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How to Legally “Button Up” When Exiting Your Business
Steven Weigler is the Founder and Managing Partner of EmergeCounsel, a company that specializes in protecting business assets and intellectual property for entrepreneurs worldwide. Before his work at EmergeCounsel, Steven was the Founder, CEO, and General Counsel of ScholarCentric, a groundbreaking educational technology startup.
With extensive entrepreneurial and legal experience, Steven specializes in intellectual property, general business counsel, and information technology law. His overriding objective is to provide legal counsel for people with evolving businesses.
Here’s a glimpse of what you’ll learn:
- [02:37] Steven Weigler shares his background as an entrepreneur and attorney
- [05:57] Steven’s advice for sourcing a company’s working capital
- [09:15] The value of hiring an attorney for your business
- [11:35] Things entrepreneurs need to legally “button up” as they head toward exiting
- [19:26] Steven talks about the TotalTM® program and how it helps people with the trademarks services
- [24:47] Why it’s vital for companies to seek trademark protection
- [28:09] How Steven’s counsel helps entrepreneurs successfully exit their businesses
- [39:55] The value of exercising due diligence in an M&A process
In this episode…
Running a thriving business consists of many moving parts, especially for entrepreneurs starting, growing, or exiting a company. It’s important to retain legal counsel to help protect the business no matter what stage your brand is in.
Many entrepreneurs think a business attorney is unnecessary, but they are essential to help you mitigate risk and protect your interests. With over 30 years in the legal arena, Steven Weigler says that growing or selling an online business is complex enough, and getting sound legal advice is crucial. He also recommends hiring counsel to help with your governing documents, protect your brand from copycats and knockoffs, and increase its value during an exit. When you have adequate legal counsel with a background in business who has your interests in mind, business transitions will be much smoother, and you can proceed confidently.
In this episode of the Quiet Light Podcast, Joe Valley sits down with Steven Weigler, the Founder and Managing Partner of EmergeCounsel, to discuss how entrepreneurs can legally prepare to grow or exit a business. Steven explains the value of hiring an attorney for your business, the legal issues entrepreneurs need to “button up” as they begin the exit process, how EmergeCounsel’s TotalTM® program helps people with trademark services, and the counsel he provides for entrepreneurs.
Resources mentioned in this episode:
- Steven Weigler on LinkedIn
- Steven Weigler’s Email: [email protected]
- Quiet Light
- Quiet Light on YouTube
- Joe Valley
- Mark Daoust
- Quiet Light Podcast email: [email protected]
- The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
Sponsor for this episode:
This episode brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.
There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. They provide trustworthy advice, effective strategies, and honest valuations. So, your Quiet Light advisors aren’t your everyday brokers — they’re your partner and friend through every phase of the exit planning process.
If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.
Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on its website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!
What are you waiting for? Quiet Light offers the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.
Hi folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.
Joe Valley 0:18
Hey folks, Joe Valley here, welcome back to another episode of the Quiet Light Podcast. Today we’ve got Steve Weigler on the podcast, Steve is the founding attorney at EmergeCounsel, I use Steve in trademark kind of a battle that I had with a large publishing company, when they didn’t like me filing the trademark exit preneur. He was invaluable in helping me through that process, guiding me counseling me, suggesting things that you would not normally hear an attorney suggested mine, mainly because it wasn’t in his best financial interest in the short term. So really straight-up, straight shooter that helps with getting all of your business documents together, helping his clients make sure that everything is buttoned up and talking to them all throughout their journey through an eventual exit. And he’s had a lot of clients that he started working with 6, 7, 8 years ago that are now exiting that had been with him the whole time. And now he’s working on their stock and their asset sale and working on those agreements. And he’s there as a counselor, as a friend, as well as the attorney. And he’s very, very reasonable. I want to say that straight up. He’s not your typical attorney, because he’s an entrepreneur, first and foremost, actually, firstly, I think he was a litigation attorney. And then he was an entrepreneur. And now he’s starting to EmergeCounsel as well. Great guy, very, as I say, towards the end of the interview, very humble, very soft-spoken, but I’ve seen him battle. And men the tiger comes out when he battles. So just because he sounds like a super nice guy doesn’t mean that you can walk all over. Let’s jump into it. Steve Weigler from EmergeCounsel. Here we go. Steve, welcome to the Quiet Light Podcast or welcome back, I should say, how are you?
Steven Weigler 2:24
Well, always good to see you, Joe.
Joe Valley 2:26
Same. So we’re going to talk about a whole bunch of different things today. But why don’t we start with you giving the folks that are listening a background on yourself and what you do?
Steven Weigler 2:37
Sure. So my name is Steve Weigler. And my background is both as an entrepreneur, and as an attorney. I started basically, I started many years ago, in criminal law practice. I was a prosecutor in Miami.
Joe Valley 2:54
That’s not how we met just for the round, folks.
Steven Weigler 2:57
No, I know, hardly anyone from my past career. But I really cannot kind of learn trial skills and learn kind of the which I think is a basic framework for lawyers, like you have to know that everything that could happen in a business setting, that could be a thing going to court and really thinking from the perspective of, hey, what’s the worst case scenario here? How would a court look at everything. And so I had years of experience in that, and then decided to be an entrepreneur, and started a, it was a company selling data and predictive analytics to school districts. And I did that for about eight years. And started from like, not knowing anything about anything related to business, to building the brand to building the assets to raising a lot of money because we sold to school districts and the cashflow sucks, and to negotiating advertising contracts, doing international deals, to investor discontent, to diluting myself out of the company, the good, the bad, the ugly. And through that I was able to successfully exit at least for myself. And I thought to myself, with my wife’s encouragement, saying even if we have money, you can’t sit in the basement, the rest of your life. I was 45 started a firm focused on helping entrepreneurs, especially in growth areas, to build their businesses without making the mistakes that I made as an entrepreneur.
Joe Valley 4:41
Very cool. Let’s hone in on that term you just use called investor discontent. I want to hear your experience with clients that have had investors and because they felt they needed money needed to raise money. I had a conversation with somebody the other day, he asked me how for coffee, lo and behold, he opens his laptop and he gives me his pitch deck trying to raise money from me, and good guy, but I don’t think it’s the smartest thing for him to raise money, it wasn’t a whole lot of money that he needed. And now he’s made some connections, and it’s gonna wind up doing a deal with getting some funds from the SBA. Now, the friend of mine, who’s been on the podcast several times, sold for a lot of money, built another company ended up taking on some venture cap money Steven wants, the ink was dry, they went from being really great guys to being total, a-holes, and very difficult to work with him and his life kind of miserable. What do you see in terms of things that you absolutely need to do in terms of making sure that if you’re going to take on working capital money, and from your personal experience, how to make it, something that’s going to be good for your heart and soul as well as your bank account?
Steven Weigler 5:57
Well, I think you hit it on some points, I think, venture capital, it’s not that even the worst venture capital, it’s not that they’re bad people, it’s that they have kind of a job to do. And that job is to invest money and grow that money very quickly, and exceed what the norm is. And then they know that they’re going to have companies that aren’t going to make it. So exceed what their normal average is. And if you feel like you’re that kind of company, number one, have someone like you or someone like me, give a second opinion on looking at the numbers quantitatively and looking at the pitch, are you really that kind of company that’s going to succeed, hockey stick, gazelle, whatever you want to call it, where it goes like this 99% of the companies I work with, are not gazelles they’re strong companies. Not all of them, but many of them are strong companies with strong ideas, strong balance sheets, strong cash flow is okay, every company has its strengths and weaknesses, but they’re not itself, the concepts not to sell, especially in e-commerce, it’s usually a proven concept. And they could be selling a commodity branded, which is why I focused a lot on trade. It’s not a good sell. So it’s not even a discussion we should be having out of the starting gate.
Joe Valley 6:25
So only if your business is growing like crazy hockey stick kind of growth, then venture cap makes sense. In your view, if it’s 10%, year over year growth, 15% 20 even not really where you want to take on money.
Steven Weigler 7:55
Well, in a lot of times, I can’t imagine that they would want to take you on. So some, a lot of times, it’s just a waste of time. So the kind of equilibrium is to find how you can bootstrap. And even if it’s going to be sleepless nights, bootstrap as much as possible, and then figure out how to supplement that as friends and family for an equity piece is it taking out a loan is unsettling is that can be. And then frankly, really looking at your business and figuring out what you want out of it. Because a lot of times the entrepreneur doesn’t even want a good sell.
Joe Valley 8:41
And you’re working with a lot of entrepreneurs now, I mean, based on your experience, you know, you’re not just their, you know, their trademark attorney, they’re, you know, legal counsel for all sorts of different things, but you’re also mentoring them a bit in terms of their ultimate goal. And in the process of getting your business sort of firmed up legally, what is their ultimate goal, and you’re working with them more? I mean, I guess what I’m saying is, you’re not the typical attorney that’s going to get them a trademark, you’re also counseling them on other things as well, in terms of business in general and what their goals are. Yeah.
Steven Weigler 9:15
Yeah, I think it’s interesting, because I guess it’s after having some business experience. I know that the last person most people want to talk to is legal counsel, like, if you see having, I remember when I was CEO, my own CEO, I would see I had a talk to talk to an attorney at like two o’clock. And I’d be like, and I’d be looking at, all right, have a cash flow meeting, have a meeting with a client when per customer, whatever. When I look at that attorney meeting, I’d be like, can I put this off until another day? Do I really have to talk to the attorney? So when I started this firm, I got that and I didn’t want to be that attorney. My primary goal is to really kind of look at, where are you? What do we need to do to get you from point A to point B. And point B usually is exit, or at some point for an increase, so it’s to increase your value. And so looking at through that lens, yes, when I talk to clients, and I don’t really charge for the consultative like to talk about where the company is, that should be really on my dime, to figure out what is this client, and personal build a relationship where they’re not like, call and think that the phone chargers are running, that’s always something I hated, too. So really get to know the client, what their needs are, and build that kind of independent bridge. Because a lot of times, and Joe, I think you’ve had it, where you have C meeting C-level meetings, and you’re meeting with those people almost every day, your CFO, your CEO, your COO, the attorney isn’t in that line of communication, usually, they’re a separate conduit for you to talk about what really the issues you see, and do kind of separate line of defense to make sure that you can be successfully get appointed.
Joe Valley 11:20
What are those things, right? So everybody thinks your company’s fine, legally, they think they’re all set, and they’re not going to be an issues in the transfer of the business? What are some of the things that people have to make sure they’ve got absolutely buttoned up as they marched towards their eventual exit?
Steven Weigler 11:35
Sure, I think though and I usually see this at the M&A table is looking at what a potential acquirer is going to look at. Number one, is, they’re gonna look at governance, and so they’re gonna see, hey, do they have, okay, they formed an LLC in 1996. And the LLC, they never had an operating agreement. They never had documents showing that they had annual meetings, they never showed compliance with state laws and never show that they have adequate capital accounts and ever, all those things are hugely important. Because the acquirer is going to take on the liabilities, a lot of times it depends on its asset sale.
Joe Valley 12:24
Right? It’s an asset sale, that doesn’t matter. But if it’s a stock sale, that’s where it counts. Yeah.
Steven Weigler 12:30
Yeah, absolutely. And so, and I would think a lot of times, you’re gonna get more, there’s going to be some value in having adequate protection in your governing documents.
Joe Valley 12:47
I think there’s value there, Steve, it’s almost intangible value. And that is that the more buttoned up, you’re doing things the right way, just in terms of governance, the more intangible value there is because the buyer, the acquirer of the business is going to believe that you’re running a business well, and they’re going to trust you more, it’s silly things like that, the more confidence I think a buyer has in the business owner that they’re buying the business from, the more money they’re gonna pay in, the better terms they’re gonna give, I see it over and over and over again. So just that alone, I think is important in terms of in terms of governance and having things set up properly. And it’s not hard to do.
Steven Weigler 13:30
And I think, Joe, in your experience, it’s like, you get a offer letter or a LOI, and the LOI says, the anticipated payments, like 29 million bucks. Yeah, good. Yeah, it’s a really good day. And the entrepreneur, which usually is my client, is like, alright, well, let’s get this stuff over to 20. And then you start looking at it. And it’s like, look at the due diligence list. It’s all your governance documents, it’s all your Annual Meeting documents, it’s your financials, it’s your trademarks. So what happens is the 29 million, that’s our leverage, if this isn’t nice and neatly packaged, it’s not so much that it’s gonna kill the acquirer, it’s that they can use it as a negotiating point to drive down the value even though it’s not. It could be a legitimate concern or not legitimate. So it’s really I look at it sometimes as a packaging thing. And so when I see a client starting to get robust sales, sometimes we do it virtually, though, we have a virtual annual meeting, that I buy dinner. So if you want to be my client, you’ll get dinner. But I’ll have it shipped down because we’re virtual, but we just go through it so we can add an annual meeting so we can put it in and just keep the books so that we can just hand it over and as really no issues. But in those governing documents, a lot of times during the journey, you have entrepreneurs that partner up, or need some kind of financing with a maybe a passive partner, and they get in fights. And that’s not unusual for one partner. I have a case right now where one partner won’t sign conversion documents to a corporation, which would be tax advantageous, because he’s trying to basically extort the other partner, like, Sure, I’ll do it if you give me $100,000, to just signed this document. And so really, a lot of times you see operating agreements or corporate bylaws that are relatively complex, and it’s relatively complex, because the parties are relatively complex. And so you really have to know, that’s what a good attorney, a good business attorney should help you do is really figure out well, what’s really the tea leaves here, what’s the level that you’re facing. And so when I talk about, like, needing to understand the client, it’s understanding just like the deal, when you get finally to the deal, it’s understanding a lot of intangibles. And so nicely packaging is a nice way to say check off non-issue, the documents are not an issue, the brand is a non-issue, because you have a trademark portfolio. Now is that trademark portfolio bulletproof, probably not most brand portfolios aren’t. But it’s a nicely packaged and a spreadsheet that shows where the that we have the logo, that name that we thought about international protection, because they sell in Canada, or that’s all things that we want to make sure.
Joe Valley 14:04
Says a dumb question. But if you’ve got the trademark, why isn’t it bulletproof?
Steven Weigler 16:57
Well, because a lot of times, if you’re looking at multiple SKUs or ASINs. And it’s say you trademarked it in you know toilet tissue, and you’re selling personal lubricants or something, you know, something that isn’t in the same category, you didn’t update it, you know, you don’t have the trademark portfolio, like, for example, boards and Miller, Coors or something. There’s always ways to poke holes through any of these strategies. But basically and it’s why start with by total TM program, it’s like, what does someone need at the very beginning, not very much, they need governance documents, and they can be very basic, and they needed a trademark, like, you need to protect your brand. Because I think it’s sale will the most intangible values of brand, I mean, everything as a tangible how much money you’re making, what the product looks like. So, I just think, you can go overboard on trademark protection. But you don’t have to. And so somewhere, I work with my clients somewhere, it’s kind of in the middle, where it looks really good. We know that we have basic, we built a basic wall, but it’s not the wall that Trump thought he was going to build on the Mexican border, it’s not like, it doesn’t have to be that way. So it’s kind of all this, it’s kind of a balancing test of what is going to pass muster. What makes sense for the entrepreneur? Well, it’s not gonna cost a ton of money. And but at the same time, it just can’t be like, go to Legal Zoom wholesome documents, and go for it, that’s going to cause more problems as the company grows, and especially at the M&A table, they’re going to discount the value of the company, or walk away. I’ve heard that. I mean, the governance or the documents were so screwed up, that they started devaluing so much that no one could get the deal done.
Joe Valley 19:01
I’ve seen certain categories become an issue because of the lack of testing or documentation. Let’s say that somebody’s selling a product in the children’s category, and there needs to be testing down there. I’ve seen deals fall apart because they didn’t have what they needed there. Tell me more about the total TM program. Is it just trademark or is it just a little bit of everything.
Steven Weigler 19:26
That was my kind of my start to really make price predictability. Because again, clients don’t love being built by the hour. And I get uneasy when I’m talking to someone that’s gonna, you’re on the phone and you think that the clock is running. So total TM is our basic trademark program. That kind of what I did is I said, what do large law firms do to protect big brands, and what processes do they do? And why did they do it? And so a big part of that is like, you have to do a detailed search. And a lot of times entrepreneurs kind of cut that stuff out. So if you Google me file a trademark $395. Yeah, you can file a trademark, just like I can file corporate tax form. But to do it, right, you need to have a really detailed search to see, well, is Miller Coors, let’s say you started here, it’s called Melissa, and it’s going to butt up against Miller? Well, it might not show up, if you just look on the USPTO. But you’re gonna get a cease and desist letter from Miller. And so at that point, you want to know that long before you pile the trademark on because you’re building your brand over that the trademark process takes almost two years. So the kind of getting in the heads of the USPTO, you have to do a thorough search. That’s what large law firms do. That’s what we do. And so it’s a process. And we’ve had it, we have it at a low price point. Because we, between using technology, and systemizing, the process, we’re lower in price than the Amazon IP accelerator, and it’s much more thorough, and it’s quick. So it’s just kind of hands on, that was our first product, then we were doing internet. The next systemized product is on productized is it’s called an international IP plan. So we kind of take a look at all you have to understand the client like so for example, if you were selling, let’s use a beer example, if you were selling nonalcoholic beer, and you’re selling in the United States, Canada, and you have a unique logo, and you have a neat, unique way to explain it. Well, that’s a copyright and a trademark and two trademarks. At that point, you might have a formula that you want to protect. Anyway, we map that all out. And we do it in the most economical way to get that protection. And then we have that nice package that we had to broker like you at the M&A table. So it’s like, at that point, it’s like check off the box, like we’re not going to talk anymore about IP, because that’s taken care of, you’ve taken the time to put that together. But we’ve taken the time to put together systems. So it’s very low cost, very low cost per our clients to have that kind of packaging, just like if you went to a large law firm and you were Miller Coors, you would have the same kind of thing. But it would be pages and pages when the attorneys working on it..
Joe Valley 22:36
You mentioned taking your product internationally, when you’re filing a trademark in this situation, is it a separate trademark, a copyright for international versus US? It is. Do you file them both at the same time generally? Or do you not?
Steven Weigler 22:56
There’s some strategy involved but there’s something called the Madrid protocol where we can, within a certain amount of time after we file, we can file take that application and violet internationally. And so we kind of need to know, again from the client, well, what’s your plan? Like? What’s your supply chain coming in? So is it coming from China? To the United States? Is it stopping anywhere? Do you sell it? And then reverse? Are you selling in Europe? Are you selling in Canada? And then let’s look at the economics of all this. You don’t want to spend all your money on trademark. And so let’s look at what would be the most cost-effective? Is it using foreign console, which we have a huge that’s what I’ve been doing for the last many years is building up relationships with console in almost every country that any of my clients would want to sell in to do foreign filings? Or do we use metric or call. So it’s there’s a lot of strategy involved. And then the last factor is cost. So we try and between technology and understanding the client and systemizing, we’re able to really put it in a very quantifiable and easy to understand and very low for what it is cost on it. And so that’s really my project. And we’re plugging away at it. And so now we’re doing the same thing on a corporate, we’re really looking at strategies and systems to make sure that the client gets the best cost and best service.
Joe Valley 24:31
And is all of this geared towards protecting a client’s business and making sure that you’re not getting knocked off and being infringed upon by either somebody else in the same country and other country via China or somewhere else.
Steven Weigler 24:47
Yeah, I think that’s a good reason to seek trademark protection or any kind of IP protection. I think it’s a combination of what we just talked about, which is creating value, and being able to establish value at the M&A table. So I guess the point is, even if the client could care less about it, the acquirer does. Or even if they don’t care about it, they’re going to make sure that they act like they care about it, if you don’t have it, so they can lower the price. The second thing is, is yes, in especially in the e-commerce space, knockoffs are a huge issue. And even large corporations don’t have a bulletproof solution to police against knockoffs. The problem I’ve seen with a lot of my clients, which are much smaller than, say, Miller Coors, I just keep on using that as an example is that if they get knocked off, that’s a real big issue for the client, but their sales drop their ability to, it’s almost like you’ve lost a substantial amount of market share. And so to do the basic prophylaxis, which we’re talking, you know, a one to 2000 out of process at most is really like, that’s the ticket to entry to protect your brand. And if you can’t do that, or if you don’t think it’s important enough, well, you’re taking really substantial risks. To me, it’s the risk analysis.
Joe Valley 26:27
And having this whole package together is that helping clients that that are selling on Amazon get knocked off, and their accounts suspended. Somebody else can claim infringement, when you actually have all the trademarks and things of that nature? Are you is that just having this all buttoned up? Does it help it sort of defend yourself against Amazon, just making a decision to quickly suspending the account? And then you having to prove it, that you’re actually the owner of the brand?
Steven Weigler 26:57
Yeah, I mean, so Amazon, is arbitrary is sometimes it can seem that they have systems in place to acknowledge their legal responsibilities. One is if you send in a trademark registration, or a copyright registration, they have to realize, or they have to recognize that it’s per se evidence of ownership of the brand, or the, the item. So they don’t really have much choice in that if you show the registered trademark. If you don’t, I mean, really good luck, it’s going to be really, really difficult. So you have basically have to get a registered trademark, that’s, that’s the beginning. The question is, like, how many? And that’s my job to make sure you get as few as possible and still make them effective.
Joe Valley 27:52
Are you helping clients when they decide to eventually exit? Are you working with them on drafting a letter of intent and the asset purchase agreement of the stock sale acting as their counsel in that situation?
Steven Weigler 28:09
Yes, yes, I’m doing more and more of that on, it’s been fun because at the beginning, when my clients started, and now, after eight years, a lot of them are hitting the M&A table. And it’s been really fun to be a participant in that. I mean, sure, I could do charity work and go to work at a hospital or something. But this is, I can’t tell you the warmth in my heart that I see watching these companies grow. And it’s been really, really fun. I think the thing is an outside adviser that I see is, there’s an initial excitement, like, and you see the number, and they’re excited. And then they go through the process, and realize that what was written on that paper, what has to be negotiated, is not that easy. It’s easier said than done. And so, again, really have working with them. At the early stage. A lot of these clients have been with me for a long time, or we’ve had a relationship, that it’s nicely packaged, it makes it just that much easier. But there’s a lot of times Joe, there’s a lot to be negotiated. And there’s a lot in that LOI, which is in your experience, isn’t it usually coming from the acquire?
Joe Valley 29:32
Well, yes, in our situation, we always are looking for certain things that are going to be presented in the offer. Because our standard letter of intent has certain features in it. And we extract those features and if we’re gonna get 10 offers rather than present 10 Letters of Intent. We break it down into bullet points. This is the basic framework of the offer. Let’s put it all in the same format. So my seller can digest them equally, instead of trying to understand the legalese of 10 different letters of intent. So I don’t want people that are making offers to give me a full letter of intent. I want to know the purchase price, the terms, the closing date, the non-compete period, some basic things of that nature, the transition and training period, things of that nature, and then get it all the same. Here’s your 10 offers here, the basic point of all these offers, let’s shed some of them, let’s move the rest of the top and focus on the ones that you want to respond to and negotiate with. And oftentimes the surprising thing, Steve is not always the highest offer, right? More times, then surprise, I shouldn’t be surprised anymore. But it’s yeah, you know, Joe, I really, that it’s a big number, but the guy doesn’t seem trustworthy, and I don’t want to work with them. I don’t believe him. Let’s talk with this person over here and see if we can just get them up a little bit and work with them instead. Because it’s very personal, these exits. And it means a lot to people to get this close. And they’re almost there. And they need to get the rest of the way through. So the key points in a letter of intent are critical. But we’ve developed a strong letter of intent over the last 17 years now, something like that. But it’s usually the asset purchase. Due diligence can be tricky and painful sometimes depends on the parties involved. But the asset purchase agreement. If someone gets the wrong attorney, negotiating their asset purchase agreement, they could negotiate themselves right out of the deal. Asking for things that are completely and utterly unreasonable. In the worst possible situation is when a seller or a buyer has their mother, father, sister, aunt, uncle, cousin professor, be their legal counsel. I had once on where the seller, his father was an attorney. His mother was a professor at a law school. And his fiancée was in law school when he was in law school, the deal fell apart because they were completely unreasonable. This is a kid at 24 years old, getting nearly a million bucks while he’s in law school, and it completely fell apart because he was completely unreasonable. So you got to have a good counsel to have good logic and reason inside the asset purchase agreement, or the stock sale as well. Wouldn’t you say? You’ve done these?
Steven Weigler 32:39
Yeah, I mean, I, here’s, here’s what I’ve noticed in my transactions, is, I am aware that there’s an LOI being negotiated. I think that it’s an art, and it’s a business deal. And there’s an art to negotiating an LOI. A lot of my deals. I’ve worked with your firm on some deals, and I really kind of get the points are, there’s been times where I’ve drafted LOI, but I get involved at the time of Okay. Let’s take a look at what the LOI is, let’s see if there’s any potential roadblocks. Like, I think a big one Joe right now is transferred inventory. Like, when is the money going to transfer as opposed to the inventory, especially on an Amazon FBA because Amazon has the keys to the castle, they can transfer the accounts. But the parties have to close a deal. And so there’s a third party involved. And so there’s a trick to put money in escrow, etc. So usually, that’s a little sticky point. And then you kind of get the idea of who the parties are involved. Is it a big roll up company, because you look at attorneys look at it, like who’s the opposing party, even though you’re trying to close the deal? But is the opposing party a huge company and what’s your leverage? And what’s their closing process? And then I see an LOI and I know documents are coming. At that point, when the documents come, yes, the APA is like, tremendously going to be attorney driven. But the lens to look at is like, Is this really a barrier? Or is this something and what negotiating position do we have to be nine above a deal
Joe Valley 34:30
Well should be very little right? The negotiation, I don’t like it when attorneys and accountants come in trying to renegotiate the deal for no good reason other than they think they need to renegotiate the deal. In my view, what attorney should be doing is negotiating the finer points of the asset purchase agreement. The liabilities, things of that nature, not the value of the business that is done in the letter of intent. I’m right there with you. Yeah, we do a lot of coaching of our buyers, right? We represent the sellers, but unless we get the buyers mindset, right, the deal is not going to close, right, and getting a letter of intent only the first step in the process, you need to get all the way through to closing and have money transfer hands. So we really want to pick the right buyer, because we want to see that it closes, and the buyers have to behave. I was at rhodium weekend up on stage at one point and somebody asked question of what it takes to be a great buyer. How do you win a deal over somebody that is an all-cash buyer. And the answer was just don’t be an asshole, it’s pretty simple, be a good likable person, present a fair offer, think about what your seller wants, and how it’s going to make the most sense to them. Sometimes it’s just reassuring them that, the staff is going to transfer, you’re going to take care of his or her people and be a good human to them as they’ve been a good human to them. That’s often more important than an extra $50,000 and knowing that the deal is going to close, especially because you got a quote, you got to work with them after the sale during the training a transition period. So there’s a lot of counseling that goes on before we even sign a letter of intent. And then when you’ve in a situation with multiple offers, you get to choose your buyer. And then you’re sort of training them on how to behave. And hopefully educating them on what type of attorney to hire. And we refer people out to you we refer people out to others as well, because the attorney can make or break the deal. You bring in the wrong attorney like that kid’s father, and they ask for completely unfair, unreasonable things that no seller in the right mind is going to accept, which can be liability forever at stake in the deals falls apart. So good attorneys are critically important, Steve, that’s why you are on a call.
Steven Weigler 36:59
I think, how I drew my business experience, it’s like, there’s business terms, and there’s legal terms, business terms. That’s not like, I mean, of course, I’m gonna say, wow, that’s a really good amount of money, or are you sure that if I feel that way? I might opine.
Joe Valley 37:20
I’ll be on the call with the other party not to the other, I’ll be like, What the hell do you know about it’s the if you’re an attorney, get out of the way.
Steven Weigler 37:30
I should get out of the way. But when it comes to the legal terms, so for example, again, the areas I see, escrow is always something that like, the deals like 99% done, we’re ready to transfer the money and no one really ever thought. So the second thing I see a lot is…
Joe Valley 37:47
Let’s touch on that first of all, so here’s, here’s what should happen is that you sign the asset purchase agreement. Money goes into escrow. You transfer the assets, money is released from escrow. Not that complicated. I’m I missing anything?
Steven Weigler 38:03
No, but in the one I have right now, where I was retained after the deal, is it says the guy pays the money. And it says transfer all assets, then the parties are scared that the Amazon one except a listing transfer or the account transfer, and they’re in litigation.
Joe Valley 38:26
We’ve never had an Amazon account not to transfer, sometimes they’re hookups. Sometimes there’s no hookups. That’s the wrong terminology here. Hiccups, right. Sometimes there’s hiccups, but it always transfers.
Steven Weigler 38:38
Was deposed as an expert yesterday on this subject on the song. And then the other thing is representation that you guys could never care less about is representation and warranties.
Joe Valley 38:54
We care about those. Those are the things that can kill deals, the reps and warranties.
Steven Weigler 38:58
Right? And it becomes very legal, and I didn’t mean that you don’t care about it’s just like, it’s very legalese. And so, and a lot of times they’re demanding a lot of indemnity does the buyer that really, in good conscious, I would love to just sign off on the deal. But that’s something that we really have to negotiate, because you don’t want to close the deal as a seller, and the next thing, you know, be sued for a violation of a rubber warranty.
Joe Valley 39:30
Yep. It’s tricky. It gets really, really tricky there and having somebody that’s not an expert explain it. It’s really not a good idea. So I’m a big advocate for hiring due diligence firms doing due diligence and attorneys to negotiate the all of the aspects of deal reasonable, logical, entrepreneurial-driven attorneys like Steve Weigler.
Steven Weigler 39:55
One last thing I got all charged up about this is there’re sharks out there. And I can’t say it’s with any deal I’ve worked on with Quiet Light, but where it’s a good reason for the buyer to, I’m sorry, the seller to sell to buyers a shark. And they’re going to take any little thing and make it a big deal, which is, again, why due diligence and making sure you just either run it by an attorney or your business advisor and make sure it’s nicely packaged and answers the question. And everyone’s aware of any guy on your team have any potential issues. So we don’t deal with that later once it closes.
Joe Valley 40:38
100%. Right. That’s why our client interviews have gotten ridiculously long in some situations. Because we want to ask every question, the buyer is going to want to ask, get the answer in advance, present the full package after they sign a nondisclosure agreement. So that after you sign the letter of intent, and while they’re negotiating the s purchase agreement or their due diligence, they can’t say, but you didn’t tell me this? Oh, yes, we did. It’s right there in the written package that you’ve had access to forever. And we’ve got the six recorded phone calls, let’s go back, you call them sharks, we call them something else. And when they behave that way, they often wind up in a particular category in our CRM with warning letters on them. So that inevitably, every time we have a new client that’s selling a business, and they’ve got multiple offers, they just get one. They’re gonna say, well, what do you think of this buyer? What do you think of these buyers, and then we look in the CRM, what’s been said about them by the rest of the team and how they behaved and how they acted. And we convey that information. 99 times out of 100, that great people, great buyers, it’s that one shark, that’s a problem. It happens, and this is not unique to Quiet Light, every M&A company, whether it’s, you know, digital, or non-digital, the team, when they get an offer, or a situation, I see this goes out to twist or email, whatever, hey, guys got an offer from selling. So has anybody had any dealings with them. So that helped one person asked him 14 other advisors, their personal experience with this individual, if there’s no notes on them in the CRM, so you’ve got to be a good buyer. So we try to prevent all the negative stuff that you’re talking about as much as possible, by coaching and training buyers all along the way, having them get a good attorney like yourself. But inevitably, that one time out of 100, it’s still, and it might be more than one, it’s still really, really painful to think you’re going to get a certain number, and you’re a certain amount of time away from closing in somebody else is just being a shark as you’re calling them. Because that’s the way that they’ve grown up. And that’s the environment they’ve been in. They think that’s what they need to do. And they’re just not good people. And it causes a lot of angst and anxiety. And it’s your livelihood on the line and your family’s well-being. And they’re just being sharks. So it’s unfortunate, it just happens sometimes. But the better attorney with a starting with everything buttoned up from governance on to somebody that has your type of experience from both the entrepreneurial experience where you’ve, you’ve got that mindset. But then one that also deals with lots of asset purchase agreements and stock agreements all on it, I’ve seen you negotiate, Steve, you’re very soft spoken, you’re a sweet guy, but I’ve seen the tough side of you as well. So and sometimes it takes…
Steven Weigler 43:48
It’s my job, it’s not, I don’t take any pleasure out of it. Or sometimes I do anyway, um, and the flip side is Joe, it’s like, it’s so much easier to do a deal. When you’re doing most of that work. Sometimes if a client is coming to me, or they’ve grown, and they think, oh, you know, the or the buyer comes naturally or the seller comes naturally, whatever, and they don’t work through a quality organization that’s focused on this field, like you, that’s a lot of times where the meeting of the minds isn’t really there. And no matter how you raise the LOI, because there’s been no vetting, there’s been no due diligence on analysis, etc. And it’s not that it can’t be done. It’s like it’s just, it’s a lot more like for me to get my arms around.
Joe Valley 43:56
It can be done. And sometimes people get lucky and they find that right buyer on their own and work with a good attorney. And it works. Unfortunately, more often than not, it doesn’t work. But look, everybody’s going to choose their own path when they choose to exit. At the very least if you’re not going to work with an M&A firm, for the process to protect you against all the negative things we just talked about. Do two things right Steve? Buy the EXITpreneurs Playbooks, they understand the process and hire a good attorney like yourself. So they’re defended along the way. If you’re not going to have an M&A advisor, that’s okay, at least do those two things. So you’ve got some knowledge and experience, as opposed to just learning everything you can from one source. Any other thoughts on that before we wrap up?
Steven Weigler 45:24
I think you hit on the entrepreneur playbook. I really after I read that I kind of reversed engineered my thinking, which is you have to think with that big like, of course, it’s like, a lot of my clients are early stage, and they come to me, and I’m like, well, let’s get the basics done. And they really have no, like, you have to start with the end in mind. And so really, it’s reverse thinking about what usually, people want to exit at some point. They like to grow, entrepreneurs in general like to grow and at some point, see the fruits of their labor can be paid off. And so the I really think looking at the points in the entrepreneur playbook, and then working backwards on what you need business wise. And especially for me, what you need legally, at various stages is crucially important, you’re not going to get it all done at once. You don’t need to, even your financial books, you don’t need to have, you know, 18 different charts of accounts if you have one SKU but it just isn’t. But really thinking about what that x is going to look like what you’re going to need to achieve that accent, and then working on the legal framework to get there, you’re going to end up saving a ton of money as opposed to just stumbling along on the journey. So I’ve been referring to it constantly, in my own practice, to build my daps to get pinpointed for my shit.
Joe Valley 46:47
Steve, how do people find you? What’s the best way?
Steven Weigler 46:50
So I offer my philosophies I want to get to know everyone I have a professional relationship with and I don’t charge for initial consultations. I usually don’t even charge for phone calls for my clients that have I have a relationship with. It’s www.emergecounssel.com is our website. Mine is [email protected]. And everyone has my telephone. 1800 or 1888-emerge-0. And you can schedule for an initial consultation. I’d love to get to know all of you. I’ll be at Seller Summit if anyone’s there and have a bunch of copies of Joe’s book.
Joe Valley 47:39
Hey, and you can buy Steve’s book there a Seller Summit as well. Steve Chu, that is, and at emergecounsel.com there’s a great resource section as well folks, blogs, ebooks presentation video newsletter, check it all out. Steve, thanks for your time. I appreciate it.
Steven Weigler 47:54
Always good to see you Joe.
Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast, subject or guest, email us at [email protected]. Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.