and or, you know, kind of where other assets of similar, uh, grade have traded here recently.

00:03:34.555 --> 00:03:36.205
Uh, but they're just doing math, right?

00:03:36.205 --> 00:03:43.604
So you've got, you know, X amount of E. EBITDA and you have a specific six to eight times multiple, whatever it might be in your industry.

00:03:43.905 --> 00:03:46.305
Um, and, and that's the way they're gonna look at it.

00:03:46.574 --> 00:03:49.245
And then, you know, I said six to eight times.

00:03:49.484 --> 00:03:51.134
So you say, well, how do I get eight?

00:03:51.284 --> 00:03:52.634
I don't want six, I want eight.

00:03:53.114 --> 00:03:59.099
Um, that's where you start looking at, you know, where does your particular asset rack and stack against?

00:03:59.455 --> 00:04:01.074
Other similar assets.

00:04:01.284 --> 00:04:16.855
And, and that's where kind of that value creation, uh, lens needs to be thought through as well as, I'll call it value preservation lens, uh, which is, you know, how do I make sure things that I'm not doing, things that are gonna erode value, uh, in the eyes of a potential buyer.

00:04:17.879 --> 00:04:20.939
So value creation and value erosion, you know?

00:04:20.939 --> 00:04:22.379
So you wanna do value preservation?

00:04:22.379 --> 00:04:22.439
Yeah.

00:04:22.439 --> 00:04:22.620
Okay.

00:04:22.620 --> 00:04:31.889
Talk to us about what are the things that you could do to do value add, value creation, and then maybe some things that happen in a business that do, you know, value erosion.

00:04:32.593 --> 00:04:39.435
Sure, and, and I, I'll look at it through, I call it the Five Cs of value creation and value preservation.

00:04:39.764 --> 00:04:43.904
Um, so the first one is, uh, competitive positioning and strategy.

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So again, if you're, you're a business owner, um, you know, you wanna make sure you can clearly articulate, uh.

00:04:51.629 --> 00:04:55.649
Where you sit in your particular market, you're a roof, you're a small roofing business.

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Where do you sit in your market?

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Are you the leader?

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Are you the cost leader?

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Are you the service leader?

00:05:00.569 --> 00:05:14.069
Uh, are you guys doing lots more repair work than, you know, tear off and, and rebuild, um, you know, whatever it might be, but really understand kind of what your competitive positioning is, uh, within your industry, within your geography, et cetera.

00:05:14.519 --> 00:05:14.908
Um.

00:05:15.704 --> 00:05:22.245
The value creation part of that is, is having a very strong, uh, competitive position.

00:05:22.245 --> 00:05:27.584
So you can take pricing, you can be dictate what jobs you take and not take, right?

00:05:27.584 --> 00:05:29.954
So that's a strong competitive position.

00:05:30.285 --> 00:05:35.564
The value kind of erosion part of it would be, I have a commodity type business.

00:05:35.714 --> 00:05:38.774
I don't have any differentiation against my competitors.

00:05:39.014 --> 00:05:43.425
And you know, that, that doesn't position me well, uh, over the long haul that.

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Uh, I'm gonna be able to, you know, create long-term sustainable value.

00:05:49.000 --> 00:05:50.050
Yeah, copy that.

00:05:50.230 --> 00:05:53.769
So the five C's, share, share what those five C's are.

00:05:53.829 --> 00:05:55.240
Yeah, so I'll give you that off the top.

00:05:55.240 --> 00:05:55.509
Sorry.

00:05:55.509 --> 00:05:56.709
Competitive positioning.

00:05:56.769 --> 00:05:56.860
Mm-hmm.

00:05:57.100 --> 00:05:58.060
As the first one.

00:05:58.360 --> 00:06:00.730
Second one is cash conversion cycle.

00:06:01.750 --> 00:06:06.250
Uh, the third one is a clean, trusted set of financials.

00:06:06.850 --> 00:06:12.339
Fourth one is concentration proof, and the fifth one is capabilities.

00:06:13.694 --> 00:06:13.994
Cool.

00:06:15.913 --> 00:06:20.654
Which one do you think, um, you know, small businesses struggle with?

00:06:20.654 --> 00:06:22.423
Small to mid-size businesses struggle with most.

00:06:23.730 --> 00:06:26.699
I, I think it's probably the clean and trusted financials.

00:06:26.699 --> 00:06:36.930
That's what, that's what I've seen as we've worked on buy side is, you know, a lot of times people think they know how they make money, but do they know how they make money?

00:06:37.110 --> 00:06:39.300
Can they show you in one.

00:06:39.564 --> 00:06:42.235
Trusted version of data, right?

00:06:42.324 --> 00:06:44.574
This is, these are my customer cohorts.

00:06:44.814 --> 00:06:48.805
This is the profitability by, you know, product segment, product line, et cetera.

00:06:49.074 --> 00:06:56.035
That data oftentimes does exist somewhere, but buyers oftentimes make it really hard.

00:06:56.925 --> 00:06:58.904
F you know, you're trying to give them money, right?

00:06:58.995 --> 00:07:04.004
They make it really hard for you to understand how do you actually make money in your business?

00:07:04.154 --> 00:07:05.805
What are the profitable segments?

00:07:06.045 --> 00:07:14.024
So having that clean, trusted set of financials, um, it doesn't take a lot of, you know, you know, robust technology.

00:07:14.024 --> 00:07:17.444
It's really just making sure you've got, you know, good clean data.

00:07:17.475 --> 00:07:19.605
One version of the truth type thing.

00:07:20.555 --> 00:07:23.675
And making sure that all the data's been input correctly.

00:07:23.884 --> 00:07:25.685
Uh, and then you can get it out.

00:07:26.014 --> 00:07:34.504
And then that's not only gonna create value when you go to sell the business, it's gonna create value day to day that, um, you know, I know how I make money.

00:07:35.399 --> 00:07:38.459
We had a client, um, you know, and it was interesting.

00:07:38.459 --> 00:07:45.449
We, we put together an analytics solution forum, uh, and we were looking at kind of their profitability by geography.

00:07:45.449 --> 00:07:48.810
They had separated the country into like seven different geographies.

00:07:49.170 --> 00:07:55.709
Um, and the, the, the founders thought that they, they knew exactly where kind of the largest growth.

00:07:56.134 --> 00:07:58.774
Uh, region was for the business.

00:07:58.925 --> 00:08:00.694
Uh, and they were fundamentally wrong.

00:08:00.694 --> 00:08:11.980
It wasn't even in the top three what they thought because they had a legacy distorted view, meaning when they were kind of growing up in the business and, and getting it off the ground, they started in, uh, in the northeast.

00:08:12.660 --> 00:08:17.730
But you know, as the business evolved, the growth areas were more the south and the west.

00:08:18.029 --> 00:08:25.949
Um, and, and so that, that's where you, you start to use and leverage data to more effectively, uh, manage the business.

00:08:26.250 --> 00:08:30.540
Um, versus just going on, you know, what you think, you, uh.

00:08:31.725 --> 00:08:33.793
How you think the business is behaving?

00:08:34.365 --> 00:08:34.695
Yeah.

00:08:34.904 --> 00:08:36.105
Uh, good point.

00:08:36.225 --> 00:08:44.595
So let, let, let's dig into that a little bit because I think what happens is we get so used to doing what we've always done, right?

00:08:44.595 --> 00:08:49.845
In a business, you know, you're running, you're gunning sometimes you're not looking back historically as what this is.

00:08:49.965 --> 00:08:52.664
Sometimes you look at it and you go, I don't even know what it means.

00:08:52.965 --> 00:08:55.095
So I, so I don't know how to make a decision based on this.

00:08:55.424 --> 00:08:56.955
Let's use your example on.

00:08:57.365 --> 00:09:00.125
Let's just say, you know, they have four or five different divisions.

00:09:00.125 --> 00:09:07.985
The company's doing, you know, it has four to five divisions, they're making money, but you know, they don't know actually which one is actually making money or losing money.

00:09:07.985 --> 00:09:08.345
Right.

00:09:08.345 --> 00:09:14.615
So when it comes to that kind of thing, you know, like in your example, how should they.

00:09:15.524 --> 00:09:20.625
What, what is the first step, you know, maybe working with you guys or taking a look at, like, how do you guys actually make money?

00:09:20.625 --> 00:09:27.854
Kind of walk us through, if I were that business owner, how you would make that clear to me or, or walk me through that.

00:09:28.453 --> 00:09:28.813
Sure.

00:09:29.174 --> 00:09:29.355
Yeah.

00:09:29.355 --> 00:09:33.105
I mean, the, the way I think about it, again, you know, back to the, to the top, back to basics.

00:09:33.105 --> 00:09:34.813
It's kind of like there's two components.

00:09:34.813 --> 00:09:42.583
There's, there's the, what's the revenue you're bringing in, uh, and do you have clear line of sight of, of what that revenue is, what's, what it's ascribed to.

00:09:42.583 --> 00:09:44.384
So let's say it's a products business.

00:09:44.504 --> 00:09:52.034
Um, you obviously, I presume, know that I sold X amount of units at X price and I generated X amount of revenue, right?

00:09:52.034 --> 00:09:56.115
So the revenue side of the equation is typically not where we see challenges.

00:09:56.394 --> 00:09:59.304
Uh, and this is true of businesses large and small.

00:09:59.634 --> 00:10:02.995
Uh, the challenge usually sits on the cost side, right?

00:10:03.264 --> 00:10:08.333
So am I appropriately capturing the costs of, uh.

00:10:09.210 --> 00:10:18.629
You know, buying, uh, maybe, uh, manufacturing, handling, shipping, uh, that particular product.

00:10:18.870 --> 00:10:26.938
Am I able to capture all of those costs in a way that I can match those costs up with a specific product?

00:10:27.240 --> 00:10:29.879
So where, where does leakage o oftentimes occur?

00:10:30.215 --> 00:10:32.225
Labor overhead.

00:10:32.404 --> 00:10:36.095
It's not appropriately allocated for a, a given product.

00:10:36.365 --> 00:10:40.625
Uh, so you have, you know, you know what your material cost was, potentially.

00:10:40.985 --> 00:10:46.355
I know what I sold it for, but I don't know, how did I actually add value and, and.

00:10:46.754 --> 00:10:51.465
You know, man, through manufacturing, through distribution, through kitting, whatever it might be.

00:10:51.465 --> 00:10:51.554
Mm-hmm.

00:10:52.215 --> 00:11:01.034
Um, so typically that's where we'll then kind of hone in is how do I start to capture and or allocate costs more specifically.

00:11:01.365 --> 00:11:05.595
Maybe that's in your QuickBooks system, maybe that's in your, you know, financial system.

00:11:06.169 --> 00:11:17.809
Uh, or it, it, maybe it's an exercise that you do kind of via spreadsheet to figure out what's the model that I want to use to allocate these overhead costs, these labor costs to a specific product.

00:11:18.110 --> 00:11:24.948
So you can start to get that better picture of, of the, the revenue side and the cost side, uh, within the business.

00:11:25.620 --> 00:11:25.950
Yeah.

00:11:26.159 --> 00:11:26.370
Yeah.

00:11:26.370 --> 00:11:26.970
It's so good.

00:11:26.970 --> 00:11:39.929
It's, it's sometimes being, you know, I, I, I grew up on a construction site, mark, so, you know, if you would ask my dad, you know, let's talk about the financials we were building a lot, you know, he would pull out a shoebox and dump receipts on the table, you know, like that.

00:11:39.929 --> 00:11:42.360
That's, that was the level of where we were at now.

00:11:42.360 --> 00:11:43.990
This was eighties and nineties, right?

00:11:43.990 --> 00:11:44.144
Sure.

00:11:44.309 --> 00:11:46.830
So, lot, lots, lots changed and upgraded since then.

00:11:47.700 --> 00:11:49.889
But this, this, this is how I, I grew up.

00:11:49.889 --> 00:11:56.879
So like when I hear that kind of cost segregation and, and accounting and stuff like that, that's, that's impressive, right?

00:11:57.059 --> 00:11:58.860
For a company to hit that side.

00:11:59.070 --> 00:12:07.799
Now that I'm on the other side of the table, you know, doing investment banking and, and helping these companies, I'm looking at for those things that I saw was a gap in the business.

00:12:07.799 --> 00:12:12.059
But I also remember how hard it was for the business owner to know these things.

00:12:12.559 --> 00:12:12.710
Right?

00:12:12.710 --> 00:12:12.799
Yes.

00:12:12.799 --> 00:12:15.559
So I have this empathy for them going, look, I get it.

00:12:15.559 --> 00:12:22.190
You're just trying to keep the lights on sometimes, and it, it's hard to understand these things when it comes to different stages of scales.

00:12:22.190 --> 00:12:29.090
Like when you've seen, you usually like talking to companies like maybe 18 months before they are thinking about selling, right?

00:12:30.075 --> 00:12:38.325
When it comes to like putting these pieces together, how do you coach them through these different, like, okay, cool, let's start working on our financials.

00:12:38.325 --> 00:12:41.054
Let's bring in a CFO or an accountant.

00:12:41.054 --> 00:12:48.164
Like walk us through like as if I were that business owner who's just a mess and you're gonna help walk me through.

00:12:48.414 --> 00:12:49.164
Getting ready?

00:12:49.794 --> 00:12:49.974
Yeah.

00:12:49.974 --> 00:12:50.844
No, a hundred percent.

00:12:50.849 --> 00:12:54.865
And, and maybe, we'll, we'll talk about it in relation to the, into the five Cs, right?

00:12:54.870 --> 00:12:54.948
Yeah.

00:12:54.953 --> 00:13:00.474
So we've kind of already talked about, and, and you just hit it nail on the head, on the, the clean and trusted financials.

00:13:00.474 --> 00:13:05.214
You know, part of it is, could just be, uh, has anybody asked for that type of data?

00:13:05.214 --> 00:13:09.083
Maybe the data's been captured all along, but nobody's asked, ever asked to look at it, right?

00:13:09.083 --> 00:13:16.105
But so understanding what data do you have, uh, and then how do you organize it so you can actually start to leverage it?

00:13:16.434 --> 00:13:18.203
Uh, if there's data that's missing.

00:13:18.529 --> 00:13:22.309
How do you, you know, modify or change the process?

00:13:22.700 --> 00:13:27.559
Um, and again, this is leveraging, you know, existing resources you have in your building.

00:13:27.919 --> 00:13:34.938
Uh, but how do you leverage, uh, change the process to start capturing a specific piece of information that maybe you're not doing today?

00:13:34.938 --> 00:13:37.309
So I think that's, that's kind of one piece.

00:13:37.549 --> 00:13:38.029
Um.

00:13:38.715 --> 00:13:45.164
If we look at the other four Cs, kind of where we like to look, capabilities, I'll, I'll hit on that one 'cause that's a good, another good.

00:13:45.164 --> 00:13:46.335
Back to basics.

00:13:46.365 --> 00:13:46.455
Mm-hmm.

00:13:46.695 --> 00:13:48.975
So the capabilities are basically, you know, what are the.

00:13:49.379 --> 00:13:54.179
Unique things that you do within your business that helps you make money, right?

00:13:54.539 --> 00:13:59.039
And what I tell a lot of clients is just write those things down, right?

00:13:59.039 --> 00:14:06.299
So again, if you're looking to sell the business, and this is especially true if you're an owner and you want to exit the business, right?

00:14:06.299 --> 00:14:13.769
You don't wanna carry on if you are the one that's doing everything and or you have a small team, but.

00:14:14.115 --> 00:14:18.075
People only have the knowledge of how the business actually operates in their head.

00:14:18.495 --> 00:14:21.735
Uh, that's not gonna be particularly helpful for the new owner.

00:14:22.034 --> 00:14:27.615
And they're not gonna want to let you walk out the door 'cause you're the one that knows how the business operates.

00:14:28.004 --> 00:14:36.164
Um, and, and so actually writing things down, documenting the, the SOPs, again, some of this stuff may sound boring.

00:14:36.434 --> 00:14:40.215
Um, but, but it's actually can be very valuable even, even though.

00:14:41.078 --> 00:14:48.549
The process of doing that, writing things down, you may discover steps that are non-value added that you have within processes.

00:14:48.879 --> 00:14:50.649
Um, so that's one thing.

00:14:50.649 --> 00:14:54.698
Another thing kind of capabilities is, you know, you may say, Hey, we have really.

00:14:55.049 --> 00:15:00.120
Strong vendor, uh, relationships, and we have great pricing.

00:15:00.570 --> 00:15:01.049
Okay?

00:15:01.200 --> 00:15:09.690
If I'm a buyer, I'm gonna be concerned that you've got a great relationship, but I'm not gonna have a great relationship with that vendor, and they may raise prices on me.

00:15:09.690 --> 00:15:10.860
So how do you.

00:15:11.565 --> 00:15:15.585
You know, if you don't have contracts in place, how do you establish contracts?

00:15:15.884 --> 00:15:19.065
Because a buyer is gonna wanna see those due during due diligence.

00:15:19.065 --> 00:15:21.105
What are the vendor contracts you have?

00:15:21.284 --> 00:15:23.294
If you have customer supply contracts?

00:15:23.294 --> 00:15:25.184
What do those customer contracts look like?

00:15:25.725 --> 00:15:28.154
So many times we, we ask, um.

00:15:28.965 --> 00:15:32.144
Clients like, you know, in the, in the virtual data room, right?

00:15:32.144 --> 00:15:38.865
Provide copies of these, you know, excellent vendor contracts that you say you have and they can't produce them, right?

00:15:38.865 --> 00:15:51.794
And, and so getting all those things get organized upfront and documenting the capabilities you have, the, the key areas that you use to make, um, you know, manage your business and run your business.

00:15:52.065 --> 00:15:54.945
Um, again, it, it may sound very simple and basic.

00:15:54.945 --> 00:15:55.904
Uh oh, we'll just do it.

00:15:56.279 --> 00:16:09.720
When we get around to selling the business, but I assure you there's going to be, those questions I just said they're gonna ask are one of a thousand other questions that a buyer's gonna wanna ask across all the aspects of your business.

00:16:09.809 --> 00:16:16.169
So as much as you can have those things, you know, ready and, and available for a buyer, uh, is helpful.

00:16:16.230 --> 00:16:20.250
But again, I'll, I'll stress again, just having these things in general.

00:16:20.679 --> 00:16:24.580
Is gonna potentially help you manage your business more effectively.

00:16:24.909 --> 00:16:44.565
Uh, and again, if you're the owner starting to potentially transition some of the responsibilities to, uh, people within the organization so you can, uh, point to when the buyer says who's gonna run the business, you can point to, uh, the people that are, you know, the, the trusted, uh, team that can take the business to the next level.

00:16:45.809 --> 00:16:46.470
So cool.

00:16:47.159 --> 00:16:51.419
Mark, one of the things that you love talking about is technology and strategy.

00:16:51.870 --> 00:16:58.799
You know, when you're working with middle market companies, you know, you know, maybe they're a couple years out from even thinking about a sale.

00:16:59.070 --> 00:17:03.870
What's one technology or a data move that can most reliably add to ebitda?

00:17:04.919 --> 00:17:06.929
I bet you can guess what I'm gonna say, right?

00:17:08.159 --> 00:17:08.263
It's go for it.

00:17:08.269 --> 00:17:11.368
It's truly that, that, that kind of one version of the truth, right?

00:17:11.368 --> 00:17:12.210
Like what is that?

00:17:12.690 --> 00:17:27.990
Uh, again, just think about it, uh, from a buyer's lens, if you can not only kind of have a, a summary level sheet that says, you know, here's, here's what our p and l look like in the last three years, and here's kind of our top segments, but you can also say.

00:17:28.068 --> 00:17:44.148
Hey, we can give you a, a database, a, a, a download of all the data that you can kind of comb through it and, and we can show you in any which way you want, uh, profitability by segment, by channel, by geography, uh, by customer cohort, whatever it might be.

00:17:44.419 --> 00:17:47.240
Um, there's just a tremendous amount of value in that.

00:17:47.569 --> 00:17:51.470
Uh, and, and so that's where I always tell people to, to invest.

00:17:51.470 --> 00:17:53.240
And, you know, one of the things I'll say.

00:17:53.444 --> 00:18:01.154
You know, I kind of segregate, um, technology, you know, business technology, not necessarily infrastructure, but into two camps.

00:18:01.154 --> 00:18:10.875
There's run the business technology, which would be your ERP system, your CRM system, uh, and then there's e-comm system, and then there's manage the business.

00:18:11.684 --> 00:18:15.914
Technology and the manage the business technology is more, could be excel.

00:18:16.154 --> 00:18:18.644
Uh, that's probably the, the most popular one out there.

00:18:18.855 --> 00:18:21.494
But it's, it's where are you doing analytics?

00:18:21.494 --> 00:18:29.414
Where are you looking at kind of summary level, looking for pattern recognition, looking for trends of how the business is operating.

00:18:29.835 --> 00:18:36.045
Uh, so those manage the business investments are are where I think people are gonna get a lot of mileage and will be.

00:18:36.589 --> 00:18:45.829
A pleasant surprise to a buyer, uh, when you can provide them with really detailed information about how the business makes money.

00:18:46.549 --> 00:18:46.759
Hmm.

00:18:47.299 --> 00:18:51.199
So run the business tech and manage the business tech, right?

00:18:51.709 --> 00:18:52.039
Yes.

00:18:52.219 --> 00:19:01.490
And you're thinking the the manage the business is, is really that aspect where it will have the biggest lever, biggest ROI is is what I'm hearing.

00:19:02.490 --> 00:19:03.119
That's right.

00:19:03.359 --> 00:19:19.470
Now, the one caveat that I'll say, you know, is that if, if you're doing, if you run the business, meaning you don't even have basic financials and or an ability to reliably invoice your customers or collect cash mm-hmm.

00:19:19.919 --> 00:19:22.199
Um, that's a, that's probably a bigger problem.

00:19:22.199 --> 00:19:25.919
You should, you should make sure you've got those basics in place.

00:19:26.128 --> 00:19:30.220
Um, but the, uh, you know, in terms of, you know.

00:19:31.994 --> 00:19:33.763
Increasing the value of the business.

00:19:33.763 --> 00:19:39.644
I think it really is having that one version of the truth of, of, you know, how the business makes money.

00:19:39.914 --> 00:19:47.263
And, and again, the reason I say that is, you know, so much about m and a is, uh, time, right?

00:19:47.263 --> 00:19:48.974
The time to actually get from.

00:19:49.605 --> 00:19:53.714
Um, we're even starting to think about it to an actual closing the deal.

00:19:54.045 --> 00:20:09.315
Um, so often I see, and, and we're in the middle of a process right now, it's been seven months that, uh, we're working with a, a, a buyer doing some of the due diligence and the, there's just, it's just a challenge to get data out of the, out of the seller.

00:20:09.644 --> 00:20:17.984
Uh, and so it elongates the process, friction enters in, um, when, when you can't have reliable answers.

00:20:18.359 --> 00:20:23.279
And you know, quite frankly, you start losing, uh, potential interest from the buyer.

00:20:23.460 --> 00:20:23.549
Mm-hmm.

00:20:24.089 --> 00:20:30.388
Uh, they get fatigued maybe that you take that hit in a, a multiple, as we talked about, early multiple reduction.

00:20:30.809 --> 00:20:31.170
Um, but.

00:20:32.309 --> 00:20:47.970
You know, having that trusted data that you can point to being, organizing, having, you know, kind of good SOPs, all your vendor contracts, et cetera, uh, allows for speed, uh, in the transaction, which is gonna be helpful for everybody.

00:20:48.210 --> 00:20:51.480
Uh, most, like, most notably the, the, the seller.

00:20:52.349 --> 00:20:52.740
Yeah.

00:20:53.250 --> 00:21:01.404
So professionalizing the system, SOPs, vendor contracts, uh, these kind of things from a founder perspective.

00:21:02.865 --> 00:21:04.154
That slows me down.

00:21:04.184 --> 00:21:05.835
I gotta focus on running the business.

00:21:05.835 --> 00:21:08.355
I can't take time to do these things.

00:21:08.505 --> 00:21:22.424
And what it, what you're saying is it might hurt them in the, the EBITDA multiples in the, in the long run, if they don't have those things, or now that the, the pressure's on for a, a buyer, they have to go back and do that now.

00:21:22.575 --> 00:21:25.275
Now you're getting a hit in the multiples when Yeah.

00:21:25.275 --> 00:21:26.355
You know, going slow.

00:21:26.714 --> 00:21:27.763
Yeah, man, that's

00:21:27.763 --> 00:21:28.904
so interesting.

00:21:28.904 --> 00:21:31.064
Think, you know, again, I think there's two lenses to think through.

00:21:31.064 --> 00:21:37.544
One is, um, if, if you're, again, this is a wide, a wide continuum, right?

00:21:37.544 --> 00:21:39.585
But let's, let's take it on one of the continuum.

00:21:39.585 --> 00:21:45.644
You're, you're a seller, uh, and you're looking to, you just want to sell the business and you want retire.

00:21:45.904 --> 00:21:47.855
Uh, to, to your favorite spot.

00:21:48.184 --> 00:22:10.684
Um, so that means you don't want to be involved in the business, uh, ongoing post-close that potentially, you know, if you don't have a lot of things, um, kind of documented, um, that potentially limits your, your buyer pool from the standpoint of you need somebody who understands your industry, your business, that could step in on day one and take over and run the business, right?

00:22:10.690 --> 00:22:11.039
Mm-hmm.

00:22:11.119 --> 00:22:11.160
Um.

00:22:11.724 --> 00:22:37.045
If, if you've got a strong team, so you've taken the time to, um, you know, kind of invest in the team, uh, invest in documenting how things are done, uh, and quote unquote professionalizing the business, uh, that gives you a, a lot wider pool that a, a potential buyer who doesn't understand your business or your industry, I should say, um, they have more confidence that they could step in and actually.

00:22:37.619 --> 00:22:38.849
Run the business, right?

00:22:38.849 --> 00:22:42.539
So, so I think through those lenses you start to see, um.

00:22:43.753 --> 00:22:45.044
That there is value there.

00:22:45.284 --> 00:22:51.224
Uh, and, and again, another way to or perspective to look at at it, if you're a seller and saying, should I bother?

00:22:51.644 --> 00:23:03.615
You know, most people don't wanna buy a project right there, there, there are some that do, but you know, I always liken, you know, the sale of, uh, businesses, assets to real estate as assets, right?

00:23:03.615 --> 00:23:08.924
So think about a, a house that needs a tremendous amount of, you know.

00:23:09.305 --> 00:23:11.134
Uh, work to be done.

00:23:11.434 --> 00:23:18.664
There's a certain buyer pool that's willing to take that on, but they're usually looking to get a deal because they know I'm gonna have to take on this work.

00:23:18.904 --> 00:23:23.585
I'm gonna have to spend the the time and potentially the capital to get it done.

00:23:23.585 --> 00:23:25.595
So I'm gonna offer you a lower price.

00:23:25.894 --> 00:23:28.535
The same thing is true for, um, businesses.

00:23:28.535 --> 00:23:30.394
If I sense that I'm gonna have.

00:23:30.964 --> 00:23:34.714
A big project that I'm gonna have to just get the basics in place.

00:23:35.105 --> 00:23:49.009
I'm going to, um, try to take a reduction in purchase price because I may not be able to start by value creation plan, whatever my hypothesis is of how I'm gonna grow your business, take it to the next level.

00:23:49.684 --> 00:23:57.845
That may have to be on pause for six months, where I just get all the basics in place and just get a handle on how do I run this place.

00:23:58.144 --> 00:24:05.194
Uh, and, and so I think when you think through those lenses, um, it, it should make a lot of sense to people why there's, why there's value there.

00:24:05.194 --> 00:24:11.105
And, uh, again, if you're 18, 24 months out, you don't have to necessarily get it all done in a week.

00:24:11.284 --> 00:24:17.795
Um, you, you can space it out and, and build kind of a roadmap and a plan to get those things, uh, documented and put in place.

00:24:18.315 --> 00:24:25.724
Yeah, what size companies do you like working with and, you know, um, you know, you could be size of revenues, size of employees.

00:24:25.724 --> 00:24:27.345
Like what, what's the sweet spot for you guys?

00:24:27.345 --> 00:24:28.575
Maybe even industry too.

00:24:29.460 --> 00:24:31.680
Yeah, so, so we're somewhat industry agnostic.

00:24:31.680 --> 00:24:40.019
What we see a lot with private equity these days is services businesses, uh, so kind of blue collar services as well as, uh, you know, some manufacturing businesses.

00:24:40.289 --> 00:24:45.930
Um, you know, I personally, I I, I enjoy kinda working with business of all sizes.

00:24:46.230 --> 00:24:48.269
Um, you know, the.

00:24:48.659 --> 00:24:54.029
Smaller businesses tend to need kind of more of the, the basics, uh, in place.

00:24:54.089 --> 00:24:59.339
Uh, they have kind of no less complex problems at times, but a lot of times it, it's really focused.

00:24:59.339 --> 00:25:09.449
So when I say small, it could be, you know, um, you know, 15 million in revenue could be, you know, negative EBITDA all the way up to, uh, you know, 250.

00:25:09.539 --> 00:25:10.740
Million in revenue.

00:25:10.980 --> 00:25:20.579
Um, you know, a lot of times those businesses still are, are operating, uh, with systems and processes that are, uh, maybe not as integrated, not as connected.

00:25:20.849 --> 00:25:31.349
Uh, so helping them understand, you know, how to integrate those processes, how to connect those systems, uh, how to build that, manage the business layer on top, uh, is always exciting.

00:25:31.378 --> 00:25:36.464
And then we also work with, you know, billion dollar companies, uh, where, you know, they, they have.

00:25:37.345 --> 00:25:39.325
Uh, sometimes the same kind of problems.

00:25:39.325 --> 00:25:40.974
The, the systems aren't all connected.

00:25:41.154 --> 00:25:44.634
The processes aren't all, um, smooth.

00:25:44.845 --> 00:25:54.325
Uh, but there can be a lot more complexity within those businesses because there's a tremendous amount of legacy systems solutions that are in place.

00:25:54.595 --> 00:25:59.244
Uh, so I guess, you know, in summary, I, I look working on complex problems.

00:25:59.244 --> 00:26:05.160
So, you know, all of these different, uh, cohorts of, of clients kind of bring those, uh, different.

00:26:05.509 --> 00:26:06.740
Types of complexities.

00:26:07.400 --> 00:26:08.269
Yeah, for sure.

00:26:09.200 --> 00:26:20.869
Um, talk to us about, um, you know, as you're building this, why are you building, you know, this consulting group and what are, what are some of the things that drive you and Yeah, give, give us an idea on that.

00:26:21.523 --> 00:26:21.914
Sure.

00:26:22.125 --> 00:26:22.335
Yeah.

00:26:22.339 --> 00:26:28.065
No, I, I, I, you know, for the most part, I, I like working on, I like learning, I guess would, would be at the highest level.

00:26:28.365 --> 00:26:28.454
Mm-hmm.

00:26:28.694 --> 00:26:38.894
Uh, and so when I get to work with, uh, new companies, uh, learn new industries that, that I've never been exposed to, uh, that's what really gets me excited.

00:26:39.194 --> 00:26:44.325
Uh, helping clients kind of overcome challenges that maybe I've seen before.

00:26:44.654 --> 00:26:48.523
Uh, and I could tell 'em the answer, but I have to kind of lead them through.

00:26:49.059 --> 00:26:54.579
And be that change agent, uh, from the outside to help 'em overcome whatever challenges they are.

00:26:54.880 --> 00:26:58.269
Um, that that's really what, what I get excited about.

00:26:59.079 --> 00:26:59.380
Yeah.

00:26:59.440 --> 00:26:59.799
Cool.

00:26:59.829 --> 00:27:10.454
So what does the future look like for you as you're building this out and as you, you know, move from corporate to consulting, to kind of like doing your own, you know, your own business, what, what's the future look like for you?

00:27:10.454 --> 00:27:10.535
Mark?

00:27:12.000 --> 00:27:17.220
Yeah, so I, so I think, um, there's no shortage of companies that, that have challenges, right?

00:27:17.220 --> 00:27:23.970
What, what I find fascinating is, um, you know, all the talk of AI in, in the, uh.

00:27:25.740 --> 00:27:27.119
In the world these days, right?

00:27:27.119 --> 00:27:30.900
And, and truly is a transform more transformational technology.

00:27:30.900 --> 00:27:35.009
We use it in, in our practice to, to help, you know, be more efficient and effective.

00:27:35.369 --> 00:27:39.960
Um, but you know, what I always see is, you know, people are looking for.

00:27:40.349 --> 00:27:49.109
AI use cases within a business, and, and again, these are the same folks that I'm talking to and, and they don't have that, that core data set.

00:27:49.109 --> 00:27:51.750
They don't understand how their business operates today.

00:27:51.750 --> 00:28:04.994
And if there's one thing we've all learned about AI is you need to feed it with data so it can learn how things work in order that it can then, you know, you can start to look to potentially automate or have it give you kind of.

00:28:05.684 --> 00:28:10.154
Answers that are in, uh, line with kind of what the answer that you would give.

00:28:10.484 --> 00:28:26.325
Um, and, and so I think what I see a little bit is, you know, how do we make sure that, uh, the haves and have nots as it relates to the ability to leverage ai, uh, in a really meaningful way to create value in their businesses, that that gap doesn't get wider and wider.

00:28:26.384 --> 00:28:26.775
Right.

00:28:26.805 --> 00:28:29.144
And, and so I see that's a, an area where.

00:28:29.815 --> 00:28:38.904
Myself and my partners really focus in is, is to help businesses, again, modernize technology, uh, start to leverage technology more effectively.

00:28:38.904 --> 00:28:48.625
Again, just the basics, but just, you know, moving into as much as we've talked about analytics today, um, that's 25-year-old technology, right?

00:28:48.625 --> 00:28:57.775
Like building a data warehouse is, you know, and I'm sure someone would say it's even older than that, but you know, it, these are basic things that people just haven't invested in and, and so.

00:28:58.214 --> 00:29:03.525
You know, trying to leapfrog into AI without having the basics is gonna be really challenging,

00:29:04.035 --> 00:29:05.505
right man.

00:29:05.505 --> 00:29:15.825
We use four different, like AI platforms and, you know, you could type in a message and it gets, you know, four different answers on the thing and it could even spit back based on the data that you put in.

00:29:15.825 --> 00:29:17.204
It could spit back the wrong answers.

00:29:17.355 --> 00:29:19.394
Yeah, so I think a lot of people are, are.

00:29:19.765 --> 00:29:36.744
You know, playing with AI and then there's groups like yours that are, you know, fully understanding and how to leverage it for, for small businesses out there, you know, what are, what are some proper ways that you think, you know, to leverage AI and maybe even implementing AI to add value to their business that could Sure.

00:29:36.805 --> 00:29:39.259
You know, maybe help them down the road, sell.

00:29:40.200 --> 00:29:41.400
Yeah, no, I love this question.

00:29:41.460 --> 00:29:46.200
Uh, and I always like to try to give some, some kind of a pragmatic example.

00:29:46.470 --> 00:29:56.009
Uh, the, the biggest thing I'd, I guess two, two aspects of this one is, um, you should absolutely be trying to leverage AI with the AI within your business at a minimum.

00:29:56.069 --> 00:30:07.529
You know, if you have folks that, um, are in marketing, uh, that you, you, you're asking them to leverage that to see if they can create, you know, better, faster, uh, marketing content.

00:30:07.829 --> 00:30:08.674
So I think that's a key.

00:30:09.190 --> 00:30:13.299
A key piece that's, that's kind of that core sweet spot of a large language model.

00:30:13.299 --> 00:30:19.839
If you're creating a report, uh, an industry report, trend report, et cetera, tools are excellent for that.

00:30:20.378 --> 00:30:25.659
And then separately, I would say, take a look and see if you have a very specific use case within your business.

00:30:25.659 --> 00:30:32.079
Say you're a, you're doing some kind of underwriting or estimating where you have a lot of data, maybe I've.

00:30:32.579 --> 00:30:41.819
You know, I have, you know, seven years worth of roofing estimates, um, if I have that data available that I could feed it into a, a large language model.

00:30:42.029 --> 00:30:42.089
Um.

00:30:43.319 --> 00:30:51.450
And, and see if I can't, uh, make my estimating process more efficient and effective, I would start to play with that.

00:30:51.599 --> 00:31:00.599
To your point, you may not want to turn it on for productive use right away, um, but you could, you could start to parallel path it and see, okay, what did the, what did the, uh.

00:31:01.420 --> 00:31:07.119
You know, estimating agent tell me the price should be and what did the experienced estimator say it should be?

00:31:07.119 --> 00:31:09.789
And start to see, you know, kind of what, how those vary.

00:31:10.029 --> 00:31:15.670
Another really practical use case I like to talk to people about is, um, I call it the, the parking lot report.

00:31:16.359 --> 00:31:19.479
So whenever I'm about to call on a client, right?

00:31:19.479 --> 00:31:23.859
I wanna understand, you know, what are the key things about this client's business?

00:31:23.979 --> 00:31:31.388
Um, the people that I'm meeting with, do I really understand kind of, you know, where they come from, what their problems might be based on their role.

00:31:32.015 --> 00:31:47.315
And AI is an excellent way to take kind of the company website, the LinkedIn profiles for the people you're gonna meet with, and then with a, a targeted prompt to say, I'm gonna meet with these folks, uh, help me understand based on kind of where they're.

00:31:47.380 --> 00:32:02.440
Company sits geography wise, uh, channel wise, uh, based on their experience and their roles, what are the problems that are, they are likely encountering, and how could my product or service address some of those problems?

00:32:02.440 --> 00:32:02.740
Right.

00:32:02.740 --> 00:32:08.140
So, you know, it used to be in, in, you know, really excellent salespeople do this every day.

00:32:08.140 --> 00:32:11.200
They make these connections in their head, do this research.

00:32:11.200 --> 00:32:14.829
So I think it can just accelerate the ability to, uh.

00:32:15.525 --> 00:32:20.684
To give you that, as I call it, a parking lot report in terms of I'm in the parking lot about to walk into the client,

00:32:20.684 --> 00:32:21.013
right.

00:32:21.075 --> 00:32:28.454
Let me read it so that I sound really knowledgeable, that I understand their business, I understand their problems, and, and I've got a solution for them.

00:32:28.994 --> 00:32:39.704
Yeah, man, there's so many times even being on podcast, what I'll do is I'll put someone's email address in the different AI platforms that we do, and I, I'll even just ask, I'm about to interview this person.

00:32:39.704 --> 00:32:43.184
What are some things about their past that would be interesting to talk about?

00:32:43.184 --> 00:32:43.753
Or what about?

00:32:43.753 --> 00:32:43.763
Sure.

00:32:44.324 --> 00:32:45.464
Like these kind of questions.

00:32:45.464 --> 00:32:49.154
So if I were to put, which I did, but like, if I were to put, you know,

00:32:49.604 --> 00:32:49.634
uhoh

00:32:49.904 --> 00:32:50.263