Headlines are Nice, but What’s Happening in the Trenches?

If you’ve tuned-in to any form of business media, chances are that the report or article was about Amazon, Google, Apple, or some other huge company. More than likely, too, all the “investment bankers” who were interviewed or were discussing all the exciting aspects of these deals were identified with names like Goldman Sachs, JP Morgan Chase, or Morgan Stanley. It’s all very impressive, but it’s not the world in which most of us operate.

If you’re running one of the 27,500,000 or so “small businesses” (defined as having fewer than 500 employees) estimated to be in the United States, would your company ever be on the radar of an investment banker? Do investment bankers ever emerge from their corporate jets and talk with the folks who are checking the tires and gassing them up?

My friend, Keith Wegen, is President and a founder of Flatirons Capital Advisors, LLC who brings “big company” investment banking experience to “small business” deals. Keith has devoted his entire career to investment banking and finance, and he’s spent countless hours out in the field in awe of the ingenuity and entrepreneurial spirit of small business owners.

Like most parts of our economy, technology has changed the way investment banking services are delivered. Virtual officing and data rooms, video conferencing, and lightening-speed connectivity and data transfer allow Keith and his firm to bring “big-deal” expertise and service to “real-world” deals. Deploying technology also allows Keith to immerse himself with his favorite clients, the owners of the small businesses that keep our economy chugging ahead day-in and day-out.

In many engagements, Keith’s primary job is to help his client sell a business when the client is looking to retire. Keith oversees the entire transaction – from preparing to go to market to closing the sale – using a strategic process that keeps things on track. Keith is all about simplicity. He prefers to list tasks with bullet points. He prefers to gather data in stages. Simplicity and defining tasks with narrow scope helps Keith prevent the process from becoming overwhelming.

Keith is highly selective about the buyer prospects he’ll introduce to his clients. “My goal is to insulate our clients from the noise during a sales process,” he says. He works hard to identify the right prospects, vetting them to make sure they’re qualified, strategic, and a good match, and getting information about the business to the right person at each prospect from the start. These extra efforts filter out stuff that wastes the client’s time and allow Keith’s client to remain focused on running the business and keeping it attractive to prospects.

An example of the benefit of his strategic and aggressive buyer identification strategy involves a small business Keith marketed to a large resort conglomerate. Most big businesses usually do not consider acquiring a small business. Keith identified the one person, among the hundreds employed by the publicly-traded prospect, who would understand the value of the deal.

The client owned the business for over 25 years and was looking to retire. The deal terms, including an advantageous and on-going financial relationship between the seller and the buyer, were untraditional and required special communication and negotiation between the parties. Not only did Keith and his company have the energy and expertise to find and communicate with the right person, they also had the flexibility and creativity needed to help the buyer and the client explore alternatives and find the best result.

Keith especially enjoys learning about his client’s business. “I love all the stuff people make,” he says. “I’ve seen all sorts of cool stuff. I love the ingenuity. I love the drive. I love the creativity that individual business owners have. Small businesses are doing some of the coolest stuff in the world.” He also loves getting to know the owner and learning what drives them, what makes them happy, and what makes them crazy.

Keith founded his company primarily to help business owners harvest their retirement nest egg. Forming an intimate relationship with his client is important to his process and its success. Keith’s intimate knowledge of his client and his strategic focus on identifying the right prospects allowed Keith and his team to quickly close a recent deal for a client who was making a major life-style change. As part of the sale, the client also wanted to limit the duration of her commitment to help the buyer during the transition after the sale. Keith and his team helped the client negotiate a post-closing employment agreement that lasted only six months, and they closed the transaction quickly. Within a year after hiring Keith, the client was finalizing plans to sail around the world, and Keith now follows the client’s adventures on her travel blog.

One of Keith’s favorite transactions was one where things did not go according to plan. After introducing a prospect to the seller and starting down the path toward a sale, Keith noticed some red flags in the prospect’s latest financial statements. Keith advised the client against striking a deal with the prospect. Even though Keith’s company would have been paid its fee, Keith was happy with his advice when, six months later, the buyer prospect filed for bankruptcy. Had Keith not advised the client against selling to the prospect, the seller would probably have lost a large part of the sale proceeds that were to be paid out over time.

The fun wasn’t over after this initial set-back though. After negotiating a subsequent deal with the right buyer and after the new buyer announced the transaction, a hurricane washed-away about $2 million of the client’s inventory. Simple insurance claim, right? Not in this case because the inventory was designed for underwater installation and the client didn’t ever imagine a need for flood insurance covering this kind of inventory. Keith and his team worked with the client and buyer and collectively they recovered about 80% of the displaced inventory. Keith says he was proud of his team and his client for closing the transaction. “I look at all the things we went through, including that last-minute curve ball,” he says. “It was a great deal. The buyer was an awesome, publicly-traded company, and we all worked as a team to figure it out and get it done.”

Not all business sales involve a retiring seller. In one transaction, Keith’s client really loved selling products to her clients, but she didn’t enjoy running her business. Processing payroll, hiring employees, working with vendors – it all killed the fun of doing business. Keith identified a buyer who saw the value of retaining the seller as a salesperson. Today, Keith’s client is focused on what she loves – selling, traveling, and making the world a better place through her company’s products – free from the distractions that kept her from enjoying being in business.

Keith’s clients engage him when they have concluded that they need the help of a professional to navigate the journey to a sale. If you’re thinking about such a journey, Keith advises finding a person who you like personally and who you trust absolutely. “It’s a full-on marriage when you go through this process,” he says. “You’re calling each other at all hours, going through things. If you don’t enjoy being around each other, it’s a mess.” Some professionals say they don’t care if the client loves or hates them so long as the deal gets done. The relationship with the client is most important to Keith. “If the rest of your life is all about relationships, why shouldn’t your professional life be too?”

Getting ready to sell? Keith’s advice is twofold. First, make sure your financial statements are solid. You need to have the system and people in place to quickly produce quality financial reports. These are the tools you will use to show a prospect what’s going on in your business. Further, if your “small” business is closer to the 500 employee-size, audited financial statements go a long way and are probably worth the expense.

Second piece of advice: Have reasonable expectations. Think ahead and be prepared! Unless your company’s stock is publicly traded, you can’t simply decide to sell all your shares and be finished. Expect to devote another five years to the sales process if you haven’t already started actively planning. Do some research about sales of similar businesses in your industry so that you’ll have a realistic idea about the value your business is likely bring and how long the process may take. Talk to your professional advisors, like your wealth planner, your accountant, and (unabashed self-promotion here) your attorney, about your future and your needs.

Most of Keith’s clients are geographically-based in what Keith calls the “Rodeo Region” – the Midwest and Rocky Mountain states, and of course he’s happy to talk with any business owner regardless of the location.

If you’d like to learn more about Keith and his services, please reach out to me. I’d be honored to connect you.