How prepared is your business to operate without you? Laurie Barkman was joined by Jason Seltzer, entrepreneur and risk mitigation expert with EHD Insurance. Jason shared challenges business owners can face when they are not prepared for the worst case scenario and how the Four D’s (Death, Disagreement, etc.) can affect a business.
If you're an entrepreneur looking to avoid critical pitfalls of not planning ahead, this episode is for you.
Listen to the episode here or in your favorite podcast software.
Laurie Barkman (00:58):
The focus of this episode was transition planning and mitigating risk. I had a great discussion with Jason Seltzer. Jason is with EHD, one of the largest privately-held full service insurance brokers in the United States. We had a great discussion because Jason is an entrepreneur. He sold the firm that he co-owned with his father, so he's a risk taker by nature, and he's in a profession that helps companies manage risk and protect their interests. Jason shared some practical questions for business owners to consider to enhance and protect value:
How prepared is the business to operate without you?
Do you have a structured plan in place that can be implemented or is it only in your head?
Have you worked with experts to evaluate your risks?
Timing is everything. Will you recognize opportunities that may come your way when you least expect them?
Jason also shared some stories of companies that weren't prepared for the worst case scenario. If you're a business owner that has an idea, but doesn't yet have a transition plan. I think you'll find this episode helpful. Thanks for tuning in!
Laurie Barkman (01:48):
Jason, thanks so much for joining me today on the Succession Stories Podcast. It's great to have you here. There's two main areas I want to explore with you today. You have more than 15 years of experience in insurance, benefits, financial services, and you work with various business owners to help them manage their risk. And, you have an entrepreneurial background. You have various things that you've done in the entrepreneurial space-- launching and operating independent companies. This is a pretty unusual combination between risk advisor and being a risk seeker. So I want to start there. I'd love to start with entrepreneurship. How did you become interested in being an entrepreneur?
Jason Seltzer (02:40):
Well first of all, thanks for having me. I really appreciate the opportunity to talk about this. As you said, I do have a somewhat unique background. I would say that entrepreneurship has always run in my family, even though I didn't fully realize it until I was out of college myself. My grandfather started own medical transcription business back in. I want to say the 1960s and you know, it's a very outdated concept nowadays, but I believe how it worked was doctors would, instead of transcribing their notes would call a phone number and there would be a transcription person sitting at the other end who would type up all the notes for all of the files and send them in. And my father was approached by my grandfather and he said, look, you know, I've, I've started this company. I'd like for you to take it over.
Jason Seltzer (03:28):
And he said, that's not really what I'm interested in doing. Part of it was that he wanted to move from South Jersey to Pittsburgh, with his now wife, my mother. The other part of it was that he had that kind of entrepreneurial streak of his own. And he didn't really know what to do. He worked in a couple of different things before he ultimately got into the risk management business himself. And ultimately he was starting his own business, which was an employee benefits consulting firm in Pittsburgh. That he ran for 27 years prior to its ultimate sale-- initially to a private equity fund and ultimately to another buyer. And unfortunately for him, he did not have any ownership stake in his business. And so once it was sold for the second time, he found himself out of a job. It was around the same time that after I had been in Corporate America for about seven or eight years, myself, in an insurance business, I found myself reorganized out of a job as well.
Jason Seltzer (04:33):
And all along my professional career, once I got out of college, I always just had these, I hate to say it, but I was somewhat of an idea guy. I kept coming up with these ideas, but I always struggled to implement them because my ideas were somewhat reliant upon skills that I did not have. It was also the early 2000’s. And really I'm going to use a very outdated term, but computer science was still not the prevalent course of study that it has become. So for all of the ideas that I was coming up with, if only I could program, I could build this thing myself. And so for a number of years, I was seeking out people who had the skillset that I didn't have because I said, I think this is a really good idea, but I don't know how to make it come to fruition.
Jason Seltzer (05:26):
And so I did that for a little while. I had a few companies that we dabbled around with, but never really got any traction because of the shortcomings of technology that we had. But at the same time, because I had that background in Corporate America, in sales, in evaluating opportunities, evaluating product fit, helping to develop products. I was approached by a local seed organization to say, look, you've kind of got this weird skillset that a lot of our portfolio companies could really use, which is, you know how to sell, you know how to find product fit. You know how to do consultative analysis for companies. And we have companies that have products, but they don't know how to find a market for them. And I thought, wow, this, this could be my calling a blend of my two skillsets that I didn't really know existed.
Jason Seltzer (06:21):
Unfortunately at that time in Western PA and in Pittsburgh, the technology startup scene was not what it is today. It's not what it has been for several years. And the institutional support for a person with that skillset just didn't exist at the time. They said, we'd love to have you. We'd love to have you do this are our companies need it, but we don't have the financial and internal capital to support that person. So I said, all right, well, my dad was out of a job. I was out of a job. I had a nice severance. So I had some time to sit around and think about what I wanted to do. And he said, look I've got an opportunity to start my own business with some of my former clients who are calling on me. I'd love to have you because we had similar backgrounds and employee benefits, but I understand that you're somewhat disillusioned with this industry and Corporate America.
Jason Seltzer (07:11):
And if you don't want to do it and you want to focus on technology and startups, I get that. And I said, I think that there's a way to blend the two. And that's what we did. I brought my startup experience of outsourcing a lot of things that we did not specialize in. I like to refer to that time around 2010 as the democratization of technology where a lot of technology solutions that were previously only available to large enterprise level businesses started to become available to the everyday person at an affordable cost. And it was just fortuitous timing. And so I said, look, we don't need to have a marketing department. I can use MailChimp. We don't need to have a social media director. I can use IFTTT and type something one time and broadcast it on infinite social media channels.
Jason Seltzer (08:02):
And so that allowed us the ability to operate as a very small, very lean and nimble, low overhead startupy kind of business in a very traditional sense, a traditional industry, like insurance. And so that was kind of a way for those two things to finally come together for me as a way to say, I'm evaluating an opportunity as an entrepreneur, 2010 was around when the affordable care act was passed. And a lot of people were saying, this was the death of the insurance industry. And we said, we didn't think that it was, we saw an opportunity. We evaluated that risk as risk professionals to say, okay, well, how, if we're going to do this, how do we do it in a way that gives us the best possibility of success? And we were very fortunate. We did it the right way.
Jason Seltzer (08:56):
We were featured in a number of industry publications who thought that we had come up with this new business model for the Post Affordable Care Act Future of lean insurance agencies. And we did that for several years until we realized that in order to take the next step as an organization, we needed to either make a capital investment in our business, or we needed to look for a partner. And it just so happened that the perfect partner fell in our laps. And so that began my succession story with my company as well. And you know, all along the way, I still dabbled in other technology companies. I was an advisor to a technology startup that ultimately was acquired in New York in the digital media space. I was a co-founder of a technology startup here in the real estate space of all things, and all of those things I've divested over the years, as I try to focus on growing, what was my business that we ultimately sold. But to your point, I was very fortunate to identify those two parallel tracks of risk taking and risk analysis at a fortuitous time where I could bring both of those things together to form a company that capitalized on both.
Laurie Barkman (10:06):
Yeah. That's a fantastic overview. And there's so much in there over a ten year span. But you tried a few things you learned along the way, and entrepreneurship is definitely not easy, especially if you are trying to do something solo and need essentially a team around you. The place that you mentioned, was it a startup accelerator? Is that right? That's another avenue that some entrepreneurs are participating in across the country. The one here locally is called Alpha Lab. I believe that was the one you were a part of?
Jason Seltzer (10:37)
Laurie Barkman (10:38)
So that's really interesting. And eventually that led you and your father to come together because you had such different backgrounds. Yet the commonality of interest was around the insurance or risk mitigation space. So let's talk about that. So you started the business with your dad and it was called J Seltzer associates, is that correct?
Jason Seltzer (10:55):
Yes. We got really creative.
Laurie Barkman (10:57):
You got really creative. So tell us a little bit about that business, was it successful? It sounds like it was. What do you think inherently from going from zero to a hundred miles an hour? What were some of the reasons behind that success?
Jason Seltzer (11:12):
I think a couple of things. We had a lot of people around that time start to tell me on a personal level, I really wish I could do what you're doing. And I said, well, not everybody can. And we were fortunate for a couple of reasons. One, as I mentioned, I was very fortunate to have a very generous severance package when I was reorganized out of my prior company. They gave me about six months of full-blown income to decide what I wanted to do. The other thing is that I come from a very fiscally conservative family. Maybe conservative's not the right word to use because of the political connotations, but very responsible family where my parents, my dad in particular, had very little to no debt. House paid off, no car payments, a nice amount of money socked away from his 27 year career.
Jason Seltzer (12:02):
And that allowed us to say, okay, we can operate with no income for the better part of a year. Fortunately, I had a working spouse who made a nice living. So between a lot of those things, the financial aspect of it, I think is what scares a lot of people away. They can't work for free for an extended period of time. The second thing I think that made us jump at the opportunity and get off the ground running was that we were leaving an existing business and coming into a similar business, if not the same business, with somewhat of a book of business to bring with us. I worked for my father at his prior company for a short period of time. And when he left his prior firms, a number of his former clients were calling him saying, I want to work with you.
Jason Seltzer (12:48):
I don't want to work with the new people. I've worked with you for 25 years. I want to keep working with you. And that gave us the kind of spiritual motivation that people still wanted to work with us. And it also gave us a little bit of clout when it came to two guys working out of their basements to go into an organization and say, yeah, we are two guys working out of our basements, but these are all of the companies that have chosen to do business with us. And if it works for them and they've been with us for 20 years, regardless of where we are, there's no reason it can't work for you. And so I think those two things made a significant difference in our ability to not only start a company, but continue to grow that company, for the nine plus years we did it prior to our acquisition.
Laurie Barkman (13:42):
I think that's such a powerful thing to get that first customer. I recall being at a startup and we hung the printout of the very first software sale. We had that hanging on the wall. You know, sometimes you go into a restaurant, you see the first dollar bills hanging there, and that is very motivating. And thanks for sharing that story about working in the basement. I think that's pretty relatable for anyone who's been at a startup. You got to start somewhere. And it's also kind of cool. I just want to point out there was a different episode that I recorded. On that episode, [E05: Ageless Startup: Rick Terrien] we talked about ageless startup and that it's very common for people to start businesses and their second half of life. And your dad certainly was one of those people. So I think that that's fantastic.
Jason Seltzer (14:26):
As someone who has tried and failed to start companies as a 22, 23, 24 year old, who did start a company when I was 29 or 30, who started another company when I was in my early thirties. And obviously my father had started a company when it is in his mid-50s. I genuinely think that my life experiences and professional experiences, even over that short of time really made a huge difference when it came to when I did ultimately jump at starting a company. I felt as though I was a lot more prepared than when I was a 24 year old, just throwing things against the wall and hoping something stuck. So you're absolutely right. I know in the tech industry, there's somewhat of a, I’m not going say a prejudice, but a preference for younger founders. Although I think that older founders, if there's probably a study out there somewhere that says that they're probably just as successful, if not more successful than younger founders for that very reason.
Laurie Barkman (15:24):
And it's a readiness factor too. So let's go to your succession story. As you mentioned, you and your father sold the company two and a different company called EHD, which was the company you're with today. I'd love to hear about the dynamics of that decision making. If you put yourself back in that chair with your father. Was that an easy decision overnight, no problem, done, get the paper signed. Or was it something that really took some time to think through?
Jason Seltzer (15:49):
The impetus for ultimately selling the company was a somewhat challenging one in the sense that we only had two people that had to make the decision, me and him. He and I did not agree on what our future was going to be. As I mentioned, his father started a company, wanted to pass it off to his son. He started a company, he wanted to pass it off to his son. I also have a younger brother who's nine years younger than I am who's in the industry. And his goal was always to start a business that could be ours, start a multigenerational business that could create somewhat of a legacy. And while I agreed and appreciated all of that, I also looked at it and said, we are in a period of unprecedented M&A activity in general, and specifically in the insurance industry.
Jason Seltzer (16:40):
And I got a very insider glimpse into that because of some work that I have done over the years through a third party company that advises private equity funds and management consulting firms and etc. on issues specific to our industry. And as I was doing that consulting work, I came to realize that, I don't want to call this the golden age of agency acquisitions, but it may be. The multiples that the firms were paying were outrageous. And I said, this is not a get rich quick scheme. But we have two opportunities. There's a lot of smaller insurance organizations that do not have the expertise that they need to operate in this new post ACA world. The insurance agency tends to skew older. So a lot of these agency principals are getting older.
Jason Seltzer (17:33):
They don't have a succession plan and they have a book of business that they are no longer able to manage. And if these private equity funds aren't attracted to them because of their size, why don't we go buy them all? And we start our own mini private equity acquisition strategy. And he said, okay, that makes sense. I get what I want. I keep the business in the family. You get what you want. We get to go out and grow. And we somewhat future-proof ourselves because we're not reliant upon us two guys. The only problem with that is when you're in the golden age of mergers and acquisitions, everybody thinks that their business is worth way more than it actually is. And when we would talk to people who needed to sell, should sell, wanted to sell, we would do our due diligence and find out that the quality of the business that we were going to be buying was suspect.
Jason Seltzer (18:31):
The multiples that they were expecting were far too high. We were far more flexible than the private equity funds would be in working with them to come up with a way to reach those multiples. But I can't tell you how many people we had stand up in the middle of a meeting, where we were talking to them about this process and just walk out and leave because they thought their business was worth $250,000. And it was worth a $100,000 or their businesses were $3 million and it was actually worth less than $1 million. So it quickly became clear that that wasn't going to work. And my father is, as of last month, he is 66 years old. He has no intentions of retiring, but he has had a few health scares over the years. And we're certainly not wealthy, but he is financially stable.
Jason Seltzer (19:26):
And if he had to stop working tomorrow, he could live comfortably for the rest of his days and not worry about it. I at the age of 39 with a mortgage and two kids that I have to put through school, didn't have that financial certainty that he had. Our growth had somewhat plateaued in the prior year or so, mostly because as the agency acquisitions accelerated, it created a number of very large private equity backed conglomerates with a lot of resources, a lot of money to throw at problems. The national and regional firms also had a lot of money and resources to throw at problems. We were neither of those things. And in order for us to compete with those companies, we would have needed to make significant capital investments in the company to acquire those resources. And so I was facing a dilemma. Do we invest heavily in our company in the hopes that it works. Or if god forbid my father drops out of a heart attack tomorrow I'm toast because I can't replace 35 years of experience and knowledge. And if I did and I tried to go out and hire somebody, they wouldn't need me. And I probably couldn't afford to hire that person anyway.
Jason Seltzer (20:48):
So it just so happens that we were approached by a number of people who were interested in acquiring us. Most of them were private equity backed, and because of my experienced in advising those private equity firms we were not interested in that because we knew what the long-term ramifications of those agency acquisitions was. And we were only interested in selling to a company that was committed to remaining private and somehow, a bolt of lightning struck somewhere and we got introduced to EHD. It was pretty quick to come together. I think we agreed fairly quickly that it was a good fit. They needed us, we needed them. And I think the deal itself basically came together over a span of about 48 hours. They gave us an offer, we countered, they accepted and that was it. So it was a somewhat drawn out process on our end, just getting to the table to decide if this is what we wanted to do. But the actual consummation of the deal was not a long drawn out process. We were ready. And when we got to the table that we were happy to do it and we still are.
Laurie Barkman (21:50):
How long did the process take from when you first started to have these conversations about strategy with your father till when you sold to EHD?
Jason Seltzer (21:58):
I would say probably about a year. We spent about six months on our own trying to do our own little mini acquisition spree. And when we realized that wasn't going to work, it was about the same time we were introduced to EHD. And that process took six months. Not because of anything other than it happened to be in the fourth quarter of 2018. Fourth quarter for our industry is typically extremely busy. So we were busy, they were busy. We kept a meeting in Bedford Springs because it was halfway between our office and their corporate office. My birthday is January 27th. I want to say right around my 38th birthday, we had essentially agreed in principle and the deal closed March 1st of 2019. So it came together pretty quick, six months from initial conversation to ink on paper, but it was probably closer to three months of discussion.
Laurie Barkman (22:57):
And the discussions were probably pretty interesting if there was a fly on the wall between you and your father. And just going back to something you said, which was initially, it seemed like your goals were divergent, that he wanted to create something that could continue as a multigenerational family business. And you were more interested in kind of the growth and more short term liquidity event. And ultimately that's what did happen for the right reasons. It sounds like you guys talked it all through and worked it out, but that's probably something that a lot of family owned businesses can relate to. That when transitions are discussed, a transition can mean a variety of things, right? Does it stay within the family. Does it transition to whom? Or is it an exit and you're going through an M&A experience. So that's what you guys did. Thanks for sharing that background.
Laurie Barkman (23:46):
So let's segue now to talk more about the service that you're in and the insurance industry and how you work with clients. Because I think this is the other side of the conversation that is helpful too, family businesses, and did another episode [E07: Financial Transition Planning – Brian Baum] with someone who works with family businesses to plan transitions. And in the planning process is risk mitigation de-risking phase, if you will. And so that's certainly not a one and done. But in the context of EHD, I'd love for you to tell us about how you work with your clients, what types of clients you serve, what industries they're in, and if they're multigenerational businesses, what are some of the most common situations that you talk about with them to help them in de-risking their business?
Jason Seltzer (24:38):
Sure. And I'm somewhat anecdotal when I work with our clients because I have not only my experience in working with a multigenerational businesses, but my father's, which is even greater than mine. And it's oftentimes, our clients historically have been white collar professionals, closely held businesses, family owned businesses. Now that we've joined EHD, that is changing a little bit, but that's still a client profile that we really seek out. One of the reasons is because most of the people who do what we do, I use the term, employee benefits consulting, a lot of people who do that tend to focus primarily on the employee benefits portion. And that's a lot of what we do from health care to executive compensation, executive disability, employee life insurance, and all of that good stuff.
Jason Seltzer (25:42):
As a result of our backgrounds, we have a lot more experience in the transition planning portion and the succession planning portion of working with privately held businesses then I would say anybody else in the area who is a benefits professional. There may be a few, but not many because they tend to focus on group benefits as opposed to working with owners and managers of privately held businesses. I think from our perspective, the thing that we try to talk to our clients about is when they have a plan, ensuring that that plan is current, ensuring that that plan has been well thought out and appropriately funded whether that's using insurance or whether that's using traditional financing mechanisms. A lot of times we find out that people have an idea, but they haven't gotten around to doing anything with that idea.
Jason Seltzer (26:48):
Either, well, my son works here, so he's going to take over the company. Okay. Well, what does that look like? Is he going to buy it from you? If he is, how is he going to finance it? Are you going to finance it for him? Is he going to have to go to the bank and take out a loan, and what does that look like? A lot of times that that's kind of where it ends. I know what I want to do, but I haven't thought through how I'm going to do it. So what we do in those situations is we try to politely and professionally scare them into doing something by telling them stories of people who didn't get past that stage and what happened to their businesses. We have countless examples of the father who had his son worked for him and the son was going to take over the business.
Jason Seltzer (27:43):
The son was basically the second in command and the father dropped dead out of the blue, and the son suddenly inherited a company. The management was working for somebody 25 years their junior. He had been in the industry for five years, they'd been in it for 30. And all of the problems that come along with stuff like that. We try to incentivize them to say, you can't just have an idea, you have to have a plan. And we are not necessarily the people to help you implement that plan or further develop that plan. We can help you with certain aspects of the plan, but we try to ask the questions that get them thinking about how prepared are they really? Or is this just a pipe dream that has no way of coming to fruition if something happened tomorrow unexpectedly.
Laurie Barkman (28:47):
And when you talk about a plan, do you talk to them about a plan for their leaving the business? However they leave, whether they leave on their own, or whether in terms of retiring or they're leaving because of a death? How real are you getting with them on this?
Jason Seltzer (29:03):
Well, as risk people, we tend to get pretty real, pretty quickly because we want to assume the worst case scenario and then work backwards from that. So, one of the questions that we'll typically ask is, let's be honest. If you drop dead tomorrow, how would your business continue operating without you? Could it continue operating without you? What would the revenue implications of your inability to be at work due to your business and how prepared are you for that? And then we take a step back and say, okay we talked about it. If you were to unfortunately meet your untimely demise. Let's talk about what happens if you can't work. You're still alive, but let's say you are suffering from dementia or you're suffering from Alzheimer's. Or you're diagnosed with cancer, and you can't come in and do your job.
Jason Seltzer (30:00):
How prepared is the business to operate without you? What mechanisms are in place to support both financially, as well as operationally, your business? And some of that is self-serving, setting up buy-sell agreements, key man policies, where there's insurance involved is obviously part of what it is that we do. But in our experience, if you don't get people thinking about the worst case scenario, it's harder for them to kind of get off the line and think about the best case scenario. And so we'll take a step back from there and let's say nothing happens to you and that's probably what's going to happen. You should still plan accordingly and buy some insurance in case those things happen. But if it doesn't, what's your plan? Are you going to sell to the highest bidder?
Jason Seltzer (30:59):
Are you going to sell to a family member? Do you want to sell to your employees through an ESOP? What have you explored? What are your feelings about those different things? Some people have very significant gut reactions to certain things. I would never sell to a private equity company or I'm not selling to an ESOP because I don't I fundamentally don't believe in that. Then that helps us further whittle down kind of the conversation to say, okay, well, all right, maybe an ESOP’s not a good fit. Let's talk about, you know, selling to your son or to your daughter, or to your business partner. Then we kind of work with them through that. Would we love to help them set up a buy, sell agreement and fund it with some insurance? Sure. Would we like to set them up with some key man policies? Absolutely. And they should have those. But the ultimate goal is to get them to acknowledge that there's a need, and then help them fill that need with someone who can really walk them through the process of establishing a plan to achieve whatever that goal may be.
Laurie Barkman (32:13):
Yeah, totally understand what you're saying. And it's getting that conversation started because it really is going to take a while to figure out all the pieces and owner readiness is a big part of that. They have to really be in that mindset and in that strategic thinking and the what if thinking that you talked about in the worst case scenario. Also thinking about that future, what do they envision and is it in the multigenerational setting who they want to transition to et cetera. And I've seen some statistics out there from the Exit Planning Institute that says that about 49% less than half of multigenerational business owners have no transition plan in place. For your experience, would you say that's the case?
Jason Seltzer (33:00):
I would say that may even be a little bit generous. I think that depending upon what you determine a plan in place to be, that may be a little bit generous because I think a lot of people have a plan. It's just between their ears and they haven't actually done anything to begin to implement that plan. And when it comes time to implement that plan, do you want to implement it on your terms, or do you want to implement it on someone else's terms because of the circumstances surrounding that exit, whatever that exit may look like? I shutter to think again, because I've heard the horror stories of what happens when you don't plan. I'm sure all of the people that I could tell stories about how that had a plan. But the plan wasn't an actual plan. It was an idea. And without an actual plan, it's nothing. There's nothing there really.
Laurie Barkman (34:08):
Yeah. It can't be just in someone's head. It has to be a real implemented plan. That's an excellent point. I was curious about any other stories that you wanted to share? You mentioned there was a story about an untimely death. I'm sure from the five D’s, there's a couple of other D’s out there that float to the surface most commonly. Divorce I understand is another common one.
Jason Seltzer (34:30):
Yeah. I mean, a few quick stories. A friend of mine's father ran a hedge fund with a business partner. And he worked for his father. They had no plan in place. Unfortunately, the business partner passed away unexpectedly. And the spouse of the business partner approached my friend's father and said, I want my husband's portion of the business. And I think that it's worth X. And my friend's father said, it's not worth X it's worth Y. And she said, all right, I'm going to get a lawyer and we're going to settle this in court. And what ended up happening is the fund was dissolved in order to pay the legal fees and pay the spouse, surviving spouse. The son, we're talking about multigenerational businesses, the son had to leave the business, go get a normal job. He's doing okay, he's managing funds for someone else, but it's not his business anymore.
Jason Seltzer (35:31):
And in a very tight knit community, this drew lines socially. People were coming up to people in the grocery store saying, I can't believe what you're doing to this guy's poor spouse, widow. Or people would go up to him and say, I can't believe she's trying to do this to you. It had enormous costs on them and the surviving partner’s spouse is a very prominent real estate agent who works in the community as well. And so that affected her business. And so, you look at the trickle-down effect of these kinds of things. It's not just the people in the business that are involved, it's their children. It's the community. You risk alienating the people that you live with because of the political angle that people will take. Everybody's going to pick a side depending upon who they tend to favor in these types of things.
Jason Seltzer (36:30):
And quite honestly, it's the surviving spouse that usually gets the most of the sympathy because everybody thinks they're just getting what's theirs. Oftentimes they are, but if there's no plan in place, there's no way to know for sure. That's one example. I mentioned earlier, a friend of mine, his father ran a company. He's younger than I am. He was in his early thirties and his father died unexpectedly. And at, in his early thirties with a young family, he had to take over a company that has about 60 employees over two or three states. Fortunately he had been working in the business his whole life and was prepared to do it. His mother worked for the company, a typical family business, his wife works for the company.
Jason Seltzer (37:23):
They are so reliant upon this business that could they have put something in place that if something had happened, if he passed away unexpectedly, and they had a key man insurance policy on him. How would that money have helped that first six months or a year after he passed away to help the business and help him in his family continue on while dealing with the unexpected death of their father and business owner. You said divorce. A company here in the neighborhood that I live in. Two friends started a business. One of them got divorced. They didn't have a plan. And the spouse was entitled to her share of the business. And the business ultimately went under because of the legal fees and the lack of liquidity in order to pay her what she was owed.
Jason Seltzer (38:22):
And that's just three quick examples. There's a lot more of those five D’s. I think going back to your previous question, I think if you asked all of those people, they would all say that they had a plan. Everybody had a plan.
"Everybody has a plan until you're punched in the face. If your plan isn't articulated, funded, structured and organized, it really isn't a plan at all."
And at least in two of those three scenarios, it costs them the business.
Laurie Barkman (39:11):
I like to ask everybody if they have a favorite quote about entrepreneurship, maybe I should start asking if they have a favorite quote about worst case scenario. And I think your quote would be at the top of the list. Everybody has a plan until you're punched in the face. That's good.
Jason Seltzer (39:29):
Yeah. I can't remember who came up with that, but I'm sure a quick Google search, you can find out who to attribute that quote. [Transcript note: attribution to Mike Tyson]
Laurie Barkman (39:35):
Oh, we'll find out. We'll find out which then leads to the last question for you, which is back to entrepreneurship. Do you have a favorite saying, or quote about entrepreneurship?
Jason Seltzer (39:48):
I think there are so many, that it's really hard to nail down one that I would ascribe to. Partially because I think I have such a different approach to entrepreneurship than a lot of people. Entrepreneurship, I guess, is in my blood, but it's not something that initially came naturally to me. Without being able to pinpoint one, I think as trite as this is, timing is everything. If my father and I were both out of work at the same time, would we have started our previous company? If I hadn't gone to work for a large multinational company that reorganized my division and gave me a really nice severance, would I have been in a financial position to start my own company? If we didn't take a meeting with this guy who ultimately went back to central Pennsylvania and mentioned to someone else that we existed, would we be here right now?
Jason Seltzer (41:08):
Timing really is everything. You can't force timing. Timing is everything, and you create your own luck kind of go hand in hand.
I don't necessarily believe in luck, I believe in timing and being fortuitous with the opportunities that are presented to you. Never closing a door and making sure that you leave all your options open. You never know which of those times it’s going to be the right investor, or the right financier, or the right buyer, or the right business partner. And if you meet the right person, but it's the wrong time, don't force it. Wait for the time to be right. And if you do, you'll look back on it afterwards and you'll go, man, the timing of everything was just perfect. But at the time you don't realize that. It's only in retrospect you can realize how relevant timing is to your decisions. As old and as trite a saying as it is, I really do believe that that timing is everything. You create your own luck by virtue of taking advantage of timing.
Laurie Barkman (42:36):
I love it. Thank you for that. And I agree. I think a lot of it is timing and it is hard to know when you're in it, but when you look back and you say, oh, that really fell into place. So one final thought, if you had something to say to a multigenerational business owner who has not yet started transition planning, what advice do you have for him or her?
Jason Seltzer (42:55):
Not to coin my own phrase that I came up with earlier, but I think I might have to go back to that because I liked it. I'm sure in your mind, you have a plan for what your business was going to look like a year, 5 years, 10 years, 50 years from now. If you didn't, you wouldn't be an entrepreneur. You wouldn't be a business owner. Nobody gets into business without having an idea for what they want their business to become. If you don't have a legitimate structured plan in place that is funded, that is leveraging third party resources and experts who do this for a living and who understand the pitfalls of transitioning a business, you don't have a plan. You really don't. So take your plan out from in between your ears, put it on paper, and ask for help. There's a lot of people in a lot of different industries like you, Laurie, like us, who excel in different areas of helping you bring that plan to fruition and the consequences of not taking action now are significant.
Laurie Barkman (44:19):
The consequences are significant. Indeed. That's probably a good place to stop. Jason, thanks so much for joining me today. We talked about a lot of things. I think the biggest thing being for family owned business owners, or privately held companies, to take a hard look at how prepared are they, and how prepared is the business to operate without them. You gave us a lot of things to think about so thanks again for being here.
Jason Seltzer (44:40)
My pleasure. Thank you for having me.
Laurie Barkman (44:43)
Thanks for listening to the Succession Stories Podcast. I hope you enjoyed this episode and that you'll consider sharing it with a friend. If you think it's worth five stars, please go to iTunes and rate it so that others can find it as well. I would love to hear from you. Tell me what insights inspired you today. And if you have suggestions for content, please let me know. You can reach me at Laurie Barkman on LinkedIn or send an email to SuccessionStoriesPodcast@gmail.com.