Pete Vera, Exit Algorithms: Welcome to Exit Algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations, and prepare your business for a high-value exit. I'm your host, Pete Vera, and today I'm joined by Carter Looney, Principal Advisor at Meritage Partners. Carter has spent over 25 years as a business owner, MA advisor, turnaround operator, helping business owners unlock hidden enterprise value and exit on their terms. Carter, excited to have you here. Welcome to the podcast.
Carter Looney: Hey Pete, thanks for having me.
Pete Vera, Exit Algorithms: Yeah, k you're ⁓ I can't wait to get into this. Your your background is fits perfectly with the show. I think we're gonna give some really good really good information to listeners today. Do you mind starting off? Can you share a bit about your background on business journey? How you know, how you ended up at ⁓ Meritage Partners?
Carter Looney: Sure, sure. so it's a I've around for a while, so it's a long story, but I'll I'll try to just go do couple highlights. First of all, most important for me is about where I come from. I grew up in rural Arizona. Okay, so there's a there's there's a redneck in me somewhere, right? Yeah. But yeah, after after after I Went to college. got lucky enough to be chosen to by IBM to go into an accelerator that they had. And always wanted to work for myself. And so I up in and building a business around financial services digitalization. So you think about this. It wasn't called that in the 90s, right? So but but that's what we did. Okay, financial services today too still isn't digitalized as much as they need to be, but that's ⁓ another subject. But we we built an organization around that, or or my part of it. it was actually a subsidiary. They they've just brought entrepreneurs in and then they let them do their own profit center and then they could grow it from there. And after I don't know, three and a half, four years, ⁓ I I 15 of my best people. and did an MBI a at a competitor. The company in Germany was really small, only had like a couple people, the the competitor, the Belgian company. And I brought my people there and bought basically what did a management buy-in, management buyout of that of that thing. So we bought into it and then we bought the whole thing out two years later. then we grew up to a couple hundred people and in 2010. after that, I went more to my true calling. Okay, well, I mean, I just like growing companies, right? ⁓ I really that. I like helping people, and I like growing companies. And so I going to different owners. Lots of business they make a decent business. And they get to a plateau. And and the and the limit, their bottleneck is almost always their own time. But they have a hard time getting off that plateau. And that's sort of how I how I approach things. found out very quickly that people don't want consultants, especially business owners. ⁓ so I looked at it at focusing little bit more on what they want.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: And most of them, or a lot of the ones that I found, they wanted growth financing, right? So I went about that a different way. And I said, okay, I can help you get growth financing, right? And that could be debt, it could also be equity. Yeah. but in order to get financed, you need to be financeable, right? And I found a couple of brothers that had been had a company, wonderful company. They've been around for 20 years. They founded the company themselves. It was an automotive supplier. were doing about, I don't know, two hundred two and a half million in EBITDA. I came in there, we partnered together, I got part of the equity for doing this, and we grew the company over four years. We grew it to about 13.2 million in EBITDA. From the two and a half, that's a good deal. yeah, right. And then we wanted to keep growing it, we brought in a ⁓ private equity and it actually came down to a family office or a private equity. We ended up going with this private equity because it wasn't a typical PE company, was a r older and ⁓ anyways, we
Pete Vera, Exit Algorithms: Yeah.
Carter Looney: know, I mean we went from an EV of 18 at the beginning to 92 at the at the end, right? So to what and then we brought the private equity in. Yeah. So that was significant for everybody, most especially the brothers, but it was also for me not a bad thing, right? And
Pete Vera, Exit Algorithms: Wow. Got it.
Carter Looney: yeah, and it and that was great. And that, I just started looking for for what I call a project, right? Then the next the next one, and I did the next, the next, and in in 2021, a group a group of ⁓ portfolio managers in the distress asset space ⁓ came to me and actually they're to me by a by a a lawyer that I know and They were looking to create their own fund. These guys were really experts in what they did. They worked for very, very large hedge funds and really good at portfolio management, but they were not not very good at like building a business, right? So I came and did that. I I raised 250 million for them and to get them started. And that was six years later, became a ⁓ a partner in the ⁓ in the
Pete Vera, Exit Algorithms: Mm.
Carter Looney: still call myself an operating partner even though I don't I don't operate the the business. I mean they do that most of the stuff. I I just do more strategic things than they're if all. Yeah. but about three years ago I said, well I wanna I wanna I see a real opportunity in this silver tsunami thing of busin business owners and ⁓
Pete Vera, Exit Algorithms: Mm-hmm.
Carter Looney: A li like myself because I I went through all those things myself. Yeah, I still go through Yeah. And ⁓ wanted flow in the United States. So I ⁓ I came to the US and started a a with with several different people to build an ecosystem ⁓ around around the business owner, about around making a business owner get it first of all, get as successful as much money as he could for his company and and be keeping as much as he could, right? So it's it's sort of an ecosystem of everything from of course exit planning, preparing a company for exit, but it could also be preparing it to be a platform to grow more, right? I mean yeah it it it's it's a very similar thing. It just depends on what he wants to achieve. Yeah.
Pete Vera, Exit Algorithms: Mm-hmm.
Carter Looney: Or she could be also, w woman yeah. But yeah, depends on what they want to achieve. And then got planning, because anybody that makes than half a million a year should be planning their taxes and should be be there's plenty of legal ways to avoid most all of your taxes. And when you go through an exit, there are plenty of legal ways to pay almost no taxes, right? So there's that.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: So so you got that, your tax planning, you got your ⁓ and A, and and you got your wealth management, right? That whole thing around the business owner. Yeah? Okay. so that's how I got to Meritage, right? Because Found another entrepreneur that wanted to partner with, and he wanted to partner with me, Brian, Brian Franco, great guy, founded a wonderful company. It's built it for 20 years. It's it's one of the one of the top ⁓ lower middle market MA firms in the United States. Okay, and and fits very well our vision of doing a lot more and also ⁓ investing in companies right? So that's that's how I got to her top.
Pete Vera, Exit Algorithms: Yeah. that's awesome. Yeah, a wealth of experience and you know, a real insider perspective too. Having had exits yourself, now you're able to to help other businesses do it too. I'm curious, you know, having had multiple a number of exits, maybe if you could go back to probably your first your first exit, ⁓ before you, you know, you've had all this experience. What did you were there any lessons you took away from from that experience that you know, you wish or things you wish you would have done or known before you before you exited?
Carter Looney: Yeah, yeah, sure. Things I wish I would have known. Okay, some of them some of them were actually most importantly is being organized. Right? I I'm an entrepreneur and or organized is not always the best that strong point. So you gotta find people that are organized and work with them. Yeah. A very very smart man told me very early in my career. I asked him, he he's a he's a billionaire now. And and I I asked him, Hey, hey, Michael, what's the secret of your success? Right? And he's and he's like, I find people that could do things better than me and I hire them. Okay. So yeah, and it's sort of a little bit of tongue-in-cheek, but but there's a lot of fact on it. It's jumping over your own shadow and and saying, Okay, I'm not the best this, so I need to find somebody that's good at it. I need to understand what's done because yeah, I I I I run the company. But doing that, also things that. I mean, or or that that it's more important that that a founder should build a company, get a company with the with the beginning, the end in mind, right? And the end in mind is that. His his or her role should be focused on creating an environment where it's where where the employees can excel, where his partners, his employees, where they can excel. That that should be that's his major function in the business, right? I mean surely early on you gotta do stuff yourself. That's that's how it is. But you need to get to a point where you can choose what you do. Yeah. And the major portion of what you do is you know like work on the company and not in the company kind of concept. Yeah. Michael, Michael Garber stuff, right?
Pete Vera, Exit Algorithms: Yeah. Yeah. awesome. yeah, and and you you you help business owners unlock potentially millions value w they go to sell. Do you mind sharing maybe some of the you know common pockets of of hidden value that that business owners miss?
Carter Looney: Okay, so so so there's so that this is gonna sound like really weird, but but you know, I mean other than the obvious okay, for hit we'll talk about value, right? So so first of all, we need to understand what drives value from from the standpoint of an a investor, right? Somebody that's gonna buy your company, most as most especially, but also for you as as a business owner. Okay, and and what drives drives value more than anything else that have a predictable recurring cash flow. And that doesn't mean you have to be a SASS company, right? means that you have to have systems in place that create that create that. It means that the pit the the that it's not dependent on anybody, it's not dependent on any, and that means the owner, and it means customers, right? And it means that it has systems for doing things. Yeah, at the very least, it has a strategy, it has planning, has reporting controlling. Right? Transparency is what I call it. Right? Okay, that that makes just having transparency, it's one of the highest ROI things you could do a company, is transparency. other words, where am I gonna go and am I actually getting there? And how am I gonna get it better? Right? Okay. that starts with yeah, it starts with planning, but it also starts with financial reporting. Yeah. It's a pain in the butt for all of us. Yeah, but but something that you can set up very easily have it automatically done. I mean ⁓ QuickBooks, QuickBooks you can set up in QuickBooks. It's not like it's rocket science. Yeah. ⁓ There's plenty people out there that can set it up for you.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Yeah, and then and and then have that always. It means that you got an organized system. That's worth that's worth really a lot of money. That that's that's one thing. the other thing is is really a a value driver that that ⁓ I would say that most owners miss that buyers see is pricing. Okay, believe it or not, most buyers.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Most businesses, especially if they've been around for a while, their pricing is imperfect, is a is a a nice way to say it. Yeah. They could charge a lot more for their business in ⁓ for what they do in a in a lot of different ways. They could be a little bit more creative how they how they earn their money. Yeah. especially, especially if you look at the the last five years with all the inflation and everything.
Pete Vera, Exit Algorithms: Yeah.
Carter Looney: There's lots of businesses that haven't raised prices. Yeah. Or only very minimal. Especially again, I I tend to my specialty is B2B businesses. it's a little bit different with B2C. ⁓ might have a better idea where the pricing is in B2C, but in B2B businesses, it's almost always something an owner overlooks. And it has to do with with some of our psychology, right? We we we feel like we're a little too dependent on some of our big customers. ⁓ ⁓ I can't do that. They've got so much more more leverage against me. And they, you know, well, the fact of the matter, if you've been delivering something to them for for five or ten years, they're probably not gonna want to change. Right? And usually you to you you you can talk with when you bid new deals or when you re up stuff, there's places where you go and you talk to to purchasing and you say, Look, this is where it's at. And usually, especially ⁓ You know, especially in the world of AI, you can make a pretty good idea what the market is really charging. Right? And then you go to and say, look, this is what the market's charging. Okay. I I I I would need to, I'm I'm right here and I would need to do this, but I'll tell you what, I can give you a 10% discount, yeah, and we're still moving along good. Right? Things like that. Yeah. ⁓
Pete Vera, Exit Algorithms: Mm. Yeah.
Carter Looney: Th those are things that I don't know. I I maybe I'm overdoing here on pricing, but this is one of the things that you don't hear people that are preparing companies for to exit, you don't hear about things like that. Right? You mean you hear about don't be dependent on the person, don't be yeah, but but this is really something that can make a huge difference. The other thing is is that most owners miss for an exit is they miss timing. Okay, market timing ⁓ is
Pete Vera, Exit Algorithms: Mm.
Carter Looney: It makes up makes about depending on the thing can make up thir up to 30% difference in the price you earn for your company. So what does that mean? That means if I can set my company up where I have the opposition optionality to sell now in three years, then I have a choice and I can get a much better price for my company. Yeah. And and and lastly, taxes, I mean, we all likes to pay taxes, but
Pete Vera, Exit Algorithms: Mm. Yeah.
Carter Looney: But to sit down a professional and go through what you can do to save it and put the things in place to save it is something that most of us just don't do. Right? We think, ⁓ we'll do it when we get ready to exit. Believe ⁓ it it it's that's ⁓ too late. Yeah.
Pete Vera, Exit Algorithms: Yeah. Yeah. How far in advance would you say is ideal for a business looking looking to exit?
Carter Looney: I mean two to three years is really good. but be honest with you, I think that I think that they I they set it up that way today. There's no reason not to start today. Yeah? Okay, it's not like you have to do it all at once. I mean if you get ready to sell, then you have to do it all at once. And what's gonna happen is you you're gonna have omega stress. you you're not gonna have time to focus on keeping your business running like it should. Okay. And and you're not gonna get things done. That that's what's gonna and that's gonna cost you real money. So better is to say, okay, here's a strategy, here's the plan, and I do one thing at a time, right? Maybe maybe I start and sit down with with this whole this whole reporting thing, right? That would be one thing, yeah, that you do. Okay, and then and then I sit down with somebody and I maybe even I a coach if that's what I need to do. Right? Okay, there's nothing wrong with I mean, I mean, the the most productive people in the world, they all have coaches. And I'm not just talking about businessmen. Every single super they wouldn't be where they were if they didn't if they have have coaches. And I don't just mean coach of the team. I mean actually trainers or coaches that help them be better at what they do. Yeah? And and so there's nothing wrong with that. Huh?
Pete Vera, Exit Algorithms: Definitely. great, great advice. Really good, really good nuggets there. yeah, and you mentioned earlier, you know, beginning with the the end in mind, I I like that concept a lot. When when you decided to go with a private equity group instead of a family office, ⁓ that that exit and you mentioned earlier, what would what went behind that? You know, and and maybe what is could you offer some advice for for business owners in that situation?
Carter Looney: Well actually in that case it was real specific to the to the situation, but in general there's there's a concept that's much more prevalent in Europe for I guess because of the culture than it is in United States. And that is that there's a lot of families that have sold a business or have built a business and they buy more of Yeah. And and then they just They're like a they buy their own little industrial, like a private, private equity, right? They don't they don't use anybody else's money. you know, they may leverage things to do a buy or something like that. That's normal, but but they they do it they do it to keep things long term, right? So so so that's i ⁓ may be that ⁓ fact in most cases, probably a private equity. If if you're attractive for them, you can get a higher price, but it costs you in other things. Okay? It's going to cost you in the legity legacy thing. I mean, private equity has been changing though, right? So so over the and this is why we did the choice that we did is because this was a private equity that was actually quite a quite ahead of its time. They actually started from the very beginning as a minority They never bought majorities to begin with. And so were actually responsible for for a lot of multi-billion dollar companies by investing them when they were making 20 million, right? Or earning I mean 20 million revenue, right? And and and so was one of the reasons we went with them, even though it was a private equity, is because they had had this idea of stewardship.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Right. And that's usually the difference that I see between especially PE in the US. We're a lot more PE, there's a very clear model, right? It's a three plus one plus one. They only have so much time. Sorry, I'm so they get money, right? So they raise money from a from a limited partner, and that and that partner gives it to them for a certain amount of time. Right. let's say five years or let ⁓ and maybe maximal seven maximum seven years right so they have to have a very short they have about two years to invest the money maybe three yeah and then and then they've got to then they've got to really go through a quick process to to value ⁓ To to add value with the least amount of right? Okay. So they at dealing with the business completely differently. Yeah. Because of how the market has changed over, especially the last, I would almost say 10 years, but probably started that long ago, but especially the last five years, there's
Pete Vera, Exit Algorithms: Mm.
Carter Looney: They're coming to the point where they realize hmm, maybe it's better to partner with the the owner, let them roll over twenty percent or twenty-five or even forty percent, and and grow it with them. There's even ⁓ in there in markets, especially markets that are super highly competitive, ⁓ right? So so market for wealth managers right now is like super highly competitive. In other words, to buy ⁓ They're paying people are paying There's reasons for it, but people are paying like like 10 to 12 times times the bit of for this, right? and really, really competitive. So there's a couple of groups, actually, more and more people are coming. Well, well, they say, Well, I don't need to buy the whole whole R RAA. I'll I'll buy 20% ⁓ of it. with the right, find the right owners. That's important. And say these owners they can scale. If they're if given the right help, they can scale. Okay, and they'll only buy 20%, maybe 20-25% of the of the company, give access to all the stuff in their group, right? Which is financing. Help them, for example, buy other IRA, smaller ones, right?
Pete Vera, Exit Algorithms: Mm-hmm. Mm-hmm.
Carter Looney: And this this is this is more advanced in that particular niche, but it's going into other niches the same way. And and it's it and it's more profitable for for the ⁓ the PE, nonetheless, this with the constraints of their LPs, they have to change that model to do that. But but they're doing that too, yeah. And that's where most family offices are different, or or a family office-backed private equity, right?
Pete Vera, Exit Algorithms: Mm-hmm. Got it. So knowing knowing that buyer and what their intentions are and their strategies, you say that is the kind of the takeaway for for business owners considering a an exit?
Carter Looney: Yeah, yeah, sure. I mean I mean the take the takeaway is understanding first of all understanding what you want to achieve. I always sit down when I sit down with people and talk to ⁓ whether it's whether I want to buy ⁓ or I want to help them grow or whatever it is I want to do with them, right? Together with them. Yeah. I say, where do you want to be for five years? Okay, and how can I help you get there? Right? So so they also have to do the same thing. In other words, what are where's the end? Yeah, start with the end of my where do I want to. What do I want to achieve? Not what do I want? What do I want to achieve? Yeah, it it's a different thing, right? it and then say, who are the type of investors that are best fit to that? Because otherwise they just think, I'll just go to private equity and I'll do that. Or I'll go to some broker that just wants to sell my company and he'll find the best person, right? And and what he does is they end up wasting a lot of time ⁓ first of all, they're not as prepared as they should be. Okay. And secondly, because they have have have have some as as a po ⁓ as to a boutique or an investment banking boutique, right? Yeah, which is which is what we are, right? They don't help them get ready. Right. They they they have probably fifty companies and they just w whatever one comes up that they can sell, right? They do it more on a mass end. And sorry I don't want to talk bad about brokers, but I I have my personal personal pet peeves. Yeah.
Pete Vera, Exit Algorithms: Yeah. There's there's a wide wide range in in quality of brokers, right.
Carter Looney: Exactly. There's some of them are great. Yeah. They understand how things work and they're willing to tell business owners from the very beginning, look, this isn't gonna sell, right? You need to do these things if you want to be ready to sell. You're not ready to sell yet. Okay. Instead they torture themselves and the business owner and and they still won't sell.
Pete Vera, Exit Algorithms: Mm-hmm.
Carter Looney: Yeah.
Pete Vera, Exit Algorithms: Yeah, doing the diligence enough to to know, you know, the what the right price is also in in the market for that business and and when they when they should sell.
Carter Looney: Yeah, yeah, exactly, exactly.
Pete Vera, Exit Algorithms: So yeah, and you mentioned taxes I'd I'd love if you could expound on that a little bit. Maybe without going deep on on tax code, ⁓ what are maybe some high level shifts an owner should should make what ⁓ or or think about when when wanting to their wealth, especially when they go to sell their business.
Carter Looney: Yeah. Yeah, yeah. Okay, so so So, I mean the the first most important thing about protecting your wealth is starting some plan, right? Getting some advice, starting some plan, right? And and to honest with you, your your CPA is probably not the person you should talk to about this. Okay, I always think it's weird because because they're supposed to be tax professionals, but they're not tax savings professionals. They're they're tax preparation professionals. ⁓ Okay. I don't want to overdo it. There's a lot of good CPAs that that also their business as more, but in a lot of cases it's not that that way at all. But they should sit down with somebody that I mean already already once you start earning a decent amount of money every year, you can avoid taxes. It doesn't mean that you're gonna have the straight cash flow, but over time this will be a huge thing for you by by making certain types of investments, right? A as a simple thing. Yeah. you can also protect things by For example, if you have a company that has that has real estate by separating those two, put the real estate in a trust. There's all kinds of things you can do, right? But you shouldn't just do it half hoursly, you should do it with a plan, right? The the same the the second most important thing is they've made a decision to exit, but haven't ⁓ gone to market. This is like real important. Okay. Again, I'm I'm not a lawyer, but critical point is is when you get to an LOI. Definitely, you've got an LOI, the IRS not gonna let you do some structure to save to save it, even if you haven't sold the company yet. Right? Yeah, I I mean that's just being safe. I'm not gonna say that it's not legal unless I've got to talk to your lawyer or tax lawyer about that, but that's my experience. So you need to start once you say, once you've made the decision in your heart, hey, I want to sell, or I've already got my company already to sell. Yeah, as far as I've got a things, I I don't have to be there every day, things are going great. then you need to say, Okay, when I see that I'm maybe two years out. Two or three years, but say two years out, set you can set your company up to where you basically don't pay taxes for selling the company, right? It's it's gotta be
Pete Vera, Exit Algorithms: Mm.
Carter Looney: There's a there's a big variation in there, right? The higher value in the company, the less taxes you'll pay, right? That's almost positive. Yeah. Okay. Because you can afford do more expensive things to set it up, but it will just make make your make your tax go down to like 1% or something, right? Or in some cases, zero. yeah, a there's a lot of things, but. But sitting down with a professional, and maybe early on, maybe now, once as part of getting yourself ready, part of your normal yearly tax planning, when you know, hey, you know how much you're gonna make every year, or you have an idea, right? Then then you should sit down with a tax professional and and talk to them about what's possible. And and there's there's also a wide range of tax professionals. There's ones that focus on stuff, and there's ones that focus on a lot bigger stuff. Like I I I I talked to a a planner yesterday and they don't anything less than 50 right if if if the if the amount of gain if the amount of capital gain is less than 50 million they're not interested right but but i also know plenty that start at 350 000 for your yearly income right
Pete Vera, Exit Algorithms: Mm.
Carter Looney: And and that's so you gotta of find the right people and then and you may not be one size fits all, but that's a really important thing because it saves you a lot of money. And yeah, it's gonna cost you something to do that, but it's gonna cost you probably eight percent maximum, six to eight percent of what you save to do that. But you know, look, look, even if you even if you only you even have a ten million capital gain, ⁓ say only, but even if you have have only a ten million capital gain, right? I mean six percent is nothing. Even if even though it's you know six hundred thousand dollars, right? Yeah, okay, I'm gonna pay the at the end, I'm gonna pay them six hundred thousand dollars. But but I've saved I I've I've saved like eight million. Yeah? Right? ⁓
Pete Vera, Exit Algorithms: Mm. Right. Yeah. N net, it's definitely worth it. Yeah.
Carter Looney: And and and so many owners underestimate that and they don't have the patience to go through that, right? Plus because they hear from the you know, you hear ten billion wealth managers that tell you all kinds of stuff you can do and blah blah blah. You gotta take the time to research that and talk to somebody that that you can you can trust with ⁓ about that. Yeah.
Pete Vera, Exit Algorithms: Yeah. ⁓ great advice. ⁓ yeah, and and I know you have some experience with turnarounds. I'd love if you if ⁓ maybe you could share some lessons from you know fixing struggling companies that apply to a totally healthy business just wanting to grow faster or or be able to sell for or hire multiple.
Carter Looney: Yeah. Okay, okay. turnarounds Turnarounds, I mean it depends on what you define them as, but but turnarounds are usually companies that are in trouble. if you don't do anything, they're going to die. Okay, that's how I define it. and doing it, have to do make really hard decisions. Okay, and at least for me, they were always hard because it deals with people, right? It deals with people. ⁓ and and it and it deals and and the people could be the owner, it could be the could course the employees. it's also your suppliers, etc etc. so so so I that's I'm hawing around about this. It's just not something I like doing. I've done it more than one time. In fact I spent I spent twenty seventeen and twenty eighteen. I I was I was wanting to invest in a in a German doing this kind of program that I do with with the scale ⁓ scaling a German IT company they had a US subsidiary, and that US subsidiary the the management and it really put them in a bind and it had to be restructured. And that's part of the reason why the management left is because they left it in a desolate state. And I spent two years over Detroit doing this. And it just you know makes me grind my teeth at night when I think about it. But again, then let's not talk that about the negative things. The point of it is that make makes you have it forces you to have extreme discipline, right?
Pete Vera, Exit Algorithms: Mm. Mm.
Carter Looney: Okay, you gotta be very clearly again this thing this is where this whole idea of planning and all that comes into things, right? You you you set up your cash flow planning, a 13-week rolling rolling cash flow planning, right? In other words, three months, yeah, but I always call it 13-week, I don't know I have why I have that in my head, but it's it's a rolling. cash cash flow planning. Okay. And and that's that's what you're what you need to make sure that you don't die. I always say, you know profits like bread and and and and and Cash flows like like air, right? I can I can live for weeks without bread, ⁓ I can leave live three minutes without air. So there we go, right? So, where does my focus need to be? Certainly, long term is making sure I have enough bread to eat, but but short term, most importantly, I've got to worry about making sure I have enough air to breathe, right? And that's how it is in a company, especially a turnaround company. So
Pete Vera, Exit Algorithms: Mm.
Carter Looney: company that's that's good and wants to grow, if they set up this simple system, yeah, it it doesn't always have to be a 13 week cash flow, but it should you probably should be. You should at you should at least have your financial manager doing that. Yeah. but of saying okay this are my plans, this is what I look like, this is what I'm gonna go for and and then setting up a system to do that. Yeah. that's like Will help prevent you ever getting in the situation where suddenly you don't have the liquidity that you need. Yeah?
Pete Vera, Exit Algorithms: Yeah. Great. Yeah, great advice.
Carter Looney: That's that's probably the be the best thing. I mean, I could go into all kinds of other things where I mean growth companies they have to do that, right? If you want to grow your company, you you have to do that. It's another one of those basic things that that that you do. It's one of those base most basic, most important systems that you can have. Yeah.
Pete Vera, Exit Algorithms: Love it. Yeah, an another major theme of this show i is AI technology. I I'm curious, how are you implementing AI today, per personally, professionally? How do you see it if impacting the industries you're in?
Carter Looney: wow. So so I mean, you know, I mean ⁓ everybody, it's a it it's it I I think you know it's a there's a huge huge thing. Mostly I I AI to help me. There's a couple of things. First of all, I use it to help me better organize how I approach problem solving. Okay. That's that's actually it helps me. Take a much more organized approach, especially for problems that I haven't dealt with before. Okay, because I mean everybody, if you've done it three or four times, then you got a plan, right? It's like when I go in to analyze a company and sit down with the owner, I got a plan. I know what I want to ask him, I know what I want to talk to him about, I know what I even know the feelings I want to understand that he has, right? Okay, but but there's a lot of things where it's different, it's new, you you gotta do that. And AI will help you. instead of telling you the answers, it will ask you the right questions. That's how I use it. Right? I ask it, I get it to answer. I as I say, if I want to do this, I want to achieve this, walk me through this. that can set it up to do that, right? And it will ask me the hard questions that I need to add, and it will make me think about it because it's too easy. I mean, again, there's plenty of things that you can use generative AI for that are super. For example, if I want a picture of something.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Then I go then I go to Genesis and I ask it to build a picture like I want. Okay? That's a simple thing, right? But that's not using my brain. That's that's what that's using a tool. And that's and that's good, right? But but and and it's too easy with AI. A lot of people just use it to generate tasks and all that other kind of stuff. I I do that too, but not but more importantly. But that doesn't add the huge value. It saves me some time, maybe, right? Okay. But telling talking to it about how to solve a problem, how how to method methodically solve the problem that I'm working on, it. The number two thing is I do a lot of research with it. Okay, because it can do can do a lot of stuff and you gotta check it, right? You you can even have it check itself, which is a still a a step above what most people do, but you also gotta check it, right? ⁓ you can get a huge amount of research done in a short amount of time. So if I want to better understand certain problems in an industry, like I'm talking to say I'm talking to a I'm I'm talking to a ⁓ company right now that's ⁓ dermatology and and they have four or five clinics and they're gonna do a roll up and they want me to organize the roll the the the the roll up. Yeah in other words the infrastructure for the roll up, right? Manage the project, blah blah blah. That's all good. I understand how to do that, no problem. But there are certain specific things in the dermatology industry that I don't know that well, right? So I use that research to do that. And then I also don't just say, well, tell me about dermatology. I also say, okay, I want to solve this problem. Okay? Show me your methodology for solving it. Help me. Ask me the questions that I need to understand in order to get there. Things like that. Helps super bunch. And and as far as as as where I see it going.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: I would say would say that it has the potential to hugely improve the efficiency of companies. All right. And it means that we can do much more. Right? Yeah. It make easier for us as business owners to earn money. Okay. It will increase our profit etc. etc. That that's where I see it going.
Pete Vera, Exit Algorithms: Mm. Yeah. Love it. Wow. Yeah. Love your insight, Carter. Glad I glad I asked that question. yeah, been an amazing conversation today. just last last question. If you could leave listeners with just one practical takeaway. You're giving a lot of advice already, but if you had to give pick one thing to maximize their exit value, what would it be?
Carter Looney: Yeah, sure. Mm-hmm. I would say I would say run your business like you're gonna sell it tomorrow. Set it up that way. Okay. You're gonna get your highest highest ROI by getting your books in order, set up a monthly reporting, and make sure that it's not just a monthly reporting, gets make sure it gets organized somewhere so that when somebody asks you, you can do it so that you're in a habit of answering, of of at least being able to look up what certain things are when somebody asks you a question. Yeah? That that would be would that would be is from my standpoint the the the I I would like to I I think you can get the most value out of that for the money, right? 'Cause it's a real low investment and it ⁓ brings a lot of things and it will also bring you things your knowledge because it it'll help you think about other things. Yeah.
Pete Vera, Exit Algorithms: Yeah, you give some great advice, sir. Thank you so much for your time today, Carter. where's the best place Yeah. Sorry, yeah. W ⁓ where's the best place listeners can find you and and learn more ⁓ about your you know, your work and all your good advice that you give.
Carter Looney: Yeah, thank thank you. Go ahead. Yeah, the the easiest place to ⁓ to reach me is on LinkedIn. I mean I can give you guys an email address. the the but but the easiest way is is on LinkedIn. Even even on LinkedIn I have an email address there that goes directly to me. Yeah? Should probably shouldn't tell everybody that, but that's it. And and and you want to book an appointment, you can go LinkedIn, click book an appointment, and book an appointment with me. That's what you want to do. Yeah? And and Look, when you call me, I'm not sitting there thinking, okay, the clock's ticking and that. I I love helping entrepreneurs. All right. And if even if somebody just wants to call me and say, Carter, I've been thinking about this, ⁓ blah blah blah blah. What do you think about it? Just because I'll tell you what, most people they know the answer to their question, but they need to talk it through. Feel free. Yeah? Okay. Don't flood me with a bunch of stuff. ⁓ I don't like is people trying to sell me things all the time. if somebody needs some help, I I'll do my best to help them. Yeah?
Pete Vera, Exit Algorithms: Awesome. I'll leave that in the show notes. Thank you so much for your time today, Carter. It's great conversation.
Carter Looney: Sir. Thank you. ⁓ care.
Carter Looney: Hey Pete, thanks for having me.
Pete Vera, Exit Algorithms: Yeah, k you're ⁓ I can't wait to get into this. Your your background is fits perfectly with the show. I think we're gonna give some really good really good information to listeners today. Do you mind starting off? Can you share a bit about your background on business journey? How you know, how you ended up at ⁓ Meritage Partners?
Carter Looney: Sure, sure. so it's a I've around for a while, so it's a long story, but I'll I'll try to just go do couple highlights. First of all, most important for me is about where I come from. I grew up in rural Arizona. Okay, so there's a there's there's a redneck in me somewhere, right? Yeah. But yeah, after after after I Went to college. got lucky enough to be chosen to by IBM to go into an accelerator that they had. And always wanted to work for myself. And so I up in and building a business around financial services digitalization. So you think about this. It wasn't called that in the 90s, right? So but but that's what we did. Okay, financial services today too still isn't digitalized as much as they need to be, but that's ⁓ another subject. But we we built an organization around that, or or my part of it. it was actually a subsidiary. They they've just brought entrepreneurs in and then they let them do their own profit center and then they could grow it from there. And after I don't know, three and a half, four years, ⁓ I I 15 of my best people. and did an MBI a at a competitor. The company in Germany was really small, only had like a couple people, the the competitor, the Belgian company. And I brought my people there and bought basically what did a management buy-in, management buyout of that of that thing. So we bought into it and then we bought the whole thing out two years later. then we grew up to a couple hundred people and in 2010. after that, I went more to my true calling. Okay, well, I mean, I just like growing companies, right? ⁓ I really that. I like helping people, and I like growing companies. And so I going to different owners. Lots of business they make a decent business. And they get to a plateau. And and the and the limit, their bottleneck is almost always their own time. But they have a hard time getting off that plateau. And that's sort of how I how I approach things. found out very quickly that people don't want consultants, especially business owners. ⁓ so I looked at it at focusing little bit more on what they want.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: And most of them, or a lot of the ones that I found, they wanted growth financing, right? So I went about that a different way. And I said, okay, I can help you get growth financing, right? And that could be debt, it could also be equity. Yeah. but in order to get financed, you need to be financeable, right? And I found a couple of brothers that had been had a company, wonderful company. They've been around for 20 years. They founded the company themselves. It was an automotive supplier. were doing about, I don't know, two hundred two and a half million in EBITDA. I came in there, we partnered together, I got part of the equity for doing this, and we grew the company over four years. We grew it to about 13.2 million in EBITDA. From the two and a half, that's a good deal. yeah, right. And then we wanted to keep growing it, we brought in a ⁓ private equity and it actually came down to a family office or a private equity. We ended up going with this private equity because it wasn't a typical PE company, was a r older and ⁓ anyways, we
Pete Vera, Exit Algorithms: Yeah.
Carter Looney: know, I mean we went from an EV of 18 at the beginning to 92 at the at the end, right? So to what and then we brought the private equity in. Yeah. So that was significant for everybody, most especially the brothers, but it was also for me not a bad thing, right? And
Pete Vera, Exit Algorithms: Wow. Got it.
Carter Looney: yeah, and it and that was great. And that, I just started looking for for what I call a project, right? Then the next the next one, and I did the next, the next, and in in 2021, a group a group of ⁓ portfolio managers in the distress asset space ⁓ came to me and actually they're to me by a by a a lawyer that I know and They were looking to create their own fund. These guys were really experts in what they did. They worked for very, very large hedge funds and really good at portfolio management, but they were not not very good at like building a business, right? So I came and did that. I I raised 250 million for them and to get them started. And that was six years later, became a ⁓ a partner in the ⁓ in the
Pete Vera, Exit Algorithms: Mm.
Carter Looney: still call myself an operating partner even though I don't I don't operate the the business. I mean they do that most of the stuff. I I just do more strategic things than they're if all. Yeah. but about three years ago I said, well I wanna I wanna I see a real opportunity in this silver tsunami thing of busin business owners and ⁓
Pete Vera, Exit Algorithms: Mm-hmm.
Carter Looney: A li like myself because I I went through all those things myself. Yeah, I still go through Yeah. And ⁓ wanted flow in the United States. So I ⁓ I came to the US and started a a with with several different people to build an ecosystem ⁓ around around the business owner, about around making a business owner get it first of all, get as successful as much money as he could for his company and and be keeping as much as he could, right? So it's it's sort of an ecosystem of everything from of course exit planning, preparing a company for exit, but it could also be preparing it to be a platform to grow more, right? I mean yeah it it it's it's a very similar thing. It just depends on what he wants to achieve. Yeah.
Pete Vera, Exit Algorithms: Mm-hmm.
Carter Looney: Or she could be also, w woman yeah. But yeah, depends on what they want to achieve. And then got planning, because anybody that makes than half a million a year should be planning their taxes and should be be there's plenty of legal ways to avoid most all of your taxes. And when you go through an exit, there are plenty of legal ways to pay almost no taxes, right? So there's that.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: So so you got that, your tax planning, you got your ⁓ and A, and and you got your wealth management, right? That whole thing around the business owner. Yeah? Okay. so that's how I got to Meritage, right? Because Found another entrepreneur that wanted to partner with, and he wanted to partner with me, Brian, Brian Franco, great guy, founded a wonderful company. It's built it for 20 years. It's it's one of the one of the top ⁓ lower middle market MA firms in the United States. Okay, and and fits very well our vision of doing a lot more and also ⁓ investing in companies right? So that's that's how I got to her top.
Pete Vera, Exit Algorithms: Yeah. that's awesome. Yeah, a wealth of experience and you know, a real insider perspective too. Having had exits yourself, now you're able to to help other businesses do it too. I'm curious, you know, having had multiple a number of exits, maybe if you could go back to probably your first your first exit, ⁓ before you, you know, you've had all this experience. What did you were there any lessons you took away from from that experience that you know, you wish or things you wish you would have done or known before you before you exited?
Carter Looney: Yeah, yeah, sure. Things I wish I would have known. Okay, some of them some of them were actually most importantly is being organized. Right? I I'm an entrepreneur and or organized is not always the best that strong point. So you gotta find people that are organized and work with them. Yeah. A very very smart man told me very early in my career. I asked him, he he's a he's a billionaire now. And and I I asked him, Hey, hey, Michael, what's the secret of your success? Right? And he's and he's like, I find people that could do things better than me and I hire them. Okay. So yeah, and it's sort of a little bit of tongue-in-cheek, but but there's a lot of fact on it. It's jumping over your own shadow and and saying, Okay, I'm not the best this, so I need to find somebody that's good at it. I need to understand what's done because yeah, I I I I run the company. But doing that, also things that. I mean, or or that that it's more important that that a founder should build a company, get a company with the with the beginning, the end in mind, right? And the end in mind is that. His his or her role should be focused on creating an environment where it's where where the employees can excel, where his partners, his employees, where they can excel. That that should be that's his major function in the business, right? I mean surely early on you gotta do stuff yourself. That's that's how it is. But you need to get to a point where you can choose what you do. Yeah. And the major portion of what you do is you know like work on the company and not in the company kind of concept. Yeah. Michael, Michael Garber stuff, right?
Pete Vera, Exit Algorithms: Yeah. Yeah. awesome. yeah, and and you you you help business owners unlock potentially millions value w they go to sell. Do you mind sharing maybe some of the you know common pockets of of hidden value that that business owners miss?
Carter Looney: Okay, so so so there's so that this is gonna sound like really weird, but but you know, I mean other than the obvious okay, for hit we'll talk about value, right? So so first of all, we need to understand what drives value from from the standpoint of an a investor, right? Somebody that's gonna buy your company, most as most especially, but also for you as as a business owner. Okay, and and what drives drives value more than anything else that have a predictable recurring cash flow. And that doesn't mean you have to be a SASS company, right? means that you have to have systems in place that create that create that. It means that the pit the the that it's not dependent on anybody, it's not dependent on any, and that means the owner, and it means customers, right? And it means that it has systems for doing things. Yeah, at the very least, it has a strategy, it has planning, has reporting controlling. Right? Transparency is what I call it. Right? Okay, that that makes just having transparency, it's one of the highest ROI things you could do a company, is transparency. other words, where am I gonna go and am I actually getting there? And how am I gonna get it better? Right? Okay. that starts with yeah, it starts with planning, but it also starts with financial reporting. Yeah. It's a pain in the butt for all of us. Yeah, but but something that you can set up very easily have it automatically done. I mean ⁓ QuickBooks, QuickBooks you can set up in QuickBooks. It's not like it's rocket science. Yeah. ⁓ There's plenty people out there that can set it up for you.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Yeah, and then and and then have that always. It means that you got an organized system. That's worth that's worth really a lot of money. That that's that's one thing. the other thing is is really a a value driver that that ⁓ I would say that most owners miss that buyers see is pricing. Okay, believe it or not, most buyers.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Most businesses, especially if they've been around for a while, their pricing is imperfect, is a is a a nice way to say it. Yeah. They could charge a lot more for their business in ⁓ for what they do in a in a lot of different ways. They could be a little bit more creative how they how they earn their money. Yeah. especially, especially if you look at the the last five years with all the inflation and everything.
Pete Vera, Exit Algorithms: Yeah.
Carter Looney: There's lots of businesses that haven't raised prices. Yeah. Or only very minimal. Especially again, I I tend to my specialty is B2B businesses. it's a little bit different with B2C. ⁓ might have a better idea where the pricing is in B2C, but in B2B businesses, it's almost always something an owner overlooks. And it has to do with with some of our psychology, right? We we we feel like we're a little too dependent on some of our big customers. ⁓ ⁓ I can't do that. They've got so much more more leverage against me. And they, you know, well, the fact of the matter, if you've been delivering something to them for for five or ten years, they're probably not gonna want to change. Right? And usually you to you you you can talk with when you bid new deals or when you re up stuff, there's places where you go and you talk to to purchasing and you say, Look, this is where it's at. And usually, especially ⁓ You know, especially in the world of AI, you can make a pretty good idea what the market is really charging. Right? And then you go to and say, look, this is what the market's charging. Okay. I I I I would need to, I'm I'm right here and I would need to do this, but I'll tell you what, I can give you a 10% discount, yeah, and we're still moving along good. Right? Things like that. Yeah. ⁓
Pete Vera, Exit Algorithms: Mm. Yeah.
Carter Looney: Th those are things that I don't know. I I maybe I'm overdoing here on pricing, but this is one of the things that you don't hear people that are preparing companies for to exit, you don't hear about things like that. Right? You mean you hear about don't be dependent on the person, don't be yeah, but but this is really something that can make a huge difference. The other thing is is that most owners miss for an exit is they miss timing. Okay, market timing ⁓ is
Pete Vera, Exit Algorithms: Mm.
Carter Looney: It makes up makes about depending on the thing can make up thir up to 30% difference in the price you earn for your company. So what does that mean? That means if I can set my company up where I have the opposition optionality to sell now in three years, then I have a choice and I can get a much better price for my company. Yeah. And and and lastly, taxes, I mean, we all likes to pay taxes, but
Pete Vera, Exit Algorithms: Mm. Yeah.
Carter Looney: But to sit down a professional and go through what you can do to save it and put the things in place to save it is something that most of us just don't do. Right? We think, ⁓ we'll do it when we get ready to exit. Believe ⁓ it it it's that's ⁓ too late. Yeah.
Pete Vera, Exit Algorithms: Yeah. Yeah. How far in advance would you say is ideal for a business looking looking to exit?
Carter Looney: I mean two to three years is really good. but be honest with you, I think that I think that they I they set it up that way today. There's no reason not to start today. Yeah? Okay, it's not like you have to do it all at once. I mean if you get ready to sell, then you have to do it all at once. And what's gonna happen is you you're gonna have omega stress. you you're not gonna have time to focus on keeping your business running like it should. Okay. And and you're not gonna get things done. That that's what's gonna and that's gonna cost you real money. So better is to say, okay, here's a strategy, here's the plan, and I do one thing at a time, right? Maybe maybe I start and sit down with with this whole this whole reporting thing, right? That would be one thing, yeah, that you do. Okay, and then and then I sit down with somebody and I maybe even I a coach if that's what I need to do. Right? Okay, there's nothing wrong with I mean, I mean, the the most productive people in the world, they all have coaches. And I'm not just talking about businessmen. Every single super they wouldn't be where they were if they didn't if they have have coaches. And I don't just mean coach of the team. I mean actually trainers or coaches that help them be better at what they do. Yeah? And and so there's nothing wrong with that. Huh?
Pete Vera, Exit Algorithms: Definitely. great, great advice. Really good, really good nuggets there. yeah, and you mentioned earlier, you know, beginning with the the end in mind, I I like that concept a lot. When when you decided to go with a private equity group instead of a family office, ⁓ that that exit and you mentioned earlier, what would what went behind that? You know, and and maybe what is could you offer some advice for for business owners in that situation?
Carter Looney: Well actually in that case it was real specific to the to the situation, but in general there's there's a concept that's much more prevalent in Europe for I guess because of the culture than it is in United States. And that is that there's a lot of families that have sold a business or have built a business and they buy more of Yeah. And and then they just They're like a they buy their own little industrial, like a private, private equity, right? They don't they don't use anybody else's money. you know, they may leverage things to do a buy or something like that. That's normal, but but they they do it they do it to keep things long term, right? So so so that's i ⁓ may be that ⁓ fact in most cases, probably a private equity. If if you're attractive for them, you can get a higher price, but it costs you in other things. Okay? It's going to cost you in the legity legacy thing. I mean, private equity has been changing though, right? So so over the and this is why we did the choice that we did is because this was a private equity that was actually quite a quite ahead of its time. They actually started from the very beginning as a minority They never bought majorities to begin with. And so were actually responsible for for a lot of multi-billion dollar companies by investing them when they were making 20 million, right? Or earning I mean 20 million revenue, right? And and and so was one of the reasons we went with them, even though it was a private equity, is because they had had this idea of stewardship.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Right. And that's usually the difference that I see between especially PE in the US. We're a lot more PE, there's a very clear model, right? It's a three plus one plus one. They only have so much time. Sorry, I'm so they get money, right? So they raise money from a from a limited partner, and that and that partner gives it to them for a certain amount of time. Right. let's say five years or let ⁓ and maybe maximal seven maximum seven years right so they have to have a very short they have about two years to invest the money maybe three yeah and then and then they've got to then they've got to really go through a quick process to to value ⁓ To to add value with the least amount of right? Okay. So they at dealing with the business completely differently. Yeah. Because of how the market has changed over, especially the last, I would almost say 10 years, but probably started that long ago, but especially the last five years, there's
Pete Vera, Exit Algorithms: Mm.
Carter Looney: They're coming to the point where they realize hmm, maybe it's better to partner with the the owner, let them roll over twenty percent or twenty-five or even forty percent, and and grow it with them. There's even ⁓ in there in markets, especially markets that are super highly competitive, ⁓ right? So so market for wealth managers right now is like super highly competitive. In other words, to buy ⁓ They're paying people are paying There's reasons for it, but people are paying like like 10 to 12 times times the bit of for this, right? and really, really competitive. So there's a couple of groups, actually, more and more people are coming. Well, well, they say, Well, I don't need to buy the whole whole R RAA. I'll I'll buy 20% ⁓ of it. with the right, find the right owners. That's important. And say these owners they can scale. If they're if given the right help, they can scale. Okay, and they'll only buy 20%, maybe 20-25% of the of the company, give access to all the stuff in their group, right? Which is financing. Help them, for example, buy other IRA, smaller ones, right?
Pete Vera, Exit Algorithms: Mm-hmm. Mm-hmm.
Carter Looney: And this this is this is more advanced in that particular niche, but it's going into other niches the same way. And and it's it and it's more profitable for for the ⁓ the PE, nonetheless, this with the constraints of their LPs, they have to change that model to do that. But but they're doing that too, yeah. And that's where most family offices are different, or or a family office-backed private equity, right?
Pete Vera, Exit Algorithms: Mm-hmm. Got it. So knowing knowing that buyer and what their intentions are and their strategies, you say that is the kind of the takeaway for for business owners considering a an exit?
Carter Looney: Yeah, yeah, sure. I mean I mean the take the takeaway is understanding first of all understanding what you want to achieve. I always sit down when I sit down with people and talk to ⁓ whether it's whether I want to buy ⁓ or I want to help them grow or whatever it is I want to do with them, right? Together with them. Yeah. I say, where do you want to be for five years? Okay, and how can I help you get there? Right? So so they also have to do the same thing. In other words, what are where's the end? Yeah, start with the end of my where do I want to. What do I want to achieve? Not what do I want? What do I want to achieve? Yeah, it it's a different thing, right? it and then say, who are the type of investors that are best fit to that? Because otherwise they just think, I'll just go to private equity and I'll do that. Or I'll go to some broker that just wants to sell my company and he'll find the best person, right? And and what he does is they end up wasting a lot of time ⁓ first of all, they're not as prepared as they should be. Okay. And secondly, because they have have have have some as as a po ⁓ as to a boutique or an investment banking boutique, right? Yeah, which is which is what we are, right? They don't help them get ready. Right. They they they have probably fifty companies and they just w whatever one comes up that they can sell, right? They do it more on a mass end. And sorry I don't want to talk bad about brokers, but I I have my personal personal pet peeves. Yeah.
Pete Vera, Exit Algorithms: Yeah. There's there's a wide wide range in in quality of brokers, right.
Carter Looney: Exactly. There's some of them are great. Yeah. They understand how things work and they're willing to tell business owners from the very beginning, look, this isn't gonna sell, right? You need to do these things if you want to be ready to sell. You're not ready to sell yet. Okay. Instead they torture themselves and the business owner and and they still won't sell.
Pete Vera, Exit Algorithms: Mm-hmm.
Carter Looney: Yeah.
Pete Vera, Exit Algorithms: Yeah, doing the diligence enough to to know, you know, the what the right price is also in in the market for that business and and when they when they should sell.
Carter Looney: Yeah, yeah, exactly, exactly.
Pete Vera, Exit Algorithms: So yeah, and you mentioned taxes I'd I'd love if you could expound on that a little bit. Maybe without going deep on on tax code, ⁓ what are maybe some high level shifts an owner should should make what ⁓ or or think about when when wanting to their wealth, especially when they go to sell their business.
Carter Looney: Yeah. Yeah, yeah. Okay, so so So, I mean the the first most important thing about protecting your wealth is starting some plan, right? Getting some advice, starting some plan, right? And and to honest with you, your your CPA is probably not the person you should talk to about this. Okay, I always think it's weird because because they're supposed to be tax professionals, but they're not tax savings professionals. They're they're tax preparation professionals. ⁓ Okay. I don't want to overdo it. There's a lot of good CPAs that that also their business as more, but in a lot of cases it's not that that way at all. But they should sit down with somebody that I mean already already once you start earning a decent amount of money every year, you can avoid taxes. It doesn't mean that you're gonna have the straight cash flow, but over time this will be a huge thing for you by by making certain types of investments, right? A as a simple thing. Yeah. you can also protect things by For example, if you have a company that has that has real estate by separating those two, put the real estate in a trust. There's all kinds of things you can do, right? But you shouldn't just do it half hoursly, you should do it with a plan, right? The the same the the second most important thing is they've made a decision to exit, but haven't ⁓ gone to market. This is like real important. Okay. Again, I'm I'm not a lawyer, but critical point is is when you get to an LOI. Definitely, you've got an LOI, the IRS not gonna let you do some structure to save to save it, even if you haven't sold the company yet. Right? Yeah, I I mean that's just being safe. I'm not gonna say that it's not legal unless I've got to talk to your lawyer or tax lawyer about that, but that's my experience. So you need to start once you say, once you've made the decision in your heart, hey, I want to sell, or I've already got my company already to sell. Yeah, as far as I've got a things, I I don't have to be there every day, things are going great. then you need to say, Okay, when I see that I'm maybe two years out. Two or three years, but say two years out, set you can set your company up to where you basically don't pay taxes for selling the company, right? It's it's gotta be
Pete Vera, Exit Algorithms: Mm.
Carter Looney: There's a there's a big variation in there, right? The higher value in the company, the less taxes you'll pay, right? That's almost positive. Yeah. Okay. Because you can afford do more expensive things to set it up, but it will just make make your make your tax go down to like 1% or something, right? Or in some cases, zero. yeah, a there's a lot of things, but. But sitting down with a professional, and maybe early on, maybe now, once as part of getting yourself ready, part of your normal yearly tax planning, when you know, hey, you know how much you're gonna make every year, or you have an idea, right? Then then you should sit down with a tax professional and and talk to them about what's possible. And and there's there's also a wide range of tax professionals. There's ones that focus on stuff, and there's ones that focus on a lot bigger stuff. Like I I I I talked to a a planner yesterday and they don't anything less than 50 right if if if the if the amount of gain if the amount of capital gain is less than 50 million they're not interested right but but i also know plenty that start at 350 000 for your yearly income right
Pete Vera, Exit Algorithms: Mm.
Carter Looney: And and that's so you gotta of find the right people and then and you may not be one size fits all, but that's a really important thing because it saves you a lot of money. And yeah, it's gonna cost you something to do that, but it's gonna cost you probably eight percent maximum, six to eight percent of what you save to do that. But you know, look, look, even if you even if you only you even have a ten million capital gain, ⁓ say only, but even if you have have only a ten million capital gain, right? I mean six percent is nothing. Even if even though it's you know six hundred thousand dollars, right? Yeah, okay, I'm gonna pay the at the end, I'm gonna pay them six hundred thousand dollars. But but I've saved I I've I've saved like eight million. Yeah? Right? ⁓
Pete Vera, Exit Algorithms: Mm. Right. Yeah. N net, it's definitely worth it. Yeah.
Carter Looney: And and and so many owners underestimate that and they don't have the patience to go through that, right? Plus because they hear from the you know, you hear ten billion wealth managers that tell you all kinds of stuff you can do and blah blah blah. You gotta take the time to research that and talk to somebody that that you can you can trust with ⁓ about that. Yeah.
Pete Vera, Exit Algorithms: Yeah. ⁓ great advice. ⁓ yeah, and and I know you have some experience with turnarounds. I'd love if you if ⁓ maybe you could share some lessons from you know fixing struggling companies that apply to a totally healthy business just wanting to grow faster or or be able to sell for or hire multiple.
Carter Looney: Yeah. Okay, okay. turnarounds Turnarounds, I mean it depends on what you define them as, but but turnarounds are usually companies that are in trouble. if you don't do anything, they're going to die. Okay, that's how I define it. and doing it, have to do make really hard decisions. Okay, and at least for me, they were always hard because it deals with people, right? It deals with people. ⁓ and and it and it deals and and the people could be the owner, it could be the could course the employees. it's also your suppliers, etc etc. so so so I that's I'm hawing around about this. It's just not something I like doing. I've done it more than one time. In fact I spent I spent twenty seventeen and twenty eighteen. I I was I was wanting to invest in a in a German doing this kind of program that I do with with the scale ⁓ scaling a German IT company they had a US subsidiary, and that US subsidiary the the management and it really put them in a bind and it had to be restructured. And that's part of the reason why the management left is because they left it in a desolate state. And I spent two years over Detroit doing this. And it just you know makes me grind my teeth at night when I think about it. But again, then let's not talk that about the negative things. The point of it is that make makes you have it forces you to have extreme discipline, right?
Pete Vera, Exit Algorithms: Mm. Mm.
Carter Looney: Okay, you gotta be very clearly again this thing this is where this whole idea of planning and all that comes into things, right? You you you set up your cash flow planning, a 13-week rolling rolling cash flow planning, right? In other words, three months, yeah, but I always call it 13-week, I don't know I have why I have that in my head, but it's it's a rolling. cash cash flow planning. Okay. And and that's that's what you're what you need to make sure that you don't die. I always say, you know profits like bread and and and and and Cash flows like like air, right? I can I can live for weeks without bread, ⁓ I can leave live three minutes without air. So there we go, right? So, where does my focus need to be? Certainly, long term is making sure I have enough bread to eat, but but short term, most importantly, I've got to worry about making sure I have enough air to breathe, right? And that's how it is in a company, especially a turnaround company. So
Pete Vera, Exit Algorithms: Mm.
Carter Looney: company that's that's good and wants to grow, if they set up this simple system, yeah, it it doesn't always have to be a 13 week cash flow, but it should you probably should be. You should at you should at least have your financial manager doing that. Yeah. but of saying okay this are my plans, this is what I look like, this is what I'm gonna go for and and then setting up a system to do that. Yeah. that's like Will help prevent you ever getting in the situation where suddenly you don't have the liquidity that you need. Yeah?
Pete Vera, Exit Algorithms: Yeah. Great. Yeah, great advice.
Carter Looney: That's that's probably the be the best thing. I mean, I could go into all kinds of other things where I mean growth companies they have to do that, right? If you want to grow your company, you you have to do that. It's another one of those basic things that that that you do. It's one of those base most basic, most important systems that you can have. Yeah.
Pete Vera, Exit Algorithms: Love it. Yeah, an another major theme of this show i is AI technology. I I'm curious, how are you implementing AI today, per personally, professionally? How do you see it if impacting the industries you're in?
Carter Looney: wow. So so I mean, you know, I mean ⁓ everybody, it's a it it's it I I think you know it's a there's a huge huge thing. Mostly I I AI to help me. There's a couple of things. First of all, I use it to help me better organize how I approach problem solving. Okay. That's that's actually it helps me. Take a much more organized approach, especially for problems that I haven't dealt with before. Okay, because I mean everybody, if you've done it three or four times, then you got a plan, right? It's like when I go in to analyze a company and sit down with the owner, I got a plan. I know what I want to ask him, I know what I want to talk to him about, I know what I even know the feelings I want to understand that he has, right? Okay, but but there's a lot of things where it's different, it's new, you you gotta do that. And AI will help you. instead of telling you the answers, it will ask you the right questions. That's how I use it. Right? I ask it, I get it to answer. I as I say, if I want to do this, I want to achieve this, walk me through this. that can set it up to do that, right? And it will ask me the hard questions that I need to add, and it will make me think about it because it's too easy. I mean, again, there's plenty of things that you can use generative AI for that are super. For example, if I want a picture of something.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: Then I go then I go to Genesis and I ask it to build a picture like I want. Okay? That's a simple thing, right? But that's not using my brain. That's that's what that's using a tool. And that's and that's good, right? But but and and it's too easy with AI. A lot of people just use it to generate tasks and all that other kind of stuff. I I do that too, but not but more importantly. But that doesn't add the huge value. It saves me some time, maybe, right? Okay. But telling talking to it about how to solve a problem, how how to method methodically solve the problem that I'm working on, it. The number two thing is I do a lot of research with it. Okay, because it can do can do a lot of stuff and you gotta check it, right? You you can even have it check itself, which is a still a a step above what most people do, but you also gotta check it, right? ⁓ you can get a huge amount of research done in a short amount of time. So if I want to better understand certain problems in an industry, like I'm talking to say I'm talking to a I'm I'm talking to a ⁓ company right now that's ⁓ dermatology and and they have four or five clinics and they're gonna do a roll up and they want me to organize the roll the the the the roll up. Yeah in other words the infrastructure for the roll up, right? Manage the project, blah blah blah. That's all good. I understand how to do that, no problem. But there are certain specific things in the dermatology industry that I don't know that well, right? So I use that research to do that. And then I also don't just say, well, tell me about dermatology. I also say, okay, I want to solve this problem. Okay? Show me your methodology for solving it. Help me. Ask me the questions that I need to understand in order to get there. Things like that. Helps super bunch. And and as far as as as where I see it going.
Pete Vera, Exit Algorithms: Mm.
Carter Looney: I would say would say that it has the potential to hugely improve the efficiency of companies. All right. And it means that we can do much more. Right? Yeah. It make easier for us as business owners to earn money. Okay. It will increase our profit etc. etc. That that's where I see it going.
Pete Vera, Exit Algorithms: Mm. Yeah. Love it. Wow. Yeah. Love your insight, Carter. Glad I glad I asked that question. yeah, been an amazing conversation today. just last last question. If you could leave listeners with just one practical takeaway. You're giving a lot of advice already, but if you had to give pick one thing to maximize their exit value, what would it be?
Carter Looney: Yeah, sure. Mm-hmm. I would say I would say run your business like you're gonna sell it tomorrow. Set it up that way. Okay. You're gonna get your highest highest ROI by getting your books in order, set up a monthly reporting, and make sure that it's not just a monthly reporting, gets make sure it gets organized somewhere so that when somebody asks you, you can do it so that you're in a habit of answering, of of at least being able to look up what certain things are when somebody asks you a question. Yeah? That that would be would that would be is from my standpoint the the the I I would like to I I think you can get the most value out of that for the money, right? 'Cause it's a real low investment and it ⁓ brings a lot of things and it will also bring you things your knowledge because it it'll help you think about other things. Yeah.
Pete Vera, Exit Algorithms: Yeah, you give some great advice, sir. Thank you so much for your time today, Carter. where's the best place Yeah. Sorry, yeah. W ⁓ where's the best place listeners can find you and and learn more ⁓ about your you know, your work and all your good advice that you give.
Carter Looney: Yeah, thank thank you. Go ahead. Yeah, the the easiest place to ⁓ to reach me is on LinkedIn. I mean I can give you guys an email address. the the but but the easiest way is is on LinkedIn. Even even on LinkedIn I have an email address there that goes directly to me. Yeah? Should probably shouldn't tell everybody that, but that's it. And and and you want to book an appointment, you can go LinkedIn, click book an appointment, and book an appointment with me. That's what you want to do. Yeah? And and Look, when you call me, I'm not sitting there thinking, okay, the clock's ticking and that. I I love helping entrepreneurs. All right. And if even if somebody just wants to call me and say, Carter, I've been thinking about this, ⁓ blah blah blah blah. What do you think about it? Just because I'll tell you what, most people they know the answer to their question, but they need to talk it through. Feel free. Yeah? Okay. Don't flood me with a bunch of stuff. ⁓ I don't like is people trying to sell me things all the time. if somebody needs some help, I I'll do my best to help them. Yeah?
Pete Vera, Exit Algorithms: Awesome. I'll leave that in the show notes. Thank you so much for your time today, Carter. It's great conversation.
Carter Looney: Sir. Thank you. ⁓ care.
