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Launch Series Ep.4: Managing Seller Relationships with Jim Vesterman – Ep.182

Today’s conversation with Jim Vesterman focuses on seller relationships during the deal process.

Episode Description

Ep.182: Alex (@aebridgeman) is joined by Jim Vesterman (@jim-vesterman).

This episode is the fourth in our Launch Series on the stages leading up to becoming a CEO via the search fund model. Today’s conversation with Jim Vesterman focuses on seller relationships during the deal process. Jim shares his own experience working with the seller of Raptor Technologies, a company he ran as CEO and is now a board member of, as well as other experiences he had with sellers during his search.

This is a discussion packed with insights on building great relationships with sellers and is a perfect complement to our earlier Launch episodes on industry research, starting up a search, and managing a due diligence process. Please enjoy this Launch Series episode on seller relationships with Jim Vesterman.

Listen weekly and follow the show on Apple Podcasts, Spotify, Google Podcasts, Stitcher, Breaker, and TuneIn.

Learn more about Alex and Think Like an Owner at

Clips From This Episode

Working Through Valuation Expectations

Building Trust and Rapport with Sellers

Ravix Group — Ravix Group is the leading outsourced accounting, fractional CFO, advisory & orderly wind down, and HR consulting firm in Silicon Valley. Whether you are a startup, a mid-sized business, are ready to go public, or are a nonprofit, when it comes to finance, accounting and HR, Ravix will prepare you for the journey ahead. To learn more, please visit their website at

Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected]

Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.

If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at Or reach out to August directly at [email protected].

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(00:00:00) Intro

(00:04:01) Jim’s career and experience Searching

(00:07:26) Identifying the right characteristics for a seller in a Search Fund acquisition

(00:11:45) Navigating a multi-founder acquisition and replacing a seller’s role within the business

(00:14:55) Finding the seller with the right mindset

(00:17:13) Building trust and rapport with sellers

(00:20:25) Assessing the trustworthiness of a seller

(00:24:26) Working through valuation expectations

(00:29:01) Learning from advisors on both seller and search side

(00:33:29) The importance of face-to-face interactions

(00:35:22) Managing the seller relationship post-close

(00:37:17) Best practices for transitioning key relationships with company stakeholders

(00:39:20) Examples of when it’s right to keep the seller within the business

Alex Bridgeman: Well, thank you, Jim, for coming on the podcast for this episode of the Launch Series talking about seller relations. You’ve had a lot of different experiences with sellers and lots of different scenarios that you’ve worked with. I’d love to just start by hearing some of the, of course, the company you acquired, Raptor, and ran as CEO, learn about that experience you had, but some of the others maybe along the way of the different dynamics with sellers that you’ve had and just your experience there.

Jim Vesterman: Sure. So why don’t I just start with a little bit of background a little bit on a couple of examples that I’ll draw from. But I raised a traditional search fund in 2009. I then searched for over two and a half years, so I had a very long search, and then acquired Raptor Technologies in April of 2012. And, however, along the way, I took another two companies pretty much all the way through or almost all the way through diligence. So, I think we can draw on those as well. So, the first one I actually found very early in my search process. It was a great tech enabled services company that I thought was fantastic, fell in love with very quickly. The owner was on the younger side, in his 40s, wasn’t quite sure that he was ready to retire, but wanted some liquidity, did not have any advisors. It was a proprietary search; he didn’t have any advisors helping him. And all of those things led to a little bit of a mess, including some other elements that I’ll get into later. So that was one example that I’ll draw from. I took them almost all the way to close. About 18 months into it, I found another company that I got under LOI and took actually all the way to close. That had a private equity seller. So, a very small private equity firm was the that seller. In particular deal, it was healthcare services. And I took that from LOI all the way essentially to the closing table. And then I ended up walking away at the closing table. And we can get into some of those details. But that seller was a small private equity firm. They obviously had a whole slew of advisors. And they were the second owner of that company. Then the third example I’ll draw from was the one that I ended up closing on, Raptor Technologies, which I found about over two and a half years in, got it under LOI, and then in the diligence process, did three months of diligence and closed on that deal in April of 2012. Then, after that, I ended up running the company for eight and a half years, Raptor Technologies. And we can talk about some of the dynamics, but it was about 11 people when I found it, when I sold it about 130 people. Today, it’s about 260 people. I’m still on the board. And we can go through some of the characteristics. But that had a founder seller, which I think is important, who was ready to retire and was a single individual. His wife did do accounting for the firm, but he was essentially a single owner. And we can talk about the differences between single owners and multiple owners along the way. But I think those are the three examples that I’m going to draw from. And then of course, I had a long interaction over time with the seller post closing, again closed in April 2012, and then stepped out of the CEO role in December of 2020.

Alex Bridgeman: Yeah, so through all those different experiences with sellers, what did you learn about identifying the right characteristics for the ideal seller for a search fund acquisition?

Jim Vesterman: In my mind, there is an ideal seller archetype. That doesn’t mean that you have to find that ideal or ideal seller archetype. That doesn’t mean that that’s the only thing that closes. But I do think in my mind, there is an ideal seller archetype. And that is a single seller who is the founder and is looking to retire. And all those elements bring with them dynamics that I think are positive. So single seller versus multi seller, I think when you’re in a multi seller environment, one, you have to deal with the different dynamics of the sellers in the sale process, two, you have to replace them. And in some cases, there are two, three, four, five, six sellers involved, and you have to deal with them, either replacing them immediately or dealing with them hanging on through the operating phase, which both of those are problematic. So, in my opinion, the ideal is a single seller. In my case, I dealt with that in the first example and almost in the second example. Obviously, the wife did work in the business at Raptor Technologies, but it was close to a single seller. And then in the second example, with a private equity firm, they had a CEO, but I was going to replace the CEO. So, I think that element of having a single seller is the ideal. Again, you can close on many deals that aren’t ideal. But I think that’s the ideal. Secondly, I think founder is important for a couple of reasons. One is that the founders are usually maxed out from their management capacity. And that’s good for us, as search fund entrepreneurs, that’s good for us because that leaves some low hanging fruit. And then we can fix those issues, gain some value, and grow the company from there. So a founder, usually, not always, is maxed out at the level at which they’re trying to sell. So, I think that’s important. As opposed to, for example, the private equity firm that I was trying to buy from, they were not founders, and therefore, their sole and only interest was to maximize the value of the transaction, as opposed to a founder, more often than not, that is not their sole and only interest. More often than not, they actually have their baby, this company, their baby, and they want to see that baby grow and become prettier and prettier over time. And that is perfect, in my opinion, for search fund entrepreneurs, they too want to grow that baby and make it prettier and prettier over time. So that being one of their main criteria for founder sellers, I think is very important. Again, not the case with a private equity firm seller. And then finally, I think, having a seller that wants to retire is a key element. In the first example I talked about, the guy was in his 40s, he didn’t really want to retire. And there are many cases, I think, in the search fund world and we find lots of deals where they don’t necessarily want to retire, they maybe want to stay on as the head of sales or the head of engineering or something like that. And sometimes that can work. Sometimes it can work to keep the guy around. But more often than not, it does not work. I would say maybe eight out of ten times it doesn’t work to keep them around over a year or two. And then if they’re not ready to retire, they very well might go off and start another competitive business, which does happen. So in my opinion, there are three key criteria – that it is ideally a single seller, that that seller is the founder, and that they want to retire. In my opinion, that makes life the easiest. Again, it doesn’t have to be that way, but that makes life the easiest.

Alex Bridgeman: And it sounds like you view a husband and wife kind of founder pair as closer to the characteristic or profile of that single seller rather than multiple co founders up to, you mentioned up to six being possible, like six different co founders is, of course, different than a husband and wife. Like how do you view the husband and wife multi founder versus maybe there’s three, possibly four or five and above?

Jim Vesterman: No, I think you’re right. At the end of the day, it is close to having two sellers because you do have to replace them. But usually in that case, it’s almost always the case that one is the real CEO and the other does some things. In my experience, that’s normally the case. And so in my case, for example, the wife was the head of accounting. So, you can find a head of accounting, the head of accounting is not necessarily a key role. Whereas if they are, if I can say two distinct sellers, a pair, one might be the head of sales, and the other might be the head of operations. They might split it up that way. And in that case, you actually have to replace sales and operations, as opposed to replace the CEO and find a controller. So, I think there is a bit of a difference. I might be exaggerating that difference. But I do think there is a bit of a difference.

Alex Bridgeman: Yeah. How do you take scope and stock of different roles, the roles that the sellers are playing within the business and whether or not you can replace them? It sounds like some roles are, of course, easier to replace than others. You of course are going to be the CEO so that’s an easy role for you to replace day one. That’s what you’re designed to do. But how do you think about some of these other roles that founders, sellers might be playing in the business and how to go about replacing those?

Jim Vesterman: The way I think about it is, is it a normal hire? For example, if the owner runs sales, well, a very normal hire is to hire a VP of sales. So that can be replaced. If they are the head of product, you can hire a head of product. But at the end of the day, again, the value of having a single seller is that you really have a silo, generally, of their true expertise that needs to be replaced, you’re going to, of course, come in the general management role. But they’re going to have one kind of true expertise. And in my particular case with Raptor, the guy was the head of sales. That’s fine, we lose that strength in the company, but we can replace that by hiring a single head of sales, and then I can take general management. So, I think it depends. I think it’s a little bit more scary when they’re the head of engineering, which I think does happen, just because they usually then hold the keys to the software kingdom if you’re buying a software company. And that gets a little bit scarier, in my opinion. I know you have a software background. That to me is a little bit scary. But I think all roles are replaceable. But if you have five sellers, and one is the head of sales, and one is the head of operations, and one is the head of engineering, etc., etc., one the head of customer service, that’s a sticky situation to go into, in my opinion.

Alex Bridgeman: Yeah, certainly. So you talked about that single seller being the ideal maybe number of sellers, but what about the mindset that that seller has towards the business? You talked about that single founder more often being- more often having that mindset of this is my baby, I want to see it grow and be healthy and become beautiful and more beautiful over time. When you’re looking at the right seller, what mindsets are you looking for?

Jim Vesterman: I think it is that. I think, in my opinion, the sweet spot for search funds is to find the seller who really does value their baby, and you can make the pitch to them, unlike other options that they have, you can make the pitch to them that I’m going to take that baby, I’m going to grow that baby, and I’m going to make you proud. Alternatively, they could sell to a private equity firm. And that private equity firm doesn’t care a lick about making their baby pretty. They care about maximizing value and whatever it takes to do that, merge it with another company, whatever it takes, that’s what they’re going to do. Or you can sell it to a competitor, who also doesn’t really give a lick about your baby, they want the customers or the technology, and they’re just going to take those customers and take that technology and pull it into their firm and move on. And you, the seller, are not going to be able to look five years down the road and be proud of your baby. So, in my opinion, that is the ideal sales pitch within the search fund world is I recognize this your baby, it is a beautiful baby, I’m going to make it more beautiful, and you are going to be proud. And I think when that’s what they’re looking for, that’s the pitch we have, that’s the differentiating niche that we provide as search fund entrepreneurs, as opposed to selling to your competitor or selling to private equity. And also, if it’s the case that they want to retire, if they want to retire, then they don’t want to sell to private equity who will more often than not want to keep them around. So I think there’s a niche for us in the search fund world. I think that that is it. But again, with the caveat that you can get lots of great deals done and it doesn’t have to be exactly that way. But I think in my opinion that is the ideal archetype.

Alex Bridgeman: What did you learn about building trust and rapport with sellers through these various experiences?

Jim Vesterman: Yeah, I mean, at the end of the day, I think it comes down a lot to natural rapport. If you happen to have a good natural rapport, I think that really helps. In the case of Raptor, I had a good natural rapport with the seller. He valued my background with some security experience in the military, he valued my couple of years in SaaS software already, and we simply had a good natural rapport. So at the end of the day, you can’t gear for great natural rapport, but I think that is very important. It is important that you feel that you can trust the seller. So, in the case of the first example that I mentioned, it was a tech enabled services company with a younger seller who really was looking for money and not necessarily looking to retire. At the end of the day, I felt like I wasn’t sure that I could ever trust him. And then, 12 months down the line, after dying and being revived, dying and being revived multiple times, I ended up finding fraud on the books. And so that initial sense of not being able to trust the seller is important. And then in that particular case, it turned out that there was fraud on the books because he was trying to pull cash out, and he did it in a way that was fraudulent. So, trusting, being able to trust the seller is important. Some people like to say that a good seller knows his business inside and out, and they can hide whatever they want from you. Maybe you’ll find it, but they know the business very well, and if they want to hide something, they will try, and they will probably succeed. So you really have to have a sense of trust from that seller. In the case of Raptor, one real problem with the company was the stability of the SaaS software. So it was a single source multi-tenant SaaS software platform. And they had problems for the entire 10 year life of the company with stability. And he was very straightforward about the system crashing. And he didn’t try to hide it. And I liked that. He wasn’t proud of it. But he did not try to hide it. And it was a very good sign that he was putting the dirty laundry out there in the beginning. And so, we went in, myself and my investors went in with eyes wide open. And in fact, post closing, it was a problem. The software crashed, I think it was 42 times in the first 52 weeks. So, it was a big problem. But we went in eyes wide open. So, I think trust, transparency is very important, is a very important seller characteristic.

Alex Bridgeman: You mentioned the seller telling you about the problems as well as the good things was helpful to determine if they were trustworthy. Are there other tactics or things that you could do or maybe ask to help assess the trustworthiness of a seller?

Jim Vesterman: I think follow- ask the same questions multiple times and follow the consistency. If the answer bops around a lot, I think that’s a clear sign. So, I think that’s a tactic that some, I’ve heard some other search entrepreneurs use, and they write down specifically what they say. And they ask it three months later, and they write that specifically down. And so, I think follow consistency; that is super important. And then obviously, you’re there to build rapport. This is a sales, part of this is a sales process. So, whether you have natural rapport or not, you need to build it because you need them to want to sell to you. And so, you’ve got to build that early on, you’ve got to make your case, you got to make a clear case, and work hard to build off of any natural rapport that you might otherwise have. And then use that because you’re going to go through tough times usually in the sale process. And so you need that rapport to stabilize you in those tough times.

Alex Bridgeman: What tough times did you go through where rapport was really especially helpful?

Jim Vesterman: I would say a couple of things. I don’t think it qualifies as extremely tough. But one of the things that happened in the case of Raptor was the small two man broker shop brought the company to market, and that same week, the seller went on a month vacation out of the country. And so, I had an initial conversation with a broker. I thought this seems like it could have real legs. That conversation went well, and I asked to speak to the seller who was in Mexico. But we had such a great relationship. Again, I’m selling, but we had natural rapport, but I’m also selling, selling why I’m the best buyer for this business, how I’m going to make his baby pretty overtime, etc. We had such a great conversation that I asked him to fly back from vacation and fly into the office and meet me in the office because otherwise I wouldn’t be able to put a bid in on the company. And he flew back from vacation, met me in the office. Turns out because of that, I’m the only buyer he ever met. Because after that meeting, I said, I’ll have an LOI on your desk on Monday. He kind of laughed. But on Monday, I had an LOI on his desk. Well, it turns out that we were a couple million dollars off on the purchase price. But because we had that good rapport, I convinced the broker and the seller, saying, listen, we’re very close here, we’re a couple million dollars off, I’m the right buyer for this business. Can you only negotiate with me for the next couple of weeks while he’s on vacation, and if we can fix this $2 million gap, we can go forward. If we can’t fix it, when he comes back from vacation, he can talk to other buyers. And lo and behold, they said yes. And so by the time he got back from his vacation, we had come to an agreement on the price and got them under LOI, and then 90 days to close. So we worked through that difference in valuation, I think, in part because of the rapport, and then, again, was able to get them under LOI. And then that was the reason why I was the only bid that he ever received.

Alex Bridgeman: I want to pause for just a quick second. Every so often, there’s a bump against  the microphone. It could be as simple as like your leg hitting the table or elbow or something. Just be aware of that, that it’ll get picked up. So far, it’s been pretty minor, but just in case it gets any worse. But in terms of getting a deal done, it sounds like you worked through some obvious valuation changes and discussions. With the goal of you describe this as a sales process, you’re selling, towards the goal of closing and having this sale and transaction, how do you work through and describe and discuss valuation expectations, especially if they’re different from that of the seller?

Jim Vesterman: It depends on the situation. Sometimes there are clear industry multiples; I think that helps. This is a gross oversimplification, but in my opinion, in my experience, it’s very often the case that the seller is either looking for 10 or 20. They have a number in their mind, and it is 10 million or 20 million. And they don’t think a lot about is this six times, an eight times ARR EBITDA. I don’t think they think a lot about that; they think a lot about I want my 10 or I want my 20. And I think that that is very normal. So then you have to work around that. Because if the fundamentals of the business don’t support the 10 or the 20, you have to work around that. But you can try. You can try to show them data on the average multiples in the lower middle market for sales and help them to agree with you on the number. But I will say you’re up for a battle if, let’s say for example, the number is 20, and they don’t get even close on the industry fundamental multiples, then you’re up for a battle, because that’s the number and they’re not going to change, they’re not going to believe you, and they’re just going to wait until someone says 20. One thing I do think is important is you clarify with them, make sure that they understand whether that’s 10 or 20 after tax. Because if they think it’s 10, and then they realize, oh, I have to pay 20% capital gains, turns out that it’s not 10, it’s 12. So that’s something that needs to be- you got to make sure that they understand that because when they realize they have to pay capital gains late in the process, then they want to change the number. So make sure they understand that early in the process.

Alex Bridgeman: That’s a good subtle note to be aware of, for sure. How did the discussion go for you with that valuation gap with Raptor? It sounds like you’re working mostly with the broker. Did that conversation flow easier because the broker could be more objective about the business and industry multiples and whatnot? Or what was helpful in that conversation to bridge the gap?

Jim Vesterman: So, in that particular case, in the Raptor case, one, his number was 10. But early on, luckily, he realized he had to pay tax. And so, then he realized, oh, it has to be higher than 10 so that I can pay tax and come away with 10. So that was useful that early on he realized that. What ended up happening was we had a $2 million gap, and I was able to tweak some elements, but I was also actually able to find what I thought was missing EBITDA in the books. It was hard to know at that stage whether it was really missing EBITDA, whether EBITDA was really there or not. But I made a bet that there was more EBITDA than they were showing and that I paid six times EBITDA, and then at six times EBITDA, that accounted for actually 1.2 million of our difference in purchase price. So that bridged a lot of gap. And then I tweaked and upped the offer to bridge the rest of the gap and tried to do it pretty quickly to make sure we didn’t lose momentum.

Alex Bridgeman: Yeah, it sounds like momentum played a big role in this, like saying, I’ll have the LOI on Monday and then following through and being prompt with all communication. It sounds like that was really helpful in continuing the pace of the conversation.

Jim Vesterman: It was. And I’m going to draw on another example outside of the three that we talked to, but I do remember one situation in which they were working on cash accounting, I was working on accrual accounting. I set a multiple. They thought I meant a multiple of cash accounting. I meant a multiple of accrual accounting. And that actually sunk the deal. Because once they realized I’m talking accrual, and they’re talking cash, and then we’re off by millions of dollars, and that sunk the deal. So you do have to be careful there as well.

Alex Bridgeman: And then you worked with an advisor or broker for the Raptor deal. But in terms of the role of the advisor, what have you learned about working with sellers who have good and bad advisors and how you navigate each situation?

Jim Vesterman: Yes, I was fortunate in the case of the Raptor deal where he did have advisors, and they were honest and willing to let a good deal happen. In the case of the tech enabled services company with the founder that wasn’t quite ready to retire, he didn’t have any advisors. So what ended up happening was things would jump around on a constant basis. And that was problematic. So not having advisors is problematic. And having advisors that aren’t extremely professional in M&A is also problematic. So, I think what you hear from search fund entrepreneurs is that oftentimes, the seller will try to bring in the lawyer that they know best, which is usually their real estate lawyer, and have them run the M&A transaction. But they are not extremely familiar with standard purchase and sale agreements. And that very oftentimes leads to problems. They’re trying to push back hard because they don’t know these terms. They don’t know that these terms are standard M&A terms, and they’re pushing back hard. And that creates a ton of friction. Or a broker who has misaligned incentives from the seller, that can create a lot of friction. So, you do see that often. I think a lot of search fund entrepreneurs try to softly suggest that maybe an M&A lawyer would be better than their real estate lawyer. But you never know whether they’ll actually switch to that. So, I think if you have bad advisors that are involved in the process, you will hold up diligence, you will lead to- that will lead to a lot of problems, and it will lead to animosity. Because they will have advisors that are telling them negative things, and that’s what they’ll think. So, you do have to be careful that. You don’t want to walk away from a deal because they necessarily have bad advisors or a real estate lawyer or something like that. But it will lead to problems.

Alex Bridgeman: How strongly should you push on that point then if it’s going to cause problems and animosity and perhaps cost them a lot in terms of terms or real dollars or just time and energy wasted? How hard should you push on that with a seller?

Jim Vesterman: I think it depends upon the, you’ll see probably in the first interaction, you’ll see if they come back with a markup that is just outrageous on the purchase and sale, and then you try to do round two, and they don’t budge at all, I think that’s when you say very clearly, listen, I think you need to have an M&A lawyer on that. Let me suggest three for you, pick whichever one you want. But we can only move forward with a lawyer that really understands an M&A transaction. I’ve heard that other search entrepreneurs do that. And so, I think it depends upon the severity of the situation. But sometimes and I have heard that you have to drop the deal because the advisors are just holding it up and making it super expensive and creating tremendous animosity.

Alex Bridgeman: What about the other side, so your own advisors? How do you moderate communication between your own advisors and the seller? Do you let your own attorneys or diligence folks talk with the seller or do you, to your point earlier about rapport, how do you balance rapport with adviser communication from your end?

Jim Vesterman: I think at the end of the day, you should be the main go between with the seller; that’s ideal. It’s your relationship. You know how to phrase things in a way, you’ve learned, you’ve probably learned at that point what the seller is looking for, what they like, and you can phrase the things. I think there’s times when, yes, you want to be efficient, and you want to have their lawyer talk directly to the other lawyer without any intervention. Yes, I think that does happen. Or have your- I think it’s more often the case that your quality of earnings provider will talk directly to their accounting staff, I think that’s very normal, and grab all that information. So, I think that can go perfectly fine. If you’re having advisors that are not arrogant or unfriendly, I think that can work well, having your advisors interact with theirs, it’s much more efficient.

Alex Bridgeman: Before going into post closing discussions, is anything else around getting a deal done or tools for rapport or any of the other topics we’ve talked about that are important to mention?

Jim Vesterman: I think the only one I would mention is face to face, you can create rapport at a level and at a speed that cannot be done over Zoom. So I think when you have a real deal that you’re very interested in, you want to fly out as soon as possible, sit down, create face to face rapport. And I think that will be well worth the plane ticket and well worth the time.

Alex Bridgeman: And then maybe during the deal process, how often should you be going in person ideally?

Jim Vesterman: You hear stories of search found entrepreneurs who literally camp out at the seller, and either across the street from the company or next to their house or something like that, to try to get the deal done. And I applaud that, I think that’s great. I think it depends upon the situation itself, how precarious it is, what you need to be doing while you’re there, how much access they allow you. If they allow you to come into the office and spend time with the employees, that’s great, you should spend a lot of time there. Oftentimes, they don’t want you there more than a couple of times walking around. People start to ask questions if you’re there every week. But I think at the end of the day, it depends upon the situation. But I know that it runs the gamut all the way to people camping out at the seller.

Alex Bridgeman: Yeah, that’s definitely an interesting strategy that I’m sure works great. The seller, of course, will not be entirely leaving the business once you close. So in terms of that relationship and any ongoing help you get from them, how do you manage the relationship after you’ve closed on the business? And how long do you want them to stay within the business, around the business, within contact for you for questions and kind of maybe timeline for their interaction with the business?

Jim Vesterman: I think if the seller does not- if you don’t agree that the seller is going to continue to participate in the business, then I think it’s very common to have a six month, twelve month consulting agreement. That is, I think, the most normal thing that happens out there. In my opinion, the percentage of times that having the seller on the board, even if they roll, even if they don’t roll, whether they roll or don’t roll, having the seller on the board more often than not will lead to problems. I’m not saying it always leads to problems. I’m saying more often than not it leads to problems. So I think in the ideal world, they’re out of the business. They’re under a consulting agreement that has the right incentives for them. You don’t want to make it too cheap. You want to have the right incentives for them. And that lasts six months in a semi intense way and maybe 12 months overall. Because you will need them. You’ll need to call on them about clients, you’ll need to call on them about the history of deals, you’ll need to call on them about the competitive dynamics of X niche. So, you will need their counsel along the way. But again, I think the ideal situation is that they step away right after close so that you come in, and you’re clearly the new owner, and you’re clearly the new CEO without having them in the office, you just have them on a consulting agreement, maybe they come in and say hi once in a while, but you’re meeting them to get information, or it’s your choice when they come into the office, etc.

Alex Bridgeman: What are some best practices around transitioning some of those key relationships with customers, advisors, vendors, any other specific group of people or stakeholders?

Jim Vesterman: This is where rapport comes in and a good relationship with the seller because if you do have a good relationship and good rapport and they want to see their baby grow, then it is to their advantage to make those transitions. So in the case of Raptor as an example, we had a very important conference, Raptor does school security software. And we had a very important conference with the heads of school security from all over the country once a year. And that first one that happened post closing, the seller came to the conference with me. We prepared a dual presentation in which he got up, thanked everyone for all the years of support, and said I’m passing the reins to Jim and Jim is going to take the company from here, and it was a very positive handoff to a thousand people at once. So that was great. So you will need them to transition some things and/or be involved in some other way. So again, that rapport and/or your structural agreement. You might have a structural agreement that says, I need personal introductions to the 10 largest customers or something like that. If that’s what you need and you think you might not get it otherwise, you should put it in the agreement, in the consulting agreement.

Alex Bridgeman: What else should folks keep in mind after the close in terms of their relationship with the seller?

Jim Vesterman: I think we’ve covered a lot of it. I think there’s a lot of things that can happen if they stay in the business. And I didn’t have that experience, so I can’t talk to them firsthand. But the dynamics of dealing with a seller that stays in the business are a whole nother ballgame that I think you could talk hours about. And again, sometimes it works. I think there are some examples out there where it works very well. And there’s lots of examples where it doesn’t.

Alex Bridgeman: Any common threads for the examples where it does work really well to keep the seller in the business?

Jim Vesterman: Anecdotally, it is when you find someone who truly is a specialist, say they’re a coder or an engineer of some sort, and it’s an important engineering business, and they are truly tapped out and they know that they’re tapped out from a capability perspective of managing the larger business, not that specialty, but the larger business. I think in those cases where they say, hey, I’m tapped out, I recognize that, and they’re a trustworthy, positive person, I think in those cases where you keep them on, they do whatever their specialty is, let’s call it engineering and they love engineering and they’re a positive person, I think in those cases, it can work well and I have heard that it works well.

Alex Bridgeman: Fantastic. Jim, thank you so much for sharing your time on the podcast as part of the Launch Series. I really appreciate hearing all the different perspectives you’ve gleaned from working with sellers. So I appreciate you sharing your time.

Jim Vesterman: Well, thank you so much for having me.

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