What You Need to Know with Joe: Exiting Your Business

Today we’re sharing a video that we’ve been excited about for a very long time! Last year we had the opportunity to work with Ken Reimer on the sale of his business, Ken’s Beverage Inc. or KBI. In this invaluable video we discuss not only the due diligence and how to prep for a sale, but also the emotions that go into selling a business and whom you can lean on for all your questions. Let’s get right to it!

KEN REIMER: It’s…it's burying your soul and what they ask for is everything and they don't miss a thing.

JOE  PRIOLA: Today we're excited to talk to Ken Reimer, founder of KBI or Ken's Beverage and I had the pleasure and the opportunity, with my team, to work with him on his exit of his company. Now he's employed by the new owner, Pentair, and I thought it'd be very valuable for us today to talk about things an owner should think about when they're planning on possibly exiting their business. 

If you were to tell me as an owner, one or two things that I should think about or if you could replay what you did and what worked well for you, what would that be?

KEN: First of all you have to be ready to sell, but you also have to practice selling. You have got to go through it in your mind, go through your first LOI, don't turn down every LOI, have the conversations, talk, pray, meet with Joe, have discussions…You certainly have to a good lawyer and a good accountant and then you have to be ready for it. It's going to be a lot of work.

JOE: Just give people an idea what they should expect as a normal timeline.

KEN: From start to finish it's going to be at least a year or somewhere in there.

JOE: It's hard to believe.

KEN: It's going to be a year, but first you’re going to decide if you gel with them, if they're the people you want to talk to. Then they're going to sign an NDA and then you're going to have your lawyers and their lawyers involved.

JOE: What are your emotions of that when you were going through that?  

KEN: It’s burying your soul and what they ask for is everything and they don't miss a thing. It gets very frustrating because the list comes across with 10 pages and they want to see every aspect of your business and you get very frustrated because as business owners, we all do things a little bit different.

JOE: So you get through due diligence and now you're getting to the real part of the deal, right? Where you're getting your contract written up? Talk a little about that whole process.

KEN: So once you get through that and you've agreed to whatever number and whatever multiple you're using, then it gets difficult because now you have to finalize the asset purchase. Now you're going to fight over what goodwill is, you're going to fight over what the covenants are, you're going to fight over the reps, and you're going to fight over with the holdbacks.

JOE: Net working capital.

KEN: You're going to fight over net working capital.

JOE: Was there anything in your process that made you feel like you knew this was the right partner to do this with and how did you figure that out?

KEN: Yeah that's a great question. I mean some of it is gut and I hate to say that. It's more of an art than it is a science… if you feel it's wrong than you know it's wrong.

JOE: When was the most emotion of the deal? I know we go through the work and all that stuff, but when did you say “hey this is real now?”

KEN: The day before I actually got the wire.

JOE: Okay was that before or after the document was signed?

KEN: Everything was signed, everything was done, but I still said “ah something's going to come up” because there's exits. You can exit, they can exit, everybody can exit…and then when the wire came in the next day, it really happened.

JOE: Yeah

KEN: That was a very interesting night because for the first time in my life, I didn't own KBI.

JOE: Right.

KEN: When I did finally have to tell the entire company that I sold the company, that is where I would have done things a little bit different.  I would have started my conversation by saying I want to let everyone know I’m not dying because that was the first question.

JOE: If there are the three things you would tell yourself to think about if you're going to sell your company what would that be?

KEN: Number one is to make sure that yourself, and your family - or if you have partners, that everyone's ready and that they're ready to commit to the process. It's not like they’re going to walk in and say here's a check for x, we're going to write you the check tomorrow and it's going to be over. It's going to be nothing like that at all.

You're going to be ready for a long haul and you're going to feel like they're questioning your business practices. They're going to be questioning what you did, the decisions you made and you're not ready for that… you're not even close to the process.

You have to make sure that your attorney and your accountants are on the same page and they understand what you're doing.

You have to make sure that your financial advisor fully understands because there's another whole side to this- of making sure when you're selling your company and what your exit strategy is, how much is it going to cost you. Because there's another whole piece – taxes, that you have to be ready for.  You have to make sure all of your trust documents and your estate documents are all taken care of.  I did mine several years back again thanks to the guidance of Joe and that if I hadn't done, it would have cost me millions of dollar.

And the last piece is once…once you've decided it's just making sure the communication is right. I called all of my key employees personally, I called all of my key suppliers personally.   

Well the thing is, if you don't have the person that you can talk to that isn't the family member, isn't your spouse or significant other, when you go to your employees, the first thing that they all ask is, how much are you getting.

JOE: You're going to have a job.

KEN: The number one question that they ask is am I going to have a job

JOE: Yeah.

KEN: But I spent so much time talking about all of that. Joe was my sounding board. Pretty much every Saturday morning from 5:30 in the morning till 7 o’clock Joe and I were on the phone.  When you have a question, write it down think, about it and then you call and you have to have somebody you can bounce these ideas off of.

JOE: Well thank you so much. I’ve been wanting to do this for a long time and I hope that people find value in this, thank you so much.