In Process Podcast

Prepping the Princess for the Party: Is Your Business Ready to Sell?

(Part II of VI): An Anatomy of the Sale Process; Co-Founder & CEO of a managed network services company, Xcentric, discusses the business sale experience


This week on “In Process: Conversations about Business in the 21st Century,” we continue our third annual series of podcast episodes dedicated to the topic of preparing and selling your business.

In the second installment of our six-part podcast series, show hosts Evelyn Ashley and John Monahon of Trusted Counsel speak with Trey James, co-founder and (former) CEO of Atlanta-based Xcentric, a managed network services company, that sold to Right Networks in 2017.  Trey is also a technology thought leader to the accounting profession who is recognized as one of the 100 most influential people in the industry by Accounting Today. Trey discusses how he built Xcentric with the idea of never selling, to experiencing industry externalities that eventually led him to change his mind to sell. James says, “….what I learned in the end is that selling a business is just as energizing as growing a business because there’s a whole lot that happens after selling that can so much more interesting that what you’re doing in that business.” 

According to James, he never thought about selling Xcentric until his business got listed in the Inc. 5000 list. The listing led to calls from investment banking firms that wanted to talk about selling. Although he initially ignored the calls, three years later, the industry started to change. With potential threats looming in the marketplace, he knew it was decision time. The business was faced with the idea of having to innovate to stay relevant in the marketplace. After much thought and an executive retreat, he, his co-founder and the management team concluded that the business vision needed to change. The new larger vision became to sell Xcentric – and that is where their execution focused thereafter.  

Getting the right team in place is critical for M&A deals. Once set, James recommends having a kick-off meeting for introductions and defining roles and responsibilities, as well as devising a timeline.

During the course of the podcast, entrepreneurs, business owners and C-level executives will learn about:

  • What eventually led James and his management team to decide to sell the business

  • Choosing the right investment banker

  • Lessons learned from the sale process

Learn more about the steps involved with getting to the point of selling a business by streaming the conversation in its entirety in the player below or download it to your mobile device via iTunes. Don’t miss a single episode, subscribe to our show “In Process Podcast” on iTunes to receive this episode as well as future episodes to your smartphone.

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Legal Landmines Savvy Entrepreneurs Can Dodge

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In this episode of In Process Podcast: Conversations about Business in the 21st Century, Trusted Counsel’s John Monahon talks with Trusted Counsel colleagues Allen Bradley and Valerie Barton about some of the most common legal landmines often encountered by clients and their thoughts on how to sidestep them. In Monahon’s view, entrepreneurs are usually so busy focusing on building a business, sometimes they overlook basic legal coverage which enhances the value of the company. For example, not putting restrictive covenants on employees of your organization, or not protecting your intellectual property. We recorded this podcast episode to help you understand the ways in which the law is a tool that can help you capture value and prevent costly problems (such as additional legal or litigation fees) down the road.

#1. Put restrictive covenants in employment contracts
Simply put, a restrictive covenant is a clause in an employment contract which prohibits the employee from competing with the company, or from solicitation of customers or employees for a specified period upon termination.

#2. Get intellectual property transfer/assignments from independent contractors
Under the law, an independent contractor owns what he or she develops, writes or makes. So when working with independent contractors, it’s important to have him or her transfer the work over to you, the owner of the business. The transfer assignment occurs through a signed contract that the independent contractor signs, ideally at the start of the project.

#3. Identify and protect copyrights, patents and trademarks
Failing to trademark the company name could cost millions of dollars for future protection or could mean losing the rights should another party “steal” the name, or copy the product. The legal process of trademarking exists to send out a formal notice that a business is declaring exclusive rights to the name. Hence, trademarking the company name and product name is smart and proactive.

#4. Issue equity in a timely manner
It’s important to issue stock at the time of grant because procrastination could result in larger legal and tax fees down the road. For example, if equity is promised when the company is at the start-up stage and has a low value, postponing issuance translates into paying taxes based on “phantom income” as the company moves to the next stage which creates a higher value.

#5. Review letters of intent with legal counsel
Savvy entrepreneurs see the importance of involving legal counsel during the initial letter of intent review. Barton states, “oftentimes I’ll receive a letter of intent that has been fully executed and I think to myself, oh my gosh, I could have provided invaluable suggestions prior to mutual execution including an asset purchase as opposed to a stock purchase. Sometimes, clients do not know which purchase is better for their business, and as legal counsel, I am fully equipped to explain the difference and why I would recommend one versus the other.”

#6. Be aware of tax landmines like phantom income problems
Property such as stock can create income when there is no cash to pay the tax.

#7. Equity rollovers are often not tax free
Typically, rollover equity is taxable because the IRS takes the position that rollover equity is income. But there are various exceptions to the general rule, and there are ways to document it so that the rollover equity is tax free so that no tax is paid on the phantom income, the value of the rollover equity.

#8. Take advantage of Research & Development (R&D) Tax Credits
The R&D Tax Credit remains one of the best opportunities for businesses to reduce their tax liability. The R&D Tax Credit is for businesses of all sizes. Industries which may qualify for the R&D Tax Credit include but are not limited to Manufacturing & Fabrication, Software Development, Engineering, Food Science, and Chemical & Formula.

#9. Tax law changes: stay up to date
Taxes should be reviewed periodically as they frequently change which could result in structural adjustment. Another benefit of a periodic tax review is staying abreast on growth of the company. Most likely, the current tax election will no longer be applicable if the company has grown to a multimillion-dollar business.

#10. Put a limited liability company operating agreement or shareholder agreement in place!
The state of formation dictates requirements for entering into an operating agreement. In the world of corporations, the operating agreement is called the shareholder agreement. One of the primary reasons an operating or shareholder agreement is important is to agree upon and document rights, obligations and procedures, should disputes arise. Documented agreements will address and help resolve disputes.

During the podcast CEOs, business owners, and C-level executives will learn:

  • Legal landmines to avoid

  • A few ways to avoid paying large tax fees

  • Commonly confused legal terms

Don’t miss a single episode of our podcast show. Subscribe to our show “In Process Podcast” on iTunes and now of Google Play to receive this episode as well as future episodes to your smartphone.

The Nuts and Bolts of Selling your Business: Due Diligence

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In this episode of In Process Podcast: Conversations about Business in the 21st Century, Trusted Counsel’s John Monahon and Valerie Barton (filling in for Evelyn Ashley) speak to Dan Bradbary, Founder and Managing Partner of PMI Advisors. An accomplished entrepreneur, speaker and author, Bradbary has extensive experience with founding and selling various businesses. He founded PMI Advisors in 2017 upon recognizing the under-served needs of mid-market companies regarding post-merger integration. Since its founding, PMI Advisors has expanded practice to other phases of business management and operations, ranging from business continuity planning, sale preparation, business process optimization and divestiture and carve out.  

According to Bradbary and PMI Advisors, when preparing a business for sale, the Owner/CEO needs to approach the exit strategy with the same focus and drive that helped to build the business. Hence, an Owner/CEO who is “ready” with an attractive business will greatly improve their probability of a successful business exit.

PMI Advisors recommends the following key steps for a successful exit:

Hire a consultant who specializes in M&A
Selling a business is a complex process. A consultant will guide business owners through the steps that often include some sort of readiness assessment, plan development, implementation and value optimization.

Have a transition team
Having a transition team is favorable because they will work alongside you to address all issues involved with selling a business. There will be tax planning needs, legal compliance and succession plans that might need to be put into place. Once you have your transition team in place, schedule an introduction “kick off” meeting. 

Structure your advisory board
An advisory board does not have the legal tethering like a board of directors has – it’s more informal and easier to assemble. It’s comprised of qualified subject matter experts that have knowledge of your industry and specialties in areas such as technology, marketing, sales, operations or human resources. They offer suggestions and non-binding recommendations about key elements to make sure your business is attractive to buyers.

If you receive an unsolicited offer - engage with your legal counsel right away
It is very exciting to receive an offer, but Bradbary warns, “you don’t need to rush into signing a letter of intent.” The main area of concern is that once the letter of intent is signed, the business is taken off the market for several months. You need to be prepared to be locked in during that time period.

By taking these key steps you will be well on your way to drastically improve your probability of a successful exit. Be sure to listen to the entire interview below.

During the course of the podcast CEOs, business owners, and C-level executives will learn:

  • The PMI Advisors process when assisting business owners looking to sell

  • What is meant by having an emergency operations plan

  • The difference between an advisory board versus a board of directors

  • Post-sale final thoughts

Don’t miss a single episode of our podcast show. Subscribe to our show “In Process Podcast” on Apple iTunes and on Google Play to receive this episode as well as future episodes to your smartphone.

New Podcast Series: Episode Four

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In this fourth episode of our podcast series titled “Pithy Conversations with CEOs,” Trusted Counsel’s Evelyn Ashley and John Monahon speak to Erik Bush, CEO and Founder of Demand Driven Technologies (DD Tech). Founded in 2011, DD Tech specializes in cloud-based supply chain software solutions. With over 80 enterprises, today DD Tech has a global presence and a deep channel partner network.

Bush attributes his company success to be the first in the industry to adopt Demand Driven Material Requirements Planning (MRP) when it was introduced to the marketplace in 2011. The new methodology goes into their replenishment solution. With the new MRP model, the logic addresses the needs of manufacturers to plan both their inventories and materials out in a time phased manner. The old MRP model was much more dependent on forecasts. Bush said, “This Demand Driven MRP movement has really taken the market by storm. Clients get real value out of it and they find that they’re far less dependent on things like Microsoft Excel, which believe it or not a lot of the big companies around the world are still using as their inventory planning tool. So as a result, we’re giving clients much better results.” Today, DD Tech is the leading provider of the compliant supply chain solutions. Last year, the company was selected as a Venture Atlanta Presenting Company, the Southeast’s premier event for connecting technology innovation and investment capital.

Prior to founding DD Tech, Bush retired from IBM (2010) after 31 years with the company, the majority in executive management roles. He told us during the podcast, “When I retired, I thought I might do something entrepreneurial, because I’ve always had the itch to go out and try my luck at that.” A year later, he started DD Tech. Bush stressed over and over in the interview that the company really takes a lot of pride in delivering real value to the customer and that they solve problems for the customer.

During the course of the podcast CEOs, business owners, and C-level executives will learn:

  • What led Bush to form DD Tech after he retired from IBM

  • DD Techs process for raising venture capital

  • Bush’s sales lessons

  • KPI’s Bush follows closely every month

  • Pithy advice to new CEOs

    Don’t miss a single episode of our podcast show. Subscribe to our show “In Process Podcast” on Apple iTunes and on Google Play to receive this episode as well as future episodes to your smartphone.

Happy New Year! Your Business Guide to Speed up Innovation and Dump the Junk

This podcast originally aired in July 2017

This podcast originally aired in July 2017

In this episode of In Process: Conversations about Business in the 21st Century, hosts Evelyn Ashley and John Monahon of Trusted Counsel speak with strategist Susan Reed about innovation. Reed is the founder and CEO of EdgeDweller, which for 30 years has transformed organizations and individuals through front-end innovation practices that are powerful, practical and proven. She and the team at EdgeDweller have helped launch more than 150 products and services for 122 brands representing more than 25 industries. EdgeDweller specializes in creating high impact programs for corporations, strategic business units, nonprofits, individuals and small groups. Reed is passionately committed to driving up profitability while sustaining high growth through insightful analytics and intentional creativity.

Disruptive thinking and making it safe
According to Reed, there is a love-hate relationship about disruptive innovation. She believes the key is actually about learning how to make the planning process and the ultimate launch safe. Businesses can reduce the risks and better develop the ideas by working within the organization, or with consultants such as EdgeDweller, to better formulate those ideas and develop very incremental paths to get to the launch. Reed says, “We create those ideas but show organizations a very incremental path to get there from where they are today. So if you can prove it in step one, you move to step two. That’s the only way, until you see it through.”

In one of our most popular podcasts to date, Reed discusses how to reach innovation faster. In essence, one needs to get rid of bad innovation habits. Check out her guide for innovation don’ts to effectively speed up your innovation success.

Innovation Don’ts (according to Susan Reed):

1. Never, ever start with ideation
Starting with ideation is the least effective path to implementation of innovation. And this is very often where we start. “Really?” you ask. Unfortunately, most organizations don’t have success decision metrics in place, hence, there is no agreement on what equals true innovation if you start off with ideation. As a result, little if anything will get implemented.

2. No more one offs
As we all know, things move very quickly in this day and age. So if you believe that you can create an innovation and then give it an incremental upgrade, it’s going to be out of date before it even launches. It’s important to realize that you’ve got to have that long-term plan that requires a series of actions that need to happen behind the first innovation.

3. Forget skills-based or cross-function based teams
The idea behind this statement is that if you use these types of teams, you will only receive incremental ideas, versus real innovative ideas. These teams are working in this space daily; hence they know the rules and boundaries.

4. No more fun fest creative extravaganzas
While clearly not intentional, you are setting up your organization for failure if you don’t have a way to capture ideas and implement the really good ones that are suggested. Having an idea party or meeting will lead to frustration. You’ll end up in a worse place than you were when you started. Reed also refers to this don’t as “the rise and fall of excitement” - it is just that.

5. Never tell people that the innovation project starts with R&D or customer insights
Companies are beginning to realize this. A recent study showed that these practices are actually limiting growth and innovation. So while experts agree that organizations need R&D and customer insights, they recommend that you wait until future states are created, then use it for the feasibility of those ideas, to support them.

So are you ready to innovate or do more of it? Susan Reed recommends the following: Have a serious conversation on how you define innovation, what you’re willing to do and really understand that and communicate it very clearly to your team. Everything is based on that. When you articulate what it is you’re going to do, make sure that it’s going to work. Also remember that most initiatives don’t have a chance of working. “That’s crazy too.”

Want to get the full conversation on “Speed up Innovation. Dump the Junk?” Stream this episode in the player below. You can also subscribe on iTunes to receive new episodes of In Process Podcast directly on your smartphone.