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Today we have a remarkable guest joining us, Cameron Bishop. 
Cameron is a Managing Director at Raincatcher and a seasoned veteran in the world of business acquisitions and exits. Over his career, Cameron has sat on every side of the table—as a CEO, a buyer, and an advisor—shepherding deals totaling more than half a billion dollars. He has seen first-hand why nearly 80% of businesses that attempt to sell never actually do and understands the emotional and financial stakes involved in selling a company.
In this episode, host Dave Wolcott dives deep with Cameron into the often misunderstood and emotional process of selling a business. Cameron draws on his decades of experience to reveal the biggest traps that business owners fall into when planning an exit, from messy accounting practices to the dangers of a business being dependent on the owner. He sheds light on how proper planning can turn a business sale from a disappointing letdown into a life-changing opportunity, and why you should start thinking about your exit plan on day one, whether you’re planning to sell in three years or thirty.
One of the most valuable aspects of this conversation is Cameron’s focus on the human side of business transitions and future life planning, ensuring business owners thrive both during and after an exit.
In This Episode
- The most common mistakes that kill business deals and how to avoid them
- Key steps to maximize your business’s value before selling
- The emotional journey and life planning required for a successful transition
- Current market trends and opportunities for both sellers and aspiring buyers
They suddenly wake up. Their purpose in life was their company. Their satisfaction was working with their customers, their employees. And they don’t have that anymore. I’ve seen many of these people crash and burn and go through a really struggling emotional period. So part of future life planning is a really important part of the whole selling process.
Welcome to the Wealth Strategy Secrets of the Ultra Wealthy podcast, where we help entrepreneurs like you exponentially build wealth through passive income to live a life of freedom and prosperity. Are you tired of paying too much in taxes, gambling your future on the stock market, and want to learn about hidden strategies for making your money work for you? And now, your host, Dave Wolcott, serial entrepreneur and author of the best-selling book, The Holistic Wealth Strategy.
How’s it going, everyone? And welcome back to Wealth Strategy Secrets of the Ultra Wealthy. Today’s episode is a masterclass for entrepreneurs who have poured years or maybe even decades into building a business, only to realize that when it’s time to sell, the rules of the game aren’t what they thought. Cameron Bishop has sat on every side of the table as a CEO, a buyer, and now as a managing director, helping business owners navigate the complex emotional and high-stakes world of selling a company. He’s overseen half a billion dollars in acquisitions, seen deals soar and collapse, and knows exactly why almost 80% of businesses that try to sell never actually do. In this conversation, Cameron reveals the biggest traps that kill deals, how to avoid leaving millions on the table, and why you should be thinking about your exit plan from the very day you start your business. Whether your exit is three years away or 30, this is an episode that could make the difference between a life-changing payday and a painful disappointment. Hope you enjoy the show.
Cameron, welcome to the show.
Hey, great, Dave. Thank you for having me.
You bet. It’s a pleasure to have you on today and I’m excited to really unpack something again that is really mystified in the marketplace. I mean, typically business owners, and I being one of them, can spend a lifetime building up value in a business trying to serve others. And it could be the primary form of creating wealth for that entrepreneur. But then you come time to sell and exit, and if it’s not done properly, people could be sorely surprised on the downside of how things could go. So we love trying to provide education and helping our audience figure out some of these nuanced things—things that aren’t often described or articulated to investors and entrepreneurs. And so that’s really our mission: to help people understand some of these alternative strategies and things like that. So today, Cameron is really going to unpack how a business owner can exit for the best price.
What are some of the things to really look out for in planning? So I highly recommend you listen to today’s show, whether you’re a business owner today who has an exit in your future, or even if you’re not—maybe you’re thinking about starting that side hustle or creating a new business at some point. A great way is to think about the exit in mind when you start a business so you can build it from scratch. I think there are going to be lessons learned from all angles today. So, Cameron, welcome, and tell us how it all started for you and how you got into the space.
Great, thank you. Happy to jump in. So I’m Kansas City born and raised. I grew up here on the Missouri side of the Kansas–Missouri state line. I live on the Kansas side now. But my career path has been rather unusual for someone who is in the investment banking world. I went to the University of Missouri School of Journalism, got a degree in advertising there, and started my career in a small technical magazine publishing company here in Kansas City as an advertising copywriter.
A whole group of people left, and the CEO of the company looked around and said, well, you’re still pretty green, but we’re going to promote you. So I stepped into an opportunity and just began to grow as a publisher. The company was about a $7 million business when I started there, and about eight years later, we were up to 15 million. We were sold off and acquired by the Macmillan Book Publishing Company, which was a Fortune 100 company at that time. They said, hey, we don’t have any magazine businesses. We kind of like you guys. We want you to grow, go out, and buy companies.
We’ve got the money. They didn’t tell us how to do it—it was like taking the proverbial baby and dropping him or her in the pool at six months old and saying, hey, swim. So we started out, for better or worse. I landed the first acquisition as my responsibility when we started this process. We thought we knew what we were doing, and we didn’t. As the old saying goes, a lot of times you learn the most from your mistakes and failures rather than your successes. That was a pretty dismal start. We learned a ton. And in a corporate world, especially Fortune 500, you don’t make mistakes twice.
So you are definitely motivated to learn from them. The key takeaway was that we did the typical things around auditing the financials and reviewing circulation for the magazines and all the technical stuff you do. Our key mistake was not correctly reading the people. There aren’t many businesses where the people aren’t the key assets, and if you don’t handle that right, you have a high risk of failure. In about a year, we lost the top three people in the company. It was a small company, only a million-dollar deal. I say only, but if you’re doing 50- or 100-million-dollar deals, it’s not bad.
That’s how we started over. I spent 23 years in that first company. It was sold on to Colbert Kravis Roberts, the huge investment banking firm—or private equity firm, I should say—out of New York. We grew that company to 400 million in top-line revenue, 100 million in EBITDA profits. I ran that for the last two or so years I was there. I left the company when a new chairman came on board, took six months off, wrote a business plan, and spent a year flying all over the country on my own nickel, pitching my concept to private equity firms. I met with 50 of them, and ultimately partnered with JPMorgan Chase Bank’s Private Equity Group, who had real interest in the media sector.
So we partnered. In about three and a half years, we built that company from my kitchen table, with no revenue, to about 120 million and 700 or so employees in six or seven cities. After that, I decided to abandon the private equity world, which is extremely demanding if you’re a CEO. High pressure, seven days a week. I spent five years as a consultant at a boutique consulting firm, helping business owners avoid the mistakes that I saw owners make. When I acquired 50 companies and spent about a half-billion dollars doing that, I was recruited away by a headhunter to do a very complicated turnaround and technology transformation on a $60 million 501(c)(3) business. That ended during COVID. I get bored very easily, so I said, well, I’ve got to do something else. What do I want to do? I like buying and selling companies.
So I found the firm that I’m with now. I’ve been there almost five years. I’m a managing director and a partner. The company’s based out of Denver and has the unusual name of Rain Catcher. We are a lower-middle-market investment bank affiliated with a FINRA-registered broker-dealer. We fill a gap in the market where so many companies exist—EBITDA profits from roughly 2 million to 10 million—because those companies are too small for big investment banks, and most of the time they’re too big for Main Street brokers. So we brought traditional investment banking tactics, techniques, and criteria down to this lower-middle market. It’s an extremely busy time now because 10,000 baby boomers turn age 65 every day.
That’s the commonly cited statistic, and most of them don’t have children who want to go into their business. In most cases, it is the single greatest source of generational wealth—the asset value of their business. So when they want to retire or begin to transition out, they’re left with no choice but to sell. Where do they turn? They turn to someone like us who can represent them in a very professional manner to take their business to market and help them tweak it where it needs to be. If it were a house, it would be like putting some new shrubs out front and a coat of paint on it. That helps optimize the exit value for them so they don’t ultimately leave money on the table.
Your business should be a vehicle for freedom, not a trap that depends on you every single day.
Wow, quite a fascinating journey there for sure. Now tell us about some of the hidden traps or mistakes that could be out there for business owners that they should be starting to think about, whether they have an exit in mind at some point in the future or maybe it’s imminent. What are the things that they should be doing to prepare properly?
Thanks for asking that because, as I mentioned earlier, this is my passion mission—to help communicate and educate these owners. So I’m going to talk about two sides of that process that they need to consider. First of all, the main challenge of business owners and family- or privately-owned companies is that it’s pretty much human nature. They spend 95 or more percent of their time working in the business and from 5% to 0% working on the business. Running a company for maximum income or distributions and to avoid taxes and to kind of flow through legitimate personal expenses, if you will—that’s where they spend their focus. But that’s a different management philosophy than running a company to prepare it for exit and maximum valuation. A lot of owners, because they’re pass-through entities—S Corps, LLCs where the profits at the end of the year flow straight into their pocket—are hesitant, many unwilling, to make the investments in the company that will maximize their equity value or their enterprise value when they sell. Usually, the return on the investment they make to prepare the company for sale gives them a multifold increase in valuation. A simple example is two things.
The single greatest problem we see with business owners who approach us to sell their company is that their accounting is terrible, if they have any at all. They’re generally on a cash basis. Buyers for businesses today want to see an accrual-based accounting system, hopefully fully GAAP compliant. The banks that are going to loan money to these buyers require accrual-based accounting and GAAP-compliant financing. That often can be a very arduous process to convert cash basis to accrual basis, and most of the time it requires an outside firm. You can hire a fractional CFO or CPA firm to correct those numbers, but that usually takes a lot of time.
We’ve seen cases where it’s taken a year or more to restate the financials because buyers want to see a minimum of three years of historical data, and in many cases they want to see at least five. So we sadly turn away a lot of business owners who contact us because we say you’re just not sellable. For them to make their company sellable, it’s going to take them two or three years of focused energy to fix the issues that exist in that company. National statistics—I think Forbes had an article on it and Pepperdine University has been quoted—show that 70% to 80% of businesses that try to sell never sell. Accounting is one of those key reasons. The second biggest reason we see is what we refer to as owner dependency. These business owners are successful in almost all cases because they’re very independent, very driven, and most of them don’t delegate well. They don’t have sophisticated HR systems, so they don’t have a succession plan.
Many times they’re also successful because they’re the chief salesperson or the key person responsible for customer relationships. That scares buyers a lot—unless that owner is going to stay on and sign an employment contract and rollover equity and stay for three to five years, which normally isn’t the reason that business owners are selling.
If you don’t plan on succession, you’re not just risking the deal, you’re risking your legacy.
Some great points there, Cameron. Have you ever read Robert Kiyosaki’s Cash Flow Quadrant?
I have not. I’ve heard of it, but I have not.
Okay, great book. Our audience will appreciate this. Right? Exactly what you’re saying is there’s basically four quadrants here. You can be an employee, which is one of the quadrants where you’re a W-2 working for somebody else. You can be self-employed, which could be, say, a dentist—the practice only runs if he’s there or she’s there. Then you have the right-hand side of the quadrant, which is actually a business owner.
Or really creating a business system like Jeff Bezos has done with Amazon. I mean, you don’t need to be as big as Amazon, but he clearly has a system that runs whether he’s there or not. The last one would be an investor. But the point that you’re making is exactly the difference between being self-employed versus being a business owner. To drive valuation in your enterprise, if you’re a business—a business system that can operate even if you’re not there, which Dan Sullivan would call a self-managing or a self-multiplying business—you’re going to command a greater enterprise value.
You’re exactly right. That’s another reason we have to turn away potential business owners, because they simply don’t understand the difference between having a company that is self-sustaining with or without them versus a business that is solely dependent on them. The irony is a lot of them make a massive amount of money as a consultant, for example. I was a partner in a consulting firm for five years, but I had nothing to sell. I had a good book of business, but I was the business. There are independent writers and creative people. The litmus test is: if you get hit by a bus—the proverbial bus—will the company continue to thrive? One of the questions we ask business owners when they first contact us is about the owner dependency factor, but we also ask: do you take a vacation? A lot of people are not proud to say that, but it’s actually one of the key things we look for because it’s proof that a business is sustainable without that owner.
Present 24/7, 365. That’s such a great point, and actually it gives such a great opportunity for a team to rise to the occasion when the owner is not there and really take over and elevate themselves. Building a team, I think, building a team overall, systems, and some type of operating system like EOS is really great. I’d also say it’s really important for anyone out there with a business to really think about making that decision. Do you want this to be a lifestyle business, like your consulting where you’re just trying to make an income off of it, or are you trying to go for an exit? If you’re trying to go for an exit, it’s important to invest in some of these things in the business to increase enterprise value.
Exactly right. As I mentioned earlier, a lot of these owners are hesitant to do that because if they don’t have a succession plan, that could be a big investment in identifying and hiring someone who could replace them once they leave. That could be a two- or three-year process for that person to get up to speed and for a buyer of that business to have confidence that if the owner leaves, his or her successor can effectively step into that role. In a pass-through entity, let’s say hypothetically you’re paying a successor a salary of $200,000 a year. That’s $200,000 less in pass-through income that the owner is going to take at the end of every year. For me, it’s human nature that you live up to your income level. They’re spending everything they’re taking out of the business and they don’t have the financial bandwidth to invest in that kind of position. They can’t see that it can return a multifold increase in enterprise value on an exit if they have that proper organizational structure in place.
Good point. So let’s fast forward a little bit to an actual exit. Let’s say you’re at the table and you’re starting to negotiate. What are some of the things that people can do to actually prepare themselves to make sure the transaction goes through in their favor, as well as any pitfalls to be looking out for?
Well, first of all, in our experience, not more than about 5% of our sell-side clients have ever sold a business before, so they really don’t have a clue what’s involved. We spend a lot of upfront time trying to educate them on how the process will work. A very important part of that is how to deal with the emotional rollercoaster ride that occurs during the process. Dave, you mentioned you sold a company, and I’m sure you experienced that—there are sleepless nights for these folks, there’s stress. In our job as investment bankers, we always kind of joke about it because everybody thinks an investment banker is just somebody who’s a hardcore contract negotiator dealing with dollars and numbers and percentages.
That is certainly true, but I estimate that about 50% of my time is conducting what I jokingly refer to as Dr. Phil work. We try to keep our clients on a level playing field. We are hand in glove with them through the process, and sometimes we keep them from jumping off the cliff. If somebody tells you your baby is ugly—it’s your baby. These people, it’s been their life, and they get really angry sometimes and just say, screw it, I’m going to walk away. It’s our job to bring them back to a rational point and look at the end game of where they’re going once we get the deal done. But so many business owners literally wake up one morning and say, hey, I want to sell my company.
They just think in 30 or 60 days it’s going to be sold. Rarely that happens, but it’s very rare. The national average for the amount of time it takes to sell a company—whether you’re using a professional like our investment banking firm or even with a lawyer, sometimes longer because they don’t know how to market the company—is about nine months. Lately, with tighter bank restrictions on credit and debt leverage, we’re seeing a lot of these deals stretch out 10 to 12 months. The first part of the deal, for example, with our firm is gathering all of their information up front. It’s called sell-side diligence, and it’s an exceptional amount of work for these people.
So if they want to begin to prepare for it, if they’re going to sell in a year or two years or start that process, get all of the company’s processes and systems and legal contracts well organized and easily accessible. We’re going to ask for it to prepare the company for sale, and every buyer is going to want to see that. Then we go to market. We prepare a marketing book called a SIM—Confidential Information Memorandum. It’s a very sophisticated marketing brochure. We do research to identify a pool of potential buyers nationwide. Then we begin outreach by email and phone calls to attract buyers.
Then we go to a point where we ask them for an indication of interest. Then we have management meetings after that. Then we ask for letters of intent. We sign a letter of intent with one buyer, and then those buyers usually get in—probably 90% of the cases—90 days of exclusivity to do their own research and diligence on the company and negotiate all the contracts. So you think about it—three months of that is dictated by the buyer and six months of that is preparation, marketing, and qualifying buyers. That’s why it’s usually a minimum of nine months. Occasionally we get one done at eight or eight and a half.
But they need to think in their minds: if I want to sell, it’s going to be nine months out from today.
Yeah, well, that really hits home, Cameron, is, you know, keeping the entrepreneur from jumping off the cliff. You know, that experience that I went through was exactly how you described it. It was a complete emotional roller coaster. And I’ve actually—I don’t know if you can validate this or not, or maybe choose not to—but I’ve heard that, you know, inside of the PE industry, they literally have training to basically maximize, you know, or minimize the value that an entrepreneur is going to get for a business with all kinds of tactics such as deal fatigue, stringing things along as long as possible, changing the terms in the ninth inning, all those kind of things. And those are all things that I actually experienced myself. I mean, it was quite a roller coaster. And as you said, it’s really emotional because it is your baby and you’ve worked so hard to be able to actually build something.
And now someone’s coming in, doing a complete audit and discounting different things or taking away value so it becomes extremely personal. And then, you know, they’re typically—if it’s a larger enterprise, right—you know, they have big resources, right? I mean, they’ve got like a top-level M&A person who’s negotiating. They’ve got full teams that are doing all of this analysis on you. So yeah, you’re up all night providing all this documentation, and then they’re kind of stringing you along and then terms are bouncing up and down until literally until you get the wire, right? All the way through the end.
That’s exactly right. You are so right. That’s where we feel like other investment banking firms as well—we’re not unique in that—but we pride ourselves. We sort of look at ourselves as the bodyguard for our client. So we manage those situations you just described. And I’ve seen every one of them. And you know, if this happens before an LOI, we’ve eliminated people from the process.
So when we’re looking at offers for a business, we look at four or five key criteria. We look at the total enterprise value that a buyer is offering. We look at the deal terms that they’re going to include in a contract. We look at the deal structure. By structure, I mean you don’t often see an all-cash deal anymore. So there’s a cash component, there’s equity rollover. If it’s a financial buyer like private equity, there’s oftentimes a seller carryback note where the seller is actually loaning part of the value of the deal to the buyer, generally over a three- to five-year period. And those interest rates get negotiated, payback schedules get negotiated. And then in a lot of cases where it’s dependent on individual contracts and they track their pipeline of future business, there’s an earn-out component where they’re only going to get paid if they hit certain negotiated financial thresholds.
And if the owner of a company has never been through this before, so much of it is foreign to them that they oftentimes have no idea where they’re getting hurt on the deal. So one of the things we try to educate owners is that the price isn’t always the price. And they a lot of times will say to us, “Well, the other guy down the road in my same industry, he sold his company for mega bucks.” Well, maybe he did, but probably he didn’t. Because there are certain parameters as multiples of adjusted EBITDA profit where these buyers play given the type of company and the other characteristics. So some simple examples: if it’s a business that requires inventory, in one deal a buyer might get paid less, but they’ve negotiated a deal where they get to liquidate the inventory. Or if we do almost all deals, the area where most sellers get hurt the worst is in how what is called the net working capital adjustment is calculated. And I’ve seen—I acquired a company one time, it was a $100 million deal, but we reduced the net effective purchase price by over $3 million just based on how we negotiated the net working capital, meaning that seller had to leave a lot more cash on the balance sheet, pay off a lot more debt than they would have anticipated.
So that’s where your professionals really protect you. And there are also factors in structuring a deal that can have significant tax implications which can result in far less realized wealth if they don’t structure the deal right. And a lot of those are nuanced in the structure sales contract, whether it’s a stock purchase agreement or an asset purchase agreement.
That was exactly going to be my next question because, you know, our audience, we really study advanced tax strategies for entrepreneurs and investors. And this is definitely one of those areas where you really want to have a great team around you and you want to be doing proactive planning because, you know, a significant miss on the taxes—it’s not about that final purchase price that you get, it’s about the overall terms and what are you going to really net. And taxes could be a massive chunk on that if not planned properly.
Yeah, for sure. And you’re right. So we see ourselves as the quarterback on a deal. So again, we’re managing factors around our clients, the seller. We almost always—well, we are ardent proponents of having our clients represented by an experienced M&A attorney. There are so many nuanced factors that can impact the value of a deal that I’ve never seen a case where an experienced M&A attorney didn’t pay for themselves as part of the process.
If there are tax requirements, we will bring in outside tax experts. We tell our clients we know enough to be dangerous when it comes to legal stuff and tax stuff, but we’re not tax experts and we are not lawyers, so we never pretend to be. But we certainly can help play a role with our clients to interpret in layman’s terms what something a lawyer has told them.
Yeah. Cameron, how do you see the, you know, really, the market in terms of valuations right now in 2025, especially going forward in the next couple of years? Is it favorable for business owners to be thinking about an exit right now, or should they be kind of putting it off for the future? Or how are valuations tracking in the market?
Yeah, well, it depends on the industry. And there could be 20–30 different criteria that can impact valuation on any specific company. We sort of break those down into the macro factors and the micro factors. The micro factors are things going on inside the company or things that are specific to the industry that that company serves. On a macro level, the last five years, frankly, in the M&A world have been virtually unprecedented, obviously heavily driven by COVID. During the early stages of COVID, the entire M&A transaction market virtually went dark. Then as we came out of it, there was an absolute feeding frenzy because all these private equity firms had all this money from their limited partners and they’re expected to spend it.
So some valuations went off the top of the charts because—supply, demand, and competitive. Then things kind of tailed off around late 2022 into 2023, and then we went through the supply chain issues. We’ve gone through the ramifications of all the labor force that were paid by the government not to work during COVID and that’s still cycling through. So many business owners have a real challenge on their hands just finding and retaining employees. But the market has—the good news is—ticked back up. You know, the whole interest rate thing, when we shot up from 3% or almost 0% to 7%, SBA loans were in the 10–12% range. That kind of froze things for a while.
But you sort of reach a homeostasis point where people are accepting that, all right, we’re going to pay 6 or 7% on interest rates on a traditional bank loan. The challenge is for owners that is hurtful in a way because if the buyer has to pay more on interest on the debt that they put on a business—and nobody pays 100% equity—then they’ve got to adjust for that somewhere in the value proposition that they offer. Or what we’re seeing more and more of is they structure the deals differently, as I mentioned earlier, by requiring a certain percentage of the sale price to be rolled over and retained by the owner, or what the owner provides in a seller carryback note or an earn-out structure, whatever it might be. We’ve seen more and more of that to be an offset to those higher interest rates. And also the banks, they go through cycles where they are what’s called credit-light to credit-restrictive. And we’re still in a pretty restrictive period where they can’t put as much debt leverage on a deal. Most of the things we’re seeing right now—again, somewhat dependent on the characteristics of the business—but it’s one and a half to two times debt leverage on deals right now. That’s a multiple of the profits, the EBITDA profits to the amount of the loan.
So there are still factors there. But frankly, our firm is crazy busy right now again because these owners are aging out. They want to sell, kids don’t want to buy the company.
How about, what would be your guidance in terms of valuation methods? And should business owners be doing a valuation just on a yearly basis as best practices to really understand kind of where they are in the market? And then are you favorable towards any particular type of valuation methods? I know there’s multiple methods. Maybe it depends on the industry that you’re in. But anything you’re seeing more of or any guidance there?
Yeah, there’s two ways to approach that. So if a company needs a valuation because they’re going to buy out a partner, for example, or if there’s an unfortunate divorce between the owner of the company and his or her spouse, or a death, there’s going to need to be some kind of a trust and estate settlement. Those almost always, if not always, require a valuation to be conducted by a Certified Valuation Analyst, CVA. And those folks go through an incredibly rigorous training and education program in order to get that certification. And that kind of valuation will almost always hold up in court or if there’s a requirement for some kind of a tax dispute purpose. That’s where they need to go. If they just want to get a sense of what their company’s worth—like your question earlier, Dave, what’s the market doing today, how’s it trading—they can talk to an investment banker like ourselves. We are industry agnostic.
We do deals from everything from high-tech SaaS platform software companies to mega road construction businesses with $10 or $20 million in what we call yellow iron—you know, road graders and diggers and stuff. And we know what the market is tolerating today within a range. We can never give a specific number because at the end of the day the market is going to determine the price. But we know generally what these are all valued in almost all cases on a multiple of adjusted EBITDA. So for example, a lot of construction deals right now that we see are going to the four-times EBITDA multiple to a six-times. The SaaS platform software company could be, again depending on all the characteristics, 6, 7, 8, 9, 10. So companies that have a lot of recurring revenue are highly sought after right now. So HVAC companies, plumbing companies, electrical companies, pest control companies all sell these service plans and buyers love that because it creates predictable ongoing income and cash flow for them.
Yeah, excellent. And are there any opportunities on the buy side for people who want to, you know, get involved? Right. Maybe as a limited partner in terms of investing in businesses, any avenues you know of?
Cameron Bishop [00:37:29]:
Yeah, absolutely. So one of the trends we’ve seen grow exponentially, literally and even just in the last two years, and that’s called being an independent sponsor. An independent sponsor is usually a professional from some walk of life in business and they have connections with private equity firms that are investing in these independent sponsors. There are also a lot of high-net-worth individuals or family offices, which are mega-wealthy people that have so much money that they hire a team of people to figure out how to invest it.
These independent sponsors will make those financing connections. Then they go out and search for a company to buy. They negotiate at least the basic indication of interest price so they’ve got guidance on where the value is going to fall. Then they’ll go back to their financial backers and say, hey, I found this company.
They’ll negotiate a deal where the independent sponsor gets to keep a certain equity percentage of the business, the high-net-worth or family office people put in all the equity. Usually, those kinds of people have a lot of banking connections because, again, nobody pays all cash for a business or with 100% equity. So then they’ll negotiate a debt facility structure with a deal. That gets these folks in the game because they want to run a company.
The other avenue is what’s called a search funder, and there’s even a website for them, searchfunder.com. These are people similar to the independent sponsor, but they almost never have the financial connections. However, there are many small investment groups specializing and focusing on these search funders. So there are tons of them. On every deal we may get 20 or 30 expressions of interest from search funders.
They’re all looking to buy a company. In those cases, most of them put no money down or very little. These funders don’t usually put in a lot of money, so they may have to go out to three, four, or five of these specialized investment groups, each putting in 100,000, 200,000, maybe a half million if they get lucky.
Stanford and Harvard now have full courses on how to buy a business. We’ve seen a tremendous number of people in their 20s to early 30s, men and women, who have been through those programs. They’ve decided rather than going to work on Wall Street, at a big investment bank, or at a CPA firm, they’re going solo to buy and run a company. A lot of them are very smart.
Yeah, excellent. That was really helpful and I appreciate all of your insights today. Cameron, if you could give a business owner just one piece of advice about planning for an exit, what would that be?
You said at the very beginning of the show, Dave, that you should have an exit plan in mind when you start a business. I taught a course for the SBA at a local university and that was like a light bulb going on for people. We’re all going to leave a company one way or another. You should choose to leave it on your own terms rather than going out in a box.
I encourage them to think about what their deadline is. If you want to exit your business in three years, you’ll have to start the sale process in the first quarter of year two. So begin that planning work.
Get the company groomed. But the thing that doesn’t get talked about, that really needs to be, is these owners need to seriously think about what their life will look like once they sell their company. For almost all of these people, this is their baby, it’s their life, it’s their ego validation. They go to a cocktail party — “What do you do?” — “I own a company.”
They don’t think ahead. Most of them are working seven days a week, so they don’t have a big social life. A lot of them crash and burn the day after the deal closes. They say, “Oh, I’m going to be rich.”
It could be millions to tens of millions of dollars. But they suddenly wake up — their purpose in life was their company. Their satisfaction was working with their customers and their employees. And they don’t have that anymore.
I’ve seen many of these people crash and burn and go through a really struggling emotional period. So future life planning is a really important part of the whole selling process.
Yeah, great thoughts. Really spot on, Cameron. If people would like to connect with you or learn more — maybe they have a potential exit or want to start working on that planning — how can they reach out?
Yeah, well, I’d be happy to talk to anybody. There’s no cost or obligation to have a conversation. We don’t sell people on selling their company because we consider that unethical. We give them the information they need to make an educated decision about whether to sell or not, and when.
They can reach me by email at cameronbishop@raincatcher.com. Our company website is www.raincatcher.com, or you can easily find me on LinkedIn.
Awesome. Thanks so much, Cameron. Appreciate it.
You bet. Thanks for having me, Dave.
Thank you for listening to this episode of Wealth Strategy Secrets. If you’d like to get a free copy of the book, go to holisticwealthstrategy.com. That’s holisticwealthstrategy.com.
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