About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management.
About the Guest
Colin Engstrom is the previous owner of Elite Commercial Cleaners in Bozeman, Montana. He purchased the company in 2014 and sold it in 2018. Colin studied finance at Bryant University and is continually learning more about entrepreneurship every day.
If you listen, you will learn:
- Colin’s move to Bozeman.
- How Colin found his cleaning business on Craigslist.
- How buying from Craigslist worked.
- Colin’s goals for the business in the beginning.
- How he structured his company.
- How Colin grew the business.
- Colin’s ideal employee.
- How Colin dealt with clients.
- Why Colin decided to sell the business.
- Why he didn’t try outsourcing.
- Why Colin wishes he hired a broker.
- What he would have done differently.
- The factors Colin will consider with his next deal.
- Should you tell the employees?
- Colin’s advice to the audience.
Full Transcript
Colin Engstrom: I think you can never ask any questions you can never bug too many people. It's only going to benefit you.
Announcer: Welcome to Life After Business, the podcast where your host Ryan Tansom brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: Hey everybody and welcome back to the Life After Business podcast. This is episode 127. Today's episode is going to be a lot of fun because I enjoyed this. It was way different than some of the other gas because of the approach that my guest Colin Engstrom had on his acquisition and the growth and sales of his company. Colin literally bought his commercial cleaning company for $5,000 off of craigslist and then over the course of the next three and a half years, Colin grew that from pretty much zero employees. I think that he said that the previous owners were making like 50 grand and he called up all the clients and then he started to hire people and get accounts. They were one of the first people in Bozeman, Montana, that had a commercial cleaning website, so he was getting leads come in and he grew up to 43 employees up to close to $650,000 in revenue and then ended up selling it for variety of reasons, which he'll explain on the show.
Ryan Tansom: But one of the big things that he wanted to make sure he accomplished was to learn what it was like to sell a business. Which I thought was very unique because a lot of people grow their business and they have it for many, many years and decades and then they have this big event at the last moment when they really need the financial windfall and they want to make sure that their legacy continues, where Colin did this with the intention of making sure that he understood what all the nuances were. Light because he wants to do it again and wants to do it again. Many times. So there was not as much at stake this time and he shares all of the things that he learned. And regardless of the size of your business. These are things that are super important that you need to start thinking about because there's a lot on the line depending on the size of your business and what your intentions are after the fact. So I really hope you enjoy this episode. Colin has a lot of great insights. He's super transparent and super energetic about what people should be learning, what he learned, and it was just an overall blast to have him on the show. So without further ado, I really hope you enjoy my interview with Colin.
Announcer: This episode of Life After Business is sponsored by GEXP Collaborative. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. So your company on your timeframe to the buyer of your choice at the price you want.
Ryan Tansom: Morning Colin, how you doing?
Colin Engstrom: Good, how you doin Ryan?
Ryan Tansom: Well, it's New Year's eve and you're able to go skiing and I'm going to go hang out with my kids. So I think we've got slightly different agendas for the rest of the day. But we'll be able torally back and forth and we got introduced to a friend of connection to something like a classmate of yours can, who I met at the Rhodium weekend with Chris Yates, which is a great community of online entrepreneurs. But you know, when we got the introduction I was like, oh my gosh, well you sold the business and you're trying to figure out what to do next. And I'm like, well this is perfect opportunity. Let's just capture it on the show. So for the people that aren't familiar with you and your background, like what, so how did you get into becoming an entrepreneur? Was it something in school? I know Ken's got a little bit of the entrepreneurial bug as well. So what's, uh, what's the backdrop and how did you guys get to know each other?
Colin Engstrom: Um, yeah, so I met Ken Wolf through. There's an entrepreneurship club in school that I was a member of and then we also carry skis as well. Um, so I think he'll be out here in February, but what we found were friends on both aspects of that. And I've kind of always had an interest in doing stuff myself, but I never knew, you know, what I was going to do. I went to school…
Ryan Tansom: Any family or friends that, that were entrepreneurs?
Colin Engstrom: Um, my grandfather had a pretty big HVAC company growing up um that kind of through shitty people label things kind of dissolved and now reformed. But um, and then both my parents have more regular job as an engineer. My brother and sister engineers, my mom kinda worked while we were in school kind of more outside.
Colin Engstrom: So then did you go to school? Was it like I'm going to be an entrepreneur or was there like some random opportunity that popped up in front of you or?
Colin Engstrom: So yeah, I went to school, I studied finance, I did well. I graduated honors. I could've had a job in the city. I did internships every year and I was like, I don't want to go work, whatever. So for a year. So me and my girlfriend moved out here, um, to Bozeman right after I graduated worked the summer just waiting tables and then moved out here to ski for a year. I waited tables out here for about a year and my first winter here, 92 days and at the time I ice climbed a lot. I probably ice climbed 30 something days outside, six, seven days a week. [Ryan interjects: That's awesome.] Yeah, it was a lot of fun.
Ryan Tansom: So how many skiable days are there? You said you got 92 in.
Colin Engstrom: Days in I think list turn about 130. 120-130.
Ryan Tansom: That's pretty good then.
Colin Engstrom: And then. Yeah. So worked out here was waiting tables and I'm a friendly person. I talked to everyone. Like my question is when I'm waiting tables, all I was asked like what do they do? What's going on in town? Like how do you, like, how do you make things work here? I mean when I moved here, a three bedroom, two bath house, 1200 bucks a month. Cool. If I get roommates I'm basically for free, like my student loans are more than my rent. Double. And then since then, Bowseman's been blowing up so it's way more than that now. Um, it's like, how do you know one can make any real money here? I mean, you can go get a bank and like $35,000 being a loan officer. I was like, this is shit. I was making the same amount of money waiting tables four days a week.
Colin Engstrom: Um, and so everyone's, like, everyone seems to work for themselves out here, which I think is awesome, you know, and it's from being out here. I don't want to like be rude to anyone but people on the east coast a little faster and a little more aggressive. People here are just kind of slow and lazy. Everyone just recreates and it's like I'll go ski hard in the morning and then I'll get up and then I'll come back and I'll go to work and I'll work hard and I work late and it's like people recreate and then fuck off for the rest of the day. And it's like…
Ryan Tansom: What do they call it? What is it that no one has any friends when there's fresh powder?
Colin Engstrom: Yeah. And it's unbelievable. So he'll be up here. We'll go up to Bridger before to open, like it'll be a Tuesday and maybe it snowed a foot or six inches something and it's like a Tuesday and the mountains not even open. So you have to hike up the mountain and the parking lot is full. Does anyone work?
Ryan Tansom: So I'm assuming you met at like a crazy amount of people when you're waiting tables. So like how to, where did he get to the point where you're like, okay, well maybe I should jump into business for myself, or did you end up purchasing the business?
Colin Engstrom: And I look around and stuff all the time and actually there was a, like I look on bizbuysell and craigslist and like I wake up in the morning and I just troll the Internet of things that I'm looking for. So it was a while. I think it was spring of '14. I think it was '14. I saw there was a, uh, reached out to a broker who has posted a cleaning company. So I had never even thought about it. Commercial cleaning as a business, you know, and it's like, I guess everyone needs that. And they were, no, there's a difference in my mind, I'm sure you agree with between having a job and profit and it was like people are like categorizing. Yeah. It's like if you're doing all the work and you're working 80 hours a week, that isn't profit, you just have a decent paying job. And it was kind of the value wasn't even close to what the value is.
Ryan Tansom: So I'm curious because before you, you elaborate on that is how did you get into that mindset? Right? I mean, so for being fairly young and then also like how did you determine that you were like, you know, trolling the Internet for job for companies like, so what were some of the building blocks that got you into that mindset? Even understanding what you just said?
Colin Engstrom: Yeah. And I don't really know. I'd always do side stuff when I was younger just to make money. I'd cut lawns. You know, I know there's, let's just, I guess that's just kind of how I'm wired. Like I don't think it's necessarily like I didn't learn that in school or in anywhere. I think it's just kinda like what I've…
Ryan Tansom: None of your finance classes, we're talking about the difference between wages and like actual profit and what a company's valued at or anything.
Colin Engstrom: No, and I mean looking back to like, I didn't really read much about business. I didn't listen to podcasts. I knew I could make money doing something else. Hmm. Yeah.
Ryan Tansom: What was it like when you're, when you're going through and you're looking, you probably, it's Kinda like when you're looking at houses where you're, as you're shopping around, you're starting to learn the market and what's going out, what different things are priced at and stuff like that. Like how you get to the point where you're like, okay, you know, so if you're making 30, 40 grand or 50 grand doing it as a teller, I'm assuming any of these higher-paying jobs, you know, your, your, how did you get to the point where you're like, okay, this is what a company is worth and this is a salary of like…
Colin Engstrom: Well and you're going to laugh… the company I bought I paid $5,500 for. Um, so I looked into that company that I was looking at and they were just asking an absorbent amount for something that they had a few customers and whatever, but um, and then months later I saw a post on craigslist for something that sounded to me exactly the same as what I've talked with a broker broker and they're over it and they're selling it for cheaper, but it was a totally different company. So it was a couple who are now married. Super Nice people. They have like one employee at a time, maybe like maybe it was two, they had one or two employees. And they basically, he was an engineer. He got laid off and she was in Grad school and they kind of did it as a means to an end. They were just paying their bills because the economy had gone down before. And then basically he got offered a job and she finished school and didn't want to do it anymore. He hated it the whole time. You know, he despised everything about it, but they did everything right. They had an accountant, they use books, they had contracts. I get everything right and they did a good job, but they um, basically they told all their customers they're closing down and then they posted it for sale on craigslist the next day.
Ryan Tansom: How does that, how does that work?
Colin Engstrom: It makes no sense. It's like, do you not want any value out of this? So then basically I, my offer to him was like either I can pay you, send them out now and then we can go and get these customers back and I'll pay you a percentage, like I basically pay you… and I would have paid him three times as much and he wanted nothing to do with it. And I was like, well I'll write you a check for five grand. You can go away. And that's what he wanted. So I think we settled on 5,500, 5.5 grand. So did they. I mean that's ridiculous.
Ryan Tansom: So what was the top line revenue that they were making as a couple?
Colin Engstrom: So I think that year, like if you did a trailing 12, they would have done like $85,000 in sales. I couldn't tell you what they made because they did a lot of the cleaning. They had an employee, so, but I mean they're probably making 50 grand together. Um, something like that. And, and then so our first month I did like $3,400 in sales, so I went back and I knocked on every door, every client and everyone. Basically everyone who didn't already have a contract stayed on, but there wasn't much so.
Ryan Tansom: So. And that was, that was in 2014. So what was your, like when you did that, what was your, what was the mindset like, was it, I'm going to build this. Did you have any kind of goals from top line? From profit? Like what was your mindset going into that and what was the ultimate goal?
Colin Engstrom: So I guess I didn't have too much goals and thoughts until I left my job waiting tables. So this was, I closed September 15th and then I hired, I had a friend who cleaned at the yellowstone club and he hated it. So I was like, Hey, I'll hire you to do this. I'll pay him more money. And then your job's in town. It's flexible. So I hired him and then I helped a lot of stuff, but basically it was, I had to almost basically two employees from the beginning or did everything and then I still waited tables because I still had to pay my bills. It doesn't mean, as you know, just because we do the work doesn't mean we get paid yet. And for the time five grams all I really had. That's awesome. Um, so I basically, and then I just want my mindset was just to grow. Like I just want, I don't care. I got, we were always cheaper and I just wanted to get all the work and I figured if we can get to be big enough then I can start making money and that I can figure it out. So I just wanted to get as much business as possible. I just, we grew fast. I mean I did… There was a first year, it was at first, whatever, three months. And then the next year we did like $175,000 in sales. That's awesome. And right around the New Year of 14, ended up quitting my job waiting tables. I've had bids out for two contracts that were worth more than what I made waiting tables. And I was like, well, forget it. I got to figure this out.
Ryan Tansom: So what were, what were some of the other milestones? So you get to 175 the second year and then what were some of the other growth milestones and then at what point. So you had their growth in the revenue, but then also the profit? Where you like, did you hire additional people and were you trying to lock in contracts? What were some of the kind of the.
Colin Engstrom: Yeah, so basically the first three months and then I um, I quit my job and now this is what I was doing and I was living off like a thousand dollars a month. I was paying my student loans, my rent, and that was kind of all the money we had. And then all the money went back because every time we get, the way we structured it is every time you get into contract it's not a much of a commitment but you buy a vacuum, you buy supplies and that all stays in the building. And then so every time I started account basically it's not much, but it's probably 700 bucks. And when you're growing fast, I mean we probably took on, I dunno, 40 accounts in the first year and a half. There's a lot of stuff, right? Just kind of pouring it all back in. And then I kind of. At one point I realized I just put in a contract, it was a bigger contract and I just put it in there. The we get paid, we, we prebill. So we start on the first and you get a bill for it. And no one said a word. And from then on out we just build them around. Well it was like I gotta do is ask, right? It's like we have terms like my supplier, I had 30 day terms and then I put it on a credit card at the end of the month. So I have 60 day terms and I'm getting paid in 30 days. So it's like this is awesome. So when we start a new account. It doesn't cost me a penny. I get paid before. Pretty much the profit from the first month paid for the stuff. So like now I'm cash positive can grow as fast as I want.
Ryan Tansom: So how did you, what was some of the things that you did and now that now that you're doing that you got cash in the bank and able to fund stuff?
Colin Engstrom: And it wasn't. I mean I didn't really, I guess it didn't change too much but it just stopped stressing me out. So now we've been growing more so that first year we did one 75 and the next year and then we did three and then I was running around my hair on fire and I was like, I couldn't handle it. I was like, I was underwater and we were just like. Because I think around then I finally got an office maybe like end of the first, maybe after the first year, year and a half, I got an office/ I was like interviewing people in coffee shops and like, people don't show up and it's just a waste of time and you're wasting your whole day. Like dicking around trying to figure out what to do. And then I got an office for super cheap and then I think that made a big difference. And then now we're a little more professional hiring because people don't want to meet at a coffee shop, you know, like what is this company, right. Yeah, exactly.
Colin Engstrom: Oh, and then right around the end of that second year I hired who then became my gm for three years or maybe that's the end of the first year. Yeah. And of my first year. So he was at the company for three years, um, when I sold. And so he basically, he helped me fix everything. He was awesome. He was just, he works harder than anyone I know.
Ryan Tansom: And where did you find him?
Colin Engstrom: So he got a job, like most of our employees are part time, so he got a job working, say up to go to Thailand from, so he was working at target and then he got a job here to save extra money. Like a lot of our staff, a lot of them are like, it's second job, so we get a much higher caliber applicant who wants to work like two extra hours a night, two to three. Um, and that's Kinda how I direct all my ads as you want that person. Like who works really hard, maybe has kids. He was like maybe he got hurt and needs to pass a medical debt or you know, shit happens. Those people are a lot better caliber applicant than someone who like wants to come clean full-time. It's an exhausting job and frankly you could make more money full-time somewhere else interested. They don't stay around as long but they worked really hard the whole time. But you know that when you hire them.
Ryan Tansom: How many employees did you have when you sold?
Colin Engstrom: I think we had 43, 43 a minus like managers and stuff like that. That's awesome dude. So, um, how about the other top, I don't know if you're comfortable sharing some of the top line and bottom line numbers before you ended up selling or. Oh yeah, no I don't care at all. So I um, so we did, so I guess it's 350 and then basically I kind of bunch of stuff back and then the next year and we just kind of made everything organized. So all of our stuff like way better. We, I finally set up an inspection software that I wanted to tablet program. So we have every floor of every building broken down by everything you do. So you'll know this was second floor office to aff and then the instructor and Click on the thing and say like, okay the table wasn't wiped down and you can take pictures and then its corresponding to the map of the building and of course, so everything was like everything got way better organized just because I had the time to do it. I had a pair of angles off of the whole time, but I never set it up and I know we've kind of cut back every time we can take on a big account. I'd get rid of some small ones because there's, it's so hard to train someone on, you know, there's all these little offices that are like 3,000 square feet and maybe have eight people and they want you to do it once a week and once a week sucks. So it's like, because then you get to train someone on five to 10 buildings, dependng on how big they are, you know, versus if you plan a bank, you trained them on one back and you get free nights and you're done and then it just goes to quality control.
Ryan Tansom: How are you finding the accounts?
Colin Engstrom: Um, so this is the best part. When I bought the company, we were the only company with a website.
Ryan Tansom: That's a good differentiator, right?
Colin Engstrom: So in the website, I mean it worked fine to my opinion. It wasn't very good. The old honor made it and I just left it. So we were always first and google. So when it's one of those things, everyone's on contracts and everyone else's contract has a 30 day opt out, which we didn't have art just auto renewing one year. So like because in the beginning they were just one years and then no one cares about the janitor. You're the ghost, you show up, you do your job, you go home. It was like you do a good job. You never hear from him. I'm like, I have clients I wouldn't talk to you for the whole year. And I mean they love us, we do a great job. They know that that shitty companies and they know we do a good job but they don't want to talk to you.
Ryan Tansom: Your customer service department is not as big as some other companies.
Colin Engstrom: So it's just like. So then it would come time to renew and I feel annoying just asking them, hey, like bugging them over and over. He signed his contract. It's either not happy. They're like, yeah, whatever, just keep cleaning. So then we just started making them all auto renewing and they didn't have opt outs and I didn't have any issues that either everyone was fine with it and I just did out of convenience. Whereas every other company in town has 30 day opt outs, so they're doing a bad job. They can get fired.
Ryan Tansom: Did you know with hindsight or maybe did you have foresight or is it or hindsight of realizing that that was value creating in the business too?
Colin Engstrom: Yeah, I mean I definitely my mind. So I guess your question before too, it was like, what was your goal? Is like my, my opinion was I want to get this company to a million dollars in sales and then I was either going to be done with it or I was going to diversify and go, okay, start a landscaping company. We'll start this. Because like if I can get. If I got 20 percent of the clients to say let's go landscape with you guys and that's a 200,000 business, that's where it started and then I can hire someone to run it. And I was, we never got to that point. But that was Kinda, that was my goal the whole time and then I just, so basically, so I did everything to set it up for so I'd always have moderate and contract so I always try to make things more longterm. And then we did. So last year we did like 460 sales and then we sold this year. So I think the company should do about 675 this year I saw my books anymore. It was just, I was hoping to do $700, but I kind of got lazy. We posted it for sale in the spring and that kind of stopped taking on business. So I want an easy transition. So we would have done 7-750 had I still been doing it.
Ryan Tansom: Wow, that's awesome. And did you actually have, so you had, was Google your main source of leads or?
Colin Engstrom: 95 percent of customers? People just called me, like they literally call my phone or they'd fill out. It feels an engineering company or any kind of tech thing. They fill out the form online and if there was any other company they'd call my phone.
Ryan Tansom: Wow, that's awesome.
Colin Engstrom: It was unbelievable. We were first in Google the whole time. We still are, so it's like, and it didn't take any extra money or whatever. It was free and it's like there's so much value in those leads because then we cherry picked them so like come in that we wouldn't want and I would just refer it to someone who I knew had a smaller business who wanted the leads and then it's like, I don't have to say no. I would just send them to them. I'd seen them an email and say, hey, we're not taking on accounts of this nature please, like please talk to these people. And then I would just email them and the client's happy and we're happy and they're happy.
Ryan Tansom: So you had mentioned that there's so much value in those leads and you were talking about like a diversification with landscaping. Why? So I'm curious on what got you to the point that you're going to sell and why and then versus taking those leads of all those. And how many customers did you have? Because I mean like you could sell more stuff to those same customers who are already working with you.
Colin Engstrom: Totally. And so the funny thing is when we went to sell, I think we had around 60 customers and by the time I closing the sale, I cut it back down to 40, the revenue was actually higher, but I started just getting rid of swollen because I wanted it. I wanted to make it to the person taking it over as the easiest time ever running a company. At this point I was already like the company kind of started to run itself and it's the small stuff. It's annoying. Like I don't want to train the new owner on like all these dinky little accounts that don't like don't create value. So we would just, we. Every time we get a big one I get rid of a couple small ones or like every time the employee we put good employees and small ones because they were kind of a hassle. So whenever that person would like something they've move or something happened, we would kind of just stop doing a lot. We'd reassess them leading the way they are until something happens and then we reassess it. Um, so when we sold, we had 40 instead of 60. The revenue still went up.
Ryan Tansom: How would, what was, why did you sell, I mean, what was the reason? What was the triggering point that said, you know what, it's time? Instead of the million bucks.
Colin Engstrom: Yeah. So I was just bored. I mean, I do the same thing every day. I hire the same kind of people that have the same kind of jobs and I, I love all our employees. Like our business is our employees, you know, like there's nothing else. I mean, yeah, you've got contracts with like the business is the employees and it took those years to find those. There's your hassle. I'd go to interview someone. I'll get 15 responses, 10 of them might show up and maybe one or two of them is hireable. And so I spent a third of my time. I mean, I probably spent half my time doing HR probably a quarter or a third of it hiring. And it's just like, you're like, really?
Ryan Tansom: You ever think about just hiring that out though? Are you ever think about hiring that out? Because like I, I'm just trying to. Because there was a gentleman on my podcast recently and I think there's a lot of interesting dynamics when you're at the revenue and the profit size that you got to where you've got enough sustainable income and it's moving into something that's more, that's not just a job. You got profits that are coming in and you can hire a $75,000 a person that is there and again you're not going to be potentially making as much profit for you the owner right now, but you're creating more value. Was there a breaking point there?
Colin Engstrom: No because all the workers at night, so like everything at night kind of ran itself is like I had management that was doing that and it's like I kind of liked having something to do and I kind of like hiring these people. So it wasn't, it wasn't a time thing. And yeah, I couldn't, I thought about hiring someone to do it, but I kinda like it because in my mind and everything is different. But the way I look at business too is if I give 110 percent or if I care 110 percent, my managers might carry 100 of my employees are going to care 90, you know, if I take that down to 100 and then it trickles down from there.
Colin Engstrom: So it's like I kind of like meeting everyone and having them know that I care about them and I care about the quality of work and I'm present. And I think that makes a difference in the business and I might never see them again after that. They'll come in, they'll interview with me and you'll have an hour orientation with me where I set them up and go or values and go over what the job entails and sort of the system I'm going to ever talk to him again. But it's like I really valued that part of the job and I think that made a difference. And we do care. Like I did genuinely care about our staff, you know, like someone's car would break they can borrow or it's like if someone needs something or you know, anything we can do to help anyone. And it was like I want them to know that and that's how I feel in general about anyone but especially staff.
Ryan Tansom: And I think that's awesome too. And I guess what I'm in that makes sense and I'm, what I'm trying to figure out Colin is like, so you send your board but you also enjoy doing that. So it was it to the point where you couldn't decouple yourself from that and keep the business as an investment or was there a reason that you still need to kind of understand the part of the question. I'm trying to figure out like what was the…
Colin Engstrom: So for me the fun part was figuring it all out and it just stopped being excited. It was like I do, I hire people for the same jobs, the same stuff and it's repetitive. Yeah, we're really good at it and we do a better job than everyone. And when we sold or the biggest company in town. I feel like I was just like, I already did it, like I didn't want to be the company that was in five cities because I think that's just going to be a nightmare. So I was kind of like, we are probably, you know, I could add in two more years, I would've been doing, I bet close to $2,000,000 in sales and financially I should have kept going and done that. But I was just, I mean I'm getting bored. I think it showed like I wasn't as excited. I don't get my managers excited, it's not, my heart's not in it anymore. So I was just kind of figured it was better if I just do something else because it's fun learning and figuring it out. So if I can find a different company to grow and especially I can grow bigger, you know, like this was going to get to $2,000,000. I think I was going to kind of start capping out. We'd have to start going to other cities. So I was just kind of print. I sold too early in my opinion, but I sold when I want it to.
Ryan Tansom: It's interesting because I think you articulated it in a really good way where I. I think honestly I'm the same way where like either so much of what we're doing on a daily basis that has to do with the internal passion because the passion and the fire makes everything and all the headaches super easy. But when that dims and it goes out, you're like this is the worst and it's easy to just dump things and I think a lot of people struggle that have been on the show or even entrepreneurs Colin where like, is there a point? You know, being able to balance it like, okay, this I'm going to get this thing self sustaining to the point where it's not my baby and it can be an investment. So it was kicking off a hundred grand in cash is potentially worth, you know, three to 500 grand, but then you're reselling to additional customers or you're using that cash flow to invest in other places. But it's difficult to separate the emotion and the fire and the drive from the actual financial reasoning behind it.
Colin Engstrom: And I, I totally agree. I think now I could go and I can own five businesses and economic, but I'm not as attached to them. You know, they're not like this was my business and I think I needed to sell it and then I can do that because I basically. I mean I had everything I wanted from three years ago, you know, I was making awesome money. I had tons of free time and I could do what I want. It snowed, I would ski. It was a nice day. I went out on the river and don't get me wrong, I worked my ass off, but it was like I could do what I wanted. I had everything I wanted, and it was like, now I want something different.
Ryan Tansom: I think it's interesting too because when we like. So just a little bit of context. So my dad, when he started the company, grew it out to all the employees that we had and then we, we did. It was kind of a turnaround. So I ended up firing and rehiring about 60 out of 100 people, some, some kind of ratio like that and so it became my baby where he was all of a sudden detach from it, right where it's like as it's my people, my thing, like it was kind of a reflection of me and then after we've sold and going through this, it's like you kind of have this distance now where it's not that big of a deal, it's more of like a system and machinery than it is of like you an extension of you so you can make more objective decisions instead of having everything emotion. I don't know if that's. Did you, did you kind of experienced that kind of evolution throughout the whole process?
Colin Engstrom: And even… part of thisto selling for me is like I'm going to do this, I imagine the rest of my life. So it's like I wanted to learn how to sell a business. So it was like there's even a huge value in that to me was just like, it's something new to learn. Um, and I think now the business sold, I'm done training and a couple of, and I think this is just how stuff goes, but a couple of key staff have left. And I think it was, you know, new people do, everyone does everything differently so it's like they're going to do it their way. They're going to hire their own key employees and the ones that don't fit their vision or what they're doing are just not going to be there anymore. And it sucks, but it's like now that they're not there, I'm not attached to it anymore because now it's their people and now it's their stuff. But it's not like I don't feel like, like I said, I'm not responsible.
Colin Engstrom: I feel responsible for those people. Like I pay their feed, their families, you know, I want to make sure that they're taken care of and everything is right for them. And I feel like I feel stressed for that, you know?
Ryan Tansom: Well how did you guys speak on a panel recently? And he word it. He was like, yeah, I got 50 employees. Everybody's got an average of like four people in their family. So I literally feed 200 mouths every single day and it's, it's a lot of pressure.
Colin Engstrom: And you want to make their job fine. Like everyone that worked for us, people who have had other jobs, like it was very young and didn't know the difference. Just think of it as a job, people will work a lot in places like know the difference and know how awesome it was to work for us. And I liked that. I think that's awesome. That's how it shouldn't be. Like you shouldn't have worked for companies. It's just like….
Ryan Tansom: There's a lot of freedom today to be able to work where you want, which is why there's more and more value being placed on culture for the companies to. We don't have to digress on that, but it's, it's, it is amazing because it's so hard to find people, especially in today's economy. So yeah, you have to, you have to make it fun first of all, because you should. But then also it's, it's what keeps the company together. To go back, Colin, you wanted to learn how to sell a business. So like you probably have a handful of things that come right to the top of your mind of like, okay, here's some big takeaways and big monumental things that I learned curious, like where would you start and what would, what would be some of the top takeaways?
Colin Engstrom: So I'm torn. So I sold it myself. I didn't hire a broker. I look into businesses all the time and 85 percent of business brokers I think are morons and I hate even talking to them the last fire business brokers. But if I did it again, I probably would hire on.
Ryan Tansom: Okay. So why?
Colin Engstrom: Just because I'm, I'm a, I'm a fairly aggressive person. Like I just, I asked a bunch, I'm curious and I asked a bunch of questions and I annoy people in a good way, but like I'm like kind of quick and annoying. So if I. and I think that makes stuff come off the wrong way. Like it almost comes off as like I'm eager to sell and it's not excited to talk to you. I met and I liked that I sold it because I met a lot of really cool people and like people who are looking at businesses or people who are interesting. And what I lack out here is everyone on here has like I always have friends to ski with or climate or bike or rap or whatever I want to do that day. Everyone does that kind of stuff when everyone's into it, but people who like work hard and have something to talk about, there isn't as much of that. So it was like it was really fun selling because I get to have all these conversations with random people you know, obviously succeed in life if they're buying business succeeded somewhere else. So I think that was a lot of fun for me, but I think you need to set yourself apart from it. You can't be the one because you're emotionally attached and it was like I think things come off the wrong way. Not that I'm not capable of doing it, but they come off and the buyer, actually, the person who ended up buying it, actually hired a broker to help facilitate it out of his pocket. Obviously for a smaller commission and I liked having him around.
Ryan Tansom: Just an ear that's able to take and digest both sides and both people's opinions?
Colin Engstrom: Snd it's good to have someone in the middle because everyone gets attached. So it's like you're, I mean you're getting close and we're fighting over like terms and your like, I don't know, I'm a very reasonable person and I'm not going to blow something up over something stupid but a lot of people won't and it's, it would suck. It sucks to ruin a deal. So we're not making money if it doesn't get done.
Ryan Tansom: Right. What were some of the sticking points in terms?
Colin Engstrom: So he based, I have no recourse on. So I financed 50 grand of it and there was no personal guarantee. I'm first in line in the business but there's no personal guarantee and that was like a firm point on his, which I get, you know, like you're selling your business, you want training to work. So it's like if someone screws you over you can tell them to fuck off on 50 grand. So. And I think that's more of an ego thing than anything. But that's what was in our package. So it's like I get whatever a thousand dollars a month for a couple of years.
Ryan Tansom: So. So what were the go back to, you know, as you're about to list, well, you didn't listen but you did it yourself and how did you know and how did you put like how did you calculate the valuation and that will kind of like scrubbing up of the finances. You was like a multiple of EBITDA. Like what was your level of understanding of that? How did you come to the value that you're asking for?
Colin Engstrom: Again, I should have kept it another year and cleaned up my financials and not like, you know, you own a small business, you don't want to pay tax. So obviously you do everything you can to not pay taxes with the new tax law coming out. Like I prepaid a bunch of shit for the year. So like my numbers weren't good, you know, that's just how… I decided after I pay my taxes that I wanted to sell. So it's just, that's how it is. But yeah, there's a lot of stuff I could have done to clean things up and make them look better and we ended up selling later in the year and the numbers start looking better as the year goes on. But it's like there's a lot of stuff you could have done to fix it ahead of time. Um, that I didn't do and I wish I did.
Colin Engstrom: But a big thing too is I changed accountants while I was selling and my account, I really like her. I think she's awesome. Like you need someone who's a little more aggressive you can talk to and I think that was a big part of it and basically he was, my accountant now is a friend of my attorney and I really liked my attorney and they worked together a lot. So it's like having them like go sit in a room and figure out how to reorganize how we're gonna allocate stuff or change things has a huge impact on my tax burden. So it's like tens of thousands of dollars. It's like, I mean I probably paid them five grand for facilitating the deal and I probably saved 30 or 40 grand in taxes. It's like a no brainer, but I think I think that goes along with a lot of businesses, like I've always put growth and making things work ahead of personal gain and I think it works out just by not being cheap. You ended up making more money if that makes sense at all.
Ryan Tansom: No, it does. So I think there's two things. One is you have to have the right people that have actually are familiar with transactions because otherwise it like it's not like doing your taxes, your personal tax returns like this is way, way, way different and then you have to have people that collaborate together because the terms conditions, the financing, the taxes, all that stuff is all one topic. Yet it's like three or four different expertise that need to, to, to handle that situation.
Colin Engstrom: Yeah. And the fact that they worked together on a regular basis is awesome because like they could bounce ideas off each other and say hey let's do this. And they come. Usually I'm the one like I like being involved and I like knowing everything I like doing what I can do and they did stuff that I wouldn't have figured out, which is awesome, you know, that's why you pay them.
Ryan Tansom: So what are the, some of the other things that you learned and what was the that you're going to be using to continue doing this before? Over and over again. What was a deal structure was it taxes? Was it valuation? What was some of the like the…
Colin Engstrom: Well, so what kind of bothers me about the whole situation is they just go off like shareholder income or discretion, discretionary earnings, whatever it is. So it's like you could have. And this I argued with a bank over this one day, I was like hey, one day. And it was like, because I was looking at a business that was a problem management company and they make like whatever, 150 a year and they don't have any boys to do the whole damn thing themselves. And I was like this is not income is not profit. This is like, you know, two thirds of this is a job, so like we get to take the job out and then it's profit and the banks are just like, nope, it goes by profit and it's like this is so stupid. So it's like I think you can clean things up to make them look better and I think next time I'm going to try to obviously show more profit closer to a sale because it's stupid. It's like the company's only worth a multiple of what profit is. And who decides what profit is? Profit is kind of arbitrary, you know, it's like…
Ryan Tansom: There's this whole thing too, and I don't know if you're familiar with it, it's called Dod. Normalizing your Ebitda or like, you know, essentially taking all the add backs. So I would even argue you could have probably done that with your taxes to show normally, like over a period of time, what is that normalized EBITDA and a lot of people that have gone where they get, they have the tax man wag the tail is wagging the dog instead of saying, okay, like you still got to be doing certain things, so you want to make sure that you're showing profit, you're going to have to pay some tax, but all the different expenses that are not, they're just one offs. You can normalize that and then you apply the multiple. I mean I don't know. It was so when you saying that the banks are doing this, is this because it's more coming from like financing or something like that? Or like…
Colin Engstrom: The first person I worked with couldn't get it done because of financing. That was a mistake on my part. They couldn't afford it. It was just the way it is.
Ryan Tansom: Their personal balance sheet, something like that? They couldn't get money down?
Colin Engstrom: It was like, yeah, you guys make good money, but that doesn't mean shit if you can't save any of it. What are you doing? I just blows my mind because I saw their income and I was okay. So when they make plenty of money to be able to like, you know, if they saved a fraction of it, they're fine, they don't save of. And it's like their house houses zero percent down all their shit, zero financial or cars, mental shit. It's like, what are you doing with all this money? I have no idea. It fell apart and it sucks because I waste a lot of time and it's one of those like I wouldn't accept. I wouldn't be so easy to accept an offer. They gave me a really good offer and that's why I accepted it.
Colin Engstrom: But I was like, I was pretty close to a couple of other people to like they were about to make offers and I just took it and that was a mistake on my part. I should've gone through and said, hey, I had this offer and tell them, hey, I'll get back to in a week because then I wasted a month and a half of my own time and then by the time you go back to someone they're not interested, they're excited about it. And then you tell them no. And now they're not excited about it anymore. So then it costs you time and I probably could have gotten up and then you wonder, could I have gotten a better offer had I just waited?
Ryan Tansom: Did you do a stock or an asset sale?
Colin Engstrom: It was an asset sale.
Ryan Tansom: Any thought behind maybe doing a stock versus an asset or?
Colin Engstrom: Um, well I have no basis in the company so it didn't really matter to me. So to me it was a nominal difference. Like I would have paid like two grand different taxes just because I bought the business for five grand. So it's not, it wasn't a big deal. Um, but I know most time it is asset just it's cleaner.
Ryan Tansom: But it's ordinary income versus capital gains.
Colin Engstrom: But for me it's, I paid almost all capital gains.
Ryan Tansom: Because you're a low basis. If you did, it'd be if you bought it for 5,500 and you had to have. Yeah, because they were the low basis.
Colin Engstrom: I mean, the only thing I paid tax ordinary on was our inventory and income, which wasn't much.
Ryan Tansom: Got It. So because it was just all this stuff and I'm assuming you're depreciating all the stuff within 12 months or whatever it was.
Colin Engstrom: Yeah, exactly. So it was all depreciated downit down. So I think like 50 grand of it I had to pay ordinary on plus a little bit of inventory, maybe like 60 grand total in ordinary. He put a large amount into a noncompete, which we changed the wording in the contract saying it's just for value purposes. Um, and then we've got to take that as cash. Yeah.
Ryan Tansom: And for the listeners, what, what ends up happening too is that a lot of people with the buyer will shove stuff into different, like you were saying, different categories, so that way they're getting their tax benefits. But if you just, like you said, you had all employees and it's a lot of good… It's all goodwill, which is cap gains. So that's really, I'm assuming your advisors that we're working on it, we're rallying to make sure that you had the best outcome.
Colin Engstrom: And that is the big thing you fight over in my. If I were to do it again to another thing would be to make sure that in the offer or like in the beginning I want to know where we're allocating things to. Because that, I mean you can get an offer for 25 percent more, but if you're paying ordinary income, you're actually losing more money. [Ryan interjects: Yup. Yup.] If you get so. And that's why I liked the first buyer and had told me they'll do a stock purchase and I told them I don't care. Like it doesn't, it's not, it's not saying it's a.
Ryan Tansom: They thought they were being competitive and it didn't matter to you.
Colin Engstrom: I was like, I really don't care. I'd rather you pay me a little more. Like I was like, you're just going to hurt you. Like I'd rather you add five grand at a deal and you guys do an asset purchase, knock yourself out. And that's what we were going to do. How it worked out, but it didn't work out. So.
Ryan Tansom: How about like any of the seller or the buyer is concerned about employee retention or was there any like, you know, how did, how did the deal structure and some of their concerns about employee retention to other things or even customer retention impact cash upfront or you know, any kind of earnouts? There wasn't really much concern with customer retention.
Colin Engstrom: Um, just because they're all on auto renewing and it's not like, I mean, they all know me personally and like I assume enjoy talking to me, but I, um, you know, it wasn't like it's not a business for. I'm really seeing no one was much concern in our business about that had I been an accountant or someone who's like the face of the business, that'd be a big chunk of it. But in our business it didn't really matter. Um, and employer retention… our key employees are super important and I, there's a, I can't hire anyone that works for the company, for my whole, um, noncompete period. But, and I think that, I mean, I would put that in the deal too. But um, I don't think there was a huge concerns, like we have decent turnover, just the nature of the business. So an average employee for us lasted about nine months. Not that I don't have ones that have been with since the beginning and managers that stay around for years, but it's the average employee isn't there that long, that the turnover is natural anyway.
Ryan Tansom: So then were they, were they asking what your systems and I don't know if you had any of that documented about like, because I'm thinking if I have buying that, I'd be like, okay, well what's your process for finding these people? If that turnovers part of it, what are, what are the ways to keep that machine turning?
Colin Engstrom: And it wasn't, I mean it's not much. I mean it's just, you know, you're hiring people who are qualified, you know, it's like you're not, you're not… And that's what makes me nervous about something else. Like I've never had to hire someone we've always promoted from within. So I've never hired someone for an important position, you know, everyone's just been… and that's what I tell everyone was like, you get your pay isn't on, you don't get annual reviews and annual raises, you bust your ass, you're going to get rewarded if you don't your ass, you're not going to get rewarded. Your wages stay the same and it's not like a, you know, I don't do it in a set way and I think if we got bigger and we'd had more management, we'd have to kind of figure out a system, but I kind of like kind of being loose about it. So if someone's not working out we can move on. Um, so it's not, in my mind is not a big deal because you can get trained in a week. So it's not rocket science here, like scrub the toilets.
Ryan Tansom: That's awesome. So any other big takeaways that you had and that you're happy you learned on this, on this deal or anything that you think that someone that hasn't gone through, you know, an accident like this might not be aware of?
Colin Engstrom: I think I learned more for purchasing than I did for selling. Just like how, like if I were to buy a business, I'm going to expect a lot of the key employees to not stay and just by nature of how it is, it's not like not because, and hopefully I can have a better impact on that. Like hopefully they'll like be better or like I can show what I'm going to do to fix it or like in my mind I would do a value added. Like I'm not a business that's doing very well out of it, isn't doing well and then kind of build it up from there. But that's the line that would make me nervous is like, you know, you're going to come in and people are attached to the old owner and it's not. It's just how it is. And then that scares me. Especially buying something that's kind of out of your… Something that would make you nervous financially, which scared me a lot because you're buying something that you might lose all the staff overnight and you might just keep all of them, but it's like that's a big fear of mine started with buying a business.
Ryan Tansom: Just just in two cents on. There are some creative things that I've seen and we've done for our customers as to whether you're buying or selling. So let's say, let's say if it was you selling again, so you'd say, okay, so you don't give them equity. It's called Phantom stock because it was a part. It's a percentage of the business only when it sells. They don't have any stock holder or rights or anything like that, so you don't have to keep them involved. But what we ended up doing is you can say, okay, I'm going to give you five percent of the business when and if I ever sell and then. But what you do is you say, I'm going to give you two percent at closing and then another one percent six months later, another one percent 12 months later, another one percent 18 months later. So essentially you're locking them in, you know, it has to be a significant amount of money, otherwise someone's going to walk for a small. But like when ends up happening is you're, you're, you know, think about that. If you're a buyer, now you're like, okay, well Colin's already locked in his key executives for me. This is fantastic. And during the negotiation, what you can do is actually have the buyer pay for everything after the closing because usually the buyer seller, great, this is fantastic. You've already done this. I'll pay additional. You're getting it with the value created because it's easier to transfer. So yeah, you're right, because I mean there's like people scattering afterwards. It's a huge risk, but there's really cool creative ways you can structure that. So everybody, everybody is essentially winning because it's easier to transfer the business.
Colin Engstrom: That's actually a really good idea.
Ryan Tansom: Does that make sense? Literally you can do anything that you can creatively think of. And then you just have to have the documents drafted accordingly because there's so many people give like, hey, you're going to have, you're going to have equity. But the reality is first of all, don't do that. Don't give them equity if they don't need to.
Colin Engstrom: You don't even work with them yet. They may have been at the business for a long time, but they could be stealing shit left and right. Have no idea. Right?
Ryan Tansom: Right. Well as a buyer, definitely don't do that. But it's like. But what happens is as a seller, people just randomly give cash or equity to get to that closing point, you know, because they ended up talking to their employees and stuff. But it's like, no, no you do, but just tie it to, to the actual outcome that you want, which is them staying. So you can give them some but don't give them equity, give them a phantom stock and tie it to closing. And then a couple tronches afterwards and then it's up to the buyer to keep them or not. But they still get paid out and usually you're getting additional value and a higher purchase price. So the whole thing should pay for it. It should actually sell fund itself. Make sense?
Colin Engstrom: For sure. And then the other thing is I feel like, so I had a two month full training time and my business is simple, very simple, very like everything. Everything's documented and figure it out. I didn't, I wasn't able to show a lot of stuff that I wanted to show, you know, because you can only learn so much at a time. I can't just dump everything on you at once. I kind of got to show you like regimented like this I can show you this stuff and I kept getting questions like "What do I do about this?" We're going to get to that. You're not going to understand that right now. And I think that period needs be longer. Um, and I think it's awesome. The new owners are eager and they think that it's just super easy, but I think they think it's easier than it is and they're kind of like, yeah, whatever. We got it. And like all my stuff shut off and it's like I am not doing anything. If you leave the admin email on and I can just see it, I'm happy to tell you things that I think will help you. Or like, if I can see what's going on and I'm here to help, but I think like in their situation would be different because they just think they got it and it's easy and I'm sure that you have it, but it's, you know, I would want more support even…
Ryan Tansom: It's interesting on kind of on two sides of the coin there is, think about if you had an earn out and there was a significant chunk tied to their success and they still turn everything off? So that this is what happens a lot is that all of a sudden there's new control and you're not controlling anything but a huge chunk of your payout comes from them succeeding. It's so, it's some serious, some serious concern and stress.
Colin Engstrom: Yeah. And that's, you know, I just want everything to work out. So it's like I just want to help just because that's who I am. But yeah, if I had a big chunk of money and I'd be, I'd be more stressed out than if I was just running the business.
Ryan Tansom: That's a great way. I the uh, this guy named Alex that I interviewed, um, and he, he ended up selling to Godaddy and like we were talking about sitting in these meetings where you have no control anymore and you're just like, even if they're good, even if the buyers are awesome people, you're just like sitting in meetings and being concerned about their success when you have no control is like horrible internal conflict. Just super stressed out.
Colin Engstrom: And that's what I think my ideal purchase is either going to be something that's not working well, that you want to get the other people out and you want to fix it and grow it. Or like selling where they're just like they don't see the bigger picture and like they're kind of stuck or somewhere where someone's retiring. They love everything they do. They just can't physically do it anymore. Cuz then they want to stay and they want to like, I think a big part of what I'll buy next has to do with who's selling. And that's Kinda hard to tell with a broker because you kind of like, you have to get through it enough to find out the situation. But I think that's a big chunk of it is who are you buying from? I mean, I do business in a, no, I, I'd do business in a… I don't know how to say it, but I'm not a dick and a lot of people who make a lot of money make a lot of money screwing people over and it's hard to tell at first what people's intentions are. So it's kind of in that, you know, it's a judgment call and I think that's a really big, hard judgment call to make.
Ryan Tansom: What's interesting too is that it's on both sides. So like there's so much of this. It's so interesting. Like when you think about all of the things that have to go perfect, so like you have to like if you and I were buying and selling a company and exchanging in between each other, we'd have to agree and trust each other and then everything else has to go perfect. Like everything, like terms, conditions, the price, all that stuff. That all has to work out per video after we like each other. Can you imagine going through that whole process where there's so much to be negotiated? If you hate the person across the table, table is like, it makes the whole thing not work.
Colin Engstrom: And then to spend all that time and money on legal and your time and everything that's going on or to not work out. And I mean from talking to, and I'm sure you know this too, but it seems like most of the time it doesn't work out.
Ryan Tansom: Over 80 percent of the time they get, the companies don't sell. So. Oh God, there's some crazy stats. I wish I could pull them all out in my memory on, on cue. But essentially I interviewed this gentleman, um, who he used to run Harvard Business Review and then now he's doing, this is called the Center for Middle Market and over 50 percent of the people that sold had no intentions of selling that year. And overlake same amount of buyers had no intention of buying. It all just happened through, by accident. And so it shows that are not ready. They had no idea that numbers, all this stuff. It's like they just, all this stuff kind of came together and then. But that's why so many fail is because they didn't have any of this. They didn't, they weren't ready and they didn't know what they're even asking for. So then you end up arguing with these people and people walk away for the stupidest reasons. Colin. I interviewed this guy named norm Brodsky who is literally a bad ass. He was on the cover of ink magazine and so he had documented the entire potential sale of his company. That was part of his LOI. I was like, I'm going to document everything so that he went through the entire sales process in the column of inked magazine with Bo Burlingham. They literally said norm decided to sell and that's what it said on the Inc's cover. It's a norm decides to sell. And he had found out like in the process that the buyer he didn't trust was like had different intentions and this is $110,000,000 sale by the way. And so the. He said, you have to call me at noon and, and the guy didn't call him at noon and you call them at 12:10. Norm pulled the, literally Inc magazine went out nationwide saying are the size of the cell, and he pulled the deal because the guiding column on time. [Colin interjects: That's awesome.] Yeah. So what's that?
Colin Engstrom: Other than I have a question for you to what um…. So when I'm there, my trust, trust in the deals and buyers and sellers are. Or how many, how many deals fall apart? Sorry, nevermind. Um, so when they're, where they're going to sell, what was the question? Have you had experience in whether you tell your staff or not? Because I was torn with that for a long time and I don't even have a good answer for next time because part of me just likes being upfront and honest. And then the other part was like I started telling key people and they started freaking out.
Ryan Tansom: Oh totally. Because you know, what ends up happening is because the things that humans do not enjoy the most is ambiguity, right? That's why people hate change. They love routine. And so you tell employees that they just, they filled their whole world with all these different assumptions. I'm going to be fired. I'm going to have to go to la, blah blah, and they just kind of go down this whole rabbit hole. I… To go back to your point, and this is a key sticking point for so many entrepreneurs, so many business owners and I believe that if you do this the right way, which that's why our process is called growth and exit planning is because you tell like people are not stupid, right? I mean when you have an owner that 75 you're going to sell because you're like 10 years away from a hospice. Like you mean like it's just physical nature of what's going to end up happening so people already know this stuff or generational transfers or whatever. I believe if you take like that employee structure stuff like I was talking about and say okay, here's the deal. Like I don't know what's going to happen with this business. The goal is to grow it, build a very healthy business where where everybody's got good jobs and for your key staff. So you might have your cfo, your vp of sales, your ops, the key employees. You're tying them to the eventual exit no matter what it is, right? So whether it's a third party or an ESOP or family transition and just saying, hey, at some point this company is going to change hands and your key part of that. So we're going to tie your account plan to EBITDA and to growth and to a transition so that way essentially you've got that they're buying immediately. So like let's say an out of the blue offer happens or you think it's time or you want to start prepping 12 to 18 months ahead of time. You start chatting with them about it because they're all rowing the same direction. You're not telling the people that are on the frontline troops. I mean for us, we didn't have any of that stuff so we had to like literally sneak around the office and I hate lying. Right? So you're just having a horrible like turmoil going on versus I think if you. So I guess to sum up and answer your question directly is that I believe that if you haven't done any of that stuff right off the bat, you don't tell anybody, and it's the most emotionally horrible thing ever, but if you've done some of these mechanisms ahead of time, then you can be open and transparent with the key people that are going to be important for the potential buyer anyways
Colin Engstrom: .Because what blew my mind, I might not see for six months. They're like really upset that like, your job's going to stay the same. Like…
Ryan Tansom: They don't know that and you don't know that either. Technically.
Colin Engstrom: Yeah, I guess you're right.
Ryan Tansom: So now think about this. Like let's say if it, let's say I wanted to buy that and you know, take a different business where it's like the VP of sales is response or the sales team's responsible for 75 percent of the new accounts and that person goes and gets another job. I'm like, I'm not gonna pay you shit for your company because of that. So. And they don't know and people are willing to go. I think people are willing to do drastic things for certainty. So to sit and I will trust me and like my dad and I would say we're selling, we're not selling, we're selling. We're not selling, we did that for four years and for me emotionally it's just like screw this man, like I'm just, I just want some sort of clarity either way. So I think people just, it's difficult to ask that of anybody, let alone your staff who are not getting paid tens, you know, six figures in the mid six figures to deal with that stress.
Colin Engstrom: That makes sense. So. So when you do those structures, are you going to stay through your sale and your transition as a buyer? I'd almost be a little nervous knowing that you're getting a big pay out because are they going to go? Or are they going to stay?
Ryan Tansom: It depends.
Colin Engstrom: I mean like now they're like now because before they had a, they had a better deal and the new owner has that dealer.
Ryan Tansom: So thinking about this, let's say if I'm, if I'm purchasing your company, if you get three executives are making 125 grand that have got some sort of stay bonuses. So let's say, okay they let's say they get 100 grand at closing and then 50 grand six months in another 50 grand, six months or 12 months in me as the buyer, I'm going, this is awesome because those people have relationships. Like the CFO knows everything about the books, the VP of sales knows all the customers, I have 12 months to bring in to either win their hearts, it makes sure that they love the new, the New Vision or I could find right. Or, or if they're that stupid or they hate me that much, they're leaving 200 grand on the table. That's a lot of money. Right. So I mean like there's enough, I think there's enough transition like period there to, to, to have it all smoothed out.
Colin Engstrom: Whereas you as a new buyer, if they don't stay the buyer, get the kickback like the $200. Oh yeah, yeah, yeah. I mean that all comes down to kind of negotiation.
Ryan Tansom: But um, so as we're kind of wrapping up for the listeners and then I know you and I are going to continue rallying after the, after the show. Um, but now that you've gone from purchasing the company for, I mean, that's quite the return on investment. I don't know the exact dollar amount that you netted, but um, from 50, from five grand to, you know, to your eventual sale in 43 employees, like what is there one thing that you want to highlight that we've talked about or maybe one thing that you want to leave the listeners with that have not gone through an exit yet and you want to leave them with something that the, that they should take away?
Colin Engstrom: This is true for everything I do. Everything I've learned and everything I know how to do is for me asking questions. I mean, you're talking to me that I asked a bunch of questions and it gets to be too much sometimes and that's how all my conversations go. So it's like you can never ask too many questions. You can never learn to much. Whenever. When I was in business, all I would do is ask other people that do similar things, you know, I'd ask about what they do about this or that. And I kind of had a network of people that I can bounce ideas off of who've gone through what I'm going through. And people who it was work hard and like what they do love to talk about it and you know, their wife is second cared about it and like they were anyone about anything but it's like you don't learn those things unless you ask. And I think people get so they're like afraid that people don't want to talk to them or like even like in my mind it was more like kind of competition. Like it's like it's fun to bs about what you do and what you're trying to do. If you don't go and find those people and ask those questions, you'll never learn itk, you're going to learn so much in a. But if someone's gone through more than you have, you're going to pull so much more information out of them. Then you would like trying to figure it out yourself.
Ryan Tansom: I think to even put a big exclamation point on that is, you know, you've got a big runway in front of you for life. And I think there's a lot of listeners here that they're going to do it once and it's going to be one of their biggest financial windfalls ever. And you don't have the chance to learn on the fly. Right? I mean, so and one of the big things, and I don't know if you noticed this, but like a lot of a lot of people get scared to ask the questions because they feel like as the big head Honcho, the owner that they should know all the questions of the CPA and the legal and all this stuff. It's like you should ask why? Because a lot of these advisors don't know what the whole picture and they pretend and they go learn on your dime, on your experience. And so you ask why until you the answer that you think is sufficient.
Colin Engstrom: Exactly. And don't just go and use the business broker your sign up with because someone told you to use it. I would always interview multiple people and multiple stuff before you do anything. You know? It's like, I think they're awesome. They meet someone else. You're like, Oh shit, I'm so glad I didn't use the first guy. I mean, you never know. I think you can never ask too many questions. , you can never bug too many people. It's only going to benefit you.
Ryan Tansom: So if our listeners want to reach out and ask you some questions or what your best questions are, what's the best way to get in touch with you?
Colin Engstrom: Um, I mean, I'm happy to talk to anyone or anything. I um, my phone number, I just gave him a phone number and seven one zero, one six six zero. And my email is Colin, c o l I N B as in boy e n g s t r o m as in Mary, at gmail. Um, and I, like I said I like talking to people.
Ryan Tansom: It was an absolute blast having you on the show.
Colin Engstrom: Awesome. Well thanks a lot.
Takeaways
Ryan Tansom: That's quite the story isn't it? I mean I can't believe he took five grand and then after three years turned it into a 600 and some thousand dollar business. And after chatting with him, off the record, you mean he, he really thinks that that thing is going to be continuously growing and can hit the million dollar mark within the next 24 months. And what I find it interesting and I think is my takeaway for you guys, is that given the fact that Colin is on the younger end of the spectrum, for him to be able to grow and sell a company in that short of timeframe and then have a ridiculous amount of experience to go and do it again is unbelievably valuable for Colin where he's at in his entrepreneurial journey and his career. So my two cents is for anybody that has had their business for many years and is looking to have one big windfall or to have one successful exit and is not really planning on doing it again, make sure you really understand the five growth and exit planning principles. Know why you're doing it. What are your financial targets? What are the different exit options that you've got available? What are the ways to maximize your company? And then hire the team of advisors that maximizes the entire blueprint that you just built because the stakes are just too high to just give it a shot and learn on the fly. I think that that's a heck of an absolute heck of an idea for someone that's on the younger end of the spectrum that wants to keep doing this. But if you have a substantial business and there is a lot at stake, go onto GEXP Collaboratives website. Start diving into the material, the ultimate guys to wrap your head around all of the things that are going to matter what you should be doing now. So that way you can engineer the outcome that you want. I hope you enjoyed this episode. I hope you enjoy the show. Share it with people that you know. Let's get the word out on how to grow and sell companies. And if you enjoy the show, go into itunes. Please give me a rating because it helps us spread the word, helps me get down really good guests. So with that being said, I hope you enjoyed it and I will see you next week.