In this strategic episode, Brandon Woodward, Managing Partner of Woodward, Kelley, Fulton & Kaplan, shares legal insights for building wealth management teams. If you struggle with exit planning or asset protection, you won't want to miss it.

You will discover:

- Why a knowledgeable attorney maximizes stage 6 exit value

- How to reduce personal spending to boost business profit

- What external advisors align for seamless wealth transitions

This episode is ideal for for Founders, Owners, and CEOs in stage 6 of The Founder's Evolution. Not sure which stage you're in? Find out for free in less than 10 minutes at https://www.scalearchitects.com/founders/quiz

Brandon V. Woodward, Esq., has been an expert business attorney for over 25 years. Brandon has closed hundreds of millions of dollars of business acquisitions and is the current President of the Martin County Bar Association. In his career, he has earned the “AV-Preeminent” peer rating (top 7% nationwide) and taught business law at the university level for many years. He is passionate about business and aiding others in the success of their business(es).

Want to learn more about Brandon Woodward's work at Woodward, Kelley, Fulton & Kaplan? Check out his website and get a free copy of his Whitepaper at https://www.wkfklaw.com/

Mentioned in this episode:

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Founder's Quiz

Hello, hello and welcome. Welcome once again

to the start, scale and succeed. Podcast, the only podcast that

grows with you through all seven stages of your journey. As a

founder, I'm your host, Scott Ritzheimer, and today we've got

an incredible episode for all our stage six business owners

out there, for years, you've honed your ability to build your

leadership and executive teams inside your business, but now,

as an owner, you need to be able to build your team outside of

your business. This is your wealth management team, and one

of your first picks should be a knowledgeable attorney. Now,

what does that mean? Well, you want someone who understands not

only the business world and how it works, I'm sorry, business

law and how it works, but also business owners and how they

think and here to help us navigate some of the biggest

opportunities and threats that you'll face at this stage is

attorney Brandon Woodward. Now. Brandon has been an expert in

business, an expert business attorney, for over 25 years.

He's closed hundreds of millions of dollars of business

acquisitions and is the current president of the Martin County

Bar Association. In his career, he's earned the AV Preeminent

peer rating, that's the top 7% of attorneys nationwide. He's

also taught Business Law at the University level for many years,

and he's passionate about business and aiding others in

the success of their businesses. Well, Brandon, welcome to the

show. Excited to have you here. Absolutely. There's so much that

we can cover in the world of business law, but today, what I

really want to zero in is this world of late stage business

ownership. So we've got this very real challenge that comes

up of having time and money, right? Is it something we fight

for all our career, and then all of a sudden we have it and we

don't know what to do with it. It's a real challenge that folks

often get caught off guard by. And so what I see happen a lot

in this space is folks, business owners, very successful, astute

businessmen and women, make some really bad financial decisions.

So with over two decades of experience in this space, how do

you help your clients to think differently about their business

and their wealth at this stage?

That's a great question. Scott, it's when I get

them in my office. It's usually because they are either starting

to think about an exit strategy, and usually the spark for that

comes from a wealth advisor, a financial planner. Might be

their accountant, somebody like that. Or, unfortunately, a lot

of times it comes from their doctor. And you know, they've

gone through, they've done very well, but all of a sudden, you

know that little, that little tick, that little flutter, is

now something bigger, and they realize they either need to slow

down. They, you know, they don't want to be at the office or at

the plant, at the at the shop every day. A lot of pressures

come from internal in the family. You know, the spouse

doesn't want the business owner, you know, to go into work every

day. You've given 2010, 2030, years, you know of your blood,

sweat and tears to this endeavor, you've achieved some

success. You've gotten some creature comforts. At what point

do we say? Okay, let's start enjoying them. Let's think about

taking some, if not all, of our chips off the table. And we were

chatting just a bit before, before air here. A lot of things

are out there. There. It's, I don't know if anybody really

wants to go into business, to be a shoe manufacturer their whole

life. I certainly don't want to be a lawyer my whole life, till

the with my last breath. No, I want to go see the Amalfi Coast.

I want to go, you know, take my kids. They're grown now, but,

you know, I've got to take some kids and take the family out and

do some cruising and things like that. Really enjoy, you know,

some of the successes you have. It's a much, much bigger world

out there than going into the office every day. So that's when

they come and talk to me, generally, at the at the

suggestion of, you know, one of their other advisors.

yeah, and there's a hand. There's, like,

an infinite number of ways to get some of the chips off the

table, but there's a few I want to dive into, because I seem to

bump into them a lot with folks who listen to this show and

folks that I work with directly. And one is the inside deal, if

you will. Right? There's the heir apparent, maybe not

related. We'll get the family stuff here in a little bit. But

that trusty right hand man or woman who's been with you all

those years, who wants to buy the company from you. Where does

that go right? Where does that go wrong? How should a business

owner think about the next generation of leadership in an

environment like that?

The One of the problems with the key man is the

kind of phrase we use for that you've got a trusty right hand

man woman, and that's a key employee that knows the business

inside and out. Is the problem is they don't have enough money

to do it. And well, okay, how do we get them to have enough money

to buy out the company, to buy out the owner of the company? At

the actual value, or even close to it, setting up for seller

financing. That is okay, this person is going to buy you out

over five years or 10 years out of the profits the company

already has. Well, that doesn't make a lot of sense, because why

would you do that? I mean, the company's making money. The

money be yours anyway. You're buying yourself out with your

own money now. And by the way, if it doesn't work and the key

man and key employee does not run it as well as you did,

there's nothing for you to get back, right? There is no funds.

The company will founder, and you're kind of done, however

talented that right hand person is the solution to the key man

problem is some is start working with that person to find them a

source of income, or find them a source of funding, not yours.

And that is SBA lending, that is conventional lending, that is

maybe in three to five years prior to a takeover. Start

increasing benefits to that or bonuses to that person, saying,

Okay, your bonus this year is 25,000 your bonus is $100,000

I'm not giving it to you. I'm keeping it, but I'm giving you

5% of equity of the company, a rolling, slow takeover. Again,

that that's not a great solution. That does take

documentation, usually drawn up by an attorney, you know, and

some real stick with this, stick with itness to get it done. The

easiest and cleanest way is to make it a cash sale. And the

thing that makes lending popular is the success in the balance

sheet of the business. So you are helping that key employee

borrow the money to pay you and buy you out by having a well run

low debt, if any debt, sort of business. And I mean, that's how

we get we suggest we start doing things for a key employee that

just doesn't have a rich uncle to hand them. The value of your

company.

Yeah, yeah, it's so true. There's a another

approach, if you will, which I see a lot, and that is

succession within the family. One of the things that tends to

complicate that, as you know better than I do, is other

family members and how all of that works. So you have the

daughter who's very active, and you've got the three sons who

are surfing or whatever they do, I don't know, but how do you

help? How do you help owners to navigate that space, especially

when family members are involved.

I think the the the the trick to that one

is, is to have a slightly uncomfortable conversation. But

even before you do that, go talk to a very, very good estate and

trust attorney, an attorney that's going to help you put

your legacy. I don't use that word very often, but your your

final wish is, what is it all going to look like on the other

side of the great beyond? Okay, daughter got the business. The

three sons are going to be pretty well. We got nothing. Is

there a way to true it up, one way or the other, such that, you

know, the business you know, writes a loan. You know, writes

some lending document to each of the sons, so they do not get any

sort of management control, but they still share in the proceeds

of the company up to a certain point, at which point the

company now belongs to the daughter and but they have

gotten equivalent value that is absolutely a joint endeavor

between your wills trust and estate attorney and a business

attorney, because the business attorney doesn't write the will

or the trust, and the state and trust attorney should not be

writing any sort of succession plan documents. So it's a joint

endeavor, and we do it quite often.

I'd be remiss at not bringing this up, because

likely the most common approach, but selling outside of the

business, sometimes there's a pretty big emotional toll on

that. There's a feeling of safety in your key man taking

over for you or a family member, carrying on the legacy, to use

the word that you just shared. Sometimes it can be hard for

founders to let it go to the wild unknown. How do you help

them process through that type of a decision?

If there's a key man, and the key man is

either unwilling or unable to take it over, you got to have a

good conversation with that key man, saying that I have to you.

Do have to look out for number one at this point, you didn't

adopt your employees. You they may feel like family, but at the

end of the day, they're not. The logo for my law firm is a shark.

So anything I say that sounds just a little bit edgy or a

little sharp, it comes from a very, very black and white

numbers business sort of mindset, not being hard. But the

bottom line is, if a key man can't afford it or doesn't want

it, then it absolutely has to go to a you know, outside of the

company, Business Brokers exist out there in the world for a

reason. I like a few of them. I don't like most of them because

I don't think they have I think they are salesy and sometimes

slick. But if you can get. Get involved with or close to a

business broker that has experience in your industry.

There's an entire company that all they do is buy and sell

veterinary practices, from retiring vets to new veterinary

new veterinarians right out of school, and they even have the

financing to do it. It's a phenomenal and so those exist in

almost every industry, area, manufacturing, professional,

podiatry, I don't care. It's out there and you work with a

broker. A broker gets a piece. They get paid for this, but then

the sale happens, and it's usually cash, and that does make

it go, takes your company and out of your hands, and then, you

know, puts cash in your pocket. Yeah, with family, like I said,

if the family doesn't want to do this, let's say there's, there's

no daughter, it's just all surfers in it. That's like, Hey,

I'm selling the company. I have a private equity that wants to

take it over. The company is going to, they're going to

install some manager to keep my pest control company running

they just care about the book of business. It's Insurance Agency.

Insurance agencies don't actually need an owner at the

top. They just need people running it. We're all going to

make X, you know, seven figures, hopefully multiple, seven

figures, maybe eight, and we all get to retire together. Yeah. I

mean, that's a great story to tell the kids.

Yeah, for sure, that's awesome. There's

another thing that's happening at this stage, and kind of going

back to our intro a little bit, but one of the transformations I

see folks make successfully here is going from being a business

owner to an investor, right? And having an investor mindset in

terms of either how they deploy capital after a sale, how they

invest their time into other into family, or into other

pursuits, and they there's this mindset shift that has to happen

from like my business to my enterprise, if you will. Have

you seen that happen? And how do you see business owners,

particularly approaching the space of mergers and

acquisitions.

A couple things, a lot of times in the

physicians practice, if the physician is younger, a lot of

times that physician will be given an executive position

somewhere upstream in the company, either to find other

businesses, or as a floating physician amongst, you know, all

the, you know, a dozen practice areas. They don't have to run

it. They can call their own. They work the days they want on

a per diem, so that keeps their hand in the practice or in the

what they like to do. And a lot of guys, men and women find, you

know, some satisfaction and joy in that if they are simply

selling out, then it's retirement like any other. And

then, while I'm not the best advisor for that, that's a

financial planner. You know, it's like, okay, did you always

want to go see Spain? Can now go you know? Now what's interesting

is, is when I get husbands and wives, and I'm not being sexist

at all, but husbands, particularly in manufacturing or

or one of the service industries, air conditioning,

pest control, you pick it. They want to go down to the shop.

They want to smoke cigarettes in the shop, disperse the crew, the

roofing crews are all going to go out and he's going to kind of

putter around and do some inventory. But it's the, it's

the hard working wife or spouse. Again, I'm not being sexist one

way or the other, but she's been HR for all these years. She has

been, you know, doing the books, arranging for a line of credit

when you know the covid happened and we couldn't afford anything,

all these things happen out there. So that's why you want to

make sure that you know it's time to go. And when it is time

to go, you're kind of ready for it. Nothing lasts forever. It's

just you want to be out of your business, you know, with, you

know, with your health, your wealth, you know, and your mind

all intact. And I do advise them, money now is way better

than money later. Well, I'll just run it for another couple

years. Maybe the market gets better, or I'm just close to

getting that next big government contract, and I'm like, what if

it doesn't happen? You can pursue two tracks. Every I tell

folks be be for sale all the time. At some point somebody

wants it more, wants to run it more than you do.

Yeah, yeah. It's so true. It's so true.

Well, Brandon, there's this question that I have asked all

my guests. I'm interested to see what you'd have to say, but in

the context of everything we've talked about here today, what

would you say is the biggest secret that you wish wasn't a

secret at all? What's that one thing you wish everybody

watching or listening today knew?

The one thing I wish wasn't a secret. We

touched on it briefly, as you don't have as much time as you

think you do. And again, it sounds like I'm wearing the

black hat. I'm certainly not death incarnate. But at the same

time, like I said, You do not know what tomorrow is going to

bring. Like I said, be for sale all the time. Be always looking

for your way out. Out. A friend of mine always said, The ride's

always a little smoother when you know where the emergency

exit is. And that's true. The other thing is that you're not

alone in all of this. You have, and you mentioned that your

executive team, you know, by this stage of your business, you

should have a bookkeeper, and probably now a CPA, if your CPA

is also functioning as your CFO to say, Okay, we're going to buy

some more x we're going to get rid of some vehicles. We're

going to have some we're going to have new equipment. We're

going to renew all of our government contracts on long

term contracts. We're going to own real estate versus rent real

estate. We're going to rent real estate. We're going to do it on

a long term lease. All of those position yourself for sale, and

that's what you know. If you're just focused on just grinding

every day and hustle and the struggle, I hope you pass that.

But you're not alone. You lean on that team you've developed.

Add, you know, add a, essentially, maybe a business

broker, that contract, CF fractional, CFO business lawyer,

and then absolutely your financial planner. And those are

the ones that are like, Okay, what is it going to look like

four years from now, three years from now, two years from now,

now, and start with the goal, five years from now. What does

it look like okay, to be there. What do you have to do in two

years? To be there in two years. What do you have to do now? And

that really, if that exercise doesn't crystallize what you

should be doing at your desk every single day, I don't know

what does.

Yeah, there's probably some folks listening

who are like, yes, absolutely still don't know what that next

step is, but you have a white paper that you've made

available. What is it? And where can folks find it?

Sure it's at the end of my website, which is

wkfklaw.com. Whiskey kilo, Foxtrot kilo, l, a, w.com, and

we wrote it for the folks that are, you know, thinking about

selling a closely held business, a family business, whether it's

a physician, single owned mom and dad, a couple of brothers,

maybe it's Mom, Dad and son, things like the you know what

we've kind of talked about, it's the team you want to have around

you, and the steps you want to take in the two, if not three,

years prior to even thinking about exiting. There are things

you want us do to really position yourself financially,

to get the highest number, get the largest market value for

your company, and then address some of these other issues we've

talked about. I tell you the number one thing is, is stop

putting expenses through your business. And when you're an S

corp, everybody loves this right off the bat. You need to stop

doing that three years out, because we want to blow up that

profit line. I don't care how you measure profit, EBITDA,

anything, but how you want to make that very, very large and

then take that and then, yes, you'll be paying some taxes on

it. But from the outsider, when I look at a set of financials, I

see growing very large profitability. I will buy

profit. I'm not going to buy the fact that you have two of your

kids working as billers, or they're they got no show jobs.

The spouse, again, I'm going to pick on husbands. You know that

the husband is slapping the American Express down at Costco,

you know, for $500 every other week, the boat, the vehicles,

the trips. Look, you've done that for a long time. It worked.

That's tax efficient. Now I need you to not do that for a couple

of years. So that way, your profit goes from 100,000 or

500,000 to 700,000 to 900,000 because most industries, and if

you talk to a broker or somebody like me, you're gonna get a

multiple of that. I would like a multiple of 700,000 versus a

multiple of 300,000 every single day, that multiplier is 234,

medical practices are getting eight, nine and 10. Yeah, 10

times that. That's real money, and it's a very hard thing for

people to see that. Hey, I need to throttle back on living in

the business. Hey, look, we do it here at my law firm. Each

firm, each partner has our own little fund of things, but our

law firm isn't for sale. Yeah, same time your your listeners,

businesses generally should be. Don't do that. My white paper

gets into that a little bit, but also talks about, have an

attorney, have a book, have a CPA, a business broker, if, if

you want to have that conversation, and all three of

us will tell you exactly that same that same point.

Yeah, fantastic, fantastic. Well, on

that note. Brandon, thank you so much for being on the show.

Really a privilege and honor having here just great advice

and wisdom in each of your responses. I appreciate it. And

those of you watching and listening, you know your time

and attention mean the world to us, I hope you got as much out

of this conversation as I know I did, and I cannot wait to see

you next time. Take care.