Brett Fellows: Craig Goldslager, thank you for your time today on The Retiring Entrepreneur Podcast. We’re excited to have you.
Craig Goldslager: Hi Brett, thanks so much for having me.
Brett Fellows: Well, I am really excited to have you today. Because I think unique to our guests so far on this podcast, you offer something different. And you are a Certified Exit Planner™, and founder of Utterly Financial. And specifically, you help SLPs, which we’ll talk about, plan for retirement and exit from their practice on their own terms. So tell me about Utterly Financial, what you do, who it’s for, what is an exit planner.
Craig Goldslager: Sure. So I think an important stat to say off the bat, and before I get into stats and numbers, I just want to share with your audience. Please do not take anything I say as specific tax, legal or financial advice. This is just general educational and informational. But I’m happy to dive deeper once that’s out of the way.
Craig Goldslager: So what really led me down this path, Brett, is I started working with business owners across all different arenas, genres. I would say mostly micros, businesses or small businesses anywhere in the valuation, probably under $5 million. Mostly closer to one to three million dollars. And then my wife happens to be an SLP, a speech-language pathologist. And I spoke at a conference about four years ago, and the presentation I gave was called Leaving Your Private Practice Is Inevitable.
Craig Goldslager: And that statistic I was mentioning was 98% of business owners do not know what the value of their business is. Yet 70% of them expect the sale of their business to be the majority of their income in retirement. To generate the income in retirement.
Brett Fellows: Yes, that’s crazy.
Craig Goldslager: It’s crazy, right. It’s a huge disconnect. And if you ask a business owner what they think retirement based on, oh I’ll just sell my business one day and that’ll generate an asset for me, and I can live off the income. So I gave this presentation to a conference of 100 private practice owners, and it was a non-solicitation.
Craig Goldslager: I was just there to educate and inform about that every business owner, Brett yourself, me, other entrepreneurs listening to this podcast, we all have to leave our business someday. It’s irrefutable, it’s 100%. Either voluntarily, because you plan for it. Or involuntarily, because of something we call trigger events, right? Death, disability, incapacitation, other unexpected life events.
Craig Goldslager: So I spoke at this conference, non-solicitation. At the end I said if you want to hear from me or my team, we offer introductory consults. Please complete the survey and turn it into us at the end. So out of the 100 participants, 50 turned in the survey. And so I said there might be something here. So just drilling down the rabbit hole and going back and forth, I find that it’s just a lack of education and awareness and addressing this topic.
Craig Goldslager: Most people are familiar with retirement planning, right? And you can’t just wake up at age 64 in 11 months and say to your spouse, honey, I’m ready to retire today. However much money we have in the bank, let’s do this thing and let’s live off the interest for the rest of our life.
Craig Goldslager: That may work. It probably won’t if you haven’t planned for it for years or decades in advance. And selling your business is no different. The more lead time you give yourself, the more preparation you give yourself, the more likely it is that you’ll be successful and sell it for the amount that you want and that you desire.
Craig Goldslager: So that was the background of Utterly Financial and working with private practice owners. But now it’s branched out not just speech pathology. but a lot more of the communication sciences. So that’s audiology, as well as ancillary fields like physical therapy, occupational therapy, behavioral therapy.
Craig Goldslager: So a lot of intangible fields, which in itself presents a lot of challenges to business owners. Because intangible businesses, like something like would I run, Brett, something like you run, financial services. We’re not selling water bottles; we’re not making and manufacturing furniture. So there’s a lot of different avenues to go down when you talk about selling an intangible business.
Brett Fellows: Yes. Back to Utterly, Craig, when you made that switch just to work with SLPs. Was that a tough decision to make? I mean, very few businesses are that targeted. So I think that must have been an interesting thought process for you to go through.
Craig Goldslager: It was, absolutely. And I think just learning from marketing experts, and how to promote businesses, with someone as a solopreneur is what I would call myself. It’s very difficult to market to everyone. I don’t have the financial resources or the capacity to do that. And so, I really truly believe to market as a solopreneur, if you lead with information and you lead with expertise, people seek you.
Craig Goldslager: And so whether that’s appearing on a podcast like yours, Brett, to share about exit planning or share about industry experts. Once you build this knowledge base, and you work with some people within the industry, it sort of snowballs and builds on itself. And so fortunately, I’ve been in business for many years. I wasn’t starting at a revenue of zero when I focused on the niche. So that gave me a little bit of a financial backing and belief that I can have some runway if it didn’t work.
Craig Goldslager: But I founded Utterly in November of 2019, so a little over two years ago. And the amount of introductions we get through the online marketing. We get leads through our website where we have clients now in 16 states. Ironically, I live in Florida, and not one person from the state of Florida has hired me. So it’s a very interesting dynamic to me.
Craig Goldslager: Traditionally, our industry financial services is very community oriented. It’s very locally based and works for a lot of people. For me, I decided to focus on an industry and an occupational niche. And people really want to, for example, I was speaking with a woman yesterday in an introductory consult, where I’m sure I would never have heard from her if she was not a speech language pathologist or a private practice owner.
Craig Goldslager: She heard about me through a Facebook group that a bunch of private practice owners were in, and she mentioned I want to sell my business someday. And three comments in the group said call Craig Goldslager. So I didn’t market to that Facebook group, but when you become an expert in a specific area. Doesn’t mean that I don’t work with other occupations or related occupations, but it’s just been quite a whirlwind on how it’s blossomed from the beginning.
Brett Fellows: Yes. As a student of marketing as well, I mean, that’s a perfect example of why a target market is so powerful. I always read that there’s three types of marketing, there’s transactional, so selling those bottles of water.
Craig Goldslager: There’s relational, like you were saying, most financial services is who do you know in your local geographic area. But the strongest is educational, and that’s how I picture you. You’ve become the person in the SLP community to go to when they want to think about exiting their practice, and through all of your education-based content, which has been fantastic.
Craig Goldslager: Yes. I think it just comes down to the type of business you want to run. Right? I know what my capacity will be, I’ve set goals on how many clients I want to take on. I can’t service a thousand households, nor do I want to. So knowing the demographics, and if it is something that interests you, breaking down into niche marketing.
Craig Goldslager: There are over 15,000 speech-language pathologists private practice owners in America. If one percent became clients, that’s 150, I would argue that’s probably over my capacity to begin with. And then when you layer in some of these ancillary fields like I mentioned, occupational therapy, physical therapy, it becomes 40 to 50,000 private practices.
Craig Goldslager: So it’s not just the business owners, we work with employees, if you work for larger firms as well. But, I think really importantly, it’s got to be a good fit and that’s part of our process, is we want to make sure it’s a two-way street.
Craig Goldslager: And sometimes, even if you would think it’s an ideal client, right? She’s a private practice owner, a speech pathologist, close to retirement, needs to sell her business and sometimes after our consult, we point them in another direction, it’s just not a good fit. Even though they check a lot of the boxes, it’s better to flesh things out in the beginning and make sure that we’re all aligned. Either from an exit planning philosophy, an investment philosophy, our approach to money, things like that.
[11:27] How Craig Goldslager works with new clients who want to begin the exit planning process.
Brett Fellows: Yes, that’s a great point. And so Craig, let’s say I am a fit. I’m an SLP, I’m 55, I want to retire in 10 years, what are the next steps? What are the first things that you do to help in the exit planning process?
Craig Goldslager: Yes. We always start in our consults; we tell every business owner that we meet. Because a lot of these women, and I will always say women, because 98% of speech pathologists are women. It’s interesting to be a male working with a field that is, I don’t know what’s stronger than overwhelming majority, but a super overwhelming majority are females.
Craig Goldslager: And so we talk to them about the intertwined-ness of their personal balance sheets and their business balance sheets. And the fact that their business is either their largest or their second largest asset behind their primary residence.
Craig Goldslager: And so figuring out how to liquidate and transition out of that will most likely make or break their retirement. And so setting it up if you’re 55, I think what’s really important is to talk about retirement. I’ll always ask that question too, is when do you want to retire? And sometimes, the person will say I have no idea or 65, because that’s what the average American says in surveys.
Craig Goldslager: So what we say to them is it’s just a number, I have a client who just sold her private practice and she’s 42. So her and her husband will be living off the income from the sale of their practice, and some other ancillary income streams. Maybe they’ll start another business, maybe not. But retirement doesn’t have to be a number or an age, I think it’s more important to say that you can make work optional, or you can live off income and replace your current income needs.
Craig Goldslager: So when we get into the, before the exit planning process, we always ask three questions. The three questions and answers to this, while they might sound simple and they’re three pretty basic questions. I would argue that’s about seventy to eighty percent of the work of exit planning.
[13:22] The three questions Craig says are 70-80% of the work of exit planning.
Brett Fellows: Okay, what are those questions?
Craig Goldslager: Yes. So the first is who will you sell the business to? And I’ll go a little deeper on each. The second is when do you want to sell the business, and the third is how much will you sell the business for, and that’s a two-part question.
Craig Goldslager: Part one is every business owner I meet wants to get a fair and reasonable value for the business. So you need to have some baseline and understanding of the valuation of your business, and the second is that enough. So for instance, Brett, have you bought a house before?
Brett Fellows: I have.
Craig Goldslager: So we always use the house example, because if your house is valued at a million dollars. And I came and I looked at your house and I said you know what Brett; this is a beautiful home. I’d like to purchase it from you for nine hundred thousand dollars.
Brett Fellows: I’d say no, thank you.
Craig Goldslager: Right, because it’s either not enough or you’re not ready to move, whatever the reason is. But there might be someone else who says yes, and to them that 900 thousand dollars if it correlates to wanting to retire soon and they have enough of other assets, it’s not worth it to stick it around and try and find other buyers for that difference of the $100,000.
Craig Goldslager: So knowing if it’s a fair and reasonable number is the baseline and then is it enough. And so we spent a lot of time going through these three questions. So if we go back to number one, the who, I always make it explicitly clear to people. I’m not a business broker, especially for intangible businesses. People can go down the business broker route, they are very valuable pieces to the exit planning process.
Craig Goldslager: But for certain types of businesses, it’s a much more preferential piece of the team, part of the team than an intangible service, right? So if we’re talking about speech language pathology in this example, you’re dealing with clients, you’re dealing with parents, you’re dealing with family members, you’re dealing with a lot of, it’s not such quantitative data, right? You’re watching on improvements; you’re looking at how people perform and how they do better.
Craig Goldslager: You’re building relationships with insurance providers, doctors or medical professionals in your community, to get referrals. So the who really comes down to two major groups of people when you’re selling your business. Insiders. So either an employee, a group of employees, perhaps someone on the other side of town or in your community that you know, that maybe was a friendly competitor for a long time. So someone you have a relationship with. And the third one is a third party or strategic buyer. So that could be a private equity firm, it could be a hospital system. It could be someone from another state, another industry, just looking to acquire your business, someone that you have no relationship with.
Brett Fellows: Okay. I’m sure there’s advantages and disadvantages with each opportunity.
Craig Goldslager: Absolutely. So in all three of these questions, I don’t think there’s any, I don’t think there’s a prioritization of the three. I think they’re very interconnected. And it’s such a great question that you asked, because a lot of the time when we talk about these, we bounce between the three because they’re all correlated, right? A pro and a con might be for an insider versus the third-party sale, but it just depends on how you want to transact or when you want to transact, right?
Craig Goldslager: So an example third-party transactions are usually much faster. You can get payments up front, they can give you a lot more cash, they’re usually much more liquid and can provide capital to acquire the business. It can happen 60 to 90 days, it can be very quick. But one of the downsides is let’s say it’s a private equity firm, and they’re going to bring in their own operations manager, or they’re going to bring in their own CFO and their own people.
Craig Goldslager: A lot of times, business owners are worried about what happens to the rest of my workforce? Are they going to cut a lot of costs? Are they going to reduce overhead, because they’re buying your business for a reason, they see that it’s profitable and they’re in the business to make money. They’re a for-profit entity. So will you lose your name in the speech pathology world. I’ve had some clients take 10 to 20% less money on the deal that they might have gotten from a third party, to go with an insider sale, because they really valued keeping their name on the wall.
Craig Goldslager: And they built their presence in the community for decades, and they didn’t want it just to become ABC speech therapy, they wanted to be Smith therapy center, because the impact it’s had on the community. And that means a lot to these people, and so when you quantify it, that could mean tens or hundreds of thousands of dollars. But to this private practice center in particular, it was more valuable to keep the name on the wall, make sure all her therapists, her leadership team all stayed intact.
Brett Fellows: Okay. So to play that back, the who is we have three options. We can sell it to a third party, we could sell it to an insider, or we can it just shuts down basically. Those are the three options?
Craig Goldslager: Yes, it’s funny. I always have a slide in my presentations where it’s sort of a road map, where you can take three paths down the trail. The insider, the third party and the third one I call death. Sometimes it elicits a laugh, and I thank you for laughing, sometimes people don’t think it’s funny. But by default, if you don’t do a or b, you’re choosing c.
Craig Goldslager: The business will shutter when you are no longer able to work. And at that point, it becomes a liquidation sale. So if we jump to question three, how much? It’s really important that all business owners, especially entrepreneurs, have a baseline valuation of what their business is worth. Because for example, in an intangible service, or an intangible business, many speech pathologists don’t have fixed assets. They don’t have equipment, they have some furniture and some machines.
Craig Goldslager: But if they had to do a forced liquidation. So if I’m the private practice owner and I pass away, my wife inherits the business if there’s no succession plan or nothing else put in place, continuity planning. She inherits the business; she has no idea how to run my business. She tries to sell whatever I have, and maybe it’s ten thousand dollars’ worth of equipment.
Craig Goldslager: So she liquidates a business for ten thousand dollars, that when you do a valuation and you look at an either an asset-based sale or an equity-based sale, it could be worth a million dollars. So once the business owners, and again, that statistic I led with about 98% of business owners not knowing what their business is worth.
Craig Goldslager: Once they realize that it’s potentially a million-dollar decision, versus a sale and a succession plan, versus a forced liquidation. They become much more attuned to saying well, how do I get this million dollars? Because it’s only worth a million dollars on the paper, right? So how do you facilitate the exit plan and get the money out of the business.
[19:46] Craig explains the best ways a business owner can determine how much their business is worth and boost its value before selling.
Brett Fellows: Yes. And how do people know what their business is worth? What’s the best ways to find that out?
Craig Goldslager: Yes, it’s a great question. So you can go to professional appraisers, someone that holds something called the CVA. Their credentialed experts, who can give you valuations and businesses. When you work with financial professionals who work with business owners and in this space, you can see a lot of ways in which third-party buyers or even insiders will look to structure deals. And how they come up with their valuations.
Craig Goldslager: So there’s a couple of different ways. The most common way is something through a multiple. A metric called EBITDA. So EBITDA stands for earnings before interest, taxes, depreciation and amortization. And it’s just a quick snapshot view of measuring the profitability of a business.
Craig Goldslager: So let’s just say for round numbers that we look. So when we prepare a fair estimate of value for clients, and we create an EBITDA metric, we will look at four financial documents. And every business owner should be very knowledgeable in these four documents. Your balance sheet, your income statement, also known as the profit and loss.
Craig Goldslager: Your statement of cash flows, and your tax returns. So by diving deep, we’ll look at the three-year history, sometimes five. But most often three-year history of these documents. And we’ll look for the profitability of the business. Said another way, that EBITDA number. And then after you come up with the EBITDA number, what you can do is you can add back. Usually you’re not supposed to use the definition of a word in the word.
Craig Goldslager: But an add back is something where it’s a discretionary earnings or discretionary income from a business owner. So it’s really good metric for small businesses in this space that I work in. Again, usually from anywhere from a million to five million dollars. And what those add backs are is a lot of business owners run their cars through the business, they run vacations or travel or stipends, you name it. I mean, that’s one of the perks of being a business owner, right? They’re business expenses.
Craig Goldslager: And so you expense it through your business. But the key there is that it’s discretionary income, discretionary earnings. So if I take my EBITDA number, and I add back let’s say another hundred thousand dollars of car payments, furniture, one-time expenses, a lot of COVID related expenses over the last 24 months.
Craig Goldslager: So now I’m up to a $200,000 adjusted EBITDA number. The third part of that equation is adding what’s called a multiple or multiplier, and that can be very industry specific, along with certain specifications which I’m happy to share. I think there’s a lot of best practices, regardless whether it’s speech pathology, paper manufacturing, recycling plant. There are common things that strategic buyers or even internal succession plans look for. But when I get into those in a minute, you’ve come up with a multiple. So in speech pathology, we’ve seen multiples anywhere from 2x to 6x. Some industries they can go up to 8 or 9x. But a lot of that is based on the infrastructure and the systems that you’ve put in place, which I’ll get into now.
Craig Goldslager: But let’s just again say it’s a 4x multiple, 200,000 adjusted EBITDA, 4x multiple gives you a valuation of $800,000. It’s a pretty back of the envelope way, you can get pretty granular and more specific. But knowing these talking points and being what’s called a prepared seller is so important when you get into the exit planning process. Because if you have these documents, and you provide this information to the strategic buyer, it just helps facilitate the conversation, and you’re ready to get into the conversations and the negotiations.
Brett Fellows: Yes. And I’d imagine you’ve in essence done a lot of the due diligence that they would do in looking at your business. So you guys are closer right from the beginning.
Craig Goldslager: Yes. And so just some of those things that I was mentioning to get higher multiples on your business, making sure that you have growing and increasing cash flow. So top line, through the gross receipts or revenue on your tax return. Maintaining or increasing profitability, so the bottom line, the net income or profitability of the business.
Craig Goldslager: Having a strong leadership team and management team in place, that’s a common one, that’s overlooked in the solopreneur world. Many people wearing many hats, thinking that they can do a lot or want to do a lot. But the problem is if I’m going to come in and buy your business, Brett, and you’re going to retire right away. I’m going to write you a check for whatever you want for the business. It’s going to be a real challenge for me to maintain morale either amongst clients, any other staff that exists in the business without some type of retention program or making sure that they stay in place upon your exit from the business.
Craig Goldslager: So a motivated management team is really important, strong financial controls. So sometimes, we business owners who do things just in excel or legal pads, have no knowledge of bookkeeping or QuickBooks or infrastructure for financial controls. Because you can say that I had discretionary earnings of a certain amount, but then, the person looking to purchase your business might push back on you and say well, where did this number come from? How did you calculate that? And if you’re just coming up with your own tabulations, it’s not as strong as true expense reporting, true P&Ls, looking at how things are expensed, how they’re depreciated amortized over a period of time. So strong financial controls are really important.
Brett Fellows: And knowing these things, Craig, I would imagine back to your how much, so if that’s my practice, the valuation says it’s worth 800. But my number is 1.5. Well then, we have to do the things that you were just speaking of to make it more valuable to the buyer, correct?
Craig Goldslager: 100%. And that ties into when I was mentioning earlier, about the interconnectedness of the personal and business balance sheet, right? Because if we map out a personal financial plan for you as well, which is very common with what we do when clients work with us. If the business worth 800 in your example Brett in order to have the income they need or desire in retirement, the business has to be worth 1.5.
Craig Goldslager: Well then, we’ve established something called an asset gap of $700,000, right? So if the pool of assets needs to be 1.5 million to retire, frankly, to me it doesn’t matter if it comes from the sale of the business, if you’re saving into a 401k or a profit share or other type of investment. As long as you shrink that asset gap of $700,000, you’ll be able to retire on the lifestyle that you want. So that might adjust the second question of when do you want to retire, set another way when can you retire.
Craig Goldslager: Because if we have to close this asset gap, $700,000 is pretty sizable, but that doesn’t mean that the business can’t grow over the next 24 months, or you can institute a 401k in a profit share. Or maybe even if you’re an older business owner, a defined benefit plan and really sock away a ton of cash to close that asset gap. Because to us we categorize it into the two categories the value of the business and all other assets.
Craig Goldslager: So retirement plans, brokerage accounts, even the value of your home. Sometimes people want to sell their house and downsize or relocate to a tax friendly state in retirement. So a lot of factors and considerations in order to get to the ultimate goal of exit planning, which is to live off of an income stream in which you and your family desire in retirement.
Brett Fellows: And in your experience, Craig, when you get to that valuation point. Have you found that the business owners, SLP owners perhaps thought their business was worth more than what it really was?
Craig Goldslager: Yes, we’ve seen it both ways. We’ve seen, it’s more exciting for me at the opposite scenario which we’ve seen, where oh, my business is worth $250,000 and we tell them it’s worth 500. What an amazing thing. And we share with them why, we’re not just doing it to make them feel good. But I’m a big believer in math and data and science and when you get to this stage, the quantitative is really important.
Craig Goldslager: Qualitative stuff goals that you want to accomplish are equally important. But in this stage when you’re talking about numbers, I don’t just say yes this is worth 500, we will give you a very specific number of 484 thousand 123, because it’s rooted in math. It’s not just rounding for rounding purposes. The opposite is true though too where if someone thinks their business is worth a million, and I have to tell them well, we valued at 500,000 and they’ll tell you why and we’ll share the same math, because math doesn’t lie, numbers are numbers.
Craig Goldslager: And so then it comes down to that conversation we just had about the asset gap. Maybe they have to adjust their philosophy, or maybe it changes who the dance partner is, and who they sell the business to. Or maybe they’re willing to stick it out and work for a few more years.
Craig Goldslager: Because I think one thing that in this industry that I work with, a lot of people, and just in addition to the COVID and the coronavirus, a lot of people deal with burnout. And so oftentimes I get that in the first phone call where business owners tell me I’m so burnt out, I’m working 80 hours a week, I just don’t want this anymore.
Craig Goldslager: Well, what if there was a way, Brett, that you could scale back and truly become a passive business owner, because that’s an option too. A lot of times people think they have to sell 100% equity and 100% up front. But maybe you could sell it as part of an installment payment of 20% per year over a five-year period. You can continue earning a salary for five years, you can continue earning other perks, other benefits from the business over a period of time.
Craig Goldslager: And so that comes all down to the deal structure, and how to actually go through it and whether it’s a third party or an insider sale, you get into the deal structure and figure out what terms you desire. And the overarching goal for that part of the process is making sure it’s as tax efficient as possible.
[29:28] The potential tax implications of selling your business, and what business owners need to consider when developing their exit plan.
Brett Fellows: Yes, that’s what I was going to ask next. Obviously, we won’t dive into the specifics of the tax. But with either direction, or who you sell it to or how it’s structured, I’m sure that there are tax implications on either side of that coin that we have to consider.
Craig Goldslager: Absolutely. And so we always look at what the business center will get from a net tax perspective. So sometimes, people get, just like you said, oh my business worth a million dollars, I want a million.
Craig Goldslager: And then I’ll frame it and I’ll say well Mrs. business owner, if you could sell your business gross for a million and it’s going to net to $500,000 because of taxes. Or we could sell the business for 750 gross, and it’s going to net to $500,000 taxes. Does it matter to you if we do a or b?
Brett Fellows: No.
Craig Goldslager: It doesn’t, right? Because you’re going to net the same. And so we always want to use the least amount of resources possible being either cash flow lines of credit, notes from a bank, the least amount of resources to net the same, or even sometimes, it’s netting even a greater amount, because this leads to a deeper conversation about so many people get fixated on just the valuation, again, using the house example.
Craig Goldslager: When you sell your house, you’re going to get whatever the sale price is. But when you sell a business, there’s a lot of ancillary factors and ways to get paid after sale. So for instance, if I sell my business, I want five hundred thousand dollars for it. Well, you might structure a deal where you’ll get 400,000 for the sale of the business. You’ll get what’s called the stay bonus. That’s a common structure or common incentive plan we encourage business owners to implement for themselves, as well as the key employees of their business.
Craig Goldslager: So it’s a bonus plan. Meaning again, if I buy your business, Brett, I need you to stay on for 12 to 18 months to help this transition. Otherwise, it’s going to be a terrible deal for me. And so if you stay on and the business is still functioning after 18 months, I’ll write you a check for one hundred thousand dollars. Thank you, and then you’re done. So that’s another form of compensation, you can continue to earn perks.
Craig Goldslager: So maybe it’s writing off or keeping the car on the books or furniture or travel. In speech pathology, they travel a lot to conferences and a lot of entrepreneurs go to industry conferences. Maybe you get a travel stipend, maybe you get reimbursements. Maybe you get equipment, computers, things, perks that you never really realize how much is running through the business, until you have to write it out charges your personal AmEx, right? Instead of the business AmEx.
Craig Goldslager: So let’s just say that adds up to fifty thousand dollars a year of perks. And the fourth thing with speech pathologists is sometimes they want to continue practicing. And so working out the NDA language or reimbursement rates or structure to work five to ten hours a week. Because oftentimes, they forget because they’ve been thrust into a business owner, I often call them all accidental business owners.
Craig Goldslager: They did it for the time, freedom and because they wanted to do it. But they lost sight of why they became speech pathologists which is truly to help people and help them work through their communication difficulties. And so maybe they go back to working five to ten hours, and seeing a smaller case load. But if you can get 150, $200 an hour for reimbursement and work five hours a week, a lot of people want to do that. But carving out some language saying there is no non-disclosure.
Craig Goldslager: I can service anybody that’s not an existing client of the firm. And so all that gets into the weeds of talking about the specific deal making structure. But just to bring that back, the total compensation. Those four parts, oftentimes, will, I said if you wanted to buy your business or sell your business for 500,000. The total comp of that deal could often be seven, eight hundred thousand dollars.
[33:05] Brett and Craig Goldslager discuss the importance of having an estate plan as a business owner.
Brett Fellows: I imagine, Craig too, that both literally and figuratively, there’s some estate planning that kind of ties in all of this. I mean, when you ask most business owners, do you have an estate plan? They say yes. I have a will or I have a trust, but they’re talking about their personal assets. But what about that business, if like you mentioned something happens to that person, but this ties those two together?
Craig Goldslager: A hundred percent. And really, you mentioned you are a student of marketing, I believe I am as well. And one thing that I’ve taken away is to really communicate in the language of your clients or your target market.
Craig Goldslager: And so exactly what you’re describing it. I think you just called it a business will. And I had never thought about it that way until somebody once asked, when I gave a webinar, do you need a will for your business? And I said well, what do you mean? What’s a will? I said what’s a will for your business? And she said what you just said, if something happens to me.
Craig Goldslager: Oh, you mean business continuity planning? I could see the screens on the Zoom. And they’re looking at me like the heck is this guy talking about, business continuity planning? So being able to use non-jargony language and break it down.
Craig Goldslager: So oftentimes, I will use that exact language now. And I will say yes, you need a will for your business. And then oh, what is that? Well, in the event of something happening to you, we call those trigger events. Death, incapacitation, divorce, falling out with a business partner, losing suppliers, natural disasters, the list goes on and on, what happens to your business if something happens out of your control? And so often times, we’ll encourage business owners to enter into buy/sell agreements.
Craig Goldslager: We don’t have to go down the rabbit hole by sell agreements. If you have a partner, it’s really important. But for this podcast, and a lot of my clients, there’s something that’s really important where if you’re a solopreneur, you can enter into a buy/sell agreement one of two ways. One is something called the practice continuation agreement. So in the event of something happening to one of my clients, I often encourage them to enter into one of these PCA’s, practice continuation agreement with another private practice owner. You don’t share books; you don’t share records.
Craig Goldslager: But essentially, it obligates the other private practice owner to buy your business from you in the event of a trigger event. Most common death, disability or incapacitation. So vice versa, you then would take an interest in her practice. And so that’s a way to do it, there’s no sharing of books and records, you are not financially obligated to each other.
Craig Goldslager: But without that, the surviving spouse then takes over the business. And we talked about earlier how problematic that is. So practice continuation agreement is a great way to do business continuity planning or a business will.
Craig Goldslager: The second way, which ties into exit planning is something called a one-way buy/sell agreement. So let’s say, I’ll use my world again as an example. Oftentimes, the practice owner has a really key valuable person called the lead therapist who trains the younger clinicians, teaches them sort of the business and the ropes. In the event of the private practice owner passing away, what happens to the business? Well, the spouse would take over, we talked that would be a huge problem.
Craig Goldslager: And so what she can enter into is a one way buy/sell, which would allow the lead therapist to purchase the business from the surviving spouse of the practice owner if she dies. So sometimes, whether it’s through inexpensive term insurance or a sinking fund or other mechanisms, that’s how you tie in a lot of these retention plans, incentive plans, bonus plans to attract and retain really key employees. Because that’s another critical component of the exit plan, is making sure your people are motivated.
Craig Goldslager: Because people in any business are the most important asset, in making sure that they are happy, they are content, and that they’re not going to either jump ship or start their own business. So entering into that one way buy/sell can protect the business owner in the event of a trigger event. It can also set up longer term exit planning goals. Because just like you mentioned earlier, the more time you afford the exit plan, the more likely it is to be successful.
Craig Goldslager: And the longest one we have on the books is we have a 12-year note structure between a private practice owner and her lead clinician. So that’s the longest one we’ve done. And they reached that agreement in early 2021. So in theory, they’ll be working together into the 2030s. And again, part of the deal is that this purchaser did not have the capital to do it more than that. So that all comes into play too.
[37:42] Craig offers his best advice for business owners planning for retirement.
Brett Fellows: Great. As we wrap up, Craig, I’ve got two things I wanted to ask. So if you could give one piece of advice to all of these business owners out there, or 90% of them need this business to fund their retirement. What would that be?
Craig Goldslager: I think the most important thing to think about is those three questions. But more specifically, the who. Because you can come to a professional like myself, you can come to Brett, you can go to any financial advisor, anybody that’s not a business broker. Again, speaking specifically about intangible services, but I’m not going to find the buyer for you.
Craig Goldslager: We can brainstorm together. We can talk about your employees or your strategic third parties. But there are so many ways and just after focusing on this niche, there are so many interesting ways in which people are looking to either add on to businesses, acquire businesses, grow businesses. Just because you’re selling, there’s going to be a younger business owner who’s looking to grow. And so marketing and getting creative on how to establish and build relationships in your community, your occupation, your specific industry is really important.
Craig Goldslager: So knowing that nothing might come today or tomorrow, but you might build this up over the course of years, these relationships. And so knowing who that who is. Because even if you went through a business broker, I think the most important thing is having amicability with the sale. Because if people like each other, deals can get done much quicker.
Brett Fellows: Yes, that’s great. Craig, so this podcast is about retiring entrepreneurs. And that means that they’ve had a successful entrepreneurial journey, and how can they retire, maybe using the equity from their business to do so. So I’d be curious to know what would be your definition of success?
Craig Goldslager: For my business?
Brett Fellows: Yes.
Craig Goldslager: I feel very fortunate to be able to be an entrepreneur and be able to attend my daughter’s soccer lessons or practices, do things with my son, with my wife, just do things as a family. And so as the world comes out of the pandemic, I’m very excited for the transformational shifts that I think a lot of people have realized.
Craig Goldslager: And when I mentioned earlier about it being a good fit to work with clients, for me to work with them and for them to work with me. I expressed that I’m often available, but having people knowing boundaries and knowing limitations are really important. Meaning, don’t expect me to be at my desk on Thursday night at 5 p.m. Because if my calendar is blocked, I would prefer not to take a meeting.
Craig Goldslager: So just like we talked earlier about defining enough, I know what enough means to me and my family, from an income perspective and what that looks like. But the one commodity and it’s very cliche to say, but I believe it to be the truth, is we all have a limited number of time. And so being able to spend the time how you want, with the people you want is really important. And so working with people who respect that and have a similar mentality, it’s a very refreshing experience. So being able to do that, work the hours that I want, when I want is great.
Brett Fellows: Yes, that’s great. I love it, thank you for sharing that. Well, Craig, I appreciate your time on The Retiring Entrepreneur Podcast. And I want you to have a great rest of your day.
Craig Goldslager: Thanks, Brett. Appreciate your time, and thank you so much for having me.
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