Selling Your Business with Sunny Vanderbeck
Watch/Listen here or on Apple Podcast, Spotify, or wherever you listen to your podcasts“I believe as the leadership team goes, so goes the rest of the company. So if you don't have that consistent and significant sustainable growth, you've got some work to do.” — Mike Goldman
“Your company is worth more if it doesn't need you.”
–Sunny Vanderbeck
Key Characteristics of Leadership Teams
Fit for the Situation: The most important characteristic is being fit for the specific situation and opportunity a company faces.
- Types of Leaders:
- Entrepreneurs: Create something from nothing.
- System Implementers: Build repeatability and reliability.
- System Improvers: Enhance existing systems.
- Administrators: Enforce compliance and maintain systems.
- Turnaround Specialists: Focus on necessary changes and stopping ineffective actions.
Preparing for a Business Sale
- Timing: Preparation should start early, ideally from the beginning of the business.
- Stakeholders: Identify and prioritize stakeholders, including employees, customers, and community.
Finding the Right Buyer
Strategic Buyers vs. Private Equity:
- Strategic Buyers: Ideal if the owner wants to leave; they integrate the business into their operations.
- Private Equity: Suitable if the owner wants to stay involved and grow the business with additional resources.
Psychological Aspects of Selling a Business
- Ownership Transition: Prepare for changes and the feeling of needing permission from new partners.
- Defending Team: Post-sale, the CEO may need to protect their team from corporate changes.
Importance of Culture
- Cultural Alignment: Ensure cultural fit with the acquirer to maintain employee morale and operational success.
- Stakeholder Prioritization: Address cultural priorities and potential changes before the transaction to avoid conflicts.
Role of Private Equity
- Not Done Yet: Private equity is a good fit for owners who still want to grow the business but need financial and strategic support.
- Risk Mitigation: Sharing risk with a partner can reduce stress and enhance decision-making.
Family Stakeholders
- Family Considerations: Ensure the sale aligns with family desires and needs, such as work-life balance and financial security.
Final Thoughts
Building a great company involves understanding and planning for all stakeholders, including family, employees, and customers.
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Mike Goldman: Sunny Vanderbeck is the co founder of Satori Capital, an investment firm founded on the principles of conscious capitalism an investor, entrepreneur, and bestselling author of selling without selling out.
Sunny leverages his diverse background as a business founder. Public company, CEO, and former military leader to drive the growth of mid market companies committed to creating enduring businesses that elevate humanity. He brings his insight and experience to help business leaders generate long term value for all stakeholders, including during a sale process, sunny, welcome to the show.
Sunny Vanderbeck: Thanks for having me.
Mike Goldman: Thanks for doing this. And before we dive in, the question, I always ask, after all, this is the better leadership team show.
So the first question is, what do you believe is the one most important characteristic of a great leadership team?
Sunny Vanderbeck: So the one most important characteristic is fit for the situation and the opportunity. let, let me unpack that a little bit. every company has a different situation they're dealing with and a different set of objectives, right? To, to get to an answer like that, you've got to be able to define, what does success look like for this particular company?
and one of the patterns I've noticed over time.
Is that leaders tend to fall into one of five categoriesor types. And we've all got skills across the different types, but we tend to bias towards one. So you've got the entrepreneurs, the clean sheet of paper crowd, entrepreneur doesn't mean you're making a brand new business that just means, you know, how to deal with the world when there's nothing.
There was nothing and now there's something and that's a very particular skill set. Next to that are the system implementers. So the system implementer crowd take something that the entrepreneur built and build repeatability and reliability and consistent results like the, and I can say this as an entrepreneur, we often tend towards kind of hair on fire, hard to keep us focused, but we build something new.
the system implementer crowd says, well, hey, maybe we could do the same thing over and over again. And so they start to build some structure, into, and again, this can be in a department or company wide. Then you have the system improvers. So the system improvers don't do well when there's no system at all, but they do really well when there's a system that works kind of well.
Like it's, it's fine, but there's opportunities to make it better. Like this crowd can look at an existing system and start making changes to it and get extraordinary outcomes by their tunes and tweaks and improvements. you have the, the actual administrators themselves. so these are, people who default towards, we have a really good set of rules, a really good set of process.
And the majority of their job is to enforce compliance. Now, as an entrepreneur, it sounds like I'm saying this is a bad thing. It's not a bad thing. It's just a different thing. There are times in life. Look, if you have figured out your accounts payable process and you just need it to be on rails and work exactly the way it's supposed to work.
You don't want to get somebody that's going to come in and tear it apart and start over. You want somebody that can show up and get repeatable, reliable results. Like, just don't mess it up. Is, that crowds default? And I think this is where some people run into problems, hiring big company people into small companies.
Big companies, by and large, are the administrator and system improver crowd. That's the success pattern. And if you take an administrator that waits for, you know, something to turn yellow to go work on it and put them in a company with no process, they fail kind of catastrophically. So that's the first four types.
And then you've got this outlier type, the fifth type, which is the turnaround and the turnaround crowd. They're kind of like entrepreneurs their job is to see what's not there. Their job is to see what could be. Although more often than not, they tend to be tearing down instead of building up.
And again, I don't mean that in a bad way. the turnaround people, I know they often, a lot of what they do is figure out what we're going to stop doing. We're going to stop doing these 19 things. And that is actually the sort of genesis of, many good turnarounds. you've got these sort of five skill sets.
So depending on what you're trying to accomplish, if you've never had any kind of senior financial leadership, just as an example, like you had a bookkeeper and now it's time to skill up, you want to get a CFO or a controller. That knows how to start from scratch. They've got real experience starting from scratch and build building something.
So that would be the entrepreneur type. it's the same thing would happen in sales. You've never had a Salesforce. get an entrepreneur or at least system implementer kind of person to come and build your sales team.
Mike Goldman: Love it. Love it. And that you just set the bar, Sunny. People, normally answer that question and they say, trust. You know, or like, and you just set the bar to a whole other level, cause I think your answer is, great. And, I do agree. It's not, it's not about having the all star team of the best talented people, if they're all entrepreneurial type folks, you're going to have a bitch of a time implementing anything and holding everybody accountable if all you've got is the entrepreneurs on the team. So I love that. So thank you for that. So.
Sunny, we can probably talk about any number of things with your background, but what I really want to focus on is exit strategy, but a very specific exit strategy, so an exit strategy could be, you know, an ESOP, it could be a family transition, it could be, you know, going public.
But, what I want us to talk about today. Is a focus on selling your business as an exit strategy. And for a lot of entrepreneurs, that's the exit strategy. That's, that's the goal. So I want to start out a little bit with your background before we dive into all things selling a business, but there's a particular reason why that's something.
You went after, cause I know you had told me when, we talked that you had an experience selling your own business that kind of drove you down this road of helping others do it right. So tell me a little bit about that experience.
Sunny Vanderbeck: Yeah. So, I'll give you a quick rundown on how I got here. Cause I think it's, pretty relevant. so I spend a little time in the military, got out, went to work forquit in 96 with this crazy idea. We were going to use computers and the internet for business. at the time it was kind of silly, but we were convinced it was going to work.
It did. We grew really fast for a long time. Took the company public in 1999.Sold it in early 2002. We sold it to the wrong people. Our company was not a good fit for their company at all. That's where I learned, like, I'm not a really good business unit guy. I'm just not, I'm not good at the corporate thing.
I'm, I can be a bit of a troublemaker. if you're an entrepreneur, I'll tell you now the corporate thing probably doesn't work out for you when you have to do expense reports and TPS reports and just not my thing anyway. We sold the business and a year later, the company that bought us, filed for bankruptcy.
So we got to buy our profitable business back and have another go at it. So that, that was a wild, wild ride having that experience of selling to somebody that wasn't actually the right
Mike Goldman: And when you say Sunny
Sunny Vanderbeck: buyer.
Mike Goldman: obviously they weren't right cause they wound up going belly up, but, but even before that happened, did you know they weren't right? And what was it about that situation that wasn't right?
Sunny Vanderbeck: Well, except for everything, it was awesome. I mean, it like culture mismatch, priority mismatch, style mismatch. So, the business we had, dealt with mission critical infrastructure, online filing for H&R Block. H&R Block makes all their money like four days a year. Like when the first stuff comes out in January and again on like April 14th, 15th, their stuff has to work.
So we had this sort of culture of mission critical reliability. We were building new things that no one had ever built before. Like it was a pretty intense, technology culture. and the company that acquired us was mostly kind of in the software and consulting business, right? Most of the employees were consulting.
And so it was just way we made sense of the world was different. Our priorities were different. Our cultural, priorities were different. Look, I, I've always been, and I think this harkens back all the way to the military days. Like culture is. It's a tier one priority for leadership teams to spend their time on how can we be a better version of ourselves every day?
And just wasn't a big priority for them. And so you would see HR do goofy stuff, that worked against what an extraordinary culture looked like in our business. And part of what made our business work, this is not true of everybody's company, but it was for ours. Our culture was one of our secret weapons, like our ability to attract and retain. Not just like solid team members, but absolutely extraordinary team members was part of our success.
One of the challenges we faced is we learned we had to brief new team members when they came on board. They said, look, one of the experiences, many of the people that come here have is they were the smartest person where they worked before. And you're going to come here and you're going to meet some people that will absolutely blow your mind.
And it's going to feel weird. It's okay. We all feel that way. We all feel like everybody in the room is smarter than us. and has accomplished more than us. That's like what we're building here. So just, that's one of probably a hundred examples. so our culture was built around that and the big corporate board, like that's not how they made sense of the world and HR came down and they wanted to help and it didn't help.
And so anyway, they, they filed, which was, you know, first moment, you're like, Oh my God, this is terrible. Second moment. You're like, wait, maybe I can get it back. so we bought it back. It took us about 18 months to fix all the stuff.and had another go at it as a private company and then had what I believe was a really, really good exit.
on the second time. And one of the ways I measure that exit is, many of my team members were still there years later, and most of them had been promoted. Now the opportunity that got created through the final acquisition was, substantial for our employees. And substantial for our customers.
Like they, our customers got some new services that they couldn't otherwise get their customers, got some new services they couldn't otherwise get. And look, I won't say that we figured it all out by the second one. I think we got, you know, 50 percent lessons learned and 50 percent we got lucky. But it became very clear to me that no one was talking about this stuff.
Like I didn't grow up wanting to be an author. Like I never, never really crossed my mind. Like, well, why are you going to write a book? And what I realized was like, everybody's talking about money stuff and no one's talking about the other things we care about as owners and CEOs. Like not at all. And when you hire a bunch of advisors, everybody in the room is, they're trying to get a deal done and get a bunch of people paid and no one else cares about what happens the day after.
So I started talking to some CEO friends about their own experiences with this. We obviously had my experience and at Satori, you know, we're an investment firm. We work with sort of lower middle market and middle market companies, so kind of 5 to 50 of EBITDA. This is something we had to deal with as well as a firm was like, how do you do this in a conscious way?
Right. So that was the genesis of the book. Like I didn't, I don't want to write it, but I couldn't help it because people only get one shot. Like I got overwhelmingly lucky. You can't make your plan is, well, I'm going to get to buy it back and, you know, get a second run at it. So like you get a couple of irrevocable things that happen in your life.
Like having kids is one of them. You can't really undo that.you can get a tattoo off pretty easy. You can't unsell a company. So if you don't get it right, it's a one way street and it's all on you. Like if you're the CEO, this is your issue. No one else's.
Mike Goldman: So I love that. Let's step back. I
want to step back and kind of go through the process and not every step of the process, but I want to step through it logically. And starting with your, the owner slash CEO, you know, of a company, you're growing, you're it. You know, five, six, you know, eight, million EBITDA, whatever it is, you know, early on, you know, your exit strategy is at some point to sell when as a business owner, when should you start thinking about the sale. Preparing for the sale, not necessarily diving into a sales process, but does preparing for a sale happens as soon as you start your company? Or is there some magic period of time where it's like, Hey, now I'm ready. I need to start preparing for a sale.
Sunny Vanderbeck: Yeah, well, so let me add one thing, before we use the term sale, but the same process is true for on capital. going to sell somebody a third of your business or 60 percent of your business. the same process as preparing for a sale. by the way, you're going to sell it to an ESOP, same process.
Okay. You're going to hand it to your kids, same process, like this. process about selling without selling out is actually about sort of transitioning without selling out, but like that makes for a crappy book title. So let's, let's not use that. like the first thing is you got to figure out who you care about.
So the question I'll put back to you is, is figuring out who you care about and what you want for them. Is that something you do at the very end or at the very start? I would say let's do it at the very start. Like that's the essence of conscious capitalism is, is Figure out who your stakeholders are, which that's just like, who do you care about and who cares about you?
So stakeholders often look like your employees, your customers, maybe the community, your, your company is in.a lot of these companies have bigger impact in their community than, than many people realize, like just being a good company actually creates a lot of good in the world.investors, are a stakeholder as well owners.
And so sometimes I'm the stakeholder because I own it personally. Sometimes I have multiple family members that, you know, own parts of the business. So figure out who you care about cares about you and figure out what you want for them. So that early because that's going to help you make better decisions along the way.
Like that's when you hear me to use the terms conscious capitalism, that's a big, big part of conscious capitalism is figuring that out. so the, to be clear though. I'm not a fan of the whole built to flip. I built this company to sell it thing. Like it just feels like very transactional and sort of money focused.
And most of the CEOs that I know, and I would say all, but I'm sure there's one somewhere. They didn't start their company to make a bunch of money. The money is a side effect. They started their company because they couldn't help it. They saw a thing in the world. That needed to be different and they couldn't help it.
They just, every day they got up, it was the thing they were thinking about and they had to go for it. And so it, it often is, it ends up very customer focused. Like I saw this opportunity in the market. This customer need wasn't met. I had to satisfy this. couldn't help it. so, you know, in the media, like CEOs and owners, like it gets this bad rap of, Oh, this sort of greedy capitalists.
of the CEOs I talked to, they're not thinking about how much am I getting paid? I'm trying to get some money. They're thinking about how did I get my team happy? How do I make my customers happy? Maybe I can be a good partner with my supplier. Etceteraand I'll, the final piece here is cause at Satori, have permanent capital.
And what that means is we can be an investor for as long as it's appropriate. It doesn't mean we don't sell. means we don't have to, we can be an investor. as long as we want, if you have a growing company with lots of cashflow and a great culture with happy customers, suppliers that feel like they're partners and at a community that loves to have you there.
You have all the options available to you. You can do whatever you want. Like you don't have to build in. Well, I'm going to flip it to this strategic because they miss this that man you got a great business. How good is an exit plan? That I have a great business, which also means I don't have to do anything.
You have a great business. You have all the choices. If you have a business that was just built for this one situation, I'm going to try to flip it to somebody. Oh, I hope that works out for you. but it's a lot more interesting and soulful to just build an awesome company.
Mike Goldman: always said to my clients and, It sounds like you and I are on the same page is if you want to build something that you can sell for, for whatever the reasons are. And as you said, the people you want to take care of the best way to do that is to build a sustainably great company.
Sunny Vanderbeck: That's right.
Mike Goldman: know, and by the way, whether you want to sell or not, I hope you're building a sustainably great company
Sunny Vanderbeck: Yeah. Well, you know, one of the things I talk about, that, that I get a couple of side eyes when I talk about it, particularly in large groups of CEOs. is I think a lot of CEOs should be lazier. And here's what I mean by that.I use lazy as the anti hero, so it can be really great for your ego. If you're at the center of everything, this doesn't run without me and I'm involved in everything and I know how to turn the wrench on the machine and I know how to swab the deck and I know how to sell.
And there's a line of people at your door, man. You feel needed. And wanted, and you're the problem, like when you're, and it's worth the better you are, the worse it is like, here's the paradox. If you're absolutely brilliant and you can do everything, it gets worse. And I've seen people build a hundred million dollar businesses that cannot survive without them.
If they're gone for two weeks, the thing falls apart.
a potential
Mike Goldman: acquirer is going to figure that out pretty
Sunny Vanderbeck: quickly
That's right. So the funny paradox is your company is worth more if it doesn't need you. And it can be more fun to work on if it doesn't need you to. Now you get to spend time working on the really important strategic things. You want to spend a day rethinking culture. You got a day to do that. If you have 20 people on a line out your door, that the thing doesn't run without you, you don't have, you don't have time for that stuff.
so this, this idea of, The CEO that gets to work on their business, not in their business is another way to say the same thing. Those companies, if you're going to take on outside capital, you're going to sell to an ESOP, like let's, you mentioned ESOP earlier, Hey, if you're going to sell to an ESOP, but you're a hero and the thing doesn't run without you.
So now you're handing your employees a system that fails from day one because you're not in it versus no, it actually mostly runs without me. Like I don't, I don't need to be here day to day for this thing to succeed. You've given an extraordinary gift to your team if you give them an ESOP that owns a business that runs without you So like don't don't be a hero.
Mike Goldman: So if your exit strategy.
Is a sale. How do you, how do you find the right acquirer, whether it's a financial sale or a strategic sale, and maybe you could explain better than I can the different types, and
Sunny Vanderbeck: Yeah
Mike Goldman: that's the mistake you made the first time around, and you actually had a chance to redo it, which most people don't get a chance to do.
But how should we think of, about finding the right acquirer for a business?
Sunny Vanderbeck: Again, and I'll sound a little bit on repeat about this. First you've got to figure out what you want and you've got to ask some real questions about what's important to you. So I'll give you an example. I talked to a CEO recently who was exhausted. And it's a common affliction for CEOs where they're just exhausted and they might be exhausted for a decade,
and they keep going, but, this is a real moment with this guy. He was like, dude, I'm just exhausted. Like I think I want to sell this business to private equity. I had a real conversation with them. I'm like, Hey, look, most private equity firms, here's how that's going to go. They're going to write you a big old check and they're backing you and your plan and the business and, and, and, and so on day one, when you're like, Oh, I can finally take a break.
Their mindset is, Ooh, we're excited. We're going to go even harder and go faster. They just wrote a 50 million check to go build hopes and dreams. So they're ready for the.
Mike Goldman: think it's time to take a break. They're just getting started. It.
Sunny Vanderbeck: Yeah, they're day one. They're full of energy. And they got a bunch of people that can have a lot of good ideas and some not so good ideas and ask a lot of questions faster than you can do them or implement them. on the other hand, like I'll, I'll take the opposite of that, a sale to a strategic. So in when we say a sales to a strategic, that means another business.
Like they might be in your business. They might be in an adjacent business. but you're selling to another company instead of selling to an investor. Like if you're tired, a strategic sale is one of the best places to go because by and large the strategics, no matter what they say, they don't really want you around.
Like they'll say they want you around and sometimes I'll give you an earn out. But the, if you really actually in your heart want to be done with it. you're in the place where you just, you don't, you dread going to work like you're in that mode. God, sell it to a strategic because they kind of don't want you.
And so what happens the day after is you're like, well, this is how we do it. And the strategic, the, you know, big giant behemoth is like, no, we have a corporate approach for how we do that. And we're going to do it our way. Like they don't want to hear it. They don't want to hear, and they don't actually care if your way is better.
They just want to do it their way. So look, the second time I sold at a really short transition, it was like a 90 day transition. but again, I was in a place where I mostly worked on the business. I didn't work in the business day to day. so that made sense. And we got 30 days into it and they called me and they're like, Hey, We don't really need you, man.
You can go, you know, we'll pay you the money. We said we were going to pay you for hanging around, but like, we got it from here. Your services are no longer needed and your opinion is definitely not warranted. Please leave us alone.
Mike Goldman: you feel thankful or insulted at that point?
Sunny Vanderbeck: Ah, man, I don't know what kind of emotion it was. It was just weird. Like I gotta tell you that the last day at your own company, it's like, I still remember it. It's just kind of weird. You're like, what? I don't know how to feel. don't know what to think about this.all I can say to the team is thank you, right?
Cause we, you know, in our case, we had a decade long run and it was a, it was a wild ride.so for me, it was just uncomfortable. I didn't feel bad. I didn't feel good. I, in my case, I had this, the seed of this idea with Randy about starting Satori. So I had the inkling of, Hey, like this is coming. We're going to go do this thing where we try to fix capitalism and all the stuff we don't like about investors and change the world through being a better investor.
so I had that to look forward to, and I think that helped a lot. What I didn't have. I wasn't like sitting around twiddling my thumbs with nothing to do and I'm bored and distraught because we had an exit. was, I was at peace with it. It was actually the company was in better hands. Our business, Was a better fit for the company that owned it than for me.
Long story about strategy and why, but it's, it was a real thing. It, it belonged there. by the way, a little side note, one of the things that I was not able to do, was take a real break between data return and Satori. And I could have, but I didn't, cause I got like super excited about what we're doing here.
I had to, like, if I could give myself advice, you know, now 15 years ago, 16 years ago, be turn it all off. Take six months, take no meetings. Don't do email, like change your email address. Like just drop out of the world, business world, just drop out entirely and like go, go navel gaze for a little while, go travel, have nothing to do.
I was as busy the week after I left as I was the week before. I left and that's it. That's just how we are. Sometimes like we like to do stuff in the world. And so I got busy doing stuff. Take a break if you can. it's, it's worth it. And you only get a few shots at a break.
Mike Goldman: I'm glad you went there and I was going to go there a little bit later But but we're right there now.
So I'm gonna dive in to kind of the psychological piece of all this. Because you not only saw it from your standpoint, your advice was, man, you should have taken some time off, but, you see it in the companies that you work with, what should people be prepared for as they, you know, whether it's a sale to a, to a private equity or, or a strategic sale, when you're, you're selling your baby, what should people be prepared for psychologically there?
Sunny Vanderbeck: Yeah. So there are two, meaningfully different paths. And so you need meaningfully different preparation. so path one, I'll give you an example. We often buy 60 70 percent of the company. Okay. so we're just a new partner.we're often trading out. So you had some old shareholder, a cousin, Jimmy, that.
It wouldn't let you grow and wanted his money and you're like trying to grow. And so, so in, in the cases where you, you're going to stay and you're going to still own a meaningful piece of the business, the thing you need to be prepared for is change. Not all change is bad. Part of the point of the partnership is to go faster, go bigger, et cetera.
Like look as a CEO, when you go from a hundred employees to 300 companies, totally different place. Whether you owned it when that happened or not, it happens again in the, you know, 300 to 600 range and again at a thousand. And again, so look, change is coming. If you do a transaction, it is overwhelmingly unlikely that nothing changes at all.
So just, just be ready and like, have an open mind. and so that one of the psychological things to prepare for, is the first couple of go around, you're going to feel like you have to ask permission to do stuff and it's going to piss you off. Okay. Cause you're CEO, like, why do I have to, you know, but so we have a call Satori list.
Like there's only like seven or eight things, but like, Hey, if this happens or you're going to do this, you should call us. And the rationale is not like grading your homework.
It's just, we're partners. And if you have partners, there are certain decisions you want to talk through with your partners.
and so that can be a transition, especially like you own most of the company, you called all the shots. You didn't have to ask anybody about anything you wanted to do, but now here's the other side. And this is real. And I see this happen with our CEOs and CEOs that, aren't working with us. There's a bit of sigh relief.
Sometimes like the whole thing, like it's lonely at the top, sitting in your office, you're trying to figure out what to do. And there's nobody you can talk to about the issue for whatever reason. The issue is when you can't talk to your team about like, or you have, you have their feedback, but it's not crystal clear what to do.
And you just want to chew through an idea with somebody or chew through a direction with somebody. Like if you've got a good partner. That's part of what they're there for is like, let's just, just talk through it, look at it through other perspectives. And so from, I call all the shots and it's all on me. To I have partners and there are some things I should discuss with them.
And I have partners and there's some things I can discuss with them and bounce off. it's not good or bad. It's different. Just be, you got to be prepared for, for that piece. So that's the sort of, I sold part of it. that kind of shows up if you sell to a strategic, but you got a big giant earn out and you got to stay on board.
That one's a little different because your job mostly becomes prepare for your job to be defending your team from corporate. Like that becomes half your job on day one is just to try to keep corporate off of your team.
Mike Goldman: and that's whether it's P E or strategic with an earn out, or is that more about strategic with an
out?
Sunny Vanderbeck: that's more about strategic. The PE thing, that shouldn't be the case. It's you shouldn't spend a bunch of time defending your team from PE. It happens. It happens. There are parts of the world that look at that. There are goggles for the world are excel just be aware of that. Like there are some private equity firms that their lens on the world.
If it's not in the P&L, it's not real. If it's not on the balance sheet, it's not real. We obviously don't agree with that. One
of the things I saw go by in Slack just before we hopped on was a team survey that we had just done. This company we work with is a 40 or 50 year old company. had never done deliberate work around culture.
didn't mean they have a bad culture. It was actually pretty good. and our learning is like, Hey, if we can up our game and culture, we can get some dramatic outcomes. and in this case, like we think we're being helpful. We've had, in fact, we had one of our CEOs, this was years ago. So, so we have this sort of engagement survey thing.
We do, it's like 12 questions. It's super simple. And the CEO is like, I know everybody on my team by name. I know their life. I know their reality. Like, we're not going to get anything out of doing the survey. This is a waste of time. And we're like, yeah, you're probably right. this helps us a bunch and we always do it.
And can you just humor us? Cause it's like 12 questions. And you're smiling. Cause you know how the story ends. I wouldn't tell it if he got no data out of it. So he does the thing, he gets the survey, he pulls it up and reads it. Cause he cares. Like he reads the survey and he finds the goofiest thing he never could have imagined.
Like most of the company was like, I have a difficult time doing my job because my monitors are like a decade old and they're tiny team. They're mostly desk workers. And then he's like tiny little 15 year old monitors no one had ever brought it to him. It was like, Hey man, this is a problem. So that day he calls the head of it.
He goes, fix this today. By close of business, I want a brand new widescreen on every single person's desk in the company. Like, it seems like a little goofy thing, but imagine what it's like to go to work every day. And like the minute you sit down at your desk, you've got this little tiny crappy monitor and it makes it hard to do your job.
So, there, we, we would like to think we can help on the culture front, but the private equity often, if we can't see it in the P&L it's not real and it doesn't happen. So you do have to manage kind of some of that stuff.We were talking about like how to get your head ready for these transactions.
the thing about corporate the thing you got to get your head ready for is you're going to do it their way. Like, that's the thing. You're going to do it their way. They bought you, they wrote a check and when somebody buys a hundred percent, they get to call all the shots. Like they, they go, well, we're just not doing that benefit anymore.
And you can backflip and cry and argue and do all this stuff. the way it ends up is you're going to do it their way. Unless. You read my book and you got ready and you figured out what was important to you and you got out ahead of it. And I'll give you a specific example. we had a CEO friend that owned an insurance company in Austin.
And the thing, so the thing about Austin is like Austin's pretty casual. It's a casual place and insurance is not a casual industry. Like most of history insurance, like you see the tie guys show up and when the tie guys show up, we all know it's bankers, insurance, maybe one or two, but it's mostly going to be one of those three.
So the insurance industry, this is pre COVID was like a heavy tie crowd. And the CEO was like, man, we're in Austin. We're not, we're not playing that game. So he got to attract people to his company. Literally like tier one was like, we can dress business casual at work was a thing. It was a huge thing for him and drove part of his success.
And it was aligned with his customers because customers weren't wearing ties either. They were some software company in Austin. So strategic buys him like three weeks after it closes, HR shows up and they're like, Hey, we're from corporate. We're here to help come to our attention that you're not aware of our dress code.
Mike Goldman: some ties for you.
Sunny Vanderbeck: Oh my gosh Like he loses his mind and look so something like that can he call the CEO of his acquirer and say hey, this is a bad idea. You don't want to do it. Yeah, he can and in this case I think he did. But you kind of burn up a chip every time you do one of those. You burn up a chip. If Instead going into it. You would say, Hey, my employee stakeholder is an important stakeholder to me and life for them.
After the transaction matters to me, what do I want for them? And what, what do they want? in this case, the dress code thing would have come up you would have had it going into it. And so you would have said along the way, Hey, look, one of the things that's important to us, that's given this, this great economic performance is the dress code actually lets me attract new people.
So my preference would be, let's not change that. And in deal dynamics. The CEO on the other side is like, sure, no problem. Like it does. It's, it's a 10 second conversation. No one cares. the transaction, it's a huge piece of drama and a bunch of emails and meetings before the transaction. He's like, sure.
And so now, by the way, HR is going to show up and they're going to try to help because they're from corporate and that's what they do. But they show up and they're like, Hey, it's come to our attention. And you're like, Hey, thanks for your service. But we already have an agreement with the CEO about this.
And if you have an issue with that, you should go talk to him.
Mike Goldman: Done.
Sunny Vanderbeck: And they'll just leave and they'll never, they'll never email them and go, ah, there's these renegades down here. And so the deal is if you get clear about who you care about and what you want for them, a bunch of the stuff that's going to aggravate you, you don't have to deal with.
Mike Goldman: I want to go back, Sunny, from the psychological piece.
I want to rewind a little bit. You talked about if you're exhausted, selling to private equity may not be the way to go. If you're exhausted, it may be more of the strategic sale and then, you've got your earn out and, and you're out of there, maybe out sooner rather than later. Let's talk about that a little bit more in terms of finding the right acquirer. How should someone be thinking about benefits of selling to, or the right situation or to your point, based on what it is you want, what is the right time or the right situation to sell to a strategic buyer versus private equity?
Sunny Vanderbeck: so one of the ones I mentioned is like, you need to go, like, you're just, you don't have it in you anymore. You need to go. Strategics are pretty good about that situation. and sometimes the, you need to go is like, you just need to be psychologically done with it. Right. So this is back to in your head.
if you do something with private equity and you have a big rollover and you're on the board, but you're not the CEO anymore, man, there's a lot of teeth gnashing. Cause now you're still in it mentally and still in it economically. And it's going to be different. The new CEO is going to do things different than you.
And it's just, there's going to be a, like a lot of stress around that. so if you truly like in your heart and hearts, like need to be done that. So that's tier one for strategic. Another one though is let's say, well, I'll give you an example from, from my company. So we did this like mission critical, highly managed, hyper technical, white glove, turnkey, managing apps, mostly on the internet.
Some of them were internal facing. So that was one way to solve the problem. Well, the company that bought us the highest quality, do it yourself of products in the market. you took the highest quality. We're going to do it for you and the highest quality. You're going to do it yourself. And you put those companies together.
So what happened? Growth rate doubled for both the companies. Why? Cause both of our customers wanted to buy some of the other product and our combined sales team. Now, instead of saying, well, you should do it our way. They could show up and say, look, whichever way you want to do it, we have the highest quality way to do this.
so there was real benefit to the customer. So one of the ways to think through this is what would it mean to be a customer? If this comes in, we've got a water company that one of the things we're doing, they make systems that clean and filter and manage water at an industrial scale. So if you buy this machine from us, that does this.
Well, the step before that is a screen or the step after that is a pump or what have you. If I can bring to my customer a more whole product. So instead of them having to buy piece parts, I can sell a complete solution. That can be a really great outcome for customers.so, so part of what you're looking for there is, is there a reason and this is so this is the answer to the question.
Is there a reason for your company to be a part of their company? Sometimes it's to get bigger to have scale. Sometimes it's to bring new products to your customers or their products. the biggest driver is you just don't want to work on it anymore.they're, I think that's one of the best fit opportunities.
let me give you a, one other just example, I'd probably get 20 examples in the book. You've got a product, customers love it. You can't wait to sell it to more people and you're totally jazzed up about that. But the thing you're not great at is sales marketing. And so you sell regionally, let's say you sell in, you know, I don't know.
Nevada and Arizona is where you sell, but everybody across the country actually needs this thing. you sell to the right strategic. The next day, their sales force can sell your product to the whole country. I knew a guy had a hundred million in revenue, sold his company to IBM. The next year it had 300 million in revenue.
What, why would they do? Was it IBM have magic? No, IBM has 10,000 or 50,000 salespeople. And they said, Hey, we bought a new thing. Go talk to your customers about it. And they did. so his company tripled in a year. So that can be one of the things like I want to bring this thing to the rest of the world, or my product is a great fit inside the product line.
I'll give you one other example. We had one of our exits was like this, number three and number four by scale in the industry, those two CEOs got to talking and realized they put their companies together, they would be the new number two. And about a third of the market, neither one of them could bid on, but combined they could bid on that.
And they, both of them were like, we want to go, we think those two knuckleheads that, you know, basically just share all the deals up in that, you know, the mega part of the market, we think they're weak and they're soft and we're going to get them. And so they put their companies, but you can't mergers are kind of BS, like somebody won.
Like you can call it a merger. question is who's in charge. Who's in charge of the business units and who's in charge of the company. Like somebody ultimately has to make a call. Like committees are not a good, a good decision making bodies. So you put those companies together and you're killing it.
It's amazing when you put them together because it reshaped the whole market. So there's some examples of like why you'd want to sell to a strategic.
Mike Goldman: Now, what, what, so in what situation is private equity a better way to go?
Sunny Vanderbeck: I think one of the very best places for private equity is when you're not done. You're at the place where you're like, Hmm, this thing's getting a little like I got 99 percent this. So this is a very common pattern. 99 percent of my family's wealth is in this one company. And I got used to making 500,000 decisions and I was comfortable with it.
And now most of the stuff that gets in my desk is a 5 million problem. And if I screw it up, I screwed up for generations of my family and hundreds of employees. And the stress of that concentration is on me a little bit. And the decisions that are getting to my desk, like I want some help with these. want some advice with these.
And but I'm not done yet. And I got stuff to do in the world. I want help doing what I'm trying to do in the world. We, we often hear from team members of companies in which we invest. like, well, if you hadn't have told us, we would have never known that there was any kind of transaction. Still the same person running the place.
Like, if we do our job, we're going to help move the company forward. Maybe there's a special skill we have in sourcing or culture. Who knows what it is? that's the very best place. Cause now, like you can strap the turbo on. I can get a CEO call me and said, Hey, I'm trying to solve problem XYZ. You know anything about that?
And I might be like, yeah, I've dealt with that three times. Here's what doesn't work. Like if you want to go expand to Europe. can tell you how to fail with that. I'm really good at failing. Europe expansion. but I probably have a CEO in the portfolio somewhere or somebody in our ecosystem that actually really does know how to do that.
so I'm ready to go, but man, it's amazing how, so this is back to the psychology. I have seen this over and over again at little scale and big scale. Having a little bit or even a lot of money, just sort of over there away from the business can transform the way you feel about the company from like you're scared and it has to work.
And every tiny detail is in your head because you just like you built something great. And now your fear starts to overtake the joy because you're worried about breaking it. So, okay, share some risk with somebody and get some new advice and some new partnership. And
remember one of the things we haven't talked about this yet.
I'll mention it briefly. When you start thinking about your stakeholders, don't forget your family is one of the stakeholders. You have to figure out like what, what do you want for them? What do they want for you? Right? It might be that the one thing they want is you to be home more. That's the one thing.
Well, if you sell to a strategic. And the headquarters is halfway across the country and you're going to run the new combined business unit of whatever. And you're going to be the senior vice president at some public company and get all this new responsibility. Guess what, man, you're getting on a plane and you're going to be at headquarters a bunch and your job just got harder, not easier.
And your family's going to see less, not more. you better figure out what they want. Like the family stakeholder. Now, on the other end, you hear families like, Hey, we like how this works now. Like we don't actually want you here every day, all day long. Like we, we, we like the balance we have. We you're happier when you have something to do in the world, please don't retire.
You got to go ask them, have a real conversation with your spouse about what they want, what they want for you. but one of the things that part of the reason I was on that is it, it is very common for when you go from like, everything is existential and you've spent 20 years building this thing. And your spouse, remember, you know, sort of spouses there when you were broke and eating ramen and like.
When you get a little bit of liquidity in the family bank account. Like, man, everybody can take a deep breath and now you can go harder that worry is gone and you've got a partner and so you don't have to worry about, well, what if I make this decision and it's terrible and I run it off the cliff and like that.
So I still got fight left in me and I'm ready to go. Private equity can be a great fit for that.
Mike Goldman: got the capital cushion and the intellectual cushion. So it's not all
Sunny Vanderbeck: Yeah.
Mike Goldman: Love that. And, it definitely sounds like if folks are interested, they've got to go get your book if for nothing else, the idea of all these different perspectives of figuring out. What it is you, you know, who matters to you, what you want for them, whether it's family employees, yourself, as we kind of wrap this up, tell me more about, Satori capital and kind of the scope of what you guys do.
Sure,
Sunny Vanderbeck: so
the, the original idea for Satori Capital. As Randy Eisenman and I were, sitting at a Chili's that we had met at over and over again for three or four years. we thought we could make a difference by being the capital partner. We,wish we could have had. So Randy was another CEO and y'all know, like entrepreneurs, we complain a lot, but we, we usually do something when we complain, like it's, we complain enough.
And then eventually we go do something. So we were like, well, let's stop complaining. Let's go make this thing. And there were three things that were important to us when we made Satori. So one. Was having long, real long term capital structurally. We can be investors owners for 99 years, we want, don't have to, having that flexibility allows us to be more long term minded when we make decisions inside the company, second, the idea of the operators advantage.
We have experience as CEOs. Our team has lots of experience. Like you'll see lots of people on our team. They'd been in the trenches. They've done the thing. If we're going to go build a Salesforce, We've got somebody that knows how that works. Like we wanted to build a team full of people who could make a difference, not people who would yell at you about why is AR gone up.
You know, two days, two DSOs and since the last board meeting. And, and then the last thing, and we touched on this early, it was this idea of conscious capitalism. Now today, the idea that, Hey, maybe you should like care about your employees and customers and figure out what you want from them and have them better.
Have a better culture. Doesn't quite seem like a crazy idea. People were like, Oh yeah, that kind of makes sense. I promise you in 2008. They were patting us on our head. They're like, Oh, so cute. We were young. Like we were, you know, mid thirties. we did that. So that idea, those are the three ideas that were the Genesis of the story, for a private equity business.
Here's, here's where this sort of rubber meets the road. Like what we do manufacturing companies where there's a lot of engineering or intellectual property. and commercial services. So we call them the white truck business. You got a skilled technician and a white Ford F one 50 and work boots.
It's going to drive out to do a thing that's hard. We're pretty good investors there and established brands. That's have opportunity around e commerce to unlock the sort of digital and direct to consumer. Like those are the three types of businesses where we can be absolutely extraordinary. We'll occasionally do something outside that where we think we, we are uniquely qualified.
are companies that are some kind of 5 to 50 million in EBITDA. Usually it's like 8 to 35 when we're a majority. And somewhere above 10 if we're a minority. So one of the unique things about us, we can buy a third of the company if the company is big enough, we don't have to be a majority investor.
so about two thirds of our investor investments are our majority, about one third, are minority. And our plan is to partner with the CEO that's there and let's see if we can go build some hopes and dreams. And that gives us the opportunity to do whatever we want, like on the exits, basically at this point, I think a hundred percent of our exits have been the leadership team of the company comes to us and says, hey, we think it's time to have an exit.
And here's why, like, I'm smart enough to know. I'm not smart enough to override a call like that to say, if y'all think it's time for whatever reason, okay, let's go. Right. Do you want to merge number three and number four? Do you want to lower? We had a finance business that had a pretty high cost of capital and they realized by doing a transaction, could grow faster.
that's what they wanted to do. Okay. so that the idea here is to be a real partner with some real skills that cares about stuff like culture and customers and employees and so forth. And that like, that's, that's the fun part. Fun part for us is not, oh, we had to exit and we made some money. Like that's cool.
Like that should be a side effect of building great companies.
Mike Goldman: Love it. Love it. If people want to find out more, more about you, about Satori capital, about the book and all this will be in the show notes, but where's the best, where's the best place for people to go to find out more
Sunny Vanderbeck: Sunnyvanderbeck.com made it easy. It's my name. or satoricapital.com you can get in touch with me that way pretty easily. And I'll point out one other thing, on, on my website. I built a couple of workbooks for the book. Go Sunny Workbooks. Like, is this like fifth grade? Like what are you doing? Here's what I figured out for me when I think I figured something all the way out.
I haven't really yet. It's when I commit it to paper and there's something magic about committing it to paper. 'cause I'll write it down and then the next day I read it and I go, no, that's not actually, not it. I haven't figured it out yet and I'll do it again and do it again. So I, I literally, I made workbooks.
no crayons come with it, but I made workbooks. 'cause I know for a lot of us. When we commit it to paper, it helps us really think through it and it helps us share it with others. So those workbooks are free. They're on my website and hopefully they're helpful to someone.
Mike Goldman: it. And this is so important because I've run into, you know, over my 35 plus year career coaching and consulting, I can't count the number of people I've run into who sold their business. And we're not happy whether it was the psychological portion or, man, I could have got more money or man, I hate the company.
I've got this earn out, man, I want out and I can't get out or, you know, people, they learn so much by doing. And as you said, after the fact, normally you can't do it over again. So, so I love the fact that in the podcast and people ought to go by your book to kind of, man, figure this stuff out. Before you, you jump into that process because you're not going to get a chance to do it all over again.
So Sunny, this is great. I always say if you want a great company, you need a great leadership team. This is a big part of that. So Sunny, thanks for helping us get, get there today.
Sunny Vanderbeck: Thanks for having me. This was a blast.