#362: Lessons Learned from Growing a Company from $0 to $100M+ and Selling to a Private Equity Firm with Chris Carlson

Family business, succession planning, exit planning, goal setting, working with advisors... these concepts tend to be emotionally charged and come with a lot of opinions. If you want to know how to hear some real stories of things gone sideways and ways to avoid some heartburn, you're in for a treat.

I was super excited to get John Rodriguez on the podcast after we met. I was introduced to him a while back, and at first, I thought he was just another "exit planner". After doing some recon, I realized he might be the only person I have come across with a journey eerily similar to mine. He grew up in a family business, tried to avoid it, eventually got involved, faced plenty of challenges, exited, and is now trying to help people avoid what he went through.

Today's podcast interview, along with the blog, highlight the confusion and dysfunction that can occur within family businesses, advisors, goal setting, and planning. I hope you can take a few items away from today's material and use them to create a clearer path forward for yourself and avoid some of the things that John and I have experienced.

// WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast

5 Key Takeaways

• Communication: The generational transition in a family business can present significant challenges, such as role ambiguities and outdated financial practices, underscoring the complexities of family business management. Even when it's tough, communication remains key.
• Financial Alignment with Business and Personal Goals: Despite an appearance of success, businesses must pay careful attention to financial management, especially in aligning operational decisions with their financial outcomes.
• Plan for the Worst: The complexity of managing diverse divisions in a family business, especially following the loss of key leaders, highlights the importance of understanding all aspects of the business ownership.
• Clear Up What Exit Planning Means: Exit planning should be well-defined (if possible), and considered as an ongoing process for the family ownership group and its advisors. It's not a one-off event and its importance goes beyond tax strategies and estate planning, thus the need for continual education and resources.
• Goal Setting: Business goals, derived from the family's financial goals, should guide management decisions. This underscores the need for clarity in setting these goals in order to enable intentional and effective decision making with little conflict as possible.

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Bio:

He grew up in the one started by his immigrant Father. A Mexican restaurant that would go on to become one of the largest independent restaurants in the Midwest. Like most family businesses, it was his Father’s hope to see John and his sister become second generation owners. Eventually, they did.

But things didn’t go according to plan because like most family businesses, there wasn’t much of one. They had the usual advisory team for a business of their size and age. They were good, and they meant well. They just weren’t much help. They provided the usual exit and succession planning strategies and they were just as ineffective as they usually are for small businesses. Ultimately, the succession plan that everyone hoped for wasn’t possible and John would go on to exit the business.

After reviewing hundreds of businesses for acquisition or investment, John realized that most owners were struggling with the same issues that his family did. They had successful businesses that weren’t capable of providing the outcome that their owners wanted. John realized that they were all missing the same thing that his family and business were missing: Value.

It never came up in his family. It was never discussed with their advisors. Very few of the owners that he met understood it. It is the most important factor in any business. It’s what should matter most to any owner. Yet, no one talks about it. John decided it was time for that to change.

He became a Certified Exit Planning Advisor and founded Exit Ahead to help owners make their successful businesses valuable. He is the creator of Value Aligned OwnershipTM, an approach that builds value in a business to provide what an owner values outside of it.

Interview Quotes:

25:53 - “I can understand. I know how to serve tacos. I can get the tacos on the tables. I’m not talking about that. I’m talking about the 60 page financial packet and the fact that you don’t even know what you own and Mom doesn’t know what she owns. We have seven companies now.” - John Rodriquez

29:03 - “I think one of the problems–and I’ve seen this with other founders to a certain age is–they’ve fallen in love with what their business used to be and they don’t reconcile that with changes in the marketplace and the changes in some other dynamics.” - John Rodriquez

32:40 - “Everybody at that restaurant was looking at the kitchen and the dining room and no one was looking at the books.” - John Rodriquez

35:29 - “They were looking at all of these KPIs and these metrics that we could never connect to the finances.” - John Rodriquez

36:00 - “We got kind of spoiled with that. I wish the business had been more resource-starved because I think it got us into some bad habits.” - John Rodriquez

38:28 - “[The bank] just couldn’t get rid of us. They were just like, ‘No, no. We need you to be suffering in order to keep cash flowing into our bank.” - Ryan Tansom

55:00 - “I’ve never heard an owner say, ‘Well, I’m just going to padlock the doors one day or die in my office chair.’ There’s something they want after just being in the middle of their business and running it every day. But it’s just never a part of the discussion.” - John Rodriquez

1:00:11 - “[Goals] were never something we came up with.” - John Rodriquez

1:01:09 - “It's really hard for it not to trickle down and affect the staff, affect the employees.” - John Rodriquez

01:09:29 - “There’s a complication between what’s fair and what’s unfair, when nobody really understands what’s being exchanged.” - John Rodriquez

1:19:29 - “Just because it’s different, doesn’t mean it can’t be aligned.” - John Rodriquez

1:25:57 - “Let's be honest, exit plans don't work.” - John Rodriquez

1:26:34 - “I think an exit plan is a finite stage at the end of the business that makes you choose very narrow choices that you commit to. And I think it why it doesn't work.” - John Rodriquez

Links and Resources:

Exit Ahead

Connect with John on LinkedIn!

Intentional Growth™ Vision Board

Intentional Growth™ Online Training

Reach out to me if you have questions about the Intentional Growth™ Training or Fractional CFO services