Conquering Workflows & Systems For Bookkeepers & Accountants | with Alyssa Lang (Workflow Queen)

Thinking About Selling Your Firm? Here’s What You Need to Know with Matt Budden & Matt Smith

• Alyssa Lang • Season 1 • Episode 108

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Alyssa Lang interviews Matt Budden and Matt Smith, owners of WORTTTH Advisory, on the intricate process of business valuation and its impact on potential sales and exits. Alyssa, Matt, and Matt explore the emotional journey of contemplating a business sale, unraveling the components of a firm's value, and understanding the steps to better prepare for a future exit, offering listeners invaluable insights into maximizing their business's appeal to potential buyers.

In this episode you’ll hear:

  • How Alyssa went through the valuation process for her firm with Matt & Matt
  • What the valuation and exit readiness scorecard process looks like for potential business sellers
  • Why understanding business valuation is beneficial, even if you're not currently planning to sell

About our guests:

Matt Budden and Matt Smith are the Co-Founders of WORTTTH Advisory, a boutique financial consulting firm specializing in valuations, M&A, and strategic financial services. Both are qualified Chartered Accountants (SA) with extensive global experience in deal advisory and financial services.

Known as "The Matts," they share a deep passion for education and a relational approach to consulting. Their backgrounds include years in public accounting, with Smith specializing in deal structuring and tax efficiencies, while Budden focuses on valuations and financial due diligence. Prior to launching WORTTTH, they spent five years leading a multinational fractional CFO firm, helping entrepreneurs scale sustainably.

Budden is recognized for his ability to inspire and connect with entrepreneurs, while Smith excels at distilling complex data into actionable insights. Together, they create a safe, strategic space for founders to grow and build impactful businesses.

Connect with Matt Budden & Matt Smith:

Follow them on Instagram: @worttth

Connect with them on LinkedIn: linkedin.com/company/worttth-advisory/ Email them: team@wortttth.com

Resources mentioned in this episode:

📚 Built to Sell by John Warrillow

💻 Breakthrough for Bookkeepers & Accountants

Thanks for listening. If this episode inspired you in some way, take a screenshot of you listening on your device and post it to your Instagram stories and tag me, @workflowqueen

For more information about the Conquering Workflows & Systems for Bookkeepers & Accountants Podcast or interest in our programs or mentoring visit our resources below:

Visit our website: workflowqueen.com

Check out our courses: workflowqueen.com/courses

Follow the Blog: workflowqueen.com/blog

Connect on LinkedIn: linkedin.com/in/alyssa-lang-wq

Connect on Instagram: instagram.com/workflowqueen

Connect on Facebook: Facebook.com/workflowqueen

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So I've been keeping quite the secret lately and the cat's out of the bag. I recently just got valuated at my firm, which means I was just given a proper valuation to see what my firm can actually sell for if I decided to sell it. And so in today's episode, I'm so excited to bring on some of my favorite human beings who actually helped me through this process. Their names are Matt and Matt, and they own a company called worth. And they're going to be talking all things valuation, what that process was like for me, because they're actually the company that I. I went through to get my evaluation for my own firm. We're going to really be going behind the scenes to talk through what that looked like for me, as I was processing, potentially selling my firm and all the different things that came up, including my exit score rating, which was super fun to really realize the different components and parts of my own business that I need to fix in order to really make it look more attractive as I potentially sold. So it's so exciting. I can't wait for you guys to dive into today's episode. So if you've been feeling like someone who might potentially want to sell your firm, or you're just curious about the process or how going down this rabbit. At whole of what I did with my valuation can actually benefit you as well. If you decided to go down this path. So I'm so excited for you to be introduced to two of my favorite humans and just, just grab a pen and paper guys. Cause there's a lot of information here in today's episode, and I think you're going to love it. Hey, everyone. And welcome back to the podcast. I'm so excited because these guests, there's actually two guests on here today. I am so unbelievably excited to bring them on because I have not shared this publicly. And I've actually been kind of keeping this to myself as I've been processing all the information and just wasn't ready to really share it to the world. And now I am, and I'm bringing them onto the podcast. Their names are Matt and Matt. And yes, I said, it's Matt and Matt. So there's two of them. We have that in common when I had an Alyssa and Alyssa. So I'm really excited to be bringing them on the show. They are some killer, killer human beings that I got introduced to by multiple of my coaches actually recommended them to me. They are someone who does business valuations. I recently got my firm valuated and it's been a rollercoaster of emotions and we'll talk about that today and talk about the experience. And if you've been interested in potentially selling your firm or what that might look like or how to build your business to sell it, this is the episode for you. So welcome Matt and Matt. Feel free to introduce yourself and say hi. Transcribed Awesome. Thanks, Alyssa. Thanks for having us. We feel privileged to be on the podcast with you. My name's Matt Budden, and I'm joined by Matt Smith, and I'll let him speak a little bit about himself. affectionately, we called the Matts by most of our clients, and we are both qualified chartered accountants in South Africa. You can hear with the accent, it's a little bit strange, but we are working predominantly with founders and entrepreneurs And have a boutique financial consulting firm called Worth Advisory. That's with three T's and they stand for transform tomorrow together. That is some of the values that we want to instill in what we're trying to do through our work. And so we provide a number of services in the financial space being fractional CFO services, predominantly focused on financial strategy and how to build best in alignment businesses. Obviously with the sense of, an investor's lens. So that's where our historical sort of experience in M& A comes through. Matt and I actually met at a previous firm. We were both in the mergers and acquisitions department. Matt focused on corporate structuring and when deals were taking place. And I was more involved in the valuation and financial due diligence side. And what that basically means is when someone was looking to buy or sell a business, we would go in, lift the hood of the business, see if there were any red flags. Understand the business and the potential synergies. Matt and I are best mates outside of work too. So we have a really, we have a really good relationship. And yeah, we've been on this journey for a little while together in, in previous firms and obviously, founding our business, last year. So Matt, I don't know if there's anything you want to add. Not much more other than thanks Alyssa for having, having us. It's a privilege to be here and excited to dive into. Yeah. I'm super excited for this conversation. So as I pretty much told you guys, you listeners is I just recently went through the valuation process as of recording this podcast, it is end of December. So this episode will might come out a couple of months later, but, I want to say when did the process start? It was pretty quick. I remember being like, I want to do it. Let's get on a call. Let's make it happen. But I want to say like a month ago, was that when I, like when we connected, yeah, it was Okay. That sounds about right. Yeah. Cause I remember originally Caitlin Carlson had introduced me to you guys a couple of months before that because we were on a call and I was like, I really think I want to potentially sell the firm. And it was like this whole thing. And she had told me about you guys like a million times, like it wasn't like the first time that I was like, fine, do the intro, like do the email intro. And then like your guys's name kept popping up and I was like, I'll get to you guys. I swear I'll respond to the email. I swear I'll respond. And then finally I did. And I think it was just like the perfect timing. So. Just to share, like, from my perspective, I also want to hear from you guys. We have a lot of listeners in the Workflow Queen space here that, based off what I teach, is I want to get them to a point where they can either exit or sell. We don't help them in, like, how to sell your firm, essentially. It's more like, how can we get you the right team, the right offers, the right systems, in order to get to that point? And so, I'd love to just first dive into just the power of maybe potentially getting valuated, whether they know if they want to sell or not. Like, What's in it for them, even if they don't know what their end goal is right now? For sure. I suppose, you know, we would always be advocates of understanding the value of your business at any given point in time. When we thinking about valuations, the big elements that we focused on are some key value drivers. One of those being predominantly your financial performance and what you've been doing from an efficiency standpoint. So, you know, if you're able to better understand where there are inefficiencies in your business, That doesn't only mean that you could leverage those inefficiencies and turn them into efficiency so that they impact your valuation, but they also can help with your profitability if you don't want to sell. And so that's the first element being your sort of key performance indicators from a financial perspective. And then probably the other elements say that you were thinking about selling or you aren't thinking about selling is when we're looking at valuations, the risk factors are a big, Portion of what we discussing when we're thinking about valuation. How do we impact our valuation by sort of mitigating the risks? And I think as business owners, as founders, if we can have a better grasp of what are some of those risk factors, how do we mitigate them? What sort of actions can we take in decisions? Can we make in order to do that? That doesn't matter if you actually want to go and exit one day. Obviously the hope is that if you're building a business in alignment to potentially exit one day, that's, that's a great starting point, but at the same time, you're going to get a lot of value from understanding, excuse the pun, but value from doing the exercise and understanding the risk. One thing we will say just before passing over to Matt to share this, some other elements is you always are going to exit your business. Yeah, so you either planning for potential transaction or the other option is probably a little bit more dire in the fact that you've built something of value because there's always going to be value in your business and you're not able to sort of reap the rewards of that if you aren't planning for some sort of exit or transaction. Yeah. And I think a lot of people discount or discredit their ability to sell their business and, or exit their business. And they think, Oh, this, this business revolves around me and, without me, there is no business and perhaps at that point in time, but Max and I have worked with many founders in, in helping transition towards, a sustainable business that operates in With or without the founder in the business on a day to day basis. And I think the there's definitely room for that. And an encouragement to those that are out there that feel disheartened that without them, they feel like the business can't function currently. Well, I can tell you confidently that there are many people that have turned that around in fairly short amounts of time. And, and the reality is the longer you work at it, the more, the more disconnected you can somewhat come and a lot easier than to sell. And if we think about any Potential seller. That's a key feature is, well, could I take this business without the founder and still make it work? a lot of people do want the founder to still be involved to some extent, we met with some people just this week where keeping the founder in for a season or indefinitely was actually pretty critical because that person was intricate to the building of that company and has a lot of experience. and knows why the business was built in the first place. So not to say that, we don't want the founder in at all, but quite often when you are selling or exiting, it's usually wholeheartedly you selling all of your stock or selling the whole business in its entirety. And be able to let that piece go. One thing I think is really great to kind of hear, especially giving grace to people who think I, I know for myself that in my head, You had to be this like, big, big ass company that had to like, potentially sell and you have to have like, multiple millions and like, all these crazy like, attributes. I think I'd love to hear from you guys that like, to give people grace to know that like, You'd be really surprised that you might be surprised by the number that you could possibly get, especially for those that are really burnt out. I can't tell you how many times like students on in our breakthrough program who are just done. They're done. They're just like, I can't do this anymore. Like I can't be resilient forever. I don't like building a team. I don't want to do this. Like I'm done and they just want to exit, but they feel like they don't have a big enough client list or it needs to be 50 clients before they could sell. So what sort of grace you give to business owners as they're navigating that to think that they're too small that they can't potentially sell it. I think the one beautiful thing about when you start considering valuation and exit is that When we think about a potential transaction, we always thinking about a willing buyer and a willing seller. And we know that there are a number of businesses who need a number of different attributes from businesses that hold value for them. So what you may value a list is very different to what I may value. You may be looking for a specific part of a business that would sort of help and, and build into the synergistic Elements of your business that would be very different to what I would be looking for. And so my encouragement in terms of people thinking that they don't have value is try and break up your business and try and understand what you think you're really good at. I look at your business, for example, incredible client experience, people love working alongside you. So how do you take some sort of process or system as well as, you know, the other elements of your business you've spoken about? A book of clients. That's another asset that you could sell. There's your team. They're these these processes. They could be intangible assets that you've developed over time that you're willing to sell. And so they're definitely parts of everyone's business that become very valuable to someone else. So that doesn't mean that you have to have this very, very Pretty or beautiful business that is complete and that you are making millions and millions of dollars. A lot of the opportunity is how do we use someone else's business to sort of leverage into our business and create something even bigger. So that, that is the encouragement to see small parts as very valuable to other people and to be willing to explore, you know, often, like I said, willing by a willing seller, people are often too scared to just Meet or have a, have a discussion on it. And so this world is moving into more of a space of collaboration and partnership, and we not looking at some maybe traditional ways. And so there are so many other than just the, the assets that you have in your company, there are also so many ways that you can do a deal, which we can maybe speak about a little bit later. Yeah, definitely. I think it's one thing that I think you brought up that was really interesting is looking back at sometimes it's they might not be buying it for the client list. It could be like the process. It could be the clients might come with it, but ultimately maybe they're like, maybe they're one part of their business that they're really lacking in is we don't have a good client experience. We have a terrible sales process and we have a horrible like marketing system, but this business over here has that machine. So let's buy that. Obviously the bonus is also we get this asset plus we get these clients and these team and whatever comes with it or whatever they're buying. But I really like that you kind of pointed on that because I think that that's, as someone who's a huge proponent in processes and systems, I'm so huge on like, I want to make sure that if I sell, I want them to have that. One other thing you kind of pointed out at, because I did want to like, Kind of step back real quick.'cause I wanted to share, because I know that I went through one part of your guys' processes for the valuation. I know that you offer different versions of the valuation process. So what is it called that I went through? Like what was like my process way that you guys had me go through? it's an indicative valuation offering. It's an understanding of the current value of your business, and. You know, we used certain methodologies. We actually used sort of blended approach to, to come up with what we would say is an indicative value of your business. What that, what changes often is just the scenario in which, or why the valuation is being performed. So, you know, this gives you a really good sense of where your business is. We gave you a few scenarios that you could potentially meet. And if you did meet those scenarios, what happens to the value. So. It's giving you a lot of education on the back end of like, well, and you know, we all as entrepreneurs love to have some targets. We love to have some things to work towards. And so that's the beauty of this fluid valuation process. What I would say is some of the differentiating factors, for example, we've done a number of valuations when unfortunately there's a divorce. And you know, we have to look at evaluation as part of what does the settlement look like that becomes very important to stress test a lot of the assumptions and the growth rates and all those elements because It needs to be held up in terms of court of law before we we move towards that Same thing when we're going into maybe a more detailed Negotiation process, we would use very similar methodologies that we used for you for your valuation, yet we would really stress test all the assumptions. So for example, in our example, we said we could grow at, let's say 20 percent over the next three months, whatever that looks like. We would want to go and really test the validity of those assumptions. How are we going to get there? Why are we going to get there? So a little bit more detailed. When there's a certain event in front of us, but this is a really great starting point for understanding what is the value of a business at a point in time. Yeah. I think, other Matt, we're going to call you Matt Smith. I know there's two Matt's here. So it's going to be a little bit back and forth of Matt's and Matt's, but, um, I wanted to bring up something that you had done during our call., Where when we guys went through the numbers of the books and we went through all the details and stuff We did what's called the ad back I definitely want to like chat about that because I think that that's going to be really supportive but before we dive into that I kind of wanted to share what I went through as just someone who Was on the other side of what you guys are seeing as how far as how I was feeling I will just say that I had you guys already knew this. I had so many feelings going into this like I was like i'm gonna sell and then it was like I really want to sell to like surprise. I'm not selling like there was just so many emotions that were happening. So when the introduction happened, I feel like I was in like this weird place in the business where I didn't know where I was. Like, I felt like I was lost as an individual. And I know that we talked a lot through this and this is what I really appreciated with you guys. I feel like sometimes I get with professionals and sometimes they just want the transaction rather than like the emotion that comes with it. I remember when I drafted my will, I cried and I feel like they just like the men were just looking at me like I was weird. I was too emotional when it's like it's a it's a really heavy to have to call your dad and be like, Hey, dad, as someone who had lost his son and my brother, if I'm ever not here and like that idea, like, it's just like the emotions. I feel like you guys were so respectful of like my emotions. But the process that we went through is when I reached out to you guys, we got on our call. So we did a two call process. And the first call was where before prior to that, I gave you guys access to the QuickBooks online for my firm. And you guys viewed some things prior to our call on that call. We actually went through, if I remember correctly, that was the first part, right? We went first through the numbers, correct? So we did the numbers first and then we looked at, okay, Alyssa, Of all the spend, what is actual spend that you really need for the business? And then we went through and kind of looked through all that. And I think the next step of the process during that first call was also, us going in and putting in the data into your software, correct? Is that what we did next? Yeah. Cool. So we did that piece. And then that's when I, on that first call, I already had like some sort of evaluation. amount and I know that you guys are doing a way better job. I'm sharing it from my perspective. Then we went through the methodologies, the different methodologies, the ways, potential ways that I can possibly sell and what that price would look like depending on the situation. Then you guys gave a week, I think it was a week between our call and it just happened to work out like that. After my first call, I remember at the very end, I was like, do you guys ever have people on these calls just tell you, I don't want to do this. Like the idea. Oh, we did scenario basing. That's what we did. Cause you guys went through scenarios. After we knew the valuation total, I'm like, cool, I want it this number. So then Matt and Matt went together and put through the numbers and calculated stuff saying, okay, you need this number of clients to execute X, Y, Z, in order to sell for this much, maybe you need to replace yourself in this way or do whatever. So I was like, By the time you guys got done talking, and it was nothing you guys did, I was just like, that sounds exhausting. Like, I don't want to do any of those things. And I just remember being at the end of the call, just being like, I just don't, like, it was like, I feel like, I feel like I didn't have that desire. And then one week changed everything for sure. Because we thought the second call was going to talk about what would it be look like to put a deal on the table? Like, how would we go, about like, what's going to be the next step? Stuff like that. And in that week period I was with my biz bestie Serena and she was just like, you're not done. There's just something about it that like is still there for you but it's just not what it should be. Like it's, it's continuously morphing I guess is the right way. So by the time we got on the call I was like, surprise! I'm not selling! Like, it's not happening. And you guys were like, okay. And it was really cool that like, You guys really showed up to that call, not forcing me to continue that conversation. Because you were like, I can feel the energy, you look and feel great, like I can just feel it. And as soon as that happened, we pivoted. And we went into, I think, I believe we did the exit scorecard with all the different questions. And so I think I nailed what the process is. Was I pretty on point? You absolutely dominated it. So, yeah, I think, I think just a reflection from my side, we did feel that energy and that first call. I remember getting off the call and saying to Matt, what do you think? Alyssa thought, I was actually going to reach out to you and be like, you know, Thanks for having the courage to sort of process that with us and work through it. And i'm actually glad I didn't because when you came on the call, it was a surprise for all of us and we all got Excited and we're like, okay. Well, here we are. Let's keep going And so I think it was a it was just a really great moment to and I suppose that's that's what it's about This is you know, not meant to be a be all and end all here's the valuation go and do stuff It's meant to be an enlightening process where we can walk a journey with you to and say, well, what do you want as the owner? You know, we always trying to focus on outside of work. Like what, what life are you trying to create and how can we be good stewards of the financial part of that to get you there? And we don't do that. You do that yourself and you did that yourself, but it was just, you know, for, from us, we were really lucky to be part of that, that realization. I felt bad. I was like, Oh God, they're going to kill me. But it was so cool that you guys were just like, no, I'm, we're just going to pivot with you and let you want to keep going. Let's go. I think it was really empowering though, when we talked about the scenario basing. So I kind of want to deep dive into that piece. But first I want to touch on the ad backs, for anybody who doesn't know if someone does want to potentially sell, I guess, Matt Smith, what are some of the recommendations? Cause I know you were like the numbers man behind the scenes doing all the little magical things you were doing in Excel. What did someone look out for as they potentially might sell maybe a year or two years from down the line as far as spend within the business that way that they can be ready in this exit for sure? And I think You know, different people will call it different things and they're not all quite the same, but they follow a similar thought process and, and, the concept of normalization. So normalizing your profit and loss to add back or deduct any non recur, not necessarily non recurring, but. abnormal expenditure that might be more aligned to a founder based business. So perhaps it's things like, search and training and education that you as the founder really benefit from, but any potential acquirer would not make use of those services going forward. So sort of removing those pieces and other people will call it Sutter's discretionary earnings, slightly different, but still trying to get back to, well, if I was the founder and I went, I didn't put any expenses that relate to me talking about my salary, any kind of training, anything that's very particular to, to my involvement in the business. If I had to take all of that out, what would I essentially be earning from this business? In terms of profits and the reality is that more often than not, that is what a potential acquirer is going to be looking at. Because as a founder, what's going through my business might be very different to what's going through your business. I'd like to say it's Matt and I, we're in this business together. So what's in my business is in his business, but, um, do you know what I mean? Everyone's going to spend their money a little bit differently and grow in different ways. And so we want to make sure that we normalizing that so that we get to a more definitive profits, profitability that any potential acquirer can expect to Derive or, or, or receive in, in the future. So that's, that's kind of the normalization ad back process that we go. And so many people will put, especially as farmers, we'll try and put as much through the business as possible to lower taxes, you know, it's not the, it's not the first time we've, we've seen that. and so don't be. Alarmed when you think, Oh, I can't sell my business because it's not profitable, take a closer look and see what's in your business. That's actually necessitated. Yeah. Like like question, like, like travel. If I go to travel for like a mastermind, it's like, it is deductible 100 percent in the business, like because of what it does, but is it something that someone would carry on in the future if they were to buy the company? For sure. And it is a different mindset. It is. We no longer looking to optimize taxes as much as possible as we are to get a really clear indication of if we were to strip this business to its bare bones in efficiency, what does that look like? Interesting. Yeah, I just loved going through that process because I feel like it also whipped me a little bit into shape. Because I feel like when you guys were there and I was like, yeah, that's totally like, they wouldn't probably carry that over because there's a lot of that. I mean, we're all notorious for this, especially like, Accounts and bookkeepers were kind of the worst of like what we would put on there. We don't let our clients do it, but like sometimes like I, I get that. So it's kind of nice to hear that, like, sometimes you might think it's not profitable, but if you take away all the BS, maybe it is pretty profitable at the end of the day. So I wanted to talk through the other part of the process, which was during our first call at the very end, we talked about the scenario basing. And from what I understand, and I'll try to do my best and you guys totally correct me if I'm wrong, is like, okay, we've got this number. Great. This is where we're heading. This is where we're going. What number do you want? Or maybe what potentially could we sell for? How fast do you want the growth to be? Do you think it's realistic? And I remember a lot of the questions that you guys asked. I kept saying that these are very subjective because it really is dependent on the owner having the ability and the mental capacity to push the business. And I told you guys very straightforward, like I'm the reason why we slowed down in my firm like 100 percent because I feel like there was a disconnect between the passion there was, but I also told you guys, if I can do it, you give me a target because you talked about that earlier. We're target driven. I'm very much target driven. So now that I have a number, I'm like, I'm going to get there and I'm going to make it happen. And so I really appreciated that through that process. So for the scenario basing, I'd love for you guys to share what that really looks like and how you guys work with people to look at here's your number, but if you want this, how do you guys come up with that essentially plan to get there? Yeah, I think the, What's important here is to know what are the key drivers in this business. And so we'll pick up on that through the conversations, through the research ahead of that call, what would be a typical driver and through conversations with the founder themselves and then slowly start to work out. Well, is there, is there excess capacity in the business? So to what extent can the current team or software or systems facilitate increased revenue? And so that's where we'll start to, to run some scenarios around, potentially increasing, growth rates into the future. Both short term and longer term, without adjusting any expenses, or if we are already at efficiency, well, it's still tweak growth rates. If we think that this company can still grow further, but at the same time, while we do that, we have to, we have to adjust some other scenarios, which are, well, in order to grow, by an additional 20%, we're going to have to hire somebody and that's going to come at a cost. So let's adjust these costs. Proportionately. So that's an aura basing is, is more around and you know, what we, what we have seen as well as we get on, we get on these calls and we start running through evaluation and everyone is super optimistic, which is great because we want to be optimistic. We know that that's, we want that kind of mindset going into a sale because like Matt says, willing by a willing seller, we want to make sure that you are the best willing seller out there. But at the same time, we've got a temper. Being too aggressive and, and what, what we mean by that is, well, we, we haven't seen back to back growth of 60 percent or even 50 percent for this particular client. And so now what is the likelihood of having back to back 50 percent growth rates in the next three years? And the reality is any kind of valuation is going to be scrutinized by a potential buyer. And so we obviously need to temper that conversation to ensure that wherever we land up with the valuation. result is that we can present that confidently to an acquirer and say, well, we've, we've used historic performance to inform our decisions, but we're also conscious of the market that we operate in now, um, the traction, you know, what's sort of happening in the market currently. And that's, that's informed our decision about the future, but it does need to be realistic. Yeah. And so occasionally we'll, we'll also throw out in that scenario base. Well, so you think you're only going to grow by X number. Well, how about if you double down and you grew by one and a half times that this is what would happen to your valuation. And it's always interesting to see how founders respond to like, well, sure, but maybe I need to go and invest a little bit more of my time because it's going to have a dramatic impact on, on my valuation. Yeah, maybe it's the opposite. This is really isn't worth it. I don't think I need to increase. I need to grow by the next 10 percent because it's not really having an impact on my valuation as much as I thought. think just, you know, a number of our clients we work with also in the creative space. And. like we said, most founders are very ambitious, outgoing, wanting to achieve numbers. And so we're using a lot of reverse engineering to figure out how we get there. So there's this element of the methodologies for valuation, but we want to get to The profitability of your business and how we want to try and do that is to give you some sales goals or targets. So that's what we would want to understand during our conversations is what does an average client pay for your service on a monthly basis? How do we grow that out? Is that five clients at 2, 500 or what does that look like? What happens if we have recurring clients? That's, that's the one element. And you know, that's what we're doing. But you spoke about Caitlin Carlson a little bit earlier, you know, we were closely with her firm, her wealth advising firm theory planning partners. A lot of what she's doing is we're looking at this from a very holistic approach. And, you know, she's got goals for you as an individual to save. And so what we're trying to do from a business perspective is reverse engineer everything so that we can get you to the saving goal so that you can either put away money. It's the same with the valuation. We're doing the same process of reverse engineering. If you want to get to X, Y, and Z, this is what you have to do with the rest of your business. The only other thing I would say is, We obviously speaking a lot about the financial performance there. Something that's a little bit more subjective is the risk and the risk mitigation. So if we can pinpoint key risk factors, that will also impact your valuation. It's just a little bit more difficult for us to say, okay, well, For example, one of the big risks is maybe your revenue composition. Maybe you have like six, 10 clients and of the 10 clients, one client makes up 80 percent of all the revenue make that's a big risk for us, because if you lose that client, well, that's 80 percent of your business from a sales perspective gone. And so, yes, we can tell you that that's a big risk and it's impacting your value, but I can't tell you. How much if you change the composition of your revenue, it will change the absolute value. It definitely will it will improve it if you can spread it over more clients But it's more difficult than us being able to say go and get x y and z clients So that you grow your firm in in your financial performance I like how you touched on that, because I see this a lot in this space, and I know that you guys have evaluated so many different types of businesses, but you also come from an accounting place, so like, you understand this piece, that I swear they're like the worst, where like, they'll have clients that literally, like you said, 80 percent of their revenue, And they're like, this is great. I get paid like a couple grand a month. I'm like, that's all fun and games until you lose that client. And I tell people all the time, you have to have a plan in place, or at least like have more consistent clients at that high revenue, or bring in someone onto the team to be able to support you so you can continue to support these types of high level. Because I know for me, if I were to buy a list of clients and Like you said, one client was like 80 percent of revenue. I'd probably walk away because I'm like the risk that that client would not move forward. Cause you also can't guarantee that the client's going to stay. Like there's no force, there's no force entry for them to have to stick around as a business gets sold. And I remember that being something that came up a lot because I want to talk about the like non financial piece, which you did a great job of like naturally segwaying to that conversation. But, I wanted to talk a little bit about, cause I remember this came up a lot, which you guys had asked me several questions around like, if you were to leave, like how much do you think the client would actually stay with you? And blah, blah, blah. You asked me a lot of questions around, like, how would this team stay with, like, what are all these different questions? And I'm, as you guys probably knew, I'm very confident when I know 100 percent something is going to be fact. And I was like, absolutely, they wouldn't have a problem. I've been on consult calls with clients being like, yeah, I'm like, potentially gonna sell. And like, for some weird reason, they still move forward working with me knowing that I potentially might not be here. And so, I think that transparency, and that's something I'm really huge at here at Workflow Queen, is I always teach that always say we instead of I, and that could be on your website, that can be on calls, even if it is just you, saying we makes you feel bigger, also makes other people think there's more people, so that way when life happens, emergencies happen, you have to take a vacation, people aren't like, well, Phyllis is not there, I'm not going to talk to your team member, they're not going to respect your team. So, um, yeah. And so I'd love to touch on like some of the key components that are, I would like to say sexy to a buyer as far as like, not the financial piece, but more of like the success of the company in the back end. Absolutely. So a big piece of that is succession essentially. So as, as a founder, how are we preparing our businesses? to run without us. So what does that look like? Well, do we have good systems in place take leave and not have to worry about certain key functions? and then our team, are we raising up leaders around us to not only support our clients, but to hand over and empower people to, perform certain functions, that perhaps we aren't even actually They suited for, and the idea there is that hopefully that team would move on with any potential sale that came about. And that would give, just talking about team as a potential acquirer, I'm not speaking like if I was going to acquire a business in the service industry, like it, like an accounting practice, I would be very interested in the, team that is providing that service and how long is that team being around for. How long have they worked together for? What is the dynamic? Because I know that that's intricate to clients sticking around and client success. we all know that this is the relationship game. And so, if Matt and I are selling, like, how do we, how do we disconnect relationships from key individuals so that it's more of a holistic, and that this is way easier said than it's complicated process, but those are key factors in selling a service based industry. How do we disconnect the offering from particular people? but at the same time creating this longevity that if we were to sell, we comfortable that people would stick around and, and maybe it's a combination of. Systems and people and service delivery and expected results or, particular unique reporting way that, that someone's become accustomed to. Like Matt and I often talk about, well, how do we make the service really sticky that people really love what we providing. And so it's really difficult for someone to give that up because not everyone else is going to offer that. Yeah, totally. I those are definitely some of the top points. The other, the other areas, just getting back to that sort of revenue composition is like the quality of the clients. So it's not only about the financial performance, but how long have they stuck around? How loyal have they been? What is the lifetime value? How are you acquiring new clients? Like processes and systems is, is really big. You know, there are other financial elements that You know, investors will consider how, how cash flushes this business, how, what is its ability to generate cash is a big thing. What are some of the ability to care, collect? Do they have issues with, with data's or, the other, the other element is like, this is my passion is. Is people and culture like they've also got to understand the cultural elements that you've created that they could sort of fit in. And there's a, you know, that's probably the biggest reason that a transaction will fail is post deal, a lack of culture, but, and so I'm, I mean, we all accountants or a lot of people here are accountants and there's a term in accounting called goodwill. And basically what that means is once a purchase takes place or transaction takes place, it's the difference of the purchase price. Which is above assets, less liabilities. So there's this intangible value that you paid for. That isn't like included in the assets and liabilities of the company. And the way I like to think about that from a humanity point of view is that these are the relationships you hold. These are all your stakeholders. It's the people on your team. It's your clients. if they're investors, they're investors, and it's your ability to harness and. Have relationships flourish in your business, which is just a very interesting dynamic. We probably very tangible people. We like the numbers. And yet we don't want to lose sight of just how you do business is important when you come to a valuation table. Yeah, I love that. Yeah. I love all those points, especially because I'm such a preacher of all those things here. Like it is literally what I teach him. What I do is like, it's more important than you think people to like put these things in place. It not only makes your life easy in the meantime, like processes, people like I could not step away from the company and be able to take months off at a time. Do what I want to do, frolic around Europe if I feel like it. Like I can do these things because I have those people. I can't imagine being eight hours ahead from where I'm at trying to like do client work. Like I'd be so overwhelmed. Like I would feel frustrated. So I think this is all such a great conversation that whether someone's going to sell or not, it's like, Have you guys ever read the book, I always forget who, who wrote it, but it's John something, but it's built to sell. You guys ever, yeah. I love that book. So it's a really, really great book. I have it somewhere on my lovely bookshelf in the background here. But I love that book because he really talks about whether you want to sell or not, like you're just building it like you are going to sell it because selling it can also mean like, and it's not really you actually physically selling it, but like, you know, I had a student in one of my programs, both her parents passed in one week, so the difference. And she was at a place in her business because she had gone through breakthrough, the program that I know that you guys are going to be guest experts on, and I'm super excited about. In there, we helped her work through hiring her team. This is, obviously she didn't know that her parents were going to pass. And when that did happen, as unfortunate as it was, most firm owners can't walk away and be there with family. They're stressed out. They're going to lose their clients because they don't have anyone to support them. Um, Yeah. And it was such an honor to see and watch her pivot this and, like, honestly, like, disappear for a couple months because she had to heal and go through the process and go through the funeral and all these different things that she had to deal with. But yet the business was still thriving. And so, like, it may not always be a sale, that's the end result, but it could be when life lifes. You want to be able to have the option because you never know when something's going to hit the fan or like you said, no matter what, you're always exiting your company, whether that's you pass, like literally passing away, like, cause I've seen it happen a lot in the industry where like my bookkeeper died and I'm like, Oh my God, that's so scary. It might be me one day. Well, I am going to die one day, but like, let's hope not anytime soon. Like, you know, stuff like that. It's just really scary. So I always like recommend that people build it like that, no matter if they're the newbie or they're more seasoned, it's easier to start as a newbie. Okay. I will say, it's like, it's a lot harder to go back when your business is huge, you've got a lot of clients and stuff. So the other part of our process was going through the next call. The second call was, which at the beginning I was like, I'm just staying, I'm doing it. And we went through the exit scorecard or I think, is that what you call it? Right. Cause that's like the end result. Yeah. Exit rating a scorecard. That's right. Exit rating. So we inputted like a bunch of questions. It was like, what, 60, 70 questions we had to answer around. If I remember correctly, it was around like, who's like leading the marketing strategy. Like, you know, are you confident in management? Like, do you have legal contracts that you have in place? There was like so many different various variations of questions and. Thankfully you guys were there to like support me because I feel like I would not some of my didn't know how to answer and you guys were like this is what this means and we think it's probably this but we do agree with that anyways we got to the very end of it I pulled it up on screen so I wanted to make sure I bring it today I did want to share this that so my exit scorecard rating was 65 percent and what I thought was really cool about going through this is that It's hard to do this with people who are listening because you can't see a visual, but it's like a little spiderweb. Is that like the best way you can like describe the little visual? Like a heat map. Yeah, a heat map. Yeah, like a heat map with the little spiderwebs on it. And so anyways, it's like this little, little image that essentially can tell you Of parts and components of the business, where do you have to pay the most attention to right now? So, I'll give you an example. I'm just looking at my legal documentation, financial compliance, financial structure, and separation from the business, financial maturity, and then also customer relationships and sales process are all in the green, I guess is the best way I can describe that. And so those are like for you guys are like, Hey, you don't need to be spending a lot of time trying to focus this area because you've got it down pretty well. However, you need to work on customer concentration and retention. You need to work on depth of management and labor relations. Like I'm just reading through some of these things. And why waste our time over here? So a lot of people are concerned with like, let's refine this. I'm like, if it's running well, why are you trying to focus your attention? So I'd love to talk about the exit rating, what it actually means, how that can empower someone as they go through this process with you. Absolutely. I suppose, you know, the one thing that I find really beneficial and what many people who haven't sold businesses before don't really understand is just the weightiness of going through this process. To the deal table eventually. And there is a lot of due diligence that happens within the process. So usually what happens is you do your valuation, you find an interested buyer or seller, depending on what, which sort of relationship you are in. and at the end of that is a letter of intent that says, You've given me the value. I'm willing to commit to this As long as these conditions are met and one of the conditions is we're going to go through due diligence Meaning we want to check that exactly what you've said is exactly what you've said And so they're going to ask for a number of different documents What I love about one of the elements of exit ready score The scorecard is it gives you a sense of what our investors or potential investors going to be looking for They're going to be asking a lot of questions on Your marketing strategies. They're going to be asking about your leadership and your management structures and teams. They're going to be asking about your legal documents. They want to see agreements that, and so you're able to start already compartmentalizing these different areas of your business and potentially, you know, you, when they ask you for it, they ask it in a data room. And so you can already start. If this is something you want to look at what to start populating in that data room based on where you are and the things that I've already taken care of that are in the green, you go tick, I'm done. I know that I can pass that in new diligence. I'm going to put all my effort into the things that need improving. I've got a bit of time now. So how do I go and build a robust case so that when the investor comes, I say. actually went through a process. I was very interested. I wanted to hand you this business in its best shape. And these were the things that came up on the scorecard. And I've gone and worked on it. And I've done X, Y, and Z. That shows a very proactive approach to making changes so that you're in the best position to hand over a great business to the next owner. I don't know if there's anything else there. Yeah. Like a good example that I like to use is we're going to go buy a vehicle. Let's say you're really interested in buying a second hand car. And what are some of the things that you're interested in? You want to know what it looks like. So you want to make sure that the paint is all still intact. you maybe want to find out what the, the mileage is. So how long has it been around for? how has it had services? every year. Has somebody taken the effort to, to make sure that it's well maintained? have the wheels been replaced? Has, has the engine given any trouble? You know, those are the sort of things, and those will all have a big impact on ultimately what that vehicle can sell for, what you would be willing to buy that, that vehicle for, and the similar logic applies with selling or buying a business is, you know, if you look after your business, chances are you're going to be able to sell it for so much more, because it's going to reflect the way, the way you've looked after it and, and. I know a lot of us are like this, like we big advocates for good compliance, but then when it comes to our own compliance, it's completely out the window, you know, a really big red flag is tax returns because ultimately that's a stamp of approval to say, well, what I'm saying is the truth. Yeah, it is. IRS and the IRS, Gave me the thumbs up. So you can, you can, you can trust it. versus me just saying, well, this is my revenue. These are my profits. And there's no sort of backing up or these are management accounts, you know, or one step further and you actually have audited financials. And we know that that's not always the case, but those are the kind of the, the, the pieces that all have a material impact on ultimately, whether you have a successful or unsuccessful due diligence process. And remember an LOI is Yeah, it's a letter of intent, but as soon as you enter into that due diligence process, the aim of the acquirer is to find holes in the business because they will then use that to lower it. You know, you go, you go look at a house that you want to buy and there's an offer, but then all of a sudden you notice, Oh wow, there's a crack in the roof. What's going on? Yeah. I'm going to reduce my price. You know, my asking price a little bit. It's the same thing for business. Yeah. Yeah. and I would just once again, add that that first part of our process, when we looking at valuation and scenarios, it's very much on financial like performance. And remember the relationship there is the better the performance, obviously the better the valuation, whereas the second part, when we starting to think about it, it goes back to the risk factors. It goes back to the legal documentation. Do we have contracts in place? Why is that so important? Because it's risky as a buyer. If those things aren't in place for us, and we might have all the skeletons in the closet when we acquire this business and then we doomed. And so you've got to be thinking about the higher the valuation, the lower the risks. And so this exit readiness scorecard is giving you the opportunity to work on some of those risks. Before you even get to the table, yeah, which is what I think I thought was quite empowering was like not only the number. Yeah, the number is great and it's fine. It's all handy dandy. But I feel like this is the part that really, really empowered me. I think they kind of go hand in hand, but it's like, okay, this is what potentially could do. But as of right now, here's some of the biggest problems. So we've got about, you know, Math is mathing in my brain, but is that 35 percent of work to do, right? I can't do quick math. I know that you guys are smart like this too. So anyways, I know that I need to do some work, but like I said, it's not. I'm not going to go and like talk to my lawyer again and be like, Hey, let's go ahead and like revamp all these. Like we've got it pretty solid. It's working really well. Could it always use improvement? Sure. But right now that's not my number one priority. So I think that after we had gotten off the call, I was like, I literally put out a job posting. I don't know if I told you that this guy, this, this to you guys, I put out a job posting for an account manager. I was like, it's happening. Like so I started to do a couple of little things in the back cause I'm like, okay, what can we do? Like, and I talked to my operations manager. And one big conversation that we had more towards the end of the call, which was really interesting was I wanted to potentially have one of our operations manager that works over here at workflow queen, potentially supporting inside of magnetic to help build it over the year. And like, what can I potentially offer to her as like an incentive in order to have her to support, whether that's support and acquisition, like getting us to that next, to the deal table or, or what happens if I don't decide to sell. After the end of the year, like what, type of, you know, structure would that be? And that was really cool to just be able to have certain conversations around things and just feel a little bit more empowered, kind of walking away. Like I said, like now I know I'm literally looking at this and I've been looking at the past couple of days of what I actually need to work on. And I'm, I'm grateful that my little spider webs are more than halfway spideying. Yeah. I love it. I think it's been such a cool experience. And I think this is a perfect, perfect opportunity to just one shout you guys out. You guys already know how I feel about the two of you, but I want everyone else to hear, but it's also your testimonial. I really genuinely love the experience. Like I really had such a great time. I just recently did an in person event in Scottsdale and I was telling all the girls, I was like, I have not shared this publicly because I'm just still processing how I feel about things. And I shared this and they were like, this is so cool. I was like giving your guys contacts to them. So I'm really excited for all the people to like reach out. But I think that you guys are one, very empowering, two, quite wicked smart. Um, But also I, and I told you this personally, but I want for everyone to hear, especially if you're a woman who's listening to this podcast and you feel like sometimes you get mansplained, Matt and Matt are not going to do that to you. I usually sometimes have that experience in the professional space. I don't get taken serious. I might look like I'm childish, like whatever that looks like. You guys definitely didn't make me feel in any sort of way. Like I couldn't say what I actually needed to say. And you allowed me to have emotional moments, like where I just was like, I was processing. There was no forcefulness. And you guys let me ask questions that were probably really easy to answer for you, but for me it was like very complicated and that was just such a cool experience. So for anyone listening who's ever been. Just curious about this process, what that might look like, want to feel empowered about potentially a number down the line or what you could do in the business. I would 1000 percent recommend Matt. I think they were one of the best investments. And also guys, if you do it towards the end of the year, I know we're recording this at the end of the year, but it's probably coming out in 2025. You can always write it off. So that's a plus here to get this process done. I think you guys are, Just so, so awesome and for anyone listening, if you need help doing all the other things in the background, the processes, the team, the offers, that's what we're here for. I feel like we're like a good, good little trio here. Definitely. For sure. And thank you so much for sharing that with us. I think. You know, that is something that we really want to live out. You know, there's lots of, yeah, just a need to understand that this is a journey and our hope is that we can help advocate and empower. We work with predominantly female entrepreneurs. We love it because we do get the opportunity to have emotional conversation where men are sometimes a little bit more reserved. And so it's just been really great to be able to, it's awesome for us to sit on the sidelines and, and yes, give you maybe the catalyst to think about these things, but just watch you process it, and be a part of that journey. That's what we really are looking to, to be is. Trusted advisor, someone who can be in your corner, you know, , founders and entrepreneurship is often a lonely space. And so the hope is that we can just be a springboard for ideas, for dreaming, for, you know, someone to bounce elements off that hopefully move you in the right direction of what you want for not only your business life, but also your life as an individual. So we really encouraged by hearing that. So thank you for sharing. Yeah, thank you guys so much. Well, while we end this off, is there anything that you want to share as far as anybody who's maybe going down this journey or ready to let it go? What would be your one tip? I guess for both of you guys, we could double tips today. What is your tips for anyone listening who might be going down this rabbit hole of potentially selling or wanting to exit sometime soon? I'll go first. I think we spoke a lot about the emotion now and just how emotional it is to run a business off and it becomes a bit of your baby. and then we spoke about the importance of sort of succession and being able to remove yourself in this business to run by yourself. I think just as you move towards, you know, I would encourage you to do a process like this of understanding what your value is, but also start framing it. Okay. as what legacy do you want to leave through this business and realize that you're just a steward of this business. It's not, it is yours, but it's also how do we leave this business in its best condition for the next person? I've always felt that that sort of helps you reframe it of saying I own it, but I'm not always going to own it. And that's a good thing. And it's like, how do we bring in that perspective when we move towards valuation? I think at the end of the day, I wouldn't. Say that everyone needs to be thinking about selling their business, but there are so many elements within this process, which gives you a better understanding of what are the key drivers to even drive further value for yourself. If there's a lifestyle business or if it's a business that you can obtain further wealth from. Yeah. I think from my side and I did, I may have alluded to it a bit earlier, it's just to, we live in a world where. We always try to discredit Either somebody else or ourselves and, and give us a reason why not to do something. And my encouragement here is trust me that we have seen every deal under the sun, in terms of big, small selling a piece, selling it all, selling to existing team members, selling it to completely outsiders. And, I think the reality is. That you'd be surprised as to whether or not you could sell your business. The truth is you can sell your business. Yes, there's a valuation. Yes. There might be a timing element as to when can you sell it for the most optimal value, but I think don't discredit yourself into thinking that you can't sell your business. And evaluation a great step the direction of understanding where in that journey you are to selling your business. Yeah, I love that. Well, thank you so much for the both of you being here today. So let everyone know where can they find you? Where can they get into your world, get in your space, learn how to get valuated by you guys. Let us know. Absolutely. you can reach out to us through our website, which is worth. com. That's with three T's just a reminder. Also please feel free to just email us directly at team at worth. com. We would love it. If you could just share that, that you heard about us. Through this podcast and through Alyssa. And yeah, I think it, you know, we, we really are trying to make this as accessible as possible. And it's a great way for us to get to meet new people, to give you some real good, sort of strategic objectives to go and, and fulfill. Um, and so, you know, we, we definitely want to get in touch, even if it's just a conversation, to hear more about where you are and what you're trying to achieve. Yay. Well, thank you to the both of you for being here on the podcast today. Awesome. Thank you so much for having us. Thanks, Alyssa. It's been very epic time. Yeah.