The $4 Million Haircut

Transcript

Disclaimer: Transcripts may contain a few typos. With most episodes lasting 60+ minutes, it can be difficult to catch some minor errors.

John Warrillow:

Hey guys, it’s John Warrillow. So after five years of hosting Built to Sell Radio, I’ve distilled the secrets from the most successful founders into the ultimate field guide, The Art of Selling Your Business: Winning Strategies and Secret Hacks for Exiting On Top is now available. The Art of Selling Your Business is a playbook for punching above your weight in a negotiation to sell your company. Now, you may still be years away from selling, but there are actions you can take now that will make your business irresistible to an acquirer in the future. In this book, you’ll get answers to your most vexing questions like, “When’s the right time to sell? How should I value my business? What are the biggest mistakes owners make when they sell? How do I get multiple offers? How do I attract an offer from an acquirer without looking like I’m desperate to sell? How many companies should I approach? How do I separate real acquirers from tire kickers? When in the process do I reveal my numbers? When and how do I tell my employees? How do I avoid re-trading when the buyer drops their price during diligence?” The age-old, “how do I avoid an earn-out?” Along with actionable answers to the questions. You’ll also get a playbook for defending yourself against the dirty tricks used by the most unscrupulous acquirers, including how to defend yourself against re-trading, acquirers who intentionally set unattainable earn-out goals, financing an acquirer’s business, becoming a prop deal, strategic pacing, competitors posing as acquirers, accepting illiquid or overvalued shares for your business in lieu of cash, and giving away your retained earnings as part of your deal. You’ll also get easy-to-understand definitions of some of the most bewildering terms acquirers us in negotiating to buy your business, stuff like tipping basket, covenant, downstroke, escrow, indemnification, earn-out, Q of E, reps and warranties, churn. I’m just about to throw up just using all this industry lingo, but you’ll get a definition for each of them in an easy-to-understand package. If you order The Art of Selling Your Business today, you’ll receive a collection of thank you gifts to enjoy alongside the book, just go to BuiltToSell.com/Selling.

So this one falls into the category of cautionary tale. When you build a business, if it’s dependent on a single supplier or even a small cadre of suppliers, you can be at their mercy. As my next guest Robert Hartline discovered, it can seriously discount the value of your business, in his case to the tune of $4 million. To tell you the entire story, here is Robert Hartline.

Robert Hartline. Welcome to Built to Sell Radio.

Robert Hartline:

John, good to see you.

John Warrillow:

Yeah, for sure. So you mind telling people where you’re dialing in from today?

Robert Hartline:

So right now I’m in Uvita, Costa Rica. It’s a little vacation home that we got a couple years ago. We were actually on House Hunters International. That was a fun little story.

John Warrillow:

No way.

Robert Hartline:

But if you would go to House Hunters international and look up Uvita Costa Rica, I think our show aired in 2016 or something.

John Warrillow:

Fun. So this is what you can look forward to when you sell your company?

Robert Hartline:

Well, the experience of being on a TV show was fun. It was a whole lot of fun. But what’s even more fun is I was looking back at the video actually a couple days ago. I was editing together a different video. I came across it, and it was just a really great representation of what was going on in my life then because when everything is quality video, I got some really great family video that I could not ever recreate on my own because it’s done by professionals so that was awesome. So I have a little moment in time, a little capsule I can go back to with the family and watch how we were back there. I was fun.

John Warrillow:

Awesome. Well, let’s rewind the tape a little bit. I’d love to hear the story of your wireless company. So how did it start? How did you kind of scale it? What’s the story behind your business?

Robert Hartline:

So I started selling phones out of the back of my car in Murfreesboro, Tennessee in 1994. Nobody had cellphones. In fact, I worked for a company called Telega, which was a phone that was a basically a cordless phone when you’re at your house and a cellphone when you’re away. Back then, you got to put yourself in 94, the people who had a phone was attorneys, business people. I mean, it wasn’t a commonplace.

John Warrillow:

I’ll tell you what I had. I was working in a little town called Sudbury. It was my first job at ABC. I worked at a radio station. My job was to do the remote broadcast, to set up for my broadcast. I wasn’t allowed to touch the actual equipment, but I had to like set up the antennas and stuff like that. They gave me a phone in a bag. Do you remember these days?

Robert Hartline:

Oh yeah.

John Warrillow:

Shoulder strap, right?

Robert Hartline:

Oh yeah.

John Warrillow:

It was like this thing that was the size of like a shoe box. You could put it on this on your shoulder, and now I’m dating myself, but that was my first cellphone.

Robert Hartline:

That was it.

John Warrillow:

It sounds like you and I had a very similar indoctrination to the cellphone business.

Robert Hartline:

No. Absolutely. Honestly, it was really funny because I would go and I would knock on doors. I had to convince people the value of having a phone when they were away from their house. Really, the primary reason was safety, security. It was funny, but make a long story short, I did the door-to-door thing for a couple years, started working for Veri… Back then it was called Verizon Wireless.

Then Nextel launched in Nashville, Tennessee in 1998. About 10 months later, I started Absolute Wireless, and kept running. We sold all kinds of different brands. We grew up to our peak to about 58 locations. Two years in a row, we were the fastest-growing company in Middle Tennessee, and that was really attributed to actually an EO Event. I forgot, you’ll probably be able to mention the person’s name who speaks to a lot of EO Events. It was at a Nerve Event talking about growing through scale.

It occurred to me like, “Man, why do I need to try to grow organically one store at a time? Can I find someone who wants to sell their chain, that maybe he’s not doing well.” So really, I really sharpened the toolbox back in ’15 and ’16 to really get focused on scaling in a different way. We dramatically increased our store count and our revenue grew.

John Warrillow:

Tell me about the financial model to acquiring a wireless dealer. So what does that look like? How did you acquire them? How did you raise the money to do that? What did that look like?

Robert Hartline:

Well it’s funny too, because it sounds so crazy because you go to a conference and you hear lots of things. You take action on a few things. There was just these two guys, Jack Daley is one for sure. I know you’re familiar with Jack Daley. Really I got my head wrapped around how you grow your sales with an existing sales force by really being intentional about the way you hire people, how you manage people, that kind of thing.

But in terms of the mechanics, you have the wireless brand. They have retailers that represent their brand. They’re independent businesses that they sell and services the product. They basically do everything the carrier does, but they have their own business umbrella of the way they lead their organization and the way you lead your sales team, the way you lead your meetings. But what we sold was not something the variable that I could control. But what was under our control is how we paid, how we paid our compensation. Those were variables that we could do. But in terms of how do you evaluate, how you pick stores to build, people run their businesses in different ways.

I could take a look at someone’s model. I could see what were they paying their salespeople, what was their turnover rate? How did they market? We really uncovered how we could efficiently market to the local customer base. So it made it easier when I go to acquire, it’s like, “Are they doing X, Y and Z? Oh, they’re not?” I can add another 20 points to my bottom line if I institute this strategy,

John Warrillow:

So you would hold these strategies, I’m assuming, close to your vest. You didn’t share with the old owner that you had all these suits or secrets to make it more profitable.

Robert Hartline:

No.

John Warrillow:

Did you ask them like, “What do you want for your dealership?” Did you make them completely-

Robert Hartline:

Well, honestly you would think it would work out that way. But typically the best avenue was the dealer coming to you and going, “Hey Robert, we like the way you’re running these stores. But we don’t like the way George is running these stores.” What often happened, I had several stores where someone violated some agreement with the contract with the carrier. The carrier would say, “Hey, just so you know, there’s these six locations over here that you could probably work out something with the landlord.” That’s how a lot of those even happened.

John Warrillow:

So you weren’t actually paying for the location, you were just as absorbing the lease, in some cases.

Robert Hartline:

Sometimes we had the opportunity where we absorbed the location. There was sometimes where we actually paid for … We acquired like 26 locations in Atlanta and in Alabama. That was an acquisition that I thought in principle made a lot of sense. It turned out all the mathematics, all the planning, all the assumptions that you make, once you get in there, you don’t realize, like, for instance, in that particular deal that everyone was a fraudulent person that worked in that company just about. As soon as I took ownership, we had tremendous amount of theft and losses that it was no wonder the other dealer who was going out of business.

They were grossly mismanaged and had been for a number of years. When I came aboard, and you learn this, and you’ve seen this over and over, if you take an organization that is unorganized and doesn’t have structure, and you come in and you provide structure, you’re going to flip nearly 100% of the staff. People that are in an organization that has no structure, once you provide the structure, they typically are running towards the door.

John Warrillow:

What sort of stuff did you systematize in that situation? What sort of activities, what had the biggest impact to systematize?

Robert Hartline:

Well, in that particular situation, I had to really systematize the hiring process, how we onboarded people. That is something that we we got pretty good at and really figured out some key things that we could do that allowed us to communicate with our team better. One of the things I’ve quickly learned, at our peak, we had 350 people. That’s a lot of people to manage. We had structures, we had area managers, we had district managers. We had store managers, assistant … You have this nice little layer.

But in communicating to that team, that’s the toughest part is when you have retail people. These are generally early 20 somethings, typically their first career, right? They have got so many distractions going on, it is hard to get their attention. It’s hard to get in front of them. Email is a very inefficient program. So we started using an app called Marco Polo, it’s an app that allows you to do asynchronous video. I don’t know if you’ve ever seen it before, but it’s a fantastic way to create groups, record video, and really communicate. We use that primarily, it was very helpful with the onboarding process.

John Warrillow:

So you would record videos of you saying “welcome to the company”?

Robert Hartline:

Yeah, yes.

John Warrillow:

What else did you do? I love this. What else did you do in those videos in addition to the kind of warm and fuzzy stuff?

Robert Hartline:

Well, for one, we would communicate. It’s my belief that … Well, it’s not just mine, it’s lots of people. Winners need to be recognized. So we would use Marco Polo because it’s on demand. I could literally pull up my Marco Polo, pull up a channel.Llet’s say I want to talk to the South East region, right? I hit the button. I start talking. They can see that happening in real time. They can respond, reply, whatever. But I would use that to to congratulate and recognize good performance.

Then I would have another channel that would be for new hires. I would communicate differently to a new group of people. Then I would use some of the similar tactics that you do with a drip email campaign when you’re signing up a new customer. You got someone in a trial process and you’re going to show them this email one day and the next day, you’re going to show them this. But you’re not going to show them everything, right? The same with a new hire. You come aboard, I could send you all this stuff or I can drip a few things out to you.

So what I would do is I would take a 30-day drip campaign and give you a little piece every single day. It may be a sentence. Most people don’t have the attention span to make it past a few points.

What’s very common in any business is you have a situation that happened last week that’s a reoccurring issue. Right? But you hired a new person today. They don’t know those past issues. So what I would do is I would go through in reoccurring issues that would just tend to always happen.

I’d put it in the drip email sequence, specifically for those new hires. So they got to experience what was common for us, it’s kind of crazy, but people would call the store asking for our login credentials. A new hire, guess what they would do? They’d get a call, “Hey, this is XYZ wireless” – insert wireless carrier here. “We’re trying to log into your system because you got this order that’s busted. Mr. Jones has got an account that’s messed up. We need to fix it for you. What’s your password?” They’re a new hire. Right? What do they do? They’re like they want to help. They’re like, “Oh sure, here’s my code.” No matter how much you say at a new hire orientation, do not give your codes to anybody. So we would put these little tips in a drip email.

John Warrillow:

Got it. So that’s one of things you did to systematize the business in Alabama, the 24 locations. That’s helpful. How did that overall impact the company? I mean, you bought it, there was fraud. There were lots of problems.

Robert Hartline:

Oh, that year, we lost a million dollars. And what’s so crazy about that is as soon as we got those locations, like within a week, we had a burglary in the middle of the night. What a lot of people don’t know about the wireless business is these phones, these $1,000, $1,500 devices that that you see in the stores or whatnot, they have real value. We would pay $1,000 for that new iPhone, right? It would go into my safe. Well, there’s organized crime. They literally have people traveling the country that will break into the business next to yours.

They will climb through the ceiling, they will break open a wall, disable the alarm system, and take a blowtorch, open the safe and walk with 80 grand worth of product. It happened literally the weekend after I moved to Costa Rica, after buying all those stores, we had two break-ins back-to-back, $80 grand a pop. I had to systematize security. I had Filipinos in the middle of the night watching cameras, watching live footage. We prevented a number of break-ins through leveraging a loss prevention team in the middle of the night. But during the day, I had people coming in pretending to be other people with fake IDs going from store to store, getting phones, working with employees to steal. So we lost a million dollars. It was a nightmare.

I had to go from this mindset of … I went from being positive and enthusiastic about growing sales to a world of scarcity. Because when you’re having all this theft, what do you do when you start thinking with that scarcity mindset? It’s toxic. I literally moved into this world where I was building a loss prevention team. I had people here in Costa Rica that I had a call center of 10 people that would literally have screens up and. When they were running a transaction, they would go through their database and see if this person had been in other places doing the same thing. I mean we prevented a lot, but it was a very expensive road to go to try to stop it.

John Warrillow:

What did that do to your mindset, your psyche, going from excitement, enthusiasm to in your own words scarcity?

Robert Hartline:

I mean, I struggled sleeping. Then we went from that, and just when we had figured that out, we were like, “All right, we got the call center here. We got the night thing.” We’ve prevented about three armed robbery, I mean robberies in the middle of the night. Then we started having armed robberies. Within a span of six months, we had eight armed robberies. That was a whole new scale that I had never experienced.

I mean, when you sit with an employee that had had a gun in their face, I mean, there’s no repairing that person when they have their lives threatened. So where was my mindset? It was in the gutter, dude. It was in the gutter. That was a whole year, that whole next year. I think it was 2018 or 19, it was ugly.

John Warrillow:

Was that part of the rationale or the trigger made you want to sell? What triggered you?

Robert Hartline:

Oh gosh, yeah. I mean, it was an exhausting journey. 2020 was the the nail in the coffin. It’s one thing to deal with the struggles of retail, but it’s another when people are scared to come to work because of their health. Right?

John Warrillow:

This was COVID March of 2020.

Robert Hartline:

Yeah.

John Warrillow:

You own the business at this point?

Robert Hartline:

COVID was a lot of it, the challenges with staff. One of the things that I think we do not talk enough about is these essential employees that were going to work like champs are really heroes that did not get enough street cred out of 2020 as they should have. Because these people work their fannies off dealing with hostile customers with the mask mandates. There was just an added tension that was just over above than you would ever want to deal with running an enterprise. But it was just exhausting.

John Warrillow:

So do you remember what the straw that broke the camel’s back was like? What day, what were you doing when you decided, “Okay, that’s it. I’m selling?”

Robert Hartline:

Well, one of the things I’ve always … So I have some other businesses that I’m involved in, and mostly in the software space. I enjoy SaaS, software as a service. You just don’t have the the mechanics of dealing with the employee challenges and hiring and whatnot. So at the end of the day, one of the straws was we were in a transition where one wireless carrier bought another wireless carrier. Our brand changed due to this thing.

Well, when the launch happened, they took our stores off of Google. In fact, every other dealer that was like mine, they took us off Google. So when the transfer happened back in August of 2020, I saw my call volume drop 30%. I saw my store traffic, and one of the things about the wireless business, it’s super awesome, is you get to see everybody’s data. John, if I gave you a spreadsheet every single day with all your key competitors and what they were doing, you would modify your business. You improve your business. You would use that as a measuring stick to make it better, right? Well, that’s one of the things I loved about this business because it’s very metric driven. So I literally could tell you how many people came to the store yesterday. I could say how many people called the store yesterday. I mean, we had all this data. Overnight, because we were taken off of Google and the carrier was moving that traffic to their corporate location.

John Warrillow:

I see. I was like, “What would motivate them to want to get rid of you guys? But-”

Robert Hartline:

Yes, yeah.

John Warrillow:

So this merger happened between these dealers, excuse me, these carriers. The carriers were like, “Well, screw this. I’m going to send all the organic search traffic to our corporate stores where we get all the margin. We got our corporate employees, we’re going to take care of these dealers who are sort of expendable.”

Robert Hartline:

Exactly. That was in August. Now even before then, they gave us a notice that we had to close 10 stores. That was during the COVID thing.

John Warrillow:

You were in the business. How do they dictate to you, what gives them the right to dictate to you in that?

Robert Hartline:

Phones have been out for 30 years. Okay? Right? But the industry is very new, it is very new. They really are bypassing probably some franchise laws. Because this was not a franchise, but it was treated like a franchise business. Basically, we’re told what to do, when to open, what to sell, what price to sell it at. Everything that you would do in a franchise-franchisor relationship, but without the protection of state local laws about about how to treat those people.

So back in August, I noticed all this dip and sales. At the moment, I didn’t realize that what had happened with with our Google listings. All I know is that I was adamant about managing our Google listings. They came to us on the eve of the transfer and like, “Oh, we need to have access to your accounts.” I’ll say, I was like, “I don’t want to give you access. But it’s in your contract, you have to do that.” Okay, so I do that. Poof. We don’t exist. So in beginning August, I see sales are down drastically in the first two weeks.

I’m like, “I’m going to figure out what the hell’s going on.” I literally got in my car, I got an RV. I literally was going store to store. On my visits, I would type in, insert wireless store name nearby. I would go to Lebanon, Tennessee, and I would type that in. My stores would that show. Everywhere I would go, I would run into this situation where I literally had to get, carry a list of stores with me to even Google to know where they are because I was so used to just googling it and being able to drive to it. That also gave me indications if the listing was wrong or things like that.

But once I discovered that, I fought like mad, dude. I got other dealers involved, I was like, “We got to scream and holler, we got to get this fixed.” Silence, not helpful. It was one of those things, between that and my father-in-law passing away, I was just exhausted. There was something else, John, that I think is important for your listeners to hear is one key thing that we did like a lot of organizations do, we went remote. We had an office staff, they were in an office, all your team members working together. We had a great, great culture as a company. Everybody getting along, working well together.

Then we went remote, you have the added pressure of staff that had kids to put in online education, they were not available. The mechanics of all the systems that we had built really got stressed. things weren’t happening in the stores, operations wasn’t working like it used to. It wasn’t solely because of our team, it just lacked that synergy that we were so accustomed to. I used to really be a big believer in remote work. I have grown after 2020 to realize that remote work is not for everyone. It takes a certain type of person that can pull off working remote.

John Warrillow:

Okay. They delist you from Google. Everybody’s working remote, employees are stressed and doing home care as well as their their day job. What did you do? Did you hire a broker to sell the company? Did you get an offer? What’s that step?

Robert Hartline:

I got a LinkedIn…. Well it’s crazy so, you had these legacy dealers, and then he had the new brand. The new brand had existing dealers, right? Well, what happens when you have a long term business relationship? I had 20 years plus of solid brand relationships. Well, insert new brand had no relationships. So all of those old relationships evaporated. So they had a whole new team. They don’t know me from the hole in a wall. We take for granted our relationships, we really do. We’ve all seen it. One vendor changes ownership, and then new people come in. You lose some of the tight knit relationships that you have. That all just evaporated.

So the legacy people, the legacy brand, because they were treated like that, the new brand that they were accustomed to doing very well, luckily for us we they wanted to buy our stores. So the new brand dealers, they were actively wanting to. From their perspective, they’re looking at us like, “You guys are a bunch of bozos. You don’t know what you’re doing.” We’re like, “You take anybody off Google. How good you are, you’re not going to be as good.” You need Google.

John Warrillow:

Yeah. So the dealers that were the acquiring brand, where they delisted from Google as well or …

Robert Hartline:

Yeah, all of them.

John Warrillow:

They were?

Robert Hartline:

All of them.

John Warrillow:

So how was acquiring you going to help them?

Robert Hartline:

Well, a matter of scale that. They were doing very well and have been. The brand is a super great brand. I mean, from a customer relationship, the brand is solid, probably the best in the business. So they had been doing very well for many, many years. So for them, it’s a matter of scale. We had a great footprint, and our footprint, I’m sorry, it meshed with their existing footprint. So it’s just a matter of to add a few more stores into an existing group of stores, it just makes a lot of sense.

John Warrillow:

You got a LinkedIn message from one of these dealer groups. What do they say?

Robert Hartline:

Basically, let’s get together and chat. For me, I had no intention rolling into 2020 that I was going to sell the business. I’ve wanted to sell it. But I knew this big merger was happening. This merger had been in the works for four years. We were literally in purgatory, waiting for this thing to happen. So there was no growth. There was no new opportunities. We were just running a dead brand until the transition happened. All the dealers were just super elated and excited that this is finally going to be done. Then when it happens, it was like, “Oh my gosh, they don’t really care about us.”

That’s why I tell everyone, when you’re starting a business, you can take the path which seems nice, which seems interesting. If you’re going to go into the franchise route, you think all these things are taken care of. But please understand when your brand is tarnished, because of either the brand representative in case of Subway, you name something, you’re really at this risk of putting your fortune in something that you have zero control over. So lots of advantages when you’re selecting the way in what you’re going to be doing. There’s positives and negatives on doing franchises for sure.

John Warrillow:

Yeah, yeah. I’ve heard the the expression, “Don’t build your house on rented land.” Meaning-

Robert Hartline:

That’s what it is. That’s what it is. There’s people that have fortunes because they’ve done it. But it is a risk, it’s the asterisk that you just got to be comfortable with that something could happen beyond your control that could change it.

John Warrillow:

So you get this LinkedIn comment saying, “Hey, let’s get together.” Who made the first move? Did they say like, “What do you want for your company?” Did they put a number in front of you? Do you remember how that worked?

Robert Hartline:

Well, they came down and visited. I gave them what I thought we were worth and what ultimately we would sell for. In fact that dollar value is exactly what the offer was. But you know how, John, these things work out. They don’t always work out as you wish, right? Because after we got the initial offer, a few weeks later, the carrier announced that they were closing even more locations than they already closed that year.

Just back up. Earlier in the year, they had several other dealers close locations. Well, we weren’t targeted, we weren’t focused on that way. It was nothing to do with that. It was just generally what they do they. They play these little shell games with moving the test pieces around. We get a prize two weeks later. We get a notification from the brand, said, “Hey, we’re going to close these other ones,” when our amount went from what I thought was a very fair price that I could be very comfortable with, down to a discount of $4 million. Yeah.

John Warrillow:

How did you come up with the number, the original number? Like was that based on what you wanted for, what you needed to live the rest of your life? Was it based on some sort of valuation metric that you’d heard of?

Robert Hartline:

I wish I could go back to you and tell you that I had more thought behind it than I did. It really wasn’t. Dude, I was exhausted. You could not have picked a better way to buy my business. Let’s see, how can we completely stress out the owner? Have the owner lose his father-in-law, in October. How can we throw all these things in the stresses and then go to him, say, “If you want to sell your business.”

You could not have picked a better, between the pandemic and the way that we were treated. The way I was treated, the way leadership was treated in our company from all kinds of. I was running where I just couldn’t do anymore. I wasn’t sleeping. I wear this ring that tracks my sleep.

John Warrillow:

Yep, yep.

Robert Hartline:

Man. I’m very active, workout a lot. I stay healthy. I don’t drink. But dude, I would literally think that I needed to go to the doctor because I was going to have a heart attack. I just thought that was going to happen. I mean, in terms of buying a business, when you get somebody that is weak and tired, that is a really good time to give them an offer.

John Warrillow:

Yeah. So what was your reaction when they said that they were dropping the price by $4 million? What did you do in response to that?

Robert Hartline:

There was nothing to do. I mean they were buying X number of stores on the agreement. When that number have changed, it obviously changed. What was a bit of a surprise that I didn’t ever plan for, that’s a very common trick that everybody uses when you go and sell your business is you come up with this dollar value. Then they’re like, “Oh, how about you finance it?” Right? Instead of disclosing some of my advice to others in the sales process, “Go ahead and stay.” Hey, I’m not going to do any owner financing. Knowing that upfront would make a huge difference. Maybe you’re comfortable with that. Maybe that’s commonplace in your business. But I honestly was not thinking thoroughly enough to look forward and anticipate that.

John Warrillow:

So you’d agreed to the lower price. Then they turned around and asked you to finance it?

Robert Hartline:

Yeah, basically. Yeah.

John Warrillow:

What was your reaction to that?

Robert Hartline:

Well, again nothing had changed from that second offer. It wasn’t like the business suddenly got better. I’m looking at my financials and seeing that due to the thing they’re doing with with our Google traffic, it wasn’t like things were getting better. Even fact, when I sold in December, this still problem existed that the new owners had to deal with. But for me, it almost got comical. You’re just like, “What else are you going to give me?”

I was lucky. I was lucky because at the end of the day, I got my loans paid off. When I sold the business, we still had not our PPP money. So when he took the loans out the PPP, all I could think, John, was, well thank God I don’t have 46 leases to worry about. I’m not reaching out to these people and filing bankruptcy. So at the end of the day, I get to live to tell the tale. I get enough, I have enough to carry me on in the new ventures. But I didn’t walk away with the FU money that I keep hearing stories about.

John Warrillow:

So when they asked you to owner finance it, did you agree to finance part of the sale, the whole sale?

Robert Hartline:

Yeah, we did. We took a lump sum, and then the rest is paid out over two years.

John Warrillow:

Do you mind if I ask what proportion you took in cash versus financing?

Robert Hartline:

It was about 60-40.

John Warrillow:

Yeah. The finance piece, did you get a coupon? Was there any interest rate associated with that? What was the …

Robert Hartline:

No, that was another thing I did not negotiate adequately.

John Warrillow:

Have been good to their words to pay you out so far?

Robert Hartline:

Yeah. They’ve been excellent through the transition. There were some surprises as always. Everyone talks about the sale of the business, but they don’t talk about the aftermath. There’s a lot of aftermath, especially in the retail side. So we had 46 locations, and you have to do assign and assume for every lease. So you have to negotiate with 47 landlords and getting the lease to go into the new name. Well, the landlord’s like, “I don’t know these new people, you’ve been a great renter for the last 10 years, but I don’t know these new people.” Then you you got to coax him and say, “Well, I’m not here anymore. So these guys are going to pay you.” Those 46 conversations are tough.

John Warrillow:

To be clear, why is that your problem? Did they buy your assets or the shares of your company?

Robert Hartline:

They basically bought the assets, which is technically the …

John Warrillow:

I see. Those liabilities, those leases that you personally signed were in your name.

Robert Hartline:

Correct.

John Warrillow:

You were personally on the hook for them.

Robert Hartline:

Yeah.

John Warrillow:

If a landlord had said, “No, I’m not transferring,” you would have had to honor that. Is that right?

Robert Hartline:

Yeah. In theory. But most landlords, it’s a simple math equation. These people are out of business, they’re not going to keep paying you. So yeah.

John Warrillow:

Got it. So what other personal liabilities did you have to work through, like leases were one. Were there other things? You were like, “Oh man, I didn’t expect this one.”

Robert Hartline:

No. It’s anything from vendors and inventory, the unload. Man, I had $300,000 worth of the product that’s sitting in a warehouse.

John Warrillow:

Of phones.

Robert Hartline:

Of phones and accessories. I mean, I’m sitting here working with Amazon and eBay to get rid of them. It got to where I just gave up. I basically gave away accessories just to get them … Because I was paying space and time and energy to manage them. But what I did learn I think is valuable for everyone. I learned that we all have staff that work for us in operations. The staff and operations are using tools, cloud tools mostly, whether their email, they’re using. QuickBooks Online, they’re using all these HR tools.

I will tell you, John, probably the best lesson, if I could go do this again, let’s say I go back in time, and it is July 23rd, 2020, I would go back. I would audit cloud software and look at the audit trails. We had people that did lots of different things. What I noticed was we had people in our HR department where we would get people that would apply to work in our stores. Our HR recruiters wouldn’t call them right away, they would wait a month to call a resume.

It wasn’t until I started diving into when I shut all these platforms down, you go back and kind of look about it. It doesn’t really do any good to go look in the past. But I found out all kinds of interesting misses from operations that had I paid more attention to, how much workload did that person really have? I could have probably … I had always thought that I had way too many operational staff for our number of stores. If that was an opportunity, had I taken some time to really evaluate someone’s workload, I could probably consolidate many positions.

John Warrillow:

Interesting. So when people were working remotely, you would have liked to have done that cloud based audit to see.

Robert Hartline:

Absolutely.

John Warrillow:

Yeah. Interesting. What else, if you had it to do all over again, might you do differently if you could rewind the tape?

Robert Hartline:

I had a leader that I should have let go many, many years ago. That was great. You know that old saying, “There are those that will get you here, but none are going to get you there.” I had a great person, great, great person that got me there. But getting where I wanted to go, they were just not the right fit.

One of the things that I learned about 2020, I wasn’t hard enough, meaning there were so much adversity to conquer during 2020 that the reason I sold this is because I got weak. I got tired. I got exhausted. That’s why in 2020, I said, “I got to work on doing hard things hard things would have been a conversation with that person and get them out of the organization.” But I didn’t. It’s not a fault of that person. That person’s a great person. But we have different skills and abilities.

When you grow at scale, you get to a point where the people that are around you, if you haven’t changed those people, you are going to be directly affected. It’s going to affect the whole enterprise. You’ve got to make hard decisions. The hard decisions like replacing a leader is tough. But what’s tougher is by not doing it, and the suffering that you can yield as a result of not doing hard things. That’s why I jumped into 75 hard. I don’t know if you’re familiar with 75 hard.

John Warrillow:

I’m not. I don’t know. What is that?

Robert Hartline:

Dude, if you Google 75 hard, it is two workouts a day. Each has to be 45 minutes. One’s outside. Drink a gallon of water, read 10 pages in a book, don’t drink. You follow a diet. That’s hell of a challenge to do those things. If you ever have a chance to investigate, there’s tons of people tweeting about 75 hard. But it really is a really fantastic exercise to really build your resiliency and how you overcome things. It’s through hardship. In fact, the book that goes along with, if you were to read the book, talks about happiness. Happiness is a pursuit that we all seem to be thriving for.

But you do gain more happiness when you conquer hard things. So the whole moral of the exercise, it’s 75 days of doing those two workouts a day, a gallon of water. I don’t know if you’ve ever done a gallon of water a day, it’s the hardest challenge in the world. In fact, I’m dying to use the restroom right now because I’m drinking a lot of water. But anyway, at the end of the day, as leaders and entrepreneurs, we got to do hard things. Sometimes we just have to be willing to have a little bit more gumption to do what’s really necessary.

John Warrillow:

Well, I couldn’t agree with you more. I want to make sure you get a chance to relieve yourself. So tell people, are you open to people reaching you out? Like in your LinkedIn? What’s the best way to reach you?

Robert Hartline:

Absolutely. Absolutely. I’m in the EO national chapter. I know you got a large audience of EO members.

John Warrillow:

Lot of EO members. Yeah, gals. Yep.

Robert Hartline:

Yeah. You can reach me @HartlineRobert on Twitter, or you can email me at Robert@CallProof.com. I have an app for outside salespeople. So if you ever need any help managing an outside sales force, that’s what I do today.

John Warrillow:

Awesome. we’ll put all that in the show notes at BuiltToSell.com. Robert, it was great to meet you.

Robert Hartline:

Hey, awesome to meet you, John. Thanks for having me.

John Warrillow:

Go to the bathroom.

Robert Hartline:

I will.

John Warrillow:

I got to checkout 75 hard.

Robert Hartline:

Awesome.

John Warrillow:

Hey, if you like today’s episode, you’re going to love my new book, The Art of Selling Your Business. The book was inspired by the cohort of my guests over the years who have been able to negotiate an exit far better than the benchmark in their industry, sometimes two or three times more than they would have expected. I was curious to understand the tactics and strategies of these entrepreneurs and what they do differently from average performers. The result is a playbook for punching above your weight when it comes to selling your business. To learn more, go to BuiltToSell.com/Selling where we put together a collection of gifts for listeners who order the book. Just go to BuiltToSell.com/Selling.

Built to Sell Radio is produced by Haley Parkhill. Our audio and video engineer is Denis Labattaglia. If you like what you’ve just heard, subscribe to get a new episode delivered to your inbox each week. Just go to BuiltToSell.com.

Outro:

Thanks for listening to Built to Sell Radio with John Warrillow. For complete show notes with links to additional resources, visit BuiltToSell.com/Blog. John is the founder of The Value Builder System™. To find out how to improve the value of your business by 71%, visit ValueBuilderSystem.com. John is also the author of Built to Sell: Creating A Business That Can Thrive Without You and The Automatic Customer: Creating A Subscription Business in Any Industry. Connect with John Facebook.com/BuiltToSell or on Twitter at @JohnWarrillow. W-A-R-R-I-L-L-O-W. Thanks for listening.