Bridging the Valuation Gap: Building A Company Your Employees Want to Buy
In this episode of The Art of Succession podcast, host Barrett Young interviews Tom Gledhill, a former business owner, broker, and author who has successfully built and scaled four businesses. Listeners gain valuable insights into business scaling, valuation, and exit planning from his decades of experience spanning from early technology adoption to sophisticated exit strategies.
From Engineer to Software Entrepreneur
Tom shares his journey from electrical engineer to software entrepreneur in the healthcare industry during the 1970s, when computers were still large and uncommon. His company developed administrative software for outpatient clinics, facing initial challenges selling technology to medical practices unfamiliar with computers. Tom describes overcoming the "selling a rifle to a caveman" challenge through persistent cold calling and building referrals. The introduction of the IBM PC in 1980 was transformative, allowing smaller practices to afford their networked systems. By focusing on recurring revenue through maintenance contracts and continuously improving their product based on customer feedback, they eventually grew to 3,000 clients across the Northeast.
The Business Broker Perspective
After selling his software company (which was later acquired by a private equity group and eventually General Electric), Tom transitioned to business brokerage. During his first year, he spoke with nearly a thousand business owners, quickly learning that approximately 80% of businesses that go to market don't sell. Tom explains the common disconnect between what owners believe their businesses are worth versus market reality. Many owners base their valuation on what they need for retirement rather than what buyers are willing to pay—an "inside-out" perspective that leads to disappointment.
Creating Transferable Business Value
Tom distinguishes between different buyer types: corporations seek innovative systems and synergistic products; private equity groups want good management and recurring revenue; while lifestyle buyers look for businesses they can operate themselves. Creating a sellable business requires developing systems that can operate without the owner's constant involvement. Tom emphasizes that businesses heavily dependent on the owner's relationships or technical expertise are significantly less valuable. He recommends cleaning up financial statements, developing management teams, and creating documented processes that allow the business to run independently—ideally starting this preparation years before selling.
Listeners can learn more about Tom Gledhill and his XitPro system which guides entrepreneurs through the entire business lifecycle from startup to successful exit.
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The Art of Succession Podcast is brought to you by GWCPA. Twice a month on https://www.youtube.com/@gwcpas, host Barrett Young will bring you interviews sharing the successes and challenges from business owners with their own succession stories. If you've enjoyed this episode, please share it with others.
🎙️ Become a Guest https://bit.ly/AOSBeAGuest
✍️ Leave your feedback for the show: Google Forms
📡 Also distributed on
Transistor.fm https://artofsuccession.transistor.fm/
Spotify https://open.spotify.com/show/7uhogBxFKWAAetAbD8TVQR
Apple Podcasts https://podcasts.apple.com/us/podcast/the-art-of-succession/id1742796896
📧 Prefer to get the Art of Succession in your inbox? Subscribe to the mailing list to be notified of new episodes: https://mailchi.mp/566bff6410fc/aos-podcast-rss
🖥️ Find out more about the show at https://gwcpas.com/podcast
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
From Engineer to Software Entrepreneur
Tom shares his journey from electrical engineer to software entrepreneur in the healthcare industry during the 1970s, when computers were still large and uncommon. His company developed administrative software for outpatient clinics, facing initial challenges selling technology to medical practices unfamiliar with computers. Tom describes overcoming the "selling a rifle to a caveman" challenge through persistent cold calling and building referrals. The introduction of the IBM PC in 1980 was transformative, allowing smaller practices to afford their networked systems. By focusing on recurring revenue through maintenance contracts and continuously improving their product based on customer feedback, they eventually grew to 3,000 clients across the Northeast.
The Business Broker Perspective
After selling his software company (which was later acquired by a private equity group and eventually General Electric), Tom transitioned to business brokerage. During his first year, he spoke with nearly a thousand business owners, quickly learning that approximately 80% of businesses that go to market don't sell. Tom explains the common disconnect between what owners believe their businesses are worth versus market reality. Many owners base their valuation on what they need for retirement rather than what buyers are willing to pay—an "inside-out" perspective that leads to disappointment.
Creating Transferable Business Value
Tom distinguishes between different buyer types: corporations seek innovative systems and synergistic products; private equity groups want good management and recurring revenue; while lifestyle buyers look for businesses they can operate themselves. Creating a sellable business requires developing systems that can operate without the owner's constant involvement. Tom emphasizes that businesses heavily dependent on the owner's relationships or technical expertise are significantly less valuable. He recommends cleaning up financial statements, developing management teams, and creating documented processes that allow the business to run independently—ideally starting this preparation years before selling.
Listeners can learn more about Tom Gledhill and his XitPro system which guides entrepreneurs through the entire business lifecycle from startup to successful exit.
___________________
The Art of Succession Podcast is brought to you by GWCPA. Twice a month on https://www.youtube.com/@gwcpas, host Barrett Young will bring you interviews sharing the successes and challenges from business owners with their own succession stories. If you've enjoyed this episode, please share it with others.
🎙️ Become a Guest https://bit.ly/AOSBeAGuest
✍️ Leave your feedback for the show: Google Forms
📡 Also distributed on
Transistor.fm https://artofsuccession.transistor.fm/
Spotify https://open.spotify.com/show/7uhogBxFKWAAetAbD8TVQR
Apple Podcasts https://podcasts.apple.com/us/podcast/the-art-of-succession/id1742796896
📧 Prefer to get the Art of Succession in your inbox? Subscribe to the mailing list to be notified of new episodes: https://mailchi.mp/566bff6410fc/aos-podcast-rss
🖥️ Find out more about the show at https://gwcpas.com/podcast
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.
