If you are thinking about selling a business, we hope this podcast inspires action.
RHP Wealth Management Partner Natalie Picha and Market Talk Episode 33, guest Matthew Goldston of ABIP in Houston, discuss navigating the current M&A market conditions, following sound exit planning methodology, and why the ostrich approach to running your business does not model well.
Experience the difference of working with a firm that empowers your life—a firm that focuses on what matters most—you.
Whether you are beginning your financial journey now or have already taken steps toward your ultimate life goals, we are here to guide you.
https://podcasts.apple.com/us/podcast/rhp-market-talk/id1538051530
If you are thinking about selling a business, we hope this podcast inspires action.
RHP Wealth Management Partner Natalie Picha and Market Talk Episode 33, guest Matthew Goldston of ABIP in Houston, discuss navigating the current M&A market conditions, following sound exit planning methodology, and why the ostrich approach to running your business does not model well.
Experience the difference of working with a firm that empowers your life—a firm that focuses on what matters most—you.
Whether you are beginning your financial journey now or have already taken steps toward your ultimate life goals, we are here to guide you.
https://podcasts.apple.com/us/podcast/rhp-market-talk/id1538051530
Welcome to RHP Market Talk , Episode Number 33. Produced here in Houston, Texas, by RHP Wealth Management, an independent financial services and investment advisory firm. I'm Natalie Picha, and today I am joined by our special guest, Matthew Goldston, Partner, Chief Growth Officer, and Business Advisory Practice Leader at ABIP, CPAs, and Advisors. Welcome Matt.
Matthew Goldston:Thank you, Natalie.
Natalie Picha:I am so glad to have you. This is going to be a really interesting conversation. So, just prior to us doing this recording, I was like, wow, Matthew. CPA, CVA, CM&AA, CEPA, Partner, Chief Growth Officer, Business Advisory Practice Leader. That's a lot!
Matthew Goldston:It is. It is. And it's been a career of credentials, career of credentials.
Natalie Picha:But I loved what you said about what's your favorite title.
Matthew Goldston:Grandfather.
Natalie Picha:There you go. I love it. That's, that's perfect. That's perfect. So Matt brings over 30 years of public accounting experience within various roles of practice leadership and business advisory. He spent over half of his career in the industry as a private equity-backed chief financial officer. And during his career, Matt's been involved in and furthered many successful transactions, both on the buy and the sell side, which is a lot of what we want to talk about today. He also graduated from the University of Houston with a Bachelor of Science in Accounting and Finance. He enjoys public speaking, including moderator roles, and is typically involved in M&A and exit planning. He writes for Forbes on their Forbes Finance Council, and he also serves on the board of Sky High for Kids and the board of the Economic Alliance Port region. And so I have to ask you, you know, my heart, RHP, we're passionate about Sanctuary Foster Care Services. And so we do a lot of things...for all of our listeners out there, if you go to any of our social media, you'll see that we really encourage and support that group. But tell me a little bit about the board of Sky High for Kids.
Matthew Goldston:Certainly, it's remarkable. It's a mission, and the leadership and the team , our advisory board, we work together to raise money and raise awareness for children with cancer. And the goal is to end it, too. For it to cease to exist. And it's one of my greatest pleasures to be part of it.
Natalie Picha:That's awesome. That's awesome. So, in addition to that, writing for the Forbes Finance Counsel , how did that come about?
Matthew Goldston:Yeah, that was an invite that I received out of the blue. And at first, I...you know, checked it for spam or that sort of thing.
Natalie Picha:Yeah, of course.
Matthew Goldston:And then as I engaged and talked to them about that opportunity, I , you know...I found it to be a really great way to talk with other CFOs and CEOs. Get a good bead on what's going on in the general marketplace.
Natalie Picha:Yeah.
Matthew Goldston:I enjoy writing for them.
Natalie Picha:So you know, in preparation for our conversation today, I actually went and grabbed a couple of articles. Which we'll talk about one here in just a minute that you just recently were involved with. But I think it's pretty cool when you get the opportunity to really speak into others' lives. Which really is what it means to be an advisor. So, you know, here at RHP, we think of ourselves as the people that are going to walk hand in hand with the family as they design a life that matches their value system. Yeah . I love that this conversation is happening because what you do is walk alongside the business, right? And that's kind of your role. And even as we were getting ready to get together today, you said exit planning is just good business. That's right. What do you mean by that?
Matthew Goldston:You know, exit planning can be a defined process with an intended time horizon. Exit planning could also be how we manage our business today. So implementing the same methodology that we would implement if we were to plan to sell a business in three years is not all that different than what we would do if we began today. So looking strategically at the business, what are the core components and values of the business? And how do we work to mitigate risk or enhance value? Those are steps that work in everyday business intent with an intended exit or not.
Natalie Picha:Right. So whether you're deciding today what's going to happen in the future, right ? You should still be doing these things, right, regardless. Right. Well, I liked the last article that Forbes Finance Council actually produced, which was 20 Strategies to Improve Cash Flow and Working Capital Management for Leaders. And I was thinking, that's not really an exit strategy. That's something you should just be doing. Right. On a regular basis.
Matthew Goldston:Right. You know, within our exit methodology, we do capture benchmarking. We do capture goals as it relates to cash flow . Cash flow is a key driver in the value of a business. But knowing strategically the cash that we need to get where we intend to go, that is an important number to hold and know. So that I recall that article, it was around establishing the cash that we'll need. You know, I've seen businesses grow out of business rather than go out of business. Because they don't have the cash flow to grow with the business and all of the working capital needed to continue to churn and turn that growth. That happens all the time. So it flattens the growth curve at some point. If we look out far enough, we may have a good sense of when that will occur. So we can mitigate that risk if we're able to do that; if not, then we go into that cash crunch well in advance, knowing that that's going to happen.
Natalie Picha:Right. Could you tell me a little bit more about your methodology?
Matthew Goldston:Sure. You know, the methodology that I and we've adopted at ABIP is the exit planning institute methodology. One of my credentials is CIPA- Certified Exit Planning Advisor. They have a wonderful program that synthesizes the process of taking a business from today to a successful exit, whether that's a defined period, as I mentioned earlier, or planning for an indefinite exit. Always being ready is a way to say that. Because a lot of these opportunities for a business to sell are unsolicited. And if you're ready and you've gone through the steps to be attractive, you position yourself well to receive that unsolicited call; you really maximize the value of your business, which is, at the end of the day, the goal. Because you work so hard, right? To create and grow the business. It makes sense. It's good business sense to make sure that you maximize a return at the end. But the process is identifying very early on what we call a triggering event. We identify what is a person's personal goals. In other words, what will they do after the exit? Golf. I'm a golfer. I couldn't do it as a lifestyle. I like to fish. I couldn't fish for a lifestyle. Right.
Natalie Picha:You couldn't fish every single day?
Matthew Goldston:I don't believe so. I'm a partner at a CPA firm, so that's some of my identity. What happens often is sellers of a business; we can help them get out of the building. And we want to make sure they're not stuck in a stairwell. That they have a full vision of what they'll want to do. And you've brought up some wonderful missions and initiatives that a person could attach to, but it's identifying personally; what will a seller do? You know , on the other side of a transaction, identifying what is the business worth and what will it ultimately transact for? Along with this is my favorite part, partnering with you. Because a seller needs to sit with you and identify what are my cash needs.
Natalie Picha:Well, I mean, as you're even speaking, I'm matching up your methodology to what we do on the individual side. And much like you said, not wanting to leave someone in a stairwell. You'd be surprised. Or maybe you wouldn't. You probably wouldn't be surprised, but our listeners might be surprised to hear how many times I sit across the table from someone. And when I say, okay, what's your goal? What's your value? What's the life you want to have? They can only equate it back to a number. And I will often say a number's not a goal. Right. Because ultimately, you may make your bills every month. And you may have extra money sitting the in the bank. And you may have a lot more money than you ever thought you would have over here. But that doesn't get you up in the morning. Like, you literally don't know what to do when you get up the next day. If you haven't really thought through the life, the legacy, and what you're going to do moving forward. After you've really put in all this time and effort to get to that day.
Matthew Goldston:That's right. And you know, all types of surveys of people that have exited say that greater than 50% of those sellers are unhappy regardless of the amount that they get as part of their exit. It's very tied into the why. Why do I get up in the morning? That's key. it's key to know that today in the workforce. It's key to know that tomorrow when I won't be.
Natalie Picha:Right. Right. Absolutely. Oh my gosh. Okay. So we've talked a little bit about the methodology. How does someone, I mean, obviously, if they're going to work with our team, you just have to call and set an appointment? I'll talk to you. You know, right?
Matthew Goldston:I'm sending them to you.
Natalie Picha:I don't have a problem talking. And I love digging in with people and figuring out kind of what makes them tick. How do they get started with you? And then I want to talk about why I think people don't actually take that first step. But if they wanted to work with you, how would they do that?
Matthew Goldston:You know, a lot of times, it's happenstance. A lot of times, a CPA firm will get a call because a CFO left a company. Right? And now, so they , they need someone to just, in essence, sit in the chair until they replace that person. As we engage in that role, we begin talking about, you know, what would you think is a fair value for your business. You're wrong. It's not worth that. It's all the time. Right. You're wrong. It's not worth that. But let's talk about what it could be. And as you start to bring that type of approach into the day-to-day activities, the owner starts to see that what I'm doing matters. What I'm doing aligns with what I did with Royal Harbor and my plan. So I am fully aware of where I'm going and know that each step is moving me in that direction. It allows a seller to step away from the transactional. You know, day-to-day cost x, cost y. If we are moving in a way that's going to get you two times your exit. That's in your head. And , a lot of times, it's being able to even transact. Because a lot of deals fail because it is an uninformed seller goes into a market. It's an efficient market, and it's not pretty.
Natalie Picha:Right.
Matthew Goldston:It's not pretty. Typically, it's not pretty when a seller meanders into a sell process.
Natalie Picha:No, it's not. It's not pretty. I've been party to some of those, and it's not, it's not fun. What about those individuals that are looking to transition to the next generation? I think sometimes that's even more difficult. Because you got family dynamics involved, you may have outside family members that aren't involved in the business at all. But I do think...and my experience has been, that just like you would be doing in a regular sell transaction, you should be considering all of these things and what those values and numbers are, even when that next generation steps in. How do you see that play out?
Matthew Goldston:Certainly, you know, when you talk about the why... I understand a patriarch matriarch wanting to pass the business down a generation. What often happens is the younger generation doesn't want it. So it's for...
Natalie Picha:...or at least not in its current form.
Matthew Goldston:No. That's right.
Natalie Picha:That's right,
Matthew Goldston:They want the benefit of it , in instances . So really having a rounded conversation to give the generation that would receive in that transaction a full understanding of whether or not that's what they truly want. Because you don't want them trapped in the stairwell either, right? They never wanted to be in the building. And that happens as well. So the failure rate as you pass a business from generation, generation increases significantly to second to third. Third, it's abysmal that the business would. It would continue as a going concern, which is sad because that's only one option. And it may be that everyone would be happier with a well-planned exit and cash off of that transaction so that everyone within the family can then do what they want to do.
Natalie Picha:Well, and I love...we've had the pleasure here of working with some amazing families. Opportunities to create things like family foundations. Where the values of that family can be carried on. For multiple generations. And there's just a lot of good that can be done in this world as a result of that. It's pretty astounding. Here's a good question for you. So, you get through... Let's just say it's someone who hasn't thought any about any of these things at all. Just it's not even on their radar, quite frankly. They don't want anybody meddling in their business. Right? And they've been doing it the same way forever and ev er a n d e ver. Right. How do you get people? And I struggle with this, too... I have to put a plug-in for Women and We alth. It's one of my passions. Right. It's why I'm out there doing these Women and Wea lth seminars because I want to inspire people to take action. Because I know that there's good on the other side of taking some steps. And one of the great business books I've read is The Four Disciplines of Execution, 40 X. Now, and I'm not great at it. I'm not goin g to s ay I'm really good at it. But I will say that you know, the idea behind that is that until we start to move and change and take action, nothing happens. Right? So how do you inspire, move, or get someone to make a change or take action on these things?
Matthew Goldston:You know, it's a great question. And it happens day in, day out. It's uncomfortable for business owners to take their heads out of the hole as the ostrich approach, right? Ostrich's approach has worked for X number of years, but the problem is that it doesn't model well. So if I can say or get a response that would have someone just lift their head out of the hole and look around, then that's progress. And that's typically what I'll do in those types of conversations. You know, bringing awareness to ostrich cash management is terrible. Ostrich's exit planning is terrible. Neither of those model well. Neither of those is likely end well. So, I think it's an awareness that we're responsible to bring to the marketplace, frankly.
Natalie Picha:Yeah. Trying to. So I'm going to throw this one in . We didn't discuss this beforehand, so I hope you got a good answer.
Matthew Goldston:I'll do my best .
Natalie Picha:How do you feel about the current market environment with the interest rates and everything that's been going on? You know, here we are, post covid by...I don't know...depending on who you are, maybe a couple of years. Yeah. And just looking at the M&A market as a whole, I know there's been a tremendous amount of consolidation, you know, in our industry as an RIA in recent years. What do you see on the current landscape, and how do you navigate it?
Matthew Goldston:Yeah. With interest rates, the way they are with credit, as tight as it is. And cash flow reduced and levered transactions. There, it's creating some inefficiencies within the market. So, private equity, right? It is deep in cash. Deep in that dry powder, we call it. Right. They're positioned well to get a transaction done. That and a leveraged buyout may not be successful in this market. So as a seller, you know, you have limited options in this type of market condition. Now that said, we still have an aging entrepreneur...a fleet of entrepreneurs...an aging fleet of entrepreneurs that need to transact. Right. The baby boomers. Is this group , and, you know , working through market cycles is, easy to do when you're 35? It's different when you're 70.
Natalie Picha:Right.
Matthew Goldston:So there's this impetus to have these discussions and drive these transactions, even though there's now a core component of the marketplace that's unable to transact because there's no bank backing. It will come back.
Natalie Picha:Yeah, of course it will. Yeah .
Matthew Goldston:It's having a plan in place that prepares your business outside of the market conditions. So that when those market conditions are correct, you're ready to affect a sale . Whether that's unsolicited or it's a planned and timed event through your process.
Natalie Picha:I think what we do, runs very parallel to one another because we say similar things to the individual. That is if your plan is well thought out. If all the components are there. We will weather market storms. Right. We will. We'll get through them. It's a cycle. It happens similarly, and I think that's what you're saying about the business. Yeah. You know.
Matthew Goldston:If I run into an executive that's ready to sell their business and they've not met with you, we have much to do.
Natalie Picha:Right .
Matthew Goldston:Before we're ready to transact.
Natalie Picha:We have to start way back there.
Matthew Goldston:That's exactly right. Right. We run at different speeds, but we run together.
Natalie Picha:Yeah, absolutely. Okay. I didn't mention this in the opening. But I have to ask this because it's in your bio, right? It says Matt's personal passion is agri-tourism and real estate. He particularly enjoys time at his family's Kona Coffee Farm. Now, that's not something I get to say about many of the guest speakers here. Just so you know.
Matthew Goldston:Well felt led to do that. We do own a coffee farm. The gist of it is I love traveling and spending time with my family. With my wife. With my grandson and with all of my kids. And the agri-tourism is a wonderful space, and I enjoy being part of that.
Natalie Picha:Okay. One of these days, I'm going to have to get a sample of that coffee. That's all I can say .
Matthew Goldston:You absolutely will. When we get some, you'll get some.
Natalie Picha:Okay! Oh, it's one of those kind of farms. I get it. I see. Okay. Well, thank you, Matt. I really appreciate it . Do you have anything else you'd like to share with us today or share with our listeners?
Matthew Goldston:You know, I think that working together, whether it's ABIP or Royal Harbor and attorneys, insurance providers tax , advisors, you know, finding a group of people that a seller's comfortable working with is the key to a successful exit. No one of us has every component of what's needed to get a seller through a transaction. I have personal experiences where deals have failed in the marketplace, not because the company wasn't ready. Maybe the leadership team wasn't ready. Right. In a private equity-backed world, you have to have full alignment between the private equity firm and the management team. But getting everyone within the same room and working together to address concerns. And mitigate risk is so key. And sellers, whether they know it or not. Meaning whether they intend to sell or not, will have a much more stable business if they listen to the advisors in that room.
Natalie Picha:Right. Right.
Matthew Goldston:And I've seen it time and time again.
Natalie Picha:Well, and having perspective, just walking with people...together. I truly believe that collaboration is how you reach a successful point. Anything in your life, I think you just...you don't...none of us get there alone.
Matthew Goldston:Right, right. And, without the entrepreneur, we'd have a lot less to work with. Right . The entrepreneur is America. And so we're able to work together to further the mission and expand a family's influence through multi-generational wealth building. Right. It's the best thing you could do in life.
Natalie Picha:It's pretty awesome. It is amazing. Well, thank you, Matt, again for joining us today. This has been a fantastic conversation. I hope for our listeners you have gleaned another little piece of information, and that's what RHP Market Talk is here for. To continually give you something else to think about. So thank you to our listeners for subscribing to RHP Market Talk. You can also follow us on LinkedIn and Facebook. If you have any questions or would like to discuss today's topics, please feel free to contact us through our website at www@royalharborpartners.com. At RHP, we are passionate about planning for your financial future. Through our one-on-one conversations, we can help you navigate your personal wealth management and investment journey. How different will your life look with the right advice?
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