Subscribe
Share
Share
Embed
Confessions of a Shop Owner is hosted by Mike Allen, a third-generation shop owner, perpetual pot-stirrer, and brutally honest opinion sharer. In this weekly podcast, Mike shares his missteps so you don’t have to repeat them. Along the way, he chats with other industry personalities who’ve messed up, too, pulling back the curtain on the realities of running an independent auto repair shop. But this podcast isn’t just about Mike’s journey. It’s about confronting the divisive and questionable tactics many shop owners and managers use. Mike is here to stir the pot and address the painful truths while offering a way forward. Together, we’ll tackle the frustrations, shake things up, and help create a better future for the auto repair industry.
Tony Zanders [00:00:00]:
If you're selling simply because you need more money, your only option is to sell it to the highest bidder. But if, like most of us, if you've built a business that you have a heritage, a legacy-mindedness into, when you've built it correctly, the why of why you're selling is to pass it on. That changes the game. You can choose then who you sell it to.
Becca Zanders [00:00:25]:
The following program features a bunch of doofuses talking about the automotive aftermarket, the stuff we or our The views of our guests may say do not necessarily reflect the beliefs of our peers, our sponsors, or any other associations we may have. There may be some spicy language in this show, so if you get your feelings hurt easily, you should probably just move along. So without further ado, here's your host, Mike Allen, with Confessions of a Shop Owner, presented by TechMetric, the best software in the history of ever.
Tony Zanders [00:00:57]:
All right. Here we are.
Mike Allen [00:01:00]:
I've got a couple of guests that I'm meeting for the first time today, but I'm super excited about because I've read some background and we've been talking for a few minutes just a little bit about your history. And I think you've got a great story to tell for our listeners, and I'm looking forward to meeting you at Apex in Vegas right around the corner. Gosh, it's almost here. Um, so real quickly, Tony, Becca, if y'all could do me a favor and just kind of introduce yourselves to our listeners. and then we'll dive right in from there.
Tony Zanders [00:01:26]:
Is that all right? Yeah, absolutely. You wanna go first then?
Becca Zanders [00:01:30]:
Sure. I'm Becca Zanders. And Mike, thank you for having us on the show today.
Mike Allen [00:01:37]:
Absolutely, my pleasure.
Becca Zanders [00:01:39]:
Yeah, I am, first of all, mom of 4 kids and also a grandma. All our kids are out of the house and a dog named Huckleberry. And we owned a shop for 22 years. We're very passionate about the automotive repair industry. The broader adjacent markets. And I'm a certified exit planning advisor. So what I especially love in the consulting and coaching world is getting owners to grow and to exit in a way that they can harvest the most wealth out of their business while accomplishing their personal and their business goals.
Mike Allen [00:02:24]:
That's awesome. And I love having that conversation. So I'm going to want to come back and spend a lot of time on that if we can. Tony, what's a little bit about your background?
Tony Zanders [00:02:33]:
Perfect. Well, I like to joke that I'm the arm candy to Beckett.
Mike Allen [00:02:38]:
Trophy husband.
Tony Zanders [00:02:39]:
Yeah. Yeah. So the background, the history is I, as a young kid, I found I had a pretty good aptitude to work on cars. My dad was a house painter and I hated that. And so he told me, if you don't find a job this summer, when I was, you know, 14, if you don't find a job this summer, you're working for me. So I went and as quick as I could found a job. Ended up, and I love my dad, ended up working at a shop We're in Boise, Idaho, and found that I really had a good knack for it. Pursued that, went to trade school, worked for a couple of different shops, and finally we realized that the way we wanted to do business wasn't being done in, you know, in the larger shop environment.
Tony Zanders [00:03:38]:
And so we put up a shop in our backyard.
Becca Zanders [00:03:41]:
Okay.
Tony Zanders [00:03:42]:
Started working on cars and grew like a, you know, started growing like it was on a rocket ship, you know? And we very quickly found our position, found our footing in Meridian, Idaho, and excelled to, you know, one of the best shops in the area for years on end. And so that's kind of the background and history.
Mike Allen [00:04:07]:
And so you guys met up over automotive repair, much like the way I met my wife. Uh, and y'all worked together in the business?
Tony Zanders [00:04:15]:
How did you meet your wife?
Mike Allen [00:04:17]:
My wife was a customer at my dad's shop when I was a service advisor. Uh, and I did a— it's actually a pretty cringy story on how I, uh, how I tried to strike up a conversation because I wasn't even her service advisor. My buddy was helping her out, but I wanted to ask her out on a date. Um, and she was in the lobby. reading a book, waiting for a service while her car was being serviced. And we had a little water cooler over there. So I went over there to get a little cup of water.
Tony Zanders [00:04:47]:
Hey, what are you reading?
Mike Allen [00:04:49]:
And I think it was The Red Tent is what she was reading. So this had to have been like 2005. And I said, well, you know, I haven't read that book, but I read books too. And she looked at me and she went, I'm really happy for you.
Tony Zanders [00:05:09]:
Clearly, shame is part of it among you.
Mike Allen [00:05:12]:
So, I did the walk of shame back over to the service advisor counter, and the guys were all making fun of me for being such a loser. But eventually, we struck up a conversation over book recommendations, and the rest is history.
Tony Zanders [00:05:25]:
Nice.
Mike Allen [00:05:26]:
But anyway.
Tony Zanders [00:05:27]:
Love that. But anyway, well, my deal is Becca, her youth pastor at our church, when she was in youth group, sold her a car, just a miserable old worn-out car.
Becca Zanders [00:05:42]:
Datsun B210.
Tony Zanders [00:05:44]:
Yeah, 19— what was it, '74?
Becca Zanders [00:05:47]:
'74, yeah.
Tony Zanders [00:05:48]:
Datsun B210, two-tone. It was mustard yellow and rust, like real rust.
Mike Allen [00:05:53]:
They all were.
Tony Zanders [00:05:53]:
It was bad. They all were. So yeah, but he called me one day 'cause he knew I was a mechanic, said, hey, you know, I got this young girl in my youth group that has this car. Could you help her out? Could you take care of her? And, you know, and I don't think he ever called me back and told me to stop taking care of her. So she's sitting right here.
Mike Allen [00:06:13]:
And now she takes care of you and you've become the arm candy.
Tony Zanders [00:06:16]:
Yes.
Becca Zanders [00:06:16]:
I try.
Tony Zanders [00:06:18]:
That's true.
Mike Allen [00:06:19]:
I will tell you, you should never, ever, ever think that it's a good idea to drive a car that the youth pastor is getting rid of. Yeah.
Tony Zanders [00:06:29]:
Because the youth pastor's car is always a train wreck. Yeah, pretty much.
Becca Zanders [00:06:33]:
Yeah, it was $250. Yeah.
Mike Allen [00:06:37]:
And worth every penny, right?
Tony Zanders [00:06:39]:
All right.
Mike Allen [00:06:41]:
So you guys meet up, you hit it off, you get married, you end up owning a shop together for over 20 years.
Tony Zanders [00:06:48]:
Is that right? 22 years.
Mike Allen [00:06:52]:
What was the name of the shop?
Tony Zanders [00:06:53]:
Heritage Auto Repair.
Mike Allen [00:06:56]:
Is it— does it still exist or when you sold, has it been rebranded?
Tony Zanders [00:07:00]:
We, we had built such a worthwhile and stable business We sold it to one of our employees, our manager, who'd been with us for about 7 years. And, and it was— he chose to maintain the integrity of the business, which was what it was built on. And in the, in the transition, we actually handed him an engraved baton and handed off the heritage that we had built. But yeah, it still, it still exists as its own entity, as Heritage Auto Repair.
Mike Allen [00:07:35]:
That's awesome. So, you know, I think for decades it was a super common theme for owners to transition ownership of the business to a key employee or to a child, um, and, and that was the exit plan, right? And there are all sorts of creative ways to facilitate that transition with profit share or You know, we can go into that for sure at length, but I think the elephant in the room now is that it's getting harder and harder for key employees to purchase businesses where they've worked for an extended period of time because the multiples have gotten so high and the valuations have gotten so high because of all the private equity money coming in, right? Um, are you guys seeing the same thing now?
Becca Zanders [00:08:24]:
Yes, yes. And I just, I always tell people, be careful who you get into bed with. You know, you know your private equity group. We've seen people greatly regret it. Statistically, 75% of business owners regret selling their business, and it usually has nothing to do with money. So it has everything to do with we as people were made for purpose, right? And why did we build this business to begin with? And where are we going next? Is that well-defined? And what do we want that business to look like? And if you look at a community, the glue of most communities is the entrepreneurs there. The people that are willing to sponsor the baseball teams, the people that are giving to the food bank. We as an auto repair shop, we picked a couple of things that we were passionate about.
Becca Zanders [00:09:20]:
We did single moms oil change days because I was raised by a single mom. One year we had 300 people at our Single Moms Oil Change Day. We had food trucks, we had jump houses, we had kids.
Tony Zanders [00:09:33]:
Parking attendants.
Becca Zanders [00:09:34]:
The college comes and helps, parking lot attendants. It got a little crazy, but those are the things that small businesses do for a community. And if you are a purpose-driven owner, you are going to make a difference in your community that nobody else can make except somebody who's willing to pick up that vision, pick up that baton and do the same thing. And a private equity group is beholden to their investors. Well, somebody coming in with a vision to do what you're doing will continue making that community impact and they will continue taking care of your employees the same way. So I like to say part of what we do for a business owner is changing the outcome.
Tony Zanders [00:10:24]:
Mm-hmm.
Becca Zanders [00:10:25]:
for not only the owners themselves, but for their organization and for the communities they serve. And is it wrong to sell to a private equity group? And are all private equity groups evil? A lot of people think that. I don't. I've seen it go well. I've seen it not go well. We had a private equity group courting us that a lot of our peers had sold to, and we probably could have gotten more money, but for us, it wasn't our end goal.
Mike Allen [00:10:56]:
I gotcha. Well, what do you say to those owners who, you know, would like to maintain the relationship with the community and the culture that they've built within their business to support their people, and they're looking at an exit and they might be able to get a 1.5 or 2.5 multiple, and then equity comes in and they want to offer a 4.5? Or a 5 times multiple. And you see that with like 1s and 2s and 3s. It's the giant multiples are with the, you know, kind of the little regional areas with 10, 15 stores, that kind of thing.
Tony Zanders [00:11:32]:
Right.
Mike Allen [00:11:33]:
Um, is it just a, it's a judgment call? You've got to decide what's more important, the bucks or the, or, you know, the, what you leave behind culture-wise.
Becca Zanders [00:11:42]:
There's a couple of things that I would say. One is the old way of exiting your business is to wait until you're 65 and decide you're burned out. You're finished and you need to sell.
Tony Zanders [00:11:56]:
Or you throw your kid the keys on your way into the grave. Yeah, yeah, yeah.
Becca Zanders [00:12:01]:
Or you get surprised one day by an offer from a PE company or a strategic buyer and on a whim you sell your company. None of those are the best practice for today. We've seen it fail. People do not walk away happy in those type of situations. So what I would say to a business owner Is don't look at what— don't wait until the day of the sale and say, wow, I can get 5 times from this person and only 3.5 from this person. Instead, build your business to sell it. And I like to say we align 3 legs of a stool. One of those is you personally as a leader.
Becca Zanders [00:12:48]:
Where are you at and where are you going? Healthy leaders have healthy transitions.
Tony Zanders [00:12:52]:
Yeah.
Becca Zanders [00:12:54]:
And I can, I can say I've seen this many times. I have a client that called me, they had gone through an exit planning process, they thought they were ready to sell, and then they decided not to. Really what came out was that they had had a death in the workplace, and they were so traumatized by it, they were just ready to give up. And that is not a great reason to sell. Never sell under a big cloud. Never make a huge decision under a big cloud. Wait till that cloud passes. So they did.
Tony Zanders [00:13:28]:
That's good.
Becca Zanders [00:13:29]:
And they decided to grow. They were selling for the wrong reasons, but never— really make sure that you're in a healthy spot. Don't sell in crisis. Don't sell in burnout just because you're burned out. Sell because you're ready and you have somewhere else to go. That's the first thing. Secondly, are you personally financially ready to sell? And I bring this up in this conversation about multiples because 80 to 90% of a business owner's wealth is usually tied up in their business. And really, as you're building, as you're growing profit, as you're growing value, Taking that value out of your business and building multiple streams of income is— it allows you choices later.
Becca Zanders [00:14:26]:
It's not all of your wealth is not locked in your business. So a good exit includes personal financial health, personal leadership health. And then the last leg of the stool that gets focused on usually exclusively, but should not be, is your organizational health. Are you really ready to transfer and can you get a top multiple? But dealing with those other 2 legs of this tool long before the multiple question comes up gives you lots more options on who you're going to sell to, how you're going to sell, on picking a buyer and incentivizing them like you talked about with— There's all kinds of strategies. We don't have time to go into that today, but you, you build your business from day one to have the exit of your choosing at the time of your choosing and to be a healthy leader and to be healthy financially. So that makes all the difference for the owner.
Tony Zanders [00:15:30]:
I mean, let me weigh in on that. So I can— one of the things that we see all the time are business owners coming forward and saying, hey, I want to sell my business. And the simple question why just puts them in chaos because they've never really thought why. The challenge with the multiple issue, you know, the private equity and the sell it to your son, you know, there is different income that comes out of those various strategies, right? You know, there's ways to get more money out of your business, but the reason or the— sorry, the question of why are you selling suddenly becomes the most important question. Because if you're selling simply because you need more money, your only option is to sell it to the highest bidder, right? If that's the reason you're selling is you need more money. But if, like most of us, if you've built a business that you have, you know, a heritage, a legacy-mindedness into, you want this business to continue in the way that you built it. I've had, I don't know how many, I can't tell you how many shop owners I've talked to that won't let go of the reins of their business because they want it to be just the way they run it, which isn't wrong. I've got no question, I've got no qualms with that, but the challenge is that it's, it's not a transferable entity and they're stuck, right? But if they have built something with legacy in mind, then they actually are selling— when they come to sell, they're selling for legacy, not for money.
Tony Zanders [00:17:01]:
And when you've built it correctly, like Bekah was describing, and you put all the ingredients in place and you built it correctly and you established your net worth and you figured out what you need, when you've built it correctly, the why of why you're selling is to pass it on. That changes the game. You can choose then who you sell it to. We look back at our— the sale of our business, and the business has continued to grow. It's very, very profitable business. We could have maintained that business and made more money. We could have held onto it and sold it to a different buyer for more money. But the reason we sold was not for the money.
Tony Zanders [00:17:44]:
We sold it and we got good money out of it, but we sold because we were passing on the, what we called Heritage, which is the name of the business, of our business. We passed that on just to the next person.
Becca Zanders [00:17:55]:
Yeah.
Tony Zanders [00:17:55]:
And we built it all along so that it could be passed on.
Mike Allen [00:18:00]:
That's awesome. So, um, and Tony, you said that for a while, uh, you were a facilitator of a 20 group with one of the major coaching organizations. Is that right?
Tony Zanders [00:18:11]:
Yeah.
Mike Allen [00:18:12]:
And so you've probably, uh, even before the business that the two of you have now, uh, witnessed a lot of exit plans and transitions and that kind of thing. One of the things that I see happen fairly often, or I hear about happening fairly often, is there's a sale to a third-party entity, not a key employee, not a community member, and there's a holdback, and the boss has to stay there for a year or 2 years or however long now as an employee, and a big portion or a chunk of that buyout is tied to that employment period. And very rarely do I hear that that works out well for the seller. Has that been y'all's shared experience as well as you've walked through these deals?
Tony Zanders [00:19:05]:
Sorry, Mike. We were sitting in a situation with an open window and the neighbor decided now is a great time to fire up the blower. So let me step away from this conversation for half a second, close this window, and we'll try that again.
Becca Zanders [00:19:20]:
Yeah, sorry about that, Mike.
Tony Zanders [00:19:22]:
That's okay.
Becca Zanders [00:19:24]:
While we're waiting for Tony, I think he will want to weigh in on that. Back to the last question, I just wanted to say, I— we do not advocate that you should undersell your business. We got fair market value for ours. Could we have gotten more? Yes. I'm not advocating that you should be unwise with your largest asset and And I just had a client that came to me in 2024, thought their business was worth $4 million selling to a buddy and ended up selling. We're expecting an LOI in the $10 to $12 million range. And they thought they were going to sell to their buddy for $4 million. And so knowing what you're worth and selling for a fair price, it's important.
Becca Zanders [00:20:12]:
You built it. So I didn't want it to sound like it didn't matter.
Mike Allen [00:20:17]:
Just give it away to your favorite employee.
Tony Zanders [00:20:19]:
Yeah, no, don't do that. You don't need to do that.
Mike Allen [00:20:22]:
Uh, all right, so, um, my question was about, um, and I don't know what the proper term, term is, um, but it's about, uh, you know, when you're selling to large buying groups, sometimes they ask that the selling owner stay back as an employee, as a managing employee for a period of time, and a portion of the purchase agreement is tied to that employment agreement for X number of months or years or whatever it might be. And I've not heard of many instances where the man or the woman who was the owner and operator of the business for the last 20 years executes effectively as an employee all of a sudden for the length of time needed for that final check. Has that been your experience as well, kind of walking others through these engagements?
Becca Zanders [00:21:14]:
Yes. In general, that's what statistics say. It's very hard to go from being an owner to being an employee. I will say that there is one, and I'm not going to say the name, private equity group that people I hear are having really good experiences with. But they're committed to keeping the name, keeping the culture, keeping the community impact. They have a way different approach. And that's why I say I'm not in the camp that all private equity is evil. And they do employ that type of deals where they leave owners on for a period of time.
Becca Zanders [00:21:52]:
But it— you really have to know who you're selling to, take the time to do your due diligence. To look up people that have sold to them, to ask questions, to know who you're getting into bed with. It's statistically, again, 75% of owners regret selling, and it has nothing to do with the paycheck.
Mike Allen [00:22:19]:
What do you think it does have to do with primarily?
Becca Zanders [00:22:24]:
I think it has to do with the health of the leader. Are they healthy? Is their identity so tied up in their business that once that business is gone, nothing else matters? Like, we are not our business. You don't walk through a cemetery and see owner of Mike's Auto, right? We don't. You don't see that.
Tony Zanders [00:22:47]:
Yeah.
Becca Zanders [00:22:47]:
That at the end of your life, nobody's gonna care what business you owned. They're gonna care about the person you were. And we as owners that have lost ourselves in the chaos of running a business and the stress of owning a business, and sometimes in the pride of success, so tie our, our own identity to the things we're doing that we forget about what really matters. And I think that is one of the number one things that causes a lot of stress when people leave their business and exit. The second thing is if they have a wealth gap, you know, they think with $1 million, one of the things we say is you have to know your 3 gaps. You have to know, do you have a wealth gap? And that's what you have right now in wealth and what you need to ultimately retire. If you don't know that number and you're shooting in the dark and you sell your business and you end up Just having to get a job. It's miserable.
Becca Zanders [00:23:53]:
It's miserable for the owner.
Mike Allen [00:23:55]:
Yeah, I'm unemployable at this point. So yeah, if I can't, if I can't, if I can't get what I need to never work again, uh, I'm probably just going to have to keep the shop forever. I'm going to, yeah, I'm going to be that guy who just, uh, I hand the shop over to, uh, to the kids as I'm on the way to hospice. So it's probably not a super healthy viewpoint.
Tony Zanders [00:24:18]:
No, not entirely. But, you know, the thing that I coach my clients on is to move away from being that it's all about me mentality and instead shift to how can I empower the people around me to accomplish the things that they need to accomplish in their life? One of the things we did in our shop, and I was just in our— so we sold our business and we still own the property. And so we still have an ongoing engagement relationship with the owners of the new, you know, the new owners of the business, right? I walked into the building a week or so ago, and in the break room, there still exists the board that I put up years ago with the goals of the individual employees. Written on the board. What are they trying to accomplish? Right? And so we built a mission around if the employees are not healthy and accomplishing their goals, then we as a team are not going to be healthy and accomplish our goals. And then me as a leader, I've failed. Right? And so it had nothing to do with fixing fixing more cars and making more money. It's about empowering the people around me to accomplish the things that they need to accomplish so that we as a team can reach the level of success we're trying to reach.
Mike Allen [00:25:42]:
Right?
Tony Zanders [00:25:42]:
And so when you, when you think about it from that perspective, it's no longer about running the business efficiently. And, and, you know, none of these things are unimportant, but it's not about running the business efficiently and getting the right amount of cars in. It's not about all the details and the KPIs. It's about what can I as the owner do to empower the people that, that are my team members, you know, my shop family? How can I empower them to be all that they're meant to be, right? And so now I'm no longer the boss or the owner. I'm the head coach of a winning team and I'm leading them to a victory where they get the glory, right? What's in it for me? It's great, great deal of satisfaction. And at the end of the day, I actually get a pretty good paycheck out of it, right? But it has nothing to do with me.
Becca Zanders [00:26:34]:
Yeah. Mike, what do you think most people were thinking, most shop owners, when Tony talked about the goals of the employees?
Mike Allen [00:26:43]:
Well, you know, I, I had a conversation yesterday actually with a shop owner who I, who I really respect a lot. And, uh, I'm not gonna say who, just out of, in case he doesn't wanna, wanna share this, but he sits down and has goal conversations with every one of his employees, uh, every year. And last year he sat down with, uh, a relatively new hire technician and he said, what do you want to be doing one year from today? And the technician's goal was to be putting an offer on a house in a year. And so they talked about his current income level. They talked about the type of house that we would want. They looked at what the prices on those houses were and what the down payment on one of those houses would be. And they talked about how many additional hours he would need per week to be able to earn enough money to be able to save enough to make the down payment. And then they talked about what training he needed.
Mike Allen [00:27:34]:
to increase his skills, to be able to generate those hours and what tools he needed. And they laid out a road, a pathway to getting— and then they checked in once a month on how many hours did you get per week this month? How are you ahead or behind goal? And a year later, the dude was putting an offer on a house.
Tony Zanders [00:27:54]:
Love that stuff.
Mike Allen [00:27:55]:
And I'm like, bro, that's incredible. You know, that is— I mean, not only did he ask him for his dream, he then sat beside him and laid out a pathway to recognize that dream. Um, you know, a goal without, without a plan is a dream, right? So, uh, they set the goal and then they made the plan and then they followed the plan and were accountable to it. And so that gave me chills just hearing him tell that story. I was like, man, yeah, I'm a shitty boss.
Tony Zanders [00:28:19]:
Well, not to interrupt Becca, but there, there's an awful lot of us that are, you know, and Becca joked, uh, earlier about, uh, being an expert in any given field is making every mistake possible. And we've probably done, you know, almost every mistake you can make in this. I've done it wrong, right? And I learned how to do it right, and I learned how to lead my team, and I learned so many things. I learned how to be a better boss. And this satisfaction from that was so great. When I did hand over the reins, it wasn't, oh, now what am I going to do with my life? It was, Man, I'm so excited that I accomplished what I was— I built somebody that could take the reins and run with it, right? You know, and they were— they had a lot of raw materials. I didn't build them from scratch, but, you know, I empowered somebody to take the reins and run with it. And that was the biggest win.
Mike Allen [00:29:13]:
That's awesome. Hey, so tell me, guys, how did D6— what is D6? And D6 Elements is your business now. Tell me how you came to that name and then tell me a little bit about that business if you don't mind.
Tony Zanders [00:29:28]:
Sure. You want me to start? Who do you wanna be?
Becca Zanders [00:29:33]:
Sure.
Tony Zanders [00:29:33]:
The, the, the funny thing is, is the, the, the D6, the D6 stands for Develop 6 Elements. We realize there's 6 critical, crucial strategic elements that any business needs to have or have functioning in order for the business to flow correctly. And when we first like, you know, modeled this out, I actually drew it in a circle like a wheel. And I joked that if you take any one of these elements out, it's like a flat tire, right? And suddenly you're trying to roll, roll, stop, roll, roll, roll, stop. And so the 6 elements, and we've sort of, you know, refined and built it out and finally realized there are 6 specific things, and it always starts with purpose. If they're— it's a— what is it they call it? An alliteration. Everything starts with the same letter. Purpose.
Tony Zanders [00:30:29]:
Begin with your purpose. What are— where are you going? What is the purpose? Why are you in business? What are you trying to accomplish? Your purpose, right? And then it goes to your product. Do you know your market? Do you know what you're doing? Do you know— do you— have you perfected what you're selling or what service you're providing? Do you know exactly— do you know what your competition is facing. You know, what are you— what is going on in the marketplace? Do you know, you know, understand your product. Okay, and then you go to people. People have— people are people. One of the mission statements in our business was provide exceptional service to every person. And every single time I would recite that mission statement to our employees, I would I would remind them that it does not say customer because customer is a transactional word and we have to have transactions.
Tony Zanders [00:31:23]:
That's what business is for. But we're dealing with people. We're dealing with people and we have to personalize how we engage with them and personalize what we're doing and understand them, them as a person. So we have the people on the business side. We have the people on the other side of the business, the The ones that bring in their keys and their wallets, right? Those are still people. And so we really focused on the entirety of the people element of the business. So that's the first 3. Well, then you have, you have the— what am I missing? Sorry.
Tony Zanders [00:31:59]:
People, the planning. You have to have a strategic— Becca, Becca, always, we always forget that because you get going down that list.
Mike Allen [00:32:05]:
Yeah.
Tony Zanders [00:32:05]:
It's like, wait, where was the next one? Planning. What is your strategy? What is your plan? How are you going to accomplish that? You know, like, I love this story of this shop owner that grabbed his employee and put together a plan with him, right? That's planning. You've got to have a plan. The plan has to be clear. It has to be well written out. It has to be understood. You have to have clarity. You know, you've got to have a plan.
Tony Zanders [00:32:32]:
You can't just show up every day and turn the key in the door and expect everything to work. Right? I mean, many times it does because you've learned how to operate your business, but is that really all there is to it? No, there has to be a plan.
Becca Zanders [00:32:47]:
Yeah. Have you ever read The One Thing, the book The One Thing?
Tony Zanders [00:32:51]:
I have not.
Becca Zanders [00:32:53]:
No. Jay and Don Papazian, I believe is their name. They are awesome family-owned, like, business oriented couple, and they talk about doing your annual retreat for your business and for your family and for you personally as a healthy leader. What does that look like? And Tony and I regularly practice that. And I think we, we all have a marketing plan. We might have a strategic plan. We might have a 5-year plan, but getting it down to a process where you're really Um, looking at those 3 legs of the stool, personal health, financial health, organizational health, and also looking at your employees, your team members, you know, where are they going? Can I help them get there? What, how do we build our culture? That planning piece is so important. And then the last 2 are process and performance.
Becca Zanders [00:33:57]:
So there's a That's where we see failure, right? Most, most businesses, they know why they started their business. They have their people, they have their product, they do some planning, but are you really able to execute what you planned? Or 3 years later, are you going, I still want another location?
Mike Allen [00:34:19]:
So this is a client right now that's starting a really big conversation and So you guys, Becca, you're teaching a class on this very subject at APEX, is that right?
Tony Zanders [00:34:32]:
So, um, exit planning, yes.
Mike Allen [00:34:35]:
Okay, uh, and that's gonna be, uh, it's on the 5th. Uh, I've just got— I just pulled up the APEX website here. Um, I'm gonna be there and I'm trying to figure out if I can get out of the recording booth long enough to come in and, uh, take the class because Um, one of the things that's important to me, like the earliest that I would possibly exit my business is after my youngest child is out of school completely, right?
Tony Zanders [00:34:59]:
Right.
Mike Allen [00:35:00]:
And so that's still a ways away, but let's say if she's going to be out of school in 7 years, I probably need to start preparing for that exit like 7 years ago, but in earnest, at least 3 years in advance, do you think, or? Like day one?
Becca Zanders [00:35:16]:
The best time to plan is day one when you start your business. The second best plan is—
Mike Allen [00:35:22]:
Well, I'm 20 years late. Sorry, 20 years early.
Becca Zanders [00:35:25]:
So start today, start planning today. And there's so much you can do. Most people don't realize that 80% of their business value is built in 4 intangible capitals. We've touched on a lot of those today in our conversation, but it's the human capital, Building your team, your customer capital, structural capital. Do you really have the infrastructure to deliver and to transfer your business to a new person? And social capital, which is what you and Tony were talking about, that the culture that you're creating. And in an appraisal, they look at all that and it really reflects in your value. And then the value and the multiples that you're able to get at the end of the day.
Mike Allen [00:36:17]:
I know that one of the services you offer is business valuation and kind of guidance on how to maximize valuation, right? What are one or two of the most common things you see that owners are doing that destroy value in their business?
Becca Zanders [00:36:35]:
Okay. With a caveat, I do not have my CVA. I'm not a certified valuation analysis. I can pull comparisons, much like a realtor can pull comparisons of previous sales. I do work with companies to know what their value is. And depending on their situation, sometimes we use a CVA and sometimes we just look at comparisons.
Mike Allen [00:37:02]:
Gotcha.
Becca Zanders [00:37:03]:
The couple things that you can do to kill your business is one, not have an exit plan.
Mike Allen [00:37:09]:
Yeah.
Becca Zanders [00:37:09]:
Because 50% of U.S. businesses are affected by what we call the 5 D's: death, divorce, disability, distress, or disagreement with a partner. And we've had this happen to a client of ours. He died, he didn't have a partnership agreement, no one had his power of attorney, they sold his business for the, the whatever the assets were worth on a secondary market, and he got none of that 90% of his wealth that was trapped in his business. So the first thing you can do is de-risk by having an exit plan. Have a plan so that if something happens, your business is still transferable and your family can inherit the wealth. Secondly is get owner independent, and that is way different than being owner Oh, what is the word?
Tony Zanders [00:38:09]:
Disconnected.
Becca Zanders [00:38:09]:
When you're disconnected, owner disconnected, you need to be connected to your business and you need to be leading the business where it goes, but you do not have to be there 40 hours a week. And a business that's the— that is completely dependent on the owner is not going to value well. Those are the top 2. A few others, customer concentration, Don't have too much concentration in one fleet account or a few fleet accounts. Not having transferable processes. I was working with a shop this week. They said, oh yeah, we have a process for onboarding employees. We have an interview.
Becca Zanders [00:38:53]:
Yeah, it's all in your head.
Tony Zanders [00:38:55]:
Yeah, nothing written. And I think to Becca's point, Mike, that's, that's one of the biggest things that we see business owners, they built a great business using their knowledge and their engagement, and but when they go to sell it, it's worthless because they have not— there's nothing written down, there's nothing transferable like Becca just mentioned, there's nothing transferable. And so now you have, unless I hire you, I don't have anything, right? And that's many business owners.
Becca Zanders [00:39:27]:
Yeah.
Tony Zanders [00:39:28]:
tied into that, you know, that question you asked earlier, you know, engaging in that after-sale agreement to work, they get stuck there because there's nothing to transfer.
Mike Allen [00:39:40]:
I'm curious, I wonder if I have a great process manual for how to do business in my business, right? And I'm relatively, I'm not required personally for day-to-day operations and success, right? That's what y'all say. You gotta write your process manual and you've gotta, you know, train yourself out of a job, uh, to get, you know, better valuations. Um, but let's say Main Street comes in, or Sun or whoever, I don't know, one of these big groups, and they buy me up. They're going to give a better multiple if the business doesn't rely on me every day and I have all the processes written out and everything else. But they don't even use my processes. They come in and they throw my processes away and they put theirs in. has been what I've been seeing and reading. So I don't understand how that works, why that works.
Becca Zanders [00:40:30]:
Yeah, it's, it's a barometer on the overall health of the leader and the business.
Mike Allen [00:40:35]:
Okay.
Becca Zanders [00:40:36]:
It's if nobody wants to buy a business that's in complete chaos and has no processes and no, you know, it's what are the roots of the plant?
Mike Allen [00:40:47]:
I gotcha. That makes sense.
Tony Zanders [00:40:49]:
A business owner, uh, at Apex last year, actually it was at SEMA. We were speaking at SEMA and met with the business owner and they lived in Arizona. The business was in California. They had no processes, nothing, and they wanted to get rid of it. They just wanted it off their back. And the transition, the transaction cost and the debt that they were carrying, they would have been upside down. And we simply said, the right thing for you to do is start building out the processes regardless. know, and it really doesn't matter if somebody buys your business and they want to do their own thing, that's fine.
Tony Zanders [00:41:27]:
But it's worth something because you put processes in place and, and built a successful or stable business, right? This shop owner had nothing and they were so upside down that they could— they couldn't even sell it. And we said, stop, go build some processes, make this thing function correctly, and in 2 years you probably can sell it for a profit. Instead of selling it to get out from under it and then still being in debt. Yeah. Yeah.
Mike Allen [00:41:58]:
Yeah, I get it. It makes sense. It's just, I have a friend who used to be in my 20 group and he, uh, he built out an incredible online process map and procedures for everything. And it was searchable. It was like a database on how to do his business. Like, hey, we're out of oil change stickers. You could search oil change stickers and it would come up with the account number and the phone number and You know, the main door spring just broke, you know, I mean, it was incredible, right? And it helped him get a much bigger number to sell his business. Uh, and they trashed it all like 2 months in and went to their system.
Mike Allen [00:42:38]:
And, and, and you could tell that it hurt him because he was like, I put so much time and effort into that incredible resource. And they're just like, whatever.
Tony Zanders [00:42:47]:
Well, that's serious. That's part of it. That's part of that 75% of business owners that regret selling. Has nothing to do with the money he got, right? Sold for the right reasons to the right people at the right time.
Mike Allen [00:43:03]:
To be fair, I think he is very happy right now.
Tony Zanders [00:43:07]:
But that is the point of frustration. Good for him, you know. But, but yeah, it does hurt. It does hurt to put all that work into it and see it. Yeah. You know. Turned off.
Mike Allen [00:43:16]:
Somebody call your baby ugly, right?
Becca Zanders [00:43:19]:
Oh yeah.
Mike Allen [00:43:22]:
So, uh, you guys have been, uh, you guys have been heavily involved with, uh, Auto Care Association for a long time, right? Among others, I think reading on the website, Women in Auto Care, NAPA BDG, um, Auto Care Association, um, the list keeps going on. You guys are super well plugged in. But I have a very important question, and, and I always hit the, the most hard-hitting questions, uh, come in late in the episode. But, uh, where do I gotta eat in Vegas? You guys have been going to SEMA and Apex all these years. Where, where can I not miss the best meal in Vegas?
Tony Zanders [00:44:02]:
You know, we had last, last, uh, last year at— when we were speaking at the SEMA show, our best meal actually, believe it or not, was a chain. It was P.F. Chang's. We had some of the best food at P.F. Chang's, you know, and it was like we walked to it and it was wonderful.
Becca Zanders [00:44:19]:
This is very disappointing. I have celiac disease, so I was just diagnosed a couple years ago, so I actually just get a condo with a kitchen and do most of my own food.
Mike Allen [00:44:33]:
Man, you can have like steak though, right?
Becca Zanders [00:44:35]:
Yeah, it's just a lot of restaurants cross-intolerant. Contaminate. There is an awesome breakfast place. I can't remember the name of it, but you can't miss it. It's right across from— across the street from the fountains at Bellagio.
Tony Zanders [00:44:49]:
It's right underneath the Paris.
Becca Zanders [00:44:52]:
It's awesome.
Tony Zanders [00:44:53]:
Oh, sounds—
Mike Allen [00:44:55]:
so there's a breakfast place down the way, um, kind of in that dead spot. It's like the something fireside. No. Uh, oh my gosh, this is so embarrassing. My wife and I go every time we're in town, but Amanda hasn't been able to travel with me for the last several years, so I haven't been able to go. But all right, well, so what you're saying is you guys are going to whip up an incredible dinner in the apartment that you rent for SEMA and all of our listeners.
Becca Zanders [00:45:21]:
For Apex. Yeah.
Tony Zanders [00:45:24]:
Okay. Apex.
Mike Allen [00:45:25]:
Yep, yep, yep. Well, awesome, guys. Thank you so much for taking the time to come on with me, and I appreciate it. Sorry about your neighbor and the leaf blower, but it is—
Tony Zanders [00:45:33]:
Yeah, you know, it's always fine.
Becca Zanders [00:45:37]:
Yeah, thank you, Mike.
Mike Allen [00:45:40]:
Um, I will see you no later than November 5th at 9:30 AM.
Tony Zanders [00:45:49]:
Yep.
Mike Allen [00:45:50]:
Looking forward to it, guys. Talk to you soon. Yeah, see ya.
Becca Zanders [00:45:52]:
Hope to see you then.
Tony Zanders [00:45:53]:
Hey, thanks a lot, Mike. Appreciate it. Bye.
Mike Allen [00:45:55]:
Thanks for listening to Confessions of a Shop Owner, where we lay it all out— the good, the bad, and sometimes the super messed up. I'm your host, Mike Allen, here to remind you that even Even the pros screw it up sometimes, so why not laugh a little bit, learn a little bit, and maybe have another drink? You got a confession of your own or a topic you'd like me to cover, or do you just wanna let me know what an idiot I am? Email mike@confessionsofashopowner.com or call and leave a message. The number is 704-CONFESS. That's 704-266-3377. If you enjoyed this episode, be sure to like, subscribe, or follow. Join us on this crazy journey that is shop ownership. I'll see you on the next episode.