Is it time to exit your business? Half of the business owners out there don’t know how to successfully leave their business. That’s because people usually focus on building companies, not leaving them. Succession planning is complicated. And after all the work you put in, it can be challenging to see a way out.

Welcome back to the Author Hour podcast. I’m your host, Hussein Al-Baiaty, and my next guest, Alex Carter is here to talk with us about his new book, Exit $trategy. Let’s get into it.

All right, everyone. I’m here with my good friend, Alex, who I have just gotten to talk to a little bit before recording. He’s here to tell us about his new book called Exit Strategy. I’m super excited because this book is something I wish I had when I was on the verge of selling my business. I’m excited because all of you out there who are entrepreneurs, solopreneurs, all that good stuff, there’s a great deal of content here that’s really easy to go through, and learn a few tips, and tricks, and really activate that thinking around potentially selling your business. Alex is a guru in that space, and he decided to share his wisdom with us today. Alex, thank you so much for coming on the show. I really appreciate it. Glad to have you here.

Alex Carter: Yeah, my pleasure. Thanks for having me.

Hussein Al-Baiaty: I always like to give our listeners a little bit about you, your background, perhaps where you grew up, and how you fell into this work.

Alex Carter: Sure. I’m from Toronto, Canada, and I grew up surrounded by some hard-working parents who – my father worked at a Public Broadcasting Corporation, and ended up leveraging from a small amount of money various income properties over time. I saw what sort of the entrepreneurial spirit, and the work ethic, and patience could do for compounding, and building wealth, and planning around that. My mother as well continues to be an intellectual and kind of taught me about my emotional IQ or EQ, and just around conversations. That’s really being a good listener, and communicating well, and asking good questions. That’s kind of led me to this world of financial advising, which builds on both of those things. I was really lucky to have two great parents that were very supportive, that also gave me a lot of skills that I didn’t even realize I was obtaining through my youth.

Hussein Al-Baiaty: What a powerful – what a gift. Thank you, mom and dad, for helping us get to where we are. I feel like in my scenario, it’s a little bit different. But I too have learned so much from my parents, you’re 100% right. Sometimes things you’re not even thinking about that you are learning, such as patience, those have to be exemplified to you in some way, shape or form for you to enact them, because they’re a practice. That’s a really powerful way to display that. Thanks for sharing that. Tell me, what did you do? Because I know you said something about, you were talking about how you purchased basically a company from your father, and then you went on to kind of build it out. What made that transition? I’m assuming you’re out of college, and you’re kind of trying to sink your teeth into a project, you’re young and getting after it. But what made you sort of get into this niche of selling businesses and how you can help other people? Is that something you helped your dad do or what happened there?

The Importance of an Exit Strategy

Alex Carter: After my father left the world of public broadcasting, he started a financial planning company. I was around the age of 10 when he did that, and watched him study, and constantly focused on personal finance, and helping people buy and sell businesses. I grew up around the dinner table discussing those types of things. I was very involved, openly, I wanted my father to succeed, as well as myself. I think some people are born entrepreneurs, and they’re willing to take risks, and they see risk differently than others. I definitely fall into that camp of knowing that I wanted to create my own destiny, and I knew I wanted to work for myself. I saw a good opportunity to do that with my father, and I was just very involved with the planning of that transition between the two of us, because I found it to be a gift that he was willing to sell his business to me. We worked hard through the tax planning, and all the implementations of the various strategies to successfully transition that business, which helped me learn initially, and then I did it multiple other times subsequently with different people.

Hussein Al-Baiaty: Yeah. What a powerful thing to learn at such a young age too, and from someone, obviously, you can trust and navigate the waters together. I’m sure you’re also navigating the emotions, and the excitement, and the fears. But what a powerful way to learn from your father, who’s been basically coaching you, and developing you in a way, maybe it was indirect, maybe it was direct. But also, it sounds like your mother played a role there too. When you start off on a path, when you are seeking someone to help to figure out how they can sell their business. First of all, when does that thought really come to a business owner, do you think? How far along? Is it usually at the beginning when people are like, “I’m going to build this thing and sell it.” Or is it halfway through the middle like, “Okay, I think I’m ready to do something else.” Or is it towards the end, when they kind of want to leave a legacy and are trying to figure out how to transition out? Where do you see a lot of your clients make that decision?

Alex Carter: Well, unfortunately, I wish the answer was right when they set up the company, they should think about selling the company, because that’s what every professional would like them to say. Unfortunately, it tends to be very reactive. It’s almost an aha moment, whether it’s something like COVID that happens, or a health issue, or just some catalyst comes, and they haven’t thought thoroughly about the planning. They don’t really know the true value of their business. Their books aren’t up to date. They have redundant assets throughout their holding companies. They have a lot of things that they really need to be cleaning up if they’re wanting top dollar. That could be also the corporate structure. There’s one thing to get a huge dollar amount, but it’s what you get to keep on an after-tax basis is and to me most important. So making sure that corporate structure is set up for you to obtain the best outcome possible. Unfortunately, it’s similar to will planning in North America. Most people don’t have wills. Similarly, most business owners do not have a succession plan. This book was – my hope would be that most people begin to think of it, begin to build their team around it, and don’t fall into those percentages of people that don’t have that plan at all.

Hussein Al-Baiaty: Yeah, it’s a tough position to be in. As I shared a little bit before hitting the record button, I found myself sort of late 2019 or so really deciding, “Okay, this is something I want to do.” I started lining some things up. But yeah, it was a lot to think about, and navigate, and there’s so much I didn’t know. There’s a lot of fear around that, there’s a lot of anxiety around, “How do I do this, trustworthiness, who do I call, who would I reach out to, who’s done this before?” At least, those are the kinds of things that were going through my mind. But, obviously, something like COVID doesn’t go through your mind at all. That’s because, from the get-go, my thing was, it was a hustle turned into a hobby, a hobby turned into a business. For me, I didn’t think from the beginning. I just thought I was going to keep growing the business, and then one day, maybe hand it off to my kids. But that’s way more complicated than just saying that.

When you’re thinking about those kinds of things, I had no idea, like three types of buyers for your business. That was really interesting, because I never thought about the buyers. I always thought about, “Who am I going to sell it to?” Now that I’m just sitting here thinking about it like, “That was so silly.” Because the types of buyers in my industry was like, “Oh, the guy who owned the bigger print shop, he may benefit from this.” But how do you display these three buyers? I guess, can you share a little bit about each one?

Alex Carter: Yeah. I think just broadly speaking, whether you’re selling to family, and that could be your children, or it could be an in-law, it could be any related party that you have a really high degree of trust and conviction. It could be an employee who you’ve typically grown the business with, and you have a very strong relationship, and they’re almost like family to you, but they’ve just been an employee and you want them to succeed equally. In both of those scenarios, there’s a lot of trust built in and both parties typically know the business intimately and know the clients intimately. So there’s usually less due diligence or less strenuous due diligence in that process because they know what they’re buying, they know what they’re getting into. The issue sometimes with those is the flexibility on financing. How are those people going to fund that purchase? Because of their good relationship with the buyer, sometimes that can leave the buyer in a more difficult position financially because they have to help fund this.

Then you have the external sort of third-party purchase. That, like I mentioned, the due diligence process is typically, they know nothing about your business, and they want to see the books, they want to see all sorts of records. They want to see your minute book, they want to know who owns what, they want to know what the structure is, who the shareholders are. They want to see your financials, your revenue. You kind of have to think of who’s capable of doing so, where’s the financing going to come from. I think most people with the family and the employee side, they have a good indication of if that person is capable, and you have a much better indication. You go to a third party, typically, if your business is just a very large business, and there’s no chance that those other two parties can really purchase it, that’s typically seen with much larger businesses. Or if there’s just someone who – maybe you do have a family member in there or an employee, but you don’t view them as a capable successor, but they could still be part of the management team going forward.

Hussein Al-Baiaty: These are really powerful indicators. When we’re sitting there thinking about these three elements, these three groups of people, but who can we sell to the buyer, what are their needs, what can we expect, especially the one that’s outside of your business, right? The one that completely needs every bit of information so that they can make a decision. That’s what I dwelled on the most, I feel like when I was thinking about business. What is it they need? Okay, the financials. I would go to my CPA, and I would hit up my tax lady, so that’s really powerful to think about. What are some key elements someone needs to think through while beginning to work on this exit strategy? If you were to give some advice right now to a person who’s like, “I’ve been thinking about it, but what should I be thinking about first?” What would you tell him?

Readying the Right People for an Exit

Alex Carter: I would likely talk to either someone like myself or a trusted CPA and look to see, is everything in order? What is maybe a loose valuation of your business? I’d look to see, are my books in order? I would look to see, is my business structure, what does that look like? If I was to sell, what would that look like? How would that money flow to me? What I’ve spent a lot of time doing is vetting various professionals. In the book, I talk to a business valuator, I speak to a CPA, corporate lawyer, a tax lawyer, an M&A lawyer, an investment banker. The investment banker and the M&A lawyer are typically for deals over 20 million plus sort of as a baseline. But vetting these professionals, I think that’s the toughest thing to do. Are you even aware that your CPA can handle this? As one trusted CPA of mine said, when I said, “How would someone vet various professionals?” None of us have a succinct answer. She said, “You have to kiss a lot of frogs to get to the prince.” Unfortunately, that seems to be the case.

I’ve been in the business a long time, I understand the nuances of tax, of investments, of estate planning, et cetera. I’ve vetted about 92 different professionals, and I’ve narrowed that down to professionals that I trust, and then I work closely with clients. I think you need to be able to find someone that you trust, and then use their network to collaboratively work together. I think that’s a big portion. Words that come to mind about the importance of exit planning are collaboration, communication. I write a little bit about the need for a quarterback, and how that can change from person to person. But there really, really does need to be collaboration, and you’re not operating in silos.

Hussein Al-Baiaty: Yeah, that’s so powerful. In creating that mindset, you kind of need the environment, right? You need the environment of the people that can really help you sort of start to direct this in a positive way, and spin it upwards. By meeting and communicating with the right people, you can start putting the right people in place along with the pieces as you slowly, gradually start to build out this strategy. Can you share a story of when you and your team maybe, perhaps went in and started developing that plan, and maybe what it looks like to have that fully fleshed out and what it means for that business owner to come out of that sale on the other side, as you go through and help them sort of navigate those waters?

Alex Carter: Right. It’s so intertwined. We had a client that was looking to sell their business to an external third party. They were approached. But we had been doing planning for several years leading up to that, so we collaborated closely with their accountant. In the book, I actually have two graphics. One is how I define wealth management. It’s really in the first chapter. It focuses on five key elements of affluent clients. It’s making smart decisions with your money around the investment side, tax mitigation, cash flow planning, wealth transfer, so taking care of your heirs and business succession, protecting your wealth from being taken through litigation divorce, or liability, health. Lastly, charitable giving to the extent that you’re charitable and want to magnify those gifts.

There’s another graphic of how we deliver wealth management. My point being is, we take a very holistic view of not only looking at the investment side, but then speaking with their CPA or our internal CPA that we’ve partnered with. So setting up that structure just so. So we would set up a family trust in this example, so that we could multiply something called the capital gains exemption. In Canada, you can multiply this exemption through a family trust, through multiple family members. In this case, our client had their spouse, themselves, and two children, and were able to generate about $4 million tax free through this structure. This all needs to be done two years in advance to a sale. So, if you’re really reactive, as one CPA framed it, if a person has sold their business, it wasn’t necessarily unsuccessful, because they did sell it. But they might have left some money on the table through poor planning.

What we try and do is plan in advance, ideally, two years before a sale. Worst case, two years but ideally, five years or earlier. Have that structure set up with their accountant, with their lawyer. As we all take the ball per se as quarterbacks, where we just stay in touch regularly. Typically, what I found in working with professionals is I find that I typically end up being the quarterback, just because everyone is so busy, and I’m almost the generalist. And I’m more focused on the post-sale transaction of how you’ll fund your lifestyle, and should we be incorporating philanthropy, because it’s a great time to donate to charity in the year of a sale to reduce taxes if you’re philanthropic. It’s hard for me to pinpoint this because there’s just so much planning and details. But it is just so important to have a great team that is just constantly working on your behalf in your best interests.

Hussein Al-Baiaty: That, I think, in of itself is the powerful strategy, is to align yourself with the right people that can really help you get there through your intentionality, and like you said, it’s being proactive, as opposed to being reactive. I really love that idea, because I feel like that obviously applies to – especially if you’re a successful business owner, you already have that mindset. Now, it’s just applying it in the right place. That sounds amazing. What does it look like on the other side of that sale once you’ve developed the strategy, and the year’s out, and now it went through? What does that enlightened state feel like on the other end?

Alex Carter: Part of that wealth management consultative process, like how we deliver wealth management, one of the things that we do is, we do a total client profile interview. What that means is, we do a mind map and questions around seven key themes for our clients. We talk to them about their values, their goals, what they’re most proud of, their quality of life, their desires, their hobbies and interests, their relationships, their assets, process how they like to work, et cetera, who their advisors are. Those seven key themes, we go through in detail, and we mind map, and we review that at least annually, if not, semi-annually.

What that allows for is potential – I’ve seen gaps where if there’s no interests, and there aren’t a lot of hobbies, and this person’s identity is shaped around what they do. I have some resources that I use in order to begin the conversation several years before retirement, and we do some workshops, and things around trying to enter retirement in a way that is emotionally sound as well. Because most clients that I deal with, the finances are not an issue, it’s around – it could be around their ego. They love the ego that they receive from their clients in business, and they’re deemed to be very successful, and maybe they’re not going to get that on the home front when they’re at home all the time. It could be, like I said, lack of interest, and they lead a very sedentary lifestyle, which leads to horrible health outcomes. A very vulnerable time, there’s lots of studies that speak to the vulnerability of the first 12 months after entering into retirement. Unfortunately, there’s a mortality spike that happens in North America specifically, when people enter retirement. There has to be – like we have a plan for the finances and tax, there needs to be a plan for your emotions, and lifestyle, and purpose as well. So I like to get as involved as clients will let me, but that’s important to me as well.

Hussein Al-Baiaty: I love that so much. It sounds like you really manifested this bridge between what this financial aspect of selling a business means alongside the emotional aspect of it too, due to, I’m sure your mother’s helping you understand your EQ, and what it means to be human. There are things, there are businesses, there’s the world, but it’s like how you navigate your emotions around people, and understanding their emotions, especially around money. And like you just said, ego and all those things you have to navigate in order to do a really great job. I think it’s built on this idea of trust and patience. Once you can really trust one another that you’re going to come through and help navigate these waters that no one else has yet at that point, that’s really powerful.

Kudos to you for just being able to navigate that within yourself and learn that these skills are really valuable, but they weren’t taught to you from, like, going to university. They were not taught to you from a specific mentor, or perhaps they were, but those early days, when your mother and father were sitting around that dinner table, and the things that they were discussing. It seems like there was a lot of life, there was a lot of humanity in there. I’m glad that that’s what you carry through what sounds like today.

Honestly, on that note, I just want to say, congratulations for accomplishing this book, because wisdom locked away in a mind is absolutely useless, I like to say. So, you bringing it to the world, and sharing it, and carrying it through our communities and people who could really benefit from these thoughts is so powerful. I told you right off the bat when you got on the call, I was like, “Man, I wish I had this when I was selling my business.” I just love that because I know it’ll probably ring true for some of our audience members, and I’m sure your own people. Thanks again and congratulations. If there was one thing you want people to take away from this book, though, what do you think that is?

Alex Carter: I think that I’d encourage people to find a trusted advisor, and just do some high-level planning, whether that’s your CPA, whether that’s your advisor, whether that’s a good friend who works in and around the business of law, or estates or tax. I think it’s just really important that we are typically – a lot of us are procrastinators. Some of these things are actually really simple to do, and it’s just that we are either intimidated, or we don’t have someone we can trust. Try and build your network of people that you trust or that people you trust can extend the people that they work with. Just begin planning ever so slightly. Reach out to a trusted professional.

Hussein Al-Baiaty: That’s real powerful, man. Thank you so much, Alex. Today, I’ve learned so much from you, very inspired. I’m grateful that your book is out there now that I can sort of devour it and kind of keep it up on my shelf for when the time is necessary. I really appreciate you. I’ll be sure to share your content as well. Thank you again for joining me today. The book is called Exit $trategy: A Guide to Successfully Selling Your Business. Besides checking out your book, where can people find you?

Alex Carter: People can find me, I work for Assante Capital Management, which you can Google. It is a Canadian-wide firm that has multiple advisors. I’m based out of Toronto, Ontario, Canada. You can Google Alex Carter Assante Capital Management. You can email me if you’re interested in talking further.

Hussein Al-Baiaty: I love that. Thanks again so much for joining me today, Alex. I really appreciate your time.

Alex Carter: Thank you. Thank you so much.