Brett:

I’m excited about our next guest. He’s out of the great state of Virginia. He has over 25 years of experience in the marketing world and in the business, coaching world. He brings to the table an award-winning recipe of revolutionary ideas combined with enthusiasm to encourage, inspire and support his staff and clientele. He strives to help people and his clients take their marketing, strategy, creativity and grow their business. We’re gonna be talking about five ways to maximize the value of your business before the sale. Please welcome to the show with me, Gordon Van Wechel. How are you doing, Gordon?

Gordon:

Doing great, Brett. Nice to be with you.

Brett:

Absolutely. For our listeners getting to know you for the first time, would you give us a little bit more about your story and your current focus?

Gordon:

Sure. I think I’m probably one of those people that’s been a serial entrepreneur. I started my first company at 25. I’ve built and sold three companies that each we’re doing in excess of 5 million in revenue. My current company Alchemy Consulting, and Alchemy Transitions, we started in 2003. We work with business owners to grow their companies and build value for the eventual sale if that’s what the owner decides they want to do.

Brett:

Fantastic. I want to take one other step back before we dive into the five ways to maximize the value of your business. I want you to go back perhaps to your early earlier days, high school, maybe university days, and I believe we’ve all been given certain gifts in this life. These gifts have been given to us to be a blessing and help to others. Some people call him strengths. Some people call them superpowers. But I’m curious, what are those one or two gifts that come to mind that you believe you are given? And how does that help you bless people today?

Gordon:

Interesting question. I would say that at least based on my experience as an adult in business, it’s the ability to see a problem and how to organize a solution. If you look at the successful companies I’ve had, and I’ll admit, there were some that were less successful, but those that were successful, I think it was perceiving a market opportunity and then being able to design a system to take advantage of that opportunity. That really was my strength and that’s what our clients look for as well. You know, they look to us to help them resolve some issues that they’re having a fresh pair of eyes, a different set of experiences. It helps them position their businesses.

Brett:

Fantastic. You can learn more about Gordon Van Wechel at alchemytransitions.com. So let’s dive right into the show, five ways to maximize the value of a business. So let’s start with the number one way to maximize the value of your business.

Gordon:

Well, let me preface it by saying that, surprisingly enough, 90% or just under 90% of the businesses that are offered for sale in the US each year, never do sell. And that’s really frustrating for a business owner to learn that because we all kind of start our business careers thinking that we’re going to build an asset here that’s saleable, that will fund our retirement or help our kids get through college or whatever our goal is, but a significant majority of those businesses don’t sell. And I think part of the reason for that is that as business owners, we tend to look in the rearview mirror. You know, we’re justifiably proud of the enterprise, we’ve created all the work that we’ve done, the people we’ve developed the products and services that we’ve met market needs for. But an acquirer or somebody that’s looking to buy your company, whether it’s an individual or a company, they’re looking at future cash flow, they’re making an investment, and they want to know what the return on that investment is going to be. And they’re going to discount that cash flow over the next few years. And those things are surprising to a business owner. So what we focus on through turn through Alchemy Transitions is helping them identify areas of their business where they can build that value, and as a result, increase the multiple, whether that’s a multiple of revenue or a multiple of EBITDA, that they’re going to be able to sell their company at. Now, our data is based on working with over 65,000 businesses over the last few years. Our company hasn’t done all of that we belong to a consortium of consultants. And what we’ve learned from that is that a company that goes to market on their own typically, is going to sell for multiple 3.5. And after they go through and focus on building the value through these eight value builders that we’ve identified, that multiple goes up almost double, it’s typically up to about 6.1 – 6.2 times revenue. So, there’s definitely a payoff in spending some time doing this.

Brett:

I think it’s good to set the mindset that 90% of the businesses offered for sale don’t sell. And that’s a problem, right? Because people want a chance to move on. Generally speaking, as owners or entrepreneurs, when we’re selling a business, we tend to look in the rearview mirror, our experience our hard work, or blood, sweat, and tears, rather than taking the perspective of a new buyer who tends to look or is looking and everything in the future cash flow. Is that a fair summary so far?

Gordon:

Absolutely.

Brett:

So what’s the number one secret to changing and helping us to look at to make sure that we’re maximizing the value of the business?

Gordon:

Well, it means that as business owners, we need to be willing to step away from the things that we’re so proud of, and really change our mindset and how we look at our business. To help with that process, we’ve identified a variety of what we call value drivers. So let me summarize a few of those, just to give your audience a flavor. One is what we call, the hub-and-spoke. The real key here is how dependent on you is your business. If you’re personally involved in most of the decisions in your business, most of the sales of the hiring decisions, that’s a problem because an acquirer isn’t necessarily looking to buy a job, they’re looking to buy an investment in your business. One way to think about it is, do you know by first name, more than 15% of the customers of your business? If the answer to that is Yes, then that’s an indicator that maybe you’re too much of the hub and you need to start developing people and assets in your company to get you to step back a little bit more. I lived in Denver for many years. As you probably know, Denver is a huge hub airport for several airlines. So, when a snowstorm hits in the middle of winter, that creates chaos that backs up all across the country. Well, the same thing happens in your business, if you’re the one that’s involved in everything, then from the eyes of an acquirer, that’s not a good thing. So, if you want to fix this, the easiest thing to do is to take a short vacation. Then, when you come back, see where and what broke down while you were gone and start to work on processes to fix it. Then, take a longer vacation. Remember that as you’re building value in your business, this is a several-year project. If you want to sell your business in six months, this is not the program that you want to start on. But if you’re thinking that three years, five years, 10 years from now, you might want to put your business in the marketplace. This is when you want to start thinking about these value builders.

Brett:

Fantastic. I heard a quote by a gentleman named Ray Dalio. He is a phenomenal Financial Advisor, very respected in the world of finance. He said in his book called Principles, “He had to learn to get away from his ego and get away from the blind spots”. Apart from that, he said, how did he do that? He had to learn to trade the joy of being right. For the joy of what’s true he had to shift his mindset and practices. I think like entrepreneurs and business owners and our minds, part of selling your businesses for multiple millions of dollars is because we’ve been for many years and we’ve been serving our customers and clients and that feeds our ego in a good way because it helps us to build, continue to serve them at a high level and create more solutions for people but it doesn’t necessarily translate into the sales price of a business, the joy of being what’s true and if I hear him I put this together now with the hub-and-spoke. So, if you’re the person who’s so intimately involved and it’s so dependent upon you, if you’re the queen bee having to make all of the whole hive go, be the worker, be the queen bee, you’re having the one making the decisions, and you’re the hub-and-spoke. Without you, the whole thing falls off. People aren’t looking for investors, especially those who are paying the highest price for businesses aren’t looking for a job, they look for a cash flow producing machine. Whether it be real estate, whether it be a business, and so you’ve got to be willing to step away, delegate, and do it in a way where it’s not so dependent upon you. Is that a fair summary?

Gordon:

That’s a fair summary. Your objective is to create systems and promote your people to having the authority and the confidence to make decisions to help the business and promoting them so that you can take a longer vacation in the short term, but so that you can offer an acquirer a business that’s functioning without you as the hub.

Brett:

Okay, so I think we all know, we need to create more systems and processes, right? So I don’t necessarily want to go into all of that, per se, although maybe touch on that. But I do want to touch on what you just said about giving the confidence over and delegating and building up the leaders around you. So, what’s the number one secret that you found in your years? Like, what’s the top thing to do to start doing right now, if you ever want to sell your business in the future? What does that look like to build leaders up?

Gordon:

Well, you have to give them the confidence that you’re going to back them. You help people understand what the job is, and what the parameters are, that they can work within, but then step back and let them do it, recognizing that they’re going to fall on their face sometimes. But you know, you have to give them those learning opportunities, or they’re never going to be able to take over and manage significant portions of your business.

Brett:

You said give them the confidence that you’re going to back them. I don’t want to overlook that because I was thinking the first stuff that came to your mind about that question. So how are the best folks that you’re working with? How are they on a day-to-day basis? What is it about what they had to change? What habit did they change in order to start to build a culture of giving their team members, their managers, their leaders, and their business, the confidence that they’re going to back them?

Gordon:

I think you have to make sure that everybody in the company understands what the directions are, what the values are, what it is that you’re trying to accomplish as a business, and their particular role in that. And then how they work together with other departments, or even within the people in their own department. In our company, we’ve got several people that are really excellent at graphics. But they don’t always agree on what the right graphic for a particular situation is. So creating an environment where there’s that freedom to disagree, and then figure out a way to meet the client’s objectives in the best way possible with the tools that we’ve developed, is one way that they can develop that level of independent thinking and feel like they’re empowered to move forward, once they make those decisions.

Brett:

Well said, so much wisdom there, Gordon. I could see why you need someone like Gordon Van Wechel to help you because this takes so much experience. I love that you’ve sold businesses, you’ve built businesses, you’ve been on the front line. This isn’t just theory for you as like a university professor. You’ve actually done this and you’ve been through the challenges so you can help. So, I’m curious, at what point did you say, “Hey, you know what, I have a passion?” What changed for you to go out and help business owners? What’s the story behind what you do now?

Gordon:

When I sold my last company in 2001, I spent some time trying to figure out what the next step was. One of the things I recognized was that smaller companies, either solopreneurs, or smaller regional companies really needed the services of a full-fledged ad agency, but they couldn’t afford to stroke a $12 or $15,000 check every month. So I felt there was a market opportunity to help those businesses do the direct results kind of marketing that they needed. And so that’s the niche that we started working to fill. And you know, when we started in 2003, with this business, the internet wasn’t the dominant force that it is today. That didn’t really start to evolve till about 2007. And now we find about 80% of what we do is web-based and the other 20% is more traditional work. And then the transition or the development of our transition side, Alchemy Transitions, came about a few years ago when again, some of our clients said, Hey, you sold businesses helped me figure out how to sell my business in a couple of years. And so that started a whole new track for our company.

Brett:

Excellent. So, it kind of organically came about. And now you really enjoy it, I love that. I’m curious about maybe folks who are at the one to $3 million of revenue want to get to that three to five, or that five to $10 million dollars of revenue? And they’re considering bringing on like, they realize this is bigger than me. And maybe I got to give some equity, or maybe I’ve got to bring in venture capital, maybe I’ll take out some debt, maybe I need to find that other who to help me on that next level? What some wisdom behind that and maybe for those who have done that, what does that look like? How would you talk with him about that?

Gordon:

As much as possible, I would try to help them design a way to grow organically. Trying to implement rapid growth is a two-edged sword because you can easily make the phone ring more frequently with some quality marketing. But oftentimes, business owners focus so much on making the phone ring, they forget the importance of fulfilling whatever their product or service is. So, you’ve got to be growing on those dual tracks, you’ve got to be developing your fulfillment team, at the same time as you’re enhancing your sales efforts. And sometimes the fulfillment team takes a little longer than you’d like to get those people to the place where they’re really doing the work at the level you need to fulfill for your clients. But you have to take a little bit longer-term view as a business owner, you can’t say, Well, gosh, I’m at 2 million today, I think I can go to 4 million next year unless you’ve really got the people in place to take you there. So it’s striking that balance between the two sides of the business sales and fulfillment.

Brett:

That makes sense. So the importance of fulfillment team and understanding that not just the leads and not just making the phone ring. So what’s the number one secret to building a great fulfillment team? What’s been some of the bottlenecks when somebody brings in that person? Like, what is that typical personality type? Is that typical that they want to be behind the scenes, introvert-extrovert? Tell us the fulfillment part of that? Is there any kind of secrets to that?

Gordon:

Well, one of the things that you have to know as the business owner is what exactly are you looking for, in each one of the silos in your fulfillment team, for example, in our company, we have graphics people, we have people who specialize in social media, we have people that do Google Ads management. So those are very different skill sets. But we have to be very clear on what it is that we’re looking for in each of those departments. And I wish it were easy to say that you can hire somebody to fill those positions quickly. But the reality is, that’s not true in today’s marketplace. We’ve got a really solid team now in all of our departments. But I can tell you that, we’ve gone through 25 or 30 people in the last three years to get to this solid team. Not everybody can do what they say they can do. People don’t actually tell the truth sometimes on their resume, even when you use a headhunter they don’t necessarily vet the candidates to the level that you would like. So a lot of times people show up and they don’t have the skill sets that you expect it. So then you’ve got to determine whether the attitude is such that they’re trainable and they’re going to fit into the culture of your business. And if they’re not then you need to make the decision quickly. I think the worst thing you can do as a business owner is try to fix somebody. It’s important that you’re clear and honest with them about what the expectations are. But if they’re not going to fit that then you know you’re hurting your team by keeping them around.

Brett:

I got a call with a charity called the Ideal Team Player and he talked about three major traits – humble, hungry, and smart. Smart being emotionally intelligent. Hungry being just you have an innate drive to work very hard and it’s come from inside, you don’t have to get these outside motivation factors right to work really hard. And then humble, which is the most important, which is that you’re coachable you know your strengths. You know what you’re good at, you know what you’re not as good at and you’re willing to grow and so I think that’s there’s so much wisdom and for folks that work with you maybe you can also clarify because I know you have a marketing side of things where you help people with the coaching the transition. For folks who are saying I’m loving what I’m hearing about Gordon Van Wechel, alchemytransitions.com is one place. Give us an overview of your services, and where people can find you before we move into capital gains tax and lightning round.

Gordon:

The Alchemy Consulting Group, thealchemyconsultinggroup.com, that’s our marketing division. We do pretty much everything that you would expect a digital direct results marketing company to do, whether its reputation, paid to advertise, building websites, social media management, those are our core competencies, and really the things that we focus on, we do search engine optimization as well. And then the Alchemy Transition side of our company is what we’ve been talking about helping business owners prepare a company for sale. And again, as I said earlier, that’s a two or three or four-year process, I mean that you don’t have to retain us for that long. But if you’re thinking about selling your business at some time in the future, spending a year working to build value on these eight value drivers that we’ve identified is a worthwhile investment of time. And it’s going to pay off when you do get around to dealing with an M&A Consultant and selling your business

Brett:

So, let’s dive into capital gains tax deferral, and see if you can ask questions. Gordon can help you with marketing. He can help you with preparing your business to be able to maximize the value. Again, alchemytransitions.com. I want to transition Gordon to when people go to sell, they get frustrated with capital gains tax, and it can be something that can be daunting, and can be overwhelming and can be, frankly, a reason why they don’t sell and it can hold them back. And so I’m curious, what’s been the biggest frustration for maybe even yourself when you sold or for clients, and then people that you work with when it comes to capital gains tax deferral, or lack thereof for options like the 1031 exchange can be for real estate for when people sell businesses.