The vast majority of business owners spend somewhere between 90% to 95% of their time working IN their business and only about 5% working ON the business. Running the business is working in it; exit and transition planning are working on it. However, when it’s high time to sell, most business owners don't know what they don't know about selling their company. They are unaware of how to transition or exit their business. Joining Bob Roark on today’s show is Cam Bishop, the Managing Director at Raincatcher, a business brokerage and M&A firm that partners with entrepreneurs and business owners looking for help in buying or selling remarkable companies. If you’re thinking about selling your business or in the process of doing so, you don’t want to pass up this episode as Bob and Cam dive into the exit planning fundamentals that will help you extract additional value out of your company.

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Watch the episode here:

[embed]https://youtu.be/eB4ILmWLn_g[/embed]

Exit Planning Fundamentals With Cam Bishop

We're incredibly fortunate we have Cam Bishop. He's the Managing Director at Raincatcher. It's a business brokerage and M&A firm that partners with entrepreneurs and business owners who are looking for help in buying or selling remarkable companies. He is the author of Head Noise: Perspective and Tales from the Executive Suite and Onward & Upward: Motivational Advice for Career Success.

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Cam, thank you from Kansas City and for coming on the show. We appreciate it.

Thank you, Bob. You’re welcome. I'm glad to be here.

Before the show, I did a little bit of homework. I looked at your long resume of experience. If you could, give us a quick snapshot or thumbnail of your experience prior to here.

It has been an interesting journey. I went to the University of Missouri School of Journalism. I got a degree in Journalism and came out of school. I wanted to become an advertising copywriter. I thought I'll spend my entire career working in ad agencies. Instead, I started out in a marketing job and writing ad copy in a small publishing firm. It was a $7 million business. It got acquired and the new owner said, "We want you to go out and buy companies to grow this thing." We grew from $7 million to $13 million, to $90 million and then we got sold again. We grew from $90 million to $300 million. I stepped in as the CEO of that company and we grew it to $400 million. It was a profit machine. We were throwing off $100 million a year. We had 2,000 employees in 23 US cities in 4 or 5 foreign countries. It was a crazy ride.

[bctt tweet="The integration plan is the absolute make or break of the deal." via="no"]

The management structure changed and I said, "I liked this business model." I took six months off, wrote a business plan, flew around the country, pitched in the concept to about 50 different private equity firms, and ended up landing in a very happy relationship with JPMorgan Chase Banks' Private Equity Division. At that time, they had about $6 billion fund they were working out of. Unlike most PE deals, we didn't start with a direct acquisition. We started on my kitchen table. We went out and sourced a business as a starter, what they call a platform company.

We ran the same model I had been running at the previous business, which they called in the PE world, the leverage roll-out business, where you buy a platform company and then you rapidly begin to tap companies that are strategic fits for your business. You build it up into a much bigger company, then you exit that deal and gain a benefit from scale that we used to call arbitrage on the exit multiple. Meaning if you had averaged all your deals in six times EBITDA, when they're aggregated together and you resell it, you can sell it for 8 or 9 times EBITDA based on the scale of the business and the efficiencies that you've driven into the business.

We did that and then we exited that business. I consulted as a partner in a consulting firm that did exit and transition planning. Over the course of my career doing these leverage roll-ups, to buy one company, you normally look at 30 to 50 companies before you buy one. Over the years, I've looked at well over 500 different businesses in terms of their offering documents and completed 40 buy-side deals. A lot of times, we would carve out non-strategic assets from those deals, repackage them, and sell them off. At any one time, we might be buying 2 to 5 companies and spinning off and selling 1, 2 or 3 companies. We were a deal machine to that process.

[caption id="attachment_5848" align="aligncenter" width="600"] Exit Planning: If you listen to the employees of the company you’re acquiring, they'll tell you everything you need to know about the strengths, weaknesses, opportunities, and threats of that company.[/caption]

What you see with so many business owners, sadly, they don't have the right representation and they leave money on the table. If I was paying somebody $2 million, $3 million, $4 million for their business and if it had been a better package, they could have gotten an extra $500,000 or $1 million. For most people's legacy, that's a lot of money. I developed a passion for that to help business owners. That's why I went into exit and transition planning, where I also helped broker a few deals for those companies.

I spent the last few years doing a very fascinating and extreme business transformation, coupled with a digital transformation for a $60 billion 501(c)(3) organization that looked behaved, felt, and competed like a for-profit company. What was very attractive was the purpose-driven nature of that business. I was under a contract for the board of directors to do that because all the money that business made went to fund scholarships and the endowment for a small private university. It was a very worthwhile cause, but that contract ended and I said, "What do I do with the rest of my life?" I love the transaction business. I love helping business owners to achieve their life goals and financial goals. I started looking around for somebody to join and that's where I found Raincatcher.

What made you decide on Raincatcher?

After I finished my contract, which was very high stress and extremely difficult work environment, it was 10 to 12-hour day for three years, I said, "I don't want to go back into another CEO job, but I want to be challenged. I want to be useful. I get bored way too easy." I said, "I want to partner with either a lower-level market investment banking firm or a higher-level, sophisticated business brokerage." I spent a month just doing research on firms around the country and identified a list of about twelve. I began doing deep-dive research on one of those to proceed with conversations. It would have to be a two-way street, but I was going to be very picky about who I would want to work with.

Fortunately, the third firm I came to was Raincatcher. I was very impressed with their digital presence and the quality of their website. I reached out to them via their website. I got a call back from the two partners, Marla and Jason. We set up a couple of Zoom calls. We hit it off. We found that we were very much in alignment on mission, vision, and the value of corporate culture in a company. They're marvelous and highly ethical people. I said, "I like how this is going. If you're agreeable, I'll drive out nine and a half hours from Kansas City to Denver during COVID. Let's meet someplace outdoors." We met at an outdoor restaurant and spent five hours together. We went through lunch and dinner. It was great. My wife came out with me because we believe in the family orientation of businesses. She came over after a while.

[bctt tweet="Running a business is in and of itself a full-time job. Packaging a company to sell is also a full-time job." via="no"]

We had to figure out a business model that worked for both of us and rightfully so, that took some time because they were evolving their business. We finally got that all ironed out. We set up Raincatcher Midwest LLC of which Marla and Jason, the two owners and partners with them held a co-firm in Denver, our partners and I'm a partner. We're going to focus on building out the Central Standard Time territory in the United States as part of their nationwide build-out strategy.

It's the chemistry. You think about the importance of that. In your early career of acquisition. When you were rolling up all the companies initially, how important was chemistry to you when you were looking at acquisition targets?

The chemistry portion of the acquisition process is primarily driven through the integration into the business. That's one of the big mistakes that many companies make when they acquire a company. I've seen it countless times. I've done a number of lectures for CFO-type organizations on the whole process of mergers, acquisitions and integrations. The primary thought is you put about 90% to 95% of the effort into identifying the business, doing the due diligence, negotiating the deal, and trying to get the deal closed. Only about 5% of the energy and time goes into the integration plan. The integration plan is the absolute make it or break it of the deal. With the exception