Market Positioning – Jason Somerville

Jason Somerville:
On the financial front, I think a lot of founder owners, when they look at their economics of their business, they’re not looking at them the way that an acquirer would. You know, they’ve built their business. Sometimes they’re just looking at cash in my pocket, you know, at the end of every month. Sometimes they’re looking at how you’re spending your resources and are they efficiently deployed? One of the things we do on the financial front is help them understand through their p and L. This is where your business isn’t efficient. Let’s work on how we make it more efficient. How do I scale it once I I buy it?

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.

Dana Robinson:
Job or running a business.

Dana Robinson:
Let’s get started with this episode of the Exit Plan podcast.

Dana Robinson:
Hey, everybody, it’s Dana Robinson coming at you with the exit Plan podcast, talking about all things business and pretty stoked to have Jason Somerville on the podcast today. An advisor who helps businesses through various iterations of exits. And we’re just wrapping before we went live, about a deal he’s coming to San Diego to work on that involves restructuring a cap table, which we don’t have to talk about that specific client, but we’re going to have some fun talking about things that I think some of our listeners may have not heard people talk about. Jason, welcome.

Jason Somerville:
Thanks, Dana. Glad to be here, man. Thanks for having me.

Dana Robinson:
So, I’d love to know, like talk me through your resume. I hate introducing people, and so you have the opportunity here to make yourself sound as astounding and amazing as you want.

Jason Somerville:
Okay, I’ll try. I’m one of those guys that hates to hype myself up too much, but I’ll do my best and also not pretend to be more humble than I actually am, because that’s never cool either. Yeah, but I’m a guy. I think the best way to describe it, I started out in a traditional investment banking kind of institutional path, so came out of school, went into the bank of America investment banking program as an analyst, made my way up to associate while I was there, and then decided at that point, I didn’t love big banking. I didn’t love working for a giant public company. I wanted to go somewhere a little more entrepreneurial. So I ended up going the hedge fund route down in Miami and ran capital markets for a real estate kind of focused, although we did a lot of different stuff. Hedge fund for almost seven years.

Jason Somerville:
And then kind of my life has gotten progressively more entrepreneurial as it’s gone along. So I start out in the giant bank, work my way to the really kind of cool hedge fund, privately held, super nimble, doing all kinds of cool deals, and then decided to be a small business owner and operator. After that, sort of decided to be an entrepreneur. I bought and started a few different businesses. Everything from, you know, home construction business where we helped make homes, and actually businesses too accessible for people who are disabled. Had a business in helicopter leasing. I became a helicopter pilot and decided to lease helicopters to flight schools. And, you know, and then after, you know, some of that experience for about, you know, let’s call it six, six years or so, seven years of that.

Jason Somerville:
I had one, one of my businesses that I sold, I used an intermediary. And it was like a smaller business kind of broker intermediary. And the process, to be honest, was terrible. And I kind of started to dig in a little more and sort of got really interested in and sort of bringing kind of the idea of institutional training from somebody like myself who spent years in institutional capital markets to kind of owners of smaller companies. Cause I honestly just felt like they deserved better when it came to exits. And so that’s what got me into this. And I conned another guy into joining me, my business partner, who actually wasn’t from investment banking. He was sales and marketing and baby products for most of his life, which, by the way, I’ll tell you more later, but it was a good combination of skills because we do a lot in consumer now.

Jason Somerville:
And so, yeah, for the last seven years, we’ve been helping founders really build and ultimately exit their businesses or execute strategic deals like, say, growth equity deals or strategic partnerships, in addition to kind of just pure exits.

Dana Robinson:
I love that. I like the. I’m always skeptical of big bank people, to be honest, because they’re eager to do what they do for anybody. They really have talent. And I’ve interviewed some people who spent their entire lives at very large institutions, but most businesses that are going to transact are small businesses. I don’t know what the percentage is. It’s by quantity. It’s most.

Dana Robinson:
So every boomer business that’s out there that some boomer wants to sell is probably a small business. Every buyer who is up and coming that says, boy, I want to own a business, is going to transact on that business. And those big advisors, I’ve been to dealmax and seen the guys in the suits, and although they’re wearing the finance bro vest now, instead of the suit.

Jason Somerville:
The finance bro vests, by the way, I can say that you don’t own. I own it. I do not own one.

Dana Robinson:
All right. All right. So, yeah, I’m wearing my, like, mister Rogers sweat sweater sweatshirt right now. I feel a little bit like this might qualify for finance pro wear. The. But. But here’s the thing. I love what I love about your story, and let’s.

Dana Robinson:
Let’s use this as a type. Talk more about the things you bring to the table. You own some businesses, right? You’ve done the things, and you’ve been that person. And I would imagine you were probably unprepared for the things that you learned from business based on all those years at the big bank, right, between the big bank and even the hedge fund, you probably had no idea about the things that you ended up learning as an entrepreneur.

Jason Somerville:
Yeah, that’s totally fair. I mean, obviously, you know, that world, that world, there’s a lot of hubris. There’s a lot of ego. Everyone around is, to be frank, pretty smart. And I think that I didn’t come from an entrepreneurial family, so I didn’t get to watch, like, a parent run a business and really understand what it’s like from the inside. So when I came up and was trained right in school, and then ultimately in my original parts of my career, it was always from that kind of analysis, sort of just point of view, not the day to day blood and guts, you know, running a payroll and making sure the floors are clean and making sure that people show up to work and, you know, all of that kind of stuff. And, you know, it’s the kind of stuff that. Yeah, unless you’ve done it, it’s hard to relate.

Jason Somerville:
Now, that doesn’t mean you can’t be good as an advisor. I think, though, it’s a lot harder to be good at that, especially with smaller, founder owned businesses, if you don’t fully appreciate what it’s like, and especially when you’re telling the story of a company, right. To a potential acquirer understanding, how does this really work? How does this business really function, you know, at the molecular level? It’s very hard to do it and really get it if you haven’t been there.

Dana Robinson:
Yeah. So I want to get to your, what you bring to the table, but I want to pause and talk about your own entrepreneurial journey because I love the lessons. A couple of businesses talk about some, some wins and some losses, like what were some good things that came out of those business ventures and what are some things that you bring to the table that were hard learned lessons?

Jason Somerville:
Yeah, I mean, I think I’m someone that I would say I get bored easily and there have been times when I probably gave up on things a little bit too quick. So I think in one of my earlier ventures, actually, I had a partner that we had started really a consulting business. And I think that the lesson was, I don’t think our go to market strategy was really well thought out. I think we just felt like, hey, we have really good skills and we think we can do a variety of things here and help people in a variety of ways. But it wasn’t a very coherent strategy. It ultimately wasn’t terribly successful. We ultimately decided not to continue doing that. And I think the hard lesson learned there is really understanding that you have to fully understand your market, you have to understand your customer.

Jason Somerville:
You have to have an actual go to market strategy. You can’t just show up and be smart and expect that things are going to go well. I think that was one of my earlier ones coming off again, more that institutional sort of experience where that was what you were doing a lot of times is kind of showing up and being smart and not necessarily developing kind of a full strategy for how to go to market with a company. And so I learned a lot from that. And then I would say one of my next ones was the construction business that I had that it was actually interesting enough. It was a franchise that was built originally off of modular ramp, like a steel ramp product, and then built around it just a much larger accessibility business and, you know, again, full kind of remodeling business. And I was able to kind of forex that business in like three years. Right.

Jason Somerville:
So that was, that was a good, good example of, of taking that first learning and understanding when I was evaluating that, how to, how to, how to really go to market and understand who my customer was and how I was going to really approach them and what my value prop that I was really bringing was and how to articulate that right to, to a market. So those are, those are two kind of, I’d say the sides of the coin that I experienced, for sure.

Dana Robinson:
Yeah. The, there’s so many people that I encountered as a lawyer in my practice, I feel like, weren’t involved in best practice groups, hadn’t read the most common books about business and were just pouring themselves into the business, beating their head into the wall and didn’t know what they didn’t know. And so maybe your first venture, you go into it thinking you got the book smarts, you’re an analyst, you’ve seen it all on paper in some way or another. Do you feel like obviously you just said that the learning you got from a business that didn’t go well turned into a really an opportunity to apply all of that learning? Did you find resources, tools, mentorship, books? I mean, was there anything else besides the pain of the lessons you learned on the first business?

Jason Somerville:
No. I mean, unfortunately. And I always look back at my career so far, and I never had a great mentor, and I always wish I did. You know, I wasn’t, just, wasn’t lucky enough. I mean, when I look at, like, some of the positions I had in my career, there were definitely people above me that were, I’d say that taught me a lot. I wouldn’t necessarily call them mentors. I think that that is something that if I had to kind of go back to the beginning, especially becoming an entrepreneur, I would have sought that out because I’ve seen that be really, really effective for a lot of people. I think that, you know, a part of, again, that early road was, you know, I felt like, hey, I, I can figure this out, right? A little bit of I can figure this out on my own kind of thing.

Jason Somerville:
And I think that what I learned from that approach, and I think I also did see seek out more of a community and more resources of other entrepreneurs as I got more into it, is I would always advise anyone looking to become a business owner to really seek that out, make that part of your overall approach, whether that’s both a mentor and a community or at least one or the other, I think that I would say I probably failed that part of the test for the most part, but wish, wish I had passed. I feel like I would have been better faster if I would have, for sure.

Dana Robinson:
Right? I love that. That’s great. And then were you able to exit the construction business? Was that one nice? Forex the business and then did it having a franchise give you some advantages? I’ve heard mixed reviews, haven’t been involved with any franchises, but you get, you’re supposed to get some business systems, processes, and some things that give you a leg up.

Jason Somerville:
Yeah, it was, it was a really, it was part of a small network. I mean, it was, it wasn’t a huge network. I think there were maybe 50 total. And so there were some, I think there were definitely obviously, the idea of the core, some of the core products were, you didn’t have to deal with product development. Right. Which I think is a, which was a big help, especially if you’re not someone who, you know, is a product designer or an industrial designer or someone who’s really heavily in that product development piece. I think that that was a huge help for that one. And I think it also, it’s not a terrible way early in an entrepreneur kind of journey to have.

Jason Somerville:
It’s almost like there’s a little bit of a safety net, you know, that you’re working with as you’re trying to get your, your legs under you. And, you know, if you’re someone who sees yourself as, you know, you could be a serial entrepreneur. As an early on, I’d say venture, I would, I would absolutely look into, you know, a franchise. It was, overall experience was good for me. You know, like a lot of people, they look at, well, how much money am I paying the franchisor every month? You know, where are those fees going? Am I really getting the value for my money in this case? I would say I never felt like that trade off was a bad trade for me. And then, and it definitely didn’t hurt the liquidity and marketability of the business when it came to sell it. In fact, I would argue it even potentially enhanced it because as you probably well know, a lot of people who buy businesses as their first entrepreneurial kind of endeavor are kind of middle, tend to be middle kind of executives that are looking, you know, maybe in their kind of forties, you know, late thirties forties, fifties that say, I’ve done the corporate thing and I want to now do my own thing. And so I think that gave them a little bit of the same kind of feeling of security, a little bit of a security net.

Jason Somerville:
Safety net. So, yeah, overall, I definitely wouldn’t, wouldn’t knock it.

Dana Robinson:
That’s good. Yeah, I mean, I get franchise gives you the opportunity to not fear being a first time entrepreneur because they’re, they’re doing the things that you said you probably might have failed on, on your first business. Right. Those are built in mechanism. And, and if you want to build something and sell it, there’s a built in market for reselling. Once you’ve repay, you know, you can take over business that someone has got to a certain level, grow it four times and then sell it for a lot more than you paid for it like you did. So there’s a built in market for exiting those businesses.

Jason Somerville:
Yeah, absolutely. And I looked, you know, I think as I was, you know, on, I kind of left that part of the journey, you know, when we started this firm now. But, you know, I would say that I would still look at them now. I think there are some really interesting franchise concepts out there.

Dana Robinson:
Yeah. Yeah. And I did just have a guest on Reed Tileston wrote a book, grit it done. And he, his first failure and for success was in the exercise franchise business. He got a franchise and kind of did it wrong and then figured it out and then did it all right and then turned that into a bunch of franchises and then, you know, exited a bunch of those, kept one, and has done really well with it. Talk about the how you approach. Let’s talk about what your typical client setup is like. What’s that avatar? What are they doing, where they at in their business, and what are you bringing to the table?

Jason Somerville:
Yeah, and I think the answer to this is going to be a little bit two part, because it changed a couple years ago when we started our firm. It was sort of a traditional, kind of a lower middle market, investment bank type business where very much transactional, sell side only, pretty much just selling businesses. And then we kept sort of saying to ourselves that we felt like if we could engage much earlier with clients one or two years out, that we could have a lot more positive impact on the overall exit. And so we decided to stop sort of talking about it and start doing it a couple of years ago. So today, our ideal client, we do a lot in consumer. So consumer products is really where we spend a lot of our time. So we work with a lot of consumer brands, and we work with a lot of ecosystem companies, like logistics businesses, software businesses, et cetera, that are, you know, kind of have some tie into the consumer universe. So typically now clients are engaging with us one to two years away from when they think they might want to ultimately sell the business.

Jason Somerville:
And they hire us really to kind of work with them very intensely in the beginning to build a plan and execute on the plan to kind of make the company into a more attractive strategic acquisition target. So what we’re doing is we’re saying we’re assessing every part of the company and basically scoring it and looking at it through an acquirer’s point of view and saying, well, what’s good about this business? What’s not so good about this business? How do we maybe develop it, refine it and grow it, not only just make it bigger, but make it better along the way so that when we do bring it to market, it’s this really sort of shining star type of, of company that while it may still be, quote unquote, on the smaller end, you know, in, in its peer group, it’s, it’s a real top performer. And so that’s what we do now.

Dana Robinson:
I like that. The, I’ve had a lot of conversations with, with people that do buy and build down the lower, you know, small roll ups. I’ve done, you know, five, six acquisitions of property management companies at different stages in the last 20 years. And I’ve always felt like the main business of the, of the buyer of a, someone who’s retiring of their businesses. Most of the hard work is doing the things that they couldn’t or wouldn’t do, which is a place to add value as a buyer. So I would say that as a buyer, you know, buyer might actually want to find a business that’s like the ones that you’re helping before they get help. But, but if a seller really wants to optimize their exit, they’ve got to realize well in advance that they’re probably doing a lot of things that buyers will find unattractive, that, that buyers will feel as a liability, you think?

Jason Somerville:
Yeah, and I think, yeah. And I think it’s, it’s also, it also is sort of, the context is it’s got to be within the realm of not only possibility, but the realm of what, what a particular owner may actually want to do. Right? So, for example, we may sit down with a client and say, look, you know, in order to continue to develop the company here, we’re probably going to need to go out and build a big sales team. Let’s just use that as an example. So the founder may say, okay, I totally get that as a strategy, but to be honest, I don’t want to be the guy that does that. I want to let the next owner do that. And I’m happy to kind of, we’ll say, leave meat on that bone effectively for that new owner to go and do that because the founders, like, I just don’t, whether it’s, doesn’t want to devote the capital, doesn’t want to devote the energy, doesn’t want to take the risk, whatever the reason is. So when we’re having these conversations and building these plans, it obviously is, you know, it’s kind of always centered in, well, what does the founder ultimately want to do and how far are they willing to stretch themselves before ultimately handing the business off to the next owner.

Jason Somerville:
Right. So I think we’re able to maybe thread that needle a little bit where we’re, you know, we’re, we’re developing these companies so that we’re really taking out the headaches a lot of times and maybe blazing some trail, but still there being quite a bit of future value for that next owner. So that the goal is, of course, we’re trying to balance that, and then we’re trying to create a situation where everyone’s really excited to do this deal. And I think that’s what we saw in a lot of our, you know, and you’ve probably seen this, too, is deals are hard, man. Like, they’re hard enough. And so anything you can do to make it easier on both parties, not just the, not just the seller, but, you know, thinking about, you know, the buyer as well, make it so that it’s easier to get deals done. There’s less impediments to a potential transaction. That’s a lot of what we’re spending time on is just removing those roadblocks.

Dana Robinson:
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Dana Robinson:
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Dana Robinson:
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Dana Robinson:
Yeah, let’s talk about some common themes or roadblocks. Then. You’re seeing a lot of people who, you bring your knowledge of things they don’t know. They don’t know, and you’re being paid to advise them two years in advance. What are the things you’d say are most common? That someone who owns a business is listening to this might pique their interest and help them understand what they might be not seeing.

Jason Somerville:
Yeah, I’ll give you two. I’ll give you one that’s kind of more financial and one that’s more operational. Right. So on the financial front, I think a lot of founder owners, when they look at their economics of their business, they’re not looking at them the way that an acquirer would. They’ve built their business. Sometimes they’re just looking at cash in my pocket at the end of every month. Sometimes they’re looking at, well, I can go if any opportunity to go grab revenue is a good opportunity, which isn’t necessarily always the case. So you’re looking at how you’re spending your resources and are they efficiently deployed? If you look at your margins up and down your p and l, are you running an optimized, kind of efficiency efficient business model? Right.

Jason Somerville:
So one of the things we do on the financial front is help them understand, you know, through, you know, through their, their p and L. This is where your business isn’t efficient. And let’s, let’s work on how we make it more efficient, right? How do we make it so that, especially as it scales, and I’m sure you, you know this, and probably your, your, most of your audience knows that anytime someone’s going to buy a business, what is the, one of the main things they’re thinking about is how do I grow it, right? How do I scale it once I buy it? So a big part of the discussion in any transaction is these growth opportunities and what are they and how accessible are they and what kind of capital does it require to actually go and attack them? And so if you’re building a business that has already been made more efficient. It will then help you to scale it once it’s bought. Right. So that’s a good sort of financial example. Right. I think that from an operational perspective, it can be something as simple as just the supplier base that you’re working with.

Jason Somerville:
And not only do you have a properly built supply chain, where’s the product coming from? Is it IP protected? Do you have a backup? Which is always a controversial topic, I think, in the world, which is, it’s this weird balance of, you don’t want to, you don’t want to over concentrate to one supplier, but at the same time, you know, you, you’re oftentimes getting better terms the more business that you give a supplier. So it’s the idea of building this supply chain that feels like it’s free of risk, but it’s also, again, optimized. So a lot of times what we’re doing is we’re finding new suppliers or we’re negotiating with existing suppliers. You know, when it comes down to how am I freighting my products, how am I shipping them? Am I getting them there by boat, by air? Am I shipping half containers or full containers? Bigger. Am I shipping half containers? Because I don’t have the money right to ship a full container. And so we’re building out supply chains that run efficiently and bottom line. A good example would be, all right, well, in order to make this an efficient supply chain, we need an extra four or 500 grand of working capital. We go help them get the four or 500 grand of working capital so we can get that done.

Jason Somerville:
Right. So there’s a couple right there. There’s some, if you think about every functional aspect of a business and kind of put them on a piece of paper, there’s going to be a bunch of stuff in every category. But, you know, I don’t want to give you a three hour podcast.

Dana Robinson:
No, I think that’s, that’s super useful. The most owners aren’t really measuring the gross margin, for example. So do you end up doing a lot of kind of rejiggering of how they’re looking at the financials and showing them? Like, for example, we bought some landscape businesses, and when you look at the gross margin, it doesn’t support any profit. In fact, we might be losing money on some of those accounts. And if we’re getting a good deal on the business, then we just de risk and do our best to make up for that. But if you’re helping somebody well in advance of their exit, you don’t want them taking a discount for having a pricing model that’s under market. Are you able to weigh in on that because you have expertise in the domain?

Jason Somerville:
Yeah, it is a big chunk of what we do. So I’d say there’s three parts to it. There’s making sure that the financials are properly structured. Just first of all, your accounting is good, it’s up to par, it’s proper, it’s accurate. In smaller businesses, you never have pure gap, but at least you have something close, good accrual accounting that’s kind of basic, like table stakes. And then when it comes to understanding, once you’ve built it out properly, of how should you look at a properly structured income statement? Very much what you said. A lot of it’s about margin at the different margin points. Right.

Jason Somerville:
Where am I at with gross product, gross contribution, EBITDA, all those margin points and why they all matter? Because I think a lot of, again, I think there’s a lot of people who follow the small business exit sort of world and they pretty much are only thinking about this sort of quasi eBITda metric, you know, called SDE. Right. And that’s it. And they don’t fully understand how. Well, that’s obviously a big part of the joke. But elsewhere, up, further up the chain in your income statement, those points matter too. Again, going back to the whole idea of scalability, right? So if I don’t have, I may have a really lean operation. So my opex is really tight.

Jason Somerville:
So I have this decent EBITDA margin, but my contribution margin and my gross margin, it’s not that great. So if I have to go and build this business and scale it, I don’t have as much room to do that, right? Or opening up a channel like in our world with a lot of consumer, you’ve got direct consumer, but then you have wholesale channels. And do I have enough where I can, where I can have both of those channels be healthy and have them play together. So 100% totally agree. And then what we do is on top of just the financials, right. It’s, it’s building more of a KPI type of approach to the business and understanding, hey, these are the key things that, that manage and really show my health of my company. And when a buyer, again, a lot of this is all like, well, what’s a buyer going to do? What’s an acquirer going to do, where they’re going to say, hey, can you show me all the KPI’s you use to manage the business and how do you determine if things are going good or not so good. It’s good to not have the answer of.

Jason Somerville:
I don’t have one. Right. That’s not a good answer. So stuff like that too. Right. And then I guess on, on a lot of it is we definitely try to up level the kind of bi and data analytics part of a lot of people’s businesses, which is great. It’s a really cool, I love that part of the, of the industry. I’m a, I’m a bit of a data nerd myself.

Jason Somerville:
And so a lot of cool software, a lot of cool systems where you can get your hands on a lot of good data and if you know how to slice it and dice it, you can get some really good insights in your business and make good decisions off of them. So we spent a lot of time with that stuff too.

Dana Robinson:
Right. So I know maybe you can throw some examples out of actual, the platform software SaaS, the products that.

Jason Somerville:
Yeah, for sure. Like, so again, like in think about the, again, we’ll kind of focus on the d two C world. But so there’s a bi tool we use a ton called source medium. It’s very popular, I’d say among a lot of consumer brands, both large and small. It is effectively what I would call, it’s built on looker studio, but it’s got its own back end. And so really there’s a bunch, you can build a ton of data visualizations and a ton of data tables because it’s just pulling in all your raw data and you have a lot of flexibility around how do you ultimately display that data. So that’s cool. Use that ton.

Jason Somerville:
One like a marketing attribution software that the world is kind of smaller, smaller company worlds going to is a software called triple whale. A lot of people I think are aware of it. It’s a big, a big part of the direct to consumer world is trying to figure out, you’re spending ad dollars in a lot of places and you’re trying to figure out well, which ones are working and which ones are not. And that customer journey, you know, with a typical, say, average consumer who, you know, sees a, let’s say they see some cool watch, some new watch brand and they really like it, right? And they want to buy it. And first time they see it, they probably get hit with an ad on like Instagram or TikTok or something, kind of puts a bug in their ear. They’re like, oh, that’s cool. They get hit with it again. Like, oh yeah, I really like those.

Jason Somerville:
And then they get hit with, again, like, you know what? I’m actually going to go check that out. And then they go, and they go to Google, they type in the name, they get hit with a Google Ad, right? And like, well, sometimes they click the Google Ads, sometimes they just go right to the company page, you know, and so on and so forth. So there’s this fairly complex journey for a lot of customers, and along the way, the companies are spending a lot of money to try to get, you know, disrupt that customers day and get in front of them. So it’s understanding, how do I know where to put my money and not. And there’s actually a very cool. The people in your audience that are kind of in more into the d two c space will probably know about this, but there’s some AI now, software called Prescient is one of the names of it, or that’s the name of one of them. It’s this mixed media modeling software that’s kind of the new thing in the space. And it’s sort of a combo, like, it’s almost like taking the source medium type data and it’s synthesizing it for you, and it’s sort of spitting out a recommended course of action, saying, you know what, you should put 20% of your budget here and 10% of your budget there.

Jason Somerville:
And. And it’s kind of almost giving you a roadmap of how to spend your, your ad money. That those are like all of those things. And there’s a bunch, I’d say there’s multiple versions of everything I just said. There’s like multiple providers. But good example of building out the right tech stack in that industry is very important to getting your hands on the right data.

Dana Robinson:
Yeah, I think. Let me highlight that. Every business that I’ve seen, scale does it on the back of a SaaS. They do it on the back of an erp of some kind. And the more broadly embraced that tech stack is by the upmarket players, the easier it’ll be for them just by buying you. So to your point, Jason, of getting involved with someone two years before they’re ready to exit, you have a full year where you can implement, aspire and landscape service, titan and h vac, plumbing, electrical. Pick your business. There is a tech stack that you can adopt and embrace that’s going to help you manage everything from the accounting.

Dana Robinson:
Most people are still in QuickBooks, but those integrate with all these platforms. But whatever business you’re in, I think, and maybe you can tell me if I’m wrong. If you want to sell your business a couple of years, this might be the very first thing you start thinking about is how do I get off the antiquated systems I’ve created with spreadsheets and Google Docs and homemade, homemade things baked into customized QuickBooks things and get on a whatever the, the most commonly embraced software platform is in your industry?

Jason Somerville:
Yeah, I totally agree. My experience is the same, and I think it’s one of those where you’re actually going to likely, I mean, worst case is you’re going to do something that’s a bit of a prerequisite. The best case is you’re going to add some value, honestly, because as you well know, when an acquirer is looking at an opportunity, on the one hand they’re very much looking for, hey, how can I dig up some of this value? But on the other hand, they’re like, what are the headaches once I buy this? What are these kind of what I would call almost required upgrades that this business is going to have to go through right away? And what’s that going to do? Is it going to take time? Is it going to take money? Is it going to prohibit. I can’t start growing until I do it. So, you know, not only are you going to get the operational benefit of having it while you have it, it’s going to help your deal. It’s going to help your deal go a lot quicker when someone comes into due diligence and they’re like, oh. Because the other cool thing about a lot of these is they have so much information that’s handy. It’s like, you know what? Normally in a deal, like, they give you a massive request list, give me all this information.

Jason Somerville:
Like, how about I just give you a login?

Dana Robinson:
Yes.

Jason Somerville:
You know, you just go to town, man, get your stuff. And, I mean, that’s huge. Everybody who’s done a deal, they know that’s.

Dana Robinson:
Yes. Yeah. If you, if you’re on Quickbooks and then whatever, the, the sas, the software as a service, that, that is your platform, those two logins will get 70% of the diligence operationally that most people need, at least up front. Right.

Jason Somerville:
For sure. Yeah. That’s huge.

Dana Robinson:
For the benefit of everybody understanding how to work with guys like you. Talk a little bit more about the kinds of things that you do. Obviously, the investment bankers, if anyone is listening and doesn’t know it, are basically guys that are guys and gals and humans that take your business to market to sell it. But the advisory role that they fill can take a number of different permutations and we’re talking to jason here about starting an advisory capacity with a business, you know, a year or two years even before they’re ready to transact. What do those kinds of things look like? I mean, you’ve got multiple owners and they come in and say someone wants to retire, they have one owner that says I’m a mess, fix me up and help me get ready to sell. Talk through some of the different kind of scenarios that fit your niche.

Jason Somerville:
Yeah, absolutely. Yeah. One, you just mentioned kind of this idea of a buyout, kind of a minority partner buyout. As we talked before the show, we’re going through one of those now. We’ve done a few of those where you have two, two, maybe say two owners, or it could be more than two where you have a little bit of a different opinion on timeline or you have a majority owner that just wants to kind of clean up the cap table, buy out the rest of their partners. So during that process, there’s a lot that goes on. Right. Number one, let’s say, I mean, do you have the capital on hand to buy out those partners? If you don’t, you’ve got to go raise the capital, which we, that we help do that a lot of times that’s going to obviously be a, it’s going to be a debt funded buyout more often than not because, you know, if the buyer is looking to own 100% of the equity, they’re obviously not looking to just swap equity for equity.

Jason Somerville:
So we’re doing that. We’re going out raising, you know, debt capital, going through all the documentation, structuring, and then you see that a lot in, id say, this world where you might have a 20% owner or 25% owner, basically they get bought out and then the business goes to market probably within a year after that, usually and ultimately gets sold. And what it does, theres a couple things, obviously, if youre the one doing the buying out, youre going to have to pay a fair price. Youre likely not going to get some sweetheart deal. But at the same time, the reason people do that is if they’re thinking about, you know, taking the full company to market soon, they will. They don’t necessarily want to have to deal with more than one owner. Right. They don’t.

Jason Somerville:
They kind of want one guy or one girl to have that ability, just kind of control the deal. They don’t want any other voices in the room. So that often is the reason why they do that. But, yeah, so speaking of deck, I mean, we do a lot of debt, capital market raises. Like we, there’s a lot of people who come to us and say, hey, I’m looking for two, three, 4 million of debt. And as your audience probably is aware, with the private credit market going through such a massive, massive boom, there’s a lot of very interesting opportunities for smaller companies to go out and get private credit for different things. It’s non dilutive, it’s less expensive than equity. You can use it to fund growth.

Jason Somerville:
Buy a building again, buy out a partner. There’s a lot of really good uses for it and a lot of very willing lenders and a big market for it. So that’s something we’ve done a lot of recently as well. And then, of course, just strategic. We’re always doing things where we’re trying to just create a strategic partnership among a client and maybe, you know, another party where we can. Maybe it’s a joint venture, maybe there’s a minority kind of ownership situation that happens, where, you know, we have one now, actually, where they’re in the, they’re in the home goods space, they’re actually in rugs, and they have a really cool model, but it’s like they can really fast forward that model if they attach it to somebody who already has a ton of their customers, but just buying different products. Right. So we’re in the process of kind of going through and, and trying to put together an interesting partnership there and, you know, where we have some common ownership, you know, and, and ultimately, it’s likely that, say, the larger party does acquire the smaller party at some point, but in this way, you know, there doesn’t have to be that commitment.

Jason Somerville:
They can grow together. It’s mutually beneficial, and then maybe there’s a deal down the road. So I think one of the things that’s cool about the way that the lower middle market is developing, in my view, is there’s more ways to skin the cat these days, right? There’s more things you can do if you sit back and think about your business strategically and say, well, what’s the most optimal situation? Can I actually go out and create that? The answer now is yes, a lot more than it used to be. And so we’re always at that intersection of trying to, even though the majority of what we do is still landing on an exit at some point. Those other transactions, even things like just valuations, we do those as well. Where somebody wants, like a fairness opinion for something or just understand where they’re at, but they’re going to use it as part of a transaction, not just to say I want to check in, you know, on what my business is worth.

Dana Robinson:
How important do you think it is that you, for you, your clients, from your perspective, that you have an expertise in the, in the space?

Jason Somerville:
I would say. I’d say it’s, it’s very important. I think that. Is it like 100% of the time, do you have to have it? No, but I think the majority of the time it’s going to lead to a better outcome. I think the other thing, too, and I’ve noticed this, if you have more experience, I think you have more tools in your toolbox. And so, you know, it’s not like, because a lot of people have good experience of, say, how to sell a company. Like basic experience. I’ve sold a company, therefore I can sell any company.

Jason Somerville:
Well, in some ways that’s kind of true, but in other ways, it likely leads to something less than optimal in terms of an outcome. Right. That person could probably still sell your company. They may still do a decent job at it. But if what you’re trying to do is really maximize the outcome and also understand, should I actually be selling this thing any, is that what I really should be doing or should I be doing something else? Like, that’s where I think that experience starts to really play a big role.

Dana Robinson:
I love that. I love that. It’s a little bit of a loaded question, but I mean, I’ve transacted small businesses, you know, the, that aren’t even the bottom of the lower middle market. And the generalist is really just a deal person that knows how to make a market and find some buyers and knows how to navigate the deal. And that’s even helpful. Like, I’m a lawyer and have done that for other people, but I don’t do it myself when I have transacted businesses on the sell side. So I’ve hired and engaged brokers. But I just think what you’re talking about is what most business sellers need.

Dana Robinson:
They need your expertise as if they’re going to sell, but way before they need to. And then they have some freedom and agency to choose those battles based on the knowledge you’re going to bring to the table that they could do this. And they might, as you said, they might just say, yeah, it’s not, I don’t want to lift that weight. Let’s pick some other things that I can really optimize. I love that. Let’s brag about you as we get toward a wrap up here. And so that people understand if you’re selling an H Vac or plumbing company, don’t call Jason Somerville. But if you’re looking to optimize and eventually exit or working on a business in the consumer product space, fill that in a little bit so that people get a sense of how broad or narrow your consumer products practices.

Jason Somerville:
Yeah, so. So I would say our consumer practice covers, you know, anything that’s in CPG in general. So omnichannel direct to consumer traditional products based, you know, businesses, whether you’re selling to wholesale or selling, you know, to direct to consumer ecosystem. Like we do a lot in logistics around consumer. So, you know, we have clients that, you know, provide services primarily to CPG companies. So that’s the other place we spend a lot of time. We’ve done some, some SaaS deals in that same market, you know, software that, that is facing consumer, you know, consumer businesses. So anything around that is definitely well within our wheelhouse.

Jason Somerville:
And I’d say that, you know, from a manufacturing standpoint as well, if what they’re manufacturing are consumer products. Right. You know, I think you get a lot less of that in the US than you used to. So there’s not as much, but yeah, that’s another sort of part of that ecosystem where we spend a lot of time.

Dana Robinson:
Awesome. And if people want to find you, what’s you got a website you can chime in? We’ll put it in the show notes, of course, but. And what are you active on LinkedIn? Is that a good place to connect?

Jason Somerville:
I am, yeah. So our website is actually GW partners. So. Www dot. Gw dot partners. My email, they can email me Jasonw partners and then. Yeah, I’m actually very active on LinkedIn. Actually.

Jason Somerville:
We do every, every Monday we actually post a deal tracker for the prior week, all of the venture capital and m and a deals that got done in the US for the prior week. So we get a lot of people who follow us for that. Kind of gives them a good, kind of consistent weekly sort of bead on the market in the consumer world.

Dana Robinson:
Love it. Is that an email list or is that posted to LinkedIn?

Jason Somerville:
We just posted to LinkedIn. Yeah. So best thing we’ll do to follow me and connect.

Dana Robinson:
Appreciate it. Hey everybody, it’s Dana with Jason Somerville, GW Partners, GW Dot partnersnot.com for those that are still getting used to these new top level domain extensions. And email me with questions, comments, anything you want. Hello@danarobinson.com. jason, thanks for coming on today.

Jason Somerville:
Thanks for having me, Dana, appreciate it, man.

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@danarobinson.com or leave comments and questions by calling 858-252-7785 call 858-252-7785 and leave a message.