Hal Denbar, an Entrepreneurs' Organization (EO) member in Austin, is a founding partner of National Pool Partners, the nation's largest multi-regional pool service company. As an entrepreneur who sold his company successfully with the help of situational mentorship, we asked Hal to share his journey:
As a successful entrepreneur, is mentorship still beneficial? In short, yes--unless you've learned and experienced all there is to know about every possible business situation that may arise.
Traditional mentoring is incredibly valuable to professionals looking to grow and master overall business skills. However, the past year has made it clear that a more provisional form of mentoring may also hold value.
That's what situational mentorship is all about: It's a short-term, high-focus twist on traditional mentoring in which a mentee approaches a mentor who has experience around a specific challenge they're facing for guidance, inspiration, and support.
In 2020, I received an unexpected offer to buy my company. I wasn't looking to sell, but the offer was viable and backed by private equity. The situation deserved serious consideration but was out of my league. I asked around my network to find out who had completed a successful business sale. One name came up several times: Steve Schaffer, a fellow EO Austin member. When I asked if he'd guide me through this opportunity, he enthusiastically agreed. There were two critical areas where Steve provided enormous value: tactical and big picture.
From a tactical perspective, Steve helped me dig into my company's financials. The numbers were the numbers and didn't change, but Steve showed me exactly what a private equity firm looks for as far as how those numbers are presented.
In the bigger picture, Steve's guidance increased my comfort level with the idea of selling. We walked through what he had done when he sold his company, which eliminated my fear of the unknown and made me far more comfortable considering this unexpected offer.
Steve's experience opened my eyes to new possibilities. He suggested that my taking a job with the new company formed after the sale might be an ideal scenario for long-term wealth creation and experience building. As an entrepreneur in my late thirties, it was very appealing to think of adding executive experience in a private equity venture--which could open new possibilities in the future.
All said, here are three critical lessons Steve shared as I prepped my company for the sale:
Get Your Books in Order.
Make sure the financials you share with potential buyers are spotless. You can never take back what you share. If someone asks about revenue or net income, answer: "Let me pull that together for you," or give them a range. Steve suggested I get my financials more presentable. I started the business after college and had introduced different types of revenue, renamed revenue categories, but hadn't adjusted for that in Quickbooks so it flowed from start to present. We reorganized my Chart of Accounts so the potential buyer could clearly see earnings before interest, taxes, depreciation, and amortization (EBITDA).
Seek professional legal input early.
Steve advised me to get an experienced lawyer at the beginning of the process--even before negotiating the non-disclosure agreement (NDA) and certainly before signing any letter of intent. The sooner you have professional legal input, the more likely the deal will close.
Get your partner(s) on the same page.
Your business partner needs to agree on "your number" for the sale, and also your walk-away number. People can get greedy. But if all partners agree on your number, you can sell the business and be happy with the result.
It's amazing what an experienced mentor can offer in a few calls. The main thing to remember is that the mentee will get the most out of the arrangement if they know the exact challenge they're looking to solve and remain open to advice from a more experienced mentor.