Today, our guest is Darryl Bates-Brownsword. Darryl is actually managing partner of Succession Plus, which we’ll get into. He’s a, I guess, “Exit Strategy Planner”—he’ll tell me if I said that correct or not. But we’re going to about, you know, working with business owners on succession planning and exit strategies, and probably even the valuation of businesses, making it more profitable during the owner’s lifetime, or lifetime of ownership of the business, rather than just at the end. We’ll see. Darryl’s the expert. I’ll try to stop to explain it. Darryl, welcome to The Unique CPA.

Hey. Thanks for having me, Randy. It’s a pleasure to be here.

Yeah! So okay, first thing, people probably just heard your accent’s a little different than mine. Why don’t you explain where you’re coming from today, and a little bit of your background?

I’m actually an Aussie, born and bred, spent most of my life there, but I’ve been living in the UK for the last nearly 20 years. So it’s a pretty mild Aussie accent, but even in the UK, they still treat me as if English is a second language, but I make do.

Alright. Well, I understand you completely, so I think we’re starting off on the right side here. 

Good start!

Let’s get in a little bit of, you know, I mentioned the business succession planning and what you’re doing. There’s also a platform, Capitaliz.com, we’ll probably talk a little bit about today, but why don’t you give us an idea of what it is you do and why it’s important? We’ll get into a whole conversation, but give us a little background on Succession Plus and what your goal is working with businesses.

So a bit of background, is I spent a lot of my secnd career, shall we say coaching and consulting SME, privately owned, businesses and business owners. And I focused on getting them through the growth stages, and then understanding how business owners and businesses grow, and where they get stuck. And a lot of them would get to the point where they go, hey, look, I want to exit my business, and if I just grow it to some point, at some point, someone will come along and they’ll offer me a lot of money, and I’ll, you know, ride off into the sunset and live happily ever after. And after working with a number of them it’s just not true, is it?

No.

It just doesn’t happen.

Right.

If they get offered a deal, it normally means they’re on the back foot, they’re reacting, because they weren’t prepared, they weren’t planning for it. And it means that if they’re being—if someone’s approaching them and they’re not prepared, the person making the approach, you know, this is their gig. They do it every single day. So they’re in control of the process, and effectively they’re pushing you around. And they want to deal that de-risks things for them. So they end up having a deal where the selling business wasn’t and so they have to do some sort of earnout. 

And what I learned when I was just working on the coaching side is that entrepreneurs and/or business owners and earnouts, they’re like oil and water. They just don’t mix. And most earnouts, you know, well, I won’t say “failure,” but they don’t get the best opportunity—that business owner doesn’t end up exiting on their terms. So whatever cash, however sizable that is up front, that’s it because, you know, they said, hey, look, I could work for three years with someone else, and then three weeks into that, it’s kind of, what was I thinking? 

Mmm hmm!

So that’s how I thought, hey, look. How do I narrow down? I didn’t want to continue with just generic coaching. And so I ended up bringing Succession Plus from Australia, from a colleague over there who started there about 1two years ago, and I started it up in the UK in 2019, and we joined forces and expanded it. So it was all about recognizing that 80% of business owners or businesses that go to market don’t end up in a successful exit. They don’t sell. And only one in five actually hits a deal. And they’re stats from business brokers and M&A guys. And of those one in five that actually get a deal, only about half of those end up with a successful exit. So, you know, complete, with the owner completing the exit or completing the earnout. 

So I recognized that business owners, you know, they were thinking of their business as their pension, you know, as a generic statement. and they wanted to get the most from their life’s work. They’ve built it, they’ve taken risks for their whole career of building this business, so they wanted to maximize value, and they want to exit on their terms. So that’s what Succession Plus is all about, is how do we create that for business owners? How do we—they’re the grassroots of our economy, SME business owners. So let’s help them get what they’re looking for and get the most from their life’s worth.

Yep. For sure.

You mentioned Capitaliz, so just so we don’t leave that hanging.

Oh, yeah!

Succession Plus has designed a process. So one of the things we do is that we show business owners, especially in service based businesses, how to move out of selling your time, because you’re never going to maximize the value of your business as an asset if you’re just selling time. So we teach them how to identify their IP and turn it into a product, so they can sell solutions for their clients. So the solution we sell our clients is a process, and it’s based on a 21 steps platform, which are the 21 steps or 21 things that you have to have in place to get that successful exit. And those 21 steps are grouped into five stages. 

When we were presenting this and going into the States and meeting with the planning associations and and the industry bodies, they were going, looking at our process and going, that’s a pretty good process. How do we get that in, access to that over here? Can you bring Succession Plus into the U.S.? We’ve sort of gone, that’s a big step to bring the whole business. You already have a lot of exit planners, there’s an established industry in the States. Why don’t we just make our platform, our product, if you like, available to all the exit planners in the States? And that’s how Capitaliz was born. It’s spelled “Capitaliz” with a “z” on the end, but no “e.” 

With no “e.”

So it’s Capitaliz.com, and so Capitaliz is now a digital platform—it’s a B2B product, so direct end use clients kinda access it. But it’s a program, a platform for exit planners to use, so that they can use the process to take their clients through exit planning. And it’s a really cool process because you can show the value you’re adding to your client in terms of increased valuation every step along the way. So there’s the background. I know it’s a long answer to a short question, but, hopefully, it’s complete.

No. I love long answers, because that’s less time I have to think about the next question, so you can keep going as long as you want on these things. But this is intriguing to me for a few reasons: One, you know, I’ve owned multiple businesses in the past, and I’ve sold, I guess, multiple businesses. The first one I probably sold for about $25, which was a window washing company I started when I was sixteen years old. And I went to college and my brother took over. So he had to pay me for the supplies I had. Not a lot of planning done there.

Another was my accounting firm kind of got to a point where I was running two different businesses, and the accounting firm needed to move on because the other business that I was concentrating on had a lot more risk and potential reward in it. And so again, I wasn’t proactive. Like you said, I was like, okay, we’re ready. I did not do anything to get prepared. It was just like, okay, who do I know that can take this over? And we had the earnout, which obviously never ends up, like you said, like you expect it to. At least I got, I think, you know, maybe 25% upfront, and the rest was—or not, or whatever. I don’t even remember at this point. 

And then another one, which was a real estate development firm, which again, you never get what you expected it to get. So the planning portion is so important, and it’s not, I think—and you can tell me if I’m right or wrong—I think you start doing this even before you even think you’re going to exit the business because, you know, if you’re ready to exit, you’re probably too late, from a planning standpoint.

Oh look, 100%. If I talk to people and they go, well, I’m not ready to exit yet, like, I’ll get back in touch when I’m thinking of exiting, I go, well, you can do that if you want, but do you want to maximize the value? Do you want to minimize your risk? Because that’s what buyers are looking for—they’re looking for an asset, an acquisition where they minimize their risk. The more you can prepare it and make it attractive to them, the more they’ll pay for it, but also, the wider the audience your business will be attractive to. So we say, look, ideally three years, but the more time you allow yourself, the more upside to you. 

And the flipside is once your business is ready for exit, or exitable, or attractive or whatever language we want to use, it ends up being a more profitable business, and it’s more fun to run. So, yeah, the sooner the better. And as a side note, you know, we don’t do the deal ourselves. Our process is all about getting businesses ready for exit. And one of the reasons for that is because sometimes business owners, their prompt for wanting to sell the business is, they’ve just had enough. They’re stressed to the eyeballs, they’re going, get me out of here, I just need to get out of here at any cost. It’s taken over my life. I need to escape. I’ll give it away if I can. Now that’s a firesale type of thing, and you never get a lot there. 

But if we can come in and work with those guys, the businesses in that situation, sometimes, or you know, more often, regularly, I’ll say, is we work with them for one, two, three years, and the business is really attractive now. It’s ready for exit, and they’ll go, guys, the business is ready for exit now—do you mind if we don’t sell it? I’m still in fact in love with my business. It’s profitable, it’s a fun place to be, my career has been reignited because I’ve got a different job to what I had before. I’m loving this. I might just hang around. 

And we go cool! Our work here is done. You know exactly what to do to keep all these things in place. Look, we can just have a check-in every six months or 12 months with you to make sure that things are are staying on track, and you keep everything ready so that you are on the front foot if someone does come knocking—or you’re at least ready when you want to take it to market and get some competitive bidding going on. So, yeah, that’s how we see things. It’s the sooner the better.

Yeah. And I was actually going to ask you that question. How often do people get to the point where you’re ready for the exit, and they’re in love with the business again, and they don’t want to. So I assume that means you become more efficient? You’ve probably made this business more self-sustaining. You’re not maybe as important. And it could be sold because you can, but you’ve taken on a role that you just love so much, and you’ve went in there and made this business somewhat self-sustaining, that they are just having such a great time. I can see that for sure. 

I want to expand on one thing you said because you said you deal with service businesses a lot. And, you’re working with them to stop selling time, which that’s something I talk about all the time. Because I’m a big proponent of figuring out ways, and you’ve talked about this too, ways that we can minimize or completely avoid burnout. Because burnout for business owners is so common, because all they do is they concentrate so much on the business and they forget, oh, wait—I have a life too. So when you’re doing this “let’s stop selling hours,” do you have a plan in place? How do you make this switch from their mindset of I’m going to, you know, whatever, bill by the hour, I’m going to sell my hours, to now I have whatever the program is you’re saying?

So I call it a “let’s build a product” architecture. So even if I’m in a service business, let’s think of, you know, what I’m selling as a product. 

Yep. 

We’ve got to understand, why do clients buy it? They’re only going to buy if they’re running away from something or running to something. There’s something not happening in their business the way they would want it to.

Right.

Now, if I’m a traditional professional service provider, I’ll go, hey, Mr. Client, ah yes, I understand this problem. I’ve seen it many times before. Look, I’ve got 20 years experience I’ve been doing this—trust me, I know what I’m doing. Buy me, buy me, buy me. And often I don’t have a solution—I’m just saying, I know what I’m doing. So the only thing that’s left is they go, well, come and fix it for me. How do I charge? Well, it’s hours. And everyone in my industry charges hours, so that’s pretty normal. 

Now when everyone in my industry charges hours, and the only thing that’s different is me or you or them, you know, we’re a commodity. There’s no difference. We’re a commodity. And so our hour is our time, our unit of commodity, if you like. And how do we buy commodities? It’s the lowest thing. So there’s always going to be like, why do we expect anything else? Like, because I’m charming and got a great personality?

You do!

You know, clients aren’t going to buy that. At the end of the day, they want a solution and they want something solid. They want something assured that they can wrap their hands around. So If I’m just saying buy me, I’ve done this a million times, trust me, it’ll be okay, I’m selling a promise. I’m selling, I’m really selling the intangible. 

Now if I switch that and go, hey, Mr. Client, yeah, look, we understand what you’re doing, and our business has been solving this problem, for a number of ways—let me just go back a step. A lot of businesses then go, oh, okay, we need to productize our system. So they go, oh, so we’ll end up with, here’s our five step process for solving your problem. And they think, oh, that’s a good way to go.

Mmm hmm. 

And I go, look, imagine we go into a restaurant and the waiter comes up to us and says, you know, what would you like? And you go that that steak on the menu sounds pretty good. I’d love that steak. And they go, sure, well, how would you like it cooked? And you go, oh, medium rare, please. And they go, well, Randy, look, what you need to know is our chef has this five step process to make sure that your steak comes out medium rare. You gotta sit there and go, I couldn’t care less! It’s not that process behind the kitchen. You ask me what I wanted, I expect it medium rare. I don’t care how you do it. 

Now if they come out and go, hey, the medium rare, good choice, Randy, because that sizzle, that aroma when it comes out, is still going to be sizzling on the plate, but just a little bit of blood is going to be amazing when you cut into it, and it’s going to be so tender. If they sell what’s beneficial to you—so we need that five step process, or whatever it is, and that’s the first part of the process. But when it comes to building product architecture or IP, what we need to do then is move and start to present that five step process in a way that’s in terms of the benefit to the client, right? So it’s no longer a five step process. It’s, hey Mr. Client, if we work with you to solve this problem, here’s our model or our approach, and and I like to create a little drawing map it out on every sales call as I develop is let’s do it in front of the client. So we do a fact find of problems, and then we feed back and present this model or our IP to the client. So now we’re selling the solution.

And what they’re buying into is the solution, and because you’ve got a model or a process or a methodology that you can document, they can see that it’s no longer up to chance of your experience, because you’ve you’ve just made it tangible. You’ve created something tangible out of the intangible. So they’re buying the process. Now if they’re buying the process, they’re no longer buying your hours, and you can charge for the solution as a project, and you’re distancing yourself from the hours. 

So we’ve got a process that we use that we understand and we extract the IP, because most business owners have got no idea how to do it, because they’re just, they can’t see it as IP. They’re just stuck at going well, I’ve just got all this experience. I know what to do. It’s creative, Darryl. It’s a magic process. Every magic process can be captured with the right, you know, process of extracting it. I’ve got to suck it out of their heads. But we have a process that our consultant’s doing that. So, yeah, we’ve gotta make it as tangible as possible, even though it’s an intangible. And, then you’ve got some IP. And by the way, when people are buying the process and they’re not buying the person, your business is worth more. Because now I don’t need gurus, I can employ average quality people, train them in my process, which means the staff will stick around, I’ve got less primadonnas in my organization, I’ve got a lot more staff consistency. and that relates to retention and tends to go back to higher profitability as well. When you’re showing that and demonstrating that to a buyer, you get some great assurance and value. Otherwise, it is how do I scale this? I just can’t scale this.

And what you said a few times there is value, and they talk about that too. If you show that value there, you can charge more. You have the opportunity, because now it’s not just I’m doing what everybody else is doing. I am showing you the value, and I can quantify it. And I can, yeah, I think that’s awesome.

Alright. So we kinda went through just a short process of one of the things that you do, I assume there. You’ve now, like you said a little bit before, Capitaliz, you’ve taken this, and this is something you make available to exit planners, right? That’s who uses Capitaliz. And you’ve kind of created the system that you’ve used, and you make it available to others. So I mean, what are the process or the steps that Capitaliz goes through? Is this what we just talked about? Is there other things, who should be using this? Let’s expand even more on Capitaliz, because I think that’s a pretty cool tool that you put together.

So I mentioned the 21 steps and it’s broken down into five stages. So the first stage is, we need to identify the value. What’s the starting point of the business? And it doesn’t matter where you want to get to, “just let me get a little more profitable, just let me get”—let’s understand the starting point, and let’s take a snapshot of your business today. So let’s identify the value in your business. And we do that, that process is called a Business Insights Report. And we come in there, and it’s a bit of pre-due diligence, it’s soft due diligence, but it’s on the same side of the desk as a business owner. We have a look at all of the things through a buyer’s lens that are going on in your business, and identify all the areas that they will look at your business and go, oh, this reduces the value of your business, and, oh, this is good, this adds value to your business. And we just take that snapshot, and we go away, and we prepare, and we get our team—and is all the done-for-you piece—we’ll prepare an analysis and we’ll prepare a report. It’s about a fifty-odd page report, and CFOs love the report. It’s got all the information they’re looking for, but, you know, it just takes forever for them to put together.

It prepares an attractiveness score—how ready is your business to be exited now—and it shows you all the elements, all the criteria we use to make up that score, and it has a traffic light system. So I said, here’s a red light, and here’s a green light. And so it’s really visible to the owners, what they need to work on. Let’s turn all the red lights green. 

So we then have a look at that, and we’ll also go, okay, we’ve got an attractiveness score. We’ve got a readiness assessment. We’ll go, here’s what a buyer would value your business today. Now if you were operating at best practice, and we’ll do some benchmarking—if your business was operating at best practice, so you had best-in-class profit, here’s the impact that would make on your valuation. So improve the profit. Now if your business was attractive to a strategic buyer and really, you know, reduced dependence on the owners, and so in fact, attractive to a wider audience, i.e., typically increase the valuation multiplier in the valuation formula, then here’s what impact that would have on your valuation. So improve the profit, improve the multiple, here’s the value potential of your organization at the current revenue. 

Now in 12 months’ time, you’re going to increase that revenue, because of all the things you’ve put in place in the business. You’re going to increase the profit, so you’re going to increase the profit and the multiple, and you do that a couple of years in the running, and you’ve you’ve really got a big value increase available to you. So stage 1, let’s identify the value.

Stage 2, the next few steps in the 21 steps, is let’s protect what we’ve got. So let’s get in there and go, hey, make sure all the legal, you know, it’s like building strong foundations in the business. All the sort of things that a buyer would expect, assume, to be in place, shareholder protection, all the legal variants, client contracts agreements, good financial reporting, insurances, unplanned events, contingency plans, all those sort of things, let’s protect the foundations on the business. Once we’ve got a solid foundation in place, we can move on to stage 3.

Stage 3, we’re moving from protect the value, to let’s maximize the value. So then this is where most of the steps come in, and we’re doing all the sorts of things we need to do to maximize value. Make sure you’ve got good marketing. Let’s look at your product and IP. Let’s have a look at your systems and processes and your financial controls and, you know, what’s your business planning? What’s your governance look like? Do you have a board? What are your business operating structures? How functional are you? All those things will maximize the value and build the intangible assets in your business and boost your valuation.

Once you’ve maximized it, then what you want to do is go to stage 4, and stage 4 is all about extracting value. What do I have to do to get my business actually ready for an exit event, and do that, and do I need to work with an M&A guy, broker, merchant banker? How do I get involved in extracting the value and then if I’ve done everything really well up to this point, I then need to move into stage 5, which is about the estate planning, and that’s when I want to manage my value because now, I’ve got out of my business. I’ve, you know, cleared all my warranties. I’ve, you know, it’s going smoothly, I’ve had a successful exit. My bank account is filled to the brim and overflowing. So, yeah, I’ve got enough there for the next 33 generations or at least two generations, if they all go well, maybe I’m the new king of England who knows? That puts a date on the episode!

So, you know, I need to do some estate planning, and I need to manage my value. So then I need to work with different advisors and professionals. So this whole 21 step process over five stages, it makes sure we pull in all the different expertise of the different professionals, and our exit planners tend to become project managers, and they’re pulling in all the right people and they’re coordinating, they’re orchestrating the whole process, so they become pivotal for the client, and make sure that everything’s addressed for the whole journey. That’s the twenty one steps in a nutshell and the five stages.

In a nutshell. And then Capitaliz actually walks or helps you, organizes you through all of this process.

Yeah. Capitaliz, it’s a project management tool, work management tool. So it says, hey, look, here’s a number of forms, here’s the data you need to collect from your client to help us prepare the stage 1 report. We input all the data in there, financial and non-financial information, cultural and commercial information, enter it in, and then a report is produced. The report’s emailed to us. We then go to the client, take the client, present the report. They go, that’s fantastic. Oh, I want to get some of that upside, that value potential. And then they’ll work with me to implement the rest of the 21 steps. So then we show, our Capitaliz consultants go, we’ll get your clients on a monthly engagement, and we’ve got tools to implement each of the 21 steps, so we go, you need to guide them through the 21 steps. It’s not a cookie cutter approach. You adapt it for each client.

Right.

But with tools for each of the 21 steps. And, you know, it’s a two year program, ideally. But you can take it longer if you need to to really maximize value and add extra bits in. But the core program is two years. And within that two years, we do evaluation at the beginning. We do the incremental valuation as you increment each step, and then we’ll do another evaluation of full on business insights report after one year, do the rest of the 21 steps or, you know, how we’re working with them. And every year, we do a new valuation. There’s a fee for the report because that’s a big chunk of work, and then a monthly fee as they stay on the platform working with their clients. And that changes with volume of clients you’re working with, and what have you. 

Right. 

But it’s great value.

Oh, yeah, no. I can see this. This seems like a perfect fit. So this week, I had three different sessions talking about the importance of advisory services within a CPA firm. So this seems like a perfect tool to increase your advisory service, and I assume CPAs are a big user of this tool?

I think it’s a really good complement to CPAs. Why? Because we know for 20 or 30 years, people have been coming into CPAs and going, hey, you need to be doing advisory, and you need to be doing this, and they’re throwing in suggestions that are sort of just a little far off their lane. This is, a lot of exit planning is right in the CPA suite spot, but this provides a framework to guide them through it.

Yep.

And so it’s a real compliment to them. And then if they’re already the center of their client’s universe, so they can then coordinate, bring in the legal advisor, and get the legal support, you know, appropriately done. They can coordinate, bring in the wealth manager, the financial planner, and they can demonstrate the value add. And because we’ve got a, it’s a third party valuation, they can charge their fees and demonstrate that it’s totally different to their normal service. Even better if they’ve got someone else in their practice doing it, but, yeah, it’s a great complement to CPAs and, you know, it works well.

Yep. And then, obviously, exit planners, whether they’re in a CPA firm or or have their own just exit planning. My son’s in investment banking, and do you see investment bankers using this as well, or are they just more at the ready-to-sell side of things?

Some investment bankers are using it. Some financial planners are putting themselves in the center. Some management consultants and business coaches are doing it. So it’s anyone who’s involved in advisory, in SME business owners, so that small to mid-market. You probably need to have 10 or 15 people in your business, employees in your business to get the best value out of this type of process. 

Right.

Because then you’ve got a business that you can sell and really increase the value of, as, you know, up to ten people, it’s often really self-employed with a few helpers.

Well, What you did for me today is you gave me another talking point, for when I’m out talking about adding advisory services to your practice. Now, we can do that with technology, which I often talk about as well, but adding technology with Capitaliz. So that’s awesome. I’m going to start to wrap up, but before I do, any, you want to give us a wrap up on Capitaliz at all? I think you did a pretty—I know you did a really good job already.

Ah, thanks. You’re too kind. And, look, I guess the only thing is we will include some information in the show notes if people want to know more. We’ve got some DIY demo stuff if people want to check it out, and some informational stuff on Capitaliz, because I’m sure once they’ve heard about it, they’ll go, oh, I want to have a look at that. How does that work in practice? And we’ve got some materials we can share with them.

Yeah. I already want to take a look at it. I’m starting it, I just decided I’m starting a new business. I’m going to now be an exit planner. No, I am not. But it is intriguing to me to have this tool available. Alright. So before we close-up here today, we need to ask a question. We know what you do. We know it’s fun. It’s exciting to me. But what do you do that’s fun, that’s exciting, that’s not work? What are your outside of work passions?

Well, what do I do? The things, well, my kids are all grown up and left home. So, yeah, I love it when they come back and visit. My son’s with me today. 

Nice. 

He’s actually, he’s here for the weekend, and he’s only 22, but he’s offered to—we’re doing a fun run on Sunday, which is a 10K, and he said he’s going to act as a sherpa for me, to make sure that I can try and get a PB because I’ve only been running a couple of years. 

Oh!

You know, a PB for me is going to be just under 50 minutes, and I don’t think he’ll even raise a sweat doing that. So that’s no problem for him. So, running is a bit of fun for me and gardening is, yeah. And if I can’t have an English garden while living in England, then, it’s not too good.

Well, that’s great. Yeah. I didn’t I didn’t warn you ahead of time, you’re getting that question, but you were prepared. So that’s nice. So far, I haven’t had one guest, and I’ve probably recorded 150 shows at this point, I haven’t had one guest not say that they don’t have a passion outside of work. So far, we’re 100%, which is good.

You gotta have balance, right? You know, you gotta have work-life balance, and one gives you energy for the other.

Exactly. And then last question, if people want to find out more about Capitaliz, find out more about you, what’s a good place for people to look for things?

A good place to find me is on LinkedIn, Darryl Bates-Brownsword. There’s only one of me in the world. So, yeah, if you put in a search, you’ll find me real easy with that double barreled name.  Capitaliz.com, or Succession.Plus is the website for our consulting business. I’m imagining most people would be interested in Capitaliz.com, and that’s “Capitaliz” without an “e” on the end.

No “e.” I assume the “e” was already taken, is that how this happened? 

Yeah.

Alright! Well, Darryl, thanks. It’s been a blast. You educated me—if you educate me, I think we’ve done a good job, because I assume some other people are, I feel they’ve been educated too. So thank you so much for being on the show.

Thanks. It’s been a blast, Randy.