The Wise Exit

Christine Nicholson - Episode 61 | CASHING OUT M&A PODCAST

00:00:00:15 - 00:00:23:22
Christine Nicholson
Two inalienable facts. Every business owner leaves their business. Somebody else can do the job that you are currently doing. I guarantee it, because at some point they're going to have to put those two things together and all of a sudden you can actually start thinking about how you release the weight from your shoulders of carrying your entire business.

00:00:24:00 - 00:00:52:14
Todd Sullivan
Welcome to the Cashing Out podcast, where our fellow founders share real stories and offer honest advice around selling their companies to some of the top acquirers in the world. My name is Todd Sullivan, CEO of Exitwise, where we help business owners create the exits they deserve. Today, my guest is Christine Nicholson, a serial entrepreneur with multiple exits under her belt and who has now turned her attention to helping fellow business owners with succession planning before the sale of their businesses.

00:00:52:16 - 00:01:16:04
Todd Sullivan
Christine sold her first business just 12 months after launching. She then helped a client sell a distressed business, which led her to help a family office sell off over 40 businesses. Christine knows a thing or two about the exit process and believes the number one piece of advice for business owners preparing to exit is to hire people to take over each of the business owners tasks over time.

00:01:16:06 - 00:01:57:07
Todd Sullivan
This will leave the business owner in a place to oversee the growth of the business and walk away when it's sold. I hope you enjoy my conversation with Christine Nicholson. Christine, thank you so much for being here. I've been excited to chat with you because you're a different type of guest for us. You've certainly been a founder who has exited businesses, but you've kind of turned that entrepreneurial spirit back into giving back to founders around succession planning and so I feel like our listeners are going to get a lot out of this episode to learn about how are you setting your business up, not only to have a great transaction, but how are your people

00:01:57:07 - 00:02:12:21
Todd Sullivan
taken care of? How do you think about succession when selling a business? So I think of this more as like M&A office hours for us and really, really appreciate you being here. You know, just so you know, Mark Cuban had this spot. I don't know if you know who he is now that you're on the other side. Yeah.

00:02:13:00 - 00:02:14:14
Christine Nicholson
Yeah.

00:02:14:16 - 00:02:20:23
Todd Sullivan
He had today's spot and when we booked you, I immediately bumped him. So thank you for being here.

00:02:21:01 - 00:02:27:12
Christine Nicholson
I am going to take that. So thank you so much for having me. And super thanks. Now, yeah.

00:02:27:14 - 00:02:40:20
Todd Sullivan
Really a great place to start. Really, is where you decided, you know, you want to be an entrepreneur. You started your own business, so maybe you could take us back into those moments and the types of companies that you were building and eventually exiting.

00:02:40:22 - 00:03:08:01
Christine Nicholson
So. So my entrepreneurial spirit started very young with the one thing that most successful entrepreneurs need. There was a necessity. We were very poor when we were kids and we didn't have an awful lot and the other kids had sweets. So, Candy, in American terms, we didn't. And I was like, I need to find a way to remedy this situation.

00:03:08:05 - 00:03:28:22
Christine Nicholson
So it was all driven by the sweets. And so I always had a side hustle. But then when I started my first, what I would call grown up business with a proper business plan, etc., and I had to go to the bank and ask for a lot of money. And it was pre the financial crisis and banks were literally just throwing money at you.

00:03:28:22 - 00:03:55:16
Christine Nicholson
But one of the things I had learned from my previous career, and I'm an accountant by profession, is having seen the experience of business owners building a business and not having and in mind and the disasters that that would then befall. I built my first business definitely with the end in mind. I had a succession plan built in to the business.

00:03:55:16 - 00:04:19:01
Christine Nicholson
With an exit plan, I knew exactly how I was going to exit and more importantly, because I had investors and the banks involved, I was very clear about that. And I think that's one of the reasons why they gave me so much money so quickly. It wouldn't happen quite so easily these days. And so my first business, I exited really easily because it was all built into the plan.

00:04:19:03 - 00:04:39:13
Christine Nicholson
My next business was probably a bit more messy and frankly, I started it really quickly and somebody came along and just offered me the money for it, but wasn't really planning for that. So I had a I would call a lucky exit because literally the guy came along and said, I want that business. How much are you willing to sell it for?

00:04:39:15 - 00:04:41:09
Christine Nicholson
It's like that's almost unheard of.

00:04:41:11 - 00:05:03:21
Todd Sullivan
I was going to ask, with all the planning on the first one, I'm assuming that you had a data room with all the financials, all the marketing materials, all of the contract checks, insurance, employment, everything really buttoned up, which makes exiting more. It makes it easier, it makes due diligence easier. And then on the second one, probably weren't as prepared.

00:05:03:21 - 00:05:16:18
Todd Sullivan
It sounds like the way you you planned it was not quite the same way. Why? Why? If you were so successful with the exit plan in mind on number one, did you go into number two? Really unplanned.

00:05:16:19 - 00:05:47:13
Christine Nicholson
I think because the whole business started unplanned. I mean, literally, I was at a networking event sitting next to someone and we ended up talking about health and wellbeing in the workplace. And I obviously articulated this vision so clearly that they thought that person thought I was running a business and I was oblivious to the fact that they were thinking this and they invited me along to what I now know is a pitch for some business, whereas I just thought I was going to be part of a roundtable discussion.

00:05:47:13 - 00:06:20:21
Christine Nicholson
I mean, talk about two people sitting next to each other divided by a common language. We were coming at this in completely different perspectives. So when I went into the room, I realized quickly that they were expecting me to pitch and I just articulated the same vision. And I literally walked out of that room with a contract in my hand, and I didn't actually even have a business, although a year later when somebody came up and said, I want to buy that from you, it was like, okay, I need to just respond to this.

00:06:20:21 - 00:06:41:00
Christine Nicholson
So it was very much a reactive it was a big lesson because the first business was so planned and it was in a regulated environment, whereas the second business it was like the Wild West. I mean, this was a properly like the Wild West that was just you never knew what was going to happen from one day and to the next.

00:06:41:02 - 00:07:01:04
Todd Sullivan
And it sounds like the second one didn't require external financing, because if you're borrowing from banks or investors showing that plan, adhering to that plan and reporting along the way is pretty critical. So it helps you keep your those books in order, maybe the start of a data room. Okay. Well, thank you. Thank you for sharing those those two experiences.

00:07:01:04 - 00:07:16:13
Todd Sullivan
So but now today and I know you've been part of multiple exits in lots of different contexts, right? So you are very familiar with mergers and acquisitions. Maybe you can take us through some of that experience as well.

00:07:16:15 - 00:07:43:12
Christine Nicholson
So my very first exit experience was coming into a family owned company that was family run. But the next generation, multiple generations but the next generation had taken one look at the current generation and said, We don't want to work that hard. So the family went out. What do we do with it? And so they had it was a very messy thing.

00:07:43:12 - 00:08:07:18
Christine Nicholson
It was kind of 40 different companies. It was like a big bowl of spaghetti. And we had to kind of pull the spaghetti out to get these threats. And we groomed that business over a period of time to sell it in a number of bundles. And it was for me, it was my first job as a newly qualified accountant.

00:08:07:19 - 00:08:32:16
Christine Nicholson
I already knew I didn't really want to do accountancy. So all of this was was taking me out of the kind of humdrum accounting into this. How do we add value to this business so that we can sell it for the most money? And it was the most fabulous apprenticeship. And over four and a half years, we managed to dispose of the whole the whole business.

00:08:32:17 - 00:09:06:16
Christine Nicholson
And I mean, I was literally the last person out of the office, like on the family office. I switched the light out and I wrote my own termination check. It was it was that that that fantastic experience. I mean, we bought every aspect of disposal in here. We acquired companies to fill a hole so that we could make more valuable collection of of companies, which we put one company into liquidation because it literally was just devaluing everything else around it.

00:09:06:18 - 00:09:40:20
Christine Nicholson
So in terms of M&A, it was the A to Z - that in a way we literally covered everything. And and I sat there and thought, I love this. Like, I love the cut and thrust of it. I loved the the the exit process, which for most people is a roller coaster, particularly when it's your own business. And I think I really understood it when I when I was operating my own business about how the temptation to become attached and start saying, well, my business is my baby.

00:09:40:22 - 00:10:15:02
Christine Nicholson
No, it's not. Your babies are your babies. Your business is a legal entity. It's a bunch of papers. And and you really need to think about how your business serves you, because to be honest, most business owners become the servant of their businesses. And so I learn all of those lessons during that four year apprenticeship. And anybody else who study something for four years comes out with a Ph.D. And I definitely served my my time in terms of being able to look at existing businesses.

00:10:15:02 - 00:10:39:18
Christine Nicholson
Now and being really able to see those key things that immediately add value and actually those things that are just you don't just don't bother wasting your time doing anything because the next buyer will come and do those things for you. Here's the core of how to add value. And you know, one of those big pieces, one of the big keys is this is succession planning.

00:10:39:23 - 00:11:06:18
Todd Sullivan
Christine, can I stop you there? I'm jealous. The experience that education must have been amazing to work for a conglomerate like that and understand all the pieces, all the different business units and make decisions on how they could increase in value by either buying companies, divesting pieces, all of those strategic decisions all driven around creating enterprise value. So you must have learned so much.

00:11:06:18 - 00:11:28:00
Todd Sullivan
You're on the buy side, you're on the sell side. I what I what I think is I think the best advisors to us as fellow founders, growing businesses are the ones that have stood in all the shoes, right? So you can look at a transaction from everybody's point of view. And I like what you just said, right? It's not your baby, Right?

00:11:28:00 - 00:11:48:10
Todd Sullivan
It is a stack of papers and that might be off putting to an owner who has invested their livelihood, their their emotion. They've made a lot of sacrifices. Right. That is more than just a stack of papers. But to your buyer, how are they actually looking at it and what piece of the full puzzle is it really filling?

00:11:48:10 - 00:12:13:05
Todd Sullivan
And you've seen that, done that, been there. So I think you're probably going to give some some amazing insights. Now you've said, okay, the number one thing that you see across the board is this kind of idea of succession planning. And I really do want to dive into that. First. Can you explain to me and to us the difference between exit planning and succession planning?

00:12:13:06 - 00:12:48:06
Christine Nicholson
There's going to be plenty of people who are listening to this. They're going to argue with what I'm about to say, for which I'm not going to apologize, because for me, succession planning is about the people, and exit planning is about the transaction. But without the people planning, because your transaction is going to be harder, possibly more prone to fail and certainly going to either reduce the value of your business or make the terms on which you sell your business or exit your business whichever way you choose to do it.

00:12:48:06 - 00:12:58:10
Christine Nicholson
They're going to make the terms more challenging and more challenging for you because the challenges are always going to come from the buyer's perceived risk.

00:12:58:12 - 00:13:30:11
Todd Sullivan
Okay, I get it. One is people perspective and one is the actual transaction. And, you know, we've done a number of transactions here, and I can tell you it is not infrequent where the the call it the head of sales decides that they are not treated fairly in this transaction and they want more and can hold up a sale because all of those relationships that that head of sales has are paramount right to the value that is going to be realized by a buyer.

00:13:30:13 - 00:13:52:14
Todd Sullivan
And then you see multiple generations, right. Who wants to be king on the other side when when dad retires, that decimates companies, right? So planning that out, I'm taking kind of two examples that we've seen where it's a family succession or it's, you know, a sale of a business. But the whole team has to essentially be on board.

00:13:52:16 - 00:14:13:11
Todd Sullivan
We're working with a client right now where it's just multiple owners that can't quite agree on what the next step is. And it just makes everything challenging and so a buyer sees that and exactly, exactly. Like you just said, it creates kind of the the red flag of risk. Risk risk goes up and that means purchase price goes down, down, down.

00:14:13:13 - 00:14:24:13
Todd Sullivan
So I we see that frequently. I'd love to hear your examples so people really understand probably more pronounced examples of what you're talking about.

00:14:24:15 - 00:15:08:14
Christine Nicholson
Yeah, absolutely. So let me tell you the horror story first, because this is the one of the main reasons why I do what I do. Early on, after we'd done that, the sale of the, you know, my basically my M&A apprenticeship and then I went on to found a couple of businesses. When I came out of that, one of my first clients was a guy who had invented something in his garage and it literally had started with him tinkering around with some equipment and he took that from his garage and just him and one other person to employing 100 people and tens of millions of of turnover, but no succession plan in place.

00:15:08:20 - 00:15:20:19
Christine Nicholson
Everything really pivoted around him. And then he was actually outside his house up a ladder one day and the ladder slipped and he fell. And seven days later he was dead.

00:15:20:21 - 00:15:21:17
Todd Sullivan
Wow.

00:15:21:19 - 00:15:55:07
Christine Nicholson
And 18 months later, his business was insolvent. It went to the wall and it was all because they were literally he was the sole kind of decision maker, literally nothing else. Nobody else would, you know, facilitate sales or make any of the decisions. He was the sole signatory on the bank account. There were so many factors that meant that he was the linchpin of that business and that was a tragedy because his family had relied on the income, let alone the capital value of the business that went to the wall.

00:15:55:07 - 00:16:25:17
Christine Nicholson
And then 100 people had to go and find other jobs. So so that and then so everybody is is damaged by that. And that really was one of the key reasons why, for me, the whole the whole idea of succession planning is is really important. And that brings me on to another thing, especially within family companies, because just because you're a member of the family doesn't mean to say that you're the best person for the job when he's the bad news.

00:16:25:19 - 00:16:46:09
Christine Nicholson
Just because you founded the business doesn't mean to say that you're the best person to be the chief exec. And this is something that is so wound up in people's heads. It's like, Well, I found it. Therefore I've got to be in charge. But there are three particular roles for a founder, usually, and especially on day one, you are the shareholder.

00:16:46:11 - 00:17:11:18
Christine Nicholson
So you find the thing that to be honest, if you were the shareholder shell, you wouldn't go in to work every day. You know, you wouldn't be telling Shell how to run their business. So why do you think that that's the key objective of being a shareholder in your own business? You're a director and you're usually a director because you own the business, but actually you might not be the best director in the world.

00:17:11:20 - 00:17:38:14
Christine Nicholson
And then invariably you've also got that day job and those three roles then kind of meld into one and they become so part of the founder's identity that they don't even think about succession planning because go back to the business is my baby and you know, I am the protector of the baby. And those three roles are so I can't separate the three roles and neither can anybody else.

00:17:38:16 - 00:18:18:07
Christine Nicholson
So one of the first things that you really have to do from a succession planning perspective is actually separate out the three roles. And in a family business, it is it's really important to separate out the three, the three roles because ownership does not mean that you're the best person to lead. And it could be that you just have a day job or not be involved in the business at all because actually, from what I know is that even if you founded the company, you typically will take it from zero to a certain point and you're not necessarily the best person to take it to the next level.

00:18:18:09 - 00:18:26:06
Christine Nicholson
And nobody ever asks, So who is if not me, who? And it's a it's a really big question.

00:18:26:08 - 00:18:44:14
Todd Sullivan
I like that question. It reminds me I was I was pitching one of my businesses to a venture capital firm, and they talked about the phases of growth with me. And I, I said, hey, you know, I built and sold business businesses before, but I've really only grown a business to about 25 people. And I really didn't enjoy that.

00:18:44:16 - 00:19:09:22
Todd Sullivan
I knew I wasn't the right person to be managing 25 people. And so I do see as we progress as this business progresses, that there will be a better leader at some point. And I just I remember the look that was a not a comforting look. It was this is not the guy to bet on. And so by being very upfront about what I believed would be the best thing for the business, the investor was not wanting to hear that.

00:19:09:22 - 00:19:29:07
Todd Sullivan
They wanted to hear I'm the guy to take it to the billion dollar mark. I frequently talk with business owners who say, Yeah, I'm trying to decide whether it's my son or my daughter who's going to take over. There really can be only one, you know, to take over. And I say, Do they really want to be in an apparel manufacturing facility?

00:19:29:07 - 00:19:57:16
Todd Sullivan
Is like, is that their dream? Or do you just assume that they they want this or an HVAC distribution facility, right. That you have built up in in very admirable business and and supported your family incredibly well. But do your kids really want to do this? That was one and two. They really you know, do they have the skill set because they didn't grow up building the business from day one and now you're handing over a very big organization to to to your kids that have.

00:19:57:16 - 00:20:17:05
Todd Sullivan
Yeah, kind of worked there. But, you know, it may not be the right thing. And I think something to think about for business owners. I actually have a good friend that did this. His name is Brian Elias, and Brian owned Hansen Windows and instead of turning the keys over to his children, Brian said, No, I'm going to sell this business.

00:20:17:05 - 00:20:35:17
Todd Sullivan
And with the proceeds, I'm going to let my kids decide what they want to do and they're going to start different businesses. And sure enough, he and his son went off and started another business and from the ground up. And the son is doing incredibly well and he's, you know, taken it from day one to, you know, a sizable business today.

00:20:35:19 - 00:21:01:17
Todd Sullivan
So I do think people that have businesses that think they should hand it over to their kids really should consider if you create the liquidity event, you're now creating options for your children. And, you know, one might be want to be an actress and one might want to start a staffing company, something totally different. And you can support that financially and not kind of thrust them into a role that may not be what they're they love or what they're designed to do.

00:21:01:19 - 00:21:04:02
Todd Sullivan
So thank you. Thank you for sharing that.

00:21:04:04 - 00:21:28:06
Christine Nicholson
Well, I completely agree with you. And I think that your presentation to the investor of, you know, being completely honest and this isn't isn't my thing, that that's actually an incredibly brave thing. And from an investors perspective, I would have thought that they would have welcomed that. But then, you know, everybody's now now everybody's as aware as you would want them to be.

00:21:28:06 - 00:21:48:14
Todd Sullivan
So so all right. So let's let's move like into the succession planning and a little bit of kind of the nuts and bolts of it. I feel like we could serve our our clients better if we got to know them sooner. Right. A lot of clients come to us and they say, I've got an inbound offer. Intel wants to buy our business.

00:21:48:15 - 00:22:12:23
Todd Sullivan
What do I do? Right, That's one. And then the other is what you've alluded to is there's some family event happens or there's a health problem and they've owned a kind of a business service type company. And they're like, I think it's kind of time to sell and so we wish we got to know them sooner to start setting up some things that would help them from a tax perspective or that transition elevating employees right.

00:22:12:23 - 00:22:24:08
Todd Sullivan
Not having so much key man risk is is a lot of times what we call it. Can you take me through some of like the major succession planning elements that we could learn from today?

00:22:24:10 - 00:22:50:19
Christine Nicholson
Oh, absolutely. So there's not one simple place to start. But let's start with the organizational structure, because a lot of organizations that are founder LED tend to be the two layers. There's the founder or the current leader, and then almost everybody answers to them in some way. It might as well just be literally one box. He's the leader and literally all the reporting points are directly to them.

00:22:50:21 - 00:23:19:22
Christine Nicholson
So I think if you're really honest and start looking at your organizational reporting structure, then you can start to really think about. So the first step is always, if I was outside of my business for a day or two, what would stop? What would C's, where would the barriers be? And then so you can now start thinking about delegating, what do I need to how do I delegate those, some of those decisions downwards?

00:23:19:22 - 00:23:38:17
Christine Nicholson
And what does my organization need to look like and be completely transparent about it. So so the three moving parts really are the organizational structure, the decision making process and the transparency and the three elements all work together.

00:23:38:18 - 00:24:10:19
Todd Sullivan
Could I ask, when you say transparency, does that mean everybody in the organization understands reporting structure and the decision making process, right, that just everybody gets it, got it. Got it. I really like that. Like what stops if you're not there for two or three days, Right? Because I can think of the companies that I've been in and started and what would have stopped until you got to a certain size where you had the structure that everybody knows the playbook and you can actually step away and have a vacation is really what we were working towards.

00:24:10:21 - 00:24:32:21
Christine Nicholson
From a mindset perspective. You know, let's come at it from the mindset of and trust me, I have been there even with the business that I planned the end in mind from the very beginning. I still went to bed every night thinking this is my baby, even though I knew that it wasn't, you know. So it's psychologically I was still tight, tight in there.

00:24:32:23 - 00:25:08:03
Christine Nicholson
But if we start if we start from a mindset perspective of there's only three jobs that any business owner has and that's getting and keeping customers staying legal and making getting and keeping customers or staying legal more efficient. Now, anything else that's on your desk that doesn't take those three boxes for a starter you can stop doing and so can everyone else that will actually free you up because you're like, if you start questioning everything that you're currently doing, it means that you can now get clarity on the things that are really making a difference to the business.

00:25:08:05 - 00:25:40:02
Christine Nicholson
So what's this got to do with succession planning? Well, now what you're left with all the things that are left on your desk. Just think about the lowest common denominator that someone can handle that thing. And if you think about your A as a business leader or and certainly as a founder, if you think about your hourly rate in terms of how much value that business is worth, then I call this the £10,000 an hour approach.

00:25:40:04 - 00:26:06:14
Christine Nicholson
Then typically you'll be thinking of your business as your hourly rate being £10,000 an hour, because for every hour that you're working on the absolute highest level, it's adding £10,000 to the business. And then if you think of all the things that you're doing and then you say, okay, this task payroll, the classic one, would I pay someone £10,000 an hour to do that?

00:26:06:16 - 00:26:26:02
Christine Nicholson
And the answer is invariably no. So how much would I pay for someone to do that? Well, actually, for someone to do your payroll here in the UK, probably about £20 an hour or $25 an hour, maybe. Well, let's let's stretch it out. Let's get the gold plated version. $40 or $50. Now, that's a long way from £10,000 an hour.

00:26:26:04 - 00:26:49:01
Christine Nicholson
So now every hour I'm spending on payroll, which I'm not doing very well, and it takes up time and it's a real drag. And I'm usually doing it at the weekend or in the evening when I should be with my wife and kids. I'm now spending £10,000 worth of hour on something that I can pay $40 for. I need to delegate that job.

00:26:49:03 - 00:27:27:16
Christine Nicholson
And this is a really good way of getting into the mindset of of delegation. Once people start working on the issues like, oh my goodness me, all these things I can now delegate because they are so less than £10,000 an hour. And it's a it's a mindset changer. So now you've got some delegation things going on. Now you can start looking at all the people who are doing stuff in your business that you are now allowing them to do, and the decision making that you allow them to do starts to elevate and all of a sudden you're kind of out of a job for some of the things.

00:27:27:18 - 00:27:49:10
Christine Nicholson
But you could have been working 80 hours a week. Now you're only working 40. Well, it's like a part timer, so you can actually get really caught up in that whole delegation stuff. Now you start looking at your people and thinking, what else are they capable of? And this is just changing your mindset. Now we can start thinking about, okay, what are they really capable of?

00:27:49:12 - 00:28:19:22
Christine Nicholson
Who's the next person who's capable of doing some of this stuff, this thousand pound an hour work? And who is the person either inside the business or maybe you have to bring them in who is capable of doing £10,000 an hour work because to ineligible facts, every business owner leaves their business at 100%. Leave that business. Somebody else can do the job that you are currently doing.

00:28:19:22 - 00:28:42:01
Christine Nicholson
I guarantee it, because at some point they're going to have to put those two things together and all of a sudden you can actually start thinking about how you release the weight from your shoulders of carrying your entire business and start thinking about who else can help you carry it. One analogy I like to use is it's like a bed of nails.

00:28:42:03 - 00:29:08:13
Christine Nicholson
If you've only got five nails on the bed, that's a really uncomfortable thing to lie on. If you've got a thousand nails on the bed all carrying the weight. So think of nails as your employees. You don't need 2000. But if you're if the weight of carrying your business is spread over all the employees, it's a bit more of a comfortable, better nails to lie on that.

00:29:08:16 - 00:29:33:19
Todd Sullivan
That's a funny analogy I think it employs as as nails. You know, I'm taking all of this in as like personal advice and I'm thinking through the businesses that I founded. And I think the hard part, right, is you start out doing everything because you don't have the resources to hire the $25 an hour person, right? And you start creating habits of how you spend your time.

00:29:33:21 - 00:30:02:22
Todd Sullivan
And I think that that is one of the lessons that I'm taking away, is you have to step back once you have the resources and say, should I be doing this job or could somebody else be doing it better and far more efficiently? So I really, really love that advice. I feel like I didn't let go at certain times in other businesses where other people could have been doing a far better job and doing it more efficiently when we had the resources to actually hire those people.

00:30:03:00 - 00:30:27:04
Todd Sullivan
But you're also talking about elevating people within the organization, right? And I love to hear that. And that takes, you know, larger organizations. It is It's great advice. I think people will absolutely take something from that. I really just want to hear more. So after after you're kind of getting people in the right seats. Right. You've as presumably you're bringing in the right people on the bus, getting them in the right seats.

00:30:27:08 - 00:30:52:02
Todd Sullivan
Right. And you are going from this 80 hour a week job down to 40. You know what is next? Because I know from an M&A standpoint, every buyer is going to say, what is the management team that we are buying? And if the founder, if you're hit by a bus, what happens like is this business devalued? And that's ultimately what we're trying to think through and present and solve.

00:30:52:04 - 00:30:57:16
Todd Sullivan
But you're getting very proactive about it, so keep going. What are the next steps?

00:30:57:18 - 00:31:20:21
Christine Nicholson
Okay. So I always talk about actually getting the right people because ultimately the value in a business is about the right people doing the right things at the right time for the right reason. And so the next step really is once you get your head around the fact that somebody else can do some of this stuff, which actually then will get you thinking, Oh my God, I'm out of a job, know what am I doing?

00:31:20:23 - 00:31:39:03
Christine Nicholson
And honestly, it's the biggest question if everybody is doing all that that I'm doing now, what about me? Where am I going to do? Well, well, here you are flying the 747 at 30,000 feet. That's your job. And if you're in the weeds, you can't do that because you're looking at the long and the long term.

00:31:39:05 - 00:32:09:02
Christine Nicholson
And also you're getting yourself ready to act as the shareholder in a transaction. So actually getting to understand what the transaction is, a transaction or a transition is going to look like and how you can prepare for it. And actually still be thinking strategically. And then now your identity isn't tied up with being in the weeds, it's actually tied up with being the leader because if you are leading, you are not reacting and most business owners are reacting.

00:32:09:04 - 00:32:31:06
Christine Nicholson
And if they're reacting, they're not leading. And I think it was actually that's a phrase that comes from designated survivor. It's like who says that you can't learn business from TV? So so actually now the next thing you really want to do is make sure that this is about having the right roles and that the right roles in your business for where it's going to go to next.

00:32:31:06 - 00:32:55:14
Christine Nicholson
And that's future thinking. And so you've got to have the right structure, the right roles and the right people. So actually, what are the right people? Well, here I use the analogy of stalagmites and stalactites. So that and this is how I remember them stalactites hang down from the cave. You know, they're literally water dripping down and they're draining them.

00:32:55:18 - 00:33:19:10
Christine Nicholson
And that's how they live on these deposits. Whereas Stalagmites are coming from up, they're building from the bottom up. So if you've got stalactites, you've got people who are hanging off you, and so people hang off, you, drag you down. You know, they're the ones that if you are hanging over the edge of a cliff and holding onto someone, they're going to pull you over the cliff as they fall over.

00:33:19:12 - 00:33:39:16
Christine Nicholson
So you don't want stalactites, you want stalagmites, you want people who are actually going to push you up. This comes back to the bed of nails again, actually elevate you because as they elevate themselves, they're not trying to get your job. So that they can kick you to the curb. They should be trying to get into your job so that they can elevate you to the next to a higher level.

00:33:39:18 - 00:34:03:11
Christine Nicholson
And that's that's how you define the right. People have a number of tools to do this fancy detail it's going to be right now. But if you want a team full of people with elevating everybody, including themselves, and these are the people who encourage people to come in underneath them and then they guide them to improve themselves as well.

00:34:03:12 - 00:34:38:04
Christine Nicholson
And that actually derisks the entire organization. And it actually doesn't take much. It's it's just investing in communicating effectively and transparently with your people about where the business is going and what needs to happen for the business to succeed and what they need to do to make that happen. And so, again, that that comes back to the the transparent sea thing, which a lot of business owners have difficulty with being completely transparent.

00:34:38:06 - 00:34:44:20
Christine Nicholson
But honestly, transparency pays. It pays in spades.

00:34:44:22 - 00:35:08:11
Todd Sullivan
Well, thank you for that. I tried to put that in the context of of M&A right, because I very much see as an owner who wants to go into retirement and transition the business into the ownership of the the management team. Right. There are certainly structures to exit your business that way, but the majority are not. And in the US they're called ESOPs.

00:35:08:13 - 00:35:30:18
Todd Sullivan
Now in a normal M&A transaction where a buyer is coming in and saying, I want to understand the strength of the management team and it sounds like you've been on that side, that buyer side, and you're evaluating the strengths. You must have been in situations where there is kind of that duplicate strength on the buyer side, right? So they already have a great CFO.

00:35:30:23 - 00:35:47:06
Todd Sullivan
And so the CFO is kind of duplicative once this business is sold. How do you think about these kind of succession plans where talent ends up being a little bit repetitive in an M&A transaction?

00:35:47:08 - 00:36:20:11
Christine Nicholson
I am a big believer in the Richard Branson approach, which is there's a lot of things that he's done that I wouldn't necessarily agree with. But on this we are united and that is train your people so they can leave, treat them so they don't want to. And what that means is that when they have to leave and then they've they're tuned up for the next opportunity that that that takes them.

00:36:20:11 - 00:36:48:03
Christine Nicholson
Because even me, we're all in situations where somebody can come and choose to work with me or they can choose to go and work for someone else with someone else. My clients have got choices. There's more choice these days than anything else. You just got to make sure that we're equipping our people and ourselves to be the best at the next opportunity and to be able to see the opportunity and take it.

00:36:48:05 - 00:37:15:07
Christine Nicholson
And so so actually elevating them to be the best. I mean, it could be that you've got two people and actually you've now got a different succession planning problem, because when two businesses come together, succession planning doesn't go out the window. Actually, you've got the post-acquisition integration, which is usually a challenge, and then you're going to have another succession planning commitment ahead ahead of you.

00:37:15:09 - 00:37:28:08
Christine Nicholson
So for me, it's if you're treating people the right way, then you're giving them the best opportunity, either within the business or outside of it.

00:37:28:10 - 00:37:58:19
Todd Sullivan
Yeah, I love that answer because I think if you're training people really well, not only are you helping them create options for themselves, but you can also make them invaluable in an organization, right? So maybe there is a really appropriate place within a combined entity for that person. But if they're really just, you know, one tool for one job and that is repetitive or it's replicable, then, you know, maybe you didn't do that employee the service that that they deserved in training them.

00:37:58:21 - 00:38:25:00
Todd Sullivan
So yeah, it's a great answer. It's a just a lot to think about. I think the great leaders think that way. Right. So thank you for sharing, Christine. Like, I'm learning a ton. I took a bunch of notes. I'm going to think about, you know, my past experiences, how I move forward with Exitwise. Are there any other kind of parting words that you would give to our listeners about how to think about succession when when they're building their business?

00:38:25:01 - 00:38:59:05
Christine Nicholson
Yeah, certainly the biggest thing I can say if I was, I need to give one thing for you to think about and take action on today, and that is get out of your own way. And so if you are now thinking, well, how does how do I make that work? Actually just go and think about everything that you're doing and think about who else in the business could actually do it better or easier and how.

00:38:59:05 - 00:39:22:07
Christine Nicholson
That doesn't mean that you will end up doing nothing. At the moment. You're probably like a tethered balloon, and if you start giving things to other people, you're releasing their potential. And the great thing is that you're letting out the tether of the balloon so that you can elevate yourself. It's all about elevation and it's a win win, win win for everyone, win for you and for the people, win for the business.

00:39:22:09 - 00:39:26:05
Christine Nicholson
So just think about get out of your own way.

00:39:26:07 - 00:39:42:01
Todd Sullivan
Christine, thank you. I want to end it there. That was the perfect ending. I really appreciate you taking the time. I've learned a ton. Like I said, I'm looking through my notes and thinking about how I'm going to move forward. More enlightened here. But yeah, just really appreciate your time. Thank you.

00:39:42:03 - 00:39:50:18
Christine Nicholson
Know that it really was a fabulous opportunity for me to come on to bump Mark Cuban off. So thank you for that?

00:39:50:19 - 00:40:05:22
Todd Sullivan
I have one question for you, though. In that conglomerate where you were buying companies, assembling, divesting, and you were the last one to turn out the lights, you said you got to write your own termination check. Did you throw an extra zero on the end there when you were walking out the.

00:40:05:22 - 00:40:17:11
Christine Nicholson
Door as an accountant? It didn't even enter my head. It did afterwards. But now that I do know.

00:40:17:13 - 00:40:20:20
Todd Sullivan
Your number two was stay legal, right? So, Yes.

00:40:20:22 - 00:40:23:04
Christine Nicholson
Yes, absolutely.

00:40:23:06 - 00:40:25:22
Todd Sullivan
Christine, thanks so much. I really appreciate it.

00:40:26:00 - 00:40:27:23
Christine Nicholson
Pleasure. Thank you.

00:40:28:01 - 00:40:50:04
Todd Sullivan
Thanks again for listening to the Cashing Out podcast. For more Founder Exits stories, please subscribe to the Cashing Out podcast on Apple, iTunes, Spotify, FI, or wherever you listen to your favorite podcasts. And please remember exercise dot com and the Cashing Out podcast are for entertainment purposes only. This should not be relied upon as the basis for investment decisions.