Kevin Short: Doubling What Your Business is Worth | On The Homefront with Jeff Dudan

Brief Summary
In this value-packed episode of On the Homefront, Jeff Dudan interviews Kevin Short, founder of Clayton Capital Partners and the author of Sell Your Business for an Outrageous Price. With over 45 years of M&A experience, Kevin shares war stories, pricing psychology, negotiation strategies, and practical wisdom for business owners looking to maximize their exits. This episode is a must-listen masterclass in running a competitive sale process, understanding buyer behavior, and avoiding costly mistakes.
Key Takeaways
- You Only Need One Buyer, But You Need 150 to Find Them: Kevin’s proven process starts with 10,000 prospects and filters down to 15 serious offers to generate bidding pressure.
- Outrageous Prices Are Real—but Only With the Right Process: Strategic buyers sometimes pay double the average EBITDA multiple if the deal solves a big enough problem for them.
- Your Competitive Advantage May Be Hidden: It's not always your product—sometimes it's your location, team, or how you fit into the buyer’s existing business puzzle.
- The Willingness to Walk Away is Crucial: Sellers must be trained to maintain leverage, stay quiet, and let their advisors control the narrative.
- Terms Matter More Than Headline Price: Earnouts, rep & warranty insurance, IP structuring, and holdbacks can make or break your outcome.
- Choosing the Right Advisor Is Mission-Critical: Past client references, industry trust, and battlefield-tested negotiation skill matter more than a slick suit or fee structure.
Featured Quote
“Sellers are not professional sellers. Buyers are professional buyers. That’s why you have to level the field with process, preparation, and representation.”
TRANSCRIPT
Who Is Kevin Short? 45 Years of M&A Experience Explained
Jeff Dudan (00:03.776)
Welcome everybody. This is Jeff Duden and we are on the home front. And today we have a guest that I've been trying to get on for quite some time because of the impact that they made in my journey and what I learned from their book, Sell Your Business for an Outrageous Price. Welcome Kevin Short.
Kevin Short (00:22.222)
Thanks, Jeff. Excited to be here.
Jeff Dudan (00:25.208)
Yeah, yeah, fantastic. So I've been looking forward to this. Kevin, can you give the listeners a little short synopsis of your background?
Kevin Short (00:35.074)
Yeah, absolutely. Grew up in St. Louis, which is where I'm located still. Came out of school, went into the financial advisory business for about 10 years. And during that time, clients, local clients that wanted to acquire businesses, had me go out and do that for them. And so that's where I began to learn the M&A path for I'd call entrepreneurially owned company. So.
The companies I've learned how to do deals with are anywhere from 10 million to 200 million. And my practice is all over North America. So we're an investment banking practice. All we do is M&A. All we do is privately held companies that have decided to sell.
Jeff Dudan (01:22.068)
And was your background in accounting or finance? What were you trained in originally? Okay.
Kevin Short (01:26.378)
Yep, finance. Yep, St. Louis University, finance.
Jeff Dudan (01:31.68)
Yeah, well, my brother, he's got a son who's a pitcher at NC State University. And he told me when he was young, he said, if you love your kid, you'll teach them to bat left, throw right. And then I've added, and learn finance. So I've added that on. You know, it's the money. It's the science of making money with money.
Kevin Short (01:44.302)
Hahaha!
Kevin Short (01:47.634)
Yeah, that's exactly right.
Kevin Short (01:53.77)
Yeah, absolutely. It's a fascinating time. It's very challenging every day. A lot of creativity is important. Negotiating is important. Salesmanship is important.
Jeff Dudan (02:05.188)
Yeah, and you've really seen the rise of private equity throughout your career. Can you speak a little bit about that?
Rise of Private Equity and Why You Must Run a Competitive Sale
Kevin Short (02:11.07)
Yes, I started 45 years ago doing deals and private equity was nowhere to be found. They were there, but they were very small. Today, we track 4500 private equity groups and we market our deals to them because we never know where the right buyer is going to come from. We will slice and dice the database because there are some private equity groups that are more on point than others. And then of course, we go out to the
Kevin Short (02:40.578)
The deals we have, you know, it's not like you're selling IBM to GE where everybody knows who the buyer and the seller is. We have companies that most people haven't heard of, so we've got to find the buyers and get them to the table. So in our process with private equity, with strategic, private equity is by far the largest number of respondents to our different marketing efforts. But the A&A...
we close about 80% of our deals with private equity. When we go to market, we will market to 150 folks will raise their hand, sign an NDA and say, we wanna look at your deal. So that's one of our advantages is we put in the hard work to make sure we have plenty of qualified buyers at the table because when you go to ask for offers, which is a big part of the process, if we do not put a selling price,
as you know from reading the book. We ask them for offers. You better have a lot of people there at the table because many of them don't want to participate in an auction or they don't want to pay the price. But if you have plenty there, at the end of the day, you only need one buyer. And so that's what we do. You start with 150. We start with close to 10,000 prospects. 150 will raise their hand and say yes. I'll sign an NDA.
That 150 melts down to about 50. And that 50 turns into about 15 offers when we ask for them. That's the process.
Jeff’s Franchise Exit: 120+ Offers, 10 Finalists, 2 at the Finish Line
Jeff Dudan (04:15.9)
That's my experience as well. We were represented by Boxwood, Pat Gallaher. Really, they've been exceptional inside of the franchise space over the last five years. I think AdvanaClean, my company, was their second deal in the space. Did a great job. I think we had 121, what would be, indications of interest. And then I think 35, maybe, LOIs. And I think we had 10.
Ten came, we put ten in for management meetings, and we ended up with two at the end of the day that were right down to the end there, so.
Kevin Short (04:51.826)
Yeah, that's an excellent auction result.
Jeff Dudan (04:55.808)
Yeah, yeah, it really was exceptionally well done. We had a good product. There was people looking. I've shared some of the wisdom in here and I pulled the book back out and I found all my old highlights in it. And again, it's sell your business for an outrageous price. If people are out there thinking about selling their business, it's a highly recommend because the book is so...
easy to read and understand. It doesn't get into the technical aspect of finance. But it really, I mean, it'll give you some diligence lists and things like that. But what it really gives you is an understanding of what the process needs to look like. So you're a seller and you're unsophisticated. You've never sold a company before. There's a real chance that you can get taken advantage of inside of that process. And there was four things and I've...
I've changed it a little bit over time, but now I got right back to it, looking back in the book again. But there's four things that you recommend as pillars of a good deal and a good process. One is that you need to have a competitive advantage. I've said you've got to have a competitive advantage that you can articulate, that you can prove, that makes sense. The second thing is you've got to find the buyers, which means ultimately you've got to run a competitive process.
Four Must-Haves for Selling a Business at Maximum Value
so that you can find enough buyers of interest so that you can find the best buyer inside of that. Number three, you've got to have a seller who, and this is the way I've said it, is who will keep their mouth shut and who will be willing to walk away. I mean, even inside of our deal, and we were clearly represented by an investment banker, I was getting calls on the back door, people trying to.
you know, get in touch with me and see where I was, maybe emotionally around the business, or, you know, just trying to, you know, break, you know, subvert the process. And so really, the seller has to, has to maybe just watch the process happen and then be, people have to believe that the seller's gonna be willing to walk away. Because if you don't have that, then you're really putting your representation at a disadvantage in their negotiation.
Jeff Dudan (07:12.992)
If they know you're not gonna walk away, then I've just cut the legs out from under you if you're advising us. And then the fourth thing is, is you've gotta have proper representation. You've gotta have a great advisor that's done this before, has relationships. I would even go farther as to say what I've learned in the last five years is somebody that the industry trusts, that when they do the diligence or quality of earnings and they put the SIM together,
Kevin Short (07:13.302)
Yeah.
Kevin Short (07:19.202)
Correct.
Jeff Dudan (07:40.844)
and it's all out there that you're a reputable company, they know you've done your homework and that you're gonna be able to defend at the end of the day what you put in that SIM. So.
Kevin Short (07:50.41)
Yeah, that's an excellent, all those points are dead on, of course. Uh, the buyers have to be able to check out the investment banker and they've got to be legit. If they're not, they don't even play because that, that becomes too expensive for them. But you're right on. And what started the journey, Jeff, going back to one of your earlier questions, it's been 15 years ago that I had a company that I took to market and a steel service center. And the only.
We had several buyers that came to the table. They were bidding around a five multiple. And that's what I was expecting. One buyer offered a 10 multiple. I thought they'd made a mistake. I did not mention that to them. And we kept moving forward and we closed the deal. And I ran into the CEO about six months later on a golf course. And by this time, I assumed he had figured out that he paid twice what he needed to.
and he's holding a driver in his hand. I thought, oh, this could be nasty. And he I went up to ask the pet, tell me how it's going. He said, it's unbelievable. He said, you know, we close that one plant that was losing a lot of money. We have rid of the union. We did this. We did that. All the things they knew they were going to do. I did not know as a seller rep. I did not know any of that. He did. The buyer always knows what they're going to do. And that's part of the process for me to assume that I know what this is worth to a buyer.
Jeff Dudan (08:53.452)
I'm going to go ahead and close the video.
Kevin Short (09:20.35)
is a critical mistake. You have to assume nothing. You have to assume that the buyer knows what you're doing, you give them the data, you then have to work your process to get them to go to the highest level they can. So today, that's what our process is built around, how to find buyers that will pay two times or more the average EBITDA, the average multiple in that industry. So in your industry, EBITDA was probably quite a bit less than you got.
you found the right buyer that was willing to pay more. So that's the magic. We were all trained in the investment banking business that you go for an average EBDA because nobody's going to pay you more. Why would a sophisticated buyer pay you more? The answer is if they have to, they will do it.
The “Outrageous Price” Deal That Sparked the Book
Jeff Dudan (10:08.912)
Yeah, in our process, all business owners generally that have a business of size are going to get inbound solicitations from potential buyers, strategics. And over the years leading up to my sale, I had gone through the process with very large industry players, sophisticated players. And I...
Engage the process, you know Not that seriously, but hey if I can give some information and figure out what somebody's willing to give me and I worked really hard with one inbound buyer and Ultimately, you know it came down to it and they made me this offer And I know I know they felt good about it But I when I was sitting with the ceo and he made the offer I could see his eyebrows went up and he really wasn't like
It's almost like, is he gonna take me seriously on this offer? And then less than 14 months later, I sold my business for five times what that offer was by running that process.
Kevin Short (11:16.61)
Right, exactly. But you did the critical part. You read the buyer. You knew, because we do it over and over again. I will explain it often to clients. I might make my money, I would earn my money, in about a 10 or 20 second bite. If you saw the eyebrows, you've earned your money. That's where you made your money, right there. You knew he wasn't serious. You knew that was not his top number.
Jeff Dudan (11:23.553)
Yeah.
Kevin Short (11:46.626)
So you're right on, you're right on.
Jeff Dudan (11:46.832)
That's right. Yeah, that's right. And then, you know, and of course, we weren't running the process. So there was nobody else. So and they knew that. There's buyers. You know, everybody tries to make money when they buy something. OK.
Kevin Short (11:53.611)
Right.
Kevin Short (11:59.338)
They're professional buyers. This is what they do for a living. Sellers are not professional sellers. It's a big difference.
Jeff Dudan (12:05.172)
That's absolutely right. Yeah. So going down these pillars, competitive advantage. You know, if you're kind of in a me too business, what would be an example of a competitive advantage that somebody might not even know that they had, or if it doesn't exist, then is it more difficult to get two times the average EBITDA multiple?
Why Competitive Advantage Depends on the Buyer’s Blind Spot
Kevin Short (12:31.814)
It is because the competitive advantage changes. The competitive advantage to one buyer may be very different to another buyer. We sold a company that was in the fresh produce processing business. So truckloads of lettuce would show up every day on one side of the building, and it would move through the building and be washed and sliced and diced. Nothing magic about that, right? It's a plain Jane business.
Jeff Dudan (12:41.218)
Oh.
Kevin Short (13:00.13)
What we found was a buyer who was very big in the industry, but their coverage was the perimeter of the US. So there's this big donut hole in the middle. So we went to the buyer and said, we have somebody that fits right into your donut hole. We are willing to sell for a seven multiple, which is what the industry multiple was. So we're not asking for anything more, except.
we're going to multiply the amount of EVDA you're going to make by eliminating all that deadheading going back and forth to the middle of the country, all that wear and tear on trucks, all the new business you're going to make up and pick up because you're going through the middle of the country. And our estimate was we had to build a model that said that our EVDA was going to double because of these changes. And so we're not asking for a higher multiple, but we doubled the EVDA, which then doubled the price.
So we got there through a different way, but that wouldn't have applied to almost anybody else. This was a very unusual situation. So their competitive advantage for this buyer was very different than the rest of the industry.
Jeff Dudan (14:10.924)
Well, that's exceptionally well done because typically, or at least what people have tried to tell me is that the efficiencies go to the buyer. So if, right? I mean, so, but if, yeah.
Kevin Short (14:22.57)
They tried that. Yeah, they tried. They tried that. But think about that backwards. They weren't going to get these efficiencies with anybody else. So that was that was our advantage. If they wanted those efficiencies, they had to buy us.
Jeff Dudan (14:33.348)
That's right.
Jeff Dudan (14:38.496)
Yeah, so really it's like a big puzzle when you're going out to the marketplace and, you know, taking what you have against all the different strategic buyers, even P.E. backed or not, and trying to find the one that's going to get the biggest lift immediately by integrating the company.
Kevin Short (14:58.87)
Absolutely. We sold an IT company. They were building software for prisons and jails and court systems. And we held an auction, 10 offers. They grouped around a five and one PE group offered 11. And again, we didn't point that out. And we closed the deal.
How One PE Buyer Paid Double Because of an Internal Problem
Jeff Dudan (15:24.464)
Thank you.
Kevin Short (15:27.438)
come to find out they had bought another similar company six months before but much larger and they had all kinds of trouble and our client was going to fix those troubles. Our client, they fit together so well that the PE group said look we know we paid too much but it didn't matter because it was fixing a multi hundred million dollar problem we had. That's exactly what happened. See again I would not have known that unless I could have read the buyer's mind.
Jeff Dudan (15:54.872)
right.
So we've talked about competitive advantage here. We've also touched on process earlier. That's kind of what we opened with. I wanna get to the seller behavior. And the way that you said it is, you gotta have a seller who's willing to walk. How does that manifest in behavior or inside of a process? How did they know? How do you communicate to a potential buyer who may be re-contracting that?
this seller is ready to walk.
Kevin Short (16:28.438)
Well, because they generally don't believe that when you say it. So part of what we have to do is train the seller. We call it, when a seller gets so excited, their eyes get big, eyebrows go up. They may puddle out. They get up from their chair, there's a big puddle in their chair from all the excitement. So if we have a seller like that, we have
What Makes a Great Seller? Trainability, Discipline, and Silence
Jeff Dudan (16:32.281)
Right.
Kevin Short (16:58.338)
their access to the buyers. That's job one. Job two is we train them like crazy. Because at some point they're gonna meet that buyer. We have to train them to be able to impress and convince that they're going to walk away, that their advantages are truth. And don't be counting your chickens. We had a seller, you would love this guy, bigger than life. He was in the hazardous waste business. He's hauling away all the sharp containers from hospitals.
And that business goes for about a four or five multiple. He had gotten an offer from the big dog in the industry, the biggest dog in the industry. It was, I didn't say that. That's exactly who it was.
Jeff Dudan (17:38.564)
probably stare a cycle, but you didn't say it, I did. You didn't say it, I did, but I know they rolled up, I know they rolled up like 30 businesses in like seven years or something.
Kevin Short (17:49.994)
Well, so they know this story because they've heard me say it at different conventions. They don't like it. So they offered our client a four multiple of a one and a half million dollar EBDA. Okay, six million bucks. Client came, but they walked away at the 11th hour. We never knew why. So he hires me 11, 12 months later, tells me the story. So we spent two weeks in my office brainstorming on a whiteboard.
Jeff Dudan (17:55.426)
Ha ha
Kevin Short (18:18.682)
Why in the world were they here in the first place? He was awfully small. And we came up with some theories and those theories became the premise of our marketing effort. So we had a premise that we thought that he was so good at marketing that he had wrapped up St. Louis market, but he hadn't expanded. You know, imagine his skill sets in New York or Philly or Chicago. So we went, the good news is, in the hazardous waste business, the good news is when you pull a permit to open up a location,
It's public information. So we went to those cities exactly and pulled permits that we were going to open a facility there. He gets a call within a day. You know, Regis, what in the hell are you doing? You're going to hurt yourself. You don't know what you're doing. If Regis, we had scripted everything. Tell them, look, we're not for sale anymore. Cause they said, why don't we come down to St. Louis and talk about buying you again? He said, I'm not for sale. He said, but if you're willing to sell some of your locations, we can talk about it.
So this threw him completely off balance. And I said, all right, hang up the phone, let's go quiet. In the meantime, we pulled some more permits to other cities. And they said to him, how are you gonna do this? He says, I have a private equity partner, I have an investment banker, we're going to grow like crazy. Well, they were the big dog in all the markets. For him to grow, the market share, the market itself wasn't growing, he was taking share away from them. So they knew. And they...
knew his skill set. So they called back two weeks later. They called me this time. And they said, we want to buy your client. I said, no, thank you. I hung up. Now, this is a guy who puddles out on a regular basis. And I had to keep calling him and saying, Regis, they call. I told him to get lost. He said, I hope you know what you're doing. I said, me too. So they call again in two weeks. And I said, well, let me save you some time.
We believe this business is worth, let's see, about a 20 multiple of the EBDA. So we were talking about low $20 million. And they said, you're crazy. I said, okay, thank you, goodbye. Hung up. I never hung up on somebody so many times in my life. They called back the next day and said, all right, we're not gonna pay you $22, $23 million, but we could pay you $14. I said, no, thank you, and hung up. Now, I have a problem.
The Hazardous Waste Deal That Jumped from $6M to $20M
Kevin Short (20:46.846)
I've got to call Regis who needed the money a lot and tell him it is offered 14. He goes, hey, that's amazing. I said, well, I hung up. He goes, what? I said, yeah, they'll call. They'll call back. They call back an hour and a half later. They said, well, we'll pay you 18. I said, no, thanks. I said, save me the trouble here. If you hit 20, we'll do the deal. I don't want to keep hanging up on you. He said, all right, we'll do the deal. So the next problem was we had to go through due diligence.
You know, if they're going to spend $20 million for a company that's worth $6 million, they want to make sure they're getting something for their money. And I prepared Regis, I said, Regis, this game is far from over. They're going to try to walk away and call your bluff several times. And they did. We kept walking away. And gluten the day of closing, which is what they did to him the last time, because we knew that was coming. So we said, no, thank you. And they called back in an hour and a half and closed the deal. He was so excited. He's still living large.
off the closing. He calls me on a regular basis as he drives by my office in his Bentley. He said, I just got a new Bentley. Thank you. So it's a great story. Great guy. He was a good seller. He studied hard. He came in here one day with six suits. He said, pick the one that's going to make the right impression. So he was really into making the impression and studying his script.
Jeff Dudan (21:54.436)
Love it.
Kevin Short (22:13.11)
But you have a client that has to take, you got to have an investment banker that believes, that he believes in because it's going to challenge his logic. And so they have to believe it. I've had attorney, you have to have attorney on board, either will stay quiet or believe in the process. I've had attorneys say to the buyer, I don't know why you're talking about 11 multiple, this business, you could get it for six. I'm like, the hell are you doing? I called a client, told him he fired the attorney, of course.
Jeff Dudan (22:13.53)
Yeah.
Jeff Dudan (22:42.841)
Yeah.
Kevin Short (22:43.126)
But people just don't believe that people, that buyers will pay twice as much for the same business, same EVDA, as everybody else is paying half price. So you learn a lot. You learn a lot doing deals.
Jeff Dudan (22:57.328)
That's the ultimate game of chicken. And in my experience with the investment bankers I worked with, in my deal, I know when the money was, I know when they earned their money and it was right at the end. And I did a testimonial for these guys and I was just like, you gotta have somebody that's gonna be able to stand tall in that pocket.
Kevin Short (22:59.506)
It is.
Kevin Short (23:15.485)
Exactly right.
Jeff Dudan (23:23.348)
at the fourth quarter on the 10 yard line going in. And it has to happen because, you know, there was a couple of pullbacks there. And he ended up getting me like, I have just an extra several million dollars for something that was already included in the deal, but they didn't understand that it was. And I heard him quote it. He quoted it to him and I'm like, well, that's art. And he's just calm and...
Kevin Short (23:43.983)
Right. What you do with Jeff.
Jeff Dudan (23:52.076)
you know, Tom Brady like, so it was awesome.
Kevin Short (23:55.355)
Right. All the mistakes they make like that, well, we didn't understand that. It's always in the same direction against the seller. They never make mistakes the other way in overpaying. So it's fascinating.
Picking the Right Investment Banker: Ignore the Suit, Ask Their Clients
Jeff Dudan (24:06.548)
Yeah, fascinating. So if you were going to advise somebody how to pick an advisor, an investment banker, what are the couple of things that somebody should consider?
Kevin Short (24:17.218)
Well, as I say often, be careful because investment bankers all buy their suits in the same place, have the same haircut, they look sharp, look professional, they speak the language. None of that matters. You've got to talk to their past clients and tell them how it actually went. How did it go when that 300-pound lineman was breathing down Brady's neck? Did he stand tall or did he bail? So the clients know that.
Jeff Dudan (24:30.48)
Yeah.
Kevin Short (24:46.198)
So you've got to have documented proof that they can do this. And there really are not very many people that can do it. There's a lot of investment bankers in the world that get paid very well because it's a very profitable industry, but there aren't very many people that do it well. So you've got to find the one that does it well.
Jeff Dudan (25:05.368)
Yeah, and you can't really be that fee sensitive. Everybody, all the good ones have a very similar model. But when I had that single inbound offer, I was working with somebody who was a tax advisor, but they were also a business broker. And I would happen to be meeting with him. I said, well, this is what this company offered. And he knew what my financials were. He goes, that's a pretty good deal. That's about what we would get you. And I like, but I already knew what I thought market was.
because other people that had sold. And so I knew that it was way short and that I was gonna ultimately go and run an auction. But again, if this was my trusted person and they told me that that's what it was worth and I went with it, then I would have ended up with 20% of what I ultimately ended up with. And things would be really, really different.
Kevin Short (25:55.089)
Yeah, yeah. Your intuition was very good.
Jeff Dudan (26:19.062)
Yeah, and
Jeff Dudan (26:25.216)
associates working on deals. Well, I mean, I've got, you know, my son's a finance and econ major. He works with me now. My daughter's a first year law student in NYU. Her boyfriend's working in investment banking in New York. He's working on deals, right? So there's junior people that are doing the work. But I would also suggest that people should know who's the quarterback on my deal. And if you take too small of a deal to too big of a firm,
Kevin Short (26:42.59)
Absolutely.
Kevin Short (26:48.15)
Yep.
Jeff Dudan (26:52.62)
you might not get the talent on your deal that you need.
Kevin Short (26:56.842)
You don't want you're exactly right. You don't want to settle for low talent. You want the highest level talent who has the experience that you need and do not settle.
Price vs. Terms: Why “All Cash” Isn't Always All That
Jeff Dudan (27:07.34)
Yeah, yeah, 100%. So I do trainings occasionally for franchisors. And on the second day, I open up, I bring in my deal binder, which is about 15 inches of paperwork, maybe in four or five different binders. And I slam it down on the table. And I say, I said, this is the paperwork.
Kevin Short (27:08.851)
expensive.
Jeff Dudan (27:37.004)
from when I sold my company. And I ask him this open-ended question, what do you think is more important, price or terms?
Kevin Short (27:47.466)
Right. It's terms. Terms. You get the biggest price in the world if you never collect it.
Jeff Dudan (27:47.692)
I'll ask, and I'll ask you.
Jeff Dudan (27:55.928)
Yeah. Tell me, tell us what you mean by that.
Kevin Short (28:01.814)
Well, they could wrap you up in earnouts and all kinds of weak notes for a big price and you'll never see the money. So you want the big price and you want excellent terms. You gotta have both.
But the terms, the terms gotta be there. All the non-competes, all the intellectual property ownership, because we carve our deals out. It may be better for you to keep the intellectual property as a seller and sell that later. There's all different ways to skin a cat, but you've gotta have somebody who understands all that.
Jeff Dudan (28:17.007)
Yeah.
Jeff Dudan (28:34.136)
Yeah, so if you have all your IP in a separate company and you've been charging 1% lease to the company for it or something like that, and maybe you put that... I know a guy who has a 4,000 unit chain in one of the franchising here and I was talking to him and he took all their IP and their trademarks and it's a place where... It's a well-known place that cuts hair and he put...
all their IP into a separate company and they lease it back to the franchise or and that's in his trust for his kids. So it's, you know, yeah.
Kevin Short (29:11.21)
Yep, that's smart. In case it doesn't work out, he can start up a different company the next day using an IP, because they will have blown the non-competes by not paying him. So that is very smart on his part.
Jeff Dudan (29:24.608)
Yeah, yeah, so sharp, sharp guy there. The other thing is like what kind of a basket, how reps and warranties insurance is a big thing. You sign off on all these representations and all these warranties and it's 50 pages of things that there's gotta be all kinds of little gotchas in there. You do it with the best of intent, to the best of your ability, but then will the buyer pay for.
Insurance that if something does come up that was a violation of a rep or warranty that you made that it first goes to insurance And you know, that's important how much hold back how much of a basket how long? And are there any financial markers that have to be hit for you to get the rest of your money? I mean Um, I know I have a horror story here And i'll share it because people need to know Had a friend they had a contracting business
They were in business with family. It wasn't really working out. They had started, some of the family had created the misalignment by creating a compatible but separate business without all of the original shareholders in it. So they were looking to sell and cash out of the original business. And I mean, it was only a $15 million deal or something like that. But it was negotiated over a very long protracted period of time.
and there was only 30 or 40 percent of the money down and the rest of it was on an earn out. And the day after closing, the acquiring company filed a massive lawsuit challenging all the reps and warranties on the deal. And it devastated this guy. And they spent all they spent more than half the money that they had gotten up front in legal bills over the next two or three years, trying to work it out. And ultimately they didn't get.
Kevin Short (31:07.722)
Well, well.
Jeff Dudan (31:21.568)
I don't think they ever got anything more out of it. So that's the worst story I've ever heard. And come to find out after the fact that as they investigated it, they were able to find people. This was a pattern of behavior from this buyer. But they tie everybody up with gag orders. So you can't find anything about it online or whatever. So.
Kevin Short (31:42.954)
That's sad, that's sad because the entrepreneurs worked their whole life to build these companies.
Jeff Dudan (31:48.268)
Yeah, and I mean, possession is 9 tenths of the law. So if you would have got all your money up front and maybe a million dollars in escrow, then okay, they can argue over that million, but you got the majority of your money and you walked away with it, and then now they've got to come get it. So that was.
Kevin Short (31:50.582)
Yeah. Yep.
Deal Killers at the 10-Yard Line: Surprises, Employees, and FBI Agents
Kevin Short (32:05.258)
Yeah, to your point, you don't want to be chief with your attorney. You want the best M&A attorney you can find. And to your point, the referent warranty insurance has decreased the escrows from 10% to 5%, and that often the amount of cash in escrows are around 1% because you have referent warranty insurance. So the buyer is protected. It's good. It's money well spent.
Jeff Dudan (32:10.893)
Yeah.
Jeff Dudan (32:26.732)
Yeah. Yeah, not cheap, but again, on the terms, you put it in the stipulations that the buyer has to pay it.
Kevin Short (32:36.886)
Yep, yep, exactly right.
Jeff Dudan (32:38.976)
Yeah, and then they're not arguing with you. It's probably easier too. They just make a claim. They get their money. You're not litigating over it, that kind of stuff.
Kevin Short (32:46.59)
Yeah, in the insurance companies, you'd be in the middle. So they know they don't have a rookie defending the claim. They've got a sophisticated insurance company defending the claim.
Jeff Dudan (32:59.256)
So you're in a deal and you're driving down, you're on the 10 yard line, you're going in. At that point, what are some of the more common things that kill a deal?
Kevin Short (33:13.206)
I would say things that pop out of due diligence that the seller didn't tell anybody, including us. That's a biggie. Sellers believe they're going to get away with it and they don't. We are very aggressive about keeping it quiet because the other thing that happens on the 10-yard line is key employees get wind of it and they either come in and try to hold the seller hostage. I understand you're going to get rich next week at a closing.
Jeff Dudan (33:20.969)
Oh.
Jeff Dudan (33:35.919)
Yeah.
Kevin Short (33:42.57)
I want $10 million or I'm walking out the door today. I've had that happen. We use stay bonuses a lot to make sure the key employees stay during the process. But I would say surprises and due diligence are the number one thing we worry about at the 10 yard line.
Jeff Dudan (33:45.614)
Right.
Jeff Dudan (33:53.583)
Yeah.
Jeff Dudan (34:02.756)
So it could be a payable or a liability that they conveniently forgot to tell you about. It could be a legal thing, a claim that was in their past or something like that. Diligence is pretty thorough nowadays, especially in our industry. There's been so many deals inside of franchising that there's specialty firms. If you just hire the right three or four specialty firms, they're gonna go through all the franchise agreements. They're gonna call every franchisee. They're gonna talk to them. They're gonna...
Kevin Short (34:14.826)
Absolutely.
this.
Jeff Dudan (34:32.2)
They're just gonna dig, right? So.
Kevin Short (34:36.458)
And there's the unexpected, the surprises. We had a company that was manufacturing military-grade equipment, and we were within a week of closing, and a client called me and said, bad news. Last night, the FBI hired our China sales representative. He was selling secrets to China. And that, of course, blew up the deal. You could not have predicted that in a million years. Now we got it back on track and closed it.
Jeff Dudan (34:57.886)
Mm.
Jeff Dudan (35:02.841)
No.
Kevin Short (35:05.634)
But it was really a curveball at that point.
Jeff Dudan (35:08.94)
Yeah. So Kevin, when did you write this book? And was it written for anybody in particular? I mean, obviously, it's a great tool for business owners like myself to read and to get a little familiar with the process. It's also a great marketing tool for you, because you are definitely an authority inside of this space. You know, when?
did you decide to write this book and what was the catalyst that triggered you to do it?
Kevin Short (35:42.11)
Yeah, going even further back than I said earlier, I had written it with a ghostwriter and we wrote it over a year and it was terrible. I just couldn't get onto paper what I was trying to say. It's hard to explain why somebody would pay twice the average price, the average multiple. So I finally found an editor.
Jeff Dudan (36:06.189)
Yeah, right.
Kevin Short (36:10.494)
And she and I would talk every Monday morning for two hours. And then she'd spend a week putting it on paper. And then we would review the next Monday. And this went on for five years. And it, oh yeah, it's, we, because we were, it was such an abstract concept. And our publisher, Amicomp out of New York, they did a worldwide search trying to find who had written a book about this subject. And surprisingly, nobody had.
Jeff Dudan (36:21.68)
Oh my goodness.
Kevin Short (36:39.626)
So it wasn't even a guide to use. How do you talk about this kind of pricing? So that, it was written for owners. Those were my clients, but it's become a textbook. It's used a lot in seminars all over the country. And advisors buy it quite a bit. We're about to go to our fourth printing because advisors are buying them up to give to their clients.
They want their clients to sell so they can manage their money. So all those markets we didn't really expect. We sold about 25,000 copies. People bought it in Barnes and Noble in Vancouver to get on a plane in two days and come down and visit me. Crazy, crazy stories. But that was the whole goal. We didn't know where it was going to go. We just felt like if people were to read it, that they would get it. And they do.
Jeff Dudan (37:38.816)
I've recommended it to so many people and have borrowed from the insights as I coach people on how they need to think about what it looks like at the end. More just trying to slow people down and just say, look, hey, I got a call. I'm an owner in a men's clothing business. And it's...
Kevin Short (38:05.827)
Whoops, whoops.
Jeff Dudan (38:07.712)
It's no, it's good. It's a franchise. It's, you know, trunk shows and all kind of that. It's a really
Kevin Short (38:09.408)
Was it? Okay, good.
Kevin Short (38:17.214)
They stayed current. Good.
Jeff Dudan (38:19.064)
Yeah, it's a really, really cool business. Great product, good service, still kind of at startup phase, but a lot of people are jumping on board with it. And lo and behold, we put a suit on an athlete that wins a national award, and that commercial comes out, and now all of a sudden, there's a multi-billionaire reaching out saying, I want to invest in the business. And...
Kevin Short (38:47.388)
Smart.
Jeff Dudan (38:48.436)
And he's, but he's engaging one-on-one with the founder. And I'm just like, hey, this is a sophisticated group of people that you're dealing with, an entire team of finance people. I said, you know, if you're serious about taking on this, and I mean, they were, you know, there'll be an investment, right, if the deal goes through, but I mean, don't think for a minute that there's not gonna be claws for people to claw up.
you know, above 51% or, you know, whatever the game of it is, or you're going to have to hit markers on it. So I kind of use the, you know, I use your book to say, look, you know, read this, look at this, look at these chapters. And you know, when you need to be, you need to be very thoughtful about, you know, trying to thinking that you can negotiate with somebody that's made billions and billions of dollars buying and selling companies.
Kevin Short (39:46.522)
That's a good thing. So sellers, you know, these entrepreneurs that we all know and love, they've made their living by their wits, right? They're very good at selling, they're very good at reading people. They think it applies to this process. It does not. Selling, you know, I-beams for skyscrapers does not equate to selling a business to Blackstone. So you have to accept that you're overmatched in bringing professional help.
Kevin Short (40:42.946)
Yeah, I didn't get it. Mine says we're still recording. Okay, we can do that. Okay. No, no, of course not.
Kevin Short (40:55.171)
Okay.
Kevin Short (41:53.517)
I can.
Can you hear me?
Kevin Short (42:00.616)
Hello, hello.
Kevin Short (42:42.779)
How's that?
Kevin Short (42:46.81)
Can you hear me now?
Kevin Short (42:51.174)
Hello, hello.
Jeff Dudan (42:51.386)
Yeah, it's so crazy. I didn't even have to hit the record button, but I can't hear him. So see if you can hear him on your... I know you can hear me because he just refreshed.
Jeff Dudan (43:04.984)
It's so strange. It just started recording itself.
Jeff Dudan (43:11.076)
Kevin, do I got you? OK, yes, sir, thank you. There, I don't know. That hasn't happened for a while. We used to have that, where it would stop. But we're recording, and we're going, and Jim, we'll edit this right together. What was my question? Where were we? Where do we leave off here? We were talking about.
Kevin Short (43:11.13)
Hello? Yep, can you hear me?
Kevin Short (43:33.498)
the value of the advisors, not doing this on your own, no matter how good of a salesman you think you are.
Jeff Dudan (43:35.668)
Yeah. Not doing it on your own. Yeah, yeah. And we were talking about your book. OK, how it was used and all of that. Awesome. All right.
Jeff Dudan (43:51.372)
Kevin, what's the most creative deal name that you ever assigned to one of your deals?
Kevin Short (43:57.054)
We don't do that. That's funny you say that. We just put numbers on them. Yeah, yeah.
Jeff Dudan (44:00.772)
Oh really? So when you call somebody it's not project seaside or project airplane or jet.
Kevin Short (44:06.202)
No, no, we just did do, you know, we did do one recently for the first time. The client wanted to use a name instead of a number, but we use numbers so we can keep track of all of them more easily.
Jeff Dudan (44:17.96)
Well, sure, it's yeah, that makes sense. Yeah, all right, well, so much for that theory. I have that theory.
Kevin Short (44:20.502)
over time. That's funny.
Kevin Short (44:27.653)
Right.
Jeff Dudan (44:33.664)
So one of the things that you do, how much are you working doing investment banking? And then I also would love to talk a little bit about your radio show.
Kevin Short (44:43.474)
The radio show, this one, so we did a podcast for a couple years. Did two, two years of podcasts, about a hundred episodes. And then KMOX came to me and said, what do you think about being involved in the show? So I joined them as a sponsor first. And I sat in the studio doing recording and watched, and then just became an on air host, co-host.
with a legitimate Radial personality in the stainless market and so I'm there asking questions. So that's that is all You know, we're going I say bigger time this year with the show but we've been doing this for probably four or five years and lots of Video and podcast over the years a lot of speeches
So we learned how to market probably 15 years ago and learned that there was never enough marketing. There's cheesy marketing, so we avoided that. But if you're putting out a good product and you're building good lists, there's never enough because you never know when that next lead's gonna come from. And the marketing is what's fueled our business. In the book, the book really was, put us on the map.
Jeff Dudan (46:11.092)
Yeah, 100%. The show is The Business of Family Business. It airs on KMOX, which is 1120am throughout the Midwest. It's a pretty strong signal. And based right there in St. Louis, what day and time are you on?
Kevin Short (46:25.894)
Saturdays at 2 o'clock.
Jeff Dudan (46:28.008)
Okay, is it an hour? Man, how fun is that? And you've got the same co-host every time?
Kevin Short (46:29.614)
It's an hour. Yes. Oh, it is. Yep. And I get to meet crazy people. I love business owners. I always have. And I really have a lot of respect for them.
Jeff Dudan (46:46.916)
Is it like a Dave Ramsey thing where you're just constantly taking calls?
Kevin Short (46:51.202)
No, we don't take calls at all. We actually record ahead of time. We've talked about that. Can we get enough listeners that we could do a live show? As of right now, we don't do that.
Jeff Dudan (46:54.621)
Okay.
Jeff Dudan (47:04.96)
I started doing a navigating entrepreneurship webinar once a month, six in the evening, Eastern time. It comes out of our Facebook group and navigating entrepreneurship on our Facebook group. We got a lot of, it started small and now we've got more people showing up. It's the closest thing that I could do right now to a radio show where you've got interaction with an audience and people popping questions in there and things like that. I find it to be a lot of fun.
It lights me up. It's, I mean, we had everything from, we had a guy who's an international board director and was the CEO of a huge company that sold for maybe $500 million and he pops in there, right? And then I got another guy that's a yoga instructor. And.
Kevin Short (47:53.019)
Right. I've had the same experience. But you have to love entrepreneurs because they're not perfect. You're not perfect, but they are very talented at what they do.
Jeff Dudan (47:58.593)
Yeah.
Jeff Dudan (48:02.412)
Well, what's interesting is they're engaging with one another and respecting one another and solving, you know, everybody has similar problems regardless of the scale of the business. So it was really, really interesting to see who shows up on that. But then I would love to do a live radio show or even record it or something like that.
Kevin Short (48:21.262)
Oh, it's interesting. It's, it's, it's fun. People over town here on their car radios and call me and say, I heard it. Uh, but you know, these entrepreneurs, as you and I have figured out, they all have a very different form of genius. And that's what's put them on the map. It made all their money.
Jeff Dudan (48:36.435)
Mm-hmm.
Jeff Dudan (48:40.212)
Yeah, yeah, it's interesting. And you spent a lot of time, it looks like, with charities in and around children.
Kevin Short (48:47.618)
I do educating children. In St. Louis, we have a race issue. And my solution to it, going back 30 years, was to try to develop schools that would lift these kids up out of poverty. And so I teamed up with the local archdiocese, and because they had the schools and the teachers and they had empty desks, and so we found donors, the big corporate donors in town, to provide the...
tuition. So we launched that formerly 15 years ago and raised about $200 million over that 15 years and educated about 5,000 kids a year, which in St. Louis was a lot of the kids in poverty. And it was a grand slam. And those kids went on to college. And so we tracked all of them. And there's a national program for this called the Children's Scholarship Fund out of New York.
that I'm on the board of and have been for a long time. And so I learned a lot from these programs around the country. But we were very, very lucky to have the board members, the staff and the donors, they were willing to support the cause. It was unbelievable. And to me, it was, since I've been in business for myself for a very long time, I don't have all that corporate training that the IBM guys do or the Goldman Sachs guys. I learned my training in the not-for-profit world.
Jeff Dudan (50:12.341)
Yeah.
Jeff Dudan (50:17.3)
Yeah, the same here. I've, it's been a long, long time since I worked for somebody. And all of my professional development I've had to pay for and learn through, you know, not failures, but, you know, I'm learning, but 100%. And, you know, we're passionate about
Kevin Short (50:22.735)
Right.
Kevin Short (50:33.397)
A chapter, they were chapters.
Jeff Dudan (50:39.432)
similar things. So we've partnered with Ben and Candy Carson and the Carson Scholars Foundation and Homefront Brands is building reading rooms across the country in schools in partnership with them and also participating in their Carson Scholars program where they give thousand dollar scholarships out and you can the kids can win them year after year after year. The money's put into an interest bearing account and then whenever they go off to school the kids get the money to use towards their
education, tuition, books, or whatever it is. But as importantly as that is the events that they have where these kids who may not have had the opportunity to ever participate in something like that, they get to come to a banquet, they get an award, they get to be around other people, I mean, internship opportunities and all that kind of stuff. You know, and we like to say, there's the manufacturing analogy that says the earlier in a process that you can...
repair a defect the cheaper it is to the overall production process. And it's kind of the same thing with children, the more that we can pour into them early. And we actually have a collaboration now that I think of it that was brought to me last week where they're looking for us at Homefront brands to build content that's targeted towards teens that are entrepreneurial, but is going to be safe for the kids.
parents can comfortably go and say, you can send your kids here and there's gonna be guests and there's gonna be content for them that they can learn about business or about leadership or these types of things. And you don't have to worry that it's, people are gonna be swearing on it or there's gonna be other stuff that maybe they might not want their kids to be, they already consume enough of other places. So yeah, so I'm excited about that collaboration.
Kevin Short (52:28.568)
Right, right.
Congratulations, that's a lot of hard work.
Jeff Dudan (52:33.928)
Yeah, yeah, it'll be good. But you know, we're kind of over that target already. I mean, it's not that big of a diversion for us to create that little channel of content there. And we've got great guests like you and other people that are coming on. So we're very excited about that. And we'll pursue that.
Kevin Short (52:54.542)
It's amazing what people will do. It's amazing what people will do to help others. You just got to show them the path.
Jeff Dudan (52:58.612)
Oh, that's what it's all about. It really is. All right. Well, this has been amazing, Kevin. I really, really appreciate you jumping on with us today. And again, I want to thank you because what I was able. I mean, I just on a whim, I said, I need a book that's going to teach me how I need to think about selling my business. This name popped up. Outrageous Price is attractive to anybody who's looking to sell. And so I just clicked.
buy on Amazon and it really helped inform my thinking in a time when I needed it the most. So I appreciate that. Yeah, 100%. How can people get in touch with you today if you choose for them to or where would you point them to consume more of your content?
Kevin Short (53:31.203)
That's exciting. I'm glad it worked.
Kevin Short (53:46.287)
Yep, Clay You can reach me by phone, by email, and there's a lot of content that we keep up to date. There's other websites. So the outrageous word promoted a lot of marketing. So there's ThinkOutrageous.com. So we've had a good time with all that. So, but Clay
dot com is the easiest and fastest way to reach me.
Jeff Dudan (54:19.113)
outs and spelled just like it sounds, C-L-A-Y-T-O-N, capitalpartners.com. And last question, if you had one sentence to make an impact in someone else's life, what's your go-to?
Kevin Short (54:36.686)
Don't give up. It's not about the fanciest degree or the fanciest anything. It's about understand yourself, spend time figuring that out, and then don't give up because it will happen. But many people give up on the 90th yard line and if they'd just gone a little bit further, they would have won. So don't give up. That would be my life story is just by persevering.
Jeff Dudan (55:07.328)
Words to live by with Kevin Short. I'm Jeff Duden and you have been on the home front. Thanks for listening. Thanks, Kevin.
Kevin Short (55:17.179)
Thanks, Jeff. That was excellent. Good job. All right. Thank you.
Jeff Dudan (55:18.752)
Yeah, man. Cheers. Hang on.
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