Episode 282 with Laurie Barkman: Creating a Sellable Business Asset

Join me on this episode of the Ready App Podcast as I chat with Laurie Barkman about the crucial steps in creating a sellable asset for your business. We dive into the impact of a solid exit strategy and how to prepare well in advance to make your business more attractive to buyers. Laurie shares valuable insights from her extensive experience in mergers and acquisitions, offering actionable steps for business owners to ensure their business is both valuable and transferable.

GUEST RESOURCES

Laurie Barkman, a former CEO and M&A advisor, guides business owners towards successful exits. She founded The Business Transition Sherpa® to provide transition advisory and coaching. Laurie is also an author, adjunct professor, and podcast host, sharing her expertise on business transition, succession, and entrepreneurship.

Get a free digital copy of the Amazon best-selling book, "The Business Transition Handbook: How to Avoid Succession Pitfalls and Create Valuable Exit Options” https://thebusinesstransitionsherpa.com/the-business-transition-handbook

https://www.linkedin.com/in/lauriebarkman

https://linktr.ee/businesstransitionsherpa 

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Transcript

Episode 282 with Laurie Barkman: Creating a Sellable Business Asset

Transcribed by Descript

Erin Marcus: Oh, hello. Hello. And welcome to this episode of the ready app podcast. I'm excited about my conversation today with Laurie Barkman. And here's why. We're going to be talking about creating a sellable asset. And I think that is one of the big misses I see in the small business world and what the effect that has on wealth transfer, the effect that has on an exit strategy, the effect that has on so many things.

Erin Marcus: So I'm excited to get into that. But before we get into it, tell everybody a little bit who you are, what you do, all the. All the 

Laurie Barkman: cool demographics. Oh, Erin, thank you so much for having me on your show and thank you for spotlighting this topic. It is so important. You know why? 100 percent of business owners are going to have a transition one day.

Laurie Barkman: Right. 100%. Like it's going to happen. So are we in denial? Is this such a taboo topic we can't even talk about it? Because so few business owners have an actual plan. And what I find is that they've waited too long to work on their exit. And then when they say, Oh, I'm ready. Guess what, you need 

Erin Marcus: three years of preparing for that.

Laurie Barkman: Yeah. 

Erin Marcus: And so you, it's, I tell people, here's the thing there. You can decide to have a personal brand. You could decide to have a sellable asset. You could decide whatever you want, as long as you make a decision and choose as opposed to end up by default reaction mode because you didn't choose.

Laurie Barkman: Make a choice, make an intention, and I really hope today, people listening, take some action. And I'm going to do my best to give some really actionable things that people can do to take some steps forward and not just do the lip service and tell their business partner or tell their spouse, Hey, I heard a great episode today and then nothing happens.

Laurie Barkman: So I admit this makes me chuckle. I'll talk to people and they'll be like, Yeah, three years ago, I told my wife that I was going to sell my business in three years. And here I am and I'm like, Oh what are you telling her now? And they're like, Oh yeah, another three years. And what does she say? She laughs at me.

Laurie Barkman: Oh, okay. So what does that really indicate? And I think just to give a little bit of background for me, where I'm coming at this as a point of education and a trusted source of advisory, and working with business owners to help them answer some of these really big questions that are weighing on them.

Laurie Barkman: And help them find the clarity that they're seeking. And how I got here was by way of being an entrepreneur and by working in businesses that have had a succession and have had transition, and they've innovated along the way as a multi-generational company, I've seen everything from startups to, a hundred plus year old businesses.

Laurie Barkman: And for me. as an executive going through a mergers and acquisitions that was with a major global company who acquires businesses on a fairly frequent basis. They had a playbook, right? We were no, it was not a merger. We were acquired and it was a pretty major transaction. It was over a billion dollars.

Laurie Barkman: And for myself and the other executives that went through the process, we had to keep our foot on the gas. We could not Take our foot off the gas to run the business and at the same time, keep this highly confidential and make sure that this deal, we all wanted the deal to go through at the end of the day.

Laurie Barkman: We wanted the deal to be successful. And that's the starting point. I went through that too. 

Erin Marcus: It took. My last corporate was really a family owned business that became, it was acquired and it must have taken a year and a half and every day we would, when my boss would walk in, he would look at me and he'd go 50 percent and then he'd be like, 20 percent like 80 percent and that was depending on what was going on that day.

Erin Marcus: How likely was this deal? And for a year and a half, that was the daily conversation. These can get really complex. And I think, to our point, we're joking about it because we're now both safely on the other side of that. But I think The situation is those were multi million, in my case, billion, in your case, situation.

Erin Marcus: But they don't have to be that complex. I think that's what stops people from even preparing for us having a sellable asset is they think it's going to derail their business because it's too complex. It's going to derail what they're trying to do. And to me, it's all a 

Laurie Barkman: line, truthfully. Doesn't matter how many zeros are in the number, right?

Laurie Barkman: You still have to prepare yourself. Because we're human beings and we are emotionally attached. We're emotionally attached to our baby. How many entrepreneurs do you know that have described their business as their baby? A lot. I don't have any hard data on it, but I'm going to go on the limb and say more than half, right?

Laurie Barkman: And the other side of the emotional connection are the relationships that we have that you've built over your life. Years and years, and you really are proud about those relationships, your customers, your suppliers, your stakeholders in the company. And that can be your employees, it can be shareholders, whoever they are, your community.

Laurie Barkman: There was a guy who was on my show. My show is called Succession Stories, just celebrated our fourth year. One of the earlier episodes with a fourth generation, the brother was the CEO, brother sold the business and the brother who was on my show was just, and he was depressed. There's no.

Laurie Barkman: sugarcoating it. He said that the company's product was a consumer product. It was bleach, and it was sold in, supermarkets to go down the bleach aisle. He could not go down the housekeeping products aisle. He couldn't do it. It's your identity, right? It hurt him too much. Your identity was 

Erin Marcus: just 

Laurie Barkman: wrapped up in it.

Laurie Barkman: Absolutely. That's just one example. I have so many where people feel so connected to that company. They just can't let go. I just, today I talked to a colleague, a former colleague of mine, and he was part of a business where the business owner literally told him, I am never selling this company. It is going to the grave with me.

Laurie Barkman: Guess what? My friend, Rightly so resigned. He said, I'm putting in all this effort and I'm trying to help build and create a sustainable business. And you're gonna kill it. You basically, you're gonna kill it. Basically told 

Erin Marcus: me you're going, you're basically 

Laurie Barkman: gonna kill it. Yeah. And that you don't care.

Laurie Barkman: And that happens every day. 

Erin Marcus: And I think that's part of going, this idea of the wealth transfer when you have generational wealth and people expecting their it's almost as if. The asset just dissipates, which sounds strange, but here was this thing you've created. It was created. It was value that was created and now it doesn't exist anymore.

Erin Marcus: And then it just doesn't have to happen. I think people, you can be creative. I've helped a client sell a subscription box business. It wasn't big multiple, right? But it was a really For a young female entrepreneur who is just trying to do a thing, it was a big payday. And so it can be exciting as 

Laurie Barkman: well.

Laurie Barkman: Absolutely. And there's different types of mentality approaches, mindset. And I like to talk about in my book my book is called the business transition handbook. So not a shocker that we're talking about business transition today. And one of the, one of the very first chapters is on this point, it's about transition mindset.

Laurie Barkman: How do you have a transition mindset? What does it mean for you? And what does it mean to strive to identify what are these things that are going to help? be exciting for you and pull you into your next thing, as opposed to the things that could really drag you down and drag your business down. And that there's a correlation.

Laurie Barkman: We do see a positive correlation with things that are exciting to you. And an example you shared about this young woman, she's going to probably start another business. She's a mountain climber. She's going to climb that mountain. She's going to go climb the next mountain. And then there's some people that are, Lifelong embedded in their business, their craftsperson, maybe they've got that special skill, this is all they want to do.

Laurie Barkman: It is so wrapped into their identity. It's very hard to let go. And there probably isn't another business on the other side of it. And those are the people, frankly, I worry a lot about because I think that there's probably a very high depression rate once you leave the business, are you finding some fulfillment and other things, and, You've been so busy running your company.

Laurie Barkman: You've been so busy. You probably have missed countless baseball games with your kids or softball games. You've missed all these things. And now, somebody like me and you are saying you got to have a fulfillment outside of the company. And they're like, shit, I don't have any hobbies. I spent all my time working.

Laurie Barkman: And that's a shame. 

Erin Marcus: And so my approach, I'd be interested in your take on this. I've always held that the good news is. Creating a sellable asset isn't really different than creating a really good business. So whether you're going to actually sell it or not, taking the steps that would create a sellable asset is what allows you to create a self managing business so that you don't have to work 80 hours a week.

Laurie Barkman: Isn't that an amazing best kept secret ever? I like to just couch it that way too. Hey,

Laurie Barkman: You're going to run a more valuable, easier to run business now and it's going to be worth more in the future. Wow. Like mind explosion, and when people can unpack and like we're, we use a lot of jargon and we throw a lot of words around and, but let's just say, look, in everyday language, if you are very tethered to your business and you feel that your business is your prisoner in your own business, what would feel more freeing to you?

Laurie Barkman: What would feel more freeing? And and why did we start our business in the first place? I think a lot of entrepreneurs want the freedom, right? They want the freedom to solve the problems they want to solve and how they want to solve it and go out there and get it done. They're very action oriented.

Laurie Barkman: They are motivated. and exciting people. They're risk takers. I have a huge appreciation for entrepreneurs taking that risk and building our country and building the world. And and that's why I'm inspired to help with this education just like you are and to say, look you can't do exit planning when you're exiting.

Laurie Barkman: It is just too late. And why not take more control of your future? Why not have that interest in, teeing up the topic we had talked about This idea that your business is an asset. It's not just a job. And let's explore that a little bit. What does that even mean? And there's nothing wrong with people having a business that's a job and they get a good salary and a good income and they take owner draws and distributions and they put money in the bank.

Laurie Barkman: Hey, that's great. That's awesome. Cheers to you. That's still hard to do. I get it. The difference, I think for people who are saying, yeah, you know what? I really do think I'm building an asset that someone else might want to own. And I want to diversify my portfolio. My biggest part of my nest egg is my company.

Laurie Barkman: And geez, what happens if something happens to me? What happens to my company? It can really affect. My family can affect, certainly my stakeholders. So what, how do we build and protect value? And if you have an asset, like a 401k, what are you doing with that 401k? You want to build and protect value.

Laurie Barkman: So that's how I feel about what that means is building and protecting value. 

Erin Marcus: And one of the things that we were talking about before that I think where a lot of people get stuck, and it's the same place they get stuck in growing the business, is how are you identifying yourself? Because if you identify yourself as the person that does the thing, you're gonna have a hard time letting go.

Erin Marcus: But if you identify yourself as a business owner, and a business owner's job, truthfully, is vision, is a mixture, in my opinion, of vision casting and asset allocation, then You can start separating who you are identity because that really is what drives people is who do I identify as we take action based on who we think we are.

Erin Marcus: And I was talking to someone earlier today who is spending, she was, we were kind of joey, she's I almost feel bad taking his money, but this is what he wants. He realizes he's getting older. He wants to no longer be in charge of the business. But because in his mind, he is the business. He is spending a ton of money investing in people who can help him separate him from the business.

Erin Marcus: Truth of the matter is the business is probably fine. But his ego's wrapped up in there a little. We get it. We all get it. His ego's wrapped up in believing. That he is the business, right? So this can serve us, but it can also work against us, right? If you think that you are the business and the, my favorite example of this is a mentor I've had who you would think he's a personal brand, right?

Erin Marcus: It was all speaking and author and yet he was able to sell his body of work. even though it was all him, just because of the way he put it all together. There's more options than we think. 

Laurie Barkman: Yeah. Let's go back to something you said. I want to just touch on a little bit. It's a yes. And and you talked about the business owner and identity and having a little more arm's length and I couldn't agree more.

Laurie Barkman: I just want to do a yes. And that is to say the owner of a business. Do you own a business or are you a business owner? And so I want to take what you said just one step further and that little more even arm's length, right? Owning a business is I own a business, right? A little more arm's length. You might own a portfolio of businesses and that's even more arm's length.

Laurie Barkman: And that is really critical. And I think for everything you just talked about, having a asset that is attractive to a buyer that is potentially valuable, right? Meaning they're willing to pay some money for it or some value exchange. There is a transferability. That's effective that we can make this transfer work so that the new buyer, the owner, gets the value, right?

Laurie Barkman: Price is what you pay, value is what you get, just to quote Warren Buffett. And and so how do we do this and minimizing risk along the way? So we're we've got this teeter totter of risk and value that as an owner, if you take that step back and you're looking at it from, let's say the fourth floor on down and from a buyer's lens, we can start to see things in the business that, oh my goodness, look at that risk pocket right there. Gosh darn it, I didn't even realize it. I got to work on that, right? And we're looking at our business from a different lens, like you said. We're going to work on, work on the business, not, and we're going to work in the business too.

Laurie Barkman: We can't entirely step away. But making the time to just look at your business through a buyer's lens, I really think it's eye opening. And when I have my coaching and advising clients and I help them see their business from a new point of view, they can't unsee it. It's amazing, right?

Laurie Barkman: They're, they have five years out of an intended sale, but they're starting to put things in place now because they know It's the right thing to do to build value, or it's the right thing to do to make it more transferable to reduce risk, all those things. And it's so exciting. I love it when they tell me that because it's the coolest thing.

Laurie Barkman: I help them see something they hadn't seen before, and it's so impactful. 

Erin Marcus: And what's interesting, as we're putting this all together, because I talk a lot about what I do as working at the intersection where what you need to do meets who you need to be to do it, right? Because the plan doesn't matter if you can't do the plan, right?

Erin Marcus: So we have the business plan, the marketing plan, the scaling plan, but then also the success mindset. And I think We've talked about it, but I don't know. I just really want to highlight it that most people when they start talking about selling a business transition plan, you're thinking about the what do I need to do, but it really is to your point.

Erin Marcus: Are are you a business owner or do you own a business? The who you need to be is going to outpace it by a million miles as far as importance. You're not gonna be able to do the things that you need to do if you don't first resolve the identity, the self definition. It's like a whole new, it's almost like everything you got over to launch your business and then everything you got over to grow your business, it all comes rushing back at you, right?

Erin Marcus: And now we've gotta do it in a whole different way to start considering that this would even be an option. I agree with that. I agree with that. So where do people start? Where do people start? If you're, I agree with you this starts way before you're even contemplating doing it. And again, the best news here is the business is better for it, regardless of what you end up deciding to do.

Laurie Barkman: Where do we start? There's a great place to start, which is taking a fresh look at your business from a buyer's lens. And I have a couple of tools on my website that help people do that. Business assessment is one of them. If they. Take the assessment. What's great about it is if they include financials, we can also get an out of the box range of value for the business current state.

Laurie Barkman: And we can also do what if scenarios on potential value while understanding which levers of the business can make the most movement. in that valuation. That's really powerful stuff because it's quantitative and it's not guesswork and it's not your golf buddy telling you what you need to work on or, you hearing a podcast and getting inspired, which those are all great by the way, but I think when you get, yeah, when you get to really, Having the intention for a plan, let's get some data, right?

Laurie Barkman: We're quantitative people, we're running a business here. Yeah. This isn't guesswork and hope is not a strategy, so let's get a plan together that's based on some real information. And by the way, we're also comparing your company to industry peer groups. . Which is really important too.

Laurie Barkman: 'cause you wanna punch above the way class when you can. So that's a great place to start, is a business assessment and a business estimate of value. Full stop to take it to the next level is a personal readiness assessment, which I also have available on my website. And it's a great tool. It's an excellent tool because it helps ferret out some of these identity issues.

Laurie Barkman: It helps us understand what some of the Vision future vision aspects are or we have a gap maybe in that future vision. I have some people that score a hundred. I have some people that score zero. And there's something in between. And there's also other questions that help just draw out some of these relationships, identity, some of those factors we talked about earlier.

Laurie Barkman: So I think that's an awesome, one, two, and then the third leg of that stool is a financial assessment. And this is a way to pull it all together. We need all three. We need to understand what are some of the fundamentals for the age and life stage that you're in and the expectations that you have for income after you leave the business and work backwards.

Laurie Barkman: So I have some tools that I use for that. And, one of the things that I offer is, a 90 day package where we go through and answer some of these big questions. And it leads us to the roadmapping process of what do we got to go work on to make our business more attractive for consumers?

Laurie Barkman: More transferable and less risky for, from a future transition standpoint. And I call that strategic transition planning and on purpose, it's not a five minute exercise. That would be a mistake. You've got to let the summer, you got to let it percolate. And there's so many different ways that these areas that we work on are going to, we're going to connect the dots, whether it's contingency planning, scalability and growth, innovation.

Laurie Barkman: Competitive differentiation. And of course, the financial improvements that we're looking for. So how do we grow, how do we scale and how do we ultimately, have a successful transition? That's the planning process. People, we got to do the work. We got to have a plan because we want to have an intention.

Laurie Barkman: We want to have an intention and take action when we're ready. And just by going through all of this, you're going to be so much more ready as an owner. You're going to be so much more effective as a executive that's ready to have a successful transition. And the the buyers are going to see that value, right?

Laurie Barkman: It's going to be evident. And you're gonna get the reward for that. As 

Erin Marcus: you're talking about this, so this just reminds me, the business that I owned before this was working with families with aging parents. And so we used to do senior relocation and estate liquidation. We would help seniors move out of their houses after 50 years in the same place.

Erin Marcus: And then a lot of times we would have a senior and so I had to create an estate sales of some format in order to do something with everything that they didn't take with them, right and invariably, once my team who was amazing, got done staging. The stuff for the estate sale and made it look all pretty again.

Erin Marcus: The family and the owners will be like now that it's attractive. Maybe I want to keep it and I keep thinking about I wonder how many people go through your process. And it's almost like they fall back, you prettied up their baby for them again, right? They fall back in love with their business.

Erin Marcus: Now that it's doing better and now that it works better, maybe this isn't such a bad idea to do again for a while. Yeah, 

Laurie Barkman: It's funny. I think that could happen. I do see the opposite though. I do see that people are They're sharing with me that they're expressing excitement about what's next. They are feeling relief that they have a direction.

Laurie Barkman: They know that the pieces are going to come together. They have more faith in the universe that the pieces are going to come together than, hope being a strategy and kind of waiting for it to happen. They're taking action. They're part of it. They're leaning in on it and they feel lighter.

Laurie Barkman: I have a client in California who is in his sixties. And he says he's five to seven years away. So we'll see. Everything that we're working on gives me an indication he's probably going to sell sooner because his business is going to be in very good shape for sellability. And I think he will be ready.

Laurie Barkman: And if that magic number fits the freedom point perspective of at what point is owning my business more riskier than selling it? That's when it's really worth taking a good look at. If a little blue bird comes knocking on your door and says they're interested in buying your business, guess what?

Laurie Barkman: Your business is ready to sell and having a business that's ready to sell at any time, I believe puts the power and control back with the seller. And isn't that a good thing? Absolutely. 

Erin Marcus: I love it. I call it doing the work before you go to work, right? You got it. Same thing, marketing, do the work, do the research, put your docs in a row before you go to work, because that's when you're, what are they, I forget, luck is the intersection where opportunity meets preparedness, or however that quote goes that I'm sure I'm completely eviscerating keeping you ready.

Erin Marcus: It's ready for opportunity. It's ready for opportunity. Which is amazing. That's what we all want to do. And the other thing I can see is A challenge, and maybe I'm just speaking for me, is a bit of a patience. When I know a lot of entrepreneurs, those of us who are a little more serial entrepreneurs, we like the startup phase, we have no attention span, we like to create things, so we create problems in order to create things, right?

Erin Marcus: It's the, I think people let things go rather than do the work that could have really gotten them amazing results had they just Take it a minute to think about it in these terms instead of focusing on what they don't want to do anymore. 

Laurie Barkman: Yeah, that's fair. I agree with that. 

Erin Marcus: So well worth it. Worth it.

Erin Marcus: So tell us all your website so we can go grab your tools because those sound amazing. 

Laurie Barkman: Thank you. Yeah. The website is the business transition Sherpa dot com and my book is there. They can get a free digital copy of the book if they want to, which is 

Erin Marcus: very nice. Yeah. 

Laurie Barkman: Available to the listeners of your show and also a masterclass called Endgame Entrepreneurship, which I'm really excited about.

Laurie Barkman: And I think it's going to help a lot of business owners find clarity on some of these big questions. 

Erin Marcus: I love it. I think it's important to know where on this spectrum you fall, because it really does affect your financial future. Whether you're trying to create a sellable asset, if you're not, and you're just focusing on being self employed, that's fine.

Erin Marcus: Then you need to invest your money in a different way. But now we have data. Now we know, so I love it. I think it's very important having been through mergers and acquisitions. To me, it was fun. I like all the moving parts of the puzzle doesn't have to be bad. I love all the, I love all the, how do we make this work?

Erin Marcus: How do we make this work? 

Laurie Barkman: That's how I come at it too, because I think it's a unique value proposition for the people that I work with is that I am also. Doing M& A transaction work. And that's why I really lean in on this idea of seeing your business through the lens of a buyer. Sometimes I'm on the buy side, most of the time I'm on the sell side, but isn't it interesting to put yourself in the other person's shoes?

Laurie Barkman: I think We try for win outcomes on these deals. I'm a big believer in that. And what better way to try to get a best fit buyer scenario is to see your business through the lens of a buyer and work backwards. I call it re engineering your exit. I call it reverse engineering. I do the same 

Erin Marcus: thing.

Erin Marcus: And it's the same thing you should be doing from the perspective of your client, right? The phrase that I used to use When I was teaching team building and leadership was how does it feel to be on the receiving side of you, right? So how does it feel to be on the receiving side of your business as a buyer as a user?

Erin Marcus: The more we can get out of our own way and get somebody else's perspective and get a different perspective, you're only going to come out of it ahead of the game. 

Laurie Barkman: Yeah. No, absolutely. Yeah, no I think it's my, my website has a lot of resources, including my podcast. So I really do hope that people connect there and if they want to meet with me, to just talk, there's a no pressure.

Laurie Barkman: There's not a sales call kind of deal. If you just want to have a conversation, I would love to meet with you and let me know that you heard me on Aaron's show. Awesome. 

Erin Marcus: Thank you for hanging out with me for a few minutes here. I think it's really important. I think people are missing an opportunity and I'm with you.

Erin Marcus: I like the whole it's win. It's all win. So thank you. Thank you. Thank you. 

Laurie Barkman: Oh, thank you for having me so much. It was really fun to be with you today.