How to Sell Your Company: A Multi-Time CFO's Full Playbook | Rick Smith

Rick Smith (0:00)

I'm going to create something here called Smitty's Law, but everything that can go wrong or can be uncovered in a sale process will go wrong and will be uncovered. If there are areas where you as a seller say to yourself, jeez, I hope the buyer doesn't poke too much at that, they're going to poke at that. It'll happen. The income statement is the siding on the side of the house looks pretty, right? It looks amazing. But then you get underneath it and you see wood framing covered with termites and a foundation that's cracked. The poor balance sheet, it's super important, CEOs just don't pay enough attention to it. Buyers have an unending appetite for the details of your business. And really, there is no cost to them to ask for more and more stuff. But for the seller, there's both an explicit cost of your time and there's the opportunity cost that you could be doing something else to help drive the business forward. The seller has to let their staff know what is going on usually. And if leadership doesn't properly manage the communications to the staff, it can really destabilize the company. And the last thing you want are for good people to flee en masse during a sale process, because that's going to look really bad to a buyer.

CJ Gustafson (1:06)

Is this thing on?

Rick Smith (1:09)

Yesterday's price is not today's price.

CJ Gustafson (1:21)

Welcome back to Run the Numbers, the show where I interview really smart finance leaders, including multi-time CFO, Rick Smith. Not Rick Smith's, the dunking Dutchman of the Pacers of the late 1990s, but Rick, really smart guy. He runs Bonfire Advisory right now, a fractional CFO service, and he's also an author. Yes, I have authors on my show. I called my mom today. I said, mom, I'm interviewing authors. Rick wrote an amazing book. It's called Six Months to the Sale. I read through it all, and it basically teaches you everything you need to know about selling a company. Me and Rick talk about maximizing value for the sale, what multiples different businesses are purchased upon, whether it's revenue or profits. We talk about the awkward dance that the CEO and CFO have to do when communicating to the company that they're being sold. We talk about all the different alligators you will find in a cap table, in the diligence room. This is the deep cuts, folks. If you want to learn how to sell a company, you'll want to listen to this podcast. Stay tuned for me and my friend Rick. Rick, welcome back to the Run the Numbers show. Thank you.

Rick Smith (2:23)

Glad to be back.

CJ Gustafson (2:25)

I feel like I'm talking to a world famous author who has created a new category of finance fiction.

Rick Smith (2:31)

I might sell tens, perhaps dozens of books, but yes, I'm trying to create a new category of finance fiction. Educational business stories told through fiction novels, and this is example one, the new book I'm putting out, Six Months to the Sale.

CJ Gustafson (2:44)

Why choose to teach M&A through a fiction instead of writing another business book?

Rick Smith (2:49)

The first reason, as the author of a business book, the previous book I wrote demystifying the role of the CFO in venture and growth stage companies. Most business books are boring, and they are, and I know plenty of people who start business books, but the percentage of people who actually finish reading a business book has got to be extremely low.

And so I wanted to write something that is compelling to read from cover to cover. When I wrote my previous book, I worked really hard to make it as fun of a read as possible, and that was my first attempt at creating a readable business book. Six Months to the Sale is attempt number two to make it even more approachable. And honestly, you cannot make a business book more approachable than this book. Even though I'm a long time CFO, at heart, I'm a fiction writer, and I've written three previous novels, all available on Amazon, Sal in the Suburbs, Stuck, and then I just put out a book that's a little more friendly that my kids can read called The Monster in the Room, which is not a kids novel at all. Adults and kids can read it, but I love to write fiction. And then finally, the last reason was when I was in business school, we read The Goal, which I think a lot of your listeners probably have read. I had never read anything like it. I mean, it's a fiction novel about making operational improvements in a factory. And hearing it described like that, people probably would think, oh, it's really boring. But no, it's not. It's really well done. It was a great read cover to cover and you learn something, which is great. And so my goal was to write an engaging novel that not only makes you feel like you're along for the ride in the sale of a company, but you learn a lot about the actual process, what you need to do to prep for the process, and what might go wrong in the process.