[EO New York] Making Your Business Buyable, Not Just Valuable With Bruce Eckfeldt

Bruce Eckfeldt is the Founder of Eckfeldt & Associates, a coaching and advisory firm that helps entrepreneurs scale high-growth companies. He is a former architect turned tech CEO who successfully built and exited his own company, appearing multiple times on the Inc. 5000 list. Today, Bruce works with founders and leadership teams using Scaling Up, 3HAG, and agile methodologies to drive growth with less drama. He is also a podcast host and author, sharing strategies on leadership, scaling, and preparing businesses for successful exits.

Here’s a glimpse of what you’ll learn:

[3:22] How Bruce Eckfeldt helps founders scale from millions to hundreds of millions in revenue
[4:44] Why Bruce sees exits as springboards into the next chapter, rather than endings
[6:54] Lessons Bruce wishes he had known before selling his own company
[9:08] The challenges of earnouts and losing control after a sale
[12:19] How founder identity often becomes entangled with the business
[14:21] Building relationships and identity outside of the company before exiting
[20:44] Why sharing all the skeletons in the closet upfront builds trust with buyers
[23:45] Key risks in deferred payments, notes, and earnout structures
[41:29] Why communication and alignment challenges never go away as companies grow

In this episode…

When it comes time to sell a business, many founders focus solely on valuation and the headline number. But what if a profitable, high-growth company still isn’t attractive to buyers? And how do entrepreneurs ensure their exit sets them up for long-term success instead of future frustration?

According to Bruce Eckfeldt, a seasoned entrepreneur and CEO coach, the real key is making your company buyable, not just valuable. He explains that buyers want clarity, documentation, and reduced risk, and without those, even the best-performing business will be discounted. He highlights the importance of transparency, even putting skeletons in the closet on the table early to build trust. This shift in mindset helps founders avoid costly surprises, navigate negotiations more confidently, and create smoother transactions. Beyond valuation, Bruce emphasizes that entrepreneurs should prepare for what comes next, using the exit as a springboard into future opportunities.

In this episode of the Rising Entrepreneurs Podcast, host Dr. Jeremy Weisz sits down with Bruce Eckfeldt, Founder of Eckfeldt & Associates, to discuss how to make your business buyable, not just valuable. They explore why risk reduction and transparency drive better deals, how earnouts and noncompetes can create pitfalls, and why identity outside the business matters in the exit process. Bruce also shares lessons from his own exit journey and insights on scaling companies with less drama.

Resources mentioned in this episode:

Quotable Moments

“Rather than thinking about your exit as an ending, think about your exit as a springboard.”
“You don’t realize until you lose it how much of your identity is wrapped up in the business.”
“Uncertainty and lack of clarity equates to risk for a buyer, and risk always reduces valuation.”
“Every business has skeletons, and the best strategy is to put them all on the table upfront.”
“The bigger the company is, the simpler the strategy needs to be so everyone can align.”

Action Steps

Define your post-exit vision early: Knowing what comes after selling shapes the type of exit you pursue and prevents future regret.
Document and organize all business processes: Clear records reduce buyer uncertainty, build trust, and increase your company’s buyability.
Build relationships outside your business: Maintaining a diverse identity and network ensures you don’t lose your sense of purpose after an exit.
Share potential risks upfront with buyers: Transparency about challenges creates credibility, accelerates deals, and reduces valuation cuts during negotiations.
Keep your strategy simple as you scale: Simplified goals and priorities ensure alignment and communication as your organization grows.

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Episode Transcript:

Intro: 00:02

Welcome to the Rising Entrepreneurs Podcast, where we feature top founders and entrepreneurs and their journey. Now let’s get started with the show.

Dr. Jeremy Weisz: 00:12

Dr. Jeremy Weisz here Founder of inspiredinsider.com, where I talk with inspirational entrepreneurs and leaders. Today is no different. I have Bruce Eckfeldt and you can check him out at eckfeldt.com. I’m going to spell it for you because it’s not so intuitive, but it’s eckfeldt.com. Bruce, I’m going to formally introduce you in a second, but I always like to point out other episodes of the podcast.

People should check out some of my top favorites. You know, actually being you’re you’ve been very active in the universe, right? And so Robert Hartline was a great one. He had a chain of you may know, some of these people, actually a chain of cell phone stores that he built up. And he then also has a software called proof.

I had Matt Zuehlke on who does property management all across Arkansas, Oklahoma and the surrounding areas. There some other Verne Harnish who started EO actually and wrote Scaling Up. And I know Bruce is a big fan of Scaling Up and uses the methodologies there. You can check those out and more on inspiredinsider.com. This episode is brought to you by Rise25.

At Rise25. We help businesses give to and connect their dream relationships and partnerships. We do it in two ways. One, we’re an easy button for a company to launch and run a podcast. We do the strategy, accountability, the full execution and production. Number two.

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You know, what they’re working on on my podcast and send them sweet treats in the mail. So check it out at rise25.com or email us at support@rise25.com. I am super excited to introduce Bruce. Bruce Eckfeldt. He’s a former architect turned successful tech CEO who now coaches founders of high growth companies.

Previously, he actually scaled a business onto the Inc. 500 list 5000 list multiple times. Actually, you were on my business partner John Corcoran’s podcast and you actually had a lengthy discussion about that. It’s not easy to do because you need to grow. Yeah, multiple times. And he had a successful exit and he uses his experience in Scaling Up, 3HAG, lean agile methodologies to help leaders scale faster and exit bigger with less drama.

And big. Thank you to Jerry Nyland for actually connect John Corcoran to even connect us. Jerry Nyland did of Trey’s press services. So Bruce, thanks for joining me.

Bruce Eckfeldt: 03:14

Yeah, thanks for having me, Jeremy, I appreciate it.

Dr. Jeremy Weisz: 03:16

Well I’m going to pull up your site in a second, but just tell people what you do.

Bruce Eckfeldt: 03:22

Yeah. So well today and that’s that’s changed over the years and over time. You know, my primary job is really focusing on founders, working with them on scaling strategies. How do you go from, you know, a couple million to a couple hundred million in revenue? And then ultimately, what is your exit look like, whether it’s financial or strategic or esops or, you know, figuring out that next chapter?

You know, one of the things I’ve certainly learned in my own exit experience and then, you know, having worked with many founders on this process, is you really kind of need to figure out what’s next. And once you kind of figure out what’s next, it gives you a lot of insight in terms of then what kind of exit you’re going to have. And then we can kind of define what kind of company you’re going to scale. So I end up kind of reverse engineering. A lot of this is really kind of having the discussion of what they want to do ultimately.

And then how do we how do we create the company that is going to get them there?

Dr. Jeremy Weisz: 04:12

We’ll talk about your exit and company, previous company in a second. But I know when when you’re listening to this, the book may be out, it may not be out. Or maybe it’s coming out soon because it is coming out soon. But in our conversation. But you have a different take on exits.

And so I don’t know if you have a title or working title that you can talk about. So we pointed. If not you can. We’re looking at your your website here. You can go to their go to their website.

Bruce Eckfeldt: 04:40

It will it will be on the website.

Dr. Jeremy Weisz: 04:41

I’m sure it’ll be on there. But talk about your different take on exits.

Bruce Eckfeldt: 04:44

Yeah. So so the working title is called springboard. And it really is kind of this idea of rather than thinking about your exit as an ending. Think about your exit as a springboard into the next thing. And so and really comes from my own experience in through my kind of exit.

And like I said, you know, many, many of the exits that I’ve worked on and founders that I’ve talked to, that I’ve gone through exits. And, you know, the fact is, is, you know, I exited at that’s a good question. When did I exit? 40, 39, 38 even maybe I can’t remember. I’d have to do the math again to figure out the dates.

But you know, these are not. And my you know, my exit was very, you know, very nice. But it wasn’t like I’m not going to work again in the rest of my life kind of thing. Right? Like it was an opportunity to cash out.

It was an opportunity to kind of change a chapter. And and honestly, I think most of the exits are like that, right? Yes. They’re I’ve talked to a few people that have had, you know, $100 million exits and, you know, even there, although they’re totally financially secure, they don’t need to make another dollar, you know, the rest of their lives. They need to do something right.

The whole idea that you’re going to sit on a beach and drink pina coladas is, you know, this idea that that works for two weeks if you’re lucky. And so you really need to have some kind of idea whether it’s because you need to make money or you just want to have, you know, a passion or you want to have an impact on the world. And so what I’ve really kind of looked at is the world of exit literature mostly is around transactions, mostly about valuation, mostly about the deal, very little about the what is next and how does that deal set you up for that strategically. So I end up doing a lot of work with not only thinking about what is the exit that you need, but what are the assets, what’s the reputation, what’s the network that you need. You know, pre exit so that once you have your exit you’re all set up and queued up and ready for the next thing and not sitting there flat footed, you know, wondering what to do next.

And you know, running into existential crisis which which is not uncommon in those situations.

Dr. Jeremy Weisz: 06:44

What do you wish you would have known? I’m assuming this is one of those things, because oftentimes we read books for for ourselves ten years ago.

Bruce Eckfeldt: 06:54

Yeah. So I think the two things that I wish would have played out differently, I wish I would have done differently. One is kind of understanding why I was even in the company. Right? Because I think, you know, a lot of entrepreneurs end up in these companies kind of by happenstance, right?

It’s a little bit of, well, you know, you know, I turn left and then this thing happened. And the next thing I know, I had a business, right. And so, you know, you kind of lose the sense of purpose, I think when you just start focusing on the company and why you. And I was an architect originally. I mean, I was not trained as a business person.

I did not when when my mother asked me what I wanted to do when I was young, I said I wanted to be an artist and marry a rich woman. Right. That was my strategy, right? So, like, I didn’t have.

Dr. Jeremy Weisz: 07:37

A young age. Wow.

Bruce Eckfeldt: 07:38

Yeah, I was rich.

Dr. Jeremy Weisz: 07:39

Woman actually surprises me. The artist doesn’t surprise me.

Bruce Eckfeldt: 07:43

Well, so I was. I was passionate, but I was practical. Like, I knew that as an artist, I wouldn’t make any money. I needed. I needed a strategy there.

But you know, so I didn’t it wasn’t like I had these ambitions or this, you know, lifelong yearning to found a company and be a CEO and have this exit. And so as I got into it, like, I, I think I would have done, I think it would have been much easier for me and kind of figuring out what path I wanted to do, not only how I wanted to exit and what I wanted to do next, but really how I wanted to operate the company. Right. And I think a lot of what I ended up in, the situations I had this, you know, really nice company and we had some really great stuff, but it wasn’t happy. It just wasn’t aligned with really my core purpose.

And you know, what I was good at and what I really loved to do. So I think that was number one. Number two is I think I, you know, I certainly felt very stuck at the end of the business in that I didn’t feel like I had a whole lot of options. And so when the exit opportunity came up, it was kind of fortuitous. And it was kind of a nice, a nice deal that landed in the lap.

And I was like, I’m just going to take it because I don’t know what else is going to happen next. And I think if I were to a understand my purpose better. B had a little bit more of a plan and had some different options that were really more aligned with what I wanted to do. Have a bit of a plan on what I want to do next, and then kind of choose an option that would set me up that way. I mean, like I, you know, I left my earnout early, right?

Like, I had a three year earnout. I lasted nine months. Ten months, maybe.

Dr. Jeremy Weisz: 09:07

Why is that?

Bruce Eckfeldt: 09:08

Well, it was just like once. Once you kind of give up the reins, right? So when it’s your company, it’s your baby, and you’re running, you sell it, and now it’s someone else’s company, and it’s just a job. And I realized that, I mean, I was getting paid well, but it was like, I don’t want this job, right? This is no longer fun.

And, you know, you I think this happens pretty typically, right? You take these earnouts because you get a better deal, right? You get better valuation. Right? They say, oh, great.

Yeah. You want this much? Fine. Like we’re going to put it in an Earnout and you’re thinking, oh well great. Now you forget that you’ve got to earn that money, right?

And that’s work that you still have to do. And showing up to work every day when you own the company is one thing. Showing up to work every day when you’re someone else’s company. At that point, that whole psychology changes, and I think that is vastly underappreciated, mostly for entrepreneurs. And what that really changes in terms of psychology and motivation.

And then of course, it’s someone else’s company, right? They’re going to have decisions. They’re going to have control on certain things. And you know, yeah, you can have the best conversations in the world. Pre-deal about, oh, what the plans are.

We’re going to grow, we’re going to do this. Like we’re going to keep the people. We’re going to keep the, you know, culture, all these things. You know, at the end of the day, like post transaction, all bets are off, right? Like it’s going to be different.

And it’s not even malicious. I think it’s just situational, right. Things change. Dynamics change, markets change. You got to make harder decisions.

They’re going to make decisions differently than you are. And so you know I think that whole taking the exit, you know, the terms of the deal end up becoming much more important or much more important than people think, than just the pure number. And it’s hard, you know, you get caught up in the number, you get caught up in the reputation. You know, you’re talking to your friends and all like, what do you sell for? What was your valuation?

What was the number, how much you make right? Like you get caught up in that psychology and you forget about what does that actually mean to me, right. I’ve had many cases too, where people, you know, agree to non-competes for periods of time. And, you know, one, one client I worked with there, he ended up getting in trouble for mentoring because the buying company said, well, no, these, you know, work mentoring other companies, even if it wasn’t directly competitive, was still violating or potentially violating non-compete. And look, we probably, probably could have gone to court, probably would not get ruled against us.

But just dealing with it was a nightmare, right? So it’s just, you know, it could take up time, money of actually fighting it. And so you just had to say fine, had to step back and spent three years quiet hiding, you know, until that non-compete was up. So these are the things that I just find people don’t think about and ends up having a huge amount of impact in terms of really their, their future happiness, but really the effectiveness of the deal.

Dr. Jeremy Weisz: 11:45

I want to talk about general advice in mistakes. Okay. You mentioned a couple, right? Maybe being careful about non-compete. I’ve heard you in other videos talk about being okay with what you get right off the bat, which you kind of mentioned your earnout.

What are some other general? Again, we’re talking general rules here. Not every situation may not apply. But you know, from your experience with yourself and many other people, what are some general rules people should consider with the exit and maybe some mistakes too?

Bruce Eckfeldt: 12:19

Yeah. Kind of where to start. So I think more conceptual ones and then more practical ones, I think conceptual ones is really be aware of as best you can. And it’s really hard to do this. And that’s why you kind of hire other people and get other people involved in the process.

Is is your kind of identity, attachment to the business. And you don’t realize it till you lose it, but how much you have your own kind of self-worth, your ego, your sense of identity is wrapped up in the business. And being the founder and being the CEO of a business. And. You one of the key things that I end up doing is making sure that we’ve got a broad social, relational network for founders outside the company, because I always like it happens every time they sell the company, and it’s like no one returns their phone calls.

Right? And all these people that were my friends were really just my colleagues in business. And now, you know, they’re either off to other things or they’re still in the business. I’m no longer in it. And I’ve lost all of these social connections because my social world has been entangled with my professional, particularly my company.

And so I think one is making sure you’ve developed a robust and well diversified identity outside of the business, and that’s something I would say do sooner rather than later. I think it’s something that you can kind of go, it’s good to kind of keep in mind going into business and early stage companies like, okay, how balanced am I? And, you know, we can talk about family and other things too. But people get very focused on the business. So I think that’s one area that I end up doing a lot of work in, or ends up becoming quite a bit of an issue.

Dr. Jeremy Weisz: 14:06

Do people push back on that, like with you, Bruce? Like, that’s not going to be a problem for me. I have a lot of friends who, you know, I have various relationships with. Or is that like, oh yeah, I get that.

Bruce Eckfeldt: 14:21

So, so some of this is probably a filter. Like I end up probably working with people that kind of get that. If you really don’t get that, you’re probably not going to hire me or, or I’m probably not going to want to work with you. You know, so, you know, now, I think there’s still I think they’re aware of it. They probably realize they’re not aware as they probably need to be, and they probably realize that it’s still going to be a challenge, right?

Like, it’s something that you need to put some positive pressure behind to make happen. You know, even if you’re aware of it, like you have to do something about it. And that takes time and energy and decisions and you have to make some offsets and stuff. So, you know, and and it’s you always think it’s not as bad as it’s going to be. It ends up being a lot worse than it is, right?

Like I think that’s every every facet of this is I think every entrepreneur, every founder goes into this. Oh, oh, yeah, I’ve thought about that. Don’t worry, I’m totally prepared for it. And then get to the other side and they’re like, oh my God, I was not prepared for this, right? Every interview that I’ve done on the podcast, you know, not 90% of them.

So, you know, I think that’s a big kind of general one. I think the, the, the next kind of category, there’s a lot of this kind of personal emotional kind of connection stuff, which is a bucket. The other bucket is I talk about making your business viable. buyable. So so there’s valuation which we can we can start talking about valuation drivers and things that a buyer is going to look at in terms of like moving that number up or down in terms of what the valuation is or what they’re willing to pay for the business.

But separately from that, I talk about viability, meaning you can actually have really good fundamentals in a highly profitable business that has a lot of future growth that, you know, should be valued at a in a certain way, at a certain number. But if the business doesn’t have the information organized, doesn’t have the structures in place, hasn’t documented everything, right, it is not set up to be viable. It’s like it’s putting a veil in front of the business. And so the buyer, even if beyond the veil, it’s this great business, but they can’t see through the veil. If that veil is really thick and cloudy, they’re going to have to devalue.

They’re going to have to offset value for that risk. Right. Uncertainty lack of clarity equates to risk for a buyer. And so if I haven’t done those things, if I’ve created a lot of fog around my business and they can’t see it, even if it’s there, they can’t see it, they’re not going to value it or they’re going to they’re going to offset it with risk. Make making it viable is really important.

You know, and that’s you know, like I said, having you know, having, you know, documents together, having all of your, you know. You know, contracts, having all those things in place and, and you know, your data repository, data vaults, having all that stuff together. And if you can show up to the beginning of a transaction or beginning of conversation with the potential buyer, with having all that stuff clearly laid out, that buyer is going to be much more likely. A is going to probably give you a much better valuation, because actually see the data and the transaction is going to go much more smoothly, Which is probably the biggest risk in most of the deals that I see is like the more time that goes on, the more delays, the more hiccups, right? The less likely deal is going to happen, and the more likely you’re going to get, you know, you’re going to have risk on the business, you’re going to have a downturn, you’re going to lose a client.

They’re going to come back and say, well, I know we wanted to offer you 32 million, but now we’re thinking 26, right. Like you’re going to lose money. So having that stuff together, the the other thing I tend to do, and this is a little bit of a deal strategy thing, a lot of founders, a lot of sellers will, you know, you certainly want to put your best foot forward, but they try to oversell the business. And and what happens is that it’s only, you know, later in the conversation or in due diligence where, you know, some of the things start coming up. It’s like, oh, well, you know, we didn’t realize your concentration was quite this big or okay.

Yeah, we look like, you know, we’re missing some of these documents or we didn’t see that. You know, three years ago, we had this lawsuit that, you know, was resolved, but. Right. Maybe there’s some liabilities around it or something, or, you know, there’s there’s going to be things. Every business, every business has skeletons.

I’ve I’ve written articles on this. My suggestion, my strategy on this stuff is put all the skeletons in the closet up front. Like, literally, I like creating a list of all the reasons you shouldn’t buy my company. Right? Put them all on the table up front.

And that’s going to do two things. One, it’s going to make it a much more real conversation, right. The buyer is that the buyer is going to be much more aware of the things that they’re buying. But more importantly, it’s going to build trust, right. Because ultimately that is what drives these transactions.

The buyer trusts that the seller is representing themselves and the business appropriately. They’re going to follow through on the deals. If the buyer starts to feel like, okay, A when’s the next shoe going to drop? When’s the next, you know, skeleton going to come out of this closet? That’s where they start getting skittish.

And either they, you know, they’ll they’ll kill deals or they’ll just keep bringing down valuations to offset that risk. And so some of the best transactions that I’ve seen that I’ve been involved in have had that almost like unsettling the buyer in the beginning. And then the buyers just sucking up. They’re like, okay, great. Right.

Like, okay, let’s solve I can solve all these things. And once, once they realize there’s no other things they need to worry about, they’ll push forward with the deal. They’ll give you the value. They’ll be very clear with things. Right.

So it’s a little bit of reverse psychology or a little bit of a maybe a psychology most buyers aren’t used to or most sellers aren’t used to. But I think I think that’s a real game changer in terms of the dynamics of the sale process.

[Continue to Page 2]

Dr. Jeremy Weisz: 20:19

What other? I love that because I feel like it’s counter counterintuitive advice, right? A little bit at least. I’ll I’ll phrase it like that. What other so counterintuitive advice Device will say is like, just share out all the skeletons up front.

Because even if you think of like a dating relationship, you know, it’s it’s not counterintuitive. Like, you know, it’s.

Bruce Eckfeldt: 20:38

Not a bad analogy though.

Dr. Jeremy Weisz: 20:40

Right? Yeah, but you may scare someone off, obviously, but maybe they should be scared off. Right?

Bruce Eckfeldt: 20:44

So if you’re going to marry them, right. If you’re going to do the deal, they’re gonna find out at some point. That’s always my thing is they’re going to find out sometime.

Dr. Jeremy Weisz: 20:51

Yeah. At what point do you share. Right. So sharing skeletons upfront I think also just thinking of the your broader relationships beyond the exit. What other things maybe at this point you don’t even consider them counterintuitive, but maybe best practices that most people don’t think are best practices in exit process.

Bruce Eckfeldt: 21:14

So so the one the one that comes to mind is I always try to keep this philosophy or keep in mind that the the seller is the other buyer. So like even if you’re in an unsolicited offer, meaning there’s no other offers on the table. And ideally, we want to be in a situation where we’ve got, you know, 3 or 4 offers, right? We can competitively bid this. It’s a little bit of an auction, right?

Like if one isn’t working out, you can go to the second one. Right. You’ve got some choices. What’s hard in these unsolicited or single single buyer situations. It’s you know, people feel like, okay, well, I kind of have to take it or I kind of like, I’m there’s no other option here.

And, and the philosophy I like to put in place is like you are always the other buyer. Right? So you can buy your business from yourself. Right. And I like to think about like, okay, what terms would you buy your business for.

And if if the other buyer, if the unsolicited offer is better than the terms that you would buy your business for, take the unsolicited offer. But if not, buy the business, basically keep it right. And I and the challenge is, is a lot of founders aren’t prepared to do that, right? They’re selling the business because they just want out or they’re exhausted or like, you know, and so we what I always say is let’s deal with those things first before we try to do a transaction, because we need to keep this in a situation where you’d be willing to buy your business if the other offer is not good enough. And so it both changes all the prep work, right?

It really kind of digs into motivation. Why are we selling? Like what are the things we can do to offset this. Right. Like, how do we not get into this situation where we’re in a for sale, but it also then allows them to go into this negotiations with confidence.

It’s like okay, okay, buyer. Right. Like, what are these terms? I don’t I don’t like that. Earnout right.

I’m going to take my earnout, which is I’m going to keep the business right. So it just it gives them kind of a psychology of I do have an option. Right. Like I am not negotiating against, you know, nothing. Right.

Like I’m negotiating against keeping it.

Dr. Jeremy Weisz: 23:19

Bruce, what would you say? Or maybe we’ll call it the be careful stuff. You mentioned the non-compete. You also mentioned burnout. Are there other things that from your experience, people should be careful?

Bruce Eckfeldt: 23:31

Yeah. So so the things that typically come up, things that I end up, I do a lot of Post-transaction coaching work to is like earnout coaching where people have sold and they’re trying to figure out, okay, I got it the rest of my money.

Dr. Jeremy Weisz: 23:43

That’s a good niche. I like that Earnout.

Bruce Eckfeldt: 23:45

Yeah, it’s an interesting one. And it kind of depends on if they still have equity and if they’re, you know, managing the business or not managing the business. It gets a little complicated, but it’s an interesting situation. The nice thing is, is that there’s typically, you know, the scoreboard is set right. There’s typically terms around okay, I can make another $10 million if I can get, you know, operating margin to here.

If I can get growth to here, if I can get, you know, profits here. Right. So I love those things in the sense that, you know, what winning is, is very defined. And we can hyper focus the work that we’re doing to hit those numbers. Now sometimes the challenge is they don’t have they’ve lost a lot of the decision making and the kind of resources and control element.

So we’re sometimes having to be a little more scrappy or we’re dealing with like, you know, limited options in cases. But I think the things that often become problematic. So one is and let’s separate these out a little more formally. So there is deferred payment, which is, you know, say say they say okay, we’re going to value your company at 20 million. We’re going to give you ten.

We’re going to give you cash on signing, which would be nice. We’re going to do five as a note payment and five as an Earnout. So five and the note payment is it’s a guaranteed payment meaning you don’t have to do anything to get that money. And it’s usually structured like a five year note or quarterly payments or something like that. The challenge there is typically those things are backed, you know, are collateralized by the company.

So you know, as much as you’re like, oh, well, it’s a note. It’s like, all right, well the company goes south and the buyers decide to. You know, there’s all sorts of things buyers can do once you own the company. You move the assets to another place, you start deferring revenues, right? Like they can basically shell the company.

And great. They default on the note. And as remedy you get the company back. But now the company is not worth anything anyway. So I’m always looking at those guaranteed payments.

While it looks like a fixed note payment, there’s still a significant amount of risk on it, if particularly if it’s only backed by the assets of the company. Now they can sometimes back it with other assets they have, right? But depending on the company, how sophisticated they are most times is they’re going to run you out of out of money in court trying to collect on that stuff. Then then you actually can can claw back. So those are the deferred payments.

Earnouts are more specifically around if the company performs in certain ways that you will get additional money. Now there’s two versions of this. One is where you’re actively involved in the company. Like you’re you’re in the company in some kind of management or maybe even stay on as, you know, leader or CEO and you have some control or some influence potentially over hitting those numbers or not. And usually I would say you probably don’t have as much control certainly as you would like oftentimes as, as you think.

But so that money is at risk that way. And if you don’t have a management control then I mean you’re basically an earnout. But it’s like, okay, like I let’s see how you do. Right? Like you only make money if they hit the numbers.

So, you know, there’s a lot of risk in those things. The other one that comes up is executive compensation and executive bonus. If you’re going to stay on a CEO, like, what are you getting paid for that job? And is it market rate? Is it above market rate.

And then is there performance bonuses based on that that kind of go into it. So you know, in the end these get a little complicated because it’s well what am I getting paid at signing. What deferred payments. Am I getting on a note. what earnouts am I getting?

You know, based on company performance, you know, whether or not I’m involved in the company. And then I potentially have an executive compensation package with potential performance bonuses on that. Like all those things can, you know, figuring out the net present value of all those things and the risk around all those things are difficult. And oftentimes what I find is if you look at like three years or five years out, depending on these earnouts, you know, where where you would be financially at the end of that, say, five year period with the deal, you know, getting the cash, getting the payments, getting the earnouts, getting the executive comp versus if you just kept the company, sometimes it’s not as good. Sometimes just keeping the company is better.

Right? Because you’re you can the big challenge is continuing to build equity, right. Like once you sell a company I mean, yes, you may have a 20% stake in it, but your rate in which you’re building equity on that 20% stake is much less than when you own the company and you are probably pulling. I mean, if you know a successful company, you’re probably pulling, you know, at least a couple hundred thousand, maybe $1 million in income out of the company as well. So now, you know, you’re looking at five years.

That would be another $5 million in personal income plus the increase in equity. Like doing this math can get a little complicated, but when you do it like some of these deals may look good on paper in some respects, but consider the option of keeping it. Sometimes it’s not as good.

Dr. Jeremy Weisz: 28:50

Bruce, talk about what are some examples? Because like I know with the book and you really focus on what’s next before and we were talking before we hit record, you know, one of the people they may not sell for five years and they’re thinking five years from now what they’re doing next to prepare. What are some examples of what you hear or when you explore what to do next? What are they? What are people saying?

Bruce Eckfeldt: 29:14

Yeah. So I’ll kind of bucket it into kind of business venture and then non-business venture. The business venture stuff. You know, what becomes interesting is where there’s some kind of derivative business opportunity based on the company they’re in now that they can start a new company around. So, you know, if they’re a product company, they see an opportunity to do some ancillary services or something, or there’s an adjacent industry we can take the product to.

And so those become interesting because we’re actually looking for either either developing outside assets. So it could be relationships, it could be IP and things like that. We may say okay look let’s, let’s let’s take this other application, put it into a separate entity. And you can nurture that pre exit and get that cleaved off and owned and outside of the current company, so that when you sell that thing, you’re not selling this asset that you can take somewhere else. In some cases we’re identifying those assets inside the company.

And part of the deal that you’re putting on the table with the buyer is like, hey, either I want a license to be able to use this in a non-competitive way, or I’m cleaving this off. I’m not selling this thing. So I worked with a packaging company for a while, and they worked in a very particular industry. And but there was some underlying IP associated with some of these packaging technologies that could be applied to many other industries. So a lot of what we were doing in terms of setting up these potential deals was selling, selling the use of these packaged technologies in this particular industry, but keeping the rights to be able to go to other industries because this person, she wanted to go off.

And do you know, she had lots of lots of ideas of where else she wanted to take this thing. She wanted to get out of this industry. She was kind of she, you know, ran that race. And so, yeah, so we were looking at how can we kind of cleave those things off so it could be, you know, assets, capabilities. It could be data.

Right? It could be, you know, just knowledge. It could be building up a knowledge base. It could be building up a network. Right.

So how do I use the platform I have as CEO, founder and CEO of a company for the next three years to build up a network of reputation, you know, getting involved in boards, industry organizations. Right. Like, we can find some really practical things we can do to create assets and values and capabilities that will survive or will be retained post exit that can be leveraged into the next thing. And then obviously, we want to look at the deal terms themselves. And we may be willing to take a valuation that’s 20% lower if we don’t have an Earnout or if we have a one year earnout.

Right. Or if we only have a one year non-compete rather than a three year non-compete, because we know that, you know it’s worth it, right? Like, we may give up, say we give up $5 million on a valuation, but if we know that we can jumpstart a new business that could be worth another ten, 20, $30 million in a couple of years, fine. Right. Particularly if it gives the founder something to do.

Right? Like, you know, sometimes it’s just a matter of I want to plant like I want to work. I don’t want to actually sit on the beach for a year or two years. Three years. And sometimes their spouses don’t want them sitting on the beach for a year or two years.

I had one one story of this founder who was planning an exit, and he had a whole thing. He actually put a deposit on a boat, a sailing ship, because he’s like, oh yeah, I’m going to, I want to sail, you know, I want to, I want to sail for six months across, you know, to Europe and everything. His wife looks at him and says, I don’t know who you’re going to sail with. You’re not sailing with me, right? Like, because the founders get this all like at this vision, I’m going to exit.

They don’t realize that this doesn’t change everyone else’s world, right? Everyone else continues to live their lives, right? It’s life changing for you. It’s not life changing for everyone.

Dr. Jeremy Weisz: 32:55

I love the concept of creating something. And and like you mentioned, kind of with the licensing. I’m curious. I’m sure all the circumstances are different in the in that packaging. Were they expecting, okay, they would pay the company for the license and then they’d be able to license it to others.

Or they go, I want to maintain a license to non competitive industries. How do they work it out. So like the main company is not threatened by it.

Bruce Eckfeldt: 33:23

But the buyer.

Dr. Jeremy Weisz: 33:24

Yeah. The buyer. Yeah exactly.

Bruce Eckfeldt: 33:26

So I mean some of this is that the nature is.

Dr. Jeremy Weisz: 33:29

Such a cool technology. Like I guess it’s as soon as someone says, well we’re going to use it for this, you know, other thing like, well, maybe, maybe we should be using it for this, right? You’re planting the idea, but I’m curious, how does it get executed a little bit in that circumstance, or what’s the expectation of the seller and buyer?

Bruce Eckfeldt: 33:49

Well, all kind of depends, but I think there’s two flavors of this. One is we’ve thought about this years in advance, like we’re five years away from an exit. We see this opportunity and we actually, you know, upfront set up the other entity, you know, transfer the assets over there, right. Like it’s it’s not part of the business. And that’s, that’s licensed back to this other company.

and like so it’s structurally it’s just not part of the company to begin with. Now when you go to sell it, any smart buyer is going to look at, well, what are you licensing and who owns those licenses and what are they going to do with it. And they a smart buyer might make sure that there are some restrictive covenants, you know, around what the other company that’s licensing can do it. Or they may just reduce the valuation. They may just say, okay, well, you only have a license to this.

And it’s a core part of the the business. So you know, there’s a risk here. So we’re not going to pay you 50 million. We’re going to pay you 30 million because we’re going to have to either rebuild it or we’re going to have to offset that risk, you know, somehow. So there’s kind of option A, which is you do it upfront, you do it well in advance, and it’s more of structure structurally.

You’ve already pulled it out. You know, plan B is okay. It’s it’s in part of the company. And as part of the deal, your is a term of the sale is you’re asking for rights to be able to use it in some kind of non-competitive way or, or, you know, in some way. And everyone has to define what, competitive or not competitive for what period of time.

Right. Or or maybe you royalty it back, right. Say, look, I want to go off and do this. I mean, I’ve, I’ve seen 1 or 2 cases where founders have done that, and then they sell that company back to the parent company. Right?

So you kind of it’s like, hey, buy my main company. And I see an opportunity to kind of, you know, use this in a new way. Let me go out and spend a couple years building that, and then I’ll show you that business too. Right. So it’s I think the, the trick here is what is it you want to do?

Like, where do you want to create value? What are the resources and assets that you would need to use that value. And and how could you structure it in a way such that you could economically and, and sort of business logistics, reasonably peel that off and continue to use that in some way? Yeah. And, you know, you get into funny ones where you get like personal identity and content and, you know, you know, where a business, someone’s reputation like individual reputation is really tied to the business.

And what can they do and what can they not do? And I mean, you’ve heard of these kind of crazy horror stories of like, individuals that kind of lose their ability to, to in their personal identity in a marketplace because that is branded and it’s now part of this new company. You know, so it gets a little dicey when you’re dealing with some of the not intangibles and, you know, branded stuff. But are there any other.

Dr. Jeremy Weisz: 36:33

Do next things like that’s one example, you say kind of thinking five years from now, three, five years from now, you know, peeling something off license, you know, that someone can do separately any other interesting stories on how people start to think around? Because I know you work closely with people on this.

Bruce Eckfeldt: 36:55

Yeah. I mean, so I mean, typically there’s the financial asset and then there’s the strategic asset on the financial assets. You’re right. It’s pretty much math. Right.

Like you’re basically saying, here’s the business. If we can capitalize it differently, we can put some debt in it. We can, you know, smart capital. We can grow it in these areas. There’s clear opportunities for growth, like and there’s usually some kind of time frame like 3 to 5, maybe seven years on the outside that you’re going to sell again in private equity, you know, usually is playing these games.

That’s right. I’m just going to juice the current business, make a bunch of money, flip it and sell it to somebody else and, and and turn things around in those cases, you know, it’s a it’s a pretty I suggest to founders that that’s, that’s a pretty surgical just like okay, once you do the deal, if you want to stay on great, it’s a different game. But you’re you’re really done as an entrepreneur once you sell the Strategics are where this stuff becomes a little bit more interesting, where the underlying assets and capabilities and I like I was involved in one situation where we didn’t even know why the buyer was going to buy this company until after we did the sale, and then it’s then it sort of came out and we understood, oh, like why they wanted some of these assets and stuff like that. So you never really know. But I think the more that you can try to figure out, not so much what is what is the value to you, but what is the value to that other business that the buyer.

And that’s how you need to kind of structure the deal and structure the conversations and structure the the valuation and kind of the deal structure. Right. Because it’s it depends on what they’re going to do with it. It might be your clients, right. Like they’ve got some product.

You know, maybe you’re making $50 million a year selling to, you know, these 50 important clients. Well, if they’ve got some other product, they can make $200 million a year selling to. I mean, they just want your clients and oftentimes they’ll, you know, they’ll come and buy the company. They get rid of all your people. Right?

Because we just want the client list. Maybe we want some underlying technology, maybe we want, you know, maybe it’s access to a market, access to geography, maybe it’s a certification or, you know, some kind of license that you have or ability to operate in a certain place. Geographic expansion. Yeah. So the more you can kind of figure those things out, the more you can kind of understand where the potential deals are and where some of these opportunities have like maybe don’t sell, maybe just license.

Right. Maybe we do a joint venture right on this thing to get them into the market. Maybe we really don’t need the whole company or you know, you realize that they’re really just buying it for the client, so. All right. Fine.

Keep the keep the tech or keep a license to the tech if that’s really not why they’re buying things.

Dr. Jeremy Weisz: 39:30

No, I love that question is what’s what’s the value to the other business. And there was one example I love to to talk about, which is an internet security company. Can you tell people a little bit about that scenario?

Bruce Eckfeldt: 39:44

Yeah, that was a fun one. I mean, so this was I had sold my business and I did a couple of interim COO and CEO roles, and then kind of got more formally into coaching a couple years after I sold. And one of the first companies that I started working with as a coach at the time was probably 50 people. Yeah, there was 50, 60 people. And I started running strategy sessions.

We started doing planning. We started, you know, going through the scaling up Three Hag, like I had a couple of different tools at the time. And, you know, I grew with them. They grew with me. You know, we started doing I remember they did their series B, series C, and then ultimately a couple years ago they did a series D at 140 million.

And, you know, 600 people right there on the path to go public, you know, major, major backers. And it was just fun to kind of, you know, kind of parallel my own growth as a coach and their growth as a company. As I, as I kind of started with my, you know, kind of 5 to $10 million companies and started working with the 20 to 30 million and the 50 to 60 and 100, 200 million, like, as on one hand, as my coaching practice evolved and I saw kind of the different needs and the challenges and what I needed to do as a coach and then also like what didn’t change. Right? I mean, these companies have the same problems regardless of the size, right?

Like, you’ve got leadership issues. You’ve got management issues. You’ve got, you know, how do you set up dashboards? How do you create metrics? How do you focus?

How do you set priorities right? Like every company struggles with doubt about the size. So it’s it’s just been funny to see what stayed the same and what’s changed. And I’m sure I could have predicted earlier in the process what those things would be over time.

Dr. Jeremy Weisz: 41:23

What are some of the things that didn’t change? You mentioned a few like leadership issues. What else?

Bruce Eckfeldt: 41:29

I would say growth, communication alignment. Right. Like just getting clear on who’s doing what. Right. Accountability.

Right. All those things. It’s just it just keeps becoming an issue, I think. And I think it goes back to the, you know, growing a company is not purely additive. You know, it’s not just like you need to add and add and add.

I need to kind of add more skills. I need to add more capabilities. It’s as much as it’s additive. It’s is actually reductive to like, I need to undo a lot of strategies, techniques, processes, styles, you know, things, things that I do as leaders, right? I talk a lot about unteaching leaders things.

As much as I’m trying to teach leaders and get them, getting them to realize that that is Michael the Goldsmith book, what got you here won’t get you there, right? Like the things that actually were incredibly successful for them up to a certain point now become like obstacles and, you know, get in the way of, of getting into the next level. So, you know, I think those the, the, the interpersonal, the leadership style things, I think actually in some respects the bigger the company is, the simpler the strategy needs to be, because you’ve got to communicate it out to more and more people. And I think in the beginning when I was doing, you know, ten, 20, $30 million company strategy work, we could be, you know, pretty sophisticated. We could have these really kind of interesting angles.

And, you know, because we’re only trying to align like 100 people, 150 people. You can communicate those out things pretty well. But as you get up to 500 people, 1000 people, like your strategy has got to be super simple. It’s like, here are the three things we do to win, right? Here’s who we focus on right here’s here are the core processes right.

Like the more we keep that really simple it’s going to be good. But it’s got to be simple and clearly communicate it. I think that’s been probably the biggest challenge I’ve run into with the bigger companies.

Dr. Jeremy Weisz: 43:23

What have you seen with mistakes, with communication that people are making?

Bruce Eckfeldt: 43:30

My my favorite line is that the challenge with the communication is the illusion that it’s occurred. And I think a lot of particularly I just find this with CEOs a lot and founder CEOs is like like I told them to do this, I’m like, okay, well how and how many times. And were they listening and what was the context. Right. And what else was going on.

What else did you tell them at the same time? Right. It’s like, oh well, yeah, we mentioned it in this meeting, but six other things, and three other people were talking to them, and I also was telling them how upset I was about this other issue. Like, oh, okay. Like like, you know, you’ve gotta you’ve got to communicate it.

I say you tell them six times clearly in a way that they’ve they’ve responded accurately. And now we can talk about what their challenges. But until then we got to talk about what are you going to do differently to communicate better. Okay.

Dr. Jeremy Weisz: 44:17

Thank you I appreciate that. There was another person, you know, we’re talking about, you know, people raising 140 million. One person just said their outcome, which is success, was I’m happy to come to work again.

Bruce Eckfeldt: 44:34

Yeah. Yeah. No, I love this. It was pretty recently. Yeah.

It was in a nice business, 60, $70 million business. And, you know, founder, CEO. And she had she came to me not out of desperation, but a little bit of like, I don’t know exactly what to do next because I’m I’m really frustrated. She had to kind of clean house on her team and it was like, I get it right. Like these these challenges come in waves and it can get pretty disheartening.

And, you know, it’s it’s it’s hard even when you see, okay, this is the work that needs to get done. There’s clearly a path here. Like we can see success. We know that to to kind of go through that emotionally and to feel kind of beat up and bruised, you know, we spent a couple of months just kind of making some changes, getting some better people in, you know, restructuring things a little bit, you know, cleaning, kind of cleaning up a bit. And within a couple of weeks, you know, she came to me and she’s like, I actually like coming to work now.

And you know, for me, like, that’s the win, right?

Dr. Jeremy Weisz: 45:39

Like was it the just revamping the team or what do you think what were some of the things that I mean, I’m sure it wasn’t one thing.

Bruce Eckfeldt: 45:48

Yeah. So I think it’s a little bit of framing, you know, it’s a little bit of just like this is entrepreneurship and this is being a CEO, right? And there’s nothing there’s nothing surprising here. And yes, it’s hard. And yes, these are difficult decisions and difficult conversations and difficult things to go through.

And I think it comes down to kind of reframing it and then plotting a path. Right. Like once you kind of see it’s like, okay, like I know I need to I want to get to the top of this mountain. But if I don’t have any idea of how I’m going to get there, like it just feels impossible. Versus if I kind of see, like, oh, I see we’re going to go up the west side and we’re going to do this ridge, and then we’re going to hook around, and then we’re going to come up the backside to the summit, like, okay, yeah, that’s still hard, right?

Like there’s some super challenging, but at least I have a path. Like at least I see a way. And so a lot of what I end up doing is just plotting paths, right. Like, how do we how do we get to that goal? How do we define that goal?

Figure out which summit you’re trying to climb, and then at least have a sense of, okay, I think we can do it this way. Here’s our first base camp. Let’s get there. And then we’ll kind of sort things out, like progress? Being able to make progress.

Just starts creating some motivation. It’s like, okay, I can do this. Like this is not you know, it’s kind of there’s a psychological term of of learned helplessness, right? The whole study with dogs and being shocked and all sorts of things that would be inhumane today. But, you know, like if you’re if you don’t feel like there’s hope, like you won’t respond, right?

You will just sit there.

Dr. Jeremy Weisz: 47:14

So yeah, it’s a lot of work, I guess, to not only define these things, but then put the plan into action. I’d love to hear just briefly about your, I mean, your previous company whenever I watch other videos or like, this guy worked with someone like the pioneers of agile. So talk about your your previous company and some of the things that helped you grow, because I mean, going multiple times on the Inc. list, you have to basically, I don’t know, double every year or something like that. So Talk about your early company.

Bruce Eckfeldt: 47:51

Yeah, so I’ll even go before that. I mean, as you mentioned, I was an architect originally, right? So I was, you know, like building architect, like glass and bricks and mortar things, not computer architect. But I got into interactive media. I was doing a lot of computer modeling and stuff, got into interactive media in New York area and had, you know, was part of a big roll up.

So we were a 50 person company, got bought by a European agency, immediately became 1800 people, and I was running around Europe on projects. It was a lot of fun and had the opportunity to work with a gentleman named Ivar Jacobson, who is a what they in the development world in the 80s, something called object oriented programming. And there was something called the Three Amigos. It was he was one of the three people who really pioneered a really different way of thinking about software development, or software or programming architecture, programming software architecting software. And he’s turned me on to something called.

Originally it was called Extreme Programming. I had a chance to work with them and kind of got me hooked on the whole, like, how do we actually develop software products? And so I got deep into extreme programming and iterative agile was the early kind of versions of lean agile software development. And so we started the software development company really as a way to do some projects. We had an opportunity to work on some folks work with some companies on developing software systems.

And, and I just I was very intrigued with this idea of how highly iterative customer feedback driven software development, which, you know, in the beginning, at the time, people extreme programming, like we were jumping out of planes with laptops or something or like it was it was poorly labeled, but it was a really different way of thinking about the process and not only about software, about the whole kind of product development and business development that’s fueled all the lean startups and everything like that. And so so we kind of got into it accidentally. All right. And we had a project that led to another project, and I do a lot of projects. And pretty soon I realized, okay, we’ve got a company, we started hiring people and that led to a new project, right?

So it was kind of a snowball thing. And actually, one of the things I actually give us credit for is actually not growing as fast as we could have. And being reasonably disciplined about, like, I, I don’t think I ever worked a weekend in my company, which is a little unheard of, I think, for, you know, growth companies like that. And it was just because we had some principles around, you know, let’s stay really focused. When we’re at work, we’re going to be really focused and we’re not at work.

Go recover, you know, spend time with the family, do other things. And I think that served us well. And, you know, we had some pretty big setbacks. We lost big clients. We had to kind of rebuild things.

But, you know, it was being clear on like where were we were generating value and how could we continue to stay focused on that. The other thing, too, and one of the reasons I sold it is, you know, we were early, right? And we had we could see, you know, our, our the, the rates that we were charging were kind of going down. The cost of our developers were going up. I saw these lines converging at some point.

And so you realize as an earlier stage company, like things mature and there’s probably either we’re going to have to really grow or, you know, I decided to tap out in the sense of like, I didn’t I didn’t want to do that big roll up. I didn’t want to be a 5000 person company and was happy turning over the reins to focus on other things that I wanted to do, you know? And that was a personal choice, right. And I a lot of the challenges and these decisions are like, okay, what really is important and deciding where you want, what paths you want to go down on those things.

Dr. Jeremy Weisz: 51:13

Bruce, I have one last question. I know we have a couple minutes. I do want to point people to your website. If you checked out the video, it’s eckfeldt.com he does have a assessment that he can he can share with you. And I always learn a lot by listening to you. And even before this call was a good excuse for me to do like five hours of just listening to to your, your lessons. I’d love to hear some of your favorite books resources over the years. I know scaling up is one of them.

Any others that people should just, you know, definitely check out?

Bruce Eckfeldt: 51:48

Yeah. So I tend to not to burn. Well I’ll I’ll mention burn here. And scaling up was certainly influential in my business. And obviously it’s been a core part of my coaching.

Shannon Susko who wrote 3hag Metronome that’s I’m also certified in that framework. You know, they both have amazing tool sets and have done amazing work and hugely helpful for businesses. So I always recommend those. I mean, for me personally, I think The Goal Eliyahu M. Goldratt and I pretty much give that to all of my yeah, give that to all of my CEOs. Right.

It’s just kind of like core reading, just the philosophy of systems, you know, sort of systems thinking and bottlenecks and root cause analysis. To Sell is Human. Dan Pink is another one that I give to a lot of my CEOs, because I think that the whole selling, you know, like selling is huge for growth companies. And if you don’t have a good mindset around selling, that can be a challenge. Marshall Goldsmith’s What Got You Here Won’t Get You There

You know, it’s a good one just in terms of understanding leadership and growth and an unlearning, right? Like I do a lot like really focus on like, how do we get rid of strategies that are actually going to hold you back? I’m looking at what other ones I have right here. Those are the main oh Blue Ocean Strategy. I mean, I think that’s kind of a core one and really understanding differentiation.

And how do you create differentiation in the market. And I use that a lot with the businesses that I work with. What else is there? Those are the main ones. Oh Annie Duke.

Thinking. Thinking in Bets. I reference a lot. You know, business is poker, not chess. So love it.

Bruce.

Dr. Jeremy Weisz: 53:18

Thank you so much. I really appreciate it. Everyone check out echo com to learn more. And we’ll see everyone next time. Bruce thanks so much.

Bruce Eckfeldt: 53:26

Thanks, Jeremy.

Outro: 53:26

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