Four Standards That Apex Clients Meet

Some time back Chuck Campbell came on our podcast to talk about some basic standards that he as an advisor holds to before moving forward with any deal. They are standards we are very aligned with as a team here at Apex so we wanted to share them here on the blog too.

1. We Understand the Business

Warren Buffet has famously said that he doesn’t invest in things he doesn’t understand, and that led to his missing out on investing in both Amazon and Google. You can dispute the wisdom of this as an investing strategy, but we don’t dispute it as a rule for representing buyers. If we don’t understand your business, we won’t be able to showcase it the way it deserves. Thankfully, we have so much expertise on our team that we’ve almost certainly sold a business in your category before, if not a business similar to yours. If you want you can even find advisors on our team who have sold their own companies in your industry.

2. We Think It’s Marketable

You might have a great business but it may not be a good time to go to market. For example, if you had a wonderful travel agency and were hoping to list in April 2020, we probably would have told you to wait until things got clearer. It’s not enough to have a solid business: there has to be a willing market for that solid business. It’s our job to monitor the market and at our weekly meeting we are sharing information such that as a team we have a great sense of what’s going on, even in industries we’re not currently representing.

3. The Seller Must Be Realistic

Andy Cavanaugh shared that a dry cleaning business that had fantastic numbers in 2017 and 2018 but had come to us in 2024 hoping we might just overlook the dreadful 2020 and 2021 Covid numbers. The seller wasn’t recognizing (or perhaps accepting) that whatever understandable hit a dry cleaning business took in a year or two when many people worked in their pajamas, that a serious and fundamental change had occurred in relation to business travel, meetings, and even office space. His industry, without innovation or add-ons, is in a challenging time. We could only sell the business for what it is doing now, not for its admirable performance in the past.

4. We Have to Like and Trust You

When we say “like and trust” we aren’t implying we become best friends with everyone we represent. But we do mean that how you conduct yourself with us is likely how you will conduct yourself with others and if you can’t get along with us (it’s happened!) you’ll probably have a harder time getting along with the broader marketplace.

Chuck recounts an instance in which an “expert” representing a family cost him nine months. Chuck has estimated the business was worth between $3.8-4M. The expert replied, “Well, we need $4.9M to retire, so that’s what we are going with.” After nine months passed and 80-100 buyers had gotten off at numerous stages in the buying process, the seller realized who the problem was and got rid of the “expert” and put his trust in Chuck. A few months later, the business sold, at around (surprise) $4M.

Here, Chuck did like the seller but couldn’t insist that the “expert” be kicked out of the deal. Sometimes, we all have to learn lessons the hard way.

If you’ve got a business to sell and think you can meet these standards, give us a call.

Episode 158 – Unveiling the Power of Exit Planning with Mark Kipp

We’re joined today by Mark Kipp from Prime Capital. Mark, a seasoned financial professional, who founded the Kansas City Chapter of the Exit Planning Institute (EPI).

Mark shares the formation and growth of the EPI Kansas City chapter, with a mission to share the importance of early planning for business owners aiming for a successful transition and the power of collaboration among financial advisors, CPAs, attorneys, and business brokers.

If you’re a business owner considering selling your business or simply want to maximize its potential, this episode provides essential strategies on preparing your business for any eventuality, ensuring that when it’s time to exit, you’re ready and informed. From navigating tax strategies to building a strong advisory team, discover how proactive planning can significantly benefit your business and secure your financial future.

Tell the Bank Everything (We Mean It!)

Tell the Bank Everything (We Mean It!)

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“The government can’t loan you money if you already owe the government money,” said Doug Hubler, President of Apex, on a recent podcast episode. What Doug said is part of what we want to cover today, which is full disclosure to your lender in the process of buying a business.

The Bank Is Your Partner

You may be the brains and labor behind this upcoming deal, but the bank is putting up a large part of the money, and as such, they need to know as much about you as possible to justify the loan. You have to remove the idea that the bank “works for you” as you might rightfully consider them when you’re in a regular consumer banking relationship. You are working for each other in a business banking relationship. They give you money, and you ensure that they get that money back, along with some interest.

What to Disclose

As part of the lending process you will sign paperwork attesting to “telling the truth” and not “willfully hiding” any items which may be detrimental to your application. Things you must disclose include:

  • Outstanding loans
  • Outstanding liens
  • Child support in arrears
  • Being party to a lawsuit
  • Declared bankruptcies (even if more than 7 or 10 years in the past)
  • Credit charge-offs (even if more than 10 years in the past)
  • DUI or other similar felonies

As part of their diligence process, the bank is going to find out about any of these if you didn’t disclose them. None of the items above would by themselves, if disclosed, be enough to stop a loan process. However, failure to disclose any of them may (and sometimes has) blown up a deal in progress.

All of the items listed above can be cured in some way before closing:

  • Loans and liens can be paid back or accounted for as part of the transaction
  • Child support can be brought current
  • Terms of the deal can account for the outcome of a lawsuit in relation to the business, if needed
  • Bankruptcies and credit charge-offs can be examined for their severity and distance in the past in relation to the present
  • DUIs and other similar felonies can be contextualized by personal statements along with attestations of character and a period of time (for example, you are unlikely to be approved for a loan if the DUI has happened during the course of the deal).

In a pre-Internet world it might have been reasonable to think that “nobody would find out” about something. But it’s not reasonable to think that way now, and it’s an immature way to approach a business deal, which requires everything to be in the open so everyone can walk away as winners.

Remember, we all have some kind of skeletons in our closets. It’s not the skeletons that are problems, it’s the non-disclosure of said skeletons that is the problem. A big enough problem that it could kill your deal.

Wondering if you have an incurable skeleton in your personal or professional closet? Let’s talk about it.