ERP055 - Get Acquired for Millions

If all you do for the next three years is just focus on increasing your recurring revenue and your top line doesn't change at all, you have truly increased the value of your company. And people don't think along those lines when they prepare their their their company to be sold. Welcome to Evolved Radio. I'm your host Todd Kane. Today on the podcast, I'm chatting with Linda Rose. Linda is an author, speaker, and advisor. Linda's background is in building, running, and selling not one, but several technology companies. In the episode today, we explore some of the lessons she's condensed from her experience into a book entitled Get acquired for millions. Linda and I discuss topics like how you should value your company and what goes into that calculation. Should you still be considering selling in a depressed market? How should you be preparing your company for a sale, and you may be surprised by how long that process usually takes. Linda also has some really valuable resources to share on the show notes, so be sure to check those out as well on the show notes web page. If you haven't already, please subscribe to the podcast so you get every new episode. Also, if you wouldn't mind, please leave a rating and review in your podcast app. This helps others find the show so we can reach more of the community. Now on with the show. Joining me on the podcast today is Linda Rose, M&A advisor and author. Welcome to the podcast, Linda. Thanks, Todd. Thank you so much for having me. So, you have a a background in technology. You've uh both built, run, acquired, and sold companies. So going to have a great discussion on your experiences around uh those experiences in the M&A world. And if you wanted to give us a start, just bring us up to speed on sort of your origin story and how you got started in your career and how you ended up where you are now. Yes, absolutely. So, like you said, I actually spent 25 years in the technology sector. That is not what my degree is in. I'm actually an accountant by trade. I have a bachelor's degree in accounting and a master's in taxation and actually spent the first four years, five years of my life as a CPA in a international CPA firm. And I met my husband there and back in those days you couldn't date, let alone get married and work within the same firm. So I left because he was more senior than me and uh kind of fell into consulting. Actually, I I didn't have a business plan. Actually had no funds and actually no goals other than to I found out I was pregnant and I kind of needed to work until I had the baby and then I wanted to take four months off. And it was really just a need to put money and food on the table. So I went to work for one of the firm's clients. had my son Matt and then took some some time off and then realized, you know what, I got to go back to work. But I also realized that I didn't want to go back to a full-time job. I kind of wanted to have a little bit more control over my life. And so I started doing some consulting, accounting consulting led to ERP implementation, which led to the more technical side of things. And a few years into that, I woke up one day and realized that uh wasn't just putting food on the table for me, but now I had a team, so I incorporated and got real about the business. And uh and then really slowly over, I don't know, I guess 10 years, started a number of other companies and they were really all out of the need of my client base. It's not like I woke up one morning and go, hey, I want to start a staffing firm, which I did, or hey, I want to start a cloud infrastructure practice, which I did. They all were really truly requests out of my client base. So the cloud infrastructure business I sold in 2017 was actually out of the request of a client. It was a golf company here in Carlsbad, California that had a bunch of putters in the back room or had some putters uh stored away and they said, Linda, come on out. We had been implementing their ERP system at the time and he's like, Linda, come on out. I I need to show you what my plans are for the company. So I went out and did an onsite visit and he said, you know, see this room back here that has all these servers in there? I need this for my putters. This is a very important real estate. I need this for my putters. I need all these servers to go. Can you please find someplace in the cloud? And it wasn't called cloud back in 1999. But I found him a place where he could host all of this information. And uh it was a company back in in uh New Hampshire. And so I went back to him and I said, okay, Mr. CFO, I forgot the name of this guy's first name. And I said, I found a place for you. These guys are very capable to host your ERP system. And he says, great, where are they located? And I said, they're Bedford, New Hampshire. And he said, Linda, are you serious? You want me to send my data across the entire United States? And I realized, you know, this was 20 some years ago and that was a concern, right? Latency was an issue. And so he just absolutely wouldn't do it and looked at me and said, okay, I want you to do it. I'll fund the servers. You find a data center and that's how I started my cloud infrastructure business. So, you know, three businesses later plus an acquisition in for a firm in LA, that's kind of how my life began. And then I decided somewhere in 2013 after both my parents passed away that, you know what, life is not forever and I should probably think about my own retirement and what I want to do in my later years and not wait till I was 65, 70 and working till that late so I couldn't do something anymore. So I kind of baked in my head that I needed to get out of this by 55. That was kind of my magic number. I don't know why 55, but that sounded like a good number to me. And so I basically sold all three of those companies over a 10-year time period and really learned a lot during that process, made a ton of mistakes. And really thought that I was going to retire at 55, but as soon as I sold the business, thankfully, I didn't have to stick around and actually 45 days later after selling, I walked out the door, left the keys on the table and said, see you later. They didn't need me because it was a 98% reoccurring business and we had very little customer turn and they felt that the new management team or my existing management team could carry on the business. So I left, did a big backpacking adventure, hiked 500 miles on the Pacific Crest Trail, got in tune with nature, and when you're hiking 15 to 25 miles a day, 8 to 15 hours a day, you get a lot of time to think. And that's when I decided to write the book and the book then led me into a career of mergers and acquisitions. So that's how I got to where I am today. Really cool. That's uh that's a fascinating origin story, you know, kind of the the whole gamut of uh the the needs developed out of your own company, out of the client's company is is so typical of where people end up sort of finding other businesses that they end up starting in the MSP channel often people uh start uh software businesses to sort of scratch their own itch as it were, right? So Exactly. Yeah, it's I think a lot of people kind of tend to sit back and say, you know, uh what's a great business that I could start when they I think the answers are often all around them if they just listen to the people that they're working with, right? Right. Every single business I started was really out of the request of my existing customer base. Yeah, very cool. Um I want to ask you like what were some of the things that surprised you when uh you were selling your your business. I mean, you said you kind of you made a ton of mistakes in in the process and I'm sure everyone does on certainly on their first sale because there's so much that you just don't know, especially if you've if you've not read up on it, you've not got some some advisory services or something like that. What were some of the surprises that either caught you off guard or or had created some stumbling blocks for you? Sure. So the first time, the first sale I had was my staffing firm, which I had for nine years, and I did sell that to my partners. So you know, it was a very congenial sort of thing and I did do some research on comparables with within that industry. But it, you know, I just wanted to make sure that the company went on and we were still good friends. And so I'm going to I'm sort of going to discount that other than the fact that I learned a lot in the legal process of that. I think the second company sale, which is my ERP CRM implementation firm, that I sold to a national CPA firm and there I was truly totally unprepared. And then, you know, at the end I kind of felt like I left money on the table. Actually, before I signed the bottom line, I felt like I left money on the table. But at the time I was okay with it because it was a good cultural fit for my team. I wasn't moving on into that firm, but half of my my group was and then the other half was staying with me as part of the cloud infrastructure business that I built as well. And I really wanted to sort of let go of that ERP CRM consulting firm so I could focus more on my cloud business, which ultimately was going to be my end all be all, right? So I did have the opportunity to do this three times. But, you know, and even in the last sale, I pretty much felt like I left some money on the table and now knowing what I know today, I know there were areas where I could have negotiated that better. Uh my broker didn't do any negotiation on my part at all and he told me that from the beginning, so that was um that was the expectation because he was not Finra certified, so he couldn't do that. But um I definitely learned some lessons from sale number two that I applied towards number three. Partially, I was the rainmaker. So, you know, I go into many organizations today where the owner is the rainmaker, they're doing all the sales, you know, everything sort of stops with them. And that was definitely something I learned the hard way in sale number two, which I didn't make that mistake in sale number three, even though I was doing a lot of the sales for our cloud infrastructure business, I did get another salesperson in place so that when I did leave, that that person could take over for me. So I was making sure that those key roles I wasn't fulfilling myself, which I got to tell you, especially with MSPs, I see that all the time. Yeah, I agree. I think um it sounds unusual to say that I sold my business, handed the keys and walked away. I mean, most organizations when they're acquiring a company want to keep management and certainly the executives in for, you know, six months to three years to make sure that that transition goes smoothly. And I think in a lot of cases it's to make sure that the sort of the the the tethers that are very tightly corded around the either the primary executive or the CEO are safely detached and won't won't impact the business if if you are not there. So I think it probably speaks to the level of maturity, um some degree the the business model, but the that you you would actually sort of put some thought through those things and make sure that that you were uh you were building a business that ran itself without you and you you obviously provided a lot of uh function and a lot of uh value to the organization, but you also weren't integral, right? Right. Yes, the third company I wasn't. My name was on all the companies and that originally was by design. And so people always knew there was a rose behind the scene, but in the last company, most of these people didn't, you know, they they knew there was a rose out there, but they, well, they didn't even know that actually. because they didn't interact with me. Occasionally somebody would go to the website and go, oh, there is a rose behind this name. And uh they would reach out to me, but it was very rare. I I've seen sort of a decreased level of activity for a couple of reasons. One, I think people are just focused in other places. you know, the last probably two years were uh just a white hot uh excitement around M&A and certainly in the MSP channel uh with a lot of PE money floating around, a lot of mergers and a lot of opportunity to be had, but that has definitely slowed considerably since the COVID era and I wanted to get your perspective on whether or not you feel it's still a good time to be selling. I think a lot of people are nervous about that that uh prospect right now and perhaps they shouldn't be. Yes, so, you know, one of the things I did in March, uh I ran a survey because I really wanted to understand. So I I'd seen some surveys out there already that said that this that the market was slowing down and M&As were slowing down, but those surveys were either of companies that were much larger than the space that that we work in or they weren't really focused on technology. And as we both know, technology is been what's been driving productivity and efficiency and all of this during during this time period. And speaking with many MSPs, they're doing incredibly well during this time period. So I really wanted to put a survey out there to buyers who were seriously buying or had a a history of buying technology companies and survey them. And what I found out was that if you were a strategic buyer, you were probably putting the brakes on things in part because those competitors or strategic buyers as we call them, wanted to conserve the cash that they had, right? So making an acquisition, you typically have to do some cash up front or if you're not using your own cash, you're going to the bank and financing that. And actually, in the last three or four months, the cost of money's gone up a little bit, right? Because the risk associated with financing these new acquisitions has gone up as well. So banks have actually increased the debt uh the cost of debt one to one and a half to two points depending upon the type of company. So it's it's pricier now to to make an acquisition if you have to go out and reach for debt. So I'm finding that strategics or your competitors or the the mergers that we see between MSP buying MSP, that is definitely slowed down unless somebody has a lot of cash. And even people who have a lot of cash, we don't know how long this is going on. So we're everybody's in that cash conservation mode. But the people who have not slowed down are private equity firms because they're sitting on anywhere between 1.5 to two and a half to two and a half trillion dollars of dry powder and they still need to spend it. So they're the ones that I see and that I'm getting contacted from on a daily basis that are are continuing to look for deals. And when we talk about you know, a depressed market now, you know, as I mentioned earlier, there are some MSPs that are doing incredibly well. There are some other technology firms other than MSPs, bars, ERP, CRM, um SIs that are still doing incredibly well. And if you can show that your revenue is increasing during this, what I would call depressed market, or even if you are flat, it's still a good time because you can show the seller that your company is resilient. It's not they don't have to take a chance on that it's resilient. Uh they know it's resilient because remember, buyers are not buying your historical past necessarily, they're buying the future. And this is a great time if you're doing well to show them that you can do well in difficult difficult times, which also means you can do well in good times. So I do have some people right now that are going through acquisitions and they're doing quite well and they're getting higher multiples now than they would have six months ago. as crazy as that sounds. Yeah, because the multiples were absolutely bananas last last uh I looked. Uh certainly if you're over 10 million and certainly over 15 million in top line, the the uh the multiples jump pretty considerably at that point as well. So there's still M&A activity going on. It's not as much as before because we've taken out again much many of the strategics, not all of them, but many of them, but private equity is still continuing forward. Just maybe at a little slower pace. The due diligence is taking longer. And that's in part because people are not doing onsite due diligence. Ah, that's a really good point. Yeah. And that sort of leads there's the two sides to this as well. Uh there's maybe some of the the generational shift in the market right now where people have run their businesses for, you know, 15, 20 plus years and they're maybe looking to step back at the very very least and maybe entirely get out of the business. So there are some people that are just simply selling in order to take a take out an equity day and and maybe go spend a little more time at the cabin or on the beach. And then there are others that are looking to merge together with other companies uh and make a stronger position either to resell again or start to uh uh coalesce a bunch of other groups together in order to gain some strength that way as well. Do you want to comment on sort of those two strategies in the current market? Yes, absolutely. You know, Todd, when I came off of my hike, this was in 2017, and I think it was October of 2017, there was a Forester analyst, Jay McBain, who put out an article that said 40% of the channel will age out by 2024. Now remember, this was in 2017, so that was a seven-year period and I and I read that quote and I said, you know what, he's so right because when when I was going to conferences at the time, people were in their, you know, 50s, some of people were way older than me, right? A lot of people started in the late 80s, early 90s and these people do want to do something else. They are aging out. And I thought, wow, this is, you know, this is a great opportunity to share my knowledge. And that's actually what that quote actually is what created it is what created the impetus was the catalyst of me writing the book because I realized there is going to be this significant population that's going to want to move on and they're not going to know how to do it. And what people don't realize is it's a process. It takes a good three years if you want to do it right, it takes a good three years to prepare your company for a sale. And that is something that I did learn in the last sale of my cloud infrastructure business. So there was a three and a half, four-year lag between selling my professional services company and selling my cloud infrastructure company. And during that three-year period, I was solely focused on the metrics that I needed to sell at at top dollar. So, so yes, that was incredibly important. The other thing that I find is people don't truly have an understanding of their company valuation. And I always use the um example, if you're a homeowner here in the US, I don't know how that works in Canada, Todd, but you can go out on Zillow and actually you don't even have to go out on Zillow. Zillow will send you an email like once a week and say, here's the value of your home. And so you always know what your home is worth. And if, you know, and if you're not a homeowner, but you have a car, you can always go out on to Carmax or Bluebook or Kelly book or whatever the those options are today and you always know what the value of your car is. But as an IT provider, an MSP, there is no such tool because everything else that's out there that helps with our company valuations is generic. And I felt that that was a problem. So in addition to writing the book, and this is the accountant number part of me, I decided that I was going to actually create a tool that goes hand-in-hand with the book that actually helps you to determine your company value because honestly, I was so tired of going to these conferences and getting some of, you know, some VP at the conference getting up on stage and saying, hey, you know, you build an MSP practice and you can sell for 21 times. I'm like, come on, what are these people smoking? There's no way as an MSP you can sell for 21 times. Okay, I shouldn't say that, unless you have some incredible IP that doesn't exist anywhere else in the world, yes, you probably can. And then the other thing that really bothered me is you get these M&A brokers, business brokers and they do these webinars and they'll showcase like a $30 million company. So I was on a webinar where this $30 million MSP was showcased and the M&A advisor business broker said, yeah, we sold this company for 10 times. So I get a call the next day from an MSP, he's had like 3 million in revenue and he goes, okay, I was on this webinar and it looks like I can sell for 10 times. I'm like, you know what? I know that's what they told you, but you cannot compare a $3 million company to a $30 million company. And so you have to get out of your head this notion as a $3 million company that you're going to sell for 10 times because again, that's unrealistic. So that really bothered me because a lot of partners come to the table with an unrealistic number in their head or they truly have no idea what their company was worth, which was my issue in company number two and to some degree company number three. So what I did is I started collecting all of these, all this data on reoccurring revenue, whether you're a bar, and by the way, if you're a bar, you sell a different multiple than you do as an MSP, then you do as a CSP, then you do as a custom developer, then you do as an ISV, then you do as a system integrator. There's like six different categories of technology service providers and each of these sell at different multiples. So you can't even lump them together, right? So I created as part of the book this value maximizer assessment that actually helps you to determine what your current company value is depending upon which category you categorize yourself in, but it also asks you questions about what your what your gross profit margin is, what your is, what your percentage of reoccurring revenue is, how strong your management team is, all of that plays into your valuation and people don't understand that. And even if you go to a certified valuation expert, unless they are focused in on IT and I only know one company that is, you're still going to get a valuation that is probably unrealistic or not truly what you're worth or not what a private equity firm or competitor would buy you at. So that really prompted me to write this assessment. That's awesome. Yeah, it's any any tools that people can have to have a sort of a better, more actual valuation versus what people sort of hear and and just sort of scratch on the back of a napkin based on their top line. It gets really sketchy. Uh it's interesting you kind of note like the the two things there that um there's some hard metrics that can be used, but I think the part that people don't really put a lot of thought to or even um uh work towards in their business is the squishy part that is really tough to value, but is also probably the most important as part as a part of your valuation beyond how much cash does this company generate, it's how does it actually operate? And I think that's the part that people don't really understand when they've not been through this process that they're going to ask you, what is the hierarchy, the roles and responsibility, who's responsible for what? How do these people track their metrics? Let me see your SOPs. It's all the operations side of the house that really determines whether or not a a business can be valued at a higher basis because the fact that it can run itself and it doesn't require a bunch of muscle power to make sure that this thing operates every day that it can kind of go on autopilot for a couple of days and and get by. I think that's a really important distinction that a lot of people don't know before getting into this process. And that's exactly what I talk about in my book, Todd. I didn't want to sit there and write another M&A book and but have a slight slant for technology service providers. I really went out there and interviewed a bunch of buyers and and sellers and said, you know, what were those things that people looked at when they were deciding what the value of your company is. And I came up with eight value drivers, I call them eight value maximizers that people truly need to focus on when they're preparing their company to sell and that's what this book is about as well as the assessment. So the assessment will actually assess those eight value maximizers. It'll tell you where your strengths are and where your weaknesses are and then you'll know what exactly it is that you have to work on to increase the value of your company. And that's what you said is sort of speaks directly to that that it's a three-year process because first you have to understand where your business is at, where you're at on the scale, where you're going to get to as far as trying to value your business and where are the sort of the hotspots that you need to work on in order to make sure that you can maximize the saleable uh value of your business. That right? Right. And you know, I I talk about this quite quite often and one thing that one piece of advice that I leave behind when I do do a session is, you know, if there's one thing that you there's two there's two thought process here. There everybody, you know, that's growing a company is like, okay, I I want to grow top line revenue, I want to grow bottom line revenue. But when you're looking to sell your business, you have to think about, you have to do a shift in that thought process. Now, it's not about growing top line revenue, it's about growing recurring revenue, right? So I take my $5 million company and I show on a slide and I show two examples. I'm like, this $5 million company and this $5 million company and this one has this much recurring revenue and this one doesn't, right? Guess what one is selling for more, like four times more than the other one, right? So if if all you do for the next three years is just focus on increasing your recurring revenue and your top line doesn't change at all, you have truly increased the value of your company. And people don't think along those lines when they prepare their their their company to be sold. The other thing is the strength of your customer base. You know, how long you've had them, what is your turn rate? You really need to be monitoring that because I can tell you right now, one of the very first reports that I'm being I'm always asked for by buyers is, give me the customer history, give me the longevity of the customer base, give me how much repeat revenue if you're a custom developer or recurring revenue if you're an MSP and how long's it been going on and what's the turn rate? That is so important to these buyers because again, they're buying the future, right? They're not buying how well you've sold to this customer base in the past, they want to know how long this customer base is going to stick around. And through either customer satisfaction and retention scores and your turn rate, you're able to paint a picture to buyers in terms of what the future revenue of this company is going to look like. So, and then the other thing that I always tell especially MSPs is everybody says to me, hey Linda, do I need to have a three-year contract? Isn't that more valuable than having a one year? And I'm like, you know what? And that by the way was the worst piece of information that was ever given to me. I was I was given that information by um a an advisor who said, you know what, Linda, you got to turn your one-year contracts into three. And when it came down to selling, that was not the case. My one-year contracts that were evergreen, meaning they would renew on their own every year were just as valuable than having a three-year contract. And you think about it, if you're a customer, you don't want to sign a three-year contract. Three years is eternity. It's too long. And plus as a a vendor, you don't know what the price of the product is that you're selling to that customer is going to look like in three years. So your margin may be eroding over that three-year period if you have nothing in that contract to adjust for changes in in the sales price by your vendor. So I just recommend a one-year contract that's evergreen and that's just as valuable. I'm actually glad to hear that because uh I I've heard sort of similar uh feedback as well that and I I I feel like this was often driven maybe by the private equity because you now that the private equity is starting to consolidate a lot of the vendors in the industry, you see a big push towards those three-year contracts for for the MSPs themselves with the vendors that they deal with. So I assumed that that was kind of the same uh the same um mathematics that they were using on on that side of the house and and maybe it was true. But I agree like especially if you get into these sort of what I I term as loveless marriages where you have a client and a vendor that absolutely hate each other, but they're they're sort of locked into an agreement, uh it's not necessarily good business. And I I I know a lot of people are quite nervous about having to put those three-year contracts in place for for their sales group and because they sort of recognize, uh I don't know, like is this feel right? Is this even what we want to do? So for for it to not have sort of the same level of uh influence maybe that people have been told, I think that's maybe a bit of a relief as well. It is and it makes the selling process a lot easier. My last company, we had one-year contracts with a 90-day out clause. So for some reason you were not happy with us in the first 90 days, you could leave, no problem. Beyond that, there was a buyout clause for that first year and then really that contract would just renew and it'd be a one more year after that, and one more year after that. And that that felt good to people. People felt, okay, there's not a lot of risk here. I can move on if I need to. And that's really what you need to do today is to uh eliminate as much risk and it just it it just allowed us to pick up customers left and right. Yeah, awesome. So, uh maybe back to the um the operation side of the house because this obviously this is an area I focus on, so I have some level of passion for as well. Um and I I want to understand maybe from you that um what are the things that that people should be looking at? Like if they're just in the very early stages of this and and obviously they can get a ton more info in your book, but um I I kind of rattled off some thoughts around what should the operations look like? Because a lot of people will often say, okay, here's my top line. I know how much uh revenue the the business makes. I'm often shocked by the number of people that don't really have a good sense of what's the profit. They understand the top line, they don't understand the bottom line. So those two numbers are going to be critical. What are the squishy parts in between that that we talked about the management and and the leadership and and those components. Can you expand a bit more on what are the components that people should be aware of inside their business that will judge whether or not it's uh going to get a higher resale value? Okay, well, this may be the accountant in me, but I got to tell you, I've walked into more companies where I can't make sense of the books. And I think you got to start there because there's no way as you said that you can benchmark yourself against other people because there are some benchmarks out there and I'm going to talk about the rule of 40 here in a second. So don't let me forget, Todd. Um you know, I I have a client right now, huge client, 70 plus million in revenue and up until a year and a half ago, they were running cash base accounting on QuickBooks. That's that's not usual. Um but when I looked at their financial statements initially, it was a roller coaster. I I mean, there was some months that cost of goods sold was greater than sales. I'm like, how's that possible? But because they were, you know, it was a timing issue between recording the sale of the invoice and recording the payment to the vendor. So I I see that a lot. My philosophy is if you're beyond a million in revenue, you better have accrual-based accounting so that you're accurately recording revenue and expense as as they happen. And if you need some help in that area and if you need to revamp your chart of accounts, it's money well worth invested now because the longer you wait, the harder it becomes to do because here's the other thing. When you're looking to sell, don't just give me the last year on an accrual basis, I need like the last three years, right? So you need to have three years of solid financial statements where the other thing here I see is that cost of goods sold is accurately stated, right? So I have a lot of partners that they just put the vendor costs up in cost of goods sold and most of their um engineers are down in GNA, right? And that we can't do that. We have to truly put all those engineers and if they're working on sales part of the time, then you allocate their revenue or their expense between cost of goods sold and selling and administrative expenses, but you really need to accurately do that because I can tell you right now, the one thing if you go in and get an LOI and and they give you a number for your business and after the due diligence, they realize that you haven't appropriately stated cost of goods sold, that's the sure fire thing to get your deal as we call it, retraded, right? Lowered most likely in value. And now you're, you know, two, three months into the due diligence and somebody's coming back with a different number and it's usually because people don't state their cost of goods sold correctly. So incredibly important. But that's the starting point because you can't do any kind of benchmarking of your company against industry standards unless you're doing that correctly. So let's talk about this rule of 40. Um and the rule of 40 is, and I talk about this in my book, but you can Google it as well. The rule of 40, it comes from SAS. It it was originated in SAS based companies, but it really can apply to any kind of company. And that is you take your top line revenue growth year over year and you add that to your bottom line percentage. So let's say that your top line revenue growth grew 20% from one year over the other and let's say your bottom line revenue, your number grew 5%. Um 20 plus 5% is your is your number, right? Well, what you really need to be striving for so 20 plus 5 is 25. What you really need to be striving for is that number to be 40. And the ideal metric for MSPs is a 25% top line year-over-year growth and a 15%. So 25% plus 15% equals 40. Now here's the thing. You really can't sustain that for more than three years. It's very hard to do. Studies show it's very hard to consistently do that for more than three years. But you but if you're looking to to sell, you need to hone in on that number and that may be adjusting your expenses, it may be adjusting other things, but if you can hone into that number over three years, that's the ultimate time to sell because people ask me, when's the ultimate time to sell? That's the numbers, the metrics you need to be striving for. I I think I have a blog post, I do have a blog post on that where I talk a little bit about what the cost of goods sold um numbers should be, what the SGNA numbers should be for a average best in class and high-performing companies are. So you can go and and check out my blog post blog post on Rosebizinc.com. I talk about that at length. But that's, you know, again, maybe it's the accountant in me, but that's where it all starts. You have to know your metrics, you have to hone in on your own numbers because everything else is pointless after, you know, if you if you don't have that as a starting point. Yeah, no, that's great. I think the other thing and I learned this accidentally, lots of lots of stuff I learned accidentally, Todd. But the other thing that I learned accidentally was, and you hear this so often, I think if you're beyond 3 million in revenue, you got to stop working in your business and start working on, right? It's hard to do that before that that revenue point. You really have to work in your business until you get to 3 million. But once you hit that magic number, it's time to start working on. It's like, okay, well, how do you make that transition? Well, here's my strategy for that. One of the things, I had a mentor and he was the CEO of a large software company. And the one thing that I love that he did about his company was he let all his employees that had more than seven years worth of tenure and I I believe in bringing that down to five, but his philosophy, if you had more than seven years worth of tenure in the company, in addition to your vacation, you could take a one-month sabbatical. And during that one month, you go out and you improve yourself as a person. I took that a little bit of a step further and said that everybody in the company could be eligible for a sabbatical. It it started with the management team initially, but then I brought it down to everybody because I realized the value of this. And in order to prepare for a sabbatical, you had to be gone for a month. You could not get any email whatsoever. So your email would get redirected to somebody else on the team during that month because we really wanted you to go off, learn something new, go travel, be yourself, give yourself time to think about the world, life, what you could do better for the world, whatever, whatever whatever your game was, go do it. But what had to happen within the organization is you had to let go of 100% of your job responsibilities. And mind you, as a CEO, it started with me. So I was the first person to take sabbatical. So I had to write down everything I did. It was a three-month process to get ready for it. The first month, I wrote down everything I did, when I did it, meticulously came up with a manual. The second month was, okay, here are the people who are going to do that job while I'm gone. And so that second month, I was just making sure that they did it correctly and that they were paying attention to the right thing and then I tweaked my manual because of course, the manual's never right the first time. You tweak it as people are doing things and asking questions. And then people and that second month would come back to me and go, hey Linda, I I actually kind of found a better way of doing this. Do you mind if I do it my way? I'm like, hey, you know what? If it gets the job done, go for it, right? If you can make this better, absolutely. And then the third month I was gone. And when I came back, guess what, Todd, I didn't take back all those responsibilities because people were doing them, right? And that did two things. One, it allowed me to work on the business and not in. And secondly, it showed a buyer that the business did not revolve around me. That was actually the more important thing that I didn't realize. It showed the buyer that the business did not evolve around me, that I could move on, be gone, and the business would still run on its own. Huge lesson. Yeah, that's awesome. That's like a master class in in delegation uh extracting yourself from from the business. And if you think about it, you do that with every single member of your management team and you you push that down through your entire customer base and people are like, oh well, you know, I can't do that. I only have 12 people in my company. Guess what? That was the first time I did it. I only had 12 people in my company when I went on my first sabbatical. It can be done with that few people. Yeah. People use that as an excuse. That's great. No, I think that's excellent advice, especially for the people that are in that kind of 1 million to 3 million space and it it's something I did want to expand on a little more uh just maybe to validate some of my thinking in this and see how how you compare on your notes is the the sub 5 million dollar companies, certainly the sub 3 million dollar companies, uh do you see them still like they they obviously don't get as much interest um as an acquisition target. And I think there's some valid reasons for that. Like partly what we just talked about that in a lot of cases they may uh function better as an aqua hire where like they're just acquiring the components of the business and largely just acquiring the book of business, the client base as well as the talent within the organization and that uh the owner of that company maybe becomes an executive, uh maybe they hold shares, but even not, it probably creates like an accelerated uh career growth position for them. And I think maybe some of the smaller groups may may not recognize the position that that can create the opportunity that that can create and they're trying to often see the value of the sweat equity that they put into the company and that doesn't show up when someone comes to purchase your business. Like it's hard to grow beyond sort of that that 1 million and that 3 million base and and we can respect that, but it's tough to value that for exactly that reason in my mind is that it's still so fundamentally revolves around those core people that there's not really a a business to behold uh to be held or sold beyond just the the talent and the client base that exists there. Do you see that similarly? I agree. So, so first of all, I've I've done a couple of transactions where the companies were uh less than 3 million in revenue. And they are being acquired for their geography and for their human capital. And the seller ends up going with the acquisition, right? And actually my second company, my ERP CRM bar company, I think we were somewhere in the three to four million in revenue and uh you know, we were we were bought for exactly that reason. We were bought for our location. They wanted a location in Southern California. We were bought for our human capital because we all know good people are super hard to find uh and then train them up. I mean it's just, you know, it's a time and effort of uh around that. And we were bought for our customer base because they saw our customer base and they did a lot more things than we did. So they sold products that we didn't sell and they knew they could sell that into our customer base and they did. And what was great for my people was that they all had now tremendous opportunities to learn more products, to consult on more products, to work with larger customers. Uh it was a win-win for everybody. And as the seller, you know, yes, there was some cash up front, but there was also a period where there was an earnout, right? So even though I didn't go along with that acquisition, my partner and I who my partner did go along with the acquisition, there was an earnout period and we were motivated to make sure that happened. And really, I I look back now it's been like six years or so and and virtually, I would say 80% of the team is still part of that original acquisition because they had such great opportunities. And as as an owner, at some point you you have to switch that mentality of can I grow this fast enough? Will I lose my best talent to other people if I don't provide more opportunities for these people or is being part of something larger going to be better for everybody. And there's a little bit of an ego trip there is part of that. You kind of have to let go I think a little bit of of that ego as in I can do it all, I can be all and realize that, you know, we all have our limitations and to know where being part of something better is going to be better for everybody, including yourself and including the revenue that you can make going forward. Yeah, awesome, well put. Yeah, I know I 100% agree with your sort of your view on that that uh set the ego aside, understand what you're actually interested in, what the benefits are for for the group as a whole, I think is really, really key to uh what your future will behold and uh the the for the rest of the group as well. So that's great. Well, we'll look to to wrap up here. Um do you have any uh any call to action or or something you would ask the the the listeners to to to do or dig into? Obviously we're going to link to your book uh and have them check that out if they're interested. Any other call to action that you would call out to the to the listening audience? I think there's two comments I'd like to make to close. First of all, selling your company is a process, it's not an event. And you may only get one try at it. Thankfully, I had multiple opportunities to make mistakes, but you don't you want to make as few mistakes as possible. And not not to pitch the book, get acquired for millions, but this is not a book that you buy necessarily when you're getting ready to step into that process like in the next month. I mean, yes, you'll get a lot out of that book reading it during that process as well. But this is more of a Bible that sits kind of at your nightstand that you kind of look at and read every night because the things that I talk about in the book, some of them take time. Creating IP takes time, discovering your own organizational IP takes time. Um eliminating your single points of of failure takes time. Gosh, that's a huge one. And that's a tough one between that one and 3 million time period, revenue time period, you always have single points of failure during those revenue time periods. Once you get beyond three, you can sort of eliminating those. But um really understanding the process. I actually have a quiz um that you can take on how ready you are to sell and we'll put we should put that Todd in the show notes as well. But the book uh the book get acquired for millions, if you purchase the book, you get access to the value value maximizer assessment. And so as part of the book, you get a free version of that. And also, I just Todd, put the book out on Audible. I forgot to mention that. It just came out like a week ago on Audible and there is a chapter, there's a free chapter if you go to the book page on the website, you can listen to the first chapter for free. And it's a fictional character, his name is Robert, and we listen to his story as he's putting the final touches on his closing statement and he talks about his four-year journey in in terms of how he got there. And it's I think it's a great story that everybody can relate to. And the rest of the book really talks about how you execute on that. Excellent. Well, very cool. And uh any social links or any places on the internet that people should uh should reach out to find you if they want to ask more? Yes, I I'm very very uh active on LinkedIn, so you can just find me under K as the initial K Linda Rose on on LinkedIn and the same thing with on Twitter, K Linda Rose on Twitter as well. Awesome. Well, I appreciate your time, Linda, and hopefully this has been helpful for everyone listening. Have a great day. Thank you, Todd. Have a great day as well.