Ep. 176 — Ryan: Quit Solving for Annual Income

7 min read

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Episode Summary

Most owners I talk to describe exit as something that happens to them. They get burnt out and sell out of desperation, or they don’t think about it at all and end up gutting the company to a third party years later than they wanted. There’s a middle path, and it’s the whole point of the show. In this 2019 recap, I walk through the five growth and exit principles I teach in the boot camp, and I tag the top episodes from the year to each one so you can go back and dig in. Principle one: your drivers (what you actually want and why). Principle two: your three financial targets (business value net of taxes and debt, target annual income, and outside net worth). Principle three: your exit options across five buckets, not two. Principle four: the value-building work that makes your cash flow sustainable, predictable, and transferable. Principle five: the team of advisors that optimizes the plan once the first four are clear. Look at the picture before you dump out the pieces.

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## Top 10 Takeaways
  1. Quit solving for annual income. Start solving for value creation. The freedom comes from the second one.
  2. You don’t have to exit. You can decouple your ownership from your management role and transition each separately.
  3. Bo Burlingham found 75% of owners are unhappy a year after selling because they never named what they wanted.
  4. Your three financial targets are business value net of taxes, target annual income, and outside net worth.
  5. Top-line revenue is a vanity number if you have four partners and a pile of debt under it.
  6. There are five exit buckets, not two. Each trades valuation, cash at close, and your post-close role differently.
  7. Sustainable, predictable, transferable cash flow is what makes a buyer pay more for the same dollar of profit.
  8. Sucking money out through perks and pay sacrifices the value creation that actually funds your freedom.
  9. Without a blueprint and budget, your advisors can’t optimize anything. You’re the general contractor of the whole thing.
  10. A C-team of advisors at your Super Bowl will cost you millions you’ll never see.

Sound Bites

“Quit solving for annual income and solve for value creation.” (@00:00:43) — Ryan Tansom

“75% of entrepreneurs are unhappy 12 months after the sale of their company. The business owners that were unhappy didn’t know who they were, what they wanted from their business, and why.” (@00:08:33) — Ryan Tansom

“Exiting is not about completely walking away. There’s exiting your roles and your management responsibilities and your W2 pay, versus ownership.” (@00:09:00) — Ryan Tansom

“If you don’t plug in point B, nothing happens.” (@00:14:01) — Ryan Tansom

“You can’t sacrifice a C team when you’re going to the Super Bowl for when and how you decide to exit.” (@00:39:39) — Ryan Tansom

About This Episode

Solo Ryan recap of 2019, recorded at the start of 2020. Ryan walks through the five growth and exit principles that anchor his teaching at the time: drivers, financial targets, exit options, value building, and team of advisors. Under each principle he tags the top guest interviews from the year so listeners can revisit the conversations that bring each principle to life. The episode functions as both a framework primer and a guided tour back through the year’s best episodes, ending with an invitation to the two-day Arkona Growth & Exit Boot Camp.

Resources Mentioned

Books referenced:

  • Finish Big by Bo Burlingham — The 75% statistic on post-sale unhappiness
  • The Entrepreneurial Leap by Gino Wickman — What to do before you start the business
  • Profit First by Mike Michalowicz — Allocating cash before spending it
  • The Great Game of Business by Jack Stack — Open-book management and the ESOP playbook
  • The Messy Marketplace by Brent Beshore — Selling in a world of imperfect buyers

Episodes referenced (owner stories):

  • Ep. 129 — Stephanie Breedlove (built to $9M revenue, $4.5M EBITDA, sold for $55M to Care.com)
  • Ep. 137 — Jill Nelson (Ruby Receptionists, $38M private equity recap)
  • Ep. 152 — Scott Fritz (scaled to $170M on a 40-hour work year)

Episodes referenced (Principle 1 — Drivers):

  • Ep. 174 — Gino Wickman, The Entrepreneurial Leap
  • Ep. 172 — Chris Yonkers, vision and self-talk
  • Ep. 170 — Sunny Vanderbeck, the Compaq deal that died
  • Ep. 157 — Sue Hawkes, chasing perfection and self-doubt

Episodes referenced (Principle 2 — Financial Targets):

  • Ep. 131 — Ken Sanginario, business valuations and value drivers
  • Ep. 153 — Kevin Short, selling for an outrageous price
  • Ep. 158 — Mike Michalowicz, Profit First

Episodes referenced (Principle 3 — Exit Options):

  • Ep. 140 — John Garrity, selling a family business (the son’s perspective)
  • Ep. 164 — Dave Diehl, ESOP deep dive
  • Ep. 156 — Jack Stack, The Great Game of Business
  • Ep. 144 — Brent Beshore, The Messy Marketplace (27.5-year hold period)
  • Ep. 168 — Paul Moffat, selling to a family office

Episodes referenced (Principle 4 — Value Building):

  • Ep. 160 — Chris Ronzio, Trainual and getting the business out of your brain
  • Ep. 159 — Dwane Smith, scaling from $9M to $90M with 15% annual growth
  • Ep. 173 — Jonathan “JT” Thelen, the integrator’s perspective on growing and selling

Episodes referenced (Principle 5 — Team of Advisors):

  • Ep. 175 — Todd Ganos, saving millions by hiring the right team
  • Ep. 161 — Dan Grimsrud, the role of an M&A attorney

Other:

  • Arkona Growth & Exit Boot Camp — Two-day program walking through the five principles with two case studies ($10M revenue, $1M EBITDA)
  • Simon Sinek — Referenced for “why” framing the business, not the owner

Connections

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