Ep. 465 - STS Capital Partners Chairman and Founder, Rob Follows

Summary

Podcast Summary: Second in Command: The Chief Behind the Chief with Cameron Herold

Episode: Ep. 465 - STS Capital Partners Chairman and Founder, Rob Follows
Release Date: April 10, 2025
Host: Cameron Herold
Guest: Rob Follows, Chairman and Founder of STS Capital Partners

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Introduction

In Episode 465 of the "Second in Command" podcast, host Cameron Herold welcomes Rob Follows, the Chairman and Founder of STS Capital Partners. The episode delves into Rob's extensive experience in mergers and acquisitions (M&A), his passion for maximizing business exits, and his adventurous spirit that includes climbing all seven summits, including Everest.

Notable Quote:
Cameron Herold [02:56]: "Our guest today is Rob Follows, the chairman and founder of STS Capital. Rob is a dealmaker, a visionary, and an extreme adventurer who's on a mission to help entrepreneurial business owners turn their success into significance."

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Rob Follows and STS Capital Partners

Rob Follows shares the genesis of STS Capital Partners, a firm dedicated to assisting entrepreneurs and family-owned businesses in maximizing the value of their exits. Rob recounts his own experience of selling his marketing services business at 27 times EBITDA and the subsequent realization that strategic representation could significantly enhance deal outcomes.

Notable Quote:
Rob Follows [05:12]: "That is just an outrageous multiple. But that's because it has nothing to do with the multiples."

STS Capital Partners specializes in advising mid to large-market businesses, typically ranging from $50 million to $5 billion in enterprise value. The firm exclusively focuses on selling to strategic buyers—companies that can integrate and amplify the value of the business being sold.

Notable Quote:
Rob Follows [10:36]: "Our entire range is $50 million to $5 billion. We love to be in the $100 million to $1 billion range, which is kind of the core."

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Strategic Buyers vs. Private Equity

A significant portion of the discussion centers around the distinction between strategic buyers and private equity (PE) firms. Rob emphasizes that strategic buyers often perceive additional value in a business beyond standard EBITDA multiples because they can integrate the acquisition into their existing operations to drive substantial growth and profitability.

Notable Quote:
Rob Follows [07:04]: "Strategic buyer's world, what will they make. How much profit will they make? How much sales will it drive? How much, bottom line will it drive?"

Rob criticizes the traditional PE-focused approach, arguing that it often fails to align interests with entrepreneurs. Instead, STS Capital Partners aims to ensure that entrepreneurs receive the maximum possible value by targeting buyers who recognize and can leverage hidden assets and synergies.

Notable Quote:
Rob Follows [18:32]: "It's a big conflict, Cameron, against the interests of entrepreneurs and families."

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Maximizing Business Value: The "Rembrandt in the Attic" Analogy

Rob introduces the "Rembrandt in the Attic" analogy to illustrate how strategic buyers can uncover hidden value in a business that sellers might overlook. Just as discovering a valuable painting in an attic can dramatically increase a property's worth, identifying unique assets or intellectual property can significantly boost a company's valuation in the eyes of a strategic buyer.

Notable Quote:
Rob Follows [08:19]: "And you see the Rembrandts in the attic that it comes with. And that analogy really applies to strategic buyers."

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Common Mistakes Sellers Make

Rob outlines several pitfalls that entrepreneurs and business owners often encounter when attempting to sell their companies. A primary mistake is allowing the day-to-day operations to falter during the sale process, which can detract from the company’s intrinsic value. Additionally, overreliance on biased advisors who prioritize their commissions over the seller's best interests can lead to suboptimal outcomes.

Notable Quote:
Rob Follows [15:35]: "Sellers who stop the work they're doing in driving their business value up... do themselves a disservice."

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The Importance of Independent Advisors

Highlighting the conflicts of interest prevalent in traditional investment banks and PE firms, Rob advocates for working with independent, sell-side advisors like STS Capital Partners. These advisors are committed to the seller's goals rather than their own financial gains, ensuring that entrepreneurs receive unbiased guidance aimed at maximizing their business’s value.

Notable Quote:
Rob Follows [18:59]: "Recognizing that and finding somebody that will really work for you as the entrepreneur or the family business owner is critical."

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Real-World Examples

Rob shares compelling case studies to illustrate the impact of strategic advisory:

1. Heating and Air Conditioning Group: Initially offered $256 million, the entrepreneurs delayed closing, seeking $300 million. The deal was subsequently rejected after external factors caused the business to decline. Eventually, STS Capital Partners secured a $250 million offer four years later.

2. Vancouver Company: A client with a $117 million offer saw his business collapse after walking away, only to struggle with offers thereafter.

These examples underscore the importance of decisive action and trusting expert advice during the selling process.

Notable Quote:
Rob Follows [21:38]: "We're headed for the closing date... And they sent the private jet down to pick the guys up... They wanted $300 million before they were going to accept the deal."

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Balancing Ambition and Prudence: Stretch Goals

Beyond business, Rob discusses his passion for adventure, having climbed the seven summits, including Everest. He encourages entrepreneurs to set ambitious "stretch goals" both in their personal and professional lives, fostering a mindset that embraces challenges and continuous growth.

Notable Quote:
Rob Follows [24:14]: "If an ordinary guy like me from the suburbs can become one of the first amateur couples to climb the Seven Summits, you know, what is your Everest?"

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Advice for Entrepreneurs: When to Walk Away or Seal the Deal

Rob advises entrepreneurs to clearly define their required and preferred outcomes before entering negotiations. This clarity helps in making informed decisions about whether to accept an offer or walk away in pursuit of better terms. He emphasizes the importance of having predetermined satisfactions to avoid emotional decision-making that can jeopardize long-term success.

Notable Quote:
Rob Follows [20:14]: "You want to go into the process with your required versus your preferred outcomes."

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Conclusion

The episode wraps up with Rob highlighting his dual role as a business advisor and an inspirational adventurer. He encourages listeners to pursue both professional excellence and personal ambitions, embodying a holistic approach to success.

Notable Quote:
Rob Follows [24:45]: "Setting big life planning goals and living your life to the fullest."

Cameron Herold thanks Rob for his insights, emphasizing the value he brings to entrepreneurs seeking to maximize their business exits.

Final Note:
Listeners are encouraged to like, share, and subscribe to the podcast for more valuable insights from top COOs and industry leaders.

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Key Takeaways:

• Strategic Alignment: Choosing the right buyers who can unlock hidden value is crucial for maximizing business exits.
• Independent Advisory: Working with unbiased, independent advisors ensures that the seller's interests are prioritized.
• Continuous Value Creation: Sellers must maintain their business operations and growth initiatives during the sale process.
• Clear Objectives: Defining required and preferred outcomes before negotiations helps in making informed decisions.
• Ambitious Goals: Setting and pursuing stretch goals fosters a mindset of growth and resilience.

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Join the Conversation:

For more best practices and insights from industry-leading COOs, visit COOAlliance.com.

Transcript

[Cameron Herold]

Hey, it's Cameron Herald, the host of the Second in Command podcast. Before we dive in, there's something you need to know. If you're a coo, VP Operations, or you're in any role where you're the second in command to the CEO, the COO alliance is the place for you. If you're the integrator to the visionary, you're going to want to join us. The COO alliance is the world's leading community for the second in command. We've had over 500 members like you join from 17 countries to grow their skills, connections and confidence. You'll get the tools, friendships and a 10x guarantee to ensure that you get your money's worth. Go to cooalliance.com to learn more and see if you qualify. You can even book a free call with our team to ask questions. Now, let's jump into this week's episode.

[Rob Follows]

I think that the industry has done a really poor job of sharing with. In the interest of the benefit of your listeners here, Cameron. So. So first of all, the industry has done a poor job of aligning interests.

[Unknown]

The old Lehman formula was a reduced.

[Rob Follows]

Percentage and that's what a lot of people might remember. If you had $100 million deal, it would be a lower percentage in selling that deal if you got to 300 million.

[Unknown]

Welcome to the Second in Command podcast produced by the COO alliance and brought to you by its founder, Cameron Herold. In the second in command podcast, we talk to top COOs who share the insights, strategies and tactics that made him the Chief behind the Chief. And now, here's your host, Cameron Herald.

[Cameron Herold]

Our guest today is Rob Follows, the chairman and founder of STS Capital. Rob is a dealmaker, a visionary and an extreme adventurer who's on a mission to help entrepreneurial business owners turn their success into significance. As the founder and chairman of STS, he's led or been involved in over a thousand MA transactions, driving over $100 billion in deal value. His passion is helping founders maximize their exits, creating life changing wealth and billions in new philanthropic capital along the way. Beyond business, Rob's a leader in strategic philanthropy and a lifelong adventurer. He's one of the few to have climbed all seven summits, including Everest. He's also the founding chairman of Ultravest Charitable Services, which empowers charities to scale their impact. With decades of experience, a global network and a track record of creating extraordinary exits, Rob, also a YPO member for the last 20 years, is guiding entrepreneurs. They're trusting him to move on within their next big purpose. And rerecord that last sentence. With decades of experience and a global ypo network and a track record of creating extraordinary exits, Rob is the guide that entrepreneurs trust when it's time to sell and move on to their next big purpose.

[Rob Follows]

So Rob follows.

[Unknown]

Nice to see you again, Cameron.

[Rob Follows]

It's always awesome to be with you and your team.

[Unknown]

You and I have been friends now for crazy 16 years. We met at the YPO Global Leadership Conference in Barcelona back I think it was 2009, maybe a little later, maybe 2010ish. But you've been a great friend. You helped me move to Barbados at one point or spent time at your homes in, in the US or sorry, in, in Canada up in Whistler and in Barbados and spent time with your family and your kids. You're an amazing human being, but you also run an incredible business. I mean, STS Capital has been a partner of ours for years and I've referred deals to you over the last 1112 years. Can you tell us what STS is?

[Rob Follows]

You know, first of all, I want to say what an honor it is to be with you here and what inspiration you are, Cameron Harold. And so thank you. And STS Capital Partners is a firm that I started, Cameron, when I sold my business for 27 times EBITDA way back when I was selling my marketing services business. I'd grown and developed at that point in time, free trade was coming along and it was made really clear to me that if we didn't sell the business by the person leading the negotiations. He said, rob, if you don't sell your business, you're going to get, you're going to get absolutely creamed by the people that are financing billions of inventory in your industry.

[Unknown]

So I tried to find somebody to represent us.

[Rob Follows]

I tried to find somebody, Cameron, that really understood what we did, which was a sophisticated fulfillment operation. And I couldn't find somebody that really.

[Unknown]

Was on the side of the entrepreneur.

[Rob Follows]

I couldn't find somebody that really would, would, would really work to leverage what we had to maximize value. And so we did our best. We got, you know, a fabulous outcome. It was 27 times EBITDA. But two years later, when I was sitting in the headquarters of Merits in St. Louis, Missouri, who'd bought us, and someone asked if I had seen my file, I asked for the file and Cameron, they would have paid a hundred times EBITDA for my business.

[Unknown]

A hundred times.

[Rob Follows]

And that is just an outrageous multiple. But that's because it has nothing to do with the multiples.

[Unknown]

If you are an entrepreneur and you have a business that a strategic buyer could integrate.

[Rob Follows]

We learned the hard way. And make many, many times what you're making, hundreds of times what you're making. Then the elasticity of the price on the exit becomes extreme.

[Unknown]

That is to say, it can be a huge multiple.

[Rob Follows]

And that's really one of the motives. That was what caused me to launch what we call STS Capital Partners, which helps entrepreneurs and helps families maximize value. Cameron, when they decide to sell their business or decide it's time to sell.

[Unknown]

Their business, in layman's terms, part of what you talked about in maximizing that strategic value is the buyers often have some reasons for acquiring your company that the entrepreneur may not see. And that's what gives you the additional leverage on multiples versus selling as a percentage of or a multiple of revenue or multiple of profit, they see some other value. Can you speak to that?

[Rob Follows]

Yeah, exactly, Cameron. So I will compliment the private equity industry. They've done a fabulous job of convincing entrepreneurs and families that their businesses are a multiple of ebitda.

[Unknown]

And you hear it now in different industries.

[Rob Follows]

You know, my industry is 5, 7 times EBITDA or 10 or 12 times. And in fact, Cameron, that's not the value itself. The value is if you're the, if.

[Unknown]

You'Re the strategic buyer here and you're the seller here, the value is really when you integrate your business into that.

[Rob Follows]

Strategic buyer's world, what will they make.

[Unknown]

With your business integrated into theirs?

[Rob Follows]

How much profit will they make?

[Unknown]

How much sales will it drive?

[Rob Follows]

How much, bottom line will it drive?

[Unknown]

How much is that worth to them integrated into their business?

[Rob Follows]

Now, that's not an easy thing to understand, but when you've been a strategic buyer, which all of our senior partners have been strategic buyers, and when you understand what they have to go through.

[Unknown]

To really socialize it and sell it.

[Rob Follows]

Internally and then put their own career.

[Unknown]

On the line as a risk because it's very, very public.

[Rob Follows]

When you buy a company, when you understand how all of that works and you help them with all of that as the advisor, they will share Cameron.

[Unknown]

With you what they're looking to make. And that becomes the negotiation point.

[Rob Follows]

And that's how instead of taking it.

[Unknown]

To private equity and local financial buyers.

[Rob Follows]

Which is easy, taking it to global.

[Unknown]

Strategic buyers, the strategics being the ones.

[Rob Follows]

That will integrate will drive very significant value. There's more to that, but that's the summary.

[Unknown]

So there's, there's, I guess two parts to that. One is you guys at STS are really good at identifying strategic buyers. Who already know the value in these potential companies that are up for sale. And then second, I know that you work really hard with these entrepreneurial companies to actually package them up for sale so that they. It's kind of like the. I always talk about Tiffany's jewelry. You know, Tiffany's jewelry is nice. It's fine, but it's not that great. There's. There's much better jewelry elsewhere, but they put it in the blue box with the white ribbon, and it's packaged up so nicely, and people go, oh, my gosh, look how great it is. So there's a little bit on both sides of this equation, isn't there? Finding the strategic buyer, but also packaging up the selling company. Can you talk about that a lot?

Absolutely.

[Rob Follows]

So we love the analogy, Cameron, of Rembrandt's in the attic. And so the old analogy, if your listeners aren't familiar with it, is your spouse comes home and says, you know, the house I've been talking to you about on Main Street, I really decided I want to buy that.

[Unknown]

And you're like, well, wait a minute.

[Rob Follows]

It'S $5 million more than all the others. It's listed at, at, at 10 million. All the others are at 5 million on the street.

[Unknown]

Can we please look at one that's.

[Rob Follows]

You know, 5 million? And, and so you're convinced to go and look at the house. And when you do, the real estate.

[Unknown]

Agent says, I know this is priced higher than all the other houses on.

[Rob Follows]

The street, but I think there's some. It comes with everything in the house. And one thing that, that we're not.

[Unknown]

Sure what the value is, is, is a lot.

[Rob Follows]

Attic in the top of the house is full of all kinds of fabulous, interesting antiques. And so you go up to look at it, you throw a canvas back, and you see a big painting with.

[Unknown]

An R that looks like, with a T at the end, looks like a Rembrandt. You're thinking, this couldn't be.

[Rob Follows]

So you call a Christie's guy, and.

[Unknown]

The guy comes in, he goes, these are Rembrandts. These are actual Rembrandts. And so as the buyer there, you realize that you will pay double what anybody else is paying because you've got more value than the seller sees in.

[Rob Follows]

That in that house. You see the Rembrandts in the attic that it comes with.

[Unknown]

And that analogy really applies to strategic buyers. So if a buyer, a buyer is strategic, just to put it really simply, when they can make a lot more money than you currently do owning your business.

[Rob Follows]

So let's say you have intellectual property.

[Unknown]

And you're saying this is just how I operate my business and I'm using.

[Rob Follows]

This system and it's a really unique system and let's say a buyer could, could, could Cameron, extend that across their whole organization globally. And let's say there might be a thousand implementations for that times all of their customers and all of those thousand implementations you can start to imagine how valuable buying that business with that intellectual property would be for the buyer.

[Unknown]

The job when you're selling your business.

[Rob Follows]

Is to understand what are those Rembrandts in your attic?

[Unknown]

And it's hard to see your own.

[Rob Follows]

You need a professional to help you usually. And what will that be worth to a strategic buyer?

[Unknown]

And there's a whole other conversation I.

[Rob Follows]

Can extend on and getting on, getting on the radar of the strategics well.

[Unknown]

In advance so that they can help.

[Rob Follows]

Inform that for you.

[Unknown]

And I think this, this kind of level of understanding and expertise that you and your team have globally and you've got a pretty good global team is why you found a good niche for your client types. Right? You don't work with the $5 million company who's looking to exit. What's your sweet spot? What's kind of the, the zone that you look for?

[Rob Follows]

Our entire range. Yeah. Thank you, Cameron.

[Unknown]

We're mid market so our entire range.

[Rob Follows]

Is 50 million to 5 billion. We are doing, we love to be in the hundred million to billion dollar range, which is kind of the core. And the reason we can't do 20 million or $10 million deals or $5 million deals is because of our promise.

[Unknown]

Our brand promise is to sell to strategics. And if you're a strategic buyer, usually unless it's a SaaS business or an.

[Rob Follows]

Intellectual property driven business that could plug in and leverage significantly.

[Unknown]

Normally a business that size will not.

[Rob Follows]

Move the needle for a strategic buyer and so we only act for the sellers. But the way we get the maximum value is by getting them to move the needle for the strategic buyers. And that's why we need some substance and size. But I'd like to say something if I could about the billion dollar and up businesses.

[Unknown]

Sorry, Cameron.

Yeah, and it's the hundred because I'd written down 50 to 500. So it's good to know it's 50 to 5 billion.

[Rob Follows]

Yes.

[Unknown]

Is 100 million to 1 billion. Is that revenue or is that what.

[Rob Follows]

An exit would be?

[Unknown]

It's enterprise value.

[Rob Follows]

And so enterprise value revenue is a nice guideline but if it's in SaaS of course, SaaS is much more valuable if it has intellectual property that could be leveraged. If it has a really unique circumstance, like someone in your hometown had an inland port, and to the person that.

[Unknown]

Made a $5 billion bid on the.

[Rob Follows]

Port they were gonna build out, having that inland port was worth uniquely to them, many, many, many times. One of the strategic buyers, they ended up paying 20 times, so 20 times more on the purchase price than one of the other strategic buyers because they had that leverage. And so that's the unique value driver you want to find with a strategic buyer and not. And not which will not be offered by private equity or financial buyers.

[Unknown]

Why, why do so many companies, when they're looking to sell, focus on the wrong thing? I feel like when companies are looking to sell, all they care about is what percentage is the M and a firm going to take. And that's kind of almost irrelevant if you get the right. It's kind of like if you can sell the company for a hundred million versus fifty million, who cares if they're paying five and a half percent versus three? The delta is like, do they just not understand the math? Are they too myopic?

[Rob Follows]

Are they. I, I think that the industry has done a really poor job of sharing with.

[Cameron Herold]

If you haven't read my newest book, the Second in Command, go grab a copy right now on Amazon and you'll learn how to unleash the power of a coo. And if you already are a coo, you'll learn how to really build an incredible partnership with your CEO.

[Rob Follows]

So let me do this in the interest of the benefit of your listeners here, Cameron. So first of all, the industry has.

[Unknown]

Done a poor job of aligning interests. The old Lehman formula was a reduced.

[Rob Follows]

Percentage, and that's what a lot of people might remember. If you had $100 million deal, it would be a lower percentage in selling that deal if you got to 300 million. And so it was a disincentive for.

[Unknown]

The hard work that goes into leveraging that value up.

[Rob Follows]

And so that's reversed in the last 20 years. And so now there, there are more.

[Unknown]

And more advisors that are building a hockey stick curve of value where you're.

[Rob Follows]

Starting here with the agreed value that say private equity will pay and then moving that up as you, as you both in percentages as the value goes up. So it's a win win. And if that's explained clearly to entrepreneurs and families, and it's not about the.

[Unknown]

Investment bank or in our case the.

[Rob Follows]

Sell side advisor making more money, it's about them creating more value in the.

[Unknown]

Work that they're driving, staying up all.

[Rob Follows]

Night, working to drive, leveraging their personal relationships, their focus to drive those competitors.

[Unknown]

Up and up and up and up in price.

[Rob Follows]

And it gets uncomfortable and it gets really stressful. But you can double the price in a circumstance where you're really leveraging and so incenting the team. It's an incentive. Cameron, the way I see it and the way I know many dogs, but many haven't had a chance to have that explained to them that, that if you're at a baseline, you know, you leave it at x percent. Say it's, it's 3% at the baseline but if you can double that or triple that, then then you want to.

[Unknown]

Double or triple perhaps the percentages.

[Rob Follows]

And so that everybody's aligned in maximization of value. And as you say, looking at it as, as the net proceeds is the really the best way to consider it as a seller.

[Unknown]

I wish, I wish that real estate agents that worked on behalf of the sellers operated the same way because they, they really don't. They just want to get the house sol commission and they don't really care. So you've got a seller and they're going to start working with sts. What are the biggest things that the seller does that gets in their own way? Where do they end up hurting or sabotaging a deal?

[Rob Follows]

Well, sellers who, and we had one today, sellers who stop the work they're doing in driving their business value up.

[Unknown]

And driving their EBITDA up and driving.

[Rob Follows]

Their new product design and their research up that take their foot off of that pedal and come and get very, very, very involved in the process or doing themselves a disservice. There are 10 or 15 or probably 20 ways. I recently did a summary of 10 different ways of maximizing value in selling your business. All of those are really the advisor's work. And if you divide up what the advisor does, what STS would do or another advisor would do to help an entrepreneur or a family business increase their value in the eyes of a strategic.

[Unknown]

It relies on the client continuing to do the work of strengthening the leadership.

[Rob Follows]

Team of understanding where the products are.

[Unknown]

Going to be strategic for the strategic.

[Rob Follows]

Buyers, of understanding how their weaknesses can be shored up of, of preparing the business to be assessed and to be audited by strategic buyers and to practice the management presentations to ensure that incentives.

[Unknown]

Are in place for all of their leaders.

[Rob Follows]

I mean the list goes on and on. That's where the client should be focused.

[Unknown]

In driving that business.

[Rob Follows]

Value up and not in the process.

[Unknown]

If they get involved in the process.

[Rob Follows]

Then which they have the prerogative of doing, I mean, they're the client, but they don't do themselves the best service. The other thing that entrepreneurs often do is buy into the Wall street education. The Wall street education is to service Wall street leaders. All the analysts there look up to the private equity leaders, the owners of large private equity firms and hedge fund owners and they say, look, those guys, I'm in restaurants with them, they're looking across saying, look, there's Kravitz, he's worth X billions of dollars. And it's all about how do I pay less and get more for something. It's all about. It's driven by ingratiating themselves.

[Unknown]

And when these large I banks are.

[Rob Follows]

Working in family and entrepreneurial businesses, they're looking out for themselves first. And that's a really big problem.

[Unknown]

And so if families and entrepreneurs would.

[Rob Follows]

Recognize that independent, fully independent sell side.

[Unknown]

Advisors or advisors that can help them.

[Rob Follows]

Are really the ones that they want to be working with, I think that would be helpful. There's a misunderstanding that going with private.

[Unknown]

Equity and going with traditional I banks.

[Rob Follows]

Like, you know, I mean, we can.

[Unknown]

Name them all right, Goldman Sachs and.

[Rob Follows]

JP Morgan and Morgan Stanley and, and I just spoke to somebody last night.

[Unknown]

Who had 10 of them in working.

[Rob Follows]

With him and I said to him, Raj was his name.

[Unknown]

Who did you choose ultimately?

[Rob Follows]

He said, bank of America. You know, I said, well, why would that be? He said, rob, in my opinion, I'm quoting somebody now in Singapore last night.

[Unknown]

These are all the same.

[Rob Follows]

And you know, I let the private.

[Unknown]

Equity guy drive the process because he'd.

[Rob Follows]

Invested a little bit. And I now have learned that my.

[Unknown]

Interests were not being looked after.

[Rob Follows]

I'm not putting down private equity.

[Unknown]

And I banks work that they do for themselves. I'm just calling out that.

[Rob Follows]

It's a big conflict, Cameron, against the.

[Unknown]

Interests of entrepreneurs and families.

[Rob Follows]

And so recognizing that and finding somebody that will really work for you as the entrepreneur or the family business owner is critical.

[Unknown]

And you only have one large transaction or two or three in your lives. These firms are doing many every day. And so they have a large lever.

[Rob Follows]

With advisors and I banks and so just want to share.

[Unknown]

Independence is critical.

I want you to speak to kind of what happens at the 11th hour. You know, I've talked to a couple of CEOs that I've coached and one in particular, Ben Kirschner, who had a deal for I'm not going to disclose it but a mid eight level deal that he walked away from literally the night before signing and then ended up getting a much better deal about nine months later. And then I've heard of other people that have walked away from significant money. One walked away from a nine figure deal and he's never ever seen a $7 million offer or seven figure offer since. Can you speak to that kind of moving target that entrepreneurs have? And how do you know when it is right to walk away? And how do you know when it's right just to get the deal done?

That's a great question.

[Rob Follows]

I use the example of, I use the example of. So the answer to that question and I would encourage all entrepreneurs do this because it's a very dangerous area to equivocate in. And so you want to be clear on the outcome that will satisfy your goals. And so as an entrepreneur being, and.

[Unknown]

I'll use this example of this case.

[Rob Follows]

With two of our clients, as an entrepreneur, as a family business owner, private business owner, you want to go into the process with your required versus your preferred outcomes.

[Unknown]

So what are your required outcomes and list them down.

[Rob Follows]

What are those required outcomes? And there's a required outcome of X.

[Unknown]

Amount, whether it's $500 million or 50.

[Rob Follows]

Million or billion or 100 million, whatever that number is, that's a required outcome. And, and, and a preferred outcome is.

[Unknown]

Much higher than that.

[Rob Follows]

But when, when push comes to shove.

[Unknown]

And you know that that number will meet all of your requirements and you.

[Rob Follows]

Thought about it in the calm in.

[Unknown]

Present state of mind before you get.

[Rob Follows]

Into the negotiations and that number is exceeded then our strongest advantage to accept the deal and because things can fall apart brutally and I'll use this example, we had a heating and air conditioning group that's rolled up and rolled up and rolled up to a multi billion dollar group now but it started and I won't use their name but it started, it was in let's say close to Philadelphia. And when the buyer who is from Detroit, they wanted $50 million for the business, they said $50 million is in except but the stretch goal was $100 million. We went through a process and we got them an offer for $256 million. 256.

[Unknown]

Okay, take it and run.

[Rob Follows]

Well, wait till you hear what happens.

[Unknown]

So the buyer is trying to be.

[Rob Follows]

Nice because it's a hard airport to get to that they are in Michigan.

[Unknown]

And so they send the corporate jet.

[Rob Follows]

Down to pick up the two entrepreneurs.

[Unknown]

And the deal's done, the deal's all agreed.

[Rob Follows]

To the due diligence has started. We're all agreeing.

[Unknown]

We're headed for the closing date. The closing date was in 40 days.

[Rob Follows]

It was all.

[Unknown]

And they sent the private jet down to pick the guys up to bring.

[Rob Follows]

Them in to meet everyone. And we'd done our work, so. And I was out of, out of the country at that point.

[Unknown]

And they said, look, the private jet's coming down.

[Rob Follows]

We're going to jump on it and go up there and visit. And we coached them on, you know.

[Unknown]

What not to say and just to.

[Rob Follows]

To, to let them fall more in love with it.

[Unknown]

They had never been on a private jet before.

[Rob Follows]

And when that private jet landed and.

[Unknown]

Picked them up and brought them up, by the time they got to Detroit, they'd convinced themselves if a, If a.

[Rob Follows]

Company could afford a private jet and a $256 million valuation, they wanted 300 million before they were going to accept the deal.

[Unknown]

Oh, no.

[Rob Follows]

And the buyer.

[Unknown]

The buyer said no. And, and, and because they'd already.

[Rob Follows]

I can explain the reasons why.

[Unknown]

Once you've socialized it all internally, if it's earlier on, you can get a higher price potentially. But once it's all socialized and cement and everybody's agreed and they've got the.

[Rob Follows]

Capital and they're ready to close, you can't adjust the price like that. They saw it as a retrade and rejected it wholesomely. They came back to a letter on their desks the next day rejecting the deal. And they were in the heating and air conditioning business. It was the hottest Christmas.

[Unknown]

People were playing golf at Christmas out.

[Rob Follows]

In New York that year on the golf courses.

[Unknown]

There was no snow, and so they didn't sell any furnaces.

[Rob Follows]

Their business tanked.

[Unknown]

And it took us four years to.

[Rob Follows]

Get a $250 million offer at a 30% higher valuation in four years of their life. And so that's an example where I.

[Unknown]

I saw one in Vancouver where he had $117 million offer, and six months later he was out of business because you said, no, I've got to ask you two more questions before we wrap up. And they're related, but they're not related. I think you set a world record, As I understood, 67 times EBITDA was, or 67 times revenue. Some crazy valuation you got for a company, but that's not the hardest thing you've ever done. You've been to the top of Mount Everest and you've been to the top of the tallest mountain on every single continent. Is that true?

[Rob Follows]

That is True. Yes. And in fact, we became one of.

[Unknown]

The first amateur couples to climb the Seven Summits.

[Rob Follows]

And so I'm writing a book about.

[Unknown]

That now, what is yous Everest?

[Rob Follows]

And encouraging people to set really big stretch goals. If an ordinary guy like me from the suburbs can become one of the first amateur couples to climb the Seven Summits, you know, what is your Everest? What's your next big stretch goal?

[Unknown]

Yeah, the suburbs. You were in Montreal, weren't you? Is that where you were?

[Rob Follows]

I was born in Montreal. Yes. In Montreal. Yeah.

[Unknown]

All right, so Montreal, Canada, where my youngest son goes to school. There he just ran his first sub four hour marathon. But you also do you also do speaking. I think there's groups of entrepreneurs. Yprs other groups of entrepreneurs hire you to speak. Is that right?

[Rob Follows]

Yes, I do. I do two speeches together.

[Unknown]

The keynote on what is your Everest?

[Rob Follows]

Setting big life planning goals and living your life to the fullest. I do the seven Summits that we.

[Unknown]

If I have the hour, I do.

[Rob Follows]

The seven Summits and then the seven life planning processes and then a breakout in the afternoon. And the breakout in the afternoon is on 10 Ways of Maximizing value in the sale of your business.

[Unknown]

Awesome. Well, Rob follows the chairman and founder of STS Capital Partners. Thanks so much for sharing with us. Really appreciate your time today.

Thank you.

[Rob Follows]

Thank you, Cameron. You're deeply appreciated. Thank you.

[Unknown]

You've been listening to Second In Command, brought to you by COO alliance founder, Cameron Herald. If you enjoyed this episode, please be sure to like, share and subscribe to us on Apple Podcasts, Spotify and our other podcast streaming platforms. For more best practices from industry leading COOs, visit COOAlliance.com.