Experience is the best teacher, but how can small business owners prepare for their exit when these can be once-in-a-lifetime occasions? On this episode of The Roadmap, host Lee Heisman is joined by David Boughter, President and co-founder of Will Tech Group, a leading tech advisory firm, to talk about how he gained familiarity with the buy-sell process.
When Boughter was first approached by someone asking to buy his company, a management services provider he co-founded in 2001, he was surprised. The company had only been in operation for five to six years. “We were kind of floored.” Being unfamiliar with the process of selling a business, Boughter and his colleague chose to work with the prospective client to see if they could learn about the mergers and acquisitions market. While the deal ultimately fell through, he notes that the experience provided crucial lessons on the differences between buyer-side representation and seller-side representation.
This distinction is incredibly important for entrepreneurs forming their exit strategies to understand. Different parties in a transaction can have different perspectives and may possess competing notions of what makes a product valuable. In the case of buying and selling a business, Boughter notes that buyers are often focused on profits and growth, while sellers tend to prioritize lifestyle and sustainability. “That was a big piece for the buyer that we didn’t understand,” he remarks. When it finally came time to sell their company, the two co-founders made their enterprise more appealing to clients by hiring consultants to boost efficiency and offering to help with the transition process.
After exiting their company, Boughter joined a mid-size business as its Chief Information Officer, overseeing IT operations and equipment. However, while he found the work fulfilling, his passion for entrepreneurship quickly returned. Realizing that many small businesses lack access to technology experts and the structure a CIO can provide, he joined Will Tech Group, a tech solutions firm for small business owners, as president in late 2022.
For small business owners considering an exit, Boughter encourages them to structure their business to be as valuable as possible. For example, while differed earnings appear as revenue, they can reduce the overall value of a business in the eyes of a buyer until the paid-for service is rendered. He also warns against using business income solely for lifestyle. “Every dollar that comes in doesn’t have to be spent or taken,” he explains. Rather, he encourages entrepreneurs to continually invest money back into their companies so that they can make a profitable exit when the time comes.