In this week’s episode of Built to Sell Radio, we are joined by Tom Deans, a renowned expert on family business transitions and the author of the trilogy, Every Family’s Business, Willing Wisdom, and The Happy Inheritor.
Drawing from his extensive experience, Tom shares invaluable strategies to help you navigate the complexities of selling a family business.
In this episode, you’ll learn how to:
Avoid becoming a bottleneck for the next generation of leaders inside your company.
Enable your kids to buy you out (without giving them any money).
Protect your employee culture during a sale.
Structure voting share agreements to avoid future conflicts.
Maximize your business value without offering family discounts.
Spot a “covert narcissist” and prevent them from derailing your transition.
Set up a family bank.
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More About Tom Deans
Dr. Tom Deans is a renowned expert on intergenerational wealth and business succession planning. He is the best-selling author of Every Family’s Business: 12 Common Sense Questions to Protect Your Wealth, recognized by the New York Times as one of the top ten books business owners should read.
His subsequent works, Willing Wisdom: 7 Questions Successful Families Ask and The Happy Inheritor: How Successful Families Prepare Heirs and Transition Wealth, offer innovative approaches to family estate planning and preparing heirs for wealth transfer.
With over two million copies of his books in circulation, his insights are widely respected and distributed through his publishing company, Detente Financial Press Ltd.
As a professional speaker, Dr. Deans has delivered over 2,000 keynote speeches in 28 countries, sharing his expertise on wealth transfer and business succession planning. He is the president of Détente Financial Press and provides advanced training for financial institutions, charities, and professional firms.
His work has been featured in major publications like Profit, Money Sense, and the New York Times, and he frequently appears on CBC, MoneyLine, and BNN. Dr. Deans’s thought-provoking perspectives inspire audiences to live purposeful lives as both beneficiaries and benefactors.
Definitions
Sellers Discretionary Earnings (SDE): This represents the earnings of a business before the owner’s salary, interest, taxes, depreciation, and amortization. It’s used to assess the true earning potential of a small business. Imagine you have a lemonade stand. At the end of the day, you count how much money you made. But from this money, you need to pay for the lemons, sugar, cups, etc. What you have left after paying for these things is similar to what businesses call “profit.”
However, if you paid yourself a small amount for your time running the lemonade stand, or maybe you bought a new sign to attract more customers, those are costs that are specific to you as the owner and are considered “discretionary.” They are costs that a new owner might not have or might choose to spend differently.
So, Seller’s Discretionary Earnings (SDE) in business terms is like the money left from the lemonade stand, plus any extra costs or payments that were specific to the current owner. It’s a way to show how much money a new owner might expect to earn from the business, considering they might have different ways of running things. In simpler terms, it’s a measure of a business’s earning power from the viewpoint of the owner.
TAM: “Total Addressable Market.” It’s a business term that represents the overall revenue opportunity available for a product or service in a specific market. To put it simply, TAM is the maximum amount of money a company could potentially make if they captured every single customer in a given market who might be interested in what they’re selling.
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