Kelly:

So how can companies get into these conversations? What do they need to do?

Chris Mailander:

We have a method, and it works like this.

First, we define the outcome.

So imagine this: draw in your mind a chart with an X-axis and a Y-axis. On the X-axis, write time and put that at one year. And then on the Y-axis, that is the target enterprise value of the company.

Just doing this exercise and projecting what that endpoint is to be will do several things that will be very illuminating to the process and very helpful to the company as they anticipate these major inflection points that are coming down the road and optimize their value.

The first one is that it reveals the different expectations amongst the individuals on the management team about that endpoint goal. Those become very visible. And that's going to be important to understand as you run into a process.

Secondly, different arcs or trajectories for the business get set onto this chart. Some of those arcs are steeper than others. Some of them are more realistic—or unrealistic—than others.

And then the third thing that's revealed is that we identify the size of the gap between reality and the narrative that's being told.

That's the first step in our methodology.

The second, then, is that from that endpoint, we walk backwards from that endpoint goal to where we are today.

And when we do that, we identify those inflection points that are going to be encountered at some point. We're going to identify all the specific challenges that are going to hold us back in the process or hinder our valuation.

And it includes things like product problems, customer reference problems, IP problems, sales problems, or identifying ways to take a revenue stream and create more value from that stream in order to generate a higher multiple.

It reveals when we need to negotiate new relationships with partners around that company—vendors and partners and affiliates that can help us really capitalize on the market opportunity for that company.

It helps us reveal personnel.

Oftentimes—and we're going to talk about this in a little bit because there's a story that I want to share with you—personnel is really important to the valuation of companies.

And we want to identify where we have gaps or inadequacies early in the process so that we can take the appropriate steps.

The third piece of our methodology for helping companies get into that conversation that you talked about before is this:

We go to work.

We roll up the sleeves.

We fix the problems.

And we run a game plan that gets us into that target zone.

We're really an advocate for the entrepreneur.

We've been in their shoes. We've run companies, and we've run the process all the way from the work necessary to get companies into that conversation to getting a great outcome with investors and acquirers.

So let me give you a couple of illustrations or examples of the ways that we get companies into that conversation that you targeted.

First, we go through the P&L and we find new ways to extract more value from revenues that can command a higher multiple.

That can mean, for example, that we need to build a new ecosystem—or parts of an ecosystem—around that company so that they can access new markets, new clientele, gain operational efficiencies, and decrease their costs.

We help negotiate those deals.

Secondly, we often work with a team that has been great for their business as operators and administrators, but they haven't gone through this particular process.

A business transaction can be complex. It can be arcane. It can be frustrating and emotional.

And so we help take them through that process.

We coach them up.

A third way that we often help is that sometimes we do identify a gap within the management team.

And so we've gone in to help serve as an acting CFO, an acting COO, or even an acting CEO.

Sometimes we're really coaching up the CEO because this process can be a lonely journey.

You feel alone.

The pressure is intense.

The risk is high.

And they are all looking at you to get it done.

So our role is oftentimes as a counselor to the CEO to make sure that we're making the right decisions in these critical, high-pressure moments.