E52: Monetizing Your Business Through M&A | Paul Visokey, Stony Hill Advisors

Laurie Barkman announces a new partnership with Stony Hill as a mergers and acquisitions advisor. Laurie talks with Paul Visokey, Founder and President of Stony Hill Advisors, about guiding entrepreneurs how to exit their business in the future and access the wealth they’ve created. Listen in as they discuss: Supporting business owners in the lower middle market, $5 million revenue to $50 million in revenue Why exit value and transition planning is important to maximize potential If the business can't survive without its current owner, then it's not worth very much to the next owner Supporting growth by acquiring other companies to make your business more valuable Getting an estimate of value helps you understand what your business could be worth in the market before the merger and acquisition process starts For more information, visit: Stony Hill Advisors Website SmallDotBig Website https://youtu.be/YdEpISn3yCk Transcript Laurie Barkman  0:04   Welcome to Succession Stories. I'm your host Laurie Barkman, CEO of SmallDotBig. As a strategic growth and M&A Advisor, I like to call myself a “business transition sherpa.” My mission is guiding entrepreneurs on ways to build value in your business, and then to benefit by letting it go. On this show, we spotlight the theme of transitions, not only to reward you for your hard work, but also to ensure that you look back on your succession without regret. For more Succession Stories, be sure to subscribe and follow us on LinkedIn and YouTube. Here's to your success!  I'm really excited for this episode of Succession Stories. Because if you are a longtime listener, you'll know that most often on this show, I don't talk about myself as much as I like to spotlight my guests. But today's episode is different. I'm excited to share an announcement that I am partnered with an M&A firm. It's a new opportunity for me, it's a new opportunity for SmallDotBig, and certainly for my clients. So today I'm being joined by Paul Visokey, he is the President and Founder of Stony Hill Advisors. And he's here with me to help make this announcement and talk about our partnership. So Paul, welcome. Paul Visokey  1:25   Thank you so much. It's a joy to begin working with you. We started talking a couple months back. And let me start with the fact that my business was started in Philadelphia in 2010 and I've been doing mergers and acquisition services in that marketplace now starting to expand geographically. I’m originally a Pittsburgh native, and so, in our conversation, it made sense to open up the potential for us to work together. And here we are today. Laurie Barkman  1:50   Yeah, I love that you had approached me, it really got my wheels turning because my focus for the last two years has been working with business owners in the lower middle market on exit and value planning, strategic planning, and helping them find ways to maximize the value of their business anticipating a business transition. And I think what was so awesome, how you approached me and said, Hey, Laurie, if you join us, and we partner, you can also then represent clients in the mergers and acquisitions process, should they want to have that option to sell to a third party. Or if they're looking to buy another business. And the more we talked, the more I think we discovered this shared philosophy about the lower middle market, that there is a really great opportunity there. And so this opportunity for us to collaborate was really exciting. And maybe you could just shed a little bit of light as to why you approached me and what you think our collaboration will bring to clients in Western Pennsylvania. Paul Visokey 2:55   Well, the connection that we're both Certified Value Builders, we both have the same viewpoint of business owners in this lower middle market, roughly $5 million revenue to $50 million in revenue, they need some direction in order to exit their business at some point in future and access the wealth they’ve created. And given that I'm in the same thought process, but I've taken it further, and I actually provide the transaction services to help them make that change. And I thought you would be a perfect fit to also do that, because it really supplements what you're already doing. Laurie Barkman  3:27   And one of the things I liked about the firm, that I do like about your firm, is that the M&A Advisors are business operators and people who have a lot of general business experience in certain industries. And I thought our processes really fit well together, starting with the consultative approach to understand from a business owner, what's important to them. Why do they want to transition? Where are they in this continuum if they're a certain number of years out? And so where do you find the conversation typically starts with a business owner? How do you help them understand their own readiness, whether it's their personal readiness or business readiness?  Paul Visokey  4:07   Interesting question. The conversation emanates from, what is their goal, what do they see for their future? And then we take it a couple directions. We want to make sure the business is ready for transition to a new owner, whether it be within the family or to employees. But we also want to make sure that the business owner is ready personally, to transition to some next life event, what they want to do next. So we work with business owners in that area, because they're very integral to the business. Until we can help them understand how they can make the business independent of themselves, they can't really sell. So that's integral to what we do. And it's been the foundation of my mission I've been on. Laurie Barkman  4:49   We would call that exit value and transition planning because the value part is I think the growth part - which is how can we help a business owner maximize the potential. And you were hinting at one thing that's really important, which is, if the business can't survive without its owner, then it's not worth very much. Paul Visokey  5:10   Yes, it is certainly not worth very much to the next person. And the growth part is really interesting to bring up because there's two ways you can make a business more valuable over time. One is to grow organically, by continuing to add products, new markets, get more customers in your current market. But there's also an opportunity to make acquisitions of similar sized businesses, and strategic opportunities to add to what you're doing through that process. So it, again, leads back to what we do on the buy side with our clients. We help them identify and negotiate and acquire other companies to make their business more valuable. Laurie Barkman  5:48   One of the surveys that I have seen, which is from BEI, it's the Business Owner Survey from 2019. One of the questions is “what's standing in the way of your exit?” And the number one answer was “need to improve the business.” I always talk about that as a great opportunity to get perspective because it just makes economic sense. Whether or not you anticipate selling in the next three to five years, which is a relatively short period of time, or the next 10 years. It makes sense to work on the business, improve the business. And the future value of your company, the more that you can demonstrate its growth, its profitability, is going to make it more attractive if you're looking to sell. So let's talk about that. Let's talk about selling a business. What do you see, Paul, as some of the challenges that business owners are facing in today's environment? And why is it important to plan ahead? Paul Visokey  6:43   The challenges are, as we just mentioned, making the business independent of the owner. That's certainly one of the biggest challenges. Many times the business owner views that they built a business and they can do all these roles that they take for themselves better than anyone else. So that's hard to relinquish, that's delegation, it's not easy to do. And then secondly, it's a cost factor because I have to hire somebody to do what I'm doing. And so they don't do that regularly. Then the next part is the organized process of due diligence preparation, looking at your customer base, making sure you have no serious customer concentrations, where one customer leaves and your business is impacted by 20% or more, making sure that your documentation, your employee manuals, your benefits programs, and all those things are up to current standards. So that again, you can make the transition and the next owner can come in and take over, you're just basically in a nutshell, de-risking the business for the next owner. Laurie Barkman  7:38   And a good place to start, where would that be? I think a lot of times, we assume maybe that we know what our business is worth. Because maybe we talked to a friend, or maybe we've read some statistics out there. But there's a lot of different reasons why a company could be worth X or Y. So what do you recommend for people who are thinking about selling? Does it start with an estimate of value? Paul Visokey  8:04   It does, its not only those thinking about selling now. If you're looking to the future, what is your net worth, your net worth is primarily in the company. So along your journey, you should be regularly getting a market valuation of what your business is worth now. You look at your stock market investments, you see if it goes up one day or the next. You never look at your business value, and see if it's going up or down. And that's an important consideration on how you address the business. At the point where you're starting to think about your exit, you really should know, is it going to meet your needs for your retirement purposes. And part of that's working back with your financial advisors and making sure you understand how your lifestyle would be impacted if you were to sell, and what is the business worth then. And you're right, most business owners don't understand the real value of the business. Either they think it's too low, or they sometimes more often think it's too high or think it is worth more than it is. Laurie Barkman  8:58   Right. And then that's something we can do for owners is to create an evaluation and estimate of value and help them understand what it might be worth in the market before the process starts. Just a level set. You know, it makes sense to do that. So for companies that are wanting to grow beyond organic growth, that they're thinking about acquiring businesses, and I've had quite a few folks on my show who've talked about acquisitions they've done and they're in the same sort of space right in this lower middle market. And it's a roll up strategy in the services industry. For example, I've talked to several owners who have that mentality, and they're always looking for good deals. Everybody's out there looking for the right deal. It's this magic, how do we find the right fit between the buyer and the seller? It's very competitive. So maybe you could talk about our process and how we offer guidance to both strategic and financial buyers. Paul Visokey  9:51   Very good question. You know, there are marketplaces for businesses for sale. But if you are shopping there, you know everybody is shopping there. The best option is to find a business that's not on the market. And that's a very detailed process, a very labor intensive process for someone running a business. So the best way to do that is to let us be the shepherd of the process for you. And we will engage with a business owner. And it will make a no risk process. There's no commitments, there's no retainers, no exclusivity, they just tell us what they're looking for. And in our daily process of talking with business owners, looking whether they're ready to sell, or whatever, we'll identify for them, here's an opportunity. And that's a service, we help them in the exit value process. We're building their value by helping them find these acquisitions. Laurie Barkman  10:42   So, Paul, I'm excited to be part of Stony Hill Advisors and representing the firm in Western Pennsylvania. And I certainly hope that people listening are going to want to learn more. If you're listening and you want to learn more about us and what we are doing, you certainly can reach out to Paul or you can reach out to me. So Paul, do you want to share what is the best way to find you online? Paul Visokey  11:06   Our company's website is www.StonyHillAdvisors.com - and stony has no “e”. Sometimes people will call me and say I sent you an email, did you get it? How do you spell Stony Hill? And they always have an E in it. Laurie Barkman  11:23   Now we will have to remember that. And certainly to find me, SmallDotBig.com is my website. And we'll put those in the show links as always. And so the last question for you, Paul, is if you have a favorite quote to share? Paul Visokey  11:38   Yeah, I do. It's interesting. This is attributed to Benjamin Franklin. And it applies to what we do. He's quoted as saying, “Failing to plan is planning to fail.” Laurie Barkman  11:49   That's a great quote for what we do. Paul, I am so thrilled that we're going to be working together, I'm thrilled for the value we're going to help bring to business owners and entrepreneurs in this area. And thanks so much for coming on the show and doing this announcement with me. Paul Visokey  12:05   It's my pleasure, and I welcome you to work with us and we're looking for big things. Laurie Barkman  12:12   My objective is for you to have a lucrative and successful succession. If you want to understand the value of your company today, the potential net proceeds of a transaction, and your financial needs after you leave the business, that's a great place to start. The sooner you understand these numbers, the more time you'll have to close the gap if there is one. Take the next step by requesting an initial meeting to begin planning for your business transition and strategic exit today. Request a call with me by visiting smalldotbig.com, I look forward to speaking with you