The Growth-Drive Hot Seat

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Hi, this is George Samman. I'm the founder and CEO of Growth Drive. Growth Drive is the number one best -selling business advising platform, and this is our podcast, The Business Advisor Hot Seat. Now in the hot seat, you're going to hear from industry leaders, thought leaders, your colleagues who are going to share tips, techniques, war stories about building a thriving advisory business based on delivering client wins. We're going to get into it. We'll get into it about the Growth Drive methodology, the clarity software, what we see out in the world.

so much more than just the system. And I'm also the author of The Growth Driving Advisor, which is based on over a decade of being an advisor to advisor, working with you and your colleagues, helping them build their practices, helping them through client engagements. And it's really proven strategies for leading businesses from stuck to best in class. Check it out. So strap in. We're going to light this up. Here we go.

George (00:59)
Our guest this week is Barry Goodman. Barry is the founder, managing director, and chief strategist at Birkdale Transition Partners and specializes in helping family businesses grow and maximize transferable value. And we'll have a great conversation, so strap in. Here we go.

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This week's episode is brought to you by Growth Drive, highlighting the Growth Drive Summit, held this year in Charleston, South Carolina, September 23, 24, and 25. The theme is business advisory and quantum age, harnessing technologies and delivering client wins. This is unique content. You can't get anywhere. And to learn more, go to growth -drive .com. Look under events.

Thank you. See you there.

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Welcome ladies and gentlemen. This week we have my good friend and member of the Growth Drive Board of Advisors, Barry Goodman. Barry has a ton of experience out there, started your career as a CPA. You've been an exit planner, a consummate exit planner for...

for a long, long time. And you tend to work most with family businesses. So welcome, Barry. Thanks for agreeing to be in the hot seat. And I'll turn it over to you to explain who you are, what you do, and why your clients hire you. Well, thank you, George. And thanks for having me. I spent about 40 plus years in public accounting, part as my own firm and part as a

a firm that we built from just a handful of people to more than just a handful of people in about 13, 14 years. I retired from the firm in 2014 to consult with closely held and family held businesses to help them determine what's next for them. I always would, when a client would come in and say they want to sell their business,

My first question is, OK, so what are you going to do? And they would say, well, what do you mean? I said, well, you get a big check. You turn over the keys, sign the contract, and you watch the sign being changed from your lifetime of work. How are you going to feel? And what are you going to do next? What's going to get you up in the morning to say it's going to be a great day? And usually, people would say, well, I'll visit my grandchildren.

I go fishing, I'll play golf. Well, that usually lasts about six months. And then what are you going to do? So, you know, I feel they need to have a purpose in life. And this all came out of my family. My family was in the electrical supply and leddy fixture business for about 40 years. And a lot of people will downsize their home. Well, my dad downsized his business.

to the point where he has small little retail stores selling Lenny fixtures in the suburb of Chicago. And they sold the business. But there was some strife within the family afterwards. And it didn't really end well. So I, you know, my, my goal and why, you know, why I do this is so it doesn't happen to other people.

Yeah, deep personal experience. You and I have discussed this a number of times. What was the impact it had on your family? Well, cut to the chase, I have three siblings and I only speak to two. And it's a lot of resentment, a lot of arguments, and the two siblings that I do see regularly, we...

have a loving relationship and I cherish that. And also in my own family, I don't want that to happen. My kids did not want to have anything to do with accounting. They saw how hard dad worked and they weren't willing to do the same thing. So they're doing whatever they want to do, which is great.

Which is great, absolutely. And we hear that so often when we talk about family businesses, the strife, the strain, the relationships that can get destroyed. I mean, it's really, I'm with you. How do we avoid that, right? And you work, would it be fair to say you prefer to work with family businesses? I mean, I know that's what you specialize in. Well, I'm...

Every business really, in a sense, is a family business, if you think about it. A great point. OK. And it may not start out that way, but my experience is more often than not, it really does. The business is a focal point of a family. If a family owns a business, and I usually refer to it.

as families in business, not family businesses, because mom and dad may own a business, but the son or the daughter may go into a different business. Yeah. Well, it's interesting because everyone in the family, when you own a business, everyone in your family is a stakeholder. And, you know, there's no, I can, I don't have any of my family in this business, but they are all stakeholders for sure. Well, they are stakeholders.

In one way or another, they are stakeholders. Yeah. So, yeah, that's a fantastic point. And that's one of the things I'm hoping to, you know, that you and I will keep talking about here during this interview. You know, you and I have talked about a lot of cases over the years. We've been working together for a long time. And, you know, there are a couple of that jump to mind.

When we think of now, you are also a consummate exit planner, right? A member of, or you're a previous member of EPI, you hold or held the SIPA designation, right? Yes, I hold the SIPA designation. I have a certificate from the Family Firm Institute, an advanced certificate from the Family Firm Institute. I'm a lifelong learner, right?

I consume information. I mean, I always remember it, but I do consume it. Yep. Absolutely. And you were one of the early participants in the Growth Drive Certification Program. Thank you. And, you know,

It's interesting. You know, one of the things in a family business, I know that you, you have your own very thorough discovery method. Could, would you be willing to describe that and, and why, why you go to the lengths you do during discovery, especially with family businesses? Sure. Well, I believe that every business is different and every owner,

Every family of a business has a different goal and objective of what they see they want to do with that business. Whether it's a sale, whether it's a transition to the family, management buyout, ESOP. And when I approach an engagement, I approach the engagement for a number of reasons. One, to help them get clarity on

what that and people call it end game, but what that end really looks like. Or there might be a specific issue they're trying to solve. And I approach every engagement almost the same methodology of really digging deep to understand what is going on within that business and what is going on in the owner's mind and the family's mind as to how they see things.

because I believe there's, in my experiences at least, that there's always a disconnect between what the patriarch or matriarch feel and the family members. And then when you start interviewing and talking to the key management people, they have a different perspective. And sometimes owners,

we'll have one view as to what's going on, let's say in the plant floor, or if it's a distribution company in the warehouse, then the manager of that warehouse. So we try and reconcile those and point those out and use Growth Drive as a guide to answer, you know, to ask those questions because,

We're then able to get some organization around really what the end product is going to look like. And then from that, we prepare a report that identifies our, I call it a framing goal and insights and pathway objective or pathway initiative to help them see a pathway to what's next.

in a concert with the owner or with the patriarch, we then set priorities because the issues can be numerous. So what do you start with next? Well, and the issues are, I think, especially in a family business, the issues are, we need to have alignment about strategic intent, but we also, I think you uncover a lot, you know, where people want to go personally, right?

I mean, you take the time to discover how do you fit in and where do you see your role in this business evolving to. And that...

pathway, and I literally lost my train of thought. But when a family business, there are different dynamics at play. And it's interesting because you and I have done alignment reports together on businesses, as is typical of most pre -middle market and middle market businesses. There's a distinct lack of alignment amongst the senior leadership of the business.

Well, there's also lack of alignment between the family. Yeah.

little Johnny may not want to be in that business. And he's in that business because his dad or his mom said, you're going in the family business, but he may not have any interest at all in the business, but yet he's been identified as the next leader. So we uncover those things. We don't get into, I don't get into the real nitty gritty family psychology. Cause I'm actually oftentimes,

referred in by the family psychologist that has happened on more than one occasion. And they don't oftentimes they don't handle the business issues. So we, we collaborate and work together on understanding what is going on really within that business that they may not be able to uncover.

Yeah, it's interesting. A couple of weeks ago, we did an interview with Dr. Ali Taylor. I know you know Ali and that which covers the other part. So ladies and gentlemen, if you're interested in the business psychology perspective, we have an episode on that specific topic.

How often do you interact often with wealth advisors and insurance advisors? Are you brought in by that profession? Yes, I've been brought in quite often by the wealth advisors for a number of reasons. So one, they have business owner and clients that may be interested in selling or transitioning or doing something with that business and they don't deal...

generally don't deal with those issues. And again, I go in with no preconceived notion because oftentimes it's happened where the owner will say they want to sell their business or they want to transition that business. More often they want to transition that business to the next generation. And yet that next generation either one is not qualified currently or two,

may not want it. Yeah. And so our questioning and our interviews uncover both of those. Well, and it's interesting because, yeah, because what you're getting at, I think, and correct me if I'm wrong, what you're getting at is, you know, the best thing for the family and the best thing for the business are not necessarily the same outcome, right? And the

the patriarch or matriarch, the founding generation may want to do an internal transfer to the next generation. The next generation is saying, hey, sell this thing. I don't want to be in the business. Let's give it to third party, sell it to the other managers and take our winnings off the table. Or they may want to go into a different business. Sure. And that's where you, and we, and we uncover in any of those, if you take just one of the value drivers, the senior management team,

whether it goes to the next gen or sale to a third party or to an ESOP or whatever, you still have to have that highly qualified management team. So we will discuss and uncover is that senior management team qualified or they may have a goal. In one case I had where the CFO was 74 years old and made a statement that he wants out. So.

He, we helped that company identify issues around that and also worked with somebody to help them hire a highly qualified CFO, which gave them the ability to start building a management team around him so that they have options. So often businesses don't have options.

between a sale to a third party, Sopra, whatever. Yeah, absolutely. You know, it's interesting. There are a lot of folks who are listening, gonna listen to this podcast, Barry. You know, we've talked about some of the similarities and differences between a regular privately held business and a business in which the family is actively working a couple of generations, and sometimes more, right? And -

If you could give some high level advice to an advisor who has a client, a prospect, or is introduced to someone and they discover that it's a multi -generational family, what general guidance would you offer?

Well, what is the plan? That's one question they really should find out is, an owner of Patriarch is not going to live forever. They are going to exit that business at some point in time. And what's the plan with that business? Oftentimes, the Patriarch or the Meetrec may be the shareholders.

but they're not the only stakeholders. And what's the plan to take care of the stakeholders in the business if that business is going to be sold? And oftentimes can a business be sold with several family members in the business? Yeah. Yeah, the benefit of long -term planning right there. There's benefit of long -term planning and I try to tie together,

three things. One, making sure that the owners and the families, you know, they have all their ducks in a row legally and financially. And two, you know, maximize the cash flow of that business. Like we talk about with GrowTribe. Yeah. Make their profits and cash flow predictable. And three, ensure that the owners are set for what's next.

Yeah, and that whole what's next part is we should get back together and we'll do a separate interview on that. What's next is extremely fascinating. Yeah, absolutely. Right now, we're going to do that. We'll do that in a few weeks. And so often overlooked and so important. Absolutely.

I'm going to keep myself from going down that rabbit hole, but we'll definitely get together. We'll have a what, let's talk about what's next. You know, it's the, the growth drive methodology starts with effective senior leadership, right? Let's get the head on straight and, and you know, act one scene one, the first key result is to make sure that the shareholders have defined a goal for the business that is time bound and communicated to the senior leadership team, which is exactly what you've just described.

And then I'd like to circle back to predictable cash flow and why that's so critically important, especially in these multi -generational transfers or intergenerational transfers. But you're getting at, you're actually saying that the founding generation needs to define their goals for the business and they've often done a poor job of doing that. They may not know themselves, right?

other than in broad terms, is that a fair assessment? That is a fair assessment. Yeah. And then they often have not had a frank, and this is where the family dynamic comes in. They haven't had a frank conversation. It's hard to have a frank conversation with, let's say, your daughter about what in your mind is the plan for her career, rather than sitting down with an employee and having a, it's a very different, you know.

the relationship is far more complex. You want to comment on that? Well, it's far more complex because you need to see them at dinner at Thanksgiving and all the holidays.

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This week's episode is brought to you by Growth Drive, highlighting the Growth Drive Summit, held this year in Charleston, South Carolina, September 23, 24, and 25. The theme is business advisory and quantum age, harnessing technologies and delivering client wins. This is unique content. You can't get anywhere. And to learn more, go to growth -drive .com. Look under events.

Thank you. See you there.

(19:46)
Yeah. And I find a lot of patriarchs and matriarchs will say, what do you want as your role in the business, rather than saying, do you even want to get involved in the business? Sure. And I'm thinking of a case, one of the other...

things we may see in a family business, and I've personally seen this firsthand, is blinders or outright ignoring, not just blinders, but completely ignoring deep dysfunction and destructive behavior of someone who's a family member that happens to be also in a senior leadership position. Do you have a case that jumps to mind that...

Hits on that point.

Yeah, I have a case that actually was during COVID and the patriarch employed two of the children, I think there were four children in this business, in the business and...

We always rec or usually recommend that the the next generation go work someplace else first. Yes, that's great advice to really understand. And make sure to really understand what it's like to work for somebody, OK, yeah, and to to get some broader experience that you can bring back to the business.

It doesn't have to be forever. It could be for a short period of time. Well, in this case, one of the two children involved in the business felt entitled and would come to work late, would not dress nicely. And it became a real issue with the other employees.

I believe that the family members should be held to a much higher standard than anybody else in the company. Yes. Because they reflect the culture and the vision and the mission of the family and also of the business. And this, I believe this should really be part of the conversation within the family to have a discussion of, okay,

This is what we want to project to our employees. Oftentimes the families don't get together and talk about these issues. And I think it's very important because they have that. They have that impact on the business. Yes.

There was a case I had where there were two families involved in the business, two separate families unrelated to each other. And they didn't speak to each other within the business, yet the business became extraordinarily profitable. And they were getting to a point where, again, they had to do something with this business. And they each had their own responsibilities in the business.

And it was interesting to have that conversation with them separately and together about why things are the way they are and see how we can reconcile this. And they didn't like some of the things that we said, so they didn't pursue anything. But the point is we did bring these issues up. So it does come up quite a bit. But.

You just have to handle each case, each situation is totally different. Yeah, absolutely. And it sounds as though the admonition is with a family business, you may be walking into a minefield and don't be surprised at how zany the reality is. It's fascinating, you know, the one case I'm thinking of yours, the business was incredibly successful. And yet when we looked...

at their score, they scored something like a 42 out of a hundred when it came to operational excellence. And, you know, and that's, that's another admonition just because you just said you have two families. It's almost, it sounds as though it was almost like the offensive coach and the defensive coach weren't talking to each other, but yet the team is winning the game. And it's so when you walk into a family business, do, do your discovery and.

And probably, Barry, I call giving advice without having a full understanding a sin. I'm not a religious guy, but it's a no -go. And with family businesses, I think this becomes, bar from the Catholics, a venal sin. You better understand what the heck is going on inside this family business before you start offering advice.

I think you need to start out. I'll go one step further than that, George, in order to really give any business advice, you really need to understand what is going on with the business. Yes. And to understand that you need to talk to, I believe you need to talk to people closest to the action. Yes. And that doesn't necessarily need to be a senior leader, right? This could be, like you said, the shipping manager. The shipping manager. Yeah.

Somebody who's close to the action really knows what's going on. And that's where you can discover a lot of things that will enable you to ask good questions to that senior leadership team. Yes. Because you know the answers before you ask the question. Or you think you know the answer. The, I'm.

an attorney by an attorney by training and I got to sit second chair trial a long, long time ago in the one lesson and it's a life lesson. Never ask a question. So, you know, if we think about applying this in our client discovery, never ask a question in court to which you don't know the answer. And and it's good advice discovery and you do. I just love the fact the depth of discovery that you perform. I think is, you know, it's inspiring and it's the reason.

One of the reasons I'm sure that you're as successful as you are and that your client, by the way, your clients love you even when you're telling, giving them the tough medicine, right? Hey, let's circle around and talk about the special importance of predictable profits and cashflow in a family business.

And I'll preface that a little bit. I think family businesses, in my experience, are the most likely to be in one place, so to speak. You have one strategic intent, and then disappear and reappear somewhere else altogether overnight. Let's talk about predictable profits and cash flow and why you said earlier that that's especially important in these family -owned and run businesses.

Well, oftentimes I see where the business is supporting many family members. And that's where it becomes real important. In addition to that, you've got, you may have multiple shareholders that are not in the business. Yes. When you start paying dividends to the active shareholders, well, you have to pay the same dividends to the non -active shareholders.

And once they start receiving these distributions or dividends, they now become expected. Yes. And that can cause some issues. So if you're able to get the business to have predictable profits and cash flow,

That makes that easier. Plus you have different things drawing upon a different pressures on the business. You may have, if you have non -working shareholders and working shareholders, well, you don't have the same goals and objectives. The non -working shareholders want cashflow. While the working shareholders,

want to leave the cash flow in the business to continually build the business, which adds more pressure. If you think of a Venn diagram and you start plotting where the members of the family are on this Venn diagram, that becomes relevant as to where all those pressures are. And you've got.

You may have somebody who's working in the business and is a shareholder.

or you may have somebody working in the business who is not a shareholder. Well, they have different goals and objectives than others. So you've got these diverse goals and objectives that you need to manage and understand. Yeah, and that's during the easy times when all we're doing is kind of obeying that growth reflex and working to just continuously

grow the business in a sustainable fashion. I think I'd love your comments on how that shifts when we start approaching the sale of a business in a family.

It does shift because you still have different goals and objectives of different members of the family and different ownership roles. And the patriarch may want to continue the business, but they also their shares to one of the next gen. And how do you reconcile that? Absolutely. And this is when

Dr. Ali Taylor gets called in, right? Well, and there's, if you look at the mall, if you look at businesses that are, that are truly multi -generational businesses, you have a core business, but you also have a myriad of other businesses as well. So by having multiple, and that's why I call these business owners, these family business owners, families in business.

there might be multiple businesses. So when you talk to, when you see the statistics that the businesses from first to second, or third and fourth are constantly decreasing in likelihood of success, I don't really buy into that totally because you may have the main business that was either not successful or sold, but the family may still have other businesses.

So how does that fit in with that? So you need to take those statistics with the grain of salt. Absolutely. Yeah. And it's interesting. We do see businesses setting up. So my daughter has said that she doesn't want to be part of the business, but she has a strong interest in X. And I helped stand her up in that business. Well, yeah, the whole host of, there's a whole train of considerations there.

Have you helped a family business? And I'd love if you have you to describe it from sort of 30 ,000 feet. You've helped family businesses actually sell and extract themselves, right? Yes. Could you comment on that? Describe just what you see? Well, when I did with a family that was in the healthcare field,

It was a multi -year project in that we did a initial assessment of the business and went through my normal process. And we identified certain things that should be working on improving to make the business, you know, more saleable and easier to run. A year or two went by and they, they did some things and they came back and said, we're ready to, to sell our business now.

And I helped them through the process of understanding that process of selling the business. And we still identified some things that they needed to work on. The biggest thing was owner independence. Because in family businesses especially, I find there's a tremendous dependency upon the owner.

When you say the owner, are you referring to the founding generation? The founding generation, yes. Because that's the generation that started the business. So many businesses, let's say, were started supplying companies like, well, they're no longer around, like Sears and some other ones, okay, that that was their primary customer and they made a very good living and became quite wealthy. And you still have that to a certain degree. But,

That's what I'm referring to as the founding is the founding because that's who has the relationships usually. And we started to bring in a management team. There was not a second generation in this business. And we brought in a management team and eventually sold the business and actually utilizing the process, we were able to get their price without

without a discount, which was amazing. That is amazing. That is that's the happiest of happy endings. And then that kind of leads to what will be our next interview is and then what you know, you wake up the next morning and you've gone from managing the hundreds of people to managing the toaster. Well, that's the in this case, I believe that you can get your price or close to it by going through a process that we're talking about here.

Yes. And can you just describe that process from your perspective? Pardon? Can you please describe that process from your perspective? The process is almost like a pre -due diligence, if you will. Yes. And we're assessing the business, we're finding those areas that are precluding it from having dependable and reliable, predictable profits and cash flow, predictable growth.

those things that we talk about in growth drive, by going through them, identifying and at least starting to mitigate some of those issues, you're doing what a buyer is going to be doing. Yeah, that's exactly right. Let's look at this business from the private capital markets perspective and make it shine. Yeah, well, you know, I thoroughly agree. Well, and it...

Normally when I started engagement, we look at, can the business be transitioned to the next generation if there is a next generation? If not, can the business run as an, what needs to happen that you have the business run as an investment of the family? I love that, yep. Okay, that way it can run independently. And third, if it can't do one and two,

than prepare for sale. But if you've accomplished and prepared it for one and two, you now have it almost prepared for a sale. That is a fascinating point. And what you just hit on there is exiting the business can be as simple as exiting the accountabilities chart and becoming where the founding generation becomes the chairman rather than the president and CEO, right?

And we're producing options. Yes. And that is what we do. We create options for our clients. Great. That's probably, Barry, believe it or not, we've been chatting for about 40 minutes. It's probably a great place to wrap it up. You create options for your clients, for families that include.

you know, that can include three broad buckets. One, let's transition it to the next generation in a way that is productive and sustainable and creates an immortal business. Or let's create an immortal business where we have exited the accountabilities, the day -to -day accountability, and moved into more of a chairman position. And third, we have exited the accountabilities, reduced owner dependence, and now we can actually sell it to

to an outside party, a third party sale. Yeah, I absolutely love it. And yeah, family businesses, a tremendous, do you know statistically what percentage of businesses would be classified as family businesses in the US? You know, I don't, I don't remember. I know I knew it at one time, but I don't remember right now at the top of my head. Awesome. I'll make that my own homework. Okay, perfect.

Listen, Barry, thank you very much. I appreciate your time. It's a pleasure to work with you and thanks also for your friendship. And we'll get together for part two of this, what's next. So terrific. All right, thanks. Thank you.

(36:54)
Hi this is George, thanks for listening. If you like what you heard, you can subscribe, like, and please take two seconds to leave a review. It tells the world that you like what we're doing and it helps us understand how we can improve the show. Thank you and see you next time.