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The Transparent Podcast
The Transparent Podcast
Bob Tankesley - Exit Strategies and Building Businesses for Maximum Value
Bob Tankesley brings over a decade of M&A advisory experience to this fascinating conversation about what truly separates successful entrepreneurs from those who fail. Having guided countless business owners through the complex process of selling their companies, Bob shares wisdom that's applicable whether you're planning an exit or simply want to build a more valuable enterprise.
At the heart of our discussion is Bob's new book "Exit Teams," which uses a compelling narrative to illustrate why business owners need a collaborative team of advisors - especially when facing sophisticated buyers who come armed with their own team of experts. This imbalance often leads to suboptimal outcomes for sellers who try to go it alone.
Whether you're currently running a business, planning to acquire one, or just beginning your entrepreneurial journey, this conversation provides actionable insights that can help you avoid costly mistakes and build something truly valuable. Find Bob's book "Exit Teams" on Amazon in paperback, hardback, and Kindle formats at https://a.co/d/8Nw1qmf
Welcome to the Transparent Podcast. My name is Nick Ford and I am the host of the Transparent Podcast, where we believe in bringing transparency to the world of small business, and this week I am joined by a guest, bob. I will let you introduce yourself, hey good Thanks for having me, nick.
Speaker 2:I'm Bob Tankesley. Good Thanks for having me, nick. I'm Bob Tankesley. I'm a M&A advisor for the lower mid-market, sometimes getting into the mid-market. Basically, what that means is I represent sellers that want to take their companies and find an outside buyer by building a buyer pool, doing some hard negotiations and maybe getting it across the finish line hard negotiations and maybe getting it across the finish line.
Speaker 1:Very nice. Well, the idea that inspired the podcast was bringing transparency to the world of small business. I also own a company called Transparent Staffing, which has a similar theme of bringing transparency to the staffing industry, and I founded Transparent Staffing about four years ago now, and I know that you've also been working on a book. Can you tell us a little bit about that?
Speaker 2:Yeah, sure, I got it right here Exit Teams. The name of the book is Exit Teams, so if you just go to Amazon, start typing in Exit Teams, it should be the first hit. The subtitle is build a team of advisors for your business sale to get a higher price. Nick, I'm a huge believer that owners need to have a fully built out, collaborating advisory team around themselves, whether they sell or not, but especially if they do, if they're going to hire somebody like me to take their company to market. Build that buyer pool, go through the negotiations, get through due diligence, get some documents drafted and get to closing.
Speaker 2:They need to realize that sophisticated buyers have a team of their own and they, as a seller, need to have a team of theirs. It'd be kind of unfair and kind of silly to suit up. Get on a field, you've got one or two players, your uniforms are looking real ratty, you haven't run the plays, you don't know what you're doing. The other team gets on the field. Uniforms look immaculate, they've run the plays, they know the outcome, they're confident, they're going to put points on the board. That's basically the analogy that I use in the book and when I talk with folks that the team got to have it Know what you're up against if you're going to sell your company to an outside buyer.
Speaker 1:Yeah, you got to be prepared. I'd be very curious to learn more about the book and kind of some of your insights in there as well. And you know I've been interested in entrepreneurship for a long time and a lot of people who are interested in getting into small business or entrepreneurship have watched Shark Tank in the past. And you know one of the things that a lot of times those investors that are on Shark Tank, when they have these entrepreneurs that are coming on and they're pitching products or services, sometimes those people have not gone full-time yet into the business and a lot of times those sharks will tell them you got to be all in, you got to jump in with both feet. When are you going to quit your job and be in this full-time? So when you look into you know businesses that are getting started, how do you think about that? Do you think that it can be a side hustle or do you feel, like people you know entrepreneurs need to jump all into the business?
Speaker 2:You know I'm going to, I'm going to use the uh, the it depends phrase. I think it can be a side hustle if it's the right kind. You know the kind of business that only requires, you know, 10, 15 kind of peak productive hours per week, because by the time you give 40 plus hours to an employer, you know you're probably only good for about 10 to 15 peak hours of your own time. If you know, at a point where that business begins to you know get legs of its own, be able to stand on its own, then surely you know you can make the switch at that time. However, you know, if that business that you want to start or even buy has employees you got to be all in. Yeah, you're now responsible for other folks that are, you know, basically dependent on you, looking to you for leadership in that business and to keep doing it as a side hustle. You know you run the risk of them seeing it very much the same way and not giving their all to the, to the effort, to the, to the entity itself.
Speaker 1:Yeah, yeah, and I think it it it does change things, when you know, like, when those entrepreneurs are on a shark tank, when they're trying to take on outside capital anyone who gives you outside capitals and I want you to be in a full time they're not going to want it to be a side thing for you if they're giving you money to try to get the business going thing for you if they're giving you money to try to get the business going. So, yeah, you know, I was fortunate enough where I was in a situation when I started transparent staffing where I did get the start as a side hustle and then, you know, like you said, it took on legs of its own and it was able to turn into a full time. You know business and now I do have a full time employee, so I can't imagine not being in a full-time while having staff. You know wanting them to be full-time dedicated to growing the business. So I think that it can, definitely you can get it started as a side hustle and, depending on what it is, maybe it could stay, you know, a side thing thing. But eventually I think you need to be all into it to really make it, you know, become something more than just a side thing that's not going to take off into something more than that. So yeah, I know you've had a background in M&A, so tell us a little bit about how you got into that and what keeps you interested in the M&A world.
Speaker 2:Let's go all the way back to the mid-90s. My favorite class, either as an undergrad and accounting student or an MBA and finance student, my favorite class was business valuation at the graduate level, this notion of assessing value between private parties. It just fascinated me that. I mean, I knew that companies were bought and sold before then. But now here I became aware of this methodology, or methodologies of how to value companies. And so now in my current role, for almost 12 years I've been not only assessing value of a private business but now being responsible for helping to transfer that value to another party.
Speaker 2:It's that classic intermediary role where you're representing one side of the transaction in my case typically the seller and on the other side you have the buyer. But this whole time you're negotiating, you're doing a dance, if you will, between buyer and seller, always working on the seller's behalf, if that's your client. But realize that there's this enormous difference between what the seller thinks the business is worth usually higher than what I tell them it's worth and what the buyer thinks the business is worth. And so getting those two to meet somewhere in the middle. It may not be the exact midpoint, but somewhere in the middle, nick, I kind of feel like I'm wired for this my patience, my attention to detail, I guess my personality I just eat, sleep and breathe this stuff.
Speaker 2:I feel like I was hardwired to help owners sell their companies. Plus, I'm a fourth-generation entrepreneur. At least you can go back to my great-grandfather, and I can even see it in some of my five kids, this tendency to do your own thing. So I started being self-employed at age 30 as an accountant, cpa, just doing classic tax work. Then I bolted on financial services and, like I said, about 12 years ago I made the switch to the M&A because I'd always had lots of business owner clients and I always understood their needs. Almost before we even met it was like I was already in their head. I guess it's that fourth generation DNA yeah, that's great.
Speaker 1:Well, that's very cool. So you've been in the M&A business for how long now? You said Almost 12 years, okay, very cool. So I'm sure you've been able to help a lot of business owners during that time and been able to learn a lot about how to evaluate businesses and how they face scaling and growing. What do you think are the biggest challenges that you see in scaling businesses, or your business?
Speaker 2:You know, we kind of touched on it a few minutes ago and that is the utilization of your time and other people's time. I think that that's definitely one huge factor as you build or maybe you bought your business and you're trying to build it you know, you're trying to find out constantly with you know someone like the help of yourself, you're trying to build it. You're trying to find out constantly with someone like the help of yourself, you're trying to find out do I have the right people on the bus and are they in the right seats on the bus? Given their skills, their interests, their aptitudes, their experience? Are they doing what their best efforts could be designated for, what they're ultimately designed for? Scaling, I think, ultimately to a large extent involves how you have people who work for you or maybe from the outside, consulting to you how you're best using their time and talents.
Speaker 2:Scale you can't talk about scale, I don't think, without talking about how to efficiently manage assets, the key asset, of course, being cash. You know a lot of owners focus on cash flow, and with good reason, but I think they're probably missing the point. They're focusing more on what they can get out of the business instead of what they can build the business to become. Think about this from the standpoint of a buyer. A buyer wants. If that's your ultimate outcome, if you're going to sell this to an outside person or firm, your buyer is probably going to want as many of the efficiencies perfected or optimized. They're going to want cash being generated, assets being utilized, as I said, people in the right seats on the bus. A lot of this contributes to the scaling that a future buyer or some current you know current capital provider really wants to see happen before they get involved, either before they buy the business or provide that capital.
Speaker 1:Yeah, that makes sense. Yeah, you know, and I'm in a position right now where we're trying to kind of scale and grow and I'm learning a lot through that process and figuring out you know where I should through that process and figuring out you know where I should be spending my time, where you know Matt, who's my vice president of sales and recruiting, should be spending his time. But when you think about, you know, starting a business from scratch like I started transparent staffing from scratch and you know that comes with its own challenges to build it from the ground up and kind of be responsible for all that as an owner. But there's also the option of acquiring a business or you could also look at franchises.
Speaker 2:What do you think are the biggest you know differences between trying to start something from the ground up versus acquiring another company other company, I would say, you know, starting something from the ground up, you, you, you don't know a lot of what you should know ultimately will know it is it is trial by error, lots of error, trial by fire, lots of fire. Uh, versus buying a business, you know at least someone else has built some semblance of a foundation that you can build, that you can build on top of. You know, they put the time in. They've, they've, you know, done a lot of things wrong in the business that they've learned from that they can transfer to you the new owner of that business. And I think, to get back to the buyer mindset, a lot of buyers, especially sophisticated ones, they want to own something that it almost doesn't matter who owns it, that the business has been optimized and a lot of the problems have been solved, a lot of the issues have been dealt with before they get involved.
Speaker 1:Yeah, that makes sense. Yeah, I think there's a lot of benefits to being able to yeah, like you said learn from some of the mistakes, and I would imagine that it's a lot easier to or you can scale faster if you have something that's already built, already has maybe a client base, already has processes in place. Kind of similar with, like you know, I've looked into buying a franchise in the past and you kind of get, you get the, you're paying for the playbook, like you already have a successful model and you know a system that's built out and now it's just let's go run the playbook, let's go run the models.
Speaker 2:Let's face it, some, some people are better starting something but not getting it to that next level. Some people are better at picking up a foundation and getting it through the next level or two or three. You've probably heard this, you know, I have certainly and I'm sure folks listening the person or people who got an entity started, got something built from the ground up, is often not the same team that gets it to the next level. It's not the same exact team, you know that that breaks through a million dollars worth of revenue or $5 million worth of revenue. Or it's not the same team that can, you know, pivot and start going into geographic areas that the business is not in currently, or start new product or service lines that it's not currently.
Speaker 2:It takes a certain person or team, certain mindset, to be oriented more for startup than it does for optimization. I'm a firm believer in that. Founder-led businesses, inventor-led businesses, true entrepreneur-led businesses. They need help, you know, if they want to continue to stay at the helm of something in a leadership role, they need to augment their skill sets with folks both within their business and from the outside. I'm a big believer in that.
Speaker 1:Yeah, yeah, I had a conversation a week or two ago with a founder of a big believer in that.
Speaker 1:Yeah, yeah, I, uh, I had a conversation um a week or two ago with a founder of a large franchising group and one of the big things that he really hit on and you've kind of touched on this already too is getting good advisors, getting a good group of advisors to advise you on the business so that you can learn um from them. And for him he actually gave them and I guess this is probably fairly common, but he had a board of advisors and they each had a small equity stake, a very small percentage, but it gave them kind of some sweat in the game to advise on how to scale properly and how to optimize the business and the processes and things. And so he had those people to go to who had done it before that he could lean on instead of just. You know, he was a young guy when he started his company and now he's got like over a hundred franchise locations with his business and so he he really pushed on how valuable that was to have those advisors to turn to.
Speaker 2:So I'm curious, who uh on his outside advisory team? Who did he bring in what? What uh professional or, you know, consultant titles?
Speaker 1:Yeah, so one of them was, uh, another entrepreneur who had started a over a 200 location franchise, so it was another franchising. You know cause? He bought this um company that was a single location at the time and was planning to turn it into a franchise model. They didn't have any franchises yet so he brought in. One of the advisors was a um, someone who had experience with franchising and building that model, and so that was one of the key people, um, but he had two or three others and I can't remember what their backgrounds were, but, uh, that was the one that he really emphasized was an important part of his growth.
Speaker 2:So a hundred percent, 110, 20%. Yeah, that's, that's huge, taking advice and input from someone who's literally been there.
Speaker 1:Yeah, yeah. Finding good mentors that can help you, that have walked the walk before you and can help you avoid some of the pitfalls that they encountered and help you scale and grow more quickly yeah, extremely valuable. So well, you know a lot of people go into small business or buy a business that end up failing. I can't remember the statistics these days, but there's statistics. You know that a certain percent, which is a high number of small businesses fail, end up failing. So what do you think separates those people who go into it and take off and are successful versus the people who end up having to shutter their doors?
Speaker 2:Aren't the statistics something like one out of five make it through year five, or maybe it's year 10, just to be a little more generous it's an unbelievably small percentage. Yeah Well, we kind of just touched on one of those factors that really clearly delineates whether someone's going to succeed or fail, and that's a willingness to get help and open-mindedness. That you don't have all the answers, I don't know how much more tactfully to put it than that. You know you might have had an engineering background and so you might feel very competent in the technical side of the business you've bought or started. You might have had a sales background and so you feel extremely confident in, you know, the sales and marketing side of the business that you've started or bought. But those are just individual sleeves or facets of a business. There's so much more and you really need help. I think you have to start with, you know, a knowledgeable CPA, preferably someone that is experienced in the industry that you're operating in. Yeah, you know, now you're getting, then you're getting into the consultants of different kinds, hopefully with industry experience. And before the call here, before the session here, you and I talked about this consultant model, this fractional outsourced model. We're seeing a lot of activity among fractional CFOs and fractional salespeople and even fractional marketing people. I'm not sure exactly how that piece of it works, but I would assume that more and more business owners are willing to listen because, at least from a surface level, those fractional people are out there, they're busy, they're trying to drum up business, they're trying to find new clients and they're staying out there at least two or three years. Each of them are staying out there for at least two or three years as a consultant, trying to build their own business. So I think, top of the list, you got to be willing to listen to others.
Speaker 2:I think you need to think. I'm going to make a kind of a controversial statement, but I think you need to think like a buyer. Whether you sell your business or not, you need to think like you're building this for someone else to own. The reason I say that is you're going to end up what I call optimizing your business, which has a whole lot of benefits. Again, even if you never sell, optimizing your business means you're probably going to attract better people. Sell.
Speaker 2:Optimizing your business means you're probably going to attract better people. It means you're going to be able to attract capital on better terms. It means you're going to be able to buy up competitors, weaker or stronger competitors. It means you're going to be able to offer different products or services or go into different geographic areas. You're building a company that, as I said earlier, it almost doesn't matter who owns it. This thing continues to run and it's not as owner-centric, it's not as dependent on you, the owner, as you might want it to be, or you, in the absence of any action, that you might be. Letting it trend to be, letting it trend to. I think you need to build something where, if you wanted to sell at some point, if the opportunity were presented to you because buyers just had to have this business, you had already built something that most people in the buyer pool would want. You get there. We've hit this a couple of times already. I think you get there fastest by building that team of outside advisors and shoring up your team of inside people.
Speaker 1:Yeah, no, I think that's a huge point is finding those people that can advise you, and mentors, and having them on your team and being able to call on them when you have questions or aren't sure how to do something, and I think getting, like you said, a good CPA that can help you, and getting also, I'd say, a good business attorney. The only good business attorney is your attorney, and you don't want an attorney.
Speaker 2:All the time is what I've also heard.
Speaker 1:Yeah, that's true, but being able to have one to fall back on when you need one is so important. And then, yeah, I think, being able to utilize fractional people. I have a fractional marketing person that I've used that has done a lot of my website stuff and graphic design and my logo, and she'll help with doing some other creative things that I need her for. I've used some fractional salespeople, and so finding people that are good, that you can rely on in those areas is super helpful.
Speaker 1:Because, as far as where time is most valuably spent for me, I've had this conversation before where it's like I I was asking someone like well, what do I decide? What I should delegate to someone else versus take on myself? And one of the people who advised me on that was like well, calculate out how much money you want to make in a year and then what that hourly pay is for yourself. So if you can pay someone less than what you should be earning as a business owner, then pay someone else to do it for you and you focus on strategic Yep.
Speaker 1:So you know, finding those things like, for instance, doing bookkeeping and accounting work for myself is a complete waste of my time. I could pay someone else less than what it would cost me to take my time to do it, and they would do it a lot faster and do it right, because I'm not an accountant. Yeah, so the finding those things is a constant um back and forth and trying to balance that, but, um, but, yeah. So as far as people who are wanting to get into small business, um, what kind of encouragement would you give people who are kind of on the fence, that are I call them entrepreneurs that are wanting to get into business Maybe they're wanting to buy a business and go out on their own, or wanting to start something what kind of, uh, advice would you give them?
Speaker 2:I think, um, I think your friend in in the franchise world had, um, had a great, had a great start, did a great thing by seeking the advice of someone who had been there. I think we all know, uh, that we all know somebody who's running their own business. You know, even if you're in the corporate world, maybe a neighbor, maybe a church member, maybe a relative. You know somebody who's at least taken the steps to get something started, maybe even bought something on their own. Seek counsel, seek counsel.
Speaker 2:Seek the advice of someone who's been there, someone who's going to be honest about their experiences hey, I messed up here. Someone who's going to be honest about their experiences hey, I messed up here. And this might actually be helpful for them as well. What do they say? You learn the most when you start teaching others, so that might be a good exercise for the person that you initially ask. But ask as many people as you can. Go to events where entrepreneurs gather. Owners like to talk about what they've done yeah, what they've accomplished and you know, maybe, what they wish they accomplished.
Speaker 1:Yeah, I think people will be surprised how much you know other business owners and entrepreneurs would love to talk to you and share their experiences. And you know I was lucky. I got inspired to go into entrepreneurship because of my grandfather. He passed away November 1st but he had bought a large well, small at the time but he bought a life insurance company and he ran it and grew it to being over 300 employee company in Dallas, texas, and so I saw him, you know, take that entrepreneurial journey and how successful he was and I just I looked up to him spiritually as a, you know a faith, you know spiritual leader, but also a you know kind of a patriarchal figure, like a father figure, because I just I would talk to him pretty much every week.
Speaker 1:We had a call on the calendar each week and I would ask him for business advice and and he was just that was that was he's my person for that and, uh, so finding someone like that, um, that can help you and that you can turn to, is so important A solid mentor who's, you know kind of walked the path ahead of you, um, and being willing to listen to them, being open to listening to them and not and not trying to be to shy away from being arrogant and thinking you can figure it all out on your own, and being open to taking advice and and uh, insights from people who have done it before. I think it's super important.
Speaker 1:There's that theme again openness, willingness, flexibility yeah, flexibility, yeah yeah, you definitely gotta be flexible. Um well, bob, tell us a little bit more about the book and where we can find it.
Speaker 2:Cause I'm I'm curious about, uh, exit teams. So the book is um, it's I guess it's the culmination of about a seven years worth of thinking and about one year worth of doing. Seven years worth of thinking and about one year worth of doing. It is a. It's a story, it's a fictional story. It kind of follows the life of a business owner over a concentrated period of time where things happen to him because of things, key decisions he made, decisions that were made by others. You know, it kind of follows that familiar pattern that we've seen in movies and other books out there and that is, hey, everything's great until it's not OK, let's fix it. Wait a minute, we made it worse, let's fix it even harder. Oh boy, we really messed it up. Yeah, we don't need any help just yet, let's keep working. Oh gosh, we really, really messed this up. I think we've hit rock bottom. We need some help, and so let's go get some help. The army arrives, there's some painful adjustments, but ultimately there's a better outcome for choosing the hard path.
Speaker 2:Yeah, I didn't want to give away too much of the detail. Again, you can find it on Amazon. Just start typing in exit teams. But that's the basic flow of it and within each of the 37 chapters is, you know, some of my narrative textbook kind of brain dump that I wanted to make from cover to cover initially, but then we built a story around it. I've heard people who pick it up and read it. They can't not finish it. That's awesome, which is pretty uncommon in the book reading world these days. From what I understand, I think something like one out of 10 people finish books that they start nowadays. Yeah, really low statistic.
Speaker 1:Yeah, Well, I think that's. I think the internet and, uh, our attention spans have just gone down so much. We're so used to just reading a snippet of something versus, uh, to having the patience and the time to sit down and read a whole book. I believe that statistic. It sounds right to me now in these times.
Speaker 2:So it is in print, both in paperback and hardback, and it's on the Kindle. It's in the e-book format on Amazon. We're about to launch, next week, the AI-generated audiobook version of it, with different character voices. That's exciting. Rather than me, you know, I think. I think I was going to take about six to seven months of reading the book myself whenever I had time, uh, and rather than just reading, you know, in my voice continuously, we've got 33 character voices in there. So, uh it, it's a true experience. I think I want to do a movie about the book, maybe a short video of some kind, again using AI, we'll see. That's a much bigger project than an audiobook.
Speaker 1:Yeah, well, very cool. Well, I'll make sure that I leave a link to the book on Amazon in the podcast notes so people will be able to find that. Well, bob, I appreciate you taking the time to be on the podcast notes, so people will be able to find that. And well, bob, I appreciate you taking the time to be on the podcast. Is there anything else that you want to leave to share with people?
Speaker 2:Yeah, I like to end with this. You know you may think your business is doing well. It can probably do better. You may think that you'll never have a buyer for it. Maybe you will. But even if you don't run your business in an optimized way, like I said, it has all kinds of benefits and on the off chance that you do go to market or a buyer approaches you and later you have the opportunity to sell your company to someone other than an inside buyer, you'll be better prepared by building that team around you which, nick, includes some of the services that you can offer as well To the business owners. Listening to this, build that team of advisors around you, don't worry, don't be shy about bringing in the right folks, paying for their services and being flexible and open-minded to the advice that they can give.
Speaker 1:Yeah, that's great. I love your perspective of looking at your business from the perspective of a buyer and having that kind of mindset and having the team of advisors around you to do that, so I love that. Yep, thanks, well, awesome. Well, thank you so much for being on the podcast and, like I said, I'll leave a link to the book in the notes and thanks again for your time, bob.
Speaker 2:Outstanding, Nick. I enjoyed it. Man, this is great.
Speaker 1:Yep All right, Thanks Bob.