Every business owner will leave their company one day. Laurie Barkman talks with Mark Kravietz, award-winning Certified Exit Planning Advisor and Managing Partner of Aline Wealth. Listen in as they discuss why not having an exit plan presents risk to your business, finances, and your future. Mark advises how to assemble a team of advisors to support a successful exit. It’s an insightful conversation to help business owners think about exit planning and business transition.
Listen in to learn more about:
- The three legs of exit planning: business, financial and personal
- Types of professionals you need for a successful exit
- Working through post-exit income planning
- Getting through exit related stress with advisors
- Collaborative business owner education
- Exit Planning Institute advisors and business owner resources
Don’t leave your exit to chance.
Stony Hill Advisors works with owners like you to get ready and maximize value when you’re ready to sell.
Visit www.stonyhilladvisors.com/podcast for a complimentary business valuation.
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Succession Stories is hosted by Laurie Barkman, the Business Transition Sherpa– guiding business owners through the process from “transition to transaction.”
Learn more at https://smalldotbig.com
Welcome to Succession Stories! I’m Laurie Barkman. As an exit value planning and M&A advisor, I call myself The Business Transition Sherpa. This podcast guides entrepreneurs from transition to transaction- from building value in your business to letting go.
What do I do when I’m not hosting a podcast? I work with owners to maximize business value with my firm, SmallDotBig. And as a Certified Mergers and Acquisitions Advisor with Stony Hill, I guide you through the complex process of selling your company.
Tune-in to Succession Stories for weekly insights to reward your hard work and avoid succession regrets. Hit subscribe wherever you listen to podcasts, and sign-up for our newsletter at successionstories.com. Here’s to your success!
Is this the year to sell your company? Don’t leave your exit to chance. Stony Hill Advisors works with entrepreneurs like you to get ready for what may be the biggest transaction of your life. Learn what your business is worth by visiting stonyhilladvisors.com/podcast.
I love bringing lessons learned from my experience working with entrepreneurs on exit value planning and business transitions, and have decided to put these insights into a book. Stay tuned, I’ll share more details with you soon! Be in the loop about events, my book, and more by signing up for our newsletter at SuccessionStories.com. And be sure to follow the show in your favorite podcast player!
I like to say that entrepreneurs don’t start and build their companies on their own, and neither should they plan their business transition or exit strategy without trusted experts in their corner.
That’s why I’m excited about this week’s guest, Mark Kravietz, because he definitely shares this view. Mark is the Managing Partner and Founder of Aline Wealth in New York. We talked about why having the right advisors on your team is critical and why every business owner should have an exit plan. We also talked about three legs of exit planning for your business, your finances, and your transition. It’s a great conversation to help you, help business owners think about exit planning and business transition. Mark has an excellent podcast called “Find Your Exit,” and I was excited to be a guest on his show as well– you’ll want to give that a listen too. Enjoy the insights and my conversation about planning your exit with Mark Kravietz.
Mark Kravietz, thanks for joining me on Succession Stories. I’m excited to talk to you today because you’re an entrepreneur at heart, starting your own firm Aline Wealth, and you’ve been working with business owners and entrepreneurs for years to help them achieve their goals for successful exit, so welcome to the show.
Oh, it’s great to be here. Thank you so much for giving me the opportunity to be on the show. Looking forward to it.
Wow, thank you. Why don’t we start by talking about you? Why don’t you tell me about yourself and about your firm.
Okay, sure. Thank you. I’m Managing Partner of Aline Wealth, I created that with my partner, Peter Klein. Some years ago, we looked to try to help business owners get ready for an exit, and what’s that exit? An exit is different for many, many different people, I’m sure we’ll get into that, so we try to help people get ready for the exit and also, we help manage their assets once they exit. We do a terrific job there, replacing their income of what they were getting when they were working. We also have expertise in not-for-profit organizations and helping not-for-profit organizations and helping people set up for themselves if they want to do a foundation and things of that nature.
Yeah, so let’s talk about ‘exit’ because that word, I use it myself when I work with clients and we talk about exits on the show but I like the word transition, because it doesn’t always presume what the answer is. It could be that they want to sell the company. It could be that they want to do other things. How do you think about the word exit, and how should we talk about it in this context?
Yeah, I mean, that’s it. That’s a good way. Sometimes people don’t love the word exit, they feel like oh, they’re exiting life, so exit can have a bad connotation, but transition’s probably a little bit better wording, but my definition is going to the next phase, the next step, whatever that next step is, and we have a lot of very good conversations with business owners. I like to be there early to have that conversation with the business owner to see what’s inside their mind, what do they want to do? What kind of transition are they looking to make, but that’s a very good point about exit.
Yeah, exit is an interesting word, and it does mean that there is a succession there. Sometimes there’s family, sometimes there’s management, and sometimes there’s third parties, and the Exit Planning Institute is an organization that I’ve talked about in the show, and I have a certificate from there, and you’re a CEPA, which is a Certified Exit Planner. Maybe we could talk a little bit about EPI and how you’ve been involved with them. I noticed that you have an award from EPI, I know you’re quite involved with the group in the New York metro area.
Yeah, so I’ve been involved with EPI going on nine years. I’ve been the president of the Greater New York chapter, this year will be my ninth year as president. Yes, I’ve been recognized a couple of times for my work with helping business owners, but what we’re trying to do is really trying to educate. We’re trying to educate the practitioners that help the business owners and we’re also trying to educate business owners as well.
I had a thought my first year at EPI, that I wanted to help educate the business owner so we started a business owner forum. We did our eighth annual business owner forum this past year where we’re bringing business owners in and educating them on different subjects, trying to help them get ready for whatever that transition is going to be. Interestingly, we did it live for all these years, and we’d have about 100 business owners all around. The past two years because of COVID, we’ve done it on Zoom and interestingly enough this past year, we had I think, people from five different countries and we had 30 Different states, people from different states coming onto the Zoom so it really expanded the number of people and also the different types of people that were there listening, so it was quite successful.
That’s an important mission, education. I find that too in my experience, that there’s a big need for education. That’s one of the reasons I started this show and I know you have some amazing resources that you share with your audiences both on YouTube and in your podcast, which we’ll talk about in a moment. Well, we can talk about it now actually. Find Your Exit is a great show and I was so pleased to be a guest recently, so thank you for having me on it.
Let’s just stay on this topic of education. EPI in person meetings is ideal and wow, to have 100 business owners from all those different countries and all those different states, that’s quite an event that you did. We have a chapter here in the area where I am, which is in Pittsburgh, Pennsylvania, and SmallDotBig is one of the sponsors of the EPI here. We would love to have it in person. It has been virtual, but we’re back in person, and hopefully, it’ll continue that way in 2022. I think that the collaborative side of education, I think it’s worth mentioning that you’re in wealth management. I’m in value building and growth and transition planning with business owners, and then there’s lawyers and tax professionals, the group of us the collective, I think, is really a consistent thing across not just EPI as a group, but other groups too, that have this ethos. Maybe you could talk a little bit about the collaborative nature of the approach.
Yeah, I always like to say that it takes a village for someone to go through a transition, and you hit upon a lot of the people that would help in that kind of transition. I like to say that, personally, I like to be there early on, I’d like to get into an owner’s head. For business owners thinking about making a transition, selling, exiting or growing, I like to be the first because I’ve gone through over 100 transitions over my lifetime, so I have a pretty good experience of helping them early on and then from there, we can have a conversation and they might be looking to grow and they might need someone like you, Laurie, that can help them analyze the company and grow.
I’ll give you an example. Recently, I was referred over to someone who was looking to possibly sell their business and then as we were having conversation, he was like, “Oh, my books are not really good.” It wasn’t the back of a pizza cover or box that they were writing the numbers on but in the conversation, you can tell that they needed a CFO, so I recommend them to a CFO that can get their books together. Once they can get their books together, then you can do an analysis on what the value of the company is so you can either bring a business valuator in or you can, there are other things that you can do to get a business valuation. Then we can do our part, which is the financial planning; does the person have enough money to live comfortably for the rest of their lives?
That’s a big question that people have and in certain cases, they have more than enough, they’ve put away money, year after year after year, but there’s others that 90% of their money is in their business, and God forbid their business goes out of business, they’re going to be stuck, and they’re not going to have enough money. We’re gonna go through that and we’re gonna look at different ways that they can monetize that business. That’s where you’re gonna bring in a business broker or investment banker. Also, you want to take a look and make sure that they have their estate planning ready and done, so you’ve got to bring an estate attorney and you want to bring in a business attorney in if they don’t have a business attorney, don’t have the right accountant, maybe they had their own local account, but that’s not the right accountant for this transition. There are so many different people, once you have a conversation with the business owner, to make sure that they have this village to be able to transition.
Yeah, and readiness is really a factor too. What does readiness mean? It’s really dependent upon the person and business readiness, you’re talking about business readiness, getting the financials ready. There’s a couple different facets of where I have experience too, so I’ll just interject some little bit of stories. There’s one buyer I was working with, he was looking for a small business and had approached an IT services company. I had approached them on his behalf and the IT services company just did not have their financials together, and it was always, “Oh, I’ll get those to you.” It’s been months now and of course we gave up and moved on and all they had to do was push a couple buttons out of QuickBooks. It was that you know small of an entity; they didn’t have audited financials or anything like that. But even at this stage of expressing interest in someone and saying, “Oh yeah, let me think about that,” that business really wasn’t ready for sale.
We had approached them kind of out of the blue and that is happening in my role as a mergers and acquisitions advisor, I at times I’m approaching businesses and saying to them, “I have someone interested in your type of company, in your geography, your size,” and then they have to think, “Oh, wait a minute, am I ready?” So it is one of those, ‘you have to be ready, even if you’re not ready,’ in a way.
The act of building your business and getting it ready for a potential transition is actually really good business anyway, right? You’re saying having organized books and having processes documented, having a team around you – all of that comes with time, easier said than done. Besides business owners, who are the other folks that you help in this process?
Well, we’re really helping people that are in stressful situations. We’re very, very good, when there is a stressful situation, so what’s a stressful situation? Someone that might be going through a divorce, right? We have one of our clients’ daughters, married a very well off person that works for a hedge fund and she really never built wealth for herself and so now she’s in the midst of getting a divorce, and she doesn’t really have the money to be able to live and just take care of the kids and all that, so we had to coach her and educate her and help her through and do planning to show her how much money she would need either on income basis or lump sum basis, so that she had an idea of how much she’ll need to be able to live comfortably. We helped her through that. Unfortunately, when a person passes away, that’s another very stressful situation. When big stress is coming, that’s when we can help the most.
On the topic of stress, the pandemic has been quite stressful for many business owners and employees alike. You’re on the front lines with many people who have been faced with big decisions about how to shore up the business and how to move forward. You yourself, you’re an entrepreneur, and I’m sure it hasn’t been easy and although the markets have been good, so maybe that part has been roughly okay, but maybe we can talk about that a little bit. What have you seen over the last year or two, in terms of business owners’ fears, and how you’ve helped them and also in your firm and any pivots that you may have taken?
Thank you, you said the right word, and the major word and the word that’s probably the best one word for the last two years, and that’s pivot. People need to pivot and if they don’t pivot, they can be out of business. What we’ve seen is a lot of businesses pivoting, to make sure that they understand what’s going on countrywide, worldwide, business wise, and in their life and they’ve pivoted. One of the major pivots is remote working so one thing that we recognize in our business is that we were able to work remotely, our whole team worked from home and we did it without missing any beat, it was perfect.
The interesting part of that is a lot of the business might have been a geographical limitation. In other words, we’re located in Long Island, and we’re also located in Manhattan, and also in South Florida so normally, there’d be a concentric circle of people that you can help in that business. That didn’t happen last year. Last year, we were helping people all throughout the states, a lot of clients in California, and what we found was that people just want the best person that can help them and they don’t care where the geographical location is.
This, I would say, was really an added advantage to our business. It really helped push our business much, much higher because we were getting people that normally wouldn’t come to us, they would go in a concentric geographical location. Now they were coming to us because they felt that we were the best people for them. That was a great question.
So the process that you follow to manage someone’s wealth is something that evolves over time, right? Especially if you’ve worked with them for a while, and then they have a transaction to then have an influx of a different type of asset to manage. What’s your process in assessing what’s the best way to work with people?
Okay, so the first thing we do is we do a plan, we’re all plan based. We do a financial plan, we want to inventory all their assets, we understand what their goals are, what are all the financial goals that we listed all out, and then we will do an analysis to make sure that they have enough money to live comfortably. If they have excess wealth, what are the things that they want to do? Do they want to create a foundation? Do they want to do other things, different homes that they want to buy, help their kids, help out society?
We’re going to try to get an understanding of what they want out of life and then we’re going to do a very specific process of managing those assets. How much assets do they need, how much money, what kind of cash flow do they need in their business? We’re going to make sure that we replace that cash flow that they get from their transition, because that’s a big thing, “Oh, I was making x amount of dollars when I was working, and had my own business, and I can control things. Now I don’t have that business anymore. Where are we going to replace that asset?”
In a lot of cases, as I mentioned before, their wealth is in their business. Once they transition, and they take that wealth out, now what they’re worried about is they’re not looking to create wealth for themselves. They’re looking to preserve wealth, they’re looking for income, and they’re looking to have a modest amount of growth, as well as keep up with or beat inflation, so we’re walking that tightrope where we don’t want to put them in harm’s way, from a market standpoint. We’re looking at preserving that wealth, but we’re also looking at getting them income, and also growing their assets. It’s a tightrope that we walk, but listen, we’ve been doing this for a long period of time, over 30 years, and we’ve never ever had anybody run out of money. Never not once and that is a goal and we’ll continue to keep that goal as well.
It’s funny when you think about it, you hit on it earlier, Mark, that exiting is really a transition and if a business owner has set out to create wealth, ultimately, that’s what we’re all doing, we are transitioning to someone else, we can’t take it with us and it’s hard to think about. It’s hard, like, we’re human. Who wants to think about that, but I think in the process that you’re describing, it’s about living a lifestyle that you want to live and having fun and enjoying life after your business. It isn’t the end of the road, and it is a positive.
Advisors like you and me, that’s essentially what we’re trying to do is help people live the life they want to live, and time is our biggest asset. Really, it’s time, and so how do you want to spend that time? I think that’s my other thing I’ve noticed with myself and my family and also my friends and also business owners that I talk to, it’s how we choose to spend our time, I think the pandemic has affected us that way too. We are making different choices. We see that in employment, people are making different choices and they’re — not bringing it up for political reasons — I mean, just in general, people are making choices.
Interesting statistic that you mentioned is that there are more new businesses that’s been created since the pandemic than ever before, so you’re right. People are making choices, maybe they don’t want to work in that nine to five job anymore in the little cubby that they’re in and they’ve always wanted to do XYZ, and they’re going out and they’re doing it. I’d encourage it. Listen, I love entrepreneurship. I love that so I’m very encouraging for people to do that.
Yeah, and it’s good to start with a side hustle and then see if you can have an income replacement and live the lifestyle that you want to live. It’s hard work and I have a lot of respect for entrepreneurs and the process of exiting and transitioning their company is not an easy one and that’s why it’s great to surround yourself with folks like you, Mark, and hopefully, folks like me that we can really help them.
Let’s start to talk about our words of wisdom. Like you said, you’ve done over 100 business transitions and worked with people. Let’s talk about some of the learnings we learn from failures. We learn from successes, we learn from failures, sometimes we learn more from failures. They’re certainly more painful. What are some of the observations that you would like to share with our listeners, people who are thinking about a business transition, of the challenges and lessons learned?
People don’t plan to fail, they just fail to plan. You need to have a business plan, you need to have an exit plan, you need to have a succession plan, you need to have a plan. People have it in their mind, sometimes, “Oh, yeah, when I do this, or when I accumulate that, or when I get X amount of revenue, then maybe…” You need to have a plan, whether you choose to go into succession, exit, whatever transition after that, or not, that’s completely up to you, but you have to have a plan.
People don’t plan to fail, they just fail to plan. You need to have a business plan, you need to have an exit plan, you need to have a succession plan, you need to have a plan. People have it in their mind, sometimes, “Oh, yeah, when I do this, or when I accumulate that, or when I get X amount of revenue, then maybe…” You need to have a plan, whether you choose to go into succession, exit, whatever transition after that, or not, that’s completely up to you, but you have to have a plan. So that’s, that’s one thing is, That’s a failure, not to have a plan.
Another thing is not selling when you have the opportunity. I’ve seen this time and time again. Businesses have ups and downs, markets have ups and downs, the business cycle has ups and downs, and you need to take advantage when the cycle is in your favor. If you don’t, it could take you five, it could take you 10 years. I mean, just think about the great recession that we had. Let’s say someone was about to sell in ’07, and they decided not to sell and all of a sudden, ’08 – ’09 they might have had to wait seven, eight years and who knows what age they were? That’s a long time.
Not selling when you have when you have a good opportunity. I’ll give you a good story about that. I had a client years ago, I think he was either late 30s or early 40s, had a great company, nothing unique, but a great company, and a publicly traded company came to him wanting to buy and I helped him out, did all the planning with him. They did estate planning. We did the whole nine yards. He was already set, but he was young, his kids were young. He had two partners, they were a little older but he was the main guy, and he was like, “Should I really be doing this? I’m so young. You know what? It doesn’t make sense,” so he called me the night before he was going to sign, “Mark, I don’t know, I’m getting second thoughts. We’re doing so well and making so much income, it doesn’t make sense,” and I said, “Listen, you might never get this chance ever again. You’re gonna be able to influence not only you, but your kids, and possibly the next generation.” This was a generational wealth type of situation and I said, “You might be kicking yourself for the rest of your life.” I said, “It’s your decision, ultimately, but it makes a tremendous amount of sense for you. Think of your family and think of the next generation.”
He wound up selling, he never ever had another business not even close to doing this again. Now we have over a decade since he’s done it, and he’s never been so happy. He’s a lot more relaxed and he’s done very, very nicely so in retrospect, he was very happy that he did that. That’s a case where he did so when he had the opportunity there. I don’t know, have you had any cases where people just can’t pull the trigger, and they wound up regretting it?
I don’t know about the regret side. There’s one I’m thinking of where it’s an income replacement challenge where the owner, I had identified a buyer for him and approached them. They had talked to an M&A advisor years prior and the same reason they didn’t pursue this sale or transaction with my client was the same reason 10 years prior, which was, the owner had trouble thinking about income replacement. Now the owner is in his mid 70s and it’s the same situation and so I don’t know if it’s regret. I think it’s going to be a challenge there. He’s the majority owner and there are others and so there’s that aspect where the owner just isn’t ready because he’s living a certain lifestyle. He’s envisioning that it’ll be difficult to replace that income at his age, which may be true, and I think the regrets are going to come from his team, because there’s no liquidity for them and now they’re continuing to age as well. They’re younger than he is, but they’re continuing to age, so what does that all mean? I don’t know.
Every situation is different and that’s what we see. These are all snowflake situations and so one of the biggest lessons learned from my 100 conversations, and growing in this show, and guesting on other people’s shows is that when time is on your side, it’s on your side, because you do have the benefit to make changes and change your mind on things, but when you’re 70 to 75, probably, that’s when you start to feel regret, because what will happen at some point is he will pass away, and then what? I think also for the example you shared with the gentleman, he had smaller kids, well, he could go to the baseball games, he could go to the basketball games, and when he’s working 70 hour weeks, you can’t do that and you don’t get that time back, so that is the world’s biggest trade off and making these decisions, especially if you’re in your 40s. What a wonderful option to be able to choose to sell the business and choose a lifestyle that really satisfies his other things that he wants to do in life and not have to work so hard for that. We can only wish for that.
Yeah, I would say that 70 something year old person, just, from the knowledge of dealing with people like that, I have to feel that his image and everything that he’s built up is all about the business that he’s created and he’s so intertwined with that, that if he ever sold, he’d feel like a lost puppy. The business is his life and people look at him and say, “Oh, that’s the XYZ person,” that he’s so intertwined, and we’ve seen that many, many times where people just don’t sell because they’re so intertwined with their business, and they feel like they lose their purpose in life so potentially that’s a difficult scenario.
Absolutely. Well, Mark, kind of winding down here. I know you shared one of the quotes about having no plan is planning to fail. Do you have any other favorites that you could share?
Oh, quotes. Just do it. I used to teach a class called Financial Strategies for Successful Retirement and a lot of people will go through an economic or academic exercise of understanding all the things to do, or getting information, listen to your podcast, listen to my podcast, and just educate, educate, educate and that’s all they’ve done, it’s an academic exercise, but you’ve got to make it an economic exercise, and that is, you just do it, like the Nike sign. I think that’s great. You just do it, you’ve just got to get a plan. You got to go out and hire Laurie, if you need to grow your business and want to prosper there and want to be able to transition that business. You need to hire someone like myself to come in and analyze and make sure that you have enough money to live comfortably for the rest of your life. Have conversations with other people, estate attorneys and other attorneys. Just do it. If I’m going to leave anything for people today is have a plan and just do it.
If people want to follow up and talk with you Mark, what’s the best way to get in touch?
Okay, so you can go on Aline wealth, A-li-n-e Wealth and you can also email me at email@example.com. You can catch me on my podcast, Find Your Exit, you can find it anywhere on Apple, or wherever you get your podcasts and there’s a few places to find me also on Twitter.
What about your YouTube show?
Oh, yeah. That’s a fun thing. It’s called Coffee with Krav. Here for the video, you can see I got a coffee cup, this is Coffee with Krav there. What I did was, we had the pandemic, and when the pandemic hit, I knew that I was not going to see my clients, so normally we just sit around the table and we would just have coffee together. I felt like I wanted to keep having a connection with clients so I created this Coffee with Krav where I’d interview different people from different walks of life and so I started that and on a monthly basis I’ve been interviewing all different kinds of interesting people, and I interviewed a guy, Matt Long, who unfortunately, was riding his bicycle in Manhattan during a transit strike and he got hit by a bus. He went up underneath the bus. He was pulled out, I think they gave him a 1% chance of living and it’s just such an interesting story about this man that got hit by a bus and how he lives life today. I interviewed Matt Weiss, who was a director, producer of Man in Red Bandana, talking about… he wrote a documentary about this person that saved many lives when 911 hit, when the planes hit, and this person gave up his life and he had a red bandana on, such an interesting story, so I’m doing different interesting life stories there, and I’m having a tremendous amount of fun doing that.
That’s awesome. I’ll have to check that out. I appreciate the pivot for that content. It isn’t just the business content, it’s more life and talking to interesting people. You are interesting Mark. Thank you so much for being on the show and sharing your knowledge and I really look forward to collaborating with you and keeping in touch.
Yeah, Laurie, thank you so much. Great show. Thank you so much for having me and let’s make 2022 the best year ever.