Avoiding Burnout – Eric Miller

Eric Miller:
So if I’m, like, working out and I’m not seeing any results, it’s gonna irritate you, isn’t it? If you’re putting all this energy and effort into something and you’re not getting back what you should, that’s gonna have an effect on you. And what I usually see is the compensation. How much are you actually getting back? A lot of our owners underpay themselves, so that’s one of the first things I have to fix is their compensation model, because they pay themselves as either practitioners or technicians, but they don’t compensate themselves as either executives, and they certainly don’t compensate themselves as owners, at least at the magnitude that I think that they should.

Dana Robinson:
Exit Plan is a podcast for business owners and those who want to be business owners. I’m always in search of the lesser known stories of entrepreneurship. In the exit Plan podcast, you’ll hear stories from startup to sale and hear from the professionals who helped business owners achieve their exit. Hosted by me, author and private equity manager Dana Robinson, along with my co hosts and guests, you’ll hear real stories, tips, and tools that will help you plan for the exit you want, whether you are still working at a day job or running a business. Let’s get started with this episode of the Exit Plan podcast.

Eric Miller:
It was like, that’s pretty cool, right?

Dana Robinson:
I’m going to repeat it because we’re recording now. Eric, Eric, say that again. What’s this quote? Because we’re going to lead on with it. Yeah.

Eric Miller:
The quote from, from this gentleman was very, very influential guy. And, but he said, basically, you know, he’s very philanthropic, very charitable. And he. And he said, you know, I want to save the world, but I want to do it sitting in first class, which, which, you know, obviously means it. I don’t have to. I can still have material things. I can still enjoy a life of extravagance. I can still, you know, do the things that I want to do in life and, and have luxury and have materials.

Eric Miller:
But that same time, I’m not going to. I’m going to try to bring everybody else up as well, which I think was, you know, it’s not just a zero sum game like a lot of people think it is.

Dana Robinson:
I agree with that. Yeah, I like starting with money philosophy. So, yeah, let me pull the thread. The money can’t buy happiness, I think is Isdeze misused statement.

Eric Miller:
Yeah.

Dana Robinson:
Because it depends on what makes the unhappiness. If the unhappiness is struggling to pay your bills, then money solves that problem. Money solves lots of problems. So if you want happiness by saying that I’ve. I’m unhappy when my problems can’t be solved and my problems can be solved by money, then your only problem is money. And that’s a problem that’s easiest to solve. If you’re. If you’re an unhappy person, what is the.

Dana Robinson:
Is it alcohol that it makes you the sort of, like, if you’re already unhappy, you’re more unhappy. If you’re happy, then you get more happy. Money is sort of like that. If you’re an unhappy, miserable person and you get money, I think you become more unhappy.

Eric Miller:
You’re 100% right. And I think goes back to the definition of money. You know, where does money come from? And, you know, people think it comes from a cotton bush and federal reserve or, you know, banks and everything like that. But, you know, really, money is a symbol of. Of you producing value and delivering something of value to someone else. And the most unhappy people I’ve ever met in my life are people that were unproductive. And those are the people that I think are probably most unhappy people that actually were able to obtain their wealth in legitimate ways. They’re pretty happy people, you know, because they understood what it took.

Eric Miller:
But, you know, but then there’s a. There is a class of people that obviously, you know, are. Get wealthy on the backs of others and, you know, in other nefarious ways, and those people are not happy at all because they know that they didn’t earn it. So, so true. It’s not. But that’s. That’s such a small percentage of people. I mean, it’s a.

Eric Miller:
.00. It’s not 1%. When people say the 1%, I’m sure you’ve heard that that’s the evil class that’s doing all the harm to everybody. I’m like, if people actually looked at the stats of what the, what the 1% is, I mean, 1% is making over $500,000 a year. Okay. And up.

Dana Robinson:
Yeah.

Eric Miller:
Now, there’s a big difference between making $500,000 a year and making $50 million a year.

Dana Robinson:
Yeah.

Eric Miller:
You know, but all those people are considered in the same 1% class, you know? No, I mean, people that make that much money, $500,000 a year, or 600, 800, $900,000. Those are producers. Yeah. Those are people that are working hard. They’re not evil, you know, masters of the universe kind of people, you know?

Dana Robinson:
Right.

Eric Miller:
So, I don’t know. I just, when I hear that, that 1% thing, it just kind of drives me mad a little bit.

Dana Robinson:
Well, let’s. Everybody, thanks for jumping in the middle of our conversation. So the. This week in the plan, we were delayed a little bit because Dana decided he wanted to buy tickets to EDM festival for New Year’s and made Eric sit here and watch him while he entered his credit card number. But we got to talking about. About money and people and all that. I just thought it was a good time to pop in and just go live. So, you know, Eric, those are the fun things.

Dana Robinson:
Thanks for coming on. Today’s podcast will learn more about your business, econologics, financial advisors, and sort of what you do to help people who own businesses prepare for their exit, what you can bring to the table to help people understand what they should be doing. Well, in advance of that, a lot of fun stuff to talk about that I think everyone will enjoy. But for someone who’s been around a lot of the producer class, I think you’ve got some insights into where we started this, which is that, how do we strike a balance as the producer class, where we are, I’ll call it service minded, but still claim the right when we have the means to fly first class.

Eric Miller:
Right. There’s nothing. You know, I start a lot of my. If I do talks, I’ll. I’ll. I’ll start my talk. And just a little background. Most of the people that we cater to are healthcare practice, so most of them own, like, healthcare businesses.

Dana Robinson:
Okay?

Eric Miller:
So veterinarians, dentists, physical therapists, you name it. On the. On the healthcare side, people that really are more patient oriented than anything else. I started every talk by saying, money is virtuous, money is righteous. Having money is virtuous. Having money is righteous, and it’s deserved. And, man, you should see the looks on their face when I say that to them because I don’t know that anybody’s ever told them that before in their lives.

Dana Robinson:
Yeah.

Eric Miller:
And, you know, for a group of people that anyone that owns a business or leads an organization, you know, there’s always. You get comments, you get little digs here and there. Oh, you’re. Dana, you’re only in it for the money.

Dana Robinson:
Yeah.

Eric Miller:
You know, you don’t care about the customers. You don’t care about your employees.

Dana Robinson:
Yeah.

Eric Miller:
You know, don’t care about the poor.

Dana Robinson:
Don’t care about society.

Eric Miller:
Don’t care about poor society. Any of those things. And, you know, yet this is, you know, a group that routinely, you know, give services away and donates to charities and all these things, so. But, you know, I almost have to give them permission. But what that does to them, unfortunately, is it does have an effect on how they handle money. Very much so.

Dana Robinson:
You mean the psychology of being ashamed of the creation of wealth instead of.

Eric Miller:
Even, like, you’d be surprised. I just. I talked to a veterinarian last week, and, you know, I don’t know what people think of veterinarians, probably. Oh, I got a veterinarian on the corner there. There’s a building. And, you know, these, these practices can be worth 510, 15. We had one just sell for $20 million. I mean, just huge amounts of money.

Eric Miller:
And. But I, you know, he had, like, a million dollars sitting in cash, and he’s like, I’m just, like, looking. I’m like, wow, well done. He’s like, and I was like, maybe you should start taking some of this money and doing something with it. And he felt bad about it. Like he was doing something wrong.

Dana Robinson:
Yeah.

Eric Miller:
Gosh, where’d you learn that? You know, like, where did you learn that it wasn’t okay for you to enjoy the fruits of what you’ve created here and all the risks that you took for doing that? So that’s a lot. A lot of, you know, we do have to do a lot of that, I guess, almost financial therapy, you know, to give permission, permission to people to pay themselves what their value is.

Dana Robinson:
Do you think that hampers them from making some of the investments that earlier would have grown over time? Because it’s sort of like, I shouldn’t be ambitious and go invest in real estate and invest in other businesses and give my money to an advisor who’s going to grow some wealth, kind of allocate that wealth across things that will turn it into more wealth? Do you think that shame has them sort of hiding the money, sitting on it and just sort of like, well, it’s there. And I feel okay that it’s there, but I don’t want to talk about it.

Eric Miller:
I think it definitely restricts them, that’s for sure. They definitely have a restrictive viewpoint when it comes to money. In some cases, not everybody, but, you know, a lot of people do. And it does influence their decision making process. And it’s. It can be a detriment, too, because hoarding cash is almost as bad as just blowing it. You know, I’ve seen the two extremes where people just hoard cash.

Dana Robinson:
Yeah.

Eric Miller:
And they’re almost, you know, and then I’ve watched people that you give them a dollar and they spend five, and it’s just. And they’re both equally kind of extremes, but comes from the same aberration of money. I can’t. One person says, I can’t have it. The other person says, I can’t lose it. You know, so it’s kind of an interesting dynamic, and I forgot where we’re going with that.

Dana Robinson:
But you’re just talking about the psychology of money for entrepreneurs and business owners. And I think you’re, even though you’ve got a specialty practice that focuses on sort of your medical professional, I mean, it’s got to. Yeah, it’s got to. What you do has got to apply to lawyers, accountants, anybody with a professional service is kind of in the same place. They have to work. They do work really hard to build the thing. Let’s talk about that. I mean, you know it from having hundreds, if not thousands of clients in your space, probably.

Dana Robinson:
There are probably more service provider owned, like, businesses that are gonna have to be transacted than there are non service provider businesses. I would think if you add up law practice, I mean, I was a lawyer. I sold my practice to my junior partner, so I didn’t have to face the, you know, the normal kind of like, merger situation, retirement. But all those businesses have owners, and many of them are listening and asking, what does an exit look like and how do I get there, and what are the pitfalls? And, you know, should I, should I hire people and grow so that I can sell or, you know, that they have that million dollars sitting there and one of the choices they might have to make is to hire three new people so that they can replace themselves and then have them turn into the business that makes money. What are the things that you see that you advise people around that?

Eric Miller:
Yeah, I mean, look, for anyone that’s, like, owned the business where they’re kind of doing all the work in the beginning, there is going to come a point in time which is like, I mean, there’s only so many bricks a bricklayer can lay in a day. And there, there comes a point, I think, in any business where you got to make a decision, am I going to treat this thing as something that has the ability to expand in value? I’m going to have to give up some things to be able to do that. But the payoff at the end is going to be more time, more money, more of everything, or do I just want to just keep doing what I’m doing right here and then just slowly watch it dwindle down so that when I finally do want to get out, I’m going to be able to sell it for parts I get that extreme with people to say, because there, there is that point. I don’t know when it is timeframe. It’s probably different for everybody, but there is that point where you have to make a decision that you’re either going to go, because in this universe, you are never going sideways, either going up or you’re going down. Now, you may be going down slowly and it may not look like you’re going down, but you’re going down. And so you do have to make that decision that you’re going to have to say, okay, I’m going to have to do what it takes to expand. If you know how to do that, then obviously you have to hire some people that can at least show you or help you with that.

Eric Miller:
Who do I hire? When do I hire? What condition do I need before I should start my next practice and when can I bring on an associate? And all these things, I mean, all those things that you can figure out, but you got to make a decision on that. We’re going to grow or just go work for somebody else. Yeah, because you’re just going to get, I mean, I think the biggest, one of the biggest things that we deal with, and I tell every, every business owner that we’ve ever encountered when they’ve come to me to sell, you know, one of the first questions I ask them are you burnout? And when they say yes to me, I’m like, don’t sell your business, because I would never sell a business when I’m burnt out because that’s probably what’s the, what is the, and I’m sure you’ve heard the term burnout before.

Dana Robinson:
Oh, yeah, yeah. I’ve experienced burnout at probably almost every business I’ve been involved with it, like, approaching 30 businesses, and let’s just say half of those have required time. You know, that the other half are probably just, you know, let’s say financial and advisory positions. But wherever I am in a business, there’s a point at which I probably am burned out on that business from the standpoint of me putting time and effort into it. And maybe, maybe that’s my add functioning. But I definitely know burnout. And it is a place where you shouldn’t make any decisions about anything at all, probably right. In life or work or money, pretty much.

Eric Miller:
But it’s, I think, what happens? And I, you know, took a long time to try to figure out, like, where’s it coming from? And, you know, because people say, well, I’m overworked. I’m doing too much and I, and I think a lot of it also has to do with, um, what you’re getting back. Right. So if I’m like, working out, working out, working out, working out and I’m not seeing any results, I mean, it’s gonna, I mean, it’s gonna, it’s gonna irritate you, isn’t it? It’s gonna. It’s gonna piss you an example. It’s going to. It’s going to have an effect on you emotionally. Like, if you’re putting all this energy and effort into something and you’re not getting back what you should, then that’s going to have an effect on you.

Eric Miller:
And what I usually see it is the, is the, is the compensation. How much are you actually getting back, you know, and you’re under it. But a lot of our, a lot of our owners underpay themselves.

Dana Robinson:
Yeah.

Eric Miller:
So that’s one of the first things I have to fix is their compensation model, because they pay themselves as either practitioners or. What’s the other term for? Like, like, maybe it’s an operator. I’m trying to think of like, yeah, the e myth. You got the owner, the operator, the executive, and then the op of the technician. Technician. Technician. Right, technician. Okay.

Eric Miller:
So they pay themselves as technicians, but they don’t compensate. Compensate them to compensate themselves as either executives. And they certainly don’t compensate themselves as owners. At least that’s a magnitude that I think that they should.

Dana Robinson:
And so do you think there’s a big psychology to adjusting that so that they start to see the. And feel this, the sort of risk reward payout?

Eric Miller:
Yeah.

Dana Robinson:
Right.

Eric Miller:
Yeah. Like, I’ll tell you, the first thing that I do with almost every owner is I have them set up a separate account outside of their business. And we named it the wealth storage account just because it sounded cool to me at the time. And so whenever money comes into the business, I have them take 10% of that, of the production of the practice, and it goes out into that, well, storage account, and that is your owner compensation. Now, that money is not for bigger cars and, you know, consumption purposes. It’s to create other income producing assets outside of their business. Yeah, but I looked at that because, you know, in our, in the field that we’re in, a lot of private, a lot of private equity is kind of crept into the healthcare space. And they’ve been buying a lot.

Eric Miller:
And, you know, all them charge a 10% management fee to the parent company. So they buy all these companies and they charge a 10% management fee. And I’m like, why aren’t these guys doing the same thing that these private equity groups are doing? Yeah, kind of made sense to me. And, you know, after a period of time when they start seeing, you know, if you got $2 million business, all of a sudden I’m still, business is still okay, still functioning. All right. All right. Because I’m, because I’m doing this and I got, wow, I got 200 grand sitting over in my wealth storage account. I never had that before, you know, and then they can use that, and then we use that money to create a wealth strategy.

Eric Miller:
That’s kind of boring, but, you know, we can talk about it if you want to. But the point is, is like, I’m giving them permission. I’m making sure they get compensated for everything that they do in the business. And that seems to have a pretty positive effect on people of eliminating the burnout.

Dana Robinson:
Let me just pause and ask the, a lot of businesses, like when I’ve owned businesses, I have had a hard time pulling money out until there’s an inflection point, a good month, and then you go, okay, I’m getting paid for three months and sort of, I’ve done the scoop off and pay myself as an owner. But I wonder whether your approach helps create better discipline, because I’ll just say the frog in a kettle. With a lot of business owners, they don’t raise their prices with inflation. So if you’re pulling money off the top and scooping it aside, and then you have a bad month and you go, wow, we’re going to be negative this month. You may be thinking more quickly about raising prices or making adjustments to your overhead or you have a spot in your cost of services that’s, you know, reduced or something like that, do you think it’s, it, does it help them sort of pull the money out, pay themselves first, and then let the business produce a profit or cover its nut post paying owner.

Eric Miller:
Yeah. There. For me, the simplicity of it is that the only way that you’re ever going to create a separate reserve pool of money, like you’re never going to have a profit through. I wish it’s going to happen. I really desire to have a surplus. I really, really, I want that to happen. You never create, you never create it with a desire. You physically have to remove the money from one source to another.

Eric Miller:
And what does that do? It creates necessity. And when you look at where, why business owners, you know, that are the solvent and have extra money is because when they do their planning, they treat their profits like an expense. It’s not just, oh my gosh, what’s left over? I can take it. No, it’s a bill. It’s an actual bill. And we have them take it on a weekly basis. And when they’re doing their planning for that week of how much do we, or that month of how much do we need to bring in this month for us to be able to be solventhe. When I say solvent, I don’t mean just to pay the bills, I mean to pay themselves, to pay their taxes, to have money in the business and they have reserves, then they have to figure out what that number is that creates the necessity and that’s where income comes from.

Eric Miller:
It comes from necessity. So that’s, I think that’s one of the things that a lot of business owners forget. And so you have to systematize these things. And once you do, it’s simple, but trying to start it from when you haven’t done it in a while, it can be a little hard to walk it back.

Dana Robinson:
Love it. So great, great starting point. Business owners, 10% every week. I like it. It’s bite sized. There’s always cash flow in and out, right? So you have cash flow where you’re not waiting to find out how you did, you’re paying yourself as you go. So that’s a great automation of sorts that you put in. Do you have other systems, automations that you think are the things that you tell people besides, because that’s a great one.

Eric Miller:
Well, the 10% one is the first one. Obviously, there’s other profit accounts that I would make sure people have. Obviously, I mentioned the tax account because a lot of entrepreneurs and owners, it, unfortunately, that call at the end of the year where, hey, congratulations, you had a great year. You owe 400,000 in taxes or, or 200 or whatever it is, and you never set aside for it because your business gave you the tax liability based upon the profit. So obviously, making sure that you have a tax account set up. I have, I generally have like at least a month or two of business savings just to be able to, you know, hey, if stuff happens, so let’s make sure that we account for that and then a business expansion and development account so that you reinvest back into the business to do some of the things that you need to do to make it more valuable down the line. That could be, that could be a number of things. And then, you know, I just added recently, like a celebration account, maybe it’s like 1% of revenue or something like that, just so that you can just celebrate.

Eric Miller:
Like if you have a win if you guys have a great month. My God, people don’t celebrate enough. You got to celebrate, like, your. Your victories because they’re not easy to do. So, but all these things, you can’t. You cannot look at them as desirable. You have to look at them as necessary. You see what I mean? Because your rent is necessary, your cost of goods sold is necessary, your staff pay is necessary, and that’s why you make the money that you do.

Eric Miller:
Yeah, but you got to make these other things necessary. And that’s the difference between a solvent, expanding company and one who’s kind of struggled is that they figured that part out.

Dana Robinson:
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Dana Robinson:
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Dana Robinson:
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Dana Robinson:
So it’s a single, single asset type in the fund. But I’ve noticed this pattern of businesses that we evaluate. Whether we buy them or not, it’s sort of irrelevant. The business that’s an owner operator business when they sell, are often at that point where as an outsider you go, why didn’t you just x, why didn’t you hire a general manager? Why didn’t you do this? And talking to Burnouthen, you’re burned out and you just want to sell, but you’re making 600, 700, $800,000 a year. And some of it is the sort of lack of discipline of taking some of that and setting it aside and saying this is to grow the business. This is my investment back in the business. And I like your method. Reminds me of when I was young and broke and would put cash in envelopes.

Eric Miller:
That’s right. Our grandparents taught us how to do this. You know, it works.

Dana Robinson:
It works because it’s forced discipline to sort of just allocate to these things and, yeah, and it makes them a priority. It forces you to make them a necessity. And then, and then you can say after, you know, two, three quarters of your growth allocation, you can say, hey, we, now we’re going to hire for this position. And until it’s baked into our organization, we have a reserve to help pay for this new position that we can afford to grow.

Eric Miller:
Yeah, that’s right. And it’s a telling way to expand. It certainly lessens the stress of expansion. But you have to expand. Like I just, you just can’t get around that. Like, I mean, it’s you, you can’t have the mindset that, you know, we’re just going to try to like steady Eddie it and we’ll just go this way.

Dana Robinson:
It just, yeah, yeah. In the businesses that I’ve reviewed a lot for the, for the, in the last couple of years, usually missing a sales driver. And the reason is those people are expensive, you know, so the, they, their worth. And for example, in a private equity organization, they’re going to get compensated for what they feel is fair. But the owner who is still doing biz dev needs a sales driver. And when you ask, well, why, I looked at one business and it was like, well, what do you lack? Well, we really need a sales whole department, which means you need a sales driver plus sales people under them kind of lead setters and all of that. And I’m like, well, why haven’t you? The real answer, after trying to psychoanalyze the situation was, well, the owner gets to keep a million to a million, five a year, to live a really good life and to build that sales organization, they’re going to give up half of that for a year or two. But as you know, the net result of a good sales organization should be to propel that business to double or triple its profitability.

Eric Miller:
Yeah, that’s kind of short term, that’s short term thinking. And I don’t know what the multiples are of a business like that, but.

Dana Robinson:
Um, well, if you just, just say that they’re four or five x and, you know, for your typical bottom of the lower middle market, under 2 million of EBITDA, there’s almost nothing trading above four or five.

Eric Miller:
You got to get in the healthcare business. You want to know? You want to know, you want to know what veterinary hospitals we’re paying out?

Dana Robinson:
I do, yeah.

Eric Miller:
So at the end of 2020, if you had a hospital that was doing $750 to $800,000 of EBITDA, you were getting 18 to 20 times EBITDA.

Dana Robinson:
Do you, you must understand what’s driving. I mean, I don’t understand.

Eric Miller:
It was great. Well, yeah, and in it’s come down, but it’s still ten to twelve right now. And right now, I think the threshold for most of these healthcare businesses, if you have an EBITDA of over 800,000, you’re going to get an eight and a half to nine multiple right now to pay that.

Dana Robinson:
And for those that are listening that don’t understand it, that value in most businesses is a multiple of your adjusted earnings before interest, tax and depreciation amortization. Your EBITda is how we measure value. And what someone will pay you is called a multiple. So they pay you. If you make a million dollars a year in EBITDA, doesn’t mean cash flow. It’s adjusted for a lot of things. It’s a generous number. And if you sell five x, that’s $5 million.

Dana Robinson:
So that means in a financial buyer’s mind, it would take them five years to recoup. Actually quite a bit more than that. When you consider the cash flow versus EBITDA differential to get to ten or nine or eight and a half at that size, dont the buyers have to have something thats going to expand that profitability and revenue very quickly, or is it just a very long play with long patient money?

Eric Miller:
It probably is a little bit of both. I think that the bigger groups have better negotiating power with the insurance reimbursements or they have the ability to. The cost of goods sold, especially in, like, some of these medical facilities, is pretty expensive. It could be up to, like, 18% to 20% of their revenue goes to cost of goods. So that’s like medication and, you know, accessories and all that stuff. And I think the bigger groups can probably get that number down to, like, 5%, you know, so that’s probably why they’re willing to overpay for that. And then a lot of them are playing the longer game of, you know, we’re just gonna acquire as many of these kinds of practices as we can, and then we’ll get to sell it to a bigger guy at some point in time. But, yeah, that was, that was a crazy part.

Eric Miller:
I always, I always love telling people that because they’re, they always go, how much?

Dana Robinson:
Yeah.

Eric Miller:
Hammer should have been a veterinarian.

Dana Robinson:
Well, and it’s, you know, that it’s still a lot. It’s a lot of work to build a veterinary business because it’s not easy, especially when you consider that EBITDA requires that the, you know, the owner’s pay be, you know, basically translated into whatever general manager’s pay is, it’s the 800,000 has to be net of themselves. Right. Their pay is not added back in unless it’s above market. Correct.

Eric Miller:
For someone. And, you know, I think for most people that are in any kind of business that want to sell it for value, you know, your own personal production can’t be, you know, probably more than 15, 20% of what you’re bringing in at this point in time.

Dana Robinson:
Yeah.

Eric Miller:
Because it’s just too, it’s too risky at that point for the buyer. You know, if you’re doing like, 60% of the production on there, you’re just not going to sell it for that much.

Dana Robinson:
Great. Okay, good. Let me just point, point out great advice. The, whatever your service business is, another reason why you should be investing over the course of years into replacing yourself is because your ability to sell that business will be seriously hampered if all you’re selling is your, is, for example, your law practice. The options for me when I had one junior partner was sell to my partner or go work for the buyer. Right. I basically would have sell my practice to a big firm and then become a partner there and earn my keep as a partner. And that’s not the same as exiting a business at eight times 800,000 of EBITDA.

Eric Miller:
Yeah, that’s way more awesome doing it than.

Dana Robinson:
What other things can people learn from you that’s going to make their exit way more awesome? Eric?

Eric Miller:
Well, we talked about what, you know, I think the, you know, some other nuances, just, you know, make sure that you’re emotionally and financially ready to exit out. And when I say emotionally ready, obviously don’t be burnt out. Have another game in place that you’re gonna go do think the worst thing you can, because, you know, you own a business. I mean, you own 30 of them, for crying out loud. I mean, you’re going 180 miles an hour.

Dana Robinson:
Yeah.

Eric Miller:
And then when you sell it, you dial it down to zero for a period of time.

Dana Robinson:
Yeah.

Eric Miller:
And that can mess with people and they gotta fill the void up. And unfortunately, a lot of people fill it up with not so good things.

Dana Robinson:
Right.

Eric Miller:
And, you know, I think I’ve had two or three people that have gotten DUI, you know, the first year that they’ve, you know, because they just have a game. There’s no game there. So I definitely recommend people make sure that you’re emotionally ready to exit out. Maybe that you’re just, you’re done with the game of whatever business that you’re doing right now, but you’re going to replace it with something other, some other purpose. It doesn’t have to be business, it can be something else, but there’s some other purpose in life that you have. Yeah, I think that’s really important. Financial readiness, obviously, is very important as well. I would try not to, to base my retirement on just the sale proceeds of the business.

Eric Miller:
So that’s kind of why I recommend people start extracting, you know, get a, some, some method of taking out money every single week, every single month, every single year, so that you can create some other income sources outside of the sale of the practice or the business or whatever, you know, that you own. I think that’s, that’d be smart to do for a lot of people. And there’s another thing I was gonna, was gonna say, but I forgot it, but keep talking and I’ll remember it.

Dana Robinson:
Yeah. While the practice is going, you’re sort of siphoning off some profit intentionally to set aside to grow your wealth. You think that real estate is an opportunity. While you have the ability to have assets and income to justify loans, to get into some rental properties or your.

Eric Miller:
Own facility, your own building. I definitely have had a lot of people that have sold to bigger groups. And if you sell to a corporate or a private equity group, most of them arent buying the real estate, they just want the business and theyll lease.

Dana Robinson:
The real estate at whatever premium the market holds. And then you still have that property.

Eric Miller:
Yeah. And now you have the building and they just, they sign, a matter of fact, ten year lease here, five year renewables, they’ll, they’ll increase it 2% every single year. They’ll handle it. It’s triple net, so they’ll handle everything. Aside from the roof and the parking lot.

Dana Robinson:
Yeah.

Eric Miller:
And it’s like, where do I sign up?

Dana Robinson:
Yeah.

Eric Miller:
So it’s. That, that’d be another thing that I would, I would definitely do, but, yeah, those are the two main things. And then obviously, prior to selling, because selling gets in the actual sale, you got to have a good team. I mean, you really do. I mean, I would make sure that you obviously have a good financial advisor. You know, if you’re going to use a broker, which, you know, depending on the size of your deal, I would recommend, because they, they do know how to negotiate and do things that you guys, most people just don’t know how to do.

Dana Robinson:
Right.

Eric Miller:
Obviously, a good accounting CPA, you’re going to need on your team. You know, make sure you have a good team prior to that. And, you know, don’t be afraid to negotiate with the buyer. Yeah. You know, don’t be afraid. Like some people, I’ve. I met one person, of course, you get, again, I’m talking with, like, these small, you know, a doctor. He’s like, well, I don’t want to offend them.

Eric Miller:
I’m like, I’m gonna tell you something. You’re not gonna offend a private equity guy.

Dana Robinson:
No. And they’ll have just saying no either.

Eric Miller:
Yeah, and they won’t at all. He was like, the story is really quick. He was like, his numbers were really good, but he was trending higher. When they first formulated, they got the Loi, and this is what he was going to sell for Loi is the letter of intent. I don’t know if, you know, it’s just. That’s the kind of the first. That’s the first whatever you call it. Right.

Dana Robinson:
First step in the sale process.

Eric Miller:
Yeah, exactly. And he started, his profits were really taken off, and I was like, well, my advisor was talking to him, say, why don’t you, like, ask for another $500,000 here? I mean, because your numbers are looking really, really good. And, you know, this was, you know, eight months ago when you guys did this, and the guy’s lawyer was like, no, you’re going to kill the deal. You know, don’t do it. Don’t do it. And he did it. And they said yes. And I was like, good.

Eric Miller:
You’re what? All they were going to say was, no, they weren’t going to kill a deal because you asked for another half a million dollars.

Dana Robinson:
Absolutely. I think that’s, that’s sage advice for sure. I mean, the, you know, there is the playing your hand too strong so that people, people, the buyers, you know, who are on the edge might be like, ah, you know, don’t push us because we’re, we’re, don’t give us a reason to walk because we’re kind of fragile right now. But, yeah, if you’re trending up, there is no reason why not to just say, what, can I have this? And, and even during the deal, like, you know, there’s plenty of room for a request. Any request that’s not done in a brash way, it’s going to get considered. And again, because this is deal, guys just do deals. They might just say, no, it’s okay that you asked on, you know, we’re not. But there is, I’ve never met anyone that’s offended by somebody negotiating.

Dana Robinson:
Unless they’re negotiating offensively.

Eric Miller:
Exactly. Yeah. Just be probably, I mean, just be, matter of fact, be professional, I think, during the deal. And, um, you know, I think those are, and I also try to, at least for the people that I’m dealing with, I try to get as much upfront paid. I don’t really like the earn out, um, setups where, you know, because, you know, if you’re going to sell your business, you’re kind of done. And I wouldn’t want my business, my future sale, to be based upon me having to hit some of these targets. And so I would try to, like, not have that in there, but that, I mean, that if you’re still, you still want to work there and you still want to grow it, maybe, you know, you could do that. Maybe that would be a proper structure.

Eric Miller:
But most of the time when people that we’ve had are selling, they’re just kind of checked out. They’re done. Yeah. So, you know, you really have to structure a deal. And I would not be, I would not be dependent upon, because a lot of this requires you, you know, rolling over a portion of the equity into the private equity group that’s buying you if you’re getting bought out by a private equity group. And sometimes they will embellish the amounts that you’re going to get in that second piece of the apple.

Dana Robinson:
Well, they’re making projections based on a model with assumptions, and you might double or triple your money and you might not. So, yes, you can’t take it in as the absolute as you need this to get the retirement that you want.

Eric Miller:
Yeah, just make sure the first bite of the apple is more than enough for you. And then whatever you get on that second bite would just be kind of a cherry on top.

Dana Robinson:
Yes, yes. I know. I know of a seller that sold his business and had a multi million dollar earnout that he was on track to hit until Covid. So even things that are out of your control, and that was a gamble that was probably still wisely made. You can’t project predict a worldwide pandemic shutdown. But the. But, yeah, being happy with the outcome, regardless of whether your earn out or your holdback comes, is important. Right.

Eric Miller:
And then I’ll probably, if I can say one more thing, I think the last thing would be know where that money is going to go prior to have a plan in place already of where the sale proceeds are going to go prior to selling. Because, you know, the worst things that we’ve seen happen are, number one, you get a. This is the biggest financial transaction of your life for most people, and you don’t get to take. You don’t get to take. Take it back. And, you know, that money comes to you. All of a sudden, you’re seeing, you know, millions of dollars in your bank account, which you’ve never seen before. And two things happen.

Eric Miller:
Either you are terrified because you don’t want to lose this money that you just got, and you just hold on to it and it just sits in a bank account earning two or 3%, or, you know, the wolves come out. Don’t ask me how they know, but they do. The sharks know that you have a lot of money.

Dana Robinson:
Yeah.

Eric Miller:
I can’t explain it. It’s so wild. Like, all of a sudden, these people that this person’s never. I’ve never heard of this person. I’ve had a relationship with you for ten years, and all of a sudden, you got all these people that I’ve never heard of before coming to you with investment advice and, you know, telling you to go buy this and that and blah, blah, blah.

Dana Robinson:
Yeah, yeah. So you don’t want to become an accidental angel investor by having the windfall. And there is this. The feeling that you get from selling something is slightly delusional. Right? You get. You get a sort of human high that lasts for months sometimes. That’s delusional that you did something fantastic and you should really enjoy that. But you should not make decisions during that, including, hey, I’m so good at this making money thing.

Dana Robinson:
I’m gonna put all this money into this guy’s bar down the street or this guy’s restaurant concept, or this, you know, this person’s whatever, you know, it takes a years of slowly dabbling in biotech startup investing before you should, you know, even allocate 50 grand into that kind of investment. And when people come out of these business sales, they spread all that money around thinking that everything’s going to double or triple. And it doesn’t.

Eric Miller:
That’s not really the game. Most of the, like, the bigger private, I guess, family office types that I’ve ever meth, you know, or their. Their first priority is making sure this money is preserved, you know, and then it can create the cash flow that you need to live your life. It’s not to like, try to double or triple the. That’s already been done. You’ve already done. You created the wealth. Yeah, that was through the ownership.

Eric Miller:
Now we’re just trying to preserve it so that it can sustain you for however long you want to live and whatever kind of legacy that you want to live. So just be intelligent with how you allocate that money. It doesn’t mean that you have to take zero risk, but just have a plan in place with someone that has been through this and are going to allow you to put that money in places that will pay you back.

Dana Robinson:
Yeah, I love that. I’ll just tag one thing that is sort of a corollary to the idea that people often misallocate right out of a sale into risky investments that they don’t understand. The. You said earlier you should have a plan for something to do. And there’s a lot of people who’ve had a fantasy in their head, you know, while they’re working their. Their hard work or running their business. Someday I’m going to own a coffee shop. Someday, you know, I’d have the good life if all I did was run a boat rental business or, you know, like, whatever that thing is.

Eric Miller:
That fishing. Fishing boat.

Dana Robinson:
Right. So the. I would say maybe you’ve seen this as well. Build that plan for what you really want to be when you grow up carefully and have it not be something that requires the investment of this money that you’re about to extract, because you’re coming from a success into something that maybe is more speculative, it’s going to use your time, and that might keep you busy and give you something to be passionate and ambitious. About, but also creates one of those pitfalls that I’ve seen where people come out of a, you know, great opportunity to sell and then end up deeply immersed, time, money, energy, into something that’s not going to pan out the same. And the thing that got you the success that you’ve got might not be the thing that you need for the next thing that you need to do with your time. Yeah.

Eric Miller:
It’s a totally different market and your learning curve on that. It’s going to, you know, I mean, look how long it took you to get to that point with your business. Years and years and years. So there is an element of time and a learning curve. So, yeah, wouldn’t take $3 million and then I’m just going to go buy a restaurant or a bar and take my $3 million and go buy this. That would, that would definitely be a mistake.

Dana Robinson:
Yeah, I’ve seen it, and it is. It’s a tough thing to see, but, and you can’t talk somebody out of it. So I’m saying it now while you’re, any of my listeners are thinking about what happens in their next iteration. Take your time and maybe start nurturing that thing you want to do a little bit as a side thing while you have the security of the business that you’re running.

Eric Miller:
Yeah. Prove to yourself first that you can actually do it, and then before you start reinvesting a bunch of money into it, get a product.

Dana Robinson:
Yeah, I love it. Eric, how do people get in touch with you?

Eric Miller:
Yeah, they can just go to, well, econologicfinancialadvisors.com. that’s just econologicsfinancialadvisors.com. Yeah, I know. And you can just schedule an intro call. We have advisors that are trained in helping business owners not only harness the power of your business to build personal wealth, but also help you go out at the top of your game.

Dana Robinson:
Love it. Sounds like a great piece of the team that anyone needs to be building when they’re a couple years out from thinking about selling.

Eric Miller:
Absolutely. Never too, it’s never too early to start planning your transition.

Dana Robinson:
Great. Thanks for coming on the podcast today. Everybody else, don’t forget. Hello@danarobinson.com if you want to communicate with me so that it doesn’t get lost in my regular email, thanks for listening and or watching the exit Plan podcast. And Eric, thanks for coming on.

Eric Miller:
Thank you, Dana, thanks for joining me.

Dana Robinson:
On this episode of the Exit Plan podcast. I’d love to hear from you. Feel free to hit me up with questions or comments by emailing me at hello@danarobinson.com or leave comments and questions by calling 858-252-7785 call 858-252-7785 and leave a message.