Episode Description:
In this episode, the second of a two-part series, host Elizabeth Ledoux and guest Andrea Carpenter discuss the possibility of handing the reins of Elizabeth’s business to Andrea. They explore the challenges and opportunities of navigating this deal, which would involve Andrea becoming her boss’s successor. Tap or click the play button below to listen to: Opportunities in Business Transition: A Dialogue on Succession with Elizabeth Ledoux and Andrea Carpenter.
SCHEDULE A COMPLIMENTARY CONSULTATION
On a practical level, this conversation reveals the importance of trust, communication, and transparency in potential partnerships and succession planning.
Connect with Elizabeth Ledoux, Andrea Carpenter, and the Transition Strategists:
Website: https://transitionstrategists.com/
Facebook: https://www.facebook.com/thetransitionstrategists
Elizabeth on LinkedIn: https://www.linkedin.com/in/elizabethledoux/
Andrea on LinkedIn: https://www.linkedin.com/in/andreashaver
Transition Strategists on LinkedIn: https://www.linkedin.com/company/transitionstrategists/
Transition Strategists on YouTube: https://www.youtube.com/@transitionstrategists
Subscribe to “The Business Transition Roadmap with Elizabeth Ledoux” on your favorite podcast player:
Spotify: https://spoti.fi/3MxSYA2
Apple Podcasts: https://apple.co/3IhMMux
Google Podcasts: https://bit.ly/BTR-Google-Podcasts
Get Elizabeth Ledoux and Laura Chiesman latest book, “It’s A Journey: The MUST-HAVE Roadmap to Successful Succession Planning”: https://amzn.to/3oq2LQv
Chapters in this episode:
0:02 Business valuation and potential partnership.
6:09 Valuing a business for succession planning.
11:03 Open communication between business owner and successor.
15:58 Transparency and vulnerability in business partnership.
21:15 Business negotiation strategies and transition planning.
This episode was produced by Story On Media & Marketing: https://www.successwithstories.com.
Getting Serious About the Deal Transcript
Elizabeth Ledoux: The idea of hard versus hard, it’s hard to stay in and keep going. And it’s hard to say no and leave and then wonder what you left behind. Right. And it’s hard to get to a number, because you left something behind. And it’s hard to get to a number and know that maybe you got some good things and you know, and gave up some things to on both sides. So you’re not making a decision on hard versus easy or making a decision on hard versus hard. Welcome to the Business Transition Roadmap. My name is Elizabeth Ledoux. And through my years, I have seen how communities thrive. When business succession and transition are done well. Me and my team at The Transition Strategists have been helping business owners develop and implement transition strategies for over 30 years. And on this show, we want to help you by giving you the roadmap to a healthy business transition. Let’s get started. Hello, again, and welcome back to the Business Transition Roadmap. We’re here with Andrea Carpenter. And we are starting part two of our story in our journey. So yeah, just as a continuance of that, I think we’ll pick this one up with getting serious about the deal, right. So for those of you who weren’t here, Andrea, in the last episode, we met, we got to know each other. We she came and started working with our company, as a contractor, because we thought that would be a great idea. And we started getting more serious about our deal and talking about it. So Andrea, why don’t you pick it up from there? And tell us a little bit about what it was like for you?
Andrea Carpenter: Yeah, so I think it was, we had decided it was September when I officially came in, sort of, to contract and around this time, it was okay, let’s just like what would what would it take? What would have to happen to make this this deal work? Something to move forward? Do I actually want to become a partner in this business? So again, it goes back to what am I looking for? What are my objectives? What’s gonna potentially get me there? Am I having fun? Am I doing something that I enjoy is Is this the type of work that I like to see. And I think, as time went on, I started to see more of a vision of how like how I could fit in how I could make an impact. And a big part of that was being able to start actually doing, doing some work. And delivering not necessarily in a guide capacity, but building some programs starting to think about how we could execute looking at our marketing and where we could see improvements and coming up with some suggestions to bring kind of in a in a leadership capacity for some of these different things. And it was only a couple months in and from from a work side. Here I am and you’re like, Hey, you want to just take all this marketing stuff off my plate. I’m kind of busy. I’ll just let you run with it. And I thought that was pretty cool. That was like a good first step that aligned with my past experience. And so the work side started, like, it was churning, it was moving. And it was a question of what other information do I need to start to evaluate this deal? So there’s the obvious of the financials, but there’s, what’s the IP? What’s it, what exists? What is working before what hasn’t worked before, and I think we started to dig into some of that a little bit more, which, to be fair, I did sign an NDA, but I was really starting to dig I was really starting to dig around, which probably, for you having someone like kind of from the outside starting to do this, like that probably comes with quite a few feelings. I would imagine.
Elizabeth Ledoux: That was me that would definitely was interesting, interesting. Because especially as the owner, founder, creator of this stuff, you know, I think you have the idea that it’s good, and that you have good intellectual property and a good company. And you’re running it pretty well. But on the flip of that, there’s always the like, Oh, what if they don’t like it? Or oh, what if, you know, and how, in almost preparing yourself for hopefully some positives, but also some negatives. Like, I don’t really think this is that good. I was. I really don’t think it’s worth this much. And we went through a lot of those conversations. Right and yeah, so that was it. I think you have to be prepared to just be genuine, and still have a great foundation for yourself, know what you’ve done. And then be able to navigate that, because it’s not easy. I will tell you. And I remember we were so back in September, you did sign an NDA, which I think is a good business practice. For those of you who are, you know, even with maybe an employee, if they don’t already have an NDA, and you’re thinking about showing them more about the larger over kind of the overarching company, it’s not a bad idea to sign an NDA, just for the sake of doing it. So you sign that NDA, I embarked on this great journey of valuing the company. And we have some great advisors that we use and recommend for people who are clients. So I called one of them up that I really trust. And I said, Would you be willing to give us a ballpark figure on what this is worth. And so they did a nice business valuation for us based on three years of earnings. And, you know, the whole nine yards. And when he came back, and he said, Okay, this is your number, then he said, but it doesn’t include any of your intellectual property because your intellectual property is different. And so he said, You need to get that valued. So that was a whole nother journey, which, working with a different adviser, it was fun to go through and look at, it gave me confidence, actually, to go through and look at what I had built. Truly, because most of it was built by me with my team. But I was definitely the leader in that. So yeah, it gave me some confidence and made me realize what we had. And when you do strategic work with us, or anybody, one of the foundations is to know where you are today. And that was the actual detail work that I was doing in September, this to get a very much sharper picture of what we actually had. Because Andrea would not have been able to say yes or no to anything, without me being able to say, this is what it looks like. So she can ask questions about it. So that was a big deal to go through that valuation process. And it probably took most of October, all of October and part of November, to get through that because of people being busy and, and all of those things. So it wasn’t I don’t want to underestimate the amount of work that went into that lot.
Andrea Carpenter: Ya know, it was definitely a big effort and you start looking at things and it’s a question of, from a successor perspective, like, do I need to get my own valuations done? And and there’s my evaluation and the validation that your advisor do. And that’s how we’re going to come to the number or what’s the, what’s the way? How are we going to navigate really what’s fair. And I think we ultimately ended up taking the approach of, let’s just look at all the numbers and talk about what’s going to work for the two of us with where we’re at, and where we want to go, and things like that. But there were and if this is new to you, and you’ve never done something like this before, like I’m in my late 20s Like I’ve never like valued a business before or sat in on m&a. My degree was graphic design, so I don’t have a business degree. So the learning curve that I had and still have around the numbers, the cashflow, where we’re going the EBIT, name all these different things like and it’s not just me, it’s many successors who are going to have these learning curves. And that that left me feeling. And I tend to be someone anyways, that really wants to look over things before I react to something live. I tend to be a little bit more methodical like, Oh, let me let me just sit with this a little bit. Try to figure out what’s right. But it was a really difficult time, especially when we first are talking about numbers because it’s easier to go broad strokes. Like, I remember a discussion we had in August. And I remember this because I was on family vacation and I’m sitting in the car and the whole family’s in Sam’s Club and I’m sitting in the car on the phone with Elizabeth and it was the first time like I said to her, like can we make sure we’re playing the same sport? Because if I’m playing baseball and you’re playing football, and we’re not even like in the same ballpark in terms of like what this might be worth, I don’t want to waste your time getting these valuations and you shouldn’t waste your time like you’re gonna need them someday but you don’t have to rush to try to get them done if we’re not close. And so we kind of came up with the this range, like we think it’s probably somewhere here. Like, are we in agreement that that that that starts to feel okay, and I felt okay, tucking it at that level. But when you get into your evaluation, like down to $1 number of what the business net look like, and the cash flows on this the first time you’re seeing stuff like that it can be an I felt very, very overwhelmed. So there’s definitely a learning curve. And I appreciate the grace Elizabeth, that you gave me, in navigating this a lot of businesses that we work for it’s family. And so it’s like, oh, you’re stuck with me. So as long as like, if I’m your kid, like, you’re gonna have to give me the time to work through it or process it or ask other opinions. In our case, I was something from the outside. So I think you afforded me a lot of grace and space to kind of process as this was definitely the part of the deal. Where, because it was the most unclear to me, I felt the most hesitation on the most like, wow, I really don’t know the way forward. Mostly because I had never done it before. And it was brand new,
Elizabeth Ledoux: was great. Well, in, you know, we’re getting ready to do a great webinar that we’re going to have. And it’s going to talk a little bit about the owners shift from being kind of the one that’s doing it and making all the decisions to the person who’s mentoring and helping and trying to teach and navigate. And so it does take some mindfulness, right, some real attention to, to understand from the owners perspective, how much you really do know, because it’s so natural to you to be able to just like, oh, yeah, that’s a financial and oh, yeah, no, this is how this works. Or, and you just kind of know your business to kind of slow down and stop and go, Oh, they, in order for them a successor to feel comfortable. They need to be able to know and they need, I think an important part is, I hope this is what you found is that I’m your biggest, I’m your biggest fan. I’m your biggest hero to you know, I want you to do extremely well. And not just because it benefits me. But like, we’re, if you go back to the objectives matrix that we did, that we talked about, in part one, I’m hoping that you’re gonna help me build my life the way I want to live it. And I’m hoping that I’m going to help you build your life the way you want to live it and that the business fits into both lives. My now hours together, yours. That’s how that works. So if I’m not your biggest fan and your biggest mentor and your biggest supporter in this, I don’t know how the successor could go through it.
Andrea Carpenter: Yeah. And because you were so clear sharing that with me. I think, when I talk to other successors, sometimes you can just feel this like, well, they don’t share anything, I don’t know what their plan is, I don’t know what their timeline is. And that that uncertainty or that it’s not really clear what’s going on, or what they expect, or what they need me to learn or what the process is going to be what’s going to happen first. So it’s going to happen second. And I think how candid we’ve been able to come with each other I can recognize and respect, like, it’s still your business, I don’t have any ownership in it yet. I would like to have ownership someday, the way we’re gonna get that is to have a really respectful relationship with one another. But also, I have to ask, so you know what I expect, and you need to share when there’s something big or something that might be be changing, so that I’m in the loop to so that I can react to that. So I don’t feel blindsided, that helps me show up better. And I would imagine that helps you show up better, too. And this relationship, which is it’s crucial for everything, but especially as we get into the money as we get into like, what’s our number? What’s our deal? What is the future look like? How long are we going to be doing this? As we as we start to talk about all these things? It’s mission critical that we can be having really clear communication.
Elizabeth Ledoux: Yeah. Then yeah, it’s a theme theme theme theme theme is open communication. So I remember, you and I were having a conversation. I don’t know, it was probably December, somewhere in that range of time, maybe January. And we had I had the valuation back. And I showed you all those numbers, and you’re processing that and you’re just, you know, in that space of learning about each other to and working on the company and building the new programs. And I remember you and I having a conversation and you said well, you know, I want to I want to ask for more information, right? I want to do that and you’ve already signed the NDA. And so don at my office worked with me now. I think 12 years maybe gone on 13. We’ve been together a long, long, long time. And we loved on we love on. Anyway. So we’re I remember calling done. And I said, I said Andrew is going to ask for some information. And I want you to give it to her. And she was like everything. I was like, Yeah, everything. Right, just because what do I have to hide? You know, I’m in a place where I would love to have a great successor don’t have to have a great successor right now. And but I thought that it would be really valuable for her to feel like there weren’t any barriers. Like, there weren’t any walls, there weren’t any screens up. It’s just like, yes, come and look at it. Because Have you decided to come in and come into this? You’ll find things that you didn’t find before or I didn’t intentionally not tell you. But just what there’s a lot of history in this company and with me, so can’t know everything. But yeah, just a few. I think if you have that foundation of transparency, then when you run into things in the future, because you will, there isn’t that bad, like, oh, well, she kept that from the euro. Well, you know, that was intention. Yeah. Yeah. So I like,
Andrea Carpenter: yeah. And speaking of openness and transparency, I just remember, Elizabeth and I are sitting in a room and I’m facilitating on this board meeting that she invited me to. And I had recently gotten my HCG pregnancy confirmation tests back, like I got it in the middle of that day, there was like, a salad for lunch with salmon and I’m starting to get sickness and I’m like, oh, gosh, I can’t eat this. And I’m sitting in the room, and I get the confirmation. And I’m like, I should just tell us within person, like, that’s the kind of relationship I want to have. I appreciate like, how transparent she’s been with me about the numbers and where she’s going. And all these things like, Sandra and I have been my husband, Andrew and I have been hoping to start a family for a while. And we’ve got we’ve been trying and now it’s happening for us. And who knows what’s gonna happen, right? There’s, there’s a long time to make it to some of those those major milestones, but I was like, I think I should tell Elizabeth about this. So it’s not just the numbers, right? It’s it’s the people things and I was like this could change everything. Like I could tell her this. And she could say, we, we don’t need to have a deal, or we don’t need to read like, we don’t need arrested yet. Like you could have walked that could have been a catalyst that could have caused you to walk away. But in my mind, I was like, Well, if that causes her to walk away, then that’s not the type of person I want to be working with. But it did shift our timeline. So I’m sure you have a lot more to say about how that kind of changed, changed our trajectory, maybe a little bit. But yeah, transparency and vulnerability to kind of share that at that stage was not something I ever would have thought I would have done, but it was definitely the right decision.
Elizabeth Ledoux: Yeah, I think it was great. And it was funny, because we were standing in the middle of the hallway, right at the facility. And I, she goes, I have to tell you something, and I was like, Okay, what is it? I’m pregnant. And I was like, Oh, good. But, you know, we in a, I’m a big advocate of women and, and I love father daughter type transitions. I love Mother Daughter transitions, but I, a woman coming into a leadership role, I think, can have a family and can do all of these wonderful things. And that’s my foundational value and belief. And I was able to do that, too. So so this was it did change our timing, because it changed, you know, on the timeline. Life happens. And we don’t know what it’s going to be what Sometimes life happens. And it’s like, yes, it’s awesome. Let’s do it. And let’s postpone and navigate around it. Like being pregnant and having a baby, what a beautiful thing. And then there are other things that happen where it isn’t as pleasurable, right? And lots of times I think the older generation that owner founder generation, put stuff off until there is an event and then your your options are less and it’s more emotional, emotionally charged. So this was an interesting thing because I was actually super excited for you first and foremost. That was my number one thing, and then it did though, add in the piece of do we want to do we want to get this deal done before you have the baby because we We’re shooting for that. We were when we were shooting to have it done early earlier in 2024. And then this presented some new things for you to, to start to think about how much time you want to work and and maternity leave and and I started thinking about, do we want to, we could close the deal if we wanted to, we could work on that. But we started talking about doing it after. And one of the main reasons for me was I didn’t want to be responsible with a brand new partner off for three months, me making decisions and try not to tell her what I was doing, because I was honoring her time away. And her come back and go, You should have called me Elizabeth. I’m like, but I was trying to honor you. So I didn’t want to start or our first part of our relationship like that. So obviously, we decided to, well, our goal is to have everything figured out and have it done on paper before the baby comes and then just plan to close right as whenever you’re ready to come back. Yeah,
Andrea Carpenter: so which feels which feels right. But when you go through a major life change like this, though, it was like I had so much clarity, I thought I knew exactly what I wanted. And then here we are, and like, oh, well, what if? What if I want to stay home longer, or I want a shorter leave or a longer leave? And now suddenly, there’s other things that are depending on me, what exactly is my role? How many hours exactly am I going to work when we get back and some of those conversations became more critical and super important to our discussion. And our I’ll call it the negotiation and even my sensitivity to the number knowing that. I mean, obviously, before it was, it was kind of my work, my contribution that was going to be supporting my buying as a partner in your business. But now, there’s a kid that we’re taking care of, and our cash flows are about to change. And I’m like, Whoa, so it did, it changed my perception of some of the things that I felt when we were first starting to negotiate, which was just, it’s another thing to work through. And you never know, what’s what’s gonna pop up, or who’s gonna need to leave for a little bit or when you’re gonna have to step away or when something really exciting, like growing your family is going to happen. So now it feels like the timing is right at the time. I was like, of course, it happened. Right, right now right in the middle of us trying to sort this, but I feel like I know you even better now, having worked together this extra amount of time that I have more confidence, getting ready to step in and continue than I would have if say we had had finished the deal by March.
Elizabeth Ledoux: Yeah, I think I think too. You know, looking back on it as, because we just we just three days ago, finally said, this is our number three days ago. And we started with this valuation in September. And we started with high level ballpark numbers in August. So I think both sides at times got frustrated with this is hard. And this is, you know, in I don’t know too hard. But this is hard. And then just trying to figure out, you know, is this ever going to happen? And are we ever going to get there and but it took well, two things. One is the idea of hard versus hard, it’s hard to stay in and keep going. And it’s hard to say no and leave and then wonder what you left behind. Right. And it’s hard to get to a number because you left something behind and it’s hard to get to a number and know that maybe you got some good things and you know, and gave up some things to on both sides, so that you’re not making a decision on hard versus easy or making a decision on hard versus hard. Which way is the hard hard way or the hardest. And then the other is it took for me. That took a lot of reframing of my thinking. I spent and I was I like going outside. I love skiing and we just had a great season here in Colorado. But I spend a lot of days on the chairlift when I was skiing, just thinking about what do I really want and how do I help Andrea? See what I think is a good value for this company. So she’ll agree to it. And how do I help her get what she wants? As far as you know, gosh, carrying a note or not carrying a note on my side, cash or no cash on her side what the value of the different components are in? And gosh, we talked about taking stuff out of the deal. We talked about putting it all into the deal. And then we even talked about things like, time off, you know, can she go do whatever she wants and take as many weeks off as she wants? And what about me? And do we want to be each other’s babysitters and gatekeepers? Which the answer’s no, of course that, right, we want to both be owners. And so we had it, we walk through all of these things. And it really helped me to reframe my thinking. But it took a lot of reframing to get to where we are today.
Andrea Carpenter: And there’s a long, long way to go. In terms of we have a number but our we always call it a journey, not an event. Right. So this is this is just one stage. And I think and obviously I’m newer to this Elisabet, but just to kind of put some closing thoughts on this, and probably where we’re going. There’s now a new timeline that Elizabeth and I will probably work on together. So Elizabeth has her high level timeline of when she hopes to exit but there’s gonna be milestones along the way, in terms of Andrea comes back from maternity leave, the deal starts, a percentage is purchased, another percentage is purchased. Andrea steps into some type of role, Elizabeth steps out of some type of role. What’s our vision or goal? Like? Are there certain milestones that we’re going for revenue targets that we’re we’re trying to hit or we hope to hit by a certain amount of time. So lots for us together? Like, who’s on our board of directors, we need to create one that we could probably do a whole episode on that as as we talk through and think about, like, what’s the board of directors? And who’s gonna sit on it? And how do we make decisions? So lots and lots of head?
Elizabeth Ledoux: How do we deal with spouses? And how do we deal with you know what I mean? And, yeah, there’s just so many, there’s so many next things and agreements that have to be written up and lawyers that have to tell us we’re not doing it right. Or we shouldn’t do something when we really know we want to, and it’s not very smart. Deal with all of those things, because we both will be represented by lawyers that will be telling us and trying to protect us each individually. And that happens as well. So yeah, lots and lots of good things to come. Yeah.
Andrea Carpenter: So if this format is interesting to you, if there’s more as we work through that, you’re like, Oh, I’d love to know what when they were talking about that, or how they’re dealing with this, or if they’ve run into this certain type of issue. Let us know, we have fun talking about this kind of candidly and sharing what we’ve learned. We’re both into stories and the power that like sort of sharing and Transparency can have with helping other people learn and seeing how that might potentially fit into their transition. Or maybe you can learn something to do it better than the way I did it. As we went through. So let us know we have to do at least one of these podcasts every month moving forward. So let us know. Yeah. What is interesting to you.
Elizabeth Ledoux: Yeah, thanks again. Thanks, again for joining us. And we do love your feedback. So ask us questions, and we’re looking forward to sharing more with you. Thank you for listening to this episode of the Business transition roadmap. If you’re listening to this and you find yourself wanting to go deeper into these topics and start the process of putting together your transition strategy. I’d love to offer you a free initial strategy session with my team, where we’ll help you to explore the future transition of your business, head over to www.transitionstrategists.com To schedule a call. Thank you again for listening, and I’ll see you on the next episode of the Business Transition Roadmap.
SCHEDULE A COMPLIMENTARY CONSULTATION
The Business Transition Roadmap with Elizabeth Ledoux
How do communities thrive? When businesses experience healthy growth and transition. Join CEO of The Transition Strategists, Elizabeth Ledoux as she and her guests identify what makes a successful business transition roadmap. If you know you want to transition or exit your business “one day”, today is the right day to start planning. This show will give you the roadmap.
