Interview with Terry Lammers, CVA About Business Valuation, Bankability, Cash Flow, and Growing a Business by Acquisition

Terry Lammers grew up watching his parents run their own company in the fuel & lubricants industry, and eventually came on as a full-time employee in the early 90’s and took over as President of the company. 

In just 18 years, TriCounty Petroleum had purchased 11 different companies, growing Terry’s family business from $750,000 annual sales to over $40 million when the company was sold in 2010.

Today, as Co-Founder and Managing Member of Innovative Business Advisors, Terry taps into his financial expertise and hands-on business experience to advise and guide business owners who are interested in learning the value of their business, the process of acquiring new businesses, or knowing when and how to sell their business.

Terry received his designation as a Certified Valuation Analyst (CVA), which is an accreditation through the National Association of Certified Valuation Analysts (NACVA).  He also holds a Real Estate Brokers License with the state of Illinois. 

In Terry's book, "You Don’t Know What You Don’t Know: Everything You Need to Know to Buy or Sell a Business," he provides an in-depth examination of the process of buying, growing, and eventually selling a business. No matter what stage of business ownership you’re in, Terry will help you understand how to navigate the twists and turns of the business cycle and steer your enterprise toward success.

To purchase Terry's book or to download the ebook, click here.  For Terry's speaking event schedule and links to podcasts and articles, click here.

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Learn more about what we do at Innovative Business Advisors:

→ Business Brokerage Services (Buy or Sell a Business): https://innovativeba.com/business-brokerage-services/

→ Valuation Services (3 Types of Business Valuations): https://innovativeba.com/business-valuation-services/

→ Coaching Services (Private, Teams, Retreats & More): https://innovativeba.com/business-advisory-services-coaching/

→ Books (You Don’t Know What You Don’t Know™ Book Series): https://youdontknowwhatyoudontknow.com/

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→ Facebook: https://www.facebook.com/innovativeba

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About Steven Denny: Steven Denny co-founded Innovative Business Advisors in 2018 and serves as a Managing Member of the firm. Steve has been actively engaged in M/A activities in a wide variety of industries for the last 14 years and has developed specific products to assist clients in growing their profitability and enterprise value. His specialty is working with established private companies in the lower middle market with annual revenues from $1 – 50 million.

Transcript

00:02

Welcome to the You Don't Know What You Don't Know podcast, by Innovative Business Advisors, successful business owners who have started, grown and led businesses share their journey and direction for the benefit of those traveling the same path.

00:18

Today we're honored to have with us Terry Lammers, who's my partner and a founding member of IBA, and Terry in his business career has done more than 30 acquisitions. He sold his company for greater than eight figures. He is a highly sought after business coach and author, and is a finance major, entrepreneur, and certified valuation analyst. Terry knows how to build value and companies and has a heart for teaching that skill to business owners. So Terry, welcome, how you doing.

00:48

Thanks for having me. That sounds overly important.

00:50

Well, you are overly important. You're you've accomplished a tremendous amount, and it's an honor to work with you. So Terry, I wanted to talk a little bit today about the business environment that we work in, right. And you and I have talked about this a lot. And I thought it might be helpful to our audience if we talked about after all the success that you've had in building and selling a $40 million plus business, right? You went back to school, and you became a certified valuation analyst. What did you learn in earning your CVA?

01:22

You know, that's a really interesting question, because I have bought a lot of businesses and, you know, I have my way of valuing them. And I think we've said it before valuing a business is as much an art as it is a science. So there is a lot of objective perspectives that you put into valuing a business. But I think the main thing is, especially you and I value a lot of smaller businesses, and we come back to the bankability of it, is it a bankable deal? So if I'd say your company's worth $3 million, can you put a reasonable downpayment and have a debt service coverage ratio, which is, you know, the amount of money coming in to cover the debt payments, and have that be acceptable? I think the second piece in a valuation, which is hard for us, as valuators, is, you know, we do a financial valuation, so we're valuing the cash flow of the business. But, you know, there was a lot of companies that I bought, that were very strategic in the fact that I could eliminate a ton of their operating expenses. So the cash flow with me running the company is going to be significantly more than the current owner, or are you buying the company, and it's going to add products or services to your current customer base that you don't have right now, which will enhance, you know, the two together create a synergy. So I think you have the quantifying what the cash value of the cash flow is. And the bigger the company, the likely the higher the multiples, but also to really look at as a strategic valuation or strictly financial valuation.

03:03

Yeah, and those are significantly different, right? So financial valuation tends to be kind of math drill.

03:09

So what's interesting is in the front of every one of our valuations is revenue ruling is 49. I'm missing it. But it's a revenue ruling that basically says, Your company is worth what somebody else is willing to pay for it, uncoerced of course, and knowing all the truthful facts that are out there, yeah. And it, it actually took me a couple years as a valuator to think about that. And it's like, you know, it is really true, your company is worth what somebody else is willing to pay for it, knowing all the relevant facts, boom, that's it doesn't matter what I say it's worth doesn't matter what you say it's worth doesn't matter what you think it's worth. That's the value of the company.

03:52

It's also kind of interesting for small companies, particularly, and I'm talking about companies that have an enterprise value of less than $5 million, right? So it might be 250,000, it might be up to 5 million. You and I have seen a lot of valuations whereby they'll use tools within the valuation in a discounted cash flow methodology most often that said, Okay, this company is going to grow by X percent a year. And now all of a sudden, if you apply this level of growth rate to their revenue and cash flow, now all of a sudden, this company is worth significantly more than it might be worth if you had to go borrow the money to buy it.

04:30

Yeah. And that immediately brings to mind a valuation that I did on a company, there was four owners. So classic situation, one died, and the other three wanted to buy the other two sons out that inherited that fourth, and I had the privilege of looking at a previous valuation from like five years ago, and they did a discounted future cash flow, and that's where they put a growth rate on it and a company It consistently kicked out like $400,000 a year. Well, they did this discounted future cash flow and valued the company based off a $700,000 in cash flow. Well, fast forward five years, and I'm asked to value the company, guess how much the cash flow of the company was 400 $400,000. So, I'm not a firm believer of that and obviously, there's going to be situations where you'll get that value, but I don't like valuing companies that way.

05:30

Yeah. And you certainly will see valuation experts that use that methodology, and it is one of the recommended methodologies, but that's why we're so prone to the bankability side, or smaller deals anyway,

05:44

I mean, you remember the one that we did, you and I both valued the company at $8 million, the owner and we had a willing and able buyer at $8 million. The owner went and sought another valuation from a CVA. And he came back with a $15 million valuation. Well, it wasn't bankable, the potential buyer wasn't willing to pay that. And what five years later, the company hadn't sold because the owner dug his heels on in on the $15 million. And it's just it wasn't feasible. That's what's really sad about a valuator over valuing a company, you know, because it can make it unsellable and then in the current owner’s mind, they get dug in that it's worth so much more. And I remember one time when, I'm sure you and I talked about this in the past, but I called the valuator out on it. I called him because I was upset. I'm like, What in the world? How did he come up with his number? And I called him and he goes, Well, I valued it that high because I knew he wanted to sell the business. So I wanted to give him a good number. I'm like, Well, congratulations. You just ruined the scalability of this company. And the guy's not gonna get it, you know. So you just made it

06:51

unsellable. Yeah.

06:52

Sad, sad.

06:54

And you and I both know, the banks do the math, they do the math before they do the loan to say, is there enough cash flow to make the payments?

07:02

Yeah, hence why we really liked the bankability method because it's got a cash flow. Yeah, we liked it so much we trademarked it. Well, you know, and the other thing of it is, like I said, a lot of the companies that we're valuing are primarily under $10 million in enterprise value. So most of those buyers, they're not private equity groups, you know, they're individuals or another small business, so they have to borrow the money to buy the company. When I sold my company, they're looking at just more of a return on equity, because they had the cash, you know, so that all makes a difference. But that's why you're gonna get higher multiples with larger companies.

07:41

You know, let me change the subject on you just a little bit. Most business owners as we talk about all the time, very seldom do they think about what is the value of their company, most business owners think in terms of sales, and raising sales and growing revenue. And they have this mindset that the more I raise the sales volume, the more I raise the revenues, the more valuable my company is going to become. What's your perspective on that? So

08:05

you're really trying to push my buttons, aren’t you? So I have two mantras, as you very well know. One is it is not about sales, I could care less what your sales are. It's all about gross profit in the cash flow of the company, not sales. So most people think sales net income, it's about gross profit and cashflow. If you can't convert the sales into gross profit it’s not doing you any good. And from the gross profit, you know, what are your operating expenses, and depreciation is that number, so you always gotta remember, depreciation is a non cash expense. So you have to add that back. So what is the true cash flow of the company, and that is ultimately what the value of the company is based off of, is the cash flow of the company. But we get people come to us all the time. It's like, my sales are up a half million dollars this year. And it's like, so when they look at you kind of funny, and you're like, did your gross profit go up exponentially? And that's why it's kind of a little bit of a side note, but that's why we like to look at percentages and not numbers, because you can be growing your sales, you can be growing your gross profit, but is your gross profit growing at the same percentage of sales as it did before? You know, if it's dropping, that means you're just selling more stuff, but you're not yielding the cash from it? And then likewise, what's your percentage of cash flow? If that's dropping, then you're getting heavy on operating expenses, or you know, something else is happening. So very important to look at percentages versus just strictly the numbers, especially in a growing company.

09:35

Yeah, because it is very easy. An easy way to grow is just reduce your price, right? You reduce your price, and you, you know, eliminate your gross margin, you can grow your top line pretty quickly. But there's nothing left over at the end of the day. So what's the point? Correct? Yeah, it is an amazing difference in that regard. And why do you think that's so hard for business owners to grasp?

09:57

I think most business owners are wrapped up in the day to day operations of the company. And it's always just blown my mind. I mean, I think the highest valuation I did was a company for 50 million. And the owner of that company had absolutely no idea what cash flow meant. He had absolutely no idea what EBITDA was, but he could sure as heck tell you how to run his business. You know, so they just, it is kind of funny. They don't, you know, it's really checkbook management, you know, is there cash in the checkbook, good. If there's a lot of cash, we'll go buy something else. But you know, are they taking time to get into the weeds?

10:34

Yeah, yeah, that's so true. You know, the, it's seems like accountants almost always focus on reducing taxes for business owner customers. What's your perspective on that?

10:47

It's sad. It's kind of another thing that the owners are always proud of, is like, I didn't pay any taxes. Well, you know, if they beat the income of the company down, unless it is explainable, how they did that, as far as add backs, as far as the valuation, you're not adding value to your company. So you know, it's a strong argument that in the last three years, before you're selling your company, you need to drive every dollar to the bottom line, and increase that cash flow. And unfortunately, that may mean that you're going to pay taxes, but at the end of the day, it's going to increase the value of your company exponentially.

11:28

Yeah, and when you are selling your company, this is, I think, the hardest thing for sellers to get their arms around, at least in my experience, and I want your opinion on this as well. When you're selling your company, basically, you are getting paid for the past performance of your business, you're not getting paid for the future potential of the business. Now, if you've got a strategic purchaser, as you alluded to earlier, they may have some strategic value that they apply on top of their purchase price, but for the vast majority of the time, particularly for small transactions, where they have to go get financed, the bank’s making a decision based on the history of the business, right?

12:10

Yes. And so that kind of alludes a little bit to my second mantra, which is it's not about how much you sell your company for, it's how much you get to keep net of taxes for selling it. So there's kind of two parts of that, one, yes, you want to pay attention to your taxes, but don't let it shoot the value of your company. And two, when you go to sell your business, do some tax planning, because, as you very well know, I mean, we've had situations where if they sell it one way, I had a trucking company that was actually gonna have to bring a check to the table to sell the company, because it was still a C Corp. But we ended up selling it a different way. And they still walked away with a pretty nice check. It's a big, big difference. It is. And you know, another thing that we always talk about is, it's all about your team. Who's your team of people? Who's your financial advisor, who's your CPA, who's your attorney? Attorneys are, especially in selling the business, attorneys are a big deal. I mean, you know, they can make or break deals all day long.

13:11

You know, and I think you're alluding to, that's one of the big differences between, are you simply using a broker to help you sell? Or are you using a broker as part of a team effort to make sure that you really get the maximum value out of the deal?

13:24

Which alludes to your book. But yes, that's correct. I mean, we purchased a company recently, we got the deal done in eight weeks, we met with the guy on July 5th, and we closed on September 1st. And when we met with him on July 1st, we made an offer on the price, he accepted it, and he liked it, it was fair. And then he told us, we need to close by September 1st, and there was real estate involved. It's like, oh, boy. So I told the guys that, look, we can do this. But there can't be no BS, because we got to plow through this, you need a good attorney. And, to his credit, he got a good attorney. And we hammered it out in eight weeks. On the flip side, I got a company we've been trying to buy for two years and the owner’s unrealistic and attorneys difficult to deal with. And it's just, it's an impossible situation.

14:20

It is so amazing how the team can make all the difference in the world, not only in the speed of the transaction, but in the result of the transaction as well and

14:28

right back to your accountant. You know, it's like, well, and I wouldn't blame the accountants. A lot of small business owners are, they're like happy. It's like, I filed an extension. I don't have my taxes done. You know, well, congratulations. But if you're going to sell your business, we have to have up to date financial statements. So all these things come into focus, especially when you're getting ready to sell the company because you got to have solid financial statements. You got to have your tax returns up to date. Cash flow is all about the name of the game, so don't try and beat it down. Just save yourself a nickel on taxes. It's an art.

15:03

Yeah, and it's particularly, what I'm hearing you say is is particularly important as you get closer to, you know, your particular exit. So if you're a business owner that's looking forward to the fact of, you know, it's sometime in the next 1 2 3 4 5 years, I want to exit my business. Now, it's the time to kind of pivot the way you do things and really go to town on putting as much profit on the bottom line as you can, because you'll get paid for it

15:30

that way. Yeah, and any other thing that I would encourage people to do is, even if you think you're 10 years out, have your company valued, because it's really sad. And I tell the story in my book, I had somebody come in, and the guy calls me and he's like, I don’t need a business broker. But I just wanted to pick your mind a little bit about the value of my company. So he comes in, gives me his tax returns, and I look at them and, you know, they're expecting an answer at the snap of a finger, but they had about $1.2 million in sales and for the cash flow that was coming out of the company, and I asked, you know, is there any add backs, meaning, personal expenses? You know, things like that. And they're like, nope, mom does the books, everything's squeaky clean. I'm like, All right. It's like I say, it's worth around $250,000. And the wife looks out the window of the office and the husband looks at the ceiling. And the next thing, I look back at the wife, and there's a tear rolling down her eye, and I'm like, okay, timeout, what, you know, obviously, that's not the number that she was expecting. And he said, Well, we have over a million dollars a year in sales. So I thought the company was easily worth a million dollars. And they wanted to retire in six months. And in 30 minutes, I blew a hole in their financial plan to retire in six months, because they needed the money to retire. So I think it is very prudent for a business owner to think about having your company valued. And talking to the valuator as we do when we value a company. And you know, this is a realistic value of the company. These are the things you need to think about to drive value to grow the company.

17:11

Yeah, it is amazing. And you know, not only in our experience, but industry wide, fewer than one out of 10 business owners ever do that valuation up front ahead of when they really decide to make a change and exit their company or retire. And so thus, we see all the time they come in and they’re, their numbers are not what they expected it to be.

17:32

I mean, it is kind of crazy. I mean, it's like I was guilty of it, too, as I was growing my company. I never really thought about it too much. It wasn't until after I sold the company that I really got into this business of valuing companies. But I mean, I bought a lot of companies, so I knew how to value, I knew what I was paying for. But I never probably gave as much thought to my company as I probably should have.

17:54

What, as a buyer, were you always thinking as a strategic buyer? Well, you know, if he's generating $100 a year in cash flow, I could probably do $200 a year in cash flow by taking out so and so expenses.

18:05

Yeah, you're making me laugh, because I think I talked about it in the book also that me and my accountant always butted heads. Because he was like, you paid for our company, part of you know, the value of its cash flow. And, and I'd be like, but Mike, if I buy the company, I can do this, this and this, and it's gonna make that. And he's like, that's not what you pay for. So, yes, I was always thinking from a strategic standpoint. And, you know, we talked about the bankability of the company. So which goes back to your paying for the current cash flow the company, but there is other companies that will pay you for the strategic value of the company. And I very fortunately benefited from that, because a company that bought my company, they have a whole acquisition department. I asked her, because you get to know them after a while, What's your trigger point? What makes you pull the trigger on buying a company? She answered one word, 33%. They were looking for a return on investment of 33%. But it's not 33% of what the current cash flow of my company was. It's 33% of how they perceive the cashflow of the company after they buy it. So we talked a lot about bankability and the current cash flow of the company and stuff like that. But especially when you get to larger companies, they will look at it as a return on their investment, and what they perceive that future cash flow. So future cash flow gives you an inkling as to what most buyers are looking for. They may only want to pay for the current cash flow. But in your story of selling the company, it is about what is the potential future cash flow of the company?

19:46

Yeah, you kind of sell the potential but you get paid on the performance.

19:49

That's a perfect way of saying it. Yeah.

19:51

What do you think for business owners, what do you think is the most important thing that they can do to maximize the value of their business?

20:00

I think a lot of it's keeping clean financials and the fact that the numbers don't lie, you know, but you gotta have clear financial statements. It blows my mind all the time. Even if we're just doing a valuation, and you're not ready to sell the company yet, you know, send me three years of tax returns and financial statements. Well, I got an extension, or, you know, I only do my financial statements once a year. You gotta have solid financial statements, and really concentrate on the cash flow the company. I mean, that's it, the cash flow of the company is going to determine the value of the company. Oh, and then you know, the other thing is to talk about non financial things that affect the value of the company. Remember, we had a company for sale, the guy was cash flowing over a million dollars a year, phenomenal. But the owner was overly involved in the business. I mean, one, the business was located out in the middle of nowhere. So I mean, nobody wanted to move to the small town where the company was located. But then the first question that came up, it's like, what happens when the owner leaves? Because he was intimately involved in the business, somebody had to fill that hole. So you're not buying a business, you're buying a job. And that's a problem. I mean, that's the, non financial things are really, really almost become more than the financial things. I mean, the cash flow is one thing, but is the owner overly involved in the business? You know, where's it located? Things like that can really have an effect on the business.

21:28

Yeah, the cash flow looks great. But if a buyer doesn't believe that they can duplicate that cash flow, it's not worthwhile.

21:34

In a lot of our buyers, you know, they are purchasing as an add on. So again, it gets back to, are you buying a business? Are you buying a job?

21:42

Yeah. And for smaller companies, most of the time, they're buying a job. They are and

21:46

that's why it really becomes important with the bankability method. And that's what's going to drive the value of the company. Yeah.

21:53

For companies that are out there operating today, and they're thinking about, you know, there's some potential out there that the business has, the owner is always thinking about this business has more capability in it than I'm able to realize, right? What do you think holds businesses back or business owners back from reaching the potential that they think is evidence in their business?

22:15

I think a lot of it is the non financial things that can really affect the value of the business. You know, as an owner, you got to get that business to where you as the owner aren't involved in it. And that somebody can come in and take a look at it and say, I'm gonna step in and manage this thing. But there is a staff of people that can run it. And that's hard to do. It's hard as a business owner. And if you grew this baby, to step away from it. So my case, personally, I remember seeing another business owner do it. And I'm like, That's pretty slick, because everybody wants to call you. I mean, every time the phone rang, they want to talk to Terry. So Tony was my right hand man. And when they would call, I would have Tony call them back. Well, the second time, they would call, they called asking for me, and Tony would call him back. Well, guess what, about the third time, they're calling Tony. And it's interesting that towards the end, probably the last four or five companies I bought, I really didn't know a lot of the customers because I had a company full of people that ran it, you know, and they did their job and pay them well. And, you know, my job was to go out and look for more companies to buy.

23:33

Yeah, that's, that's the owner’s prerogative, that's

23:36

part of our upcoming book, it's going to be You Don't Know What You Don't Know, The Entrepreneurial Trap. And that's one of the traps the owner gets caught in. I'm the one that's going to unlock the door, you know, I'm the one that's going to tell every driver or whatever, where to go, like, No, you need to get out of that. You need to be the driver of the company. But it takes time, you got to have the money to do it. But when you make the switch, wow, that's when you start seeing some real growth in the company. And that's when you can really start to add value to the company because the day to day things happen on their own. You manage that. And then you focus on growing the company.

24:14

Yeah. And growing the company by making strategic moves, not daily tactical moves, right.

24:19

I mean, obviously, you can, you know, it's two ways to grow a company organically and through acquisitions and organic growth that, you know, that can happen. And if you have the type of business, I don't know, what's coming to my mind is an insurance company. It's really easy to open another office in different towns, versus I was in the fuel and lubricants. It's like, well, you know, to build a bulk plant in another town is a $400,000 proposition. And you got to get to customers to make that a viable asset, you know, going through. So how easy is your company to grow geographically? You know, and how would you acquire those customers. Specifically the company that bought mine, I didn't know it at the time, when I sold the company, but they had just bought a lubricants blending facility in Council Bluffs, Iowa, and I had a packaging facility in Southern Illinois. So I was a very strategic acquisition for them, one, because I was their largest competitor in Southern Illinois. But two, when they bought me, they had a packaging facility, and they got to half a million gallons in lube sales right out of the gate. Now, they wasn't trying to build a lube business, they was in the lube business. So you know, that's kind of back to a strategic acquisition.

25:31

Makes it easier, right? They're basically acquiring capabilities and customers at the same time. And nowadays, employees. Yeah, that's a big thing that we're seeing now, right? If it's hard to go find employees, sometimes it's easier to buy the company where there may already be a good group of employees.

25:46

Even the company where I had my packaging facility, when I bought it, I needed a larger lubricants facility because we did bulk oil, but I was busting at the seams. And for what I paid for that company. I couldn't build the facilities that he had. So I got the facilities that I needed. But it's like, oh, yeah, and you got all these customers to go along with it. So there's just a lot of ways that, I just, obviously, I'm in the business, but I love acquisitions. It's a great way to grow, it's a great way to grow geographically, it's a great way to expand your current product base. I had, I talked about it in my book also, I have a friend who owns a hardware store type of business. And I think they own four of them. And they bought a fifth one, just because that was going to get them to the size where they could buy containers of stuff versus the way they was buying it. Now they can buy containers overseas. It's going to reduce your cost of goods sold, it's going to reduce the purchase price of products that they're going to sell.

26:47

Well, you're kind of the prototype of that whole strategy too. I mean, you took a less than $400,000 a year company, and turned it into a more than $40 million a year company primarily through acquisition.

26:58

Yeah, I mean, I bought two companies in one town, three companies in another town and, and you just start putting them together. And you know, the efficiencies pay for themselves.

27:09

Well, it's hard to build a retirement income on a $400,000 a year company, but when you sell a $40 million a year company, it's a little bit easier to build a nest egg and a retirement income.

27:19

And that's where your financial advisor comes in, you know, because we see that quite often. Yeah. And that gets back to the second mantra, it's not about what you sell the company for, it's about what you get to keep net of taxes. Because a lot of times, you know, say somebody wants to sell their company for $5 million. But in today's world, you may end up paying 50% of that in taxes. I can lay out a scenario for you, where you could sell your company for less money, and still end up net of taxes more than selling it for higher value, and taking the hit on the taxes. But that's where it's back to building your team. That’s where your financial advisor really comes in. And you need to make sure that when you sell that company, you have enough to get you personally to your end goal that you're taken care of. Because, you know, it's kind of like you're killing the goose that's laying the golden egg.

28:09

But it all kind of starts with knowing where you are right? It's hard. We both know, it's hard to hit a target that you can't see. So unless you start with that valuation and know where your current position is, it's kind of hard to know if you can meet the destination that you're headed towards.

28:23

You don't know what you don't know, right? Don't

28:25

know what you don't know.

28:28

Yes, you're exactly right. Hence, well, I said earlier, don't wait until the year you want to sell your company to get a business valuation. That needs to be an ongoing conversation specifically between your CPA and your financial advisor. So, and I think it's important to note that too, pay attention to who your financial adviser is. A lot of people when they don't have a lot of investable cash, start with a financial advisor. And it's probably not as bad as it used to be years ago, because they're all fiduciaries. What's a fiduciary mean? That means they are personally, they can be held liable on how they invest your money. Because when you don't have a lot of investable income, you typically end up at a financial advisor that is selling products that they earn a commission off of. So when you get, especially over a million dollars of investable assets, they're typically more of a fiduciary, which means they are earning a percentage of your invested assets. So they are encouraged, obviously, to grow the value of your asset base because that's how they're getting paid. They're not getting paid by selling you products. And that is really important. It's like hit the rewind button. Listen to that again, because I've seen it for my short stint in the banking industry where you will have people giving you financial advice, they're gonna push products on you, because that's how they earn their commission. And that's a big way they get paid.

29:55

Yeah, it's kind of like having your advisor move from across the table to sitting next to you on the same side of the table, because now they're incentivized as a fiduciary, as they grow your wealth, that's how they get paid for that growth.

30:08

Yeah. And people have a hard time understanding that, you know, because all those fees are hidden. You know, you really don't see them when you're buying and it's confusing.

30:19

Well, we've talked about a lot of things today. And I think it's very insightful. I always learn something every time I sit down with you. What's the one key piece of advice that you'd like a business owner to take away from this session together? What would you offer is that one key thing to not forget?

30:35

I think I have to go back to my first mantra. It's not about sales and net income. It's about gross profit and cash flow. I don't care what your sales are, you could have a company with $100 million a year in sales. But if you're not generating any gross profit from it, you know, big deal. If it's not creating cash flow, it doesn't matter. I laugh, I mean, we see companies that the guy owns a computer, and he's making a half million dollars a year, you know, and his total investment is a $2,000 computer, you know, and it's like jeez. And you see other companies that have, you know, huge working capital requirements, they’re not generating any cash flow. So, the other thing that we didn't talk on real quick, I know we're wrapping up. But I think it's worthwhile touching on real quick is the working capital of a company. You have to think that when you're selling your company, you're writing two checks. You're writing one check for the value of the company, but you need another check, or sum of money to cover the accounts receivable and inventory. And that can really kill the value of your company. And my company was a perfect example. You know, I had a $4 million accounts receivable, and about $2 million in inventory. So whoever bought my company, they're writing a check for the company. But they still need to bring about $6 million to the table to cover the accounts receivable and inventory they're going to inherit, and that could create obstacles, especially with your banking, you know, if you need an operating line to cover that. So two things, I guess, to answer your question, for one thing, gross profit, cash flow. And keep in mind that the working capital requirements of the company can also affect the value of the company. Yeah,

32:18

I think the bottom line is numbers are the language of business, right? And if you don't know your numbers that well, and you don't understand these things, give us a call, we'll help you sort it out and teach you.

32:27

Yeah, so yes, the third thing is then get yourself educated. I mean, it really is important. I mean, it's just really sad to people that come to us. And you know, they always want to sell their company and next week, which it doesn't happen that way, most often. And they completely don't understand the numbers, or the process, and it just doesn't help the outcome. Yeah.

32:49

Well, Terry, thanks so much for your time today. I think it's always an honor and a pleasure to sit down and talk these things out with you. And I think people that listen to this will get a heck of a lot out of it. How can they reach you if they've got additional questions, if they'd like to talk to you further, what's the best way to get in touch with you?

33:03

I'm never shy about giving them my cell phone number at 618-530-8922. Our website, www.innovativeba.com is a great place to go. All of our contact information is on there. If you click under the media tab, you'll see a ton of articles that Steve and I have wrote and videos on some of our presentations. So there's a lot of information there. The website for the book is www.youdontknowwhatyoudontknow.com. There's four books that have been published, mine, Steve's, Steve's co authored another book, then the fourth one I believe was on franchises. And Steve and I are writing the fifth book right now which will be You Don't Know What You Don't Know, The Entrepreneurial Trap. And that really talks a lot about situations we see owners get into that upends them from getting their company sold. So I think it's going to be a good book. We have the chapters laid out, now we just need to lock ourselves in a room and write it.

34:05

Yeah, get it knocked out. We know the stories behind each of them. So it's, it's a fascinating deal. Well, Terry, thanks again.

34:13

Thank you, sir.

34:14

Always my pleasure to work with you and thanks for your time today.

34:18

Thank you for listening to the You Don't Know What You Don't Know podcast. We invite you to visit www.youdontknowwhatyoudontknow.com and sign up to receive updates on upcoming episodes. You can also let us know if you'd like to be a guest or recommend a business owner to be interviewed. Find us on LinkedIn, Facebook and YouTube where you can like follow, share and join our efforts. Thanks for listening. We hope you join us again.