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Colman Swisher: From CIO to Fighting Private Equity
20 Plays1 month ago
In this episode of The Unfolding Thought Podcast, Eric Pratum speaks with Colman Swisher, former CIO of an international healthcare logistics company, about his unexpected journey from being the first technology hire to leading a fight against private equity–driven decisions.
Colman shares how he built critical systems from the ground up—transforming operations that once ran on little more than email into a fully integrated, data-driven logistics network. He explains what it’s like to navigate the high-stakes world of medical supply chain, why private equity ownership can create systemic risk, and how values-based leadership can hold the line against purely financial motives.
Topics Explored:
- Building tech infrastructure in a mission-critical industry from scratch
- The unique pressures of transporting life-saving medical products
- How private equity can undermine operational stability
- Strategies for resisting short-termism while protecting customers and teams
- Lessons in leadership from scaling a high-stakes logistics business
Links:
- Connect with Colman on LinkedIn: https://www.linkedin.com/in/colman-swisher/
- Check out Colman’s business Boldr Futures: https://boldrfutures.com
- Listen to the conversation with Colman’s business partner Jeremy Nulik: https://unfoldingthought.com/jeremy-nulik-how-vision-shapes-strategy/
- Check out Value Builder: https://valuebuilder.com
Have a recommendation? A question? Contact Eric: eric@inboundandagile.com
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Transcript
00:00:02
Speaker
Coleman, thank you for joining me. How does one go from being the CIO of a healthcare logistics firm to fighting a battle against private equity?
00:00:15
Speaker
i would like to say that it was an exciting story. It probably isn't to most people. It was exciting for me to start at a medical logistics company at 23, being the only tech person there. i was their first technology hire. And at the time, you know, they basically had email, you know, so they were shipping radio pharmaceuticals across the country for some of the biggest manufacturers and had yet to implement a TMS system. So a TMS is a transportation management system. It's what all logistics and shipping and supply chain companies
00:00:53
Speaker
use to track all of their shipments. It's what the drivers use to scan their orders and and how, you know, the company has visibility in, you know, their operations. So it's the backbone of their operations. And so at 23, they hired me to implement their TMS. And I think at the time I was just, you know, I was young and dumb and, you know, smart enough, a cheap hire and just hubristic enough to think that I could do that. So,
00:01:20
Speaker
yeah That's how I got my start. And it really just, as they grew, i grew with them. So it was a very nice setup for you know somebody right out of college. And it's something that I would recommend to any young people out there that might be listening to this. It's go work for a smaller company, be a big fish in a small pond, and stick around for a while.
00:01:42
Speaker
That was the first part of my career, was working with them. And as they grew and expanded, you know just I grew along with them. To get to the transition of Boulder Futures, I might have to go a little bit more in depth on on that career.
00:01:58
Speaker
When I was working at Associated Couriers, they were the largest radiopharmaceutical logistics ah company in the country. they had ah They had sold to private equity, and so ah they wanted to embark on a buy and build strategy.
00:02:13
Speaker
And at this time, I had been working there for around two and a half years. And in order to do these acquisition integrations, they wanted somebody who was built very familiar with their systems and their processes and their culture and had relationships within the company.
00:02:27
Speaker
So I spearheaded their integration project. So they would buy ah these companies and I would lead the integration effort. At the time, i had no experience formally with project management and or acquisition integration. So the very first thing that I did was I went and did a ton of research. I bought as many books as I could, ah read articles, watched interviews, got my hands on as much information as I possibly could.
00:02:55
Speaker
Through that research, I learned that depending on where you pull the statistics from, 80 to 90 percent of acquisitions fail to meet their intended target. So, you know, that was that was frightening enough for me and enough of a motivation to really take to really take that responsibility seriously.
00:03:15
Speaker
And so my approach I knew would need to be very detail oriented. It would need to be methodical. ah It would have to be very well planned out and well executed. So the other thing that I learned was the longer the integration lasts, the higher the chance of it failing.
00:03:33
Speaker
So what was born from that was this 90-day integration playbook. The goal was, you know, right when the but the deal was inked to kick off the integration project.
00:03:44
Speaker
So the goal is to have the these integrations done within 90 days just using internal resources. And we ran that playbook four times. And each time we ran the playbook, ah it got a little bit better and we got a little bit better at it.
00:03:58
Speaker
When you say integration efforts, you're talking about everything. People management. I don't know if you got into culture, but how are we determining lines of communication or who has responsibility for what in addition to technology?
00:04:15
Speaker
Yeah, yeah, exactly. It was it was the whole thing. So the way that we broke it down was into work streams. So we basically mapped each department to a work stream. So our IT t team would work with the IT t team of the acquired company to migrate TMS and you know Microsoft tenants.
00:04:37
Speaker
We'd have the ah HR teams from both companies working together to migrate to the HRIS to implement, you know, the new benefit system. So it was in that way that we had like multiple work streams, multiple projects.
00:04:51
Speaker
And it was also cool doing it that way because ah the teams from both companies got to build a working relationship with one another. ah right out of the gates, you know, have a large 90-day integration effort that they could check off as as a quick win and a good start to their working relationship.
00:05:10
Speaker
So, and yeah, the the culture aspect of it is, yeah, still underappreciated and on how difficult it is to integrate and and mesh cultures. but We could have a whole podcast about that, but I'm glad that you brought that up. So,
00:05:24
Speaker
So yeah, I mean, that was a that was a big part ah of you know what sort of molded my my competency as as a professional. Other things that I did along with that, it was I was a VP of strategy before I was a CIO.
00:05:39
Speaker
And so that was really organizational development, corporate development. This was Annual planning, quarterly goal setting, implementing the systems and processes and meetings thats that you know made the heartbeat of the company and how the company works.
00:05:56
Speaker
how the company operated. So working under private equity was fun until it wasn't. For most of my tenure there, while we were owned by private equity, they were pretty much hands-off, right? It was, hey, we want to go buy this company, they'd buy it, and then they'd just hand it to us and let us do our thing.
00:06:12
Speaker
But the private equity playbook is to eventually, you know, turn around and sell the rolled-up company for a profit. And so ah when... They decided it was time to start streamlining operations, making the company more profitable so that when they do go to sell, the profits were you know as juicy as possible for the trailing three years up to the sale.
00:06:34
Speaker
I didn't stick around very long. but When I saw the writing on the walls of you know the cost cutting, the efficiencies, the reorganization, um pretty much everybody was a sitting duck and everybody in the leadership team was a ah sitting duck.
00:06:49
Speaker
So I didn't really want to stick around and and see them, you know, dismantle everything and and worry about losing my job. but You know, I just cut it off at the pass and and jumped out. So I think that I had pretty good timing there. But it was on the other side of leaving the company. I didn't really have a plan.
00:07:05
Speaker
on what I was going to do. But, you know, hey, I've got all these this these skills, this experience, these competencies that I can bring to the marketplace and help other companies who need these these skills. So that was sort of the first ah inception of what Boulder Futures would become.
00:07:23
Speaker
I met up with Jeremy Nulik, who's my business partner at Boulder Futures. He was working for a company called Big Wide Sky with you, Eric. We all worked together.
00:07:34
Speaker
Briefly, you guys did some work for Associated Couriers. And so that's how I got to know Jeremy. And we linked up in doing some research on exit planning and value building.
00:07:45
Speaker
Most business owners don't know what their business is worth. They just decide one day, well, I think it's time to exit my business. I'd like to exit next year, so I'm going to go talk to a broker. And the broker ah We'll tell you what your business is worth and then you go try to sell the business.
00:08:00
Speaker
What most business owners don't take into consideration is that the price of their business or the value of their business is really born of a formula that is typically, like as an example, EBITDA times a market multiple or a multiple for the business. And the magic happens really in the multiple. So In a given industry, the average multiples might be a four or a five, whereas the best-in-class businesses in that industry might be selling for a seven or an eight.
00:08:33
Speaker
And so the question is, what's the difference between the four X multiple companies and and the eights? And it really comes down to, well, it's buyer preference. Buyers are willing to pay more money for certain companies that have certain qualities and characteristics.
00:08:50
Speaker
And every company can strive to have those qualities and characteristics. They're not something that can be done overnight, usually. Value building or implementing these systems, processes, qualities in the business that that buyers are willing to pay a lot more for, they're willing to pay a lot more for them because They're atypical and in in that industry or they're atypical in the business.
00:09:14
Speaker
ah They mean that their investment risk is a lot lower. Their probability of a return on investment is higher. The probability that the company is going to do well and scale and grow is much higher.
00:09:26
Speaker
So real building value or building the price of your company is a multi-year effort. It's not something that can be done you know in a year or two leading up to the sale.
00:09:38
Speaker
So yeah, that's what Boulder Futures is. And I'm going to pick on a couple of things before we come back around to private equity specifically.
00:09:50
Speaker
So I don't want to lose that thread, but I think you said that 80 to 90% of acquisitions fail to meet their intended targets. And I believe that the intended targets are things like well, we paid $10 million dollars for this firm and we expect that we will recoup our expenses or that we will double that cost or whatever it is in a certain amount of time. Is that what you mean by intended targets?
00:10:28
Speaker
Yes, yes. And, you know, that the way that that is phrased is vague because, you know, intended targets are different for every acquisition. But it is the intended targets of the acquisition that justify the acquisition itself, right?
00:10:44
Speaker
And so if a company is looking to do an acquisition because they'll be able to find synergies, cut costs, increase profits, ah then this amount of investment that they put in, if things go according to plan, will pay off by you know X percent or X million or whatever.
00:11:02
Speaker
And so 80 to 90 percent of the time, those targets aren't reached. And so ah you know the justification for the acquisition ah in hindsight would have been different right so it's probably the best way that i can articulate that but yeah i mean the bottom line is you know you buy a company for a reason um and you map out those reasons it's usually return on investment or some sort of geographical or strategic competency that that's added to the business and if that's not achieved then what was the acquisition for
00:11:35
Speaker
right So I don't know what percentage of acquisitions are disastrous, but it's it's a non-zero number and that was enough of of a shocking statistic ah to give me the motivation I needed in order to do it well.
00:11:51
Speaker
And also the motivation that I could position. To everybody else in the company, you know, hey, this is why we're doing things this way, because 80 to 90% of these things fail.
00:12:03
Speaker
And of those that don't fail, ah here are the characteristics, right? Here's how they run the integration. And so we're going to do it that way. You talked about your 90-day playbook.
00:12:15
Speaker
And then as you were going through talking about acquisitions in more depth and talking briefly about private equity,
00:12:27
Speaker
I think what I put together there is that you were trying to ensure that as Associated Couriers was dealing with having been acquired by private equity and also trying to hit its goals, some of which were growth through acquisition, that that you were trying to ensure that you had a higher success rate, that you got a positive r ROI out of those growth efforts by...
00:13:01
Speaker
building, you know, by adding to, you know, two plus two is greater than four sort of idea here. But i I feel like maybe it was implied in what you were saying more generally about private equity, that there is often either no playbook or the playbook doesn't happen to work or there's no real interest in having a playbook.
00:13:28
Speaker
And so the ah standard approach to ensuring that you meet the intended targets, if we keep with the same terminology, is just, I'm going to use air quotes here, efficiency.
00:13:40
Speaker
you know we The acquiring firm has an HR team already, so we're going to cut the acquired firm's HR team. That is you know a dollar saved We we ah have an accounting team already, so we're going to cut the accounting team.
00:13:56
Speaker
Where is it that we can find quote unquote efficiencies? And so then because of this approach, and please do tell me if I'm wrong, but my impression is that because of the approach that, well, we'll just gut the firm that we acquire.
00:14:13
Speaker
So we have a brand, we have a book of business, we have supply chain, warehouses, whatever it is. That is the approach to the standard approach for private equity equity to meeting intended targets.
00:14:27
Speaker
And you were trying to do something that whether it was some foresight of your own or really by intention, you were trying to build something greater rather than just trimming the fat, if I can put it that way.
00:14:40
Speaker
Yeah. And I mean, credit where credit is due. This was, you know, at the time, Matt Silverberg was the CEO of Associated Couriers. Fantastic, fantastic entrepreneur. I mean, ah talk about somebody who really cares about people, ah employees, customers, company culture, you know, where a lot of companies take company culture and, you know, sort of Talk about it in this buzzwordy thing.
00:15:07
Speaker
um You know, Matt was putting his money where his mouth was and really, really wanted to make to build a company that people liked working for. Right. And something he would say all the time is if you take care of the people, the profits would come.
00:15:21
Speaker
And so, you know, I don't know if that's true for everybody, but it certainly worked at Associated Couriers. Great reputation with customers, always putting customers first, you know, really taking care of of people and employees and building a company culture that, you know, it's just an awesome company to work for. That was that is the whole idea.
00:15:41
Speaker
so So, yeah, to answer your question, it wasn't just about marketing. ah you know, buy this company, find efficiencies, and then, you know, manage everything through the lens of a spreadsheet, which is how it's often done, right?
00:15:56
Speaker
So some of the core things that we did with our acquisitions that kind of run counter to, you know, the the mainstream playbook is we we wouldn't do layoffs.
00:16:09
Speaker
We would ah make sure that we maintained as many people from from both sides of the company as possible, especially during that 90-day integration piece, right? So that 90-day integration is when the company is the most vulnerable. So if you have employees leave that have key customer relationships or key knowledge, you know yeah it's it's a lot more difficult.
00:16:32
Speaker
um The other thing that we would do is we would never assume that we ah had the best system or process or approach or way of doing things. It was an iterative. It was a learning experience, right? So yeah the entrepreneurs of the companies that we bought were we're ah brilliant entrepreneurs. they They were smart. They had experience. They'd been running their company they for a long time. They knew their market.
00:16:57
Speaker
you know And so when we would bring them in, we would try to soak up as much knowledge from them as possible. And oftentimes, we would you know we would want to keep them as employees for you know longer than the 90-day period, maybe a year or two, or in some cases, longer, I remember.
00:17:11
Speaker
but But yeah, it was you know businesses are built by people. And so how do you get the best out of the people that are there, right? And so, you know, attrition happens, right?
00:17:24
Speaker
Employee churn happens. If somebody needs to be fired, we we can deal with that later. um You know, but it wasn't it wasn't our first priority, right, at all. You know, you you set up this example of...
00:17:39
Speaker
one company or maybe the average company in an industry has a valuation of four to five X. And then there's some standout organization that has a valuation multiplier.
00:17:53
Speaker
They sell for a multiple or could sell for a multiple of seven to eight X. I realize this is not binary, but do you think that an acquiring firm is more likely to purchase a firm that might go for a multiple of seven to eight X or whatever the higher multiple is in that industry, that they are more likely to purchase that firm because there is a greater likelihood of success on that integration or with that acquisition?
00:18:27
Speaker
Or do you think, again, it's not binary, but, or do you think that there are things that they're purchasing, it's more attractive because it's a bigger firm, it has something special, whatever, but then that the threat that the acquisition is a failure or that the integration is a failure is just increased because,
00:18:49
Speaker
We've now paid much more money for this thing. So it has to succeed. I think that you're spot on with it not being binary. It's definitely case by case. But just for anybody listening, like the general buy and build playbook as it's typically run by private equity.
00:19:06
Speaker
And speaking in generalities, what you usually have is you have a platform company, right? That will be the acquiring company. they typically That company is typically more mature, so they'll be large enough to have different departments and systems and processes and technology you know that they can bolt on smaller acquisitions to.
00:19:27
Speaker
Typically, they'll want to make sure that that platform company is already buttoned up and at a high high multiple or or has a higher valuation than the market. right So we'll say, for sake of example, a $100 billion dollar company,
00:19:42
Speaker
ah that has $10 million in EBITDA and it goes for an 8X. So it's an $80 million dollar organization. So what they might do over the course of you know a year or two buy, let's say they buy five $20 million dollar ah companies and they have $2 million in EBITDA each. right So they're acquiring an extra $10 million in EBITDA.
00:20:08
Speaker
But they buy those companies for 5X. Okay? So that's 10 million that they acquired at a 5X multiple. So that's 50. So 50 million is what they spent to acquire those companies.
00:20:23
Speaker
When they integrate them into the larger company, they now become part of an 8X organization. So if they want to turn around and sell that company, again, like, you know, simple numbers, EBITDA doesn't change.
00:20:36
Speaker
They don't grow. They don't do anything. They just bolt these companies on. Now they have, ah you know, this extra 10 million EBITDA at an 8X where they acquired it for a 5X.
00:20:48
Speaker
So you get this $30 million dollars increase in value that basically came out of nowhere other than acquiring them and integrating them. So... And if your integration costs are low like they were for us, I mean, the integration costs are negligible compared to the amount of, you know, value that gets created. So, but, you know, I was operating in the in the small small to medium market companies, right?
00:21:12
Speaker
So companies that were around so anywhere from $3 to $30 million in revenue. You know, typically, like yeah I've seen these playbooks run with larger companies. I'm interested in bringing ah skills, competencies, experience, tactics that would normally be reserved for larger companies.
00:21:31
Speaker
I'm interested in seeing, you know family owned companies, you know, implement these tactics. Right. And if there's all these companies out there for sale, you know, who's going to buy them? Is it going to be private equity?
00:21:42
Speaker
Is it going to be a family owned company? Is it going to be an employee owned company? I can tell you what, there were a lot of ah days where I, you know, sort of thought, who am I doing this for, right? Who is this benefiting? Of course, you know, I'm getting, you know, skills and experience and I'm getting paid.
00:21:59
Speaker
But at the end of the day, you know, you can't help but wonder like, okay, so... who Who am I doing this all for? Who's going to profit at the end of the day here? And, you know, coming out of that experience, it was clear to me that like, you know, I would love to see this value be created by companies that are owned and operated by awesome people, people that want to create a great company, a great company to work for.
00:22:25
Speaker
that want to take care of their customers and their employees, that want to build long-term value, that want to be a beacon in the community. Private equity, by and large,
00:22:35
Speaker
you know, speaking in generalities, not every private equity company is is evil or whatever, but, you know, by and large, that they're forced in this kind of short-term thinking, this short-term profit maximizing thinking.
00:22:49
Speaker
And so, you know, how they treat their companies, the work that they do, but the moves that they make are, you know, all for the almighty dollar, which is fine. You know, we live in a capitalistic society. You need to make money.
00:23:04
Speaker
You know, these are employers. But by and large, the thing that gets me really excited is being able to bring this to family owned companies, right? Owner operators, people who have families, people who care about ah their employees, their customers, their companies.
00:23:19
Speaker
You know, that's that's really what who, you know, I want to support with the work that we do. So let's say that let's give a scenario or situation.
00:23:32
Speaker
i started a I started as a plumber at some age. you know I went and got whatever my licensing was or something, and had some success.
00:23:44
Speaker
Eventually, i end up with a plumbing firm that has some number of employees. I don't know what it is, but we're now doing... five, maybe $10 million dollars a year. And I've been doing this for 15 years.
00:24:02
Speaker
And whatever the specifics of the company are in my financial situation, I've gotten to a point in my life where I'm thinking, what's next? You know, am I going to keep running this firm?
00:24:14
Speaker
And I going to take it from being, i don't know, let's say it's 50 employees, perhaps. I don't even know if that's appropriate to five or $10 million dollars a year.
00:24:26
Speaker
It doesn't really matter. Am I going to take it from being that number of employees to double that so that we can grow? Am I going to expand into other markets? Whatever.
00:24:37
Speaker
Well, one of my options is... to acquire other firms. One of my options, which is probably quite a bit easier if my firm is well run, is to sell to someone else.
00:24:52
Speaker
So I'm looking at selling. It doesn't really matter what age I am. I could be 40. I could be 65. I'm looking at selling. And I think what I hear in some of what you're saying is
00:25:08
Speaker
If there is ah private equity firm that's out there or some roll-ups, even whether they're technically private equity or not, I think I hear you saying that there's a greater threat that as they acquire my firm, it's not handled well.
00:25:25
Speaker
And so my legacy, as in anything that I've kind of built that could last long, it could be an impact on my community, my brand name, whatever, there's a greater threat that that gets tarnished.
00:25:38
Speaker
when the acquisition is not handled well, then if I put some forethought into this and I build a better managed firm, I figure out how to sell to my employees or take some other path.
00:25:55
Speaker
And if I'm hearing you correctly, then part of what your company Boulder Futures is doing is not necessarily saying that private equity is evil, but rather that there are other paths that I as this plumbing entrepreneur can take.
00:26:13
Speaker
Is that right? Yes, absolutely. have a lot of directions I could go with this. So let's just start with the current current state of affairs. Baby boomers own 40% of the companies in the United States and they're retired.
00:26:29
Speaker
So what's going to happen to those businesses right but they're They're going to change hands or they're going to liquidate, right? Those are the only yeah only two options. So every entrepreneur will eventually exit their business.
00:26:42
Speaker
um And once we get over that fact, then we can talk and we can say, look, there's never ah wrong time to start planning for it. Just like retirement, right? You don't wait to talk about retirement or think about it or start saving for retirement when you're ready to retire, right?
00:27:00
Speaker
It's something that you think of long in advance. And the further in advance that you think about it, plan for it, take action on it, the better off you'll be. And we're talking a compounding interest right on on the outcomes.
00:27:15
Speaker
So, yeah, I mean, if there's one thing I can impress on people today, ah it is that you know planning for your exit is a is a lifetime endeavor. right there's There's never a wrong time to start.
00:27:27
Speaker
It's always now. It's a hall always yesterday. um So with these 40% of businesses owned by baby boomers, we're still we're talking about $10 to $12 trillion in assets, business assets that will transfer.
00:27:45
Speaker
So why is it important to start thinking about this sooner rather than later? 75% of business owners regret their decision to sell within 12 months after selling.
00:27:56
Speaker
So three out of four business owners that sell their business regret it. That could be because they realize they could have sold for more. Maybe they feel like they sold to the wrong buyer who's erasing their legacy or isn't treating their employees correctly.
00:28:10
Speaker
You know, it could be a loss of identity and purpose. Like, hey, I thought it'd be a good idea to sell my business, but now, you know, I don't know who I am. I've been operating my business for 30 years. like Who am i So lots of reasons that they could potentially regret the decision. We're talking, this is like a dire situation, actually, as as we zoom out. so So three out of four business owners that are able to sell their business will regret the decision.
00:28:33
Speaker
Now, if we take a step back even further from that, 70 to 80% of businesses that go to market will not sell. Period. Right? So if they're able to get over that hump and get their business sold, there's a 75% chance that they're going to regret that decision.
00:28:50
Speaker
So there's there's some other things going on in the macro here that are worth talking about. The average business owner has 80% of their net worth tied to the business, right?
00:29:01
Speaker
So the business is their retirement account. It is their nest egg. It is 80% their wealth And so, you know, not being able to unlock that wealth by not being able to sell the business means ah that wealth will not be accessible to them unless they sell their business at it at a steep discount or liquidate it for parts, which nobody really ever wants to do.
00:29:23
Speaker
The other diverse statistic here is that 50% of exits are forced, right? they're They happen because of uncontrollable factors and usually negative factors, right?
00:29:34
Speaker
So if you're a business owner today, there's a 50-50 chance that you're going to be forced to sell or liquidate your business at some point in the future due to unforeseen circumstances. That could be, you know, ah you die or a spouse dies or there's a family death and you can't run the company anymore.
00:29:50
Speaker
It could be due to a divorce. It could be due to you know, disability happening. It could be due ah to and any other sort of distress like like burnout. Right.
00:30:02
Speaker
But the the bottom line is that there's a 50-50 chance that one day you're going to wake up and you're going to have to sell your business for some reason or exit the business. Putting all of these things together, 50% of business exits are forced. 70% to 80% of businesses that go to market won't sell. 80% of the average business owner's net worth is tied up in the business.
00:30:22
Speaker
And once they do sell, there's a three out of four chance that they're going to regret the decision. So the odds are not stacked in business owners favor, which is not freaking fair, because, you know, they're the backbone of the economy. I mean, small businesses, small and medium sized businesses are responsible for something like 80% of net new jobs, like they are job creators.
00:30:45
Speaker
Okay. And so they're the backbone of our economy. They're the ones taking on all the risk to employ the rest of us. And I think that for the odds to be stacked against them, like that is just not fair. And I think that business owners deserve better.
00:31:00
Speaker
So, you know, so let's dig into like the actual, you know, mechanics of selling a business. So, Understandably so. ah 95% of M&A professionals ah believe that business owners have unrealistic ideas of what their company is worth.
00:31:19
Speaker
And, you know, that's understandable, right? If it if it's your business, you're you're expecting to get top dollar for your business. um But 95% of them in a professional say that it's just an unrealistic number. So the first thing we need to do is however much you think it's worth, knock it down because you're probably not going to get what you think it's worth.
00:31:38
Speaker
Around 50% of business owners say that they have a good idea of what their business is worth, but only 20% have actually had a formal business valuation in ah the past two years.
00:31:51
Speaker
So we also have this, but these unrealistic expectations and not really knowing what the business is worth going into it. It sounds to me like, you know, I have been, um been going through school and I'm getting,
00:32:07
Speaker
A's or B's or whatever, you know, um I'm doing well enough or I feel like I'm doing well enough. And then I'm asked to tell you, well, where do you think, Eric, that you stand stack up in the grand scheme of all students on this subject?
00:32:26
Speaker
And I say, i pick a number, but no one has yet come from the outside and said, well, here's your SAT score. Or because I work with a lot of students, here's how I see you fitting in.
00:32:42
Speaker
And one way or another, I'm able to run with this idea well, me being above average, we all think we're above average, right?
00:32:52
Speaker
And i run into sort of a brick wall of reality that I think my business is worth $10 million dollars and i try to go to market and I'm getting, if I get any offers at all, I'm getting offers of a million or 2 million and there are bumps along the road to eventually exiting.
00:33:16
Speaker
I either, like you're saying, liquidate the business or i sell and I'm just really unhappy because I didn't get what I wanted or my people don't get taken care of or whatever else. And part of it is, i think, implied then.
00:33:32
Speaker
If you as a business owner don't learn how to appropriately value your business at some point, well in advance, you know, in advance enough that you can course correct,
00:33:44
Speaker
you should be seeking some outside guidance around your valuation. Yeah. Yeah. I mean, spot on. i mean, you're, you're, you're moving where the puck is going, Eric. Uh, I, I dig it.
00:33:55
Speaker
Absolutely. So, you know, that, that, you know, Most business owners have an inflated idea of what their business is worth. And then, you know, they try to go to market to sell their business, um you know, and they're not getting the offers that they were expecting, right?
00:34:10
Speaker
ah Well, we can get a business valuation done today and give you a pretty darn good estimate of what your business is worth. And we know why it's worth what it's worth from profits to the structure of the business.
00:34:22
Speaker
um You know, how is it run? Is there technology? Is it up to date? Do you have a management team in place? How dependent is the business? on the owner to run the day-to-day operations. These are all examples of things that impact, you know, the value or the price of business.
00:34:37
Speaker
And the earlier we get a jump on that, we say, well, this is what ah what it's worth and here's why. Now we can start systematically, you know, attacking these things that are detracting value from the business and start identifying areas of opportunity that will increase the value of the business. and i And I can get into that, you know, in a little bit.
00:34:56
Speaker
The other thing that I wanted to mention here is when it does when it comes to that business owner going to market to sell the business, in your example, hey, it's worth $10 million, okay. And then I'm getting offers for $5 million.
00:35:08
Speaker
Yeah, that's common. A lot of owners think that they'll be able to sell their business one day and get ah you know a nice, fat, juicy cash transaction that will go straight into their bank account. And the fact of the matter is that almost nobody sells their business for, you know, an all cash deal.
00:35:25
Speaker
It's exceedingly rare. And when they do, they're typically getting 40 to 60 percent of that asking price. um So most deals, they're going to need to be financed and in, you know, one way or another. So what I think is interesting here is the more an owner is willing to finance the deal themselves, right? Seller financing. So instead of asking for all cash up front, they might say, you know, give me 50% of the cash now and then the rest of the deal, I will finance the deal myself. So the new owner can pay me the other $5 million from the profits of the company that they just acquired over the course of, you know, 5, 7, 10 years.
00:36:08
Speaker
And when owners are amenable to that idea, they you know the price of their business goes up or the price that they're willing to get for their business. So like I said, if they if they demand an all-cash deal, they're just not going to get 100% of that purchase price.
00:36:23
Speaker
And the more that they are willing to finance it themselves, I think ah it's it's if an owner is willing to sell or finance up to two thirds of the cost of the business, so 66, 67 percent, the chance that they're going to get 100 percent of the price that they want goes up.
00:36:43
Speaker
Well, it's I think it goes up to 100 percent. And the chance of them selling goes up to 83 percent. So instead of getting half of what it's worth and having a 70, 80% chance of not selling, it goes, well, now you can get the full purchase price and you've got 80% chance of selling.
00:37:01
Speaker
And the more they sell or finance beyond that, they can actually command higher purchase price than the value of the company, right? Because of, you know, the time value of money and interest. So if they sell or finance 80% of the deal, that buyer is going to be willing to pay them a little bit extra, right? Because they made the deal possible and easier and less risk for ah the buyer.
00:37:23
Speaker
So, so yeah, I mean, there, there are a lot of, you know other considerations when it comes to ah selling your business and and exiting and maximizing the chance that you are able to get as much as you know, you'd like to get for it and the probability of the, of the sale being as high as possible.
00:37:40
Speaker
You must want to get involved with your clients years ahead of them wanting to exit so that they are thinking appropriately, not just about what the future might look like, but also you said skating where the puck is going.
00:37:55
Speaker
You know, if they want the puck to be in a certain place five years from now, they need to start doing the work to skate that direction. Is that right? Yeah, no, that's that's that's that's exactly right. I mean, look, we want to take the guesswork out of understanding what your company is worth.
00:38:14
Speaker
and So we can get ah business valuation and that's that's all fine and dandy. um But what we are really interested in is in-depth due diligence level understanding of why your company is worth what it is worth. right So The idea being, can we systematically build value in the company?
00:38:40
Speaker
So if we have a 200 or 300 point assessment that analyzes every single aspect of the company, and we figure out how to score every single quality of the business on a scale of you know one to six, then we can get a holistic score for your company and map it to a valuation.
00:39:05
Speaker
So this serves two purposes. This is, first of all, Now we have a really clear understanding of what the company is worth and why. The second piece is now we have a roadmap on how to build value. okay so So there are several things that impact the value of your company.
00:39:23
Speaker
These could be things like you know how strong are your customer relationships? How transferable are those relationships with your customers?
00:39:34
Speaker
from from one owner to another, right? You know, what's your what's your reputation in the marketplace? Actually, there's some there's something else I need to i need to step back and and reframe this for for the context of this conversation. And that is that 80% of the value, up to 80% of the value of a company cannot be found on a spreadsheet, right? It can't be found in a P&L.
00:39:59
Speaker
It can't be found on a balance sheet. And these are things that we call intangible capital. Right. So tangible capital and profit ah is part of the equation on what your business is worth.
00:40:12
Speaker
But the rest of it is more of an art form of like, what is a buyer willing to pay? We know, well, the buyer knows what they're looking for. They know what they see during due diligence to say, like, I don't like that. That adds risk. I'm going to ask for a reduced price. Right. So up to 80% of the value of a company can be mapped to these things that we call intangible capital, right? You can't tie a value directly to it, but it impacts the value of your company. So the best thing that we can do to map those intangible items is by talking about them as if they're qualities of a company, right?
00:40:50
Speaker
So qualities of a company are are things that buyers are willing to pay more for. And buyers are willing to pay for, you know, a a ah strong, robust, risk-resilient company that is poised for growth.
00:41:06
Speaker
that can scale, that has a strong management team with systems and processes and technology that isn't dependent on the owner. So these are just a few examples of of these intangible capital. And we've got an assessment and a scoring guide that goes through all of them, you know, one by one, where we can map a score to your company and map the value of your company to these intangible capitals. so But really, that's what a buyer is doing when they're going to look at you know potentially purchasing your companies.
00:41:36
Speaker
They're taking that average market multiple and they're comparing your business to other businesses in the marketplace. And they're looking for red flags, risk, and that risk is going to you know translate to us to a lower purchase price.
00:41:50
Speaker
So for business owners that get ahead of this, Right. They don't just say, hey, i want to sell my business and I'm going to talk to a broker so I can sell next year. They work with somebody like us.
00:42:01
Speaker
Right. Right out of the gates. We do the business valuation. We figure out around what your business is worth. ah We map out all of the intangible capital items ah for your business.
00:42:13
Speaker
And then we say, okay, well, what is a best-in-class business worth in your industry? So we might say that your your business is worth 4X, but a best-in-class business in your industry might be worth an 8X.
00:42:26
Speaker
So now we've got something to compare it to, right? Now we can say, here are the qualities of the 8X businesses, the businesses that are the same size as yours that command an 8X.
00:42:37
Speaker
And here are their qualities, map them against your qualities. and Now we have a roadmap. right We have a roadmap of what's different between your company and these best-in-class companies. And we can start chipping away at making these improvements to get your business closer to that 8x valuation.
00:42:58
Speaker
Do you think that the typical business owner either has some sense, even if it's unconscious, of some of those intangible assets or that intangible...
00:43:11
Speaker
capital intangible value and as a result when i believe that my business is worth 10 million dollars i i have some sense of it but maybe i just don't know how to show or communicate why it's worth 10 million dollars and or i think it can probably these two things can probably happen at the same time do you think that it's likely that business owners undervalue their business or misunderstand it because I think it's worth $10 million dollars and I don't even realize that there are these things that add together that should be making it worth $10 million. dollars
00:43:55
Speaker
I'm just, it's like a language that I don't speak. Yeah. I mean, I love that you're calling that out because a lot of entrepreneurs do have this intuitive understanding of what is making their company more valuable. What I, what I say all the time is a value focused strategy is good business strategy, right?
00:44:19
Speaker
So buyers are looking to buy good, strong businesses, strategic businesses, right? The businesses that don't depend on the owner to operate, right? If the owner walks away for six months, what happens to the business? Does it go under?
00:44:32
Speaker
Does it shrink? Or does it grow and get better in the owner's absence? That's the number one thing that you can do to increase productivity. the value of your business. They also want to see that it's got growth capacity, that you've got a sales and marketing engine, that sales and marketing are happening, they're not dependent on the owner, and that the business has the capacity to scale, right? ah As you're bringing on new customers, are or your operations able to scale with that.
00:44:58
Speaker
ah Is it resilient to risk? So like, aside from just financial risk or insurance risk, other risks in the risk profile of like, what's the risk that if an employee leaves, they'll take, you know, critical knowledge with them.
00:45:11
Speaker
but What's the mix of your customers, right? Do you have any one customer that accounts for a large portion of your revenue or maybe multiple customers that, hey, if a buyer buys that business, they're looking at that customer going,
00:45:25
Speaker
ah You know, if that if we lose that customer, we're we're hosed, right? but So those are those are some of the things that they're looking for. They're basically looking for low-risk business that's going to scale and grow with minimal owner input.
00:45:43
Speaker
right And so there are entrepreneurs that have this intuition for, they're not necessarily thinking about it in terms of value, but they're going, what projects can I take on you know this year or this quarter that will make my business more scalable or more robust or resilient to risk?
00:46:00
Speaker
Or you know this is you know this is the whole reason why businesses implement you know systems and operating procedures and stuff like that so that they can have more consistent outcomes a higher percentage of the time, right?
00:46:14
Speaker
And so there is an intuition to that. So there there are entrepreneurs out there that are, you know, they they go to look at the value of their business they go, whoa, but that's higher than I would have expected.
00:46:25
Speaker
That's kind of on the rarer side, um but, you know, that there are entrepreneurs out there that are just geared towards, I want to make my business scalable.
00:46:36
Speaker
I want to ah build a business that doesn't rely on me to operate in the day-to-day and things like that. So, you know, at Boulder Futures, like you said, we we provide a language for that intuition, right?
00:46:50
Speaker
What are we building? Why are we building it this way? What's a, you know, good company versus a great company? What makes a best-in-class company? And once we have that map of intangible assets and the value of the company, now we can create this roadmap to say, well, okay, your business is worth $5 million. Best-in-class business in your industry of that same size would be worth $10 million, right?
00:47:14
Speaker
And we can systematically chip away at those things. And as you're and as you're taking on you know projects and more systematically,
00:47:25
Speaker
increasing your intangible capital, right? Increasing growth capacity at the company, ah eliminating risks, making the company more scalable. Now you know exactly what you're doing and why. We can map it to a direct outcome, right?
00:47:40
Speaker
Which would be value. So Some great research done by, i think the company is called Value Builder. They have a software that businesses can track their value.
00:47:52
Speaker
And they did a longitudinal study of these businesses that specifically take on a value building strategy, a value enhancement strategy. okay So this is companies that you know do the valuation, they map out all of their ah the qualities of the business, they map it to a value of the company, and their annual goals, their quarterly goals, the projects that they take on are directly in service to you know building value via this you know systematic roadmap that's created.
00:48:25
Speaker
After two years of a dedicated value enhancement program, the average company increases their value by 70% over two years. So um me say that again.
00:48:37
Speaker
Businesses that specifically take on and follow a value enhancement strategy on average, increase the value of their business by 70% after two years.
00:48:48
Speaker
And value, just like your retirement account, it compounds over time. And so as you're making you know your business more risk resilient and ah building growth capacity, you know ah ah streamlining operations, putting in systems and processes, good things follow from that, right? you're You're going to get more sales. You're going to be more profitable. You're going to be more scalable. So These same companies that are on this value enhancement journey, on average, after five years, double the triple the value of their business.
00:49:22
Speaker
And after 10-year time horizon of doing this specific value-focused work, they 3 to 5x the value of their company. So, I mean, I've seen it.
00:49:34
Speaker
I've lived it. That was, you know, the track at Associated Couriers was after two and a half years, we went from a $4 million dollars valuation to a $20 million dollars valuation. And so this more systematic thinking is something that, you know, the bigger companies are doing, private equity is doing it, public companies are doing it. They're bringing in, you know, really expensive consultants, McKinsey, blah, blah, blah, blah.
00:49:56
Speaker
But our small businesses are doing it so much. Our medium cap businesses aren't doing it so much. Our our family owned businesses aren't doing it so much. And so, you know, many of them are, you know, great entrepreneurs. They've got an entrepreneurial intuition and they're doing all the right things.
00:50:11
Speaker
But if they had a more systematic program and they could put, you know, language, some words, the language that they're trying to speak and the words, the language that they're trying to convey to their employees, it will just supercharge their their journey.
00:50:26
Speaker
If I was looking to, if I was running a small to medium sized business and you could, all things being equal, assuming that I represent the average, you could change just one belief that I have about building and then exiting my business.
00:50:46
Speaker
Is there one thing that you would tell me or you would snap your fingers and you would say, I would just have you see the world in this way or work on X, Y, or Z thing?
00:50:58
Speaker
Yeah, I would say that value building strategy is good business strategy. It is never too soon to start planning for your exit, whether it's, you know, two years from now or 20 years from now, or if you never want to exit.
00:51:18
Speaker
Systematically building the value of your company. it It is good strategy, right? Business buyers, they pay a premium for, you know, great companies or well-run companies that are poised for growth, that have a low risk of, you know, dissolving or shrinking or not doing well.
00:51:40
Speaker
And so the very same things that make a business great and strategic and, you know, are the same things that make the company valuable.
00:51:53
Speaker
And so by providing entrepreneurs with this framework of a value-enhancing strategy, it provides a language by which to talk about, well, everything in the company.
00:52:07
Speaker
It provides a framework around your annual planning and your quarterly planning. It puts a framework around goals. um And it's really ah strategy that compounds over time.
00:52:22
Speaker
right So the other thing that it does is is whenever an entrepreneur plans to exit, 50% of entrepreneurs or owners plan to exit in the next five years.
00:52:33
Speaker
ah Like I had cited with the statistic about companies that specifically the value enhancement strategy... After five years, they are able to 2 to 3x the value of their company. So if you're ah business owner today and you don't know what your business is worth, you think you might want to exit in five years.
00:52:53
Speaker
um Now is an excellent time. So, you know, contact me or, you know, follow Boulder Futures or adopt a value enhancement strategy, you know, on your own. Older futures, you know, we were we're coaches, we're advisors, but we also like to get our hands dirty.
00:53:09
Speaker
But now's the time to do that. And there will not be any net negatives of learning about a value enhancement strategy or adopting a value enhancing strategy will definitely not have any any net negative consequences. Yeah.
00:53:27
Speaker
If anything, what it can do is put you in a position of strength, right? So when you do go to exit, say in five years, you have options. You get to pick who you sell to, right? You've got multiple buyers lined up willing to pay a premium price for your business.
00:53:45
Speaker
And you've got you know multiple options on, you know, do you want to do a partial exit? That's an option now. Do you want to recapitalize? That's an option. Do you want a full exit?
00:53:56
Speaker
All of these things. Do you want to, you know, ah form an employee stock option plan? That's also an option. So all it does is is provide you with a position of strength. And then, hey, at the end of that five years, you might you might say like, I changed my mind. I kind of like what I'm doing.
00:54:12
Speaker
Guess what? You don't have to sell. But now your company is bigger, it's badder, and you know it's more capable. You talked a little bit about here, you know just in the last few minutes, about bolder futures.
00:54:26
Speaker
So I'm going to tie two things together in the last few minutes that we're on here. but One, where should people go? What should they do to either connect with you personally or to check out bolder futures?
00:54:44
Speaker
And then if you have anything doubling down on something that you've said before or just anything in addition that you want to throw out there, do you have any things you would leave people with or parting words of wisdom?
00:54:56
Speaker
Look, 75% of owners regret selling their business within 12 months, right? 70% of businesses that go up for sale don't sell. 80% of the average business owner's net worth is tied up in the business.
00:55:12
Speaker
And 50% of businesses business exits are forced. On the other side of a but value-building strategy, once you've adopted that, you've gone through it, you know, for two, three, five years or longer,
00:55:26
Speaker
Business and work is just a lot more fun when the company is really well run. The risks are, you know, have been mitigated. but You've got wins.
00:55:37
Speaker
Goals are set and measured and tracked against and actually accomplished and projects aren't falling through the cracks and there's money to invest.
00:55:47
Speaker
You know, people are being hired and people are being taken care of. And, you know, that the risk of, ah you know, just the risk to the business owner also goes away. Right.
00:55:58
Speaker
So what if you have a forced exit? You know, so what if some disaster happens and you're forced to sell your business? It's a really valuable business. You could go to market tomorrow and get a bunch of buyers that would be really excited to buy your business and pay top dollar for it.
00:56:13
Speaker
So a lot of the risks to your nest egg, ah to your baby, to the thing that you've spent you know the past however long building, ah those risks go away simply because ah you you put yourself and your business in a position of power. So yeah, with that, I would just say it's...
00:56:32
Speaker
ah the best time to start doing this work is right now. um And if anything's too vague about you know what we've covered or what it actually is, you can just follow follow us on LinkedIn, Coleman Swisher, C-O-L-M-A-N.
00:56:51
Speaker
Swisher is just like it sounds, S-W-I-S-H-E-R. I'm on LinkedIn. You can follow Boulder Futures on LinkedIn. We host webinars all the time. Sometimes we do in-person events as well.
00:57:02
Speaker
But you'll be able to find us and some of our content and some more information granular and specific content, feel free to reach out to me, message me on LinkedIn or send me an email. ah You know, you can book time with me on on our website.
00:57:15
Speaker
Love to meet you, get to know you. Just, um you know, talk about where you're at, what challenges, you know, you're facing right now or answer any questions that that you have.
00:57:26
Speaker
I'm not going to try to sell you on my services. Typically, you know, this sells itself. We sell ourselves after we've been, you know, talking to somebody for a while. And, you know, so yeah, just that's where you can find us.
00:57:39
Speaker
Reach out to me, say hi. um And Eric, I want to thank you for hosting me on the podcast. This is my first podcast ever and made it really easy and and really fun for me.
00:57:52
Speaker
So thank you for being willing to take the risk on having me on. Thank you, Coleman. I appreciate that. And I will have links in the show notes.
00:58:03
Speaker
And, you know, I'm familiar with your work, but with some of the stats that you brought up and even the positioning, you brought in a lot of new things to mind. But I've worked a lot with startups and founders and small businesses over the I think 22-ish years that I've been, you know, I've had a career thus far and there's always more to do and there's never enough time in the day, but all things do come to an end.
00:58:37
Speaker
And I suspect that when you spend so much time running a business and, or you founded that business, that this might be one of the more important endings or transitions that many CEOs and founders go through. So the way that you present it strikes me as being worth taking the time to explore earlier rather than later. So I appreciate that.
00:59:06
Speaker
And again, thank you for being here, Coleman. I'll have links in the show notes and i hope that everybody will come back for the next podcast.