Second in Command: Episode 449 - ExitDNA Founder, Mac Lackey

In Episode 449 of the Second in Command podcast, host Cameron Herold engages in an insightful conversation with Mac Lackey, the founder of ExitDNA. This episode delves into the nuances of preparing a business for a strategic exit, emphasizing the importance of valuing a company beyond traditional financial metrics and fostering a mindset geared towards long-term success.

1. Introduction to ExitDNA and Mac Lackey's Unique Perspective

Mac Lackey begins by sharing his unconventional approach to business exits. Unlike the typical focus on EBITDA multiples, Mac prioritizes a company's strategic value and its ability to solve real problems for buyers.

“I never sold a company on an EBITDA multiple or revenue multiple. And I didn't realize until I was kind of out of building my companies how unique that was.” (00:00)

He explains that ExitDNA helps entrepreneurs create options for future exits by crafting irresistible exit stories and identifying strategic buyers willing to pay premium prices for businesses that offer unique value.

2. Beyond Financial Metrics: Valuing Strategic Assets

Cameron Herold draws a parallel to a personal anecdote about purchasing property based on hidden assets, illustrating the concept of strategic value over mere financials.

“That's exactly. I mean I used to draw this real simple chart on a whiteboard and use that example. Where are you going to be in three years?” (08:17)

Mac elaborates that entrepreneurs often overlook the intrinsic value their businesses hold beyond the P&L statements. By highlighting unique assets like technology, intellectual property, or exclusive agreements, businesses can attract buyers willing to invest significantly more than traditional metrics would suggest.

3. Building a Sellable Business: Reducing Founder Dependency

A key theme of the discussion revolves around the importance of creating a business that operates independently of its founder. Mac emphasizes that a sellable business should not rely on the founder for daily operations or strategic decisions.

“Nobody wants to buy a business that the founder is in the critical path.” (12:08)

He shares his personal experience of selling a company while still being the largest shareholder and controlling the board, but ensuring the business could run seamlessly without his constant involvement. This autonomy not only increases the company's attractiveness to buyers but also enhances the founder's personal freedom.

4. Negotiating Exit Deals: Cash Guarantees and Flexibility

The conversation shifts to the intricacies of negotiating exit deals. Mac advocates for securing guaranteed cash as the most critical component of any deal, while remaining flexible on other terms like earnouts or performance guarantees.

“I think everything is negotiable. And the way I advise entrepreneurs within ExitDNA, I think again, just a great simple strategy is the most important number is guaranteed cash.” (09:17)

By prioritizing guaranteed cash, entrepreneurs can ensure financial security while allowing themselves to negotiate other aspects of the deal that can provide additional value without compromising their primary goals.

5. The ExitDNA Model: Mastermind, Education, and Community

Mac outlines the ExitDNA model as a blend of mastermind community, educational programs, and personalized coaching. This comprehensive approach equips entrepreneurs with the knowledge and strategies needed to maximize their business's exit potential.

“Our model brings people in. It is a mastermind. It's almost a, it's a, it's a year long program. ... It's not an expensive program. It Is a mindset change and then very tactical things that you can start doing immediately...” (14:40)

Participants benefit from shared experiences, real-world examples, and a supportive community that fosters growth and preparedness for eventual exits.

6. Real-World Success Stories and Lessons Learned

Throughout the episode, Mac shares compelling stories of entrepreneurs who successfully navigated their exit journeys by adopting ExitDNA's principles. Examples include entrepreneurs who walked away from unfavorable deals or those who strategically timed their exits to maximize value.

“He said, I built a company that didn't need me.” (10:42)

These narratives highlight the importance of preparation, resilience, and the ability to recognize when to pursue or decline opportunities based on the long-term vision for both the business and the founders' personal goals.

7. Final Advice and Identifying the Ideal ExitDNA Client

In the concluding segment, Mac provides guidance on determining the right time to sell and emphasizes the significance of having a clear exit strategy aligned with personal and professional objectives.

“I would say the entrepreneur that wants the option to exit in the next, let's call it three to five years... If they're just thinking I might want the option, then I almost guarantee you ExitDNA has off the charts ROI.” (23:58)

He identifies the ideal clients for ExitDNA as entrepreneurs who are contemplating an exit within a few years and are seeking to enhance their business's attractiveness without committing to an immediate sale.

Key Takeaways

• Strategic Valuation: Focus on the unique value proposition of the business rather than just financial multiples.

• Operational Independence: Build a company that operates smoothly without the founder's constant involvement to increase sellability.

• Negotiation Priorities: Secure guaranteed cash in exit deals while remaining flexible on other terms to optimize the overall value.

• Comprehensive Preparation: Engage in mastermind communities and educational programs to equip oneself with the necessary strategies for a successful exit.

• Timely Decision-Making: Recognize the importance of seizing opportunities and being prepared to walk away if the terms do not align with long-term goals.

Quotes:

• “I never sold a company on an EBITDA multiple or revenue multiple. And I didn't realize until I was kind of out of building my companies how unique that was.” – Mac Lackey (00:00)

• “Nobody wants to buy a business that the founder is in the critical path.” – Mac Lackey (12:08)

• “I think everything is negotiable. And the way I advise entrepreneurs within ExitDNA... guaranteed cash.” – Mac Lackey (09:17)

• “If they're just thinking I might want the option, then I almost guarantee you ExitDNA has off the charts ROI.” – Mac Lackey (23:58)

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