Insights of a Maverick Exit Advisor
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Insights of a Maverick Exit Advisor by Istvan 'Steve' Preda offers essential lessons for entrepreneurs on creating and executing effective exit strategies. Through personal anecdotes and experiences from his 12 years in investment banking, Preda reveals valuable insights that are applicable to anyone involved in buying, selling, or growing a business. The book is praised for its straightforward and candid style, making complex concepts accessible and engaging for readers at various levels of business experience.
Insights of a Maverick Exit Advisor
- 1. INSIGHTS OF A MAVERICK EXIT ADVISOR ISTVAN ‘STEVE’ PREDA
- 3. The diary of 12 years of investment banking in Central Europe and the United States INSIGHTS OF A MAVERICK EXIT ADVISOR ISTVAN ‘STEVE’ PREDA
- 4. “This is an entrepreneurial wisdom-book that helps you understand how to get into a business and how to create and execute an exit strategy. A senior-level graduate course in entrepreneurship, with clear examples and in simple language, that allows you to digest the theoreticalideaspresented.” MatthewMarek,FounderandCEO, GoodNeighborCommunityServices “Insights of a Maverick Exit Advisor is a straight-to-the-heart diary ofaninvestmentbanker.Steve'sstyleishonest,transparent,andraw, and each of his essays contains valuable lessons from start-up founders to the most experienced CEOs. If you are interested in buying, selling, or starting a business, this is a must read. No need to learn these lessons the hard way when you have Steve's insights to lightyourpath.” RyannLofchie,CEO,FrontierAcademy; Owner,TheFrontierProject “Whether you are considering becoming an entrepreneur, growing your company, being a better leader, or exiting your business, you'll findinsights,inspirationandvaluethroughoutthebook.Mr.Preda's style is straightforward, honest and often bold. The book can be a quick read or you can chew on the words, reflect and revisit chapters. Iencourageeveryentrepreneurtoreadthisbook.” TerryFink,CEO,PlanetCentral Praise for “Insights of a Maverick Exit Advisor”
- 5. “Steve's unique international background and diverse group of clients make 'Insights … ' an intriguing read. From creating the business you have long been thinking about, to growing it and then to cashing out, Steve covers ideas, concerns and things to watch out for. An enjoyable and thought-provoking read no matter where you areonyourownbusinesstimeline” MarkA.Smith,Owner,MidasofCentralVirginia “I found the book to be a unique read and difficult to put down. A whimsical collection of vignettes, each providing one or two poignant business truths. Entrepreneurs and business people alike havemuchtogainfromSteve'sinsightsandperspectives.” DavidP.RomigII,President,TCSC/ForensicAdvantageSystems “Welcome addition to other successful business strategy resources. The golden nuggets embedded in Steve's experience are priceless and his practical advice is a solid foundation for any business owner considering a sale or even the “what next” when dealing with a businesstransitionplan.” JeriTurley,President,BCGCompanies
- 6. © 2016 by Istvan ‘Steve’ Preda. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise, without the written permission of the author or publisher. Library of Congress Control Number: 2016920070 Published by: Amershire Publishing Websites: www.entrepcoaches.com, www.imapmb.com Illustration: Ákos Kiss, Rajzákos Book Design: Zoltán Ember, a4-design Text Editor: Erzsébet Aponyi Publisher’s Cataloging-in-Publication data Preda, Steve: Insights of a Maverick Exit Advisor. The Diary of 12 Years as an Investment Banker in Central Europe and the United States. Includes index. | Glen Allen, VA: Steve Preda Entrep Coaching, 2016. Subjects: LCSH Business planning. | Sale of business enterprises. | Sale of small businesses. | Entrepreneurship. | Family-owned business enterprises. | Success in business. | Private companies – Planning. | Leadership. | Strategic planning. Corporations – Valuation. | BISAC BUSINESS & ECONOMICS / Leadership BUSINESS & ECONOMICS / Entrepreneurship Classification: LCC HD2746.6.P74 2016 | DDC 658.1/6–dc23 Identifiers: ISBN: 9780998447810 (Paperback), ISBN: 9780998447803 (eBook)
- 7. To my parents, István and Beáta for your faith and support
- 8. “Insightsof a MaverickExit Advisor”is a collectionof diary notes I wrote while selling my investment banking business in Europe and moving our family to the United States, to start a newcareerasanexitadvisorandCEOcoach. These mini essays recorded my thoughts and experiences working with over one hundred and fifty entrepreneurs and CEOs over a timespan of fifteen years, advising them on growing, funding and scaling their businesses. In most cases, they were looking to harvest the value they built up in their companies by way of selling to a private equity group or a strategic buyer. In other instances, they wanted to create more robustbusinessesthatcouldbehandedovertofamilysuccessors ortoaprofessionalmanagementteams. Ihopeyouwillenjoyreadingtheseshortstoriesasmuchas I did writing them. If you would like more, check out the SuccessionSecretspodcastoniTunes, oritstranscriptsatwww.successionsecrets.com. Foryourentrepreneurialsuccess, Istvan‘Steve’Preda Preface
- 9. ENTREPRENEURSHIP Mortgage and Payroll Turns Handicap into Advantage Can’t Make GREAT? Let it Go! Whatever Gets You to the Light From Trauma Through Strength to Weakness Entrepreneurial Bug Cuddle Losers, Piss off Winners Effectiveness in Art and Business The Three “C”s of Entrepreneurship Ground Your Feet and Springboard Non-Core is Not Waste Passion, Sex, Entrepreneurship Industry and Frugality Power Over All Things The Lifestyle Trap Ideas vs. Resources Conviction of Value LEADERSHIP Lead, Follow, or Get Out Love’em, if You Want to Sell’em You Live for Today, I Worry About Tomorrow Inspiration Horse and Rider GROWTH STRATEGIES Little Advantages Technology or Contracts “Profit” is Spelled “Repetition” Wanna Rock? Spend 10% on Marketing! Shortage of Capital Hostages to Fortune The More Aggressive Wins Growth or Cash Lethal Profits Follow the Competition Break Even and Stay Present Systems Replace Experience 9 10 13 14 16 19 20 22 24 26 29 31 32 34 36 38 40 41 43 45 46 50 52 54 57 58 60 62 64 67 68 70 72 74 76 79 80 Contents
- 10. ACQUISITION / INTEGRATION Who Buys Cheap May Overpay Spend a Fortune on Nothing Fix to Sell, or Sell to Fix? Buy Skills, Not Customers Would they Care if it Sank? Uncertain vs. Sure Synergies Too Big to Chew PRIVATE EQUITY / VENTURE CAPITAL Wind Behind the Sail Watch the Return on Assets Angels Better than VC? Companies Family Offices Buy Eat Your Buyout Cake and Keep it Healthy Pressure Better Sales than Your Client The Time to Use Leverage SELLING A BUSINESS How to Sell for More than it’s Worth? The Strategy of Overpaying Credibility Account Caught With Your Pants Down Knee-Jerk Reactions Whatever You Resist, Persist Fearing Phantoms Crosshairs Life Insurance Macho Entrepreneur Breezes and Bruises Empty Wheelbarrow Deal With Peace of Mind NEGOTIATION Trust The Best Lie is the Truth Merger Negotiations: How to Win by Losing It? False Characters Swingers and Singers Playing Fool for Gold When Harry Met Sally FAMILY BUSINESSES Investing the Family Silver Stress, if You Don’t Enjoy it Wonder, Thunder and Blunder 83 84 86 88 91 93 94 97 99 101 103 105 106 108 110 112 114 117 119 121 122 124 126 128 129 133 135 137 139 140 143 144 146 148 151 152 154 156 159 160 163 164
- 12. usiness Man” – read the status description of a former Bcolleague on an association website. Last I checked, he was the employee of a bank… and sure enough, he still workedforthesame. “Intrapreneur” – quipped a retired executive upon my question of what he did for a living. “This is what you call individuals who autonomously create businesses inside companies”–heexplained. A couple of my friends started an internet business when a conglomerate funded their business idea. The enterprise lasted untiltheseedcapitalranout.The“founders” thentookrefugein middlemanagementjobsatalocalbank. My own mindset was similar fifteen years ago, when in charge of the corporate finance department of a Central European commercial bank. Management knew little of the investment banking business and I enjoyed substantial autonomy in picking colleagues and going after clients. “Heck, why be an entrepreneur when I can enjoy all the freedom AND besureofasalarycheck?”–Ithought. My euphoria lasted until the bank was hit by a slow summer, and on an early September Friday afternoon, I and my deputy got fired. My staff was shocked and promised to jump with us to a competitor… but by Monday all was forgotten. “My intrapreneurialbusiness”turnedouttohavebeenjustajob. The ensuing years have taught me what entrepreneurship is all about. It has nothing to do with building a business… That can be done by a hired hand who enjoys the confidence of, and gets a budget from, their employer or investors. Entrepreneurship begins where your business hits a rough spot and you commit family silver to keep it alive. When you Mortgage and Payroll INSIGHTS OF A MAVERICK EXIT ADVISOR 10 “
- 13. ENTREPRENEURSHIP mortgage your house to survive a downturn… dip into retirementsavingstomakepayroll…forgosalariesformonthsto stemlosses.Thesearethetruetestsofentrepreneurship. On the other hand, nothing fosters creativity like being desperate. Are you prepared to go there to stay in business? Are you strong enough to hang in through a drought with no income? Do you believe in your venture enough to put your financialfutureontheline? If yes, than you are, or have what it takes to become, an entrepreneur. 11
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- 15. Innovation often springs from the frustration of the handicapped,whoisdesperatetoovercometheiradversity. One unpleasant example is Hitler, who channeled his frustrationasamediocrepainterintoapoliticalcareer. He won over his faithful by turning his feeble persona and pitched voice into a messianic icon of the reparation-opressed maninthestreet. The actor, Marlon Brando, overcompensated his mumbling by inventing coolness and becoming a sex symbol of hisgeneration. The eight-times Grand Slam champion tennis player, Andre Agassi, turned his relatively small height into a powerful weapon by developing the Agassi ground stroke that made his opponentsrunincircles. I thought of these handicaps-turned-advantages when browsing Sheryl Sandberg’s new book Leaning In. Sandberg, the COO of Facebook, is leveraging her womanness to rebrand herself from an operative executive into a political figure, the global champion of women. Stepping out of the shadow of Facebook founder Zuckerberg, she is turning a potential handicapintoanadvantage. A handicap can be a blessing for the up-and-coming entrepreneur too, if he can embrace it. The idea of being an underdog can trigger a visceral desire to heroically throw off the shackles of disadvantage and to succeed against the odds. The challenge inflates the self-image of the oppressed, turning him intoalion.Amuchstrongerdrivethanfortheleadertomaintain heredge. Aspiring entrepreneur, – go embrace your handicap and givetheleadersarunfortheirmoney! Turns Handicap into Advantage ENTREPRENEURSHIP 13
- 16. Anaïs Nin, an American author born to Spanish-Cuban parents quipped: “Anything I can not transform into something marvelous, I let go”. This quote is itself marvelous, as it compressesmultipleideas,applicableforbusiness. The first is to always shoot for the extraordinary. Anything lesswillnotinspiretheexcitementandenergyneededtoturnan initiative into a profitable business. Entrepreneurs are optimistic by nature, and their business idea will almost certainly cost more, run into obstacles and be more difficult to sell than initially thought. Warren Buffet claims that any investment must have a downside buffer to be feasible. Marvelousnesscanbethatbuffer. Second is the entrepreneur’s own input. Entrepreneurship is like art, a deeply personal activity. The idea has to offer personal synergies to the artist, allowing a full emotional commitment to executing it. A clinical approach creates neither artnoramarvelouspieceofbusiness. Richard Branson brings his passion to any business he touches and it is his personality that turns it into an extraordinary success (e.g. Virgin Megastore), or occasionally, a colossal failure (Virgin Cola). Virgin Megastore was brought to life by Branson’s larger-than-life attitude. Virgin Cola just proved that even big thinking can fail when it runs up again marketinggiantswithunlimitedresources. The third is letting go. As much as belief is an indispensable quality, it has to be tempered by sobriety to recognize if something will not work and get out before losing an arm and a leg. Thick skin helps here to shake off the disappointment and humiliation of having gone all out for the Can’t make GREAT? Let it go! INSIGHTS OF A MAVERICK EXIT ADVISOR 14
- 17. wrong idea. (The insecure will hang on too long and lose their capitalinthevainattempttopreservetheirreputation.) Lastly, it helps to believe that life abounds with opportunity. Rather than settle for a GOOD business, keep tweakingituntilitbecomesMARVELOUS. ENTREPRENEURSHIP 15