The Ripcord Moment

“When you have your back against the wall, it’s amazing what strength you can come up with” - Brian Shafton, Founder and CEO of RBC records. Hear how Brian created RBC from scratch with just a computer and cell phone in his living room, grew the business and how he approached BMG which led to a strategic acquisition.

As the acquisition unfolded, Brian discusses some of the synergies between RBC Records and BMG. Specifically, he discusses how BMG’s International presence allowed him to expand his business from only U.S. based clientele to working with artists around the world.

Pay close attention to why an independent company was a non-negotiable must for Brian when negotiating his deal.

He shares his insights on the realities of the due diligence process - how arduous, stressful and time consuming it was. And, how by going through this process, it gave him a better appreciation for his business and how he learned from himself by retracing his steps. Ultimately, in retrospect, he now looks back at it with enjoyment.

Lastly, he shares his 2 action items for owners:

1. Ask specific scenarios during the courting phase with your potential suitors. Get an understanding how the new buyer will treat your clients and your employees. Additionally, take the time to come away with a clear vision of how the buyer will integrate your systems into their systems.
2. How to ensure your legacy is preserved when your company is acquired by a strategic buyer.

“The three rules of ESOPs are cash flow, cash flow, cash flow.” – Sheryl Bayani-Alzona, attorney with the Employee Benefits Law Group, a Southern California-based practice that focuses on employee stock ownership plans. In this episode, Sheryl offers her expertise on the world of ESOPs and if this is the right exit strategy for you.
Sheryl starts off by explaining to us what an ESOP is. At a high level, an ESOP is an employee stock ownership plan. It is a retirement plan similar to your 401(k) profit sharing plan. However, it is the only retirement plan that is allowed to enter into a loan to purchase employer's stock from selling shareholders.
She dives into the main benefits of an ESOP to a selling shareholder, including the ability to defer payment of capital gains. She also discusses what types of companies usually use ESOPs as an exit strategy, with manufacturing, construction, and professional industries leading this list.
Sheryl also addresses common pitfalls that owners should be aware of when it comes to ESOPs, the biggest one being whether they can afford it. Companies need cash flow to function, and since the ESOP is funded by the company, it is important that the company's cash flow is healthy.
She also discusses the concept of a partial ESOP coupled with a later exit. She says this is an option because the ESOP is a ready buyer, and perhaps the only buyer who is willing to take a minority interest in a company.
Lastly, she shares two action items for owners:
1. Go through the ESOP suitability review process to make sure you know what you are getting yourself into before you establish an ESOP.
2. Call Sheryl. She works for the Employee Benefits Law Group, the largest ESOP consulting and legal practice in Southern California. Her direct line is 310-571-8896.
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.

On this episode of The Ripcord Moment, host Joe Seetoo invites Regional Executive Vice President at American Business Bank, Jeff Munson, to discuss the recent bank crises and what business owners can do to protect themselves.
Jeff says Silicon Valley Bank collapsed due to their investments in longer bonds, so when depositors started to leave the bank, SVB did not have much liquidity because they could not sell those long-term bonds. This is a learning lesson for anyone who has money in a bank- it is imperative to ensure your bank prioritizes risk management. Jeff says while your banker should understand your balance sheet, you should also be asking questions about theirs. You should have conversations with your banker about their loan portfolio, bond strategy, and senior management.
Jeff also notes that American Business Bank evaluates their clients’ character, management, strategy during the pandemic, etc. Therefore, the clients they take on are generally quality companies who make money and preserve their assets. Your bank should be asking questions about how your business is run and how your organization has weathered storms in the past, as this may mean they are a bank that understands risk.
Jeff recommends business owners to analyze the cash flow and debt structure they need to transform their lifestyle business into an organization that is not entirely dependent on them. Your bank should be helping you understand how to get there. Furthermore, business owners should understand how FDIC Insurance works in order to understand what risk they are taking. Jeff is confident that while some banks have failed recently, reinforcing the importance of being with a bank that mitigates risk, the banking system is here to stay through good and bad times.
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change or do not necessarily represent the views and opinions of Morton Wealth. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your financial, legal, and tax professionals before implementing any transactions and/or strategies concerning your finances.

On today’s episode of The Ripcord Moment, Joe welcomes sister-duo Lizzie Means Duplantis and Sarah Means, founders of Miron Crosby, a custom cowboy boot brand headquartered in Dallas, TX.
Sarah and Lizzie were raised on a ranch in Texas and were gifted cowboy boots on every important occasion: birthdays, graduations, and weddings. Their cousins also owned a cowboy boot factory and helped them make custom boots for their personal use. When they began wearing these boots around New York City later in life, strangers would stop and ask where they could get a pair. That’s when Sarah and Lizzie knew they had something special to introduce to the luxury fashion market.
Miron Crosby made over one million dollars in revenue during their first year. Sarah and Lizzie say they accomplished this by elevating the shopping experience through their brick-and-mortar store in Highland Park, TX, highlighting the uniqueness of their products and working with a PR firm to help get their boots featured in publications like Vogue and Elle. They have tied sentimental value with luxury by also offering the option to embroider handwritten words onto their boots. There is no one else in the fashion world who is offering such niche products.
As they grow even more this year, the sisters are putting more energy toward hiring new executives who will push their brand forward. They agree there are certain values and skills you cannot teach someone, like work ethic and kindness. Lizzie and Sarah are intentional about the tribe they keep at Miron Crosby to ensure their brand is propelled by the right people.
Lastly, they shared their two action items for business owners:
1. Work with people who are experienced and whose values align with yours.
2. Get comfortable with being uncomfortable. Be the first one to ask questions, don’t be afraid to seem “dumb,” and be open to feedback.

“If it’s going to be worth something to someone else, it has to create value for them” – Chris Yount, former CEO and 3rd generation business owner of Fortifiber.

Hear Chris’s story as he shares how he rescued the family business from bankruptcy during the Great Financial Crisis, revamped the company’s strategic initiatives and led the company to its highest level of profitability in its 80 year history. As Chris looked to the future, securing his family’s legacy and financial security was a top priority. He chose to sell the company to Henry Co., a strategic buyer backed by a Private Equity firm.

In this episode, Chris discusses some of the finer points between a family succession plan and a transaction with an external party. For example, with a family succession, Chris points out the importance of clearly defined leadership roles for the new management team so it’s clear to employees how they need to prioritize their work and responsibilities. One potential solution Chris suggests is to consider moving the former CEO to a more remote office away from the main office.

One of the beauties to family successions, if over multiple generations, is the cumulative lessons learned along the way which can be retained and passed from one generation to the next.

When it comes to an institutional buyer, Chris says cultural differences will shine through. For example, a Private Equity firm has a more formal structure and will look at the acquisition through the lens of risk management. This will cause the due diligence process to be more onerous than with a private non institutional buyer, who is likely looking to be more opportunistic. The process is much more formalized than with a family transfer.

Chris strongly encourages entrepreneurs to consider having a board of Strategic Advisors. These are non-fiduciary members who can push the owner to think about the company in a different manner than they are accustomed to. Additionally, these advisors can help professionalize the company which will enhance the enterprise value of the business and make it more attractive to a potential suitor.

Lastly, he shares his 2 action items for owners:

1. Push to professionalize your business: Specifically, Chris encourages owners to ensure their financial record keeping is accurate and robust. Sloppy accounting and financial records will not stand up to the rigors of due diligence when dealing with a strategic institutional buyer or a Private Equity firm.
2. Value Creation: Set the business up in a way that can create value for anyone not just you.

Chris now spends his time consulting with other businesses and writing for Forbes magazine. If you’d like to connect with Chris Yount, he can be reached via his website at https://www.christopheryount.com/contact.