Linda Rose's PROVEN Formula for Multi-Million Dollar Exits

Summary

In this conversation, Linda Rose shares her extensive journey as an entrepreneur, detailing her experiences in starting and selling multiple businesses. She discusses the importance of financial preparedness when selling a business, the emotional aspects of the selling process, and the unique challenges faced by women-owned businesses in mergers and acquisitions. Linda emphasizes the need for transparency with employees during the sale process and offers insights into navigating buyer motivations and business valuations. Her passion for helping others prepare for successful business sales shines through as she outlines her future plans, including a new course to assist sellers.

Takeaways

Linda Rose has a rich background in accounting and entrepreneurship.
She emphasizes the importance of financial preparedness for business sales.
Emotional readiness is crucial for sellers contemplating a sale.
Women-owned businesses face unique challenges in M&A.
Transparency with employees during a sale is vital.
Understanding buyer motivations can lead to better deals.
Valuation challenges often arise from customer concentration risks.
Linda's book serves as a guide for preparing businesses for sale.
She is developing an online course to help sellers navigate the process.
Her passion for entrepreneurship drives her ongoing work in M&A.

 

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Transcript:

jon_stoddard (00:01.289)
welcome to the top man entrepeners today my guest is linda rose linda started in working arthur anderson a long long time ago and then she started three businesses that were acquired and she started man advisory service where she's worked on twelve acquisitions welcome to the show linda

jon_stoddard (00:23.609)
yeah

i am interested to hear about this journey because i'm gonna x into it guy so i love financial number so how this skill pertains to the way you look at businesses and how you help them sell and get him in shape so let's talk about where you started at back at arthur anderson how did that go

linda_rose (00:52.82)
so yeah i don't want to

linda_rose (00:57.58)
to be a c p agent

and so i was able to fast track my way through college actually got a masters degree in taxation ended up at one of the big eight accounting firms which is now big four i met my husband there who was more senior than i was you couldn't date let alone get married back then and since he had like eight years a seniority on me at the firm and was up for partner i just totally did not want to ruin that for him and i think by then i was like four years into that career i decided spouting code sections

jon_stoddard (01:06.089)
no

linda_rose (01:30.36)
really my idea of a good time and plus i like to ski and you know as a tax account and you can't you can't take off between january fifteenth and april fifteenth and that's me prime season so you know that was out so i left public accounting and one thing after another kind of happened got married had a baby did some gig work as we call it today ended up implementing a doss based accounting system for a boat company here in san diego and that

jon_stoddard (01:38.049)
no you can't that's not the season for tax accounts

linda_rose (02:00.28)
started my career in technology was just not a plan event and started my first company and then about ten years later i started my second company which was the staffing firm to help staff all these biotechcompanys that we were getting that needed to ccountans to come in and help implement this accounting system that i just put in place and then after that i started cloud infrastructure business because you know we were moving towards the cloud although balmer

not deemed it the cloud just yet but it was a s p back in the day so i started that in two thousand and so there was a period of time there for like eight years i was running three companies was kind of crazy but it did teach me how to delegate and have good people surround me so that was a very good lesson and then two thousand eight i sold the first company which was my staffing firm two thousand thirteen i sold the consulting slashed yearpcrmfirm to a national c pa firm

and then in two thousand seventeen i sold the cloud infrastructure business to a p e firm hundred per cent cash walked out the door forty five days later and started hiking the pacific chris trail went on a long back back in trip

jon_stoddard (03:12.009)
wow

jon_stoddard (03:15.689)
how big is how big was that company the rose s p the one you sold to the private equity firm

linda_rose (03:21.64)
people wise not that many we were below fifteen but we had three four hundred customers we focused on highly regulated companies sucks compliance c f f d a c f r part eleven people who were heavily into the health care space and needed a higher level of security and regulation and just you know taking care of their data which we manage in private data centers at the time because as you're in some

the other public class weren't where they are today and that allowed us to really have pretty high margins and it was a very sticky business we had about a ninetyfighe percent recurring i'm sorry we had ninety eight percent recurring revenue but at ninety five percent customer retention rate so between the two of them and they were three year contracts we were pretty golden so that's what allowed me to walk out the door so quickly

jon_stoddard (04:15.469)
yeah so what kind of offer was that was based upon the cash flow recurring cash flow

linda_rose (04:22.46)
it was it was but a multiple which i can't talk about obviously but yeah was pretty good it was all catch though so i'm not complaining

jon_stoddard (04:29.729)
it was all cash he let's figure business that's just to add it right into our customers so how did you get into this rose biz which is emnaedvisor where you've been involved at twelve yeah

linda_rose (04:39.82)
yeah so i was fifty five at the time when i sold my business and i just kind of thought for sure you know well i couldn't say i thought for sure i just realized that i probably wasn't ready to retire yet so right after i sold the business i went on a five hundred mile back packing trip through oregon in washington and i had no sell service so it's kind of like out in the winder wilderness sleeping in a tent every night basically used my phone just

and apt to figure out where my next camping spot was where the next water was and you know five hundred miles it gives you a lot of time to think i was doing fifteen to twenty miles to day and some of it was on my own i actually met some other hikers along the way and hip some with them but it just gave me an opportunity to think about what i might want to do next in my life because i realize i am an entrepreneur this is what i love to do i still like to make money even though i didn't need to make any more money but that's kind of who i am and i came out

and the back side of that deciding i was going to write a book because somewhere along that trail i ran into a guy from the check republic who was also hiking the trail and he had flown over here to do it and we started hiking together because we have had the same pace and he was a system engineer and i just told them about what i just been through selling my company which there were good things about it and not so good things about it and he's like you need to write a book and so there you go right up there i spent the next eighteen months when

i got off the trail and i wrote my book getting quarter fa millions yet and it really the book is it's not an m and book it's i think it's more like a c o handbook bible on how to get your company ready to sell and i talk about every single man mistake i made over the three personal company sales that i did to my own one with a broker even with a broker i left money on the table absolutely unequivocally i know that today but i talk

jon_stoddard (06:09.869)
get acquired for millions

linda_rose (06:39.56)
about all that because i was very passionate about making sure that people who spent twenty thirty years building a business and had one opportunity to sell it that they didn't write so that's what the book was about and even before the book came out um on amazon people because i started advertising the book was coming out people started calling me and said hey linda we followed you all these years in the microsoph channel because i was in that channel for about twenty five years and i can you sell our company and that's kind of how it started

and so now i would say today half my clients know me for many many years and the other half my clients are just meeting me for the first time but now i know technology which is unusual to find somebody that's been in the co role that knows financial s really well and understands man incredibly well and so that was kind of a convergence of all my skill set so i kind of feel like i'm in the best crew of my life although i try to only do it part time

jon_stoddard (07:39.629)
so i have to ask you back of this and like how did you know you left money on the table because i i sold a business and it sold within i put it on a broker site and it sold within forty eight hours did i leave money on the table probably yes yeah

linda_rose (07:54.1)
yeah i know i left money on the table because well of what i know now but my broker didn't help me with bit adjustments i had to come up normalizations i had to come up with those all by myself like he didn't do that like he hid behind this guys of well i'm not fnraauthorized i really can't help you do that which i don't agree with that statement but sorry yeah so anyway whatever anyway so

jon_stoddard (08:14.689)
i don't see the connection yeah i don't see the connection why he would say yeah yeah

linda_rose (08:23.82)
knowing what i know now i i totally left money on the table i mean and the buyer also said oh we're goin to replace you were going to replace you know your husband because we worked together and we both exited immediately an they're we're going to replace you and that was at the time six hundred thousand dollars a year worth the salary plus pay roll taxes like did i add that back now but they never replace us kind of thing i think it was a little bit of a ploy to keep the price down so to speak right

because it never even attempted to replace us so you know s a few things like that where knowing what i know today i'm wise all that stuff and i really spend a lot of time with my clients because again i'm a c p in a form of life i spend a lot of time with my clients if they're not doing their own quality of earnings report before they go to market i really work with them on defining and uncovering all those normalizations to help increase that valuation in the end

jon_stoddard (09:23.609)
yeah that sounds like back to just that story of the broker i mean was he sounds like he was just kind of transactional and just want to make the sale happen like i'll go to the next person

linda_rose (09:34.02)
not yeh nice guy found adviarsbut

jon_stoddard (09:36.129)
but also the private equity firm should have stood up and said you know if they're gonna pay cash for this like six hundred thousand dollars what what really big difference is that going to be to them you know

linda_rose (09:50.14)
they always want to get the best deal possible you know i've met a lot of p firms uh selling the companies that i've sold some of them are more difficult to deal with than others some of them are just more forthcoming than others you know every every group is different you see really kind of everything in this space so some brokers that are better than others so just part for the course

jon_stoddard (10:11.309)
yeah so

jon_stoddard (10:15.969)
when you wrote this book it came out how did you find the first customer and said hey linda i need your help to sell my company

linda_rose (10:24.94)
first three found me first three found me actually yes actually my largest client as eighty million revenue found me v blog posts that i wrote which was kind of a random thing cause i just started writing blog posts now my website has know probably a hundred post if not more and because our team or i put out post religiously each week the email news letter or you know actually a blog on our side again to take the book beyond

jon_stoddard (10:26.849)
first the find you yeah

linda_rose (10:54.8)
and you know to expand on the book to learn more things because every deal i closed i learned more things as well and i share those lessons learned with the cos that basically you know follow my newsletter

jon_stoddard (11:13.069)
so let me ask you about this when you find a company like this eighty million dollars and you start looking at their books you're going to you're going to look at their books and say uh you know let's do the ad bags let's do the adjustments maximizing you're not really maximizing you're just saying this is your true even or cash flow

linda_rose (11:37.78)
yeah well in in that that was a very interesting project um even though they were so large in revenue they were just coming off in quick books and they just moved on to net suite and you would think with eighty million dollars in revenue they were cruel based accounting and so that was one of the first things i asked you know how's your accounting are you fully gap oh yeah we we you know were cruel based and you know in their mind because they had accounts receivable in council payable they were cruel based you know they weren't they were

doing a horrible job of matching revenue and expense in the same month so i would look at their pan by month and i'd see months where the cost of good sold was greater than the sales and i'd seen months where we'd have two million dollar losses and another month there was a three million dollar gain and it was just huge roller coaster on the bottom line because they were not now so we spent six months probably six or nine months getting their books in order we got an outside c p a firm involved

jon_stoddard (12:24.369)
so they weren't really using a cruel

linda_rose (12:38.16)
i think we had a quality of earnings report done as well just to just to get their books in order and just as we were getting ready to close a deal we were two weeks to close covidhits everything falls apart and we went back to market immediately and went to buyers number two three and four and actually believe nat was able to get a better price so it worked out in the end for everybody but you would think you know a company of that size would have great accounting in

that's not necessarily the case is not how how large you are necessarily

jon_stoddard (13:11.689)
it sounds like i just got away from him

linda_rose (13:14.8)
i think a little bit of that and they just didn't do the things they needed to do early on you know because they worked off a cash flow you know their tax return was based on cash basis so

jon_stoddard (13:22.269)
yeah

it was on a cash basis what did that do trans how did that transform their cash flow their income statements what did it look like after you implemented true cruel account

linda_rose (13:37.9)
in the right years because remember we were looking at three years wore the revenue plus the current year so we had a shift revenue from one year to another and it just really made it look much nicer and you can see really the growth versus his constant rockiness on the bottom line so it really demonstrated more of a true picture of the company versus this cash flow life that they were living under which you know depends on when the money comes in and when the money goes out so you know which you can somewhat manipulate that

jon_stoddard (14:04.669)
right right how did how did you know this person was motivated to sell they said i'm out o here i got i got a health problem i totally want to retire like i just find the reason i asked that is i just find some people said yes if you offer me ten million dollars for one million dollar company happy retire sell but in reality like i'm out of gas

linda_rose (14:15.98)
yeah it was a husband and wife

linda_rose (14:24.5)
yeah

linda_rose (14:29.1)
yeah and i think that's kind of where they were i spend a lot of time talking to sellers and i i do sell side representation only so i spend a lot of time talking to sellers about know how emotionally ready are you to do this and what's happening for you in the next season of your life because if you don't have something to move on to some people can't pull that trigger some people can't sign on the data line at the end because they're like i don't know what i'm going to do next that was kind of me in a way but you know i had my

my husband in the background going no sell the money i mean sell the company and go get the cash let's move on to something else and you know i wasn't sure what i was going to do what my next step was but you know you find your passions i think over time and some people are you know some people know that they're goin to retire and go to the lake house and water ski and golf and tennis and all that and other people go yeah i'm not ready for that yet not sure what i'm going to do but i'm not working for somebody else so you know they hesitate a little bit

so i think it's really important mentally emotionally that you figure that out before you go through that process and i do that really early on with the clients that want to work with me i just make sure that they are ready for that next stage of their life and we're not at the eleventh hour and they're like o know i can't do this so it's never happened to me thankfully

jon_stoddard (15:47.169)
yeah not yet i hope it doesn't you you ever work on the business and say you know look if you're wanting a lot of these advisors they say if you want to work backward you to have a transformational exit you need your eva to be eight x so but you're only at four x right now which means we need to add two more million dollars to your but do you also work on that side too

linda_rose (15:51.32)
no it's not gonna happen

linda_rose (16:15.3)
yeah i'm starting to do that as well where we're putting people together and and and doing some quick roll up before we go to market

jon_stoddard (16:24.589)
yeah well great you've been involved in three acquisitions of your own so you know how to do that how did that second one look the second customer that came to you what size were they kind of even give me a range you specific

linda_rose (16:36.64)
that was that was the eighty million dollar customer the first one was yeah the first one was actually a friend and a business acquaintance from many years smaller company but very interesting situation and she she got a pretty good deal for her company one year er out she stuck around for two years and exited um one after that is again somebody i've known in the channel we sold her to a national

jon_stoddard (16:39.729)
oh that was the second one

linda_rose (17:06.5)
p a firm uh she got a good amount of cash up front and then a two year earn out and she's now since retired so you know people usually have journey that they want to take some folks i just i just closed a portfolio company in january where the seller is going to stick around for five years five to seven years and take that next bite at the apple and he's very excited to do it he's got a group behind him that will allow him to make

additional acquisitions and so he's excited about that and we got him twelve offers so he had lots of choices in terms of which direction he wanted to go yes twelve offers

jon_stoddard (17:43.249)
weve offers yeah and how do you create that

linda_rose (17:50.34)
well you know the process of taking somebody to market put them in front of a lot of buyers and but he was a really strong company lot of recurring revenue strong customer base some ip so you know a lot of good things going for him over three million dollars and as one company so it was it was a nice company and then i

jon_stoddard (18:10.629)
was it was recurring go ahead

linda_rose (18:13.74)
no i was gonna say i've had larger companies the year before that i had a very large company probably close to forty million in revenue but one customer represented ninety plus percent of their revenue big customer but that was a tough one right we had a lot of notes on that for obvious reasons

jon_stoddard (18:33.209)
and what do you tell them like so let me give you an example was on wood bridge group they sell larger companies they don't put a valuation on it because they don't want to put a price on it because somebody portfolio company might look at him and just roll it up there's one customer does iron ax task planning they have two customers in the business are responsible in a hndrdpercent of the revenue i wasn't interested because there's too much risk i mean so what what do you do in that case are

linda_rose (18:47.68)
right

right

linda_rose (19:02.1)
yes

jon_stoddard (19:03.149)
just looking for a specific person that could tuck it in type of company or what

linda_rose (19:07.24)
yes that's what that's exactly what happened it was it was there were two risk items here one of them was the high customer concentration and the second one it was a woman own business certified company right so and and you know the reality is most women own businesses are not going to get bought by another woman own business they're going to get bought by a non women on business so that certification could be an issue for the buyer and in this case you know we had we had to get past that as well but we got to

jon_stoddard (19:19.089)
yeah

linda_rose (19:37.02)
really nice deal done it was a roll up to a much larger company so that ninety eight or ninety three percent customer concentration just kind of melted once you you know put it in the pot with everything else it was no longer such a high concentration so it worked out

jon_stoddard (19:56.229)
yeah when you say women own is that because she was able to get contracts for being a female right i'm from there with a gomeron business and that's what they do they set aside contracts for specific groups

linda_rose (20:02.4)
yeah theoretically yeah

jon_stoddard (20:10.109)
uh

linda_rose (20:10.7)
most women start out that way and i as well i got a woman own business certification i think over time you tried to get business without that certification and i think but i talk to many women who still maintain that and then they swear up and down it's what gets in the business and you know i advise them and say look you know if you are planning on selling you need to drop that certification and be able to show the buyer that you can maintain that business

specially if it's somebody that you have to re up with every year that you can maintain that business without your certification and that's the only way to really demonstrate that that someone is still working with you without that certification but that's a hard thing to do and what i tell people to do is like you know go get the certification just don't file it and of course you're goin to get ten emails that says hey we haven't got your filing and you just you know then you have to say you know we're not going to we have it we on't want to use it any

or and then see what the responses right if they're like okay no problem they just can't check that box with you and they move on but use you by then they've had a great five year ten year role with you and you know they're obviously using you because not because your women owned but because you're providing great value in your services and your products

jon_stoddard (21:28.169)
yeah did the buyer of that company discount your multiple because there was a high risk in there and that there was women own did they now

linda_rose (21:38.84)
no no they didn't what we did do instead is put an urn out in there that would extend beyond that period where the certification was required so really there was like a three year earn out so that we could prove out that that revenue was going to continue on

jon_stoddard (21:56.449)
and so that's kind of a traditional private equity model where they're buying sixty sixty six percent of the business she stays in for a second bite of the apple if they sell that portfolio to another larger company yeah yeah and how long is it going to go was that

linda_rose (22:07.46)
right yeah she did roll some equity yeah

linda_rose (22:14.0)
how long ago is that

jon_stoddard (22:14.949)
yeah is that have you had any conversations with her that the earn out is performing better and expected a beautiful yea so how are these now these other customers like for you said you've been involved in twelve four five six et cetera they're coming from your work getting acquired from millions blog posts and everything they're coming to you is it just technology or just nitching it to that

linda_rose (22:19.56)
yeah yeah er now performing quite well yes she's killing it

linda_rose (22:44.5)
i am just netting to that i don't go beyond that at all stay within that lane i mean i spent twenty five years in technology i understand m s ps i understand the differnceween m s p and m s s p which not every broker does you know i understand data centers i understand a dave you know i live that life for twenty five years i did some aspect of that for the last twenty five years and so i know that well so when a company like that comes to me i can step back

jon_stoddard (22:48.489)
yeah

linda_rose (23:14.24)
look at everything they do and i think do a really good job of articulating their value proposition because i do understand their technology and i can explain to a buyer hey this is where i think this company will excel if you either buy it as a portfolio company or as a tuck in you know here's the upsal cross sale opportunities here so you know because i know this space so well i feel like i can do this really well and i don't feel like i need to go beyond the i t space at all and if you look at my book it's a

back for technology service providers i mean you couldn't niche down any more on the book right it is not like for everybody although i've had people outside of technology you know email me or text me like i had an engineering firm and i had some lady that was i forgot what business she was in um totally outside of technology people email me and say oh my god i loved your book and it really helped me and so there's a lot of things in there that just don't relate to technology only but i do talk about i p and recurring

jon_stoddard (23:49.129)
yeah

linda_rose (24:14.26)
evenue and contracts and things like that that's somewhat you know are more relevant to technology than not but you can any any industry can get value out of this book

jon_stoddard (24:23.589)
yeah i'm just curious there are some insurance companies by side won't cover wraps and warranty insurance on m s ps because there's so much risk to credit cards office is that a concern and in that industry

linda_rose (24:41.52)
you don't i haven't had too many issues there you know we always get tale insurance for a number of things it really depends on what the buyer is requiring and then even i suggest that my salary get tail insurance on other things just so that they're not looking over their shoulders for things afterwards but i haven't had any i haven't had any issues in the deals that i've been in so thankfully now

jon_stoddard (24:58.709)
yeah it's just get the insurance

jon_stoddard (25:04.449)
yeah so where some of the stickiest points that you had to overcome through the negotiation is like every buyer comes up and it goes like to buy you and something comes up even though it's unintentional from the seller it comes up and you have to deal with it

linda_rose (25:17.0)
yeah yeah

you know i think that i think the one issue i'm seeing a lot of all of a sudden is um a lot of people over the time have have bought the building that they're in so they have an entity that owns the building and then they have their entity that does you know the m s p work whatever but what happens especially if you get an s p a loan as part of that the s p a loan will use the entity that you want to sell which is your m s p as collateral and so obviously that

s a problem a big problem obviously in a stock sale and even in an asset sale it becomes a problem because the buyer wants to make sure everything is unencumbered so you know unless you plan on paying off the loan for the building which many of these guys you know picked up their loans in the last five years and you're not going to get that kind of industrate or there's some huge prepayment penalty especially you know with the spa loans you have to think twice if you're going to do that right so that actually

i've had three deals right now where that's exactly the situation where the seller owns a building and it's being collateralized by the company they want to sell so and you say okay no problem recollateralize the loan and put it on the building and not the company and the assets of the company easier said than done

jon_stoddard (26:42.929)
yeah because pa you can get a twenty five year loan at ten point five right now i'm sure dating myself which includes the business and that would be an encumbrance with its causes just kind of more technicalities with it or what

linda_rose (27:05.02)
as of late that's been the biggest show stopper um you know i've sold four women own businesses and of course when we've talked about that already that's always that always comes up in every one of those deals m so yeah i would say those are the biggest ones

jon_stoddard (27:22.929)
is your husband untill involved in the what you're doing now no

linda_rose (27:25.32)
no no he totally retired he's like i'm good piece out

jon_stoddard (27:28.729)
yeah yeah and how many hours are you working a week because i just talked to another kind of man advisor and he's like semi retired us trying o work twenty hours a week and that's it

linda_rose (27:40.96)
you know i work more than that right now partly because i'm also writing a course i've been writing a course for the last two years it's almost like another book and i wanted to put a course out into the world four sellers again to help them prepare it kind of spins off the book a little bit it's an online course i've been really it's i've got seven modules with maybe three to five lessons under each module so there's probably about thirty five lessons there and you know between scripting it recording it

and putting all the hand outs that go with it it's a tremendous amount of work i think it's almost more work than the book was so i've probably been working more like thirty thirty five hours a week maybe not thirty five but thirty if i'm not doing that it goes in peaks and valleys right if i'm not in the middle of closing a deal if i'm in the closing a deal man we're talking day and night like man has no nine to five right it's a seven twenty four business in my book

jon_stoddard (28:37.589)
yeah you're gonna have calls in the middle of night hey man we got to resolve this

linda_rose (28:41.44)
exactly or my clients like i've been thinking about this can we can of bounce this off to you like this is really bothering me or something you know or can we negotiate this point or whatever right so you're available to your clients day and night at least i think the good man advisers are and so you know when i'm down to the last two three weeks it is a full time job no question about it but the rest of the year you know um maybe if i didn't work on the course maybe twenty hours week tops

jon_stoddard (29:08.429)
so if you work backwards the moment that they get a big check in their bank account and it's an emotional roller coaster how do you provide and even keel you know steady's calm waters for them and say hey we'll be all right we're going to do this

linda_rose (29:26.62)
um well i think one of the things i do and it's it's an exercise also in my course is i have a net cash at close spread sheet so that we can go because you know you get an offer for ten million i'll use ten million because it's a nice round number and you know you immediately assume okay i got ten million i'll get to put in the bank oh no that's not the case because there's going to be an grow for you know half a million or something like that or a million there is going to be some bonuses

jon_stoddard (29:47.709)
that's

linda_rose (29:56.56)
that you're going to want to pay your employees there is going to be um you know there's some yeah there's some network in capital adjustments that may be in there there's some attorneys fees you have your man fees so that ten million dollars all this isn't ten million anymore and then you know i kind of work through a little bit of a tax calculation with them i'm not their tax adviser but i want them to think about taxes you know what part of this is capital game what part of this is ordinary what are your federal

jon_stoddard (30:01.089)
that's the country club number

linda_rose (30:26.42)
taxes that are going to come out of here what your state taxes that are going to come out of here now i recommend they use a financial plan are really for that but i have created a work set that they could just kind of look at a big pit yer and go well that ten million right now is come down to like six and a half right because of all the things that need to get taken out of course you're probably going to get those screw amounts back you know in eighteen months but and then there may be some earn out there that's going to happen in your two and your three in six months or one year that kind of thing but

i put them through that spread seat so they know early on what the number is going to look like and to know if that number is going to be sufficient for them because they don't think about all those things they don't think about the employee bonuses whether that's a sale bonus or retention bonus or giving them part of the earn out or maybe even doing something on an equity roll over or you are rolling over some equity right they don't think about the estero they don't think about the networking capital peg

you know leaving money behind or taking money out that kind of thing so there's a lot of numbers

jon_stoddard (31:31.209)
i have a question about that i'm gonna jump onto this like so you find a business that's doing six million dollars and it's been run for twenty years they got three million dollars in the bank in cash or equivalents uh which way do you go do you recommend the buyer buy the cash or the seller take it out beforehand and i know there's different taxes based on how they

linda_rose (31:52.04)
i think it depends yeah it depends if you're an score passed through entity or score there's a different analysis that goes on yeah so it starts with the end of yeah they're an score yeah if they're an s corp it's possible they've been taxed on that case already right it was just sitting there because passed through right so at that point you just get it out of there as a distribution right so that's pretty simple but a corp that gets a little bit more complicated

jon_stoddard (32:02.889)
oh i got you start till the end

jon_stoddard (32:17.769)
right

jon_stoddard (32:22.709)
to buy the cash socker just a asset perjasesale it's beautiful and i love this work you're doing somebody was going to come to you and say let me go back to this and how do you get paid you get paid on a monthly basis in a percentage of the sale at sale

linda_rose (32:24.64)
yeah

linda_rose (32:45.04)
yeah so different ways i usually have an up front retainer initially and then with the longer projects and i usually know if they're gonna be a longer project i'll do then a monthly retainer as well but then usually i get paid at the end when the company gets old successful at the end

jon_stoddard (33:00.249)
yeah and you like what you're doing

linda_rose (33:03.9)
yeah i love what i do i love what i do a lot i think it's a perfect melting of all my skills you know be tween being accounting in a previous life being a tax accountant having run multiple companies having sold multiple companies and understanding the the emotional baggage that goes along with this when do you tell your people how do you protect yourself when you pay out all these bonuses what do you do to do that when do you include them into discussion when to not include them in the discussion

there's all these other questions that happen along the way that unless you've lived that life it's hard to put yourself in their shoes but since i've done it multiple times um you know and i did a different each time in terms of when i told my management team when i didn't tell my management team um you know those things come up people ask me well how much did i give away in bonuses well let's talk about this you know it may not be completely on ten year it may be

um more on you know what's the ongoing value that there they're going to provide for you do you need these people to help make your earn out in which case i recommend giving them part of the earn out right as well to keep them incentifized and keep them there if that is so critical especially if you plan on moving on within if there's like to your earn out and you want to you know exit left or right in one year you need to have those people continuing to work for you and make that earn out so you need to give them part of that so you know we talk about that

um it's so many things that kcome up and i think it's kind of hard it's easier for me to provide that guidance because i've been in their seat and i know emotionally what that means and you o emotionally it isn't if you've been an open book with your management team and all of a sudden you can't tell them there's a potential opportunity or a deal going on or maybe you don't tell them after you sign the l i because you don't want to create this fear and doubt you know certain uncertainty

jon_stoddard (35:02.849)
oh yeah your mind takes you into most places yeah you'll freak out

linda_rose (35:03.72)
out in their minds right right you know right and then it's like okay well even when you signed the eloi which was in my case i really wasn't totally sure if the deal is going to happen still right we were still kind of working through some stuff and so it's like well when do you tell these guys and and then also you know you want them to be part of that decision process in the end to because especially if you need them for the earn out or they're critical to the ongoing success to the company you want them

to buy into that buyer as well you don't want to just drop it in their lap and say well here it is guys here's what i picked they want to feel like they've got some investment in this as well and maybe it helped make that decision and so if you've run an open book and you've had to keep that to yourself that's just such a mental drain on you um you know it's just you think oh well it's just a secret i'm keeping but mentally it is very draining to hold that back from your team especial

if you've been used to being very open with your team and i talked to more sellers who got the day they could tell their management team that the transaction potential transaction was happening they just felt this huge release off their shoulders like they could breathe again you know because now they weren't hiding this big secret and now they could share with them you know here's the plans and here's what we need to do to close this transaction and those are all the things i walked through with my sellers so i really

jon_stoddard (36:06.269)
yeah

jon_stoddard (36:20.969)
yeah

linda_rose (36:33.68)
like the cell side i've done a couple of intermeteareas where i represented both the buyer and the seller in the middle because i knew both parties and i knew it would be a good marriage but that's where i really do really like more to be on the cell side

jon_stoddard (36:47.749)
yeah i like your focus on that being open and transparent to the employes about when you're going to sell i interviewed a guy and the u k who said here's what happened i came into the office and the seller and i walked into the meeting with a group and the seller said okay i just sold the company here's a new owner and he turned around and walked out

linda_rose (37:11.86)
oh my god

that's a tough one yeah yeah i don't think i don't think too many

jon_stoddard (37:17.789)
that's funny well linda i really appreciate your spending time with me on top man entrepreters and you got a great book get acquired for millions

linda_rose (37:25.44)
you can find it on amazon and if you're interested in the course that i'm going to release just go to my website which is rose biz biz dot com forward slash weight list and you'll get some idea of what the course is going to be the models that we have i'm hoping to get it out in the april may time frame so that's my goal

jon_stoddard (37:45.229)
yeah work on those courses the lessons well thank you so much for being on my show

linda_rose (37:51.54)
thanks john it was so great to be here

jon_stoddard (37:54.069)
let me stop this