Garry Krum is the founder and president of Agora Strategic Consulting Group and has over 37 years of experience in mergers, acquisitions and strengthening businesses.
He sat down with Mark L. Vincent, director of the Convene Consulting Network, to talk about what businesses who were planning to sell in 2020 need to do to protect their value and make smart decisions in light of the Coronavirus business shut-down.
To get in touch with Garry, head here: https://www.convenenow.com/garrykrum
To learn more about the Consulting Network, head here: https://www.convenenow.com/consulting
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Planning An Exit Or Sale Of Your Business In 2020 – Now What? With Garry Krum
Navigating Business Exits Amid Sudden Uncertainty
I am privileged to direct the Convene Consulting Network. We’re aware that there are a lot of businesses out there that were planning an exit in 2020 or planning to sell their business in 2020, and are now saying, “Now what?” I’m privileged to convene a series of conversations with Garry Krum, who’s an expert in mergers and acquisitions. He is the Founder of the Agora Strategic Consulting Group. He has agreed to join me from Colorado to walk us through some key insights and things that can help business owners figure it out, and what to do from here. Garry, I want to welcome you to this conversation.
Thanks. It’s a pleasure to be here. I do want to mention that this is for the Convene members and the time for them to be able to consider what’s going on from their position and to help them, especially given this time. That’s what we want to try to do.
It’s also quite possible, wouldn’t it be, that some of those folks who maybe weren’t planning to exit, but were in conversation with someone who was in an exit. This might be able to benefit them as well.
We saw times like this back in 2008 and 2009, where the economy fell flat, and things happened. In some cases, it helps enhance an exit plan, but in some cases, it creates chaos. Things happen to people and so forth. The careful consideration of what they’re doing is important.
The economy falls flat and things happen. In some cases, it creates chaos while other times, it helps enhance the next plan. Share on XLet’s have you get us started. Where is the grounding for where we might go from here?
Exiting With Creativity, Stewardship, And Credibility
One of the things that I enjoy as a business guy is that I get to get up every morning and live life in the image of God, to reflect His glory. I think of so many things that God did that we, as humans, are able to do. One of those things is to be able to create. God was a creator and made a phenomenal world in which we live. As business people, we’re able to go out and do the same thing.
When you think of your business, what you do, the products that you create, and the services that you create to serve people in a redemptive fashion, a loving fashion, and a good, solid business credibility fashion. Those things are fun, but the same thing would apply to an exit. I want to make sure that I’m credible and creative in what I’m doing, so that I honor God through that process. It’s not just the seller, but it’s the buying community as well to be able to do that. That’s certainly something that is important to consider.
I get a hunch already we’re going to be thinking things like how we create, how we are a steward, and how we take an abundance approach. Are we going down the road that you want to take us?
That’s it. You bet.
I know that you’ve got some key thoughts that would drive this forward for us. Why don’t you walk us through some of those key concepts?
Why You Should Not Panic Or Force A Sale
As I thought about this time together, there are three things that I think are important for people to consider. Especially if their potential plans for exit have been changed, modified, blown up, or whatever might be going on. The first thing is don’t force anything. Take the time to sit back and consider what it is you’re trying to do. What’s happening? What’s going on in your business? What’s not going on in your business, and how does that change the dynamic that you’ve been trying to achieve to get to a position where you can exit your company well?
Don't force anything. Take the time to sit back and really consider what it is you're trying to do. Share on XThere might be people who are tuning in who were in the process of talking to a buyer and trying to work out a transaction. That may change. I talked to two people who were looking to buy some businesses and walked away. Maybe that’s a good thing. Maybe that’s not such a good thing. The point is, don’t panic. Sit back and consider what it is you’re trying to do. Look carefully at why you are trying to sell your business, and consider what the reasons were and whether you can still do those things.
The second thing is that I would like people to understand the nature of the equation of buying a business versus selling a business. It is simply the transition of a business from one buyer to another buyer. Hopefully, the business is not impacting in any way. I want to talk a little bit about that. The third thing I like to talk about is making sure that people have clarity on a plan to move forward. Whatever they decide to do, they can have clarity on that particular kind of thing. Those three things are important.
It’s interesting that you’re talking about not going fast. We hear the message, “Don’t panic,” but then there’s also a counter message to that, like, “Get going. Get moving and seize your opportunity.” Yet, you’re saying to take a moment. Is there anything more you want to say about that?
From a seller’s standpoint, trying to move fast and move quickly normally disturbs the buyer. What’s going on? Why are you trying to get to this particular point? When you’re in consultations with the buyer, it can get nerve-wracking. They have a lot that they can do to make your life either good or bad, so you want to be able to achieve a good transaction.
You don’t want to move quickly. You want to move carefully. The name of the game is not selling your business. The name of the game is making your business as attractive as you possibly can to a buyer. You are showing the buyer that by buying your business, you’re going to lower his risk and raise the possibility of his future earnings, because after all, that’s what he’s primarily buying.
The name of the game is not selling your business; the name of the game is making your business as attractive as possible to a buyer. Share on XUnless you stop and reconsider, if you’re struggling with this, then pushing it, forcing it, and trying to make it happen will probably blow it up. You don’t have to sell your business, and the buyer doesn’t have to buy your business. We live in a world where God is our creator. God is our God, and we can depend upon Him that all things work together for good to those that love Him, including people trying to sell their business. Trying to rush, trying not to do it peacefully and carefully in a credible, capable way does more harm than good.
If I’m not going to panic or force a sale, what then? Let’s say I’ve made that commitment and I’m like, “I’m not going to panic. I’m not going to force it. Now what?”
Clarifying Why You’re Selling Before Moving Forward
They need to understand why they’re trying to sell their business, whether it’s retirement, retirement income, a transition out of a position, or even selling the business to your key employees, your children, or whatever. Why is that the case? Do you still have an opportunity to be able to do that, to meet that particular goal? If you’re not clear on why you’re selling, you need to consider that thing. If they’re thinking about doing this and maybe haven’t gotten started, a plan is super critical and super important. The main thing is trying to understand what your game plan was and what you were trying to do. Is there anything that you need to do to change that and move that forward?
People need to understand why they are selling their business, whether it's retirement, income, or transitioning out of a position. Share on XI’ve heard you talk a little bit about this analogy of green to the tee. Can you tell us about that?
If you play golf, you’ve had holes that were terrible. The nice thing about golf is you can start the game over again eighteen times while you’re playing a round of golf. If you’re going from the green to the tee, good golfers will leave the problems, the missed shots, and the bad stuff back on the green in the last hole and go into the tee with a refreshed mind.
It might be something that’s appropriate, given where people are, that maybe they need to stop, get off the green, and reconsider where they are and what they’re doing. They need to leave some of the negative behind and re-look at, “How do we reposition this thing? What kinds of things do we need to make this better?” Maybe there’s a pivot. Don’t try to force a transaction or go into the tee ground in a pushy manner, but reconsider and take the time to see what you need to do.
We haven’t panicked. We’ve reconsidered. We’re aware of what we have. What’s next?
The next thing is making sure that you don’t forget your business fundamentals. You still have customers. You still have to sell to your customers. That could be impaired. You have to figure out what the best way to meet their needs is now and maybe in the near future. You have employees to take care of. If you have a supply chain, then make sure it’s there. As you transition through this thing, you’re delivering to the new owner or the buyer, as healthy a business as you possibly can. Keeping your eyes on the fundamentals and practicing business from a day-to-day standpoint is also pretty important, so you win.
Let’s move into thinking about an exit transition now or in the near future, if that’s in play and still desirable, and you see your way to it, albeit there might be different measures on it because there have been these changes. What do folks need to be thinking about if an exit transition is in play?
Seeing Your Exit Through The Buyer’s Eyes
I’m a buyer. I’ve bought hundreds of businesses over my 40-year career. I look at this whole process of exiting the business from a buyer’s perspective. The name of the game or the real purpose is to be able to create as much value for the buyer as you possibly can, which might seem backwards. If I’m a seller and I say, “I want as much money as I can get,” and I get into a competitive arena. That’s not the best way to approach this.
The real purpose is to create as much value for the buyer as possible. Share on XIf I were a seller, I could position my business to create as much value as I can for the buyer, so that I’m going to be much better off. The more I lower his risk, the more he understands my business, the more he understands how we can build value from my business, and the future positioning that that business is going to have to go through. The more value he’s going to put on the business, therefore, the more value I’m going to be able to get from that particular business.
We talk about this process that we practice called value multiply. The idea is that the seller and the buyer come together to understand the nature of the business that is trying to be sold and how the buyer can best take that business forward and create success. We want to value the business and multiply the value of the business from a 1 plus 1 equals 6. It’s not a 1 plus 1 equals 2, but a 1 plus 1 equals a lot more value to the business.
The seller is trying to help the buyer understand his business as best he possibly can to be able to put all the cards on the table and be open and clear to the buyer about what his strengths are, what his weaknesses are, and where the warts in the business are. The seller is uncovering as much as they possibly can so that the buyer can take that and run with it. There’s a timeframe when you divulge more and more, depending upon the nature of whether this is going to happen or not. You can usually tell when a deal is going to happen in the flow of it.
I hear you saying that a seller might be focused on a price point, however high or low it is in comparison to what a buyer’s price point might be. They’re thinking about a price, whereas the buyer might have a lot of other criteria on top of that like future value, assets, and what it does for them. Let’s say it’s a distribution center. They also think of where it is placed geographically. Am I following correctly here that there’s a difference in mindset?
Their whole thing is to get some sort of price for their company. The more they can get, the better off it probably will be. There are always questions around that. From a buyer, I’m not interested in the price I pay. The price does not matter what I pay. You get people who don’t want to pay much. They try to discount or underpay for a company. That’s not what’s critical.
What’s critical is the value of the business I purchase 2 years, 3 years, or 4 years down the road. It’s the value I can create from that nest egg that becomes critical. If I can maximize my value and the growth of that value over time, that, as a buyer, is what’s important. If a seller harbors a fixation with a particular number, that may not help me as a buyer. I want to understand what they have and how I can take and build value from that. If it’s done correctly, the agreement on that value makes sense.
The more I can educate the buyer on my risks and my upside, and the more the buyer can understand what they’re buying and how to create value from that from the time that they own the business, the better it’s going to be for both parties. You don’t want to get into a competitive situation. You want to be able to enter into negotiations almost as partners to figure out what the best thing to do is. That’s the best way to go about doing it. There are buyers who are price buyers.
That’s what I wanted to ask you. What types of buyers there are.
There are price buyers that say, “I’m only going to pay X.” Forget it. They want a discount. They want a cheap price. That doesn’t do the seller any good, and it doesn’t do the buyer any good. There are buyers who are much more focused on value. I signed letters of intent with companies when I bought them. As we’ve gone through the transaction and more and more has been uncovered about the company. I’ve gone back to the seller and paid them more money for their company than what we agreed to previously because they’ve created in our minds so much more value. We want to be fair to that whole transaction.
The key thing is building value in the mind and eyes of the buyer. How do I position my business in an exit? How do I position my business to be able to wave the red flag in front of the bull, being the buyer, to convince him that here is something that I can take and create significant value from? The important perspective again is not the seller. It’s the buyer and what I can do to create more and more value in the minds of the buyer.
The important perspective is not the seller; it's the buyer and what you can do to create more and more value in their mind. Share on XWe’ve got price buyers and value buyers. Can you talk a little bit about long-term value and give us a little bit more there?
Building Long-Term Value Rather Than Chasing Price
My goal as a buyer is to buy something. Buy an asset, and increase the value of that asset over time. If I’ve got a product that synergizes with my other product line that I can purchase from a seller and that product can create more sales of my existing products. If I can create through my distribution channel or my sales force more sales of that particular product, then I’m going to make more revenue and more money create more value from that asset, that seed, to be able to grow and build more value from that. That’s what I’m after. I’m not going to go buy a company and then have it be flat. I want to grow it. That’s where I create that value because I want to be able to recruit my investment on the purchase.
In this kind of marketplace, I would imagine it’s possible, depending on the industry, that there might be several competitor types that are also looking to see if there are interested buyers and those kinds of things. What are some of the distinctives? I would imagine that some of what you’re talking about is long-term value and the business fundamentals would be a part of that. What else would be important to create that distinction and promote the value in the eyes of the buyer?
There’s a lot of stuff. There are several things that you can do. One thing is that buyers are looking for companies that have been run and managed by good values, by the ability of the company to have integrity, honesty, clarity, and care about their employees, and exercise good values. The business hasn’t been run from “How much money can we make?” It’s, “How much value can we build in supporting our employees and so forth?” Those are becoming more and more important in the eyes of a buyer, rather than just the financial return. There’s one thing there.
The second thing is that a seller willing to work with me as a buyer rather than be competitive is a much better deal for me. I can get more information that helps me be able to figure out how I can run that business after I own it. I don’t want to work with sellers who are competitive. They want to argue for the top dollar they can possibly get.
That’s not what I want to do. I want to take and build value from that. There’s that old adage about, “If you name the price, I get to name the terms,” and then you go at that. There are all these competitive attitudes that don’t make sense. That doesn’t directly relate to how I can take that particular business and build value from it. That’s what I’m after.
Knowing your buyer is a good thing. A lot of people will go through a process with a broker where the broker will take their business, put it together in a nice package, and not take it to a bunch of potential buyers. There’s nothing wrong with that process. It’s a process, but it’s almost better if you know 2 or 3 buyers that you think would be interested in your company. You can go talk to them, work with them, and pitch your business to them.
If you understand their product lines, their needs, what’s going on in their business, and how your business can fit in, bring value, and add value to their businesses, you’re going to be far better off in most cases than some other Rolodex, whether you call people and try to say hello to their business. We’re talking about a transition. Not an exit, where I leave and say goodbye, and the business maybe moves on. We want the business to move on as well as it possibly can.
We’re getting up against our time here. There’s so much good information. A good question to start to wrap this up would be, is there anything else people need to know to position their business for success?
Creating Clarity And Positioning For What Comes Next
Probably a million things. This is geared to people who are in this ebb and flow. It’s important that you don’t go back and push this whole thing, but you sit back and go through an assessment. If I’ve got a buyer I was talking to and the buyer maybe has pushed away or deferred the transaction, or maybe they haven’t quite started the process yet. Figure out what your business looks like. How do you want to be able to position your business? In other words, paint a picture of what it looks like.
Sit back, go through an assessment, and figure out how to position your business so it has the best competitive edge and value for a buyer. Share on XHave I lost any assets? Have I lost any value? Is there anything that’s been impaired because of this Coronavirus problem? Are there things that I need to be able to add to my business that maybe weren’t there before but would give me a better competitive edge or add significant value to my business? That thoughtful process of creating clarity in what I’m trying to do and what my package is or what my actual asset that I’m trying to sell to a buyer, anything they can do along that line is terrific.
That’s great to hear. My understanding is that if someone wants to engage with you in conversation, wants to know more, and wants to clarify something you may have said. They can reach out to you, and you’d be happy to talk with them. Is there anything that you would like to say to wrap this up before we sign off?
We’re trying to help the body and owners of businesses within the Convene space in particular. We’re doing that on a no-obligation and no-cost basis to be able to talk to people, support them, and help them. We’ve got an assessment tool that we use to help businesses look at where their position is and what their value might look like. We can help them with that particular thing. Whatever we can do to help, give us a call, and let’s talk. In that dialogue, maybe there are some things that we can help with.
I know that you have a real heart for God and people of faith who are in business. I want to give you a second here if you wouldn’t mind praying over this community, and then we’ll say farewell to this conversation.
Thank you very much for the chance to chat here. Father, we look to You for wisdom, guidance, and direction in this time of turmoil, uncertainty, and even fear. Father, I pray for the people who are tuning in to this short session that you would calm their hearts and provide clarity, wisdom, and creativity. They can look at this process and be successful in this process to understand why it’s a good thing for them to be able to do. Lord, walk with them and fill them with your spirit that they might be successful in honoring You in this whole process. Thank you for this time. Amen.
Garry, thank you for spending time with me in this conversation. Thank you to all of you who have tuned in. Farewell.
Important Links
- Garry Krum on LinkedIn
- Agora Strategic Consulting Group
- Agora Strategic Consulting Group on LinkedIn
