Rich Russakoff | From Entrepreneurship to Business Brokerage and Why Some Inc. 500 Companies Go Out of Business in Two Years

Rich Russakoff 11:38

into it. Yeah, and they call it they call it your the biggest sale you ever make, in theory should be the selling of your business. Yeah, it’s funny how I had someone that I was working with, I had a project with Valpak Direct Marketing years ago, and I was ice developed a resale program for vow pack dealers. And this woman said to me, I want to sell my business. And I said, What do you want for it, she said $3 million. I said, Well, here’s where you are now. And here are the things you need to do to take it to that $3 million dollar value. And she said to me, in other words, if I want to get out of it, I need to get into it. And the things that you do every day to make your business successful, are the key things that a buyer will look for. And what I’ve learned over the years are there are two types of buyers. There’s the buyer, that the sale, that’s going to be a multiple of earnings, and then the strategic sale. And I’m working with a client right now. And we’re putting together a deal that it’s a strategic sale, which will ultimately generate $40 million to him, the way we’re looking at it 12 million million in cash at the close from a venture capital firm that wants the business to be part of a roll up. And we’re gonna we’re asking for 11 point 5 million in shares, that when they flip, it should bring in at least two and a half times. And that’s how we’ll get to the $40 million level. But the thing is, he’s got a great business, he owns a market. And when VC capital starts talking to you, even if you don’t think you’re for sale, you might find a common ground. I have another client that I worked with for 20 years, who was the model CEO and father, and great human being. And we were able to get 44 million because that was his number and he held out for it. And so if you do the right things, you can generate a lot of money. The thing is, you need to make sure you have good financials. Do you have a stable customer base? And do you have a leadership team that if I’m a buyer, I want I have a client looking to buy a business right now. We’re very close to a deal, but he’s looking to acquire, to grow. And the best way for him to grow is through acquisition. So there’s a lot of reasons to buy or to sell. The reason people generally sell on the first thing I asked for when I was talking to a prospective seller is what are you going to do afterwards? And I find that people don’t know what They’re gonna do next, they’re really not ready to sell unless they’ve reached these things they burned out, which is a reason why people sell. And we can talk about that more as we get into some of the other subjects that we’ll talk about. But it’s health, age relocation, divorce disputes, I can handle it. When upgrade, or they’re tired or bored. Those are the reasons you look for. And on the case, the buyer, is the buyer truly motivated to buy?

John Corcoran 15:36

So that just drilling down on the piece about, you know, being tired and tired of running the business? Which is a common one? What are some of the ways in which you, you know, would would advise someone who’s comes to you and says, I got this business? I’m just tired. I want to, I want to walk away?

Rich Russakoff 16:00

Well, there’s a couple things I would ask first, I, first of all, I would ask, what are you doing in the business? Where are you putting your time and energy. And perhaps, it’s not so much that you’re tired or bored with the business, you’re not putting your energy, where you’re getting your love, and energy back. But if you say you want to sell, I want to look at your numbers, I want to look at what we can do to energize you to put the business in the best position to find a buyer. And that’s the critical piece. But I’ve worked with clients where we’ve looked at their business, and it’s a good solid business, but it’s the wrong pond for them. They need to go from being the swan, that’s the ugly duckling into a pond where they’re the swan, and they’re doing what they love. So it’s really more than anything else about high energy, doing what you love, and doing what you do best. And if you’re not doing that, then it may be time to get out of the business. And yes, move on Salat. And life is too, too valuable not to be doing what you

John Corcoran 17:25

love. So I’m always drawn to the hardest possible scenario. So let’s maybe this isn’t the hardest possible scenario, but it’s maybe what the the hardest I can dream up. So a business owner comes to you, they’re tired, they they want to hang it up. They don’t want to do it anymore. But it becomes clear to you that in order for them to get into that better pond, as you said and be the swan, and all that kind of stuff, that they need to double down on the business first before they can sell it. How do you convince someone to go back to the business that they’re tired of running and say, You got to get more into it if you want to get out of it?

Rich Russakoff 18:04

So John, let’s, let’s say it’s you. Yeah. What are your goals? What do you want?

John Corcoran 18:11

Let’s say okay, we’ll roleplay it. I love it. Okay, cool. I love being with my kids got young kids. I love vacations in the summer, spending time with them.

Rich Russakoff 18:21

Okay, so if we’re able, and if we’re able to get the price you want for your business? Will you be able to put the time in necessary so that you can get there go through a little purgatory so that you can get to Heaven’s Gate? And if not, who can do it for you or with you? Because if you don’t, you won’t get the value for everything you put in. On the other hand, if you want out tomorrow, we can probably find you a buyer quickly, what’s important to you, what are your values here, John?

John Corcoran 19:05

Well, I guess in that context, my values are, you know, you know, setting us up for the long term, you know, spending more time with family, but I’m willing to sacrifice in the short term in order to be able to, you know, preserve or to get a big sale that would result in a good payday that can, you know, pay for my kids college and things like that.

Rich Russakoff 19:27

So then let’s put together a plan. Let’s take a look at where you are. What will make your business more attractive to a buyer? Because this is really about your new customer is the prospective buyer. And what are the things we can do that will attract a buyer. First of all, let’s look at your financials. Are they credible? Will buyer buy into them? If you don’t have audited financials? Let’s start getting them, review them. Let’s take a look at your leadership team. Do you have the right people, let’s take a look at your profits and your margins. And let’s see where we can tweak it because a little change in what you bring to the bottom line with a multiple will make a big difference. Also, perhaps there’s a strategic buyer for you. And if we find a strategic buyer for you, because what you have, they can take their skills, their resources, their network, their infrastructure, and make much more for it, then that’s what we want to shoot for. And let’s figure out how we can make that happen for you.

John Corcoran 20:49

That sounds great. I want to ask you about Inc. Magazine. So you became a coach for the Inc. Magazine coaching division, which really kind of helped helped fuel your career for a number of years. How did that come about?

Rich Russakoff 21:09

It was immensely invaluable to my career. I was at a franchise convention. And I met a wonderful man by the name of Jim wood there. And he was representing Inc, Inc, was looking to get into working with franchises and they knew nothing about franchises. So we started talking about my being a potential coach for them when they found franchises, because I had really gotten to understand the franchise industry. And I was on a couple committees on the International Franchise Association for a while. It didn’t find a franchise for me, but they found a business. And they said, we’d like you to go talk to these people. So I talked to this lady, Mary Hughes about our business. We looked how she had too much inventory, how we were going to get rid of that inventory, things we were going to do. And I started coaching for them. And that took me all over the country. And I was also speaking at in conferences. It was under a previous ownership. And they got out of the coaching business and the new owners and the speaking business change. But that’s how I found one of the most important clients I ever worked with a client by the name of Four Hands in Austin, Texas. That’s how I found EO because one day, Linda Burton said we are a sponsor a birthing of giants. And we have a spot on the on the on the speaking program

John Corcoran 22:48

And is birthing of giants is no Verne Harnish, the founder of EO was involved in and now called EMP or Entrepreneurial Master’s Program.

Rich Russakoff 22:58

Yes. So she said, Rich, we’d like you to represent us. The guy last year was so bad that we’re gonna lose our spot, all you have to do is hit a homerun no pressure. And it was my audience. It was entrepreneurs, high growth entrepreneurs from all over the world.

John Corcoran 23:20

And and they gather at MIT, right?

Rich Russakoff 23:24

Yes. And by the way, anybody in the EO network, I strongly recommend you join it. It’s a three year program. The speakers are terrific. But more importantly, are the connections you make with entrepreneurs. In business three years is lifetime. And public. People go out of business, all sorts of things happen. And they become many become friends for life. So that opened up a tremendous door for me. And I’ve been on the program for the last 20 years, with the exception of the years, that the COVID years. And I’m on the program again in June. And I’m going to do a program on finding and living in your zone of genius, both in your personal life as well as your business. Like

John Corcoran 24:21

I also want to ask you about you found that with Anki. You had you’re involved in studying companies that made the Inc 500 And you found and this is just phenomenal to me. 18 to 20% of those businesses are out of business in two years. Why it happens?

Rich Russakoff 24:40

Well, a couple things. First of all, in 1987, we studied the class of 85. And our goal was to find the silver bullet. But what we really found was what’s going on that all these companies that succeeded at when it was the Inc five 100 Not being 5000. So we started studying that. And we determined it wasn’t the industry, it wasn’t the ability to raise capital. It was the critical decisions that entrepreneurs made at each stage of growth. And what gets you to one level will not get you to the next level, and you have to reinvent yourself. So one to 10 people in a company is mission driven 10 to 25 is operations driven. And it’s very exciting. You’re hiring leaders, you’re growing, you’ve established your niche. And in that first phase, where systems and procedures didn’t, weren’t necessary, and it was driven by creativity and mission, in the second phase, what you’re focusing on is the operation side, the third phase, from 25 to 50, is the transition from mom and pop to a professional company. And I call that purgatory. Because everything breaks down, communication breaks down, the systems that used to work, you have to throw them out and start all over. There’s a lot of chaos there. And when I explained to entrepreneurs, that that’s why they’re in such turmoil. It’s not just them. It’s the nature of growth. So that’s one thing we learned and we thought he had it the neat bow. And then my wife and I study conscious living and conscious loving, with Gay Hendricks and Catherine Hendricks. And Gay Hendricks wrote a book called Taking your Big Leap. And when I read the book, two things jumped out at me. One was that if you’re spending your time in what you love doing, you’re going to do well. So there’s like four zones, there’s a good zone of incompetence, you don’t want to do anything in your zone of incompetence. There’s your zone of competence. You’re okay. Yeah, you’re not good at it. The trap is the zone of excellence. You’re really good at it. But you don’t have your heart. And it’s not where time stands still, I’m a coach, when I coach Time stands still, when I speak, Time stands still. So how do we get entrepreneurs out of that zone of excellence into doing what they love, and have other people do that. And if you’re stuck in that zone of excellence, that’s where you burn out and burn out. Your energy is no longer positive, you’re not making the right decisions. And that’s a reason to go. And there’s one other piece, he talks about the upper limits barriers. And the upper limits barriers are, are these voices inside of you that that say, I’m not good enough, or I don’t deserve this success. I’m leaving other people behind, or I don’t want to stand out. And so there’s four upper limits barriers, and you self sabotage, because you don’t think you deserve it. And it’s how do you work your way out of those upper limits barriers for me, I was a terrible student. And my parents would say, you’re lazy. I’m not lazy. I just suck at academics. And it’s when if there hadn’t been a book on emotional intelligence, I wouldn’t have known I had any intelligence at all.

Finding where those upper limits barriers are, for example, I have a client that I’m working with wonderful guy. And when he was born, his father was 40. His father was traveling all over the world. And he didn’t get to spend the time with his father, that his much older brothers and sisters did. And he felt he was a burden. And sometimes when you’re very successful, up you feel like you’re a burden on other people. And so these upper limits barriers cause you to self sabotage or hold back and not enjoy. And that is a much greater factor as to why people burn out or self sabotage, and fail in business. And who knows, it might have been wind Will Smith, 10 minutes before he won an Academy Award, did something that totally self sabotage, upper limits barrier. So I look for those in clients, and how they overcome them. And I say to parents, be careful how you raise your kids, so that they don’t have these upper limits, barriers that hold them back. I recommend to everybody read the book, or I’ll be happy to do a workshop on it so that you understand the importance of overcoming them. And also working in your zone of genius.

John Corcoran 30:58

And I want to ask you, you touched on it earlier Four Hands of Austin, it was a company that when you started working with them, they were at 60 million, and they were about four, sorry, 6 million and took them to a 50 million talk a little bit about what they did, and what that brought them to what they were challenged by when they came to you.

Rich Russakoff 31:21

Well, first of all, they had a wonderful model. And the CEO Brett Hatton, who was the founder, he’s no longer the CEO had a great vision. And I was a sounding board. For him. We did strategic planning. But Brett was a brilliant entrepreneur. Now the funny thing is, Brett was a great leader, but not a great manager. And when I first met him, he used to talk to 10 people in the warehouse and piss off 11. So, but but people would follow him as a leader. So we needed to find the right manager, who could talk to people and motivate them and let Brett be the leader and the visionary, we needed to find the right financial person. So he had the right financial information. We went from him getting financing from friends, family and fools, to SBA, to working with a factoring company. Because they’ve at the time, they really didn’t know how to manage their receivables. And that was a wonderful solution to them, to finally working our way up to a VIP relationship with Chase Bank, to ultimately leading Brett to sell 48% of the company. So we could take money off the table. And I met with them. One week, a quarter at Four Hands went to the furniture shows with them traveling. But what thread had was a great vision. He’s a great leader, he made wise strategic decisions along the way, and you recognize playing to his strengths, and building the team around him that could make them such a successful company. It was an international company in scope. We had people working for us from all over the world. We were transparent in our numbers. We rewarded people financially, if we succeeded, they succeeded. And it was a marvelous learning experience for me, and a great relationship. And Brent and I are in the process right now. Sometime. In the second half of the year, we’re going to write a business fable based upon Brett story.

John Corcoran 34:09

That’s great. It can’t wait to see that. But before then you have another book that is coming out. Your newest book is The Art of Managing People Time & Money: Inspiration and Wisdom for Every Entrepreneur. I know we’re running a little short on time, and I want to be respectful of your time. But in two or three minutes, tell us a little bit about the book, the most recent book and what inspired it.

Rich Russakoff 34:31

Well, I started writing a Daily Post called Food for Thought about three and a half years ago. And every day I write a post and I made the decision that I would write about whatever I wanted to write about. So I wrote about business stories, things I’ve learned along the way. People that have influenced me and because I’m working with businesses on a day to day basis, I’m always finding new things to share and talk about. And those posts became the first book of people time and money. And now we’re doing the second version of it. And that will come out in July. So I’ve written about 500 posts, and we’re just pulling out the best posts for them, with the focus on managing people, managing money, and most importantly, managing your time and your energy. And also strategic thinking and planning and how to be the best leader and the best person you can be. I like to say I’m the CEO for CEOs, which means the chief encouragement officer, helping people get the best out of themselves, and saying, Yeah, go for it. You can do that. That works. I love that. You’re jumping off the diving board, and you don’t know if there’s water in the pool.

John Corcoran 36:09

That’s great. And then I want to wrap up the last question I was, as was just my gratitude question. So if you look around at peers and contemporaries, people that have helped you along the way have been there for you, who you’d want to acknowledge publicly who would you want to just call out and recognize them for what they’ve they’ve done or who they’ve been for you?

Rich Russakoff 36:28

Well, I mentioned the importance of Brett Hatton. Another client I worked with for over 20 years was a man by the name of Damon Gersh, who just sold Maxim’s restoration in New York. And when I love the bail Damon not only was he terrifically coachable, but we focused as much time on Damon’s personal goals and life in Damon introduced me to the concept of not work life balance, but work life integration. And he really tied it all together. He goes to spring training every year. He’s taken his kids all over the world. He’s on a softball team. He’s a new band, he started in Association. He started a, a festival in his village for the arts, his village in Long Island. And so he’s lived his life to the fullest with integrity. And he’s been a tremendous friend and inspiration to me.

John Corcoran 37:41

That’s a great story. Rich, this has been a pleasure talking to you. Where can people go to learn more about you, connect with you, and learn more about the work that you do?

Rich Russakoff 37:51

First place is my website, And that’s what I love to say I do. I coach the best, or you can reach me at [email protected] which is my email address.

John Corcoran 38:08

Excellent, Rich, thank you so much.

Rich Russakoff 38:10

Thank you so much. It’s been a treat.

Outro 38:13

Thank you for listening to the Smart Business Revolution Podcast with John Corcoran. Find out more at And while you’re there, sign up for our email list and join the revolution. And be listening for the next episode of the Smart Business Revolution Podcast.