David Shavzin, President of The Value Track, is driven by a mission to help business owners know and make their number when exiting their companies—maximizing financial returns and securing their legacies.

We learn about David’s journey from corporate leadership to founding The Value Track, where he helps business owners strategically prepare for and execute their exits. He explains the What’s Your Transition Looks Like Framework, which guides business owners through understanding the M&A process, estimating transferable value, refining their advisory team, conducting due diligence, and enhancing business value before a sale. He highlights the importance of early planning, maintaining business momentum, and avoiding common pitfalls that can derail a successful exit.

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Good day, dear listeners, Steve Preda here with the Management Blueprint Podcast. And my guest today is David Shavzin, President of The Value Track, which helps business owners set out an exit strategy and then sell their companies by optimizing price and sale terms so that they can monetize their life’s work. David, welcome to the show.

Thanks, Steve. I appreciate you having me. Looking forward to it.

It’s great to have you and we have good topics to talk about. So let’s start with my favorite question. What is your personal “Why” and what are you doing to manifest it in your business?

Yeah, for me, it really has been helping people. That’s sort of number one. And of course, we tend to do that in the way that we know or our background or our experience. So for me, that has come through decades of working in the business world, more generally, a lot of large organizations, and so helping the smaller business owners and the smaller companies in that lower bid market, I get to be pretty rewarding for me.

Well, definitely, you’re projecting that enthusiasm about helping people, which is awesome. So what was the defining moment that led you to starting your business?

It’s interesting. It came really at the tail end of my large corporate career and was transitioning out, looking at what I wanted to do exactly. And early on, ended up helping a friend with their business, just kind of went in to see what was going on. And I realized that while they had a good business, they’d been working really hard, they did not have all that help around them for either maybe outside advisors. They didn’t have all the resources in all of the companies that I’ve had, the experience. And there was so much that they could be doing to make that company run better, stronger, faster, more valuable. And that kind of triggered it for me. And I just got engaged and started working more with, like I say, those smaller companies because there was just so much I could bring to the table. That’s really what kicked it all off.

Yeah. So you basically helped them with their exit and you actually have developed the process to do that because it can be quite complicated. There are many moving parts. So what does your transition framework look like and can you walk our listeners through what you do when you meet with a new client and kind of help them figure all these things out?

Yeah, it really starts out, Steve, with just a lot of conversation. We want to understand not just the business in depth, but what their personal goals are. So they’ve been often at this business for 10 years or 20 years, 30 years, and haven’t taken the time often to think about, okay, what’s next whenever that is? What do they really want out of, I’ll say, the company, but also out of life after that? Some people might go that traditional retirement route. Some people might be thinking about another business venture, but they’re just kind of running day to day. So we want to understand what those goals are, when they want out, how much money they might need, what they want to have happened to the company, to employees, what’s going on with family, just that whole context to then start with understanding the company and then how we might advise them going forward. So, it’s that initial conversation and then most of the time they’ve not been through the sale of a business. They started this, it’s it, that’s their business. And so we want to get them to understand what that sale process looks like, what the M&A process is. I think when you haven’t been through it before, there’s this assumption that it kind of you wake up one day, I’m ready to sell, I’ll have a buyer the next week, I’ll get a check the following week. That kind of thing. And so we want to explain that it takes a lot of time. It really can take six months at a minimum, nine months, a year, sometimes longer. And so what does that mean? What are the implications on the business? What they need to be doing along the way while we’re preparing to sell and then get through the sale. So with that understanding goes with options. Again, if they’ve not been through it before, they’re typically thinking they’re going to find one person or one company to buy them. And there’s really a lot of options that might better fit their goals that I was talking about a moment ago. So there’s a lot of options once we know what their real goals are.

And then the second big piece is talking about value of the business getting an understanding across as to how somebody from the outside will look at the business and the value of that.
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So it may be that they’ve spent 30 years, blood, sweat, and tears, built a nice business, but when it comes down to it, the reality is that someone who’s going to potentially buy the company is looking at it through a very different lens. And so, we want to talk about value, what we call transferable value, not what you think it is,  but what that buyer will look at and how they’re going to scrutinize it. So that idea that it’s not some absolute value today, or it’s not a value that you want or maybe need, it’s really going to come down to optimizing this from that perspective of the buyer. And yeah, we could talk a lot more about value.

It is a fascinating topic. I remember I read a book years ago, Private Capital Markets, which talks about the different valuations. You can have 8 or 10 different values depending on what is the purpose of the valuation. Is it about giving stock to your employees? Is it about transitioning it to an ESOP? Is it about selling to a strategic buyer? A private equity buyer? Is it about management buyout? Selling to the management buyer? Is it about insuring the business? So all of these scenarios attract different valuations and that is fascinating. The other thing that really struck me when I was an investment banker was that there were some value that the owner actually perceived and had as part of owning this business that a buyer would not have. So for example, optimizing their taxes was something that the buyer didn’t have, or the prestige that came with being a business owner. They would have to keep that up, but they would actually not get anything for it, and that was a different thing to grapple with. And of course, the perks of being a business owner, the golf club memberships and the trips and all that stuff. So, that’s definitely interesting, but I digress.

No, I think that’s really important points. And that’s what you just walked through is key element of what we do with our clients because they need to understand all those things. And I would add just there’s one more layer to it, which is, you’re right. I mean, it depends on the purpose of the valuation, but also if you look at say 10 potential buyers, they also have all kinds of different priorities in what they may or may not purchase or value. And so you can get 10 people all the same information everything you would possibly want to know about this company and initial offers from those 10 could be extraordinarily different in a wide range and that’s always surprising to our clients. And so the other overlay in this process when we’re talking with our clients and looking for buyers is to think about if the seller’s trying to maximize the price when they sell, what profile of a buyer might be the best for them in their situation. In that quick example, you’ve been through this, it may be if there’s a competitor down the street, they may pay more because they know that they can take out a lot of the expenses of the company that they’re buying, whereas if it’s somebody that maybe just left a corporate job. They need everything that’s in that company. They may not be able to pay as much. So, the same company, the same P&L, the same balance sheet, this single company can be looked at from a value perspective in so many ways. And that’s what we need to get across. And then once they understand that, what’s fun is, right away, they get it and they start to make daily business decisions differently.

Understanding, they could be making a lot of really good decisions tomorrow, but which ones of those are really going to optimize value over time.
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So, it’s not an easy go to a calculator and calculate the business today based on the industry and the revenue or cash flow.

Yeah, well, that’s also very interesting that there are steps they can do to make the business look better to a buyer, but I always felt like the most important thing that they should be doing is just to keep running their business so that they don’t take the foot off the gas and they don’t slow the momentum because that’s what can really kill a deal or valuation when the momentum slows. As you said, it’s a nine-month or six-month, 12-month process and the buyer is going to see the signs of that owner is no longer focused and the business starts to lose momentum and then the poor valuation, it’s not going to be a blue sky valuation anymore. It’s going to be more of a risk management type of valuation.

Yeah, we kind of say don’t take the foot off the pedal. We say actually accelerate. In other words, keep going because anything that they can do in that time period to raise up value even incrementally can really be impacted on the purchase. We had a client who was just doing what we said and was kind of doing it naturally where we were talking to a buyer. We actually got a letter of intent with a good faith, first run at an offer price and she just kept bringing contracts in and contracts in even after that letter of intent was received and we were able to go back and argue for a higher price because these were long-term contracts. So, yeah, if they’ve been working hard for decades, we want them working even harder for that period of time at the end.

Yeah, well, and if then we renegotiated the price twice and, basically, they kept getting new contracts. In the end, they decided that they keep the company and would not sell it. And a year later, there was a change in government. They had a lot of political contacts and essentially the company declined rapidly from that point and it went into Chapter 11 a few years later. So they actually missed their window, they were too greedy, they wanted even more, they were not happy with the values they got and they would have done well actually accepting it. But anyhow, so we talked about educating clients on the M&A process, as to be a transferable value. So what’s next?

So, well, and these aren’t necessarily linear in order, but really we talk to them about their advisory team, who is working with them currently, what they need to really optimize the process going forward. So, it’s a complex world, and this is probably the biggest transaction of their life, business or personal. Often, sometimes too often, but they’re usually really counting on this for retirement and needing a lot of money. So it’s a critically important decision, and they really need that advisory team.

So we want to understand who they're working with now, who their CPA is, if they've got a financial advisor, maybe an estate planning attorney, and others to make sure that those folks are the right ones to go forward.
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So they may have been very helpful over many years, but maybe haven’t really been in the world of working towards that transaction, executing the transaction, or just bringing the expertise needed in this last period, I’ll say, which could be a few years ahead of getting out. But that team needs to be their personal wealth advisor, state planning attorney, we’ll need that M&A attorney to work on the deal. Bankers typically involved in some way. The CPA and in the mix there, the tax experts, and then somebody who’s going to lead the transaction process for them. So, it goes beyond that, if there’s enough time and some of the things that we’ll get into, not just the transaction but actually helping them get ready over time, and then you may get into advisors in all parts of the functions of the company. If there’s enough time, we may have external advisors around marketing or IT or finance, supply chain, and so on. So that advisory team is critical. Some of the pushback sometimes is the thought that is going to get expensive. And in our world, we try to manage all of that, but we also try to explain that we’re trying to optimize this business. Sometimes we’re trying to grow the value, and they need to look at that advisory team as an investment in that short-term growth and in making the deal happen and the transaction happen, and you know this very well. They can spend a year, year and a half, have a buyer, be a week away from closing, and it just falls apart. And then having that team in there helps to minimize those risks of that not happening.

Yeah, that does happen. Another thing that I noticed business owners really struggled with is to not write everything off in the day before the sale and show some profit in the accounts even if it took some tax payment because the profit that they pay tax on is much more credible than the adjusted profit that may or may not be there. And it’s worth doing that investment. But again, there’s risk. What if it doesn’t close? The transaction doesn’t close. So that’s another thing. All right, what happens then? So you’ve got your advisor team in place, then you’re good, or what’s next?

So, again, it’s a little bit of an iterative process, but really the next thing is, what we call and we tell them is a due diligence. In other words, what the buyer does is a due diligence when they’re looking at the company. We want to do that early on, which just means going in to look at everything that’s happening in the company, going through financial statements, sales, records, people, just every part of it, compliance, see if there’s risk. So we go through everything and just try to identify, first of all, any big problems that we know we want to address before going to market to sell. We want to look at areas that might have, in the timeframe that we have before sale, some upside in terms of building out sales and revenue, and potentially taking out expenses in different areas. So it’s really optimizing everything. Now you can’t do everything all at once, especially if you’ve got just, say, a year or two or three.

So we'll go through that exercise and come away with a game plan.
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What do we suggest they do from here through to the sale? And that the prioritization really is focused on what’s going to either bring most value or minimize risk. And so very big problems. It may be kind of timely these days, but if we’re looking at their workforce and they do have workers who are not here fully legally, that’s an issue that’s got to be addressed. A buyer is going to see that. In a manufacturing environment, you may have, they may not have looked at what’s in the ground for the last five years. Anybody buying that is going to have a full environmental study. So those big issues we want to take out of the way. And then other things to clean up, possibly improve from an expense side. If there’s enough time, it may be some people reorganization, helping optimize some things. And if we have time, even looking at revenue, both growth and maybe looking at a better mix of revenue. So there’s a lot of potential there that may just not have had a focus. But now we want to look through the lens of getting out, maximizing value, minimizing risk. And it’s what you were saying, Steve,

sometimes it's not just value, but what's going on now in the market, let's get clean, at least so we're always ready.
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In your example where they waited and waited and said, oh, I’ll keep it. We want to have them as ready as they can be at any given moment for that optimal time to sell.

Yeah. So what is the best time for them to approach you?

I say half jokingly, but not really, yesterday. The earlier that we can at least have a conversation, we can share with them some things that they can start doing right away. We can have that conversation even if we’re not engaged in a long-term project, at least we can get them to understand what we just talked about the M&A process and the value process. The sooner they can start that, the sooner they can start on building value, frankly. So even if they’re 5 or 10 years out, they can already be making some strategic decisions. So we want them to get started early, early, early on. And then even if they can’t do a lot, they can do a little bit incrementally each month, all of that focusing on value.

Yeah. So switching gears here a little bit from your clients to your own business. I mean, you’ve been in business for a long time as an exit advisor, M&A banker. Quick story. So I had a client, which was like that. They kept bringing in new contracts and coordinates as a construction company, investment banker. What was the hardest decision that you ever had to make in your business?

That’s a good one. Probably several. One that comes to mind is firing a client. Yeah. And that’s not a lot of fun. You asked me early on at the beginning why I do what I do, what I like about it. It is helping people. But we had a client where we did a lot of that upfront work that we’ve talked about, explained how all of this works, but they were really fixated on putting out a price that was literally three times what we felt it was worth. And we talked and talked and explained and tried to get it across that it just wasn’t there, the value wasn’t there, it wasn’t gonna sell. We collectively wouldn’t look very good if we did that. And so we did have to just kind of part ways and that’s hard because I don’t think they’re gonna get different advice going to somebody else down the line. And I don’t know what will become of that company over time and to them personally as they look to retirement. So that was probably the toughest one.

Yeah, you can only help people that are open to it. If they’re not coachable, then really at some point you have to put up your hand and say, hey, if you don’t let me help you, then I can’t. Or if you don’t trust me that I can help you, then I can’t help you. And that’s just how it is.

Yeah, it usually works. We usually can get them there. Sometimes it just takes some time.

Did you find that typically the longer someone is in business, the older an entrepreneur, the less they are willing to be coached and the more they feel like they know it, they’ve seen it all and they don’t take anything at face value?

So, I would say it’s a range. I know you’re asking the question. I know you’ve seen all of that. I would answer that two ways. Yes, in a lot of cases that does happen. They’ve worked for 30 years. They’ve had a great company, made a lot of money, put the kids through college, bought their second home and on and on. And they didn’t need me all that time, why do they need me now, kind of thing. That can happen. I will say though in the last several years, as folks are getting older, and if they’ve been in business 30 years now, they’ve gone through 9/11, the recession and now Covid. And so I’ve seen over the last several years a little bit more, I’ll say humble outreach. A little bit more awareness that they can’t do all of this on their own. I really saw that switch in terms of initial conversations over the last few years. But like I say, it takes time. And so, because of all that, yeah, it may be three, four, five, six conversations that take place, and slowly they may get there. The other thing I’ll say is the thing that helps is if we’re talking to them with other advisors. So if there’s one or two or three or four of us, and then they start to hear the same thing collectively, and that makes sense, but they’ve got to come around to it. We have a client that reached out almost two and a half years ago, had many conversations, and then didn’t hear from them, about a year and a half ago, reached out again and said, hey, I’m gonna do this. We have a big plan to do some things and I said, okay, I can help, all of a sudden silence. And then came back a third time and then they were ready to get going. And it’s a great case study, if you will, in that journey, in their heads that they have to get to it. We’re there for them. We can spend the time, educate, but they’ve got to eventually say, okay, I’m ready.

Yeah. And especially if you show them the reality, it can take time for them to process it, and to accept it, and come around to it, and stop thinking about the impossible and accept the possible. And that can be not an easy process at all. Especially if you’re in business and you have your dreams and you may not fully accomplish it, but half of something is better than all of nothing.

Yeah, and it’s even getting started. I understand that a lot of what we’ll do in those cases is share a lot of stories that are real cases, real issues that our clients have had, especially in the not starting to address things or delaying things. And that becomes even more critical the older they are. It’s one thing for a 35-year-old business owner to say, oh, I’ve got time. They can make it through another couple of economic cycles. But when we’re talking to folks in their especially 60s, 70s, even 80s, there’s not as much room for error or not as much room to wait.

Exactly, you need time to enjoy the fruits of your labor as well. So on this vein, what is the most important question that business owners, entrepreneurs should be asking themselves?

There are so many very most important questions, Steve, but I think the first is, it’s a little bit of what I talked about at the beginning. What are my goals? What do I really want to be doing? The business has been my life. I enjoy it, but am I going to do this until I’m done living?  So what are my goals? What do I want to do? Related to that, really importantly, we always say, get a really good understanding of the value of the business today. What am I worth today? How much money do I need? It’s that combination of questions where they intersect. And so if they can simply get an idea of value and work with a financial planner to understand what they might need, that gets eyes opened. It’s really the kick in the rear end to say, okay, it’s worth, let’s say, 5 million, but my advisor says I need 10. Okay, now we really need to do some things. But if they don’t get that wake-up call, they’re not going to get there. So really hard conversations with themselves, family, spouse, about where we’re headed, and understand where we are. That’s that combination question. So I cheated. I didn’t ask one question. I asked two or three.

No, it’s a good one. I think they are interrelated. What is the magic number that we need, and why, and how are we going to get it? And that’s what you can answer. Excellent. So, if people would like to learn more, maybe they want to have a conversation with you around that. Where should they go and where can they find you?

Thanks, Steve. Yeah, they can email me. It’s david@getonthevaluetrack.com. They can look me up on LinkedIn and the website is getonthevaluetrack.com.

Yeah. Well, that’s a good idea to get on the Value Track, the sooner, the better. So, David, thanks for coming and sharing your 5-step process of getting that value out of your business. Figuring out what this process looks like, what’s your value, putting the team together, making sure you shake those skeletons out of the cupboard, clean them out before the investors come, and then enhance that value, get to your value. And those of you listening, if you enjoyed this conversation, then stay tuned because I have a wonderful entrepreneur coming on the show every week. So, thank you, David, for coming and thanks for listening.

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