How to Buy and Sell a Business

How to Buy and Sell a Business

 
 
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Today we are talking to Jim Sulciner. Jim bought his business, RTD, a decade after becoming an engineer and after having a career in marketing. He experienced double-digit growth for over 12 years before selling to a very large company. He sold for a multiple of EBITA that is nearly unheard of and gave himself some great options. He’s going to talk to us about all of his business milestones.

In This Episode You’ll Learn:

  • How Jim started his career and what caused him to take the leap into entrepreneurship.
  • How Jim managed to purchase RTD after only having purchased a home – how he structured the deal and what the transition looked like.
  • Jim’s thoughts on the difference between a founder and an entrepreneur and how he strove to have an entrepreneurial strategy when it came to growth.
  • What Jim’s goals were and how he measured his benchmarks when it came to reaching those goals.
  • Details on how they balanced cash and handled employees.
  • Where Jim got the ideas for his excellent practices that ultimately allowed him to sell for so much.
  • What triggered Jim to want to sell.
  • How Jim managed two offers, how the would-be buyers valued the company, and how he ended up structuring the eventual deal.
  • How Jim transformed his life after his exit.

Takeaways:

  1. Jim had experience as a buyer and a seller. This was invaluable because he already understood the buyer’s mindset when it was time to sell.
  2. Jim implemented value-building techniques that ended up being extremely beneficial to him when the time came to exit. He had profit-sharing with his key executives and was very specific with his AP and AR.
  3. Jim had patents that raised his company’s value over and above the business profits and growth. This combination really boosted his buyer’s confidence.

Links and Resources:

The Value Advantage

Email Jim

Jim on LinkedIn

About Jim Sulciner

Jim Sulciner, a sales & marketing executive and entrepreneur, is highly experienced in growth and leadership of startups to midsize companies with an emphasis in recruiting, sales, and customer relations. Most recently as CEO,, Jim guided RTD Company through an acquisition by Measurement Specialties (NASDAQ MEAS) at seven times EBITA. This culminates 25 years of experience in a variety of sales channels — direct, manufacturing representatives, and distribution. His technical experience includes project management, ISo 9001, and lean manufacturing.

Jim was educated with a double major in Chemistry from the University of Minnesota, Deluth and Metallurgical Engineering from the University of Wisconsin, Madison. He also completed additional coursework at Harvard University in marketing, organizational behavior, and operational management. His personal interests include traveling, boating, and sailing.

Full Transcription:

Ryan:   Welcome to Life After Business Podcast where I bring you all the information you need to exit your company and explore what life can be like on the other side. This is Ryan Tansom, your host, and I hope you enjoy this episode.

Welcome back to the Life After Business Podcast. Today’s guest name is Jim Sulciner. Jim and I have an awesome conversation and I really enjoyed the interview because he did so many things right and it allowed him to sell for a multiple of EBITA that is really unheard of and put himself in a position with lots of options.

Jim became an entrepreneur when he bought his business, RTD, after a little over a decade of becoming an engineer and working in marketing in the temperature control engaged industry. When Jim bought the business, he learned a lot. Then he had double-digit growth for over 12 years before he eventually sold it to a very large company.

Jim walks us through all the different monumental milestones that helped him grow the value of the business, technical things that he did to do so, and then how it helped him with the exit and the dollar amount the he got afterwards. Jim’s story really wraps together a lot of different philosophies from exit planning, value building, and the underlying benefits that preparation gives you on the eventual exit from your business. Without further ado, here’s my interview with Jim.

This episode of Life After Business is sponsored by The Value Advantage. The Value Advantage is a platform delivered via peer groups and or one-on-one, to help you build a valuable company that could thrive without you while putting an exit plan in place so you have the option to sell when you want to who you want for how much you want. You’re able to manage the business by the numbers, work in the business as much or as little as you want and you fully understand how the business impacts your personal financials. If you want to know more, check out the show notes or the website.

Good morning, Jim. How are you doing?

Jim:     Good morning, Ryan. I’m doing well.

Ryan:   I’m excited to have you on the show because you and I saw each other at the Club Entrepreneur Event, Club E, in Minneapolis. You were on a panel explaining. You’re actually with a couple other gentlemen. I give you lots of props for getting up there and being able to do that because it took us a while to jump in and reflect. I wanted to have you on the show because you’ve got a really cool story that I want to dive into.

For our listeners, maybe just give us a backdrop of where you started your career and where did you have that entrepreneur seizure that all of a sudden just made you decide to the entrepreneurship world.

Jim:     Sure. First of all, thanks for having me on. I’m more than thrilled to tell my story. It’s interesting, my career really started in my education, I went up to UMD. I was premed. I spent four years out there getting my Chemistry degree. In the fourth year, I realized that I wasn’t going to get into medical school. I decided to take a turn into engineering and ended up going to the University of Wisconsin, Madison and then I got my engineering degree.

I came back to Minneapolis and started working for a [00:03:33] manufacturer. Then from there, I started to realize that every job I had, as I progressed, I always was in the frame of mind that I could do it better. What I decided at that point in time is that I would build a foundation and that foundation was going to be technology, and then I was going to build a foundation in business, and then at some point, I was going to venture off on my own.

That journey brought me to Boston and I ended up getting mentored with a gentleman, a GTE, that was on the business side of GTE. He taught me the ropes on the business. Then, when I decided to come back to Minneapolis, which I was originally from, I ended up going to a company called Rosemount which turned into Emerson, and then got into the pressure and temperature business. I spent about five years there.

Ryan:   You’re in engineering the whole time doing this, right?

Jim:     I was in engineering/project management during this period of time. I learned the engineering part of it which was the technology which to me, meant manufacturing, then to the vendor approval, then to processes, SOPs, learning drawings and at that time they were CAD drawings. I really, really spent the first 10 years of my career really building the technology foundation of my experience.

About third year into working at Rosemount, I was running an engineering group there, and I decided, I was the oldest one in the group, I said, “Where do old engineers go?” At that time I was nearly 33 years old and everyone in my group was somewhat younger that I was. I looked around and sure enough, older guys like me at that time got into marketing. I made my way into a marketing role at Rosemount and spent about a year and a half doing that. Then I got to know the engineering part of that business and the marketing side of that business. I got to know the pressure and temperature business quite well, all the aspects of it, from manufacturing to marketing. Then I started getting involved with customs.

In the fifth year at Rosemount, I looked around again and I said, “Well, where do the old marketing people go?” Fair enough, they get into sales. I decided that that would be my next stop. I started to look around, and at that time of course, there was no internet and there were just recruiters. I contacted a recruiter and told him what I was looking for. He ended up placing me in a small family business that was specific in temperature. They were kind enough to give me a crack and they hired me. For the next five years, I learned the sales side of technology.

During that time, I was able to double that business and in that period of time, I said, “Clearly, the next step is getting my own business.” I stepped aside from that business and a year later, I had purchased my company which was the RTD Company that was up in Cambridge, Minnesota at that time. It was a family-run business, probably less than $2.5 million in sales. I got them to eventually sell me the business.

It was a process to learn that because I had never bought a business. The biggest thing I ever bought was a house. I learned the ins and outs of working with the banks and with family-run businesses as RTD was, and I took it from there. That was June of 2001, when I purchased that business.

Ryan:   What I love about your story is that you bought a business and you learned so much through that process and you ended up exiting your RTD Company that you ended up growing. I want to focus maybe more on the end part of it, out of all the things you learned but I do want to tackle on how you went through the purchase process of this. What are some of the things that you learned, as you said you only bought a house at this point… How did you structure the deal and what did the transition look like as you were going in there?

Jim:     I had a neighbor at the time that was a general manager on one of the big Cargill divisions. Cargill was growing their business through acquisitions. He gave me a piece of advice that I used when I purchased this business. He said, “Whatever you do, get the longest terms you can to buy that business.” Which meant don’t put all the money down at once, don’t borrow all the money at once. What it really came down to is I ended up buying this business with no money down, I borrowed 1/3 of the purchase price from the bank and I got the seller to sell finance the other 2/3 at a 5% interest rate over a 15-year time table.

Ryan:   Good negotiation.

Jim:     I did not realize how valuable that was because at the end of the day, the thing that everybody will tell you when they own a business and they run a business, big or small, it’s cashflow. That was one of the biggest debts we had, obviously, going into the business. We were able to cashflow it with good revenue coming in and not eat into our cash because we were way under capital but we overcame that by bringing in revenue and minimizing our output.

Ryan:   When you are doing that, obviously because you are a buyer, I’m sure it’ll flush later in your story, but when you are doing that, did you ever once think how you didn’t want to be them with those terms, like you really want that opposite?

Jim:     100%. I certainly wouldn’t have sold my company in that realm but, that person I bought it from was up a bit north of the Twin Cities which is roughly 50 miles north. The question I asked him is, “If you don’t sell it to me, what’s your exit strategy? How are you going to get out of this business? Who is going to buy this business at this price?” I was able to give him a little bit of a premium in buying the business because of the terms and because I knew the industry. By knowing the industry, I knew I could grow that business quickly and make up for any of the deficits I had inherited which was undercapitalized and which was the first one.

Ryan:   I think there’s a lot of different ways we could go with that because I think it’s important because you didn’t have options from a lot of things that he didn’t do correctly. Were you able to see some of the things that pigeon holed him to the situation that he was in selling it to you?

Jim:     I did. As I had worked for a family business prior to this, family businesses don’t always have exit strategies that include outside family members. The other thing family businesses are at a deficit at is accessing advisers outside of their business that they have met through other acquaintances as I had obviously working at Emerson and working at GTE and so forth, and learning the ropes through big company ways.

You’ll get very insulated when you’re in a small business. You’ll get even more insulated when you’re in a small family business, when you have family members associated to that business. You rely very heavily on people that you can advise with on the outside but you’re also limited to access to them other than a recommendation and so forth. I had just the opposite. I had access to those people through relationships and experience. Those two things were a big difference between myself and that family-run business.

Ryan:   What I think is interesting, I can’t remember if it was at the panel where you had said something or it was on a phone call—because you bought a business, correct me if I get this wrong but the difference between a business owner and an entrepreneur, is that how you phrased it?

Jim:     No. I actually phrased it as a difference between a founder and an entrepreneur is strikingly different. Founders are just beat to a different drum. Founders are very creative, they’re very focused, and they believe that everything revolves around their world and their product. Entrepreneurs are ones who can come into a business and their focus is on growth. There’s a disconnect somehow between a founder and an entrepreneur when it comes to how to grow the business in just different ways.

My philosophy as an entrepreneur, as I come from large companies before, is heavy on the sales and on the marketing side of the business. Founders may think they do but until they have experienced it at a large company level, they get a bit shoved aside.

Ryan:   How did you implement that? Let’s say that you’ve got in about RTD, did you have a plan, did you buckle down, what were some of the first things you did to address and hit this growth strategy that you knew you wanted to do because you have the vision from being at a bigger company and then how did you implement it?

Jim:     That’s a great question. I’ll tell you, it’s great to look back 15 years ago and say, “How did we get there?” It was a couple of things. One, I came out of the temperature business so I knew where some of the golden eggs were and I knew that my relationship had the ability to bring them over to us. I rapidly transitioned them to our business.

The second one was small businesses are minimized in their marketing capabilities. Marketing to me really were the tools for salespeople. And since I was going to be the key sales guy at RTD company, the first thing I did was I took a look at the existing—at that time, even 15, 16 years ago, the internet wasn’t quite what it is today, not even close. Marketing literature was really, really important. An importance of it was that was the first impression you leave with the customer.

The catalogue that I had inherited was a 6×4, 20-page catalogue that was black and white and had pretty fundamental drawings and schemes in there to present to the customer. That wasn’t going to come close to what we needed to have done. One of the things that I did is I went out and got all our competitors’ catalogues and certainly competitors that were far bigger than us. We put them on the table, we hired a CAD guy to spend the next 12 months putting together our catalogue. We ended up with a 200-page 8×10 glossy catalogue. 90% of the contents were things we never made before.

Ryan:   How [00:16:35] employees that you went on?

Jim:     It was a very calculated risk to say the least. It didn’t sit well but I had enough confidence in our folks. I had two partners that really did a good job. One of them was on the operation side and one of them was on the engineering side. Between the two of them, I knew we could get the products that we needed out the door. I knew I could sell ahead of them and get what we needed to our customer.

Sure enough, we did. To say that I created chaos would probably put light on it. But what we did do is we started seeing double-digit growth very, very quickly. We were able to keep up with the growth and sustain that growth and get us ahead of our capital needs and make us very cash positive within the very first year.

Ryan:   Let’s peel that apart because I think I’m probably more in the spectrum where I would do what you did which is sell the unknown and then figure it out. I do know that it takes a special blend of people to actually make that executable. As you’re doing this, one of the couple of questions I’ve got is what was your goal? Was it a financial goal or was it just to become cash positive because I think a lot of entrepreneurs get stuck with this growth for growth’s sake just to beat your rivals or to show that you could do it just as well as Emerson could do it? How did you judge yourself and what were some of the benchmarks that allowed you to get the feedback of how well you were doing?

Jim:     That’s a great question to reflect back on. My goals were very self-imposed. I felt that if we weren’t double-digit growing, we were going to go backwards. By that I meant that if you aren’t bringing on new customers that land in your top 10, you have to be in the frame of mind you’re going to lose one or two customers in that top 10.

I knew I had to keep that pace up. I didn’t necessarily have an ultimate goal or an ultimate revenue mark for us. I just knew that each year, we would approach it with a minimum of 10% growth and we would continue to be cash positive and profitable and continue to grow by volume and by the types of work we ended up ultimately getting. We did that for almost 12 years other than ’08, ‘09.

Ryan:   Was there any major ripple effects for that for you guys?

Jim:     It was. It’s very interesting, one of the philosophies I had and I held it very close to myself, was that we were going to have a steady stream of cash so we would self-fund ourselves from the very, very beginning. I think one of the things business owners that I have met along the way, once they see this stream of cash, they pull it out and they bonus themselves out. I didn’t do that. What I did, I did it pretty conservatively over the first five years and continue that philosophy moving forward. I held a strong cash basis in the business.

In ’08, ’09, instead of divesting the business, I reinvested in the business and we shot out by the middle of ’09 because we were putting money back into the business because we had it. That also gave us the ability to never, never dip into our credit line. We never did from the beginning to the end.

Ryan:   That’s amazing. I think a lot of entrepreneurs can’t say the same. I’m curious Jim, what is the growth strategy that you have? Because you had an idea of the value of the business because you bought it, you had a baseline for when you bought the business, as you’re doing these things, did you ever—the reason I’m asking this is because I think a lot of the entrepreneurs get stuck with the annual returns other than just overall value of the business because what you were doing, whether you knew it or not, with the cash flow, you’re making your business that much more valuable, how did you track that and did you track that?

Jim:     I did.

Ryan:   What was the method in order to keep that base line?

Jim:     Well what we did is—I was fortunate enough to have two outside advisers. One we would have in on a six-month basis that really came from an operations frame of mind and then the other one was another adviser that had more of an accounting frame of mind. It was that adviser that really gave me a key metric that I would keep. That is what I would call my Tuesday numbers. My Tuesday numbers was really the ultimate goal.

Tuesday numbers, what did I really have cash on hand every Tuesday of every month. I would watch that metric and it would include our accounts payable, our accounts receivable, cash on hand, and those three numbers really gave me a metric to the health of the business at that point in time. I would watch that cash on hand increase or decrease. The other thing that we did which I didn’t realize at the time but really appreciate it later on is we had, to the best of our ability, we had 30-day terms with our customers and 60-day terms with our suppliers.

Ryan:   Beautiful.

Jim:     We could balance that cash coming in. What that also enabled us to do was to grow the business on our own cash rather than dipping into the credit line and give us the metrics of what we had coming in and what we had on hand. Those were wonderful metrics certainly starting out and became very, very valuable as the business grew. Then we really got a sense of what this business cash flowed and what the value of it was.

Ryan:   I love those 30-day terms and 60-day terms. That’s just beautiful. Did you implement that? Was it already there and then you realized how good it was? Where and how did that system come to be?

Jim:     We brought it. The thing that we did and again—most of the people that we brought in came in from our past history which was Rosemount and our largest competitor. The combination of those people coming in from larger companies brought in those types of corporate metrics that the original RTD Company didn’t have. They didn’t have access to those types of people and type of processes.

Ryan:   I’m curious on the employee size as you kind of went through at the beginning, the middle, and the end, so we can have some benchmarks. Did you have any issue of bringing in the big box of employees and having them being in a small business?

Jim:     We didn’t because we were a small business run like a big business. Although we were a small business, we had the ability to maneuver and to do things that would thimble, that would give us the ability to be flexible. We didn’t have to follow a hiring criteria. One of the philosophies I had and as well as my other partners was if somebody good came available that we knew along the way, even if we didn’t need them at the time, we would still bring them in. We would grow into them and sure enough, we did. We really, really stopped looking like a small company within the first year. That helped us grow.

Ryan:   I’m curious, because in our old business, it took us a long time to figure that out. Because you’re hiring up, that elevates your entire operations and you’ve already given a couple ridiculous and good examples to prove that. Measuring your Tuesday numbers and you’re tracking the investments of these people. I think there’s an assumption of ‘I don’t want to pay the money because it comes out of my pocket’ for these kind of people. How did you weigh the value of hiring these people versus how would it affect your cashflow and what you’re dealing with on a day-to-day basis?

Jim:     That’s a good question. Again, I didn’t realize the value of it until we certainly got further into the business and more experienced. What I would typically do is I would hire these people at equal or less than they were making in the past but what we did is we did profit share. Profit sharing was really related to the health of the company at the end of the year. On occasion, we did it twice a year. Anything they lost by coming in, if we continue to be profitable, they gained in profit share.

We did that within the first six months of owning the business just to show that we were serious about the philosophy of sharing the profits. What that did is it got everybody engaged. Everybody knew that if they worked hard, the company grew and if they gave that extra effort, they would see that in a 6 to 12-month space. Each and every year, we gave more and more money.

Ryan:   How did you structure that? How did you determine what the base line was for the company and what you’re willing to divy up and how did you end up divvying it up?

Jim:     It was based on what EBITA ended up. After taxes, we would see what our profit numbers were and we would give a percentage of that back to the employees and that was our reinvestment into the employees. Each year, we increase that percentage by points or couple tenths of a point.

Each year, people saw that we were growing and much of it we shared with our employees. We were a very, very transparent company. I had no problem sharing those numbers on a monthly basis with our employees which is what I did. We would share where we’re at every month whether we were up or down. People really got a sense of the direction we were going. There wasn’t anything hidden.

Ryan:   There’s the open book management philosophy now. I’m just curious Jim, you’ve got a lot of really, really good practices that you’ve applied, other than some of these advices, were there books, resources, people, or was it just the fact that you worked with a big company, where did you bounce and get these ideas?

Jim:     No. It came internal. One of the things that I realized early on is that when I was looking to buy this business, I knew I couldn’t do it alone. I brought in two minority partners. Between the three of us, we had enough insight to figure out what the right things were to do to treat employees with. Certainly, everyone values their paychecks and there’s nothing more valuable than people working hard and rewarding them for it. The three of us had that same philosophy.

A lot of it came from just the three of us discussing it. We didn’t always agree but I believe we always ended up doing the right thing. The other is because I have stayed in touch with enough people outside of our doors to not be insulated. I would pick their brains on different venues and different activities.

One of the advices I got, I’ll never forget it to this day, this was one of our solid advisers on the outside, was that when you have functions, make sure they’re memorable. We would have great Christmas parties, we would have our monthly meetings where we’re intended to be knowledgeable but interactive so we would do things.

One thing that I’ll never forget as well is in ’08, ’09, when we got that deep recession, instead of spending significant dollars on Christmas parties, we chose to do an in house lunch party. Instead of funding a Christmas party, we brought in people from the food shelf and gave them the check that we would have used for a Christmas party.

Those are the things that went long ways. Those ideas came from different folks. We would have, internally, what we call fun committees. They would plan these events and those ideas would come out of that. Really, at the end of the day, it was a team effort and it was a combination of outside resources and inside resources and people’s thoughts and ideas.

Ryan:   It’s so fun isn’t it? The question I’ve got for you Jim, because I love—everything you just said was a lot of our philosophies too. You’re working and you’re building this life of all these friends, family, you’re building this culture that is engrained in your personality as a reflection of who you are.

Did you still continue to think about when and how the business was going to transition to someone else or were you living in the moment of how much fun you’re having with all these stuff because the question I’ve got on top of this is where and how did the triggering happen for you to sell because it sounds like you were having a blast? I can just hear it in the passion while you’re talking about it. What was the identity difference between you and the business and how did all of a sudden the triggering event happen?

Jim:     That’s an appropriate question. The answer to that is I had always known that this wasn’t going to be a family business. There was not going to be a transitioning from myself to my daughters. It had the opportunity of transitioning from myself to my partners. But I always kept my options open. My time table came faster than I had anticipated. That being said, I was trying to learn and talk to people of how one goes about selling a business.

I got to know some private equity people. They certainly lent me their ear. I got to know people who had sold their business and I listened to what they had to say. I always had my ears open of what that next step would be. But what ultimately happened was one of the other things that we brought into this business is we believe that creating a patent portfolio of our technology was really, really important, protecting what we did and giving more value to the company.

What ended up happening is one of our sensors that we use in the medical catheter business became infringed on. That infringer was starting to take some of our business away. But rather than starting litigation against him, I decided to meet with them and see where they were at, made sure that they understood what that next step would be and that conversation, rather than getting into litigation, would you ever consider selling the business. At the end of the day, they offered a price that I couldn’t turn down.

Coincidentally, at the same time, I was working with a private equity firm to look at a mutual acquisition we could make to grow our business and to broaden our product offering. When they found out that I was looking to sell the business, they started making offers as well so I played the two of them against one another, I leveraged it and got a multiple, and the timing couldn’t have been any better at the time. I ended up selling it in 2012.

Ryan:   What was the time frame from the patent infringement and working with the PE to the eventual sale and actual signing of the documents?

Jim:     Six months.

Ryan:   Wow.

Jim:     Yeah. Six months. I never would have anticipated it. Typically, even if you’re outright selling a company, it’s not going to go that quickly.

Ryan:   Right. What are some of the things that as you’re going through, bouncing with two buyers back and forth, how did you navigate those waters? Were you using advisers? How did you play the field like you should have?

Jim:     I did two things. One of the things that I did is I had both bidders come in and sit down with our outside attorneys and my two partners. We listened to their offer. They made their presentation. Coincidentally, they both upped their offer. We continued down that path maybe two to four weeks. But the other thing I did is I was also able to tap into my outside advisers of what was the best path as well as our outside accountants, of what was the best financial benefit to all of us and which path to take.

Ryan:   That’s interesting. What you have here is a very unique set of circumstances. You’ve got a PE firm that is very financially driven. They’re probably looking at discounted cash flow, multiples of EBITA, growth projections, or the role of whatever you guys are going to do. Now, you’ve got someone that needs your patent. Two different completely methods of valuing of what is that you have. How do you deal with the financial situation of how they were valuing the business? Maybe let’s start with that and I’ve got a follow-up question.

Jim:     Sure. They both value the business within 5% of one another. Their ultimate bid was about—again, we leveraged one against the other. Once they got into a certain point which—we just never thought we would get that kind of multiple—once they got to that multiple, The PE, the private equity deal, actually was probably a few percentages higher but the deal structure was a little bit different.

The strategic buyer was going to be all cash, all up front, and had the ability and had the desire to grow the business and knew the market. At the end of the day, we took less but we took less for a higher security for us and for the employees. The lesser amount was more appealing because the company would be kept intact, it wouldn’t be resold again like the PE company would.

Ryan:   I think you hit on a couple of huge things here because the deal structure I think is so ambiguous to people that have never gone through the sale because it’s the wild, wild, west. It’s complete negotiation on how you structure your deal. You’ve got two different buyers that have different types of organizations. How did you get to the deal structure and how did you get to your objectives on what was important to you like keeping employees and all that kind of stuff. What kind of questions did you ask them to derive to your understanding of what it is that was actually going to happen?

Jim:     One of the things that I wanted to make sure on certainly with the strategic buyer, they were a 500 million-dollar buyer, a sector of their business, about a third of this sector was temperature. Their intention was to do temperature company acquisitions and we were one of them. One of the things that came out in those discussions is that we would be the company site for temperature. If anything moved, things would move to us not move to them.

That was really important because one of the things I recognize as well as my partners did as well was that keeping the company intact in Minneapolis and keeping our employees employed through this transition, not just through the transition but their future was very important to us. Because we believe that our growth and our success really had a lot to do with these folks.

The decision became easier and easier the more we thought through that. The PE company would buy for five years, sell it, and then you don’t know what would happen. There’s a lot of ambiguity out there. It didn’t feel right for our company and for the industry we were in. Ultimately, we ended up going with a lesser price with a strategic buyer.

Ryan:   It was for a lesser price but it was all cash up front, right? Versus the PE where they were doing a leverage buyout. How was the payment terms on each of the two?

Jim:     The payment terms were slightly different although the PE firm was ready to do all cash as they realized it was going to be very competitive. But the problem with the PE firm is they didn’t have the leverage that the 500 million-dollar firm had in the sense that they didn’t know the industry, they couldn’t put the same kind of cash back into the business if we hit a down turn that the strategic buyer could.

Ryan:   As you’re going through this, in your mind, where did your role fit and where did you want to play a part in the future of the business once the deal went down?

Jim:     At the time, I was 54 years old, 53 years old. I wanted to stay on. In each case, I negotiated an employment contract for four years for myself. I didn’t really understand what that role would be. What I ended up finding out is that my four-year contract, while it was paid out, should have been a six-month contract with three and a half years paid out.

Because all you do once you sell your business is, the best you can do is provide continuity and the reality is that’s all they really want. They want continuity. You have an obligation to give that continuity to your employees, to your customers, and to your suppliers. I ended up staying a year and a half which I said was probably a year too long. I was not in any decision-making capacity. The minute I sold it, I lost my decision capacity.

Ryan:   Was it different or close to what you thought that was going to be like?

Jim:     Very. The last time I was able to make those kinds of decisions that they give me power to do was when I was 16. I had none. I had to have everything authorized, from buying a pencil to taking a day of vacation. I hadn’t been in that kind of relationship in a very, very long time.

Ryan:   It just gave me a stomach ache thinking about it.

Jim:     It gave me one too.

Ryan:   Other than the decision making, well the decision making ripples into it, I want to go back to when you were talking about all the very unique things that you did from your events and how you were the chief culture officer, as would a lot of entrepreneurs are, how did you emotionally deal with the fact that they were now driving the culture of your business? How did you process that?

Jim:     I didn’t deal it well at all. It was really the hardest year of working I had. I had to stay on, I didn’t enjoy doing what I did any longer. I had to think of what that ultimate exit would be for me. I finally came to terms with them of an exit which I said was a year and a half later. I moved on. It was not a productive year for me, to say the least.

Ryan:   I went through the same thing. It was not as long as you were. How did you stay positive with your employees and all the people you were supposed to ride continuity to. Did you distance yourself? How did you actually tactically deal with that where you can’t make the decisions when everybody’s going to you or you want to and you’re dealing with this internal conflict?

Jim:     Employees are pretty smart people. They caught on. The strategic buyer had a contract with me and they felt they had to keep it. But the employees started to realize they had to go to the fallback people and slowly started to do that. The transition from having responsibility to none became very evident through our employees, maybe less evident to our strategic buyer which I said we ultimately parted ways.

Ryan:   As you’re working through your exit, as you said there’s a lot of technical stuff that you’ve got to get figured out with your employment and stuff like that but where was your head at and were you planning your next journey of what you’re going to be doing next or were you just trying to get the immediate stuff accomplished? Because it’s been a few years, how did you transition into your life afterwards?

Jim:     What I did is after I left, I’d taken some time off to do the things around my house that I’ve been meaning to do. I did that for a few months but then I reverted back to what I really enjoyed and thought I did pretty well at and that was reconnecting with as many people as I could and seeing what they were up to and seeing what kind of opportunities lie ahead for myself. Those included anything from buying another business to advising businesses, to being on boards of businesses.

It didn’t take me long to engage in all three of those. I quickly realized that I had a lot to offer still and I still had a lot of energy in me so I explored all three of those avenues.

Ryan:   How did you make your decisions on what you want to do? Is it who you want to spend your time with, financial rewards, was there causes, or did you just kind of go with the flow? What was the decision making criteria?

Jim:     It’s interesting, since I was fortunate enough to sell the business at the price we did, I wasn’t looking for financial rewards any longer. Although I still was in the mind frame that it’s good to make money. The financial criteria wasn’t the driving force. What really was the driving force was what I enjoy working with this people, it’s the part of technology that I’m interested in.

Sure enough, I was able to get involved in all three of those different things. I did that and I did it without any financial pursuit. Some of it was volunteering my time. Much of it was at certainly no pay. I eventually ran into a business that I just exited out of a couple of weeks ago. I ended up being the interim president for about ten months.

Ryan:   I think exploring, it’s kind of a new journey. One of the things that I’ve seen people struggle with or we’ve had conversations about is how do you now gauge yourself? Have you had a new life vision of what’s important because you no longer have Tuesday’s numbers to see how well you’re doing and double-digit growth so there has to be this new intrinsic way on how you value and measure yourself. Have you found a new system that’s worked for you? Is there still a process that you’re going through for that?

Jim:     As I said, I still have enough energy in me and the desire to do this again but I don’t gauge myself against that. I really, really gauge myself with the ability to connect with the right people, climbing the right thing, and I enjoyed enough that financial pursuit is not the number one criteria. It really has come down to just doing what I’ve enjoyed best and that’s getting out there and meeting people, finding what makes those people tick and seeing if I have the ability to help them as people had helped me.

Some of it is gauged on the ability to get back. The other one is gauged on interest. The last one would certainly be a financial criteria. I don’t know if I’m comfortable with it as much as I should be but at least a part of it I still enjoy. I enjoy doing all those things.

Ryan:   That’s awesome. I love it. As we’re wrapping up here, where are you at today and what is the best place for our listeners to get in touch with you?

Jim:     They’re welcome to certainly email me at sulciner@gmail.com. They can start with my email address. I’m not on Facebook but I am on LinkedIn. They can certainly access me through LinkedIn. I would love to hear from those. I’m happy to help.

Ryan:   Jim, thank you so much for coming on the show.

Jim:     You’re very welcome. Thanks a lot.

Ryan:   I hope you enjoyed the interview with Jim. He had a ton of good information there. He did a lot things right and I want to highlight three of the main takeaways that I had.

The first one was how he went about buying the business really shows what it’s like from the buyer’s perspective because Jim was able to be a buyer but then also a seller throughout his entire journey.

How he words it when he said that you need to take as long as you possibly can to buy the business and he had a mentor tell him that, shows you that that’s the buyer’s mentality which is push all of the risks onto the seller. If you’re the seller, knowing that this is the case, how can you build the value and how can you mitigate that?

The fact that Jim was able to actually do that and push all of the payment terms over time shows you that the person who he bought it from didn’t do a lot of things to grow the value and derisk it because Jim was able to look at him and say, “If you don’t sell it to me, what’s your exit strategy?” The person he bought it from didn’t have options and had to carry all the risk because he didn’t do the right things.

That shows that Jim, when he walked into his business, knew exactly what he needed to do to not be in that position when he exited. He had a lot of key metrics that he measured and the three that I really love which he called his Tuesday’s numbers which is measuring AP, AR, and cash. It’s just really measuring the vitals and the health of the business.

But aside from just those key metrics, he did value building techniques that were extremely beneficial for him throughout his exit because he had a profit sharing with his key executives. He was really specific with his AP and AR, making sure that he could use his own float to fund the business instead of becoming the bank like most of our customers and suppliers want us to become.

Then he had a ton of patents that allowed him to have a leg up and have extreme value besides just the profit of the business and his ridiculous growth that he had here over the year, all of those reasons gave the buyer the confidence to give him the multiple that he wanted and put most of the cash up front. Tons of great takeaways from this episode, I hope you enjoyed it and until next week.

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