Improving Business Value – Justin Goodbread

Justin Goodbread:
You know, as a small business owner, I believe in order for us to get the maximum value for our company, we have to build companies that operate without the business owner at the epicenter of our business. If the business owner is still the epicenter of the business, then they have nothing to sell. So I’ve always taught that you have to have systems of processes and reporting that the big boys do. There’s a reason why certain companies have good price for earning ratios and their company specific risk is declined. So if we as small business owners can take on the same personalities, the same attributes and build in our small businesses the things which allow big businesses to have the PE ratios and low company specific risk, then we win.

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. Hey everybody, it’s Dana Robinson coming back at you with another episode of the Exit Plan Podcast. Today’s guest is Justin Goodbread.

Dana Robinson:
Justin’s a entrepreneur and somebody who actually has a business around helping other entrepreneurs and so we’re going to get a double whammy. I hope I can get a good story out of Justin’s own experience and also learn what he’s learned and pass that along to you as the audience. Justin, thanks for coming on.

Justin Goodbread:
Dana, thanks for having me brother. Look forward to this conversation.

Dana Robinson:
Yeah, I do this because it’s fun and I’m always curious about someone else’s journey and what I can learn from it and hopefully people are listening. Get to learn along with me. Let’s learn more about you. How what, what are you doing? And how’d you get to do that?

Justin Goodbread:
Man, that is a journey. I like the word journey because it’s taken 32 years to get to this point. Been a business owner now for over 30 years. Started when I was 15 years old, in my mid-40s now and have gone through seven exits myself. Started companies, sold them from five to nine figures and you know my I’ve reached the point my life where now after being around business, seeing everything you can see in business, literally if you name it, I have seen it. Either through my own personal experiences or through coaching business owners. Now I’m enjoying imparting knowledge and helping business owners reach their ultimate sale. Take.

Justin Goodbread:
Taking business owners to the point to where now they can capitalize on this asset, which often comprises of almost 80% of their net worth.

Dana Robinson:
Yeah.

Justin Goodbread:
So it’s a fun journey. It’s a fun journey to sit down with business owners and say you’ve got this highly illiquid asset that more than likely no one wants to pay you what you think it’s worth. How can we now take and maximize the value of your business over a very short period of time, walk you through an exit and let you experience true entrepreneurial freedom? True freedom.

Dana Robinson:
Yeah, man.

Justin Goodbread:
That’s what I’m doing these days. It’s fun.

Dana Robinson:
Awesome. Yeah. So what? Well, I want to come back to the how because I know from businesses I’ve acquired and businesses that I’ve. That I’ve exited myself. We most owners leave a lot of meat on the bone and, and they don’t have to. There’s a lot more opportunity to monetize if they think ahead and they get good advice. So we’ll get to that. Seven exits.

Dana Robinson:
You got to talk me through some of those. Some of those businesses, what they were, the more detailed the better. Like you’re 15 years old. I, I like the first one because I was mowing lawns at 15 and making surfboard bags and selling chicken eggs. You know the learning business as any 15 year old should. What was yours?

Justin Goodbread:
Not that dissimilar. I was cutting grass. But it was a, it was this conversation, Dana, that my dad had that changed my life. So I was homeschooled. So where my brother, my sister and I back 30 years ago when homeschooling wasn’t popular. In fact we were the ones that whenever the bus would drive by as we would get made fun at and thrown things at because we were the weird ducks of the neighborhood. But mom and dad made a decision in their early days, coming from very dysfunctional families, very broken homes, that they wanted the very best for their children. Children.

Justin Goodbread:
And I know every parent wants to say the same thing and we do the best we can. Mom and dad were blue collar workers. Dad worked for the Georgia Port Authority. My mom worked at the hospital as a master’s level nurse at the hospital. But they brought us home in our early, like I think I was in third grade. They brought us home from a Christian school and they said we’re going to educate you to be business owners. So instead of taking the traditional approach where we were learning algebra or, you know, literature, we were reading Robert Kiyosaki and Dave Ramsey and Larry Burkett, and I was going to Zig Ziglar conferences, and I was listening to Les Brow around on stage talking about, man, you got to be hungry as a business owner at the age of 13, 14. So whenever I turn 15, pops, I call my dad.

Justin Goodbread:
He said, son, if you don’t have a job by this Friday, don’t come home. He said, but here’s some rules. You can’t work for anybody. I know now the last name Good Bread is not a name you quickly forget. And I was born and raised in a small town, and my dad knew everybody, it seemed like. So he goes, you can’t work for anybody. I know. You can’t work fast food.

Justin Goodbread:
And you can. You. You can’t work for a grocery store. Good luck if you have a job. I Friday, don’t come home. Long story short, on Friday afternoon, I found Mr. Brown, who didn’t, quote, quote, know my dad. I cut his grass for about two hours.

Justin Goodbread:
He paid me 40 bucks. Way back in the 1990s, I was sitting there with a clean shirt on. Smell good, Dana. My dad comes home from the Georgia port smelling like the port, like a typical hardworking American does. And he sits down beside me, puts his hand on my knee, and he says, son, I taught you a lesson today, and that is this. If you work for yourself, you’ll always have freedom. If you work for, as he called it, the man, you’re going to be beholden to the man. So, Dana, we launched a company called Lawn Care by the boys.

Justin Goodbread:
And within two years, my brother and I, who were two years apart, were making more income each than my mom and dad were together. And that launched the journey, brother, of being an entrepreneur. That was our very first business.

Dana Robinson:
That’s great. That’s. Yeah. I ended up spending my experience as, you know, the kid mowing the lawns into a landscape company as well. When I was 19, ended up growing that, acquiring municipal accounts, bought another business. Like, I still remember, like, not, you know, not being able to make payroll. I remember all the bad experiences of all the stuff you learn when you’re kind of raised by wolves in business.

Justin Goodbread:
Yes.

Dana Robinson:
What was the ultimate outcome of that business? You ran that business. You probably did like I did. Made a lot of mistakes, figured out what to do with, you know, hiring people and paying for insurance and all that stuff. Did you end up selling it, growing it, Move on to the. And what was the next thing?

Justin Goodbread:
Yeah, so I sold it. Whenever I was 22, my wife came into my life. She was from Knoxville, Tennessee. My wife is Filipino by nationality and I lived in South Georgia. And Dana, I was raised in a very traditional family. We were like leave it to Beaver, right? Like, I mean we were like the traditional Waltons of the last of the last century. And I saw racism for the first time and it was ugly to me. I saw my wife, who was, who’s a beautiful lady, broken because of words of meanness.

Justin Goodbread:
And so we made a decision that, look, we’re going to raise our family different than this. We’re not going to subject our children to this particular environment. So we sold that company. Could I have got more money? Absolutely. Did I do what was right for my family at the time? Yes, we sold our company. We moved from, from South Georgia to East Tennessee, where in Knoxville. It’s a really good melting pot because of the university here. There’s a really big nationality of as and Filipinos as well as other because of the national labs that are here, a lot of engineer mindset.

Justin Goodbread:
So moved here to East Tennessee and was recruited into the financial world by American Express Financial Advisors. Worked in that space for a little while, became a partner in a firm, an independent firm, and then faced a business divorce, let’s call it a lawsuit separation. Seven years of hell, literally hundreds of thousands of dollars in legal fees. But I learned so much in that seven years of tribulation during that time period. I ended up ultimately selling my book of business as part of that separation. And I started another company to help pay for legal bills called Dental Management Group. I was helping dentists actually buy a practice, working from a. Working with a broker, turning that business into their own, scaling it and selling it.

Justin Goodbread:
And that ended up being acquired during that seven year period by national firm. So now I’ve sold three businesses. A landscape company, a consulting business and a insurance based company during the early days. And ultimately I found my footing whenever I built my last three companies that I personally launched, which was a financial planning firm that worked specifically with business owners, but also had a financial consulting component to it and a separate sister company and a marketing firm. It was Heritage Investors, Heritage Business Advisors and Financially Simple. And I started this company from scratch after learning that, that if business owners focus on value as opposed to profitability, we can build businesses that are highly transferable. And I learned this methodology that often you would have in your industry from the M and A world and the investment banker world. That, hey, as you said, business owners leave a lot of meat on the bone.

Justin Goodbread:
Well, how can I backwards engineer this to build a company that is highly valuable and highly transferable and attractive? So I launched a company from scratch 49 months later, had an eight figure exit. The company bought me, brought me in and said, hey, won’t you be the president of the company? Took them from where they could not capitalize. 18 months later, we just did a nine figure exit. So it’s been a fun journey, man. It’s been a fun journey of, on a plethora of different ideas. But it’s been amazing to reach where I’m at, have some freedom, but also be able to impart a little bit of wisdom, if you can call it that after 30 years in the trenches.

Dana Robinson:
Yeah, that’s amazing. So the, the just to clarify, in my mind, you built this three division business or three related businesses and then you take an exit. Did they bring you back in when they, when they floundered after buying it from you, or did they just recruit you straight as part of the acquisition to stay on?

Justin Goodbread:
They recruited me straight as the acquisition to come on. They wanted me to originally stepped in as the, as the chief strategy officer because the acquiring company was, was trying to acquire. They were an aggregator, if you will, using our terms. They were buying a bunch of different businesses, trying to push them together. So they go and do their own exit. And they needed somebody who had a, who could look at the business strategically and tell them what they need to do. As I began, I was sitting in that seat for about six months and finally the CEO comes to me. He said, hey, good, Brad, look dude, you’re not in the right seat.

Justin Goodbread:
Can you take the CEO role? And I’m like, no, I just sold the CEO role. I don’t want that right now. I want a break to play with my kids. He’s like, would you step into the president role? And you only answer to me and you can run the company. Here’s your assignment. I need to capitalize this company in 18 months. I said, you can, but I need to have hiring privileges, firing privileges. I need everybody to roll up to me.

Justin Goodbread:
But you ultimately take all the responsibility and authority. But I’m your workhorse. And so I stepped to that President Rodana right out of my acquisition. It was different. Working instead of working in a small business, working in a middle market business with a national footprint versus a regional footprint. But what I was able to prove is the same principles that I teach our coaching clients today, the same principles that led me to have an 8 figure exit in 49 months. Worked also in the middle market. It’s what allowed the buyers to get all the meat on the bone and them keep it, I’m sorry the sellers of them to keep it and at the same time attract a higher quality buyer, as you well know.

Dana Robinson:
Love that. How do you think you did as an entrepreneur turned operator? I ask because I’ve, I’m not sure I’m the guy when it comes to like I’ve, I’ve been. I chose a role with a, with a roll up where I was general manager. So I was one of the executive executive team and I found it, you know, interesting, challenging, like lots of learning experience. But I, I just can’t. Having been an entrepreneur where you get your hands dirty and you sort of, you, you, you don’t have systems in process and, and you know, there’s different, different personality. You’re an entrepreneur, it sounds like. How’d you function? And, and what are some of the.

Dana Robinson:
Because I, I asked for a couple reasons. One, I’m always curious because that seems like there’s two personalities, two avatars between the entrepreneur and the, and the operator. But also I think getting some of that meat that you want off the bone means entrepreneurs have got to start thinking like, like a professional operator or engaging in hiring the right people. So like talk about your own personal experience. Did you, did you flounder? Did you flourish? Did you have coaching? What, what made you able to go from a I, what I know is the entrepreneurial sort of personality to a middle market company that has to have had, you know, cadence of meetings and operational excellence reporting and you know, like the MDNAs and you know, all the stuff that goes along with that is foreign to most entrepreneurs.

Justin Goodbread:
If I’m being completely authentic, which I try to be, it was the hardest 18 months of my life. Because you know, as a small business owner, I believe in order for us to get the maximum value for our company, we’ve got to build best in class companies. Which means we have to build companies that operate without the business owner at the epicenter of our business. Hands down, if you’re, if the business owner is still the epicenter of the business, then they have nothing to sell. They have selling a job, right? And that’s why they don’t get premium dollars for their business. So I’ve always taught that you have to have systems and processes and reporting that the big boys do. There’s a reason why certain companies have good price for earning ratios and their company Specific risk is declined. If we as small business owners can, can take on the same personalities, the same attributes and build in our small businesses the things which allow big businesses to re to have the PE ratios and low company specific risk, then we win.

Justin Goodbread:
So I’ve always believed that and I taught that I did it with my own company. Right. And as I say that day and I’ve automatically set myself apart from 99.99% of my business owners because they don’t talk the way I just spoke. Right. So whenever I stepped into this role as a president with hundred something employees, structures, processes, space, the entrepreneur is the entrepreneur spirit I had was I can fix this, get out of my way. The hard part for me was working the political system through people who didn’t, who weren’t incentivized, the same measurement of key stakeholders, working through them to get the job done. There’s a special avatar, as you said. There’s a special avatar, a true manager who can work through people vicariously.

Justin Goodbread:
Did I do a good job at it? I accomplished the mission, yeah. But I banged a lot of heads. I had a very hard time and if I had to do it again, I would walk away. I would never step myself back into that position again.

Dana Robinson:
I, I love it because. Thanks for being honest about it because I feel the same way about the, the times when I have had to become the, the sort of operational and management minded versus entrepreneurial is a very creative and problem solving. So I mean the. You’re either creating something from scratch or you’re solving problems that other people in normal with a management avatar aren’t necessarily don’t enjoy that challenge and those things fuel us and also make us very messy people in business. And as you say, if you’re the center of gravity for your business, you have to get out of that or, or you have to solve for it yourself. You have to become, as you did for a season, that someone who you’re really not so that you can hand this business over in the kind of shape it needs to be for someone to, you know, carry on that legacy without your involvement.

Justin Goodbread:
Right, Absolutely. And that’s. It’s tough. What I, what I have the privilege of teaching business owners today, especially small business community, when I say small business, obviously the SBA says anybody with less than 500 employees, but I’m talking about people with less than $50 million in Reven. Right. Whenever I’m talking to small business owners, we are a tenacious lot. You know, if we come up to a wall, we’re Going to go through the wall, around the wall, over the wall, under the wall. Because we are.

Justin Goodbread:
We don’t like the word. No, we, we’re creative, as you just mentioned. But that own, that, that tenacity and that resilience, that controlism that we like to drive the steering wheel of our business ends up harming our largest asset. It ends up taking. You know, if I look at, and I’ve looked at thousands of P&L’s and studies come out that show that small business owners, their business is often 80% of their total net worth because they haven’t been saving in a 401k like their employee counterparts have. Maybe they paid a house off, but more than likely they’ve been reinvesting into this business and they’ve got a really good asset that provides a dividend to them. But most business owners have this rental house so they’re collecting rent on, but they can never sell the property. And that makes no sense to me.

Justin Goodbread:
So in order for me to move to an exit that was highly lucrative, best in class, and to coach business owners today to a highly lucrative, best in class exit, they have to get out of their own way, which is converse to what the way God designed us. God designed us in a unique way that we have to be at the center of the business. So we end up fighting our demons. And I’m telling you, as you know, it is hard to trust the 20 year old in this particular department and a 30 year old especially whenever you’ve been in business 30 years and you’re like this little punk kid, I’m going to trust them with my asset, with my baby. But until we do that, Dana, as business owners, we never really take possession of that house. We just are collecting rents, we’re just collecting dividends. And then when it comes time to exit the business, hopefully on our own terms, many times not because of health, disability, divorce, something, but hopefully on our own terms. The statistics says, according to the AMA academies, emergers and acquisition advisors, that only 4% of businesses which transact, only 4% of those owners are actually happy with the results.

Justin Goodbread:
And that’s ridiculous. That’s ridiculous to me. Especially when they got 33 million business owners that actually employ people here in North America. To say that only 4% of them who actually transact, only 14% will actually transact, only 4% of those will actually be happy with what they receive. That to me is dismal, especially to the backbone of our society.

Dana Robinson:
Yes. Yeah. Well, let’s, let’s learn from you what what are some of the things you have, processes that you think about, like, treat me like I’m a squirrely business owner that I probably am and have been. I, I come to you knowing that in a couple of years I, if I have the ability to, I want to transact. Yeah, yeah.

Justin Goodbread:
So I walk everybody through a four step process, simple process. The first thing we need to know, Dana, is how much is your business worth today? And keeping revenue and asset class, Nic code, sic code, whatever the code is keeping everything the same. How far is your current valuation off from best in class? You and I both know, especially with your career and with what I’ve dealt with, you and I both know that every business has some sort of value. If they have a website, there’s some sort of value there. It may not be worth much, but there’s some sort of value. So if we can appraise the business today and we can compare it to best in class data points, we know there’s what’s called a value gap for the majority of businesses. You said leave meat on the bone. How can we take that business, that business owner today and say, look, I don’t want you to increase company specific risk.

Justin Goodbread:
The way I describe that is I don’t want you to take your water hose that you would typically water your yard with and try to attach it to a fire hydrant. You’re going to blow the water hose up. I don’t want you to go out and say if you’re used to making $100,000 in revenue, that you’re going to double your revenue within 39, 40 months. It could be good, but you’re probably going to end up breaking your systems down in your company. What you really should be focused on is how can I move the multiple? If we’re going to use a simple. I know you probably often use discounted cash flow methodology, but for many business owners we’ll use a multiple approach. Right? So we take $100,000 times a multiple of two, the business worth 200 grand. Instead of doubling the revenue, let’s double our multiple.

Justin Goodbread:
Let’s in, let’s increase the intangible capitals of the business to make it where that business can be taken over by a buyer and that the buyer is confident that what they’re buying is going to be there within a certain period of time, whatever the industry is in. So step number one is what is your business worth and what is your value gap? Once we know that, then we can look underneath the hood of that car and we can say hey, look, all eight cylinders aren’t hitting right. Let’s now look at the eight areas of business. Let’s make sure they’re best in class. And as we examine these eight areas of business, let’s pull you, the owner, out of the epicenter of your business. Let’s build it to where somebody can step into that seat or the strategic buyer can buy it and place their people in the seat. Let’s make it to where it’s, it’s, it’s able to be morphed to whatever the buyer wants. So the eight areas of business is planning.

Justin Goodbread:
You have the right type of planning in place because the buyers want to see it. You know this leadership, sales and marketing. Your team is dynamic. It’s a big part of your price. Your operations has to be efficient, your financial records have to be strong, and you’ve got to reduce your risk, whether that be legal, insurance risk, etc. So you have eight areas of business that drive the ultimate multiple of your company. Now, inside those eight areas, there are eight key drivers of business. For example, recurring revenue, owner dependence, the youth of your team, the structure of your systems, the quality of your assets, the flow of your revenue.

Justin Goodbread:
There’s eight areas of that actually drive those eight. There’s eight value areas that drive the eight areas of your business. So when I’m teaching clients or business owners, I’m like, look, we know your value today. We know what your value could be. All things being equal, let’s get underneath the hood and let’s make sure the engine’s hitting on all cylinders, those eight areas. Then once we understand where it’s broken, let’s run a 90 day sprint and we get your team to adopt exactly who is going to do what by when. And we’re only going to focus on two or three things over this 90 day period of time. What happens is, Dana, is whenever the owner realizes that my company is worth something and yet it could be worth X, let’s say it’s worth $100,000, it could be worth $300,000.

Justin Goodbread:
All things being equal, they readily become anxious and attentive into moving the things which drive the multiple or which drive the value without necessarily having to go out and work harder. Friend. Whenever I learned that, Dana, it changed my life. It changed my life and I was able to take my company and other companies through a process that was repeatable and predictable and generate amazing best in class results for exits.

Dana Robinson:
Dana Robinson here. Quick plug for my book, the King’s Fly Swatter. You can see it here. Behind me. If you’re watching this, I’ve got it in my hand. It’s a beautiful hardcover book printed to make it giftable, something that you can share with a family member, buy as gift. So this latest book, it’s a fable about a person who has a really crappy job. Let’s just start there.

Dana Robinson:
This is a book that most people can relate to because we’ve all had crappy jobs. This is the story of Ubar, a servant in the court of a Babylonian king who masters his boring, monotonous job and then learns to listen to the king, hearing him rule the kingdom while quietly swatting flies behind the cane. Eventually, Ubar becomes the wisest and most successful man in the kingdom. The story is fun and it’s easy to read, but it’s not mythology. It’s my story. And as I shared the idea with colleagues and friends, I learned that it was their story. And guess what? It’s your story. If you’re at a job of any kind, one that you love, one that you hate, one that’s just enough to get by, this little book gives fresh perspective on how to leverage that job to get you something greater than a paycheck.

Dana Robinson:
The lessons in this parable are entrepreneurial lessons, but not what you might think from the current entrepreneurial zeitgeist. If you or someone you know are looking for a real pathway to entrepreneurship, here’s the secret. Your job is the way out of your job. It’s counterintuitive, but once you see how it works, you can’t unsee it. Learn the way of the Fly swatter from the parable of Ubar and from the stories I share from my 30 year business journey. You can get a free copy of the King’s Fly Swatter by going to danarobinson.com yeah, it’s funny. I’ve had, I don’t know, 150, 175 interviews with entrepreneurs. I haven’t heard anybody sort of use that as a matrix for processing the what you can do in a short period of time to fix a business.

Dana Robinson:
You’re just saying, forget about increasing revenue when you’re not, you’re not going to talk about growth in order to get to this value that’s ex. That’s expected. You’re just saying if you got a business that, you know, in, in our space, you got a landscape business that’s worth three times ebitda, how do you make it worth five times ebitda? Six? Whatever. What if, if you can do that with the same Revenue, then you fix all those things. Do you find. How often do you find that that is a catalyst to exit versus a thing that starts the business actually running better that, you know, you laugh.

Justin Goodbread:
Very perceptive. Very perceptive. You’re the first interviewee that’s asked me that question. I’m grateful you asked that because what happens is actually, it’s a catalyst for freedom. See, most business owners, because they’ve never operated their business in the small business space, as a business, they’ve operated as a job where they’re at the epicenter. As they begin improving the business itself, the revenue will follow. It always does. As you improve profitability.

Justin Goodbread:
I’m sorry. As you improve the efficiency of the company and as you work on that multiple driving that value, revenue follows. But then what happens is you truly build the golden goose. You truly build the business that provides a dividend. And I can’t tell you the number of clients that we’ve gotten to the point where they wanted to exit and they’re like, I don’t want to sell this thing. I see how valuable it is now. I don’t want to sell this thing. I’m taking six months off.

Justin Goodbread:
I’m on the beach, I’m fishing offshore, catching marlin. Man, why would I sell this? The business and it’s growing because I have now built systems. I built a company that can operate with me, and now I’m a shareholder in it. Then they look at it slightly different. They’ll come to the table and they’ll say, justin, you know, my business is worth $22 million here. It was worth 8 million. We scaled it up in the last 36 months. I’ve got a high concentration risk.

Justin Goodbread:
Maybe I should take some chips off the table. And so now, instead of looking at a complete exit, they may go in and do a partial exit, right? A partial liquid event with a venture capital firm or a private equity firm or something of that nature, or even competitor. I’ve had them where they’ve sold divisions off to competitors in order to get hyper efficient on the thing that they feel like is most near and dear to the heart. So it’s not always ending in, I’m selling my baby. It sometimes ends in, dude, I’ve created the golden goose. Why would I walk away from this thing? I’m having the time, my life. Now, let’s run this thing for another five, six years.

Dana Robinson:
Yeah, well, and I’ll say from the standpoint of what lower middle market private equity usually does is that they’ll. The general term is Professionalize a business so they’re going to buy the business from an owner who’s done none of that with a flat org chart that includes the owner as the center of gravity. And as the professionalization you know, happens, it’s all the things that you just listed, you know, and it, I, it doesn’t matter whether it’s your eight not, no offense to you or Geno Wickman’s, you know, Traction or Michael E. Gerbers or pick your, pick your business performance. Interviewed the author of Mind the Most Important Number Method. So super great approach to simplifying, you know, kind of performance management in a company. But if you do that, you’re the beneficiary of those things. And if you’ve got a coach that’s going to drive your team through a 90 day transformation, that’s going to be way more effective than trying to put makeup on a pig, recast your financials and sell your business to someone who’s going to do those things because you’re getting more of the premium for having done that versus the buyer.

Justin Goodbread:
What ends up happening, Dana, is whenever you discover what’s called the wealth gap. So if 80% of the net worth of the business is net worth of the owner is tied up in this highly illiquid asset that, as you said, put lipstick on a pig, which is reality for most businesses out there. What the business owner often doesn’t realize is the amount of money they need to have in order to maintain their current lifestyle because they’re living vicariously through this business, right? They’re, they’re buying their cars, they’re paying their cell phone, they’ve had their kids online on the, on the payroll, they have their wife or husband on the payroll, they’re taking vacations, calling it, you know, business trips, which is all perfectly fine with their tax advisors approval, I get all that. But whenever they step away and now they go and, and go into an exit or transition. Now we’re going to deal with broker fees, M and A fees, attorney fees, CPA fees, taxes, and where somebody could sell a business for $10 million after they get done with everything. On a good case they may have eight. On a worst case, they may have $4 million of value. And if they got four to $8 million and they’ve been living on a million dollars a year, that doesn’t provide them what they need.

Justin Goodbread:
So the sad part about this is, is that many business owners will feel the compression of business, will feel the stress that you and I both have experienced many times in and it’s like, I’ve had enough. They wave the white flag. I can sell this thing. Jim Bob down the street sold their business for $20 million. I can get the same thing. What they don’t realize is, is now they look and they’re like nowhere where they need to be. And now they have to take a substantial lifestyle hit. The sad part to me is it doesn’t have to be that way.

Justin Goodbread:
Whether you use a good bread type of philosophy, a Whitman or any of these others that are out there and they’re all very good and very sound, the reality is as a business owner, the control person you are, is there are methodologies and there are people who can drive, drive you to actually collect as much money as possible, find a more suitable buyer, provide you more revenue, provides you more freedom than being reactive in nature. And it, but it takes three, four, five, six years of diligent value work focusing on driving the value of the company up so that you might experience a life changing freedom where you can change your family’s life for the rest of their life.

Dana Robinson:
Yeah, yeah. And, and so the statistics we’ve been talking about is you have all these businesses, I mean the, I, I heard that there’s a million home service businesses in the US and there’s probably more. If you take H vac plumbing, you know, pest treatment, you know, windows, that all of that. Millions and millions of businesses, they have an owner that’s, you know, know at some point going to need to retire. And if we look at the boomer population, most of them are hitting that right now. Do you have, do you have any advice for those with less than the five year Runway that you know, you need to extract that value. Can, you know, obviously the 4 to 8 million spread is pretty, I’d say that’s pretty common example in terms of what you’d take if you got to sell an owner operator business that’s I don’t know, putting 800 to the bottom. Right? So you got it, you got a sub million EBITDA business, someone’s going to give you 4 million bucks for that maybe and they’re going to fix it all.

Dana Robinson:
If you delivered it all as Justin Goodbread would help fix it, that’s 8 million. But they don’t have five years to get there. They need that differential or something close to it. Is there some methods you’ve seen for succeeding at an earlier turn?

Justin Goodbread:
Yeah, so let’s nail down the statistics because you’re right on the money. So there’s two studies that have come out this year, one by the Exit Planning Institute that’s called the state of owner readiness. And right now over the next eight years there’s $14 trillion worth of value that is going to be up for transaction. But of that $14 trillion in value, only about a third of that will actually ever see market and of a Third, only about 20% of it will actually transact. So that’s a huge amount of money that’s going to be lost because of, of, because of complacency, because of ignorance, because of just being businesses owners being just, just hamstrung to their own Franken firm they created. Another study that came out by the AMAA shows, shows that between now and the year 2030 there’s roughly 11 million businesses that are going to try to sell. And it was 11 million businesses. Only 1 million of them will transact.

Justin Goodbread:
And those 1 million that will transact, only 40,000 of them will get what the business owner thinks are worth. Worth. Think about that. That is ridiculous numbers. So if you’re a business owner today and you’re like hey good Brett, I need help. If I try to sell this business, I’m going to be broke. What can I do over the next 18, 24 months? And we’ve dealt with this because of health issues. Many times somebody may have a health issue where they’re not going to be around that long.

Justin Goodbread:
It’s sad, but the reality is it’s there a few things you can do. The very first thing, the one that’s going to give you the most, the most movement on your value is remove yourself, get yourself out of the way. So what does that mean? It means that you’re probably going to hire and you’re going to pay them more money than you ever decided to pay them. A mini Me, you’re probably going to reduce your take home pay significantly. You’re probably going to restructure your personal finances. You might have to live off your home equity line of credit to do what I’m talking about here. You’re going to bring in a mini me and that mini me is going to be somebody that the buyer is going to be able to lean into as, as somebody who’s going to stick through the transition. Just by getting you the owner and having yourself replaced with somebody who knows the skeletons of closet know the operational structure has bought in the team’s allegiance, you’re going to move the value up significantly right off the bat.

Dana Robinson:
So that’s number one portable management.

Justin Goodbread:
Absolutely, absolutely. Hands down. So that’s the very first thing. Now in order to do that, as I said, you’ve got to work with your financial planner, you’re going to have to work with bankers, you’re going to have to work with your team in order to find that right person. But that, that hands down gives you the greatest value increase. Second of all is you’re going to begin documenting as many of those systems, processes, thought patterns that you, the owner or your key stakeholders have. And now with modern AI, it’s super easy to do. Like you can document a business’s processes in less than 30 days with modern AI, but you’re going to document it and you’re going to wireframe it in such a way that the buyer understands exactly what they’re purchasing.

Justin Goodbread:
You see, many times a buyer is having to try to figure out what they’re getting by backwards engineering The P&Ls or income statements being what the term is. Or they’re trying to backwards engineer their risk. They’re trying to undercover the skeletons in the closet by looking for client files or contracts and various things. And that’s Dana, probably what you do. That’s what a good investment banker is going to do. They’re going to try to uncover the skeletons of closet because that is the company specific risk number that all of us face. So in order to help alleviate and add some, add some instant bang for your time and effort to know what the buyer, potential buyer is looking for and go ahead and provide them everything they need, nothing hidden. Doing so is an exercise that might seem a futility, but it’s not.

Justin Goodbread:
It’s actually showing that you have been preparing this business for the new buyer to step into that seat and continue the Runway or the pro forma, the forecast that it’s been working towards. So to me those are two things that if somebody has limited time because of health issue or because of whatever issue that we can hammer down right away and add instant value gain of the business.

Dana Robinson:
Yeah, I got some questions and comments. I’ll move backwards. The systems and processes used to be, I mean it was Michael E. Gerber in the 90s said, you know, in the eth, you got f systems, processes. The they’ve gotten easier in the last five years because of video. For example, you can turn the video recording on loom or any, you know, you can do zoom solo record your screenshots. Every staff person that works at a company can record what they do to create SOPs. Now AI can extract all of the transcripts out of that and actually, you know, produce a lot more formal reporting.

Dana Robinson:
And develop SOPs. You have all these tools at our disposal. You could literally take a 30 person plumbing and H vac business, have everybody, you know, do video interviews for every piece of their job and their task and create SOPs. The. But, but to the, to the finding the right person. I think you’re absolutely right. Portable management. Somebody who as you’re mini me and I’ve seen kind of mixed results with that.

Dana Robinson:
I’ve a longtime friend of mine and partners in some real estate with had partners in a, you know, very successful middle market business. They brought in a president, you know, well recruited, you know, all of that and it just didn’t work and it cost them, you know, 18 months and a bunch of money and any thoughts on, you know, how do you get the right person and if you want them portable, how do you get them bought into? The fact that they’re going to be there for you to be making money and going off and marlin fishing as you say, and then you’re going to transact and make you know, 4 million extra dollars and, and they’re going to be the one of the reasons for it.

Justin Goodbread:
Yeah. So I like look internally to begin with and if it’s, if it has enough employees, you can often find somebody internally who is interested in stepping that seat. They may not have the same entrepreneur or spirit and want to take the risk out of launching the company or launching the firm from the ground up. But they may have a managerial spirit which is probably what you need at this phase of your business. Somebody who can manage the business. You can give some, some distinct direction to allow them to run with you. If you don’t have anybody internally then I like looking at competitors. And so it’s very good to look at a competitor and recruit them away.

Justin Goodbread:
Recruit them away with a nice benefit package. Recruit them away as long as they don’t have NDAs in place. But you can usually find somebody that knows your industry, knows your service, that has perhaps that entrepreneurial spirit but never had their break. And if you recruit them away and put together the right package, now the right package might be high compensation, it might be a little bit of equity, it may be phantom equity, it could be some sort of a sar. Whatever the structure sure is, there’s a way to compensate that individual to where they are body into the vision. Now this is not a hasty decision. By no means. The scripture says in a multitude of counselors there’s safety.

Justin Goodbread:
Right. So this is one of those decisions that when you’re bringing somebody online that you’re trying to make sure that your team, your key stakeholders, but the potential buyer of the future already have conversations with them. Let them know what you’re going to do. You know, if you already have a strategic buyer out there, bring them in board. You know, even you don’t have to wait till your, your business is packaged up in a bow. You can go in and have those conversations now with that firm out there who’s interested in your company. Let them know what you’re doing, let them add some insight into what you’re doing. Then it makes the price go up even higher.

Justin Goodbread:
So, yes, is it possible within a very short timeframe as the answer in the catalyst that we’re speaking toward, is it possible to make monumental moves? Yes. What I’ve discovered though, Dana, is that’s few and far between. Yes, there’s an occasional health issue. Yes, there’s an occasional tired business owner. The reality of such circumstances is that if the business owner sees the value that they’re leaving on the table and the action steps they need to make over a 36 to 48 month period of time, more than likely they go back to their youth, they know the gusto they once had. They get rekindled, they get that spark back and now they have a new heel to climb, a new mountain to charge. Right. A new hell charging hell with a water pistol.

Justin Goodbread:
Often say they get that vim and vigor back and now they are dedicated. What also see happens there is they get so dedicated and so, so inspired that they can lose their current team. And so there’s a caveat here. Yes, you could have a time constraint of you, the owner, but you may also be careful in the fact that now you have a renewed and rekindled energy and you can end up losing your key players if you don’t do this right. Right. You can end up having fear in place to where your players are like, wait a second, we’re going to work ourselves out of a job. You see. So it’s a double.

Justin Goodbread:
You know, the way I look at everything in life is there’s always two sides. There’s always a pro and there’s always a con. I’ve never seen a one sided pancake. Just never have. So in any business decision, there’s always a pro and a con. How do we take what we’re dealing with? Look at the pro, identify the con and then work those two together for the outcome that is best and most suitable for you as a business owner.

Dana Robinson:
Love it. What, what have I missed? As we, as we sort of Come to toward the final, you know, five minutes or so, the show. Justin, what do you know that you think the entrepreneurs listening need to hear from you?

Justin Goodbread:
I have this firm belief internally. I believe that if we’re going to be successful, then we have to have a coach who has been there, done that. And the coach might come in the sense of a minister. If it’s a spiritual coach, it might come in the sense of someone like you, Dana, if it’s a business coach who’s been there, done that. But I believe every business owner should have somebody that is speaking into their life, that knows what their desires are. The way I think about in my own mind’s eye is I picture yourself at your business desk. You and I were talking about before we started recording. We have our desk and at the end of the day, something’s just not sitting right.

Justin Goodbread:
Maybe we’re laying in bed at night worried about that key customer and walking away. Or maybe one of of our team members just going through a hard time and your, your heart’s breaking for that particular team member. Whatever it is, we’ve all been there. Maybe it’s a legal battle that sucks, right? Whatever it is, there’s something that’s keeping you up at night. You need somebody who’s walked that journey before you in the empty chair across from your desk that can listen to you, that can help you process what you’re thinking about, that can encourage you, but also kick you in the rear and say, okay, enough’s enough, let’s get up and go forward. But that person needs to know what exactly you’re trying to achieve and they need to be lockstep with you, man. Whenever I hired my Coach back in 2017, I had this golden. I said, I’m going to grow a business from zero to $5 million in 60 months.

Justin Goodbread:
And my coach said, good bread. You’re going to grow up more than that because I’m going to be kicking you the whole time. And to go in 49 months to an eight figure exit was dedicated strictly to my coach, who was an expert in what we’ve been talking about. And he since retired, but he was an expert in what we’ve been talking about. He had been there, done that, man. He knew the game, he knew the roadmap, he knew the pitfalls. And I believe that every business owner, we’re not afraid to spend money. Let’s spend money on those who can drive value for us and help us achieve what we desire in a shorter time frame, more efficient time frame.

Justin Goodbread:
To me, that is the one piece that so many business owners, because of our ego, because of our pride, if I’m being candid, myself included, because of our control, we often miss and we often go through so many scars that you and I both possess, you know, the battle scars of being business owners. And if we just had somebody been there, done that, they could have saved us a lot of heartache.

Dana Robinson:
I love it. Well, and maybe it’s a segue to how people connect with you and what, like, what’s your what for those that are listening? What’s. What’s your customer profile who should be looking to you? And then how do they connect with you?

Justin Goodbread:
Yeah. So you can connect with me through justingoodbread.com I’m on every social media channel. I’ve got a podcast has almost 600 episodes on that we teach everything I’ve been talking about. I’ve got two books. Your Baby’s Ugly was the number one Wall Street Journal bestseller. It’s. It talks about the pitfall that we business owners don’t want to hear, that our business is ugly and it’s our baby. So you can look at my name anywhere out there and find us.

Justin Goodbread:
You know, I’m having the, I’m having the luxury right now working in the service industry, helping, helping those individuals who are out there attaching their name to their business and providing a service. I don’t do really well in manufacturing or retail, but for those 10 million business owners who are like good bread, I need help. I want to create an exit strategy that strategically is where we play so you can find out about what we do, the coaching, our courses, various things at justingoodbread.com.

Dana Robinson:
Good good spelled just like good bread Justin J U S T I N Good G O O D Bread B R E A D Justin, thank you. Thanks for coming on the podcast and I hope the audience can reach out and connect with you if they’re in that place where they need that coach that is going to be there so that they don’t get as beat up as you and I have in our careers.

Justin Goodbread:
Dana, thanks for having me, bro. This is fun.

Dana Robinson:
Thanks for joining me 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@danrobinson.com or leave comments and questions by calling 858-252-7785, call 858-252-7785 and leave a message.