Learning Lessons On The Winding Road To Selling A Business

Welcome to the Rialto Marketing podcast. Today's episode is a revenue acceleration series interview where we talk to seven figure B2B professional service firm owners that are actively trying to grow their business and get to the next level. We talk about the good, the bad and the ugly so that you can learn from their experience.

Join Tim Fitzpatrick and Anthony Fracchia for this week’s episode of The Rialto Marketing Podcast!

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Learning Lessons On The Winding Road To Selling A Business

Tim Fitzpatrick
Welcome to the Rialto Marketing podcast. Today's episode is a Revenue Accélération Series interview, where we interview seven-figure B2B professional service firm owners that are actively trying to grow their business and get to the next level. We talk about the good, the bad, and the ugly so that you can learn from their experience. I am Tim Fitzpatrick with Rialto Marketing, where we believe you must remove your revenue roadblocks to accelerate growth, and marketing shouldn't be difficult. Thank you so much for taking the time to tune in. I am super excited to have Anthony Fracchia from Altruis Advisor Group with me today. Anthony, welcome, and thanks for being here.

Anthony Fracchia
Thank you, Tim. It's a pleasure to be here with you. Looking forward to the interview today.

Tim Fitzpatrick
Yeah, absolutely, man. You've got just awesome experience to share with us, so I can't wait to dig into that. Before we do, just want to ask you a few rapid fire questions to get things kicked off. You ready to go?

Anthony Fracchia
Absolutely, sir.

Tim Fitzpatrick
Very quickly, what do you do and how long have you been doing it?

Anthony Fracchia
We have an insurance brokerage firm in Michigan, Southeast Michigan, Bingham Farms. Started that business with my father, Gosh, 23. Aging myself now, 23 years ago. I bought him out of it about eight or nine years ago. And then we were acquired about four and a half years ago by a aggregator out of New Jersey. So I'm serving as President CEO, both Altruis Benefit Consulting, which is my previous company. And then I have my separate entity, which is Altruis Advisor Group, which I'm also President CEO. Cool.

Tim Fitzpatrick
So in those 20 or so years, what's the most important lesson you've learned?

Anthony Fracchia
Yeah, that's a tough one because there are so many. I think I'll go back to There's a lot of challenges we face as business owners, as entrepreneurs. I have a lot of clients that are also business owners. I have a lot of friends that are business owners. I think, personally, I think one of the things I would attribute most of our success to is really, truly understanding how to build and nurture a team. I would always have these conversations with clients and friends that have businesses where they would lament about staffing issues. I took someone on, I read their resume, they interviewed great, we brought them in, and it just felt flat. We just found out that everything they said either wasn't valid or the experience wasn't connecting. They would always say, Isn't that true? I'm like, I don't know. I haven't had those problems with my team. Either it's just we're blessed and God was looking favorably upon us, or it had something to do with how we nurtured our team and really understanding the fact that as entrepreneurs and business owners, we are first and foremost, we are leaders. And when you're leading other people, you really tend to make more I think in a good fashion, you tend to make worse sacrifices for yourself than you will for them. An example would be you're running really lean, you're waiting for a big payment. So you're going to forego a payment as a leader and as an owner to make your team is still getting paid and you're not sacrificing or putting them in harm's way. Things of that nature. I also think one of the biggest factors for our success, which you and I have spoken about before, was knowing that you don't know everything. I think it's very important as a business owner to understand that if you stop looking for outlets or individuals that can help you grow, when you think you know everything there is to know about business or about your business, that is when you begin to stagnate, in my opinion, and that's when that growth will start to stand. I did take on a business coach right after I bought my father It's something I had always wanted to do. His name is Dr. Fadi Baradee out of Michigan. Incredible experience in my specific business. Phd in business, teaches MBA courses at Stanford. He's a brilliant person. And he was one of those people that allowed me to take those risks that I otherwise wouldn't have taken by myself, knowing that I had someone with that horsepower behind me. And I learned a ton. It was like relearning my business. And that's what opened or maybe expanded my scope of what the opportunity really was and then implementing tactics and strategies to go after it.

Tim Fitzpatrick
Yeah. And we're going to dig into that because it's interesting you say, we don't know everything. I interviewed somebody a while back on the podcast, and I wish I could remember who it was that said it, but they were like, Look, nobody has it all figured out. And that really just stuck with me because I think it's so easy for us as we look at the highlight reel of social media and you see all this stuff, it's so easy to go down that road of, Gosh, this person has it totally figured out. No, they freaking don't. There is at least one part of their life that they do not have figured out. And even at the pinnacle of business, you still don't have it figured out, man. You're still trying to figure out certain parts of it. You're never done learning. And I think if we can have that humility, we're going to be much more open and receptive to receiving the things that we need to be successful.

Anthony Fracchia
There's no way you are going to, in and of yourself, generate any idea that you're going to need to generate while you're just sitting home that's going to help you grow your business and scale. I'm a firm believer in that.

Tim Fitzpatrick
Yeah, I love that. So we're transitioning here. We know running a business is hard. Any mantra or motivational saying that you say to yourself or share with your team to push through those roadblocks?

Anthony Fracchia
There's one that comes to mind. It's very simple. It's one I find myself using a lot because it's helped get myself and my team out of any shell that we may have built around ourselves. We're a sales organization. So the mantra that I've been using as of late is The answer is always no, if you don't ask. And what I like about that in a sales perspective is we service clients, we sell, and a client will call in and ask for something. And if I catch my team saying, well, generally, Anthony, we can't do that. I'm like, Well, did you ask? Did you go to the... This client wants to do something. In general, the carrier may not allow it, but that's where our value is, right? If we can't bring value to the table, above and beyond them doing something by themselves, then what's the purpose of us? So did you go to the carrier? Did you ask them? And they're like, No, I didn't. I'm like, We're one of the largest individual insurance producers in the state of Michigan. We got great relationships with these carriers. If we call the carrier and say, Hey, listen, we've got a good client. I know you typically don't do this, but we're hoping maybe you can make an exception for it. Ask the question. Because if you don't, it's a no. And you'll be, I'm amazed at if you ask those questions the right way, if you don't call that carrier and say, Hey, we write all this business for you and you're going to do this for us, that's the wrong way. It's like. Then you're arrogant. They don't want to do anything for you. But if you approach it in a manner of like, Hey, would really appreciate if you could help us out. It's a long-time client. They love your product. They've been with us for a while. Can we do something to help them? They almost always say yes because they want to keep them on the books as much as we do. As of late, there's a lot of mantras that I've used over time, but as of late, and I've applied that to my personal life, we're not going to get a reservation at that restaurant two days before Friday. Did you ask? No. Okay, call up. Hey, I've got some very important friends in town, and we've been telling them that your restaurant's amazing, and we've talked about it, and we're just wondering if there's an opportunity for us to get a table. Yeah, absolutely. Just ask. The answer is going to be no if you don't.

Tim Fitzpatrick
The answer's always no if you don't ask.

Anthony Fracchia
Correct.

Running a Business with Family

Tim Fitzpatrick
Okay. I love it, man. That's a good one, man. Anthony, you touched on this. You worked with your dad for over 20 years. You eventually bought him out about eight years ago or so. Tell us more about what that experience was like and what your biggest learning lessons were from that.

Anthony Fracchia
I would tell anybody, I would tell any of your listeners to tread lightly or cautiously when getting into business with family, because there's obviously a personal dynamic there as well as a professional dynamic. When I graduated college, I was in the consulting business I worked at Ernst & Young for about five years, learned a very good management structure and processes my degree is in process engineering, so I'm very meticulous and organized with that stuff. My father has been an entrepreneur his entire life. He's at an Italian restaurants for 20, 25 years, he had me working in those things when I was 10 years old. No joke. If you're Greek or Italian and your family owns a restaurant, the moment you can go to the bathroom by yourself, you're working in their restaurant. You're doing something with them. I just watched my dad always run businesses, and I had never done it myself. So I'm like, what a great opportunity to work with someone that's an entrepreneur, true entrepreneur, and learn from him. And I did learn a ton from my father. I'd say that the biggest challenge was he started in the business in his late '50s, whereas I started in my late '20s. And as we're working and evolving, the life cycle different from someone in their late '50s than someone in their late '20s. Someone in their late '50s is working towards the exit. Someone in their late '20s is working towards growth. So eventually, those two things will be opposed to each other. So we came to a point where we were 50/50 business partners. The other advice I would give is if you are going to be a partner with one other person, if you're the person that started that idea or that proof of concept, it should always be 51/49. A 50/50 can make it difficult because you both have to agree on everything in order to implement it. That's where I think things got difficult for my father because he'd say something like, Well, why do we want to do all that? Things are going great. I'm like, Yeah, but I want to grow it more. He was completely happy with where we'd done a great job together, and he was very happy with the way things were running. But I'm the person where back when I was consulting, they'd sit me down and say, Hey, you got a promotion. The first words out of my mouth were, Great. What do I have to do to get another one? I wouldn't even sit for a moment to be like, Great, I got a promotion. I'm like, What's next? Let's go. That's the way I'm wired. My father was wired a little bit differently. Those are some challenges. But I tell you, I learned a lot about running a business, things that I probably never would have learned in school from him because this guy cut his teeth in a tough business. The restaurant business is a tough business, and he was very successful in in that. I learned a lot in terms of resiliency, understanding that you're going to have peaks and valleys, right? Feast or famine. There's going to be times where money is great. There's going to be times where it isn't. And you cannot let those lulls or those dips and valleys impact your strategy of what you're on the path of achieving. I learned a lot in that relationship and in that approach.

Tim Fitzpatrick
Did you guys have pretty separate roles as far as what you what you were focused on within the business and what your dad was focused on, or was there a crossover there?

Anthony Fracchia
Yeah, there was a little bit of crossover because our business was a little bit... It wasn't like a traditional business. My father and I were both licensed advisors. We both wrote our own business. We each had our own clients. Our agreement was always, we always own our individual books, but then we are also what's called a general agency in the state of Michigan. What that means is we're effectively a wholesale. We built this business up to a point where we have now independent agents putting their business through us, where we provide sales support, we provide leads, we provide training, and we can actually give them a higher commission rate than they would have otherwise earned on their own. That was the brokerage business. When I bought him out, the first thing we did was we took our books out of it because I owned mine and he owned his. Really, what we were splitting was that agency business. He did a lot of work on recruiting agents because he loved that stuff. He loved talking to people, loved going out and taking him to lunch, taking him to dinner, taking them to Tiger's Games, whatever. He also did a lot of the background administrative where he was really good with the finances. He handled the books and things of that nature, where I was working more on systemizing the business, not running fast and loose. I was bringing my education and my experience from consulting into this environment where I'm very comfortable when things are repeatable, things are documented. God forbid, you lose somebody, you can bring someone in like, Here is our format. This is what we do. It's like, Oh, let me think about what we do and see if I can make sure I get through all of this without forgetting something. That stuff freaks me out. That triggers my OCD. So I worked very hard on systemizing our business, improving efficiencies, because that's what my education background is in.

Tim Fitzpatrick
So there was a little bit of overlap because of how the insurance business is really is structured. But you guys did have your own skill sets, and within the business, you were applying those in different areas.

Anthony Fracchia
Exactly.

Tim Fitzpatrick
Which to me makes a lot of sense, right? Because I think when there's crossover in what you do within the business with your partners, that's when things, I think, can get really messy. The people that I talk to that have worked with family, there doesn't seem to be a lot of in between. It was either good or it wasn't very good at all. I told you this in our pre-interview, I worked with my dad for over nine years. And for me, it was just an amazing experience. One, because I got to see a different side of him. That I never would have had exposure to. And so I'm super grateful to have had that. But it also worked really well because, man, my dad was super laid back. He had a rep business. We had the distribution company, and I had nothing to do with the rep business. And he just let me do my thing and make my own mistakes on the distribution side. And he just let me run it day to day. He was always there as an advisor, as a mentor, but he gave me a lot of autonomy and a lot of freedom. And for me, that worked really well. I don't think that would have worked nearly as well if he would have been all over me all the time. And so for us, I think he would agree that it was an amazing experience for both of us and one that we're super grateful for. The other thing I want to pull out that you said that I think is easy for people to overlook was, don't go 50/50. Make it 49, 51. Something so that when the rubber really meets the road-

Anthony Fracchia
Something to break the tie. Yeah.

Tim Fitzpatrick
Something to break the tie.

Anthony Fracchia
There's a reason why a board of directors has an odd number.

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The Importance of Hiring a Business Coach

Tim Fitzpatrick
Yeah, that's right. That's right. But I think that's an easy thing for somebody to overlook that you don't know what you don't know. So thank you for sharing that. So after you bought your dad out, you touched on this, you hired a business coach. Why did you do that and what happened as a result of that work? I'm going to have other questions, but let's start there.

Anthony Fracchia
So this gentleman, Dr. Dr. Fadi Baraddi. His company is called Baraddi Business Performance. Phd, 20-year veteran in my business, ran a $50 million outfit in the insurance and financial services game in Michigan. So very astute, very knowledgeable, great experience. I called it getting an MBA in my own business is how I look at it. I'd met him before. I met him before I bought my father out and really thought it would work better if I did it with him on my own, if I could, if my father and I did come to an agreement on a buyout. As soon as it did, I brought him in. The reason I did it was because we were at top-line revenue, we're about 2, 3 million, and really wanted to get to the $5 million mark. When I think, I would say this to your listeners, it's tough. It's completely different structures to go from a million top line to 5 million. Then again, if you're looking to scale from 5 to 10. There are different systems that have to be in place. There's a different org structure that has to be in place. There's different expenses that you have to take into consideration to scale to that. And upwards, along the line, now you're talking about getting an executive... You go above 10 million. You're talking about getting an executive team in place. You're talking about getting a board of directors. You're evaluating private equity. You're looking at potentially doing an IPO and things like that, the higher you go. So it's just different things that have to be on your radar that aren't going to be on it based on where you're currently at. I just acknowledge that. I'm like, Listen, I know where I want to go, and I'll tell you why this was so important. You and I did this in the pre-review, so you know where we're going with this. I'm like, I'm busting my butt. I am working so hard. I'm working seven days a week. I'm always on. I'm always available. I feel like I'm just bumping my head into this revenue ceiling, and I don't know why it's happening. And so I did it because I'm like, I need someone that's done this to look at what I'm doing, give me that guidance, and help point out maybe some of the things I'm not doing. And I'm just grateful that I wasn't arrogant enough to know that I didn't know how to do it. And I was willing to ask for that help because I was so committed to it. And I knew we could do it. I just needed to get the hacks. I needed to get the cheat codes and get somebody in that knew it to get. So that's why the decision was made.

Tim Fitzpatrick
So you hired a coach who was in the same business as you, who had made it to a much further place.

Anthony Fracchia
Yeah.

Tim Fitzpatrick
Anthony, I can't even tell you how so many of us overlook that. He's the guy. He knows exactly where you are.

Anthony Fracchia
He's the shirtbut.

Tim Fitzpatrick
Yeah. He has already hit multiple levels above even where you wanted to go, he knows exactly what you need to do, right? Yeah. And so could you have figured this out on your own?

Anthony Fracchia
Probably.

Tim Fitzpatrick
Would it have taken you a longer period of time and far more headaches? Absolutely, yes, right?

Anthony Fracchia
Especially based on what he uncovered in our... Right when we started working with each other, because I don't know if I would have, because I had blinders on to what this what this guy, what he helped me discover, which is what broke the log jump.

Tim Fitzpatrick
Yeah. How long did you work with him?

Anthony Fracchia
Four years.

Tim Fitzpatrick
Okay. So four years. And was this thing, were you meeting monthly with him? What did that look like?

Anthony Fracchia
Weekly. We would meet weekly for an hour.

Tim Fitzpatrick
Okay. So once a week. Awesome. And so did he start to break this down into little like, okay, I understand where you're at. Here's the first thing we need to work on.

Anthony Fracchia
Yeah. And that was honestly, it was really the way that we started really is what solidified the fact this was probably one of the single best decisions I ever made in business. He developed this exercise called Determining your Fundamental Conversation. Your Fundamental conversation is something that is restricting you from achieving your goal. I had never heard of it before.

Tim Fitzpatrick
Say that again. What did he call it?

Anthony Fracchia
Determining your fundamental conversation. This is the conversation. It in layman's terms, this is the conversation you have with yourself, which fosters the actions that you are taking. And you are committed to this fundamental conversation, which is the reason why you are not not getting to the place you want to go, and you don't know it. It took us months of working and talking to get to this point. And what he does is he takes all this information and he forces you. This is why it takes so long. Because there's all these things that lend to your fundamental conversations. There's things you tell yourself. There's work. There's past experience. There's things that you've done in the past that you like that maybe don't work for your business that you continue to perpetuate. So the challenge was distilling your fundamental conversation down into one sentence and knowing this one sentence is the thing that is stopping you. And it was like I was once blind, and now I can see. When we got down to the nitty-gritty after months of doing this, my fundamental conversation was, Screw it, I'll do it myself. So let me dive into that a little bit and why that single sentence was the one reason why we could not experience growth beyond what we are currently achieving. He identified me as an impatient perfectionist, which I will absolutely agree with him. I am an impatient perfectionist. Now, I'm sure there's aspects of life and business where those characteristics will serve you very well. There are also aspects of life and business where those characteristics will not serve you. I found those. Being an impatient perfectionist, you bring an employee on, you're like, Hey, you work for me, Tim. Hey, Tim, this is how I do this action. I need to go focus on other things. I'm going to delegate and elevate. It's like that's how you build a team. You take the things that are great uses of your time or not great uses of your talent, and you delegate those to other people so you can spend more of your time working on the things that do accentuate your value and what you're most talented in. So when I'm doing this, I'm bringing on team members. I'm saying, I'm going to carve out this aspect of what I do in a day. I'm going to give it to you, and I want you to move forward, and I want you to grow within that role. But I want you to do it a very specific way, and I want you to do it within a very specific time frame, which is the way I do it and how fast I do it. And so what ends up happening is, Tim, I give you this job to do or this role to take, and then I watch you like a freaking Hawk, okay? And the minute I give it to you, and then I'll literally come to your desk and I'm like, Tim, why isn't this done? You're like, I'm still learning, Anthony. I'm still, okay, I'll give you another hour. And then you get it done. I look at like, Tim, this isn't the way I would do it. So, Tim, go do it over again. Take your time. I'll give you three hours this time. What I found and what he enlightened me to was I was consistently taking the work back and saying, screw it, I'll do it myself. And I would go do it myself. So I would give work and tasks to my team, give them parameters, teach them once, which I don't know why I thought, I'm going to sit somebody down, tell them how to do something once, give them a manual. It's going to get done perfectly now. It's not how life works. It got to happen multiple times. I wasn't aware of that because if someone gave me something to do in the consulting business, I didn't get three takes. If I didn't do it on the first or second I take, I'd probably be fired. Those were these unrealistic expectations I'm putting on my team. And then when they're not performing at a level and a speed that I want, I'm taking it back, I'm doing it myself, and I'm not doing the things. When I take that work back, that's now less time that I can focus on revenue growth activities. It was brilliant in its simplicity. I'm almost angry at myself that I didn't see it but he told me this-

Tim Fitzpatrick
We're too close to the fire.

Anthony Fracchia
Oh, yeah. And he told me this one very important thing. He said, Anthony, you need to reconcile with yourself and you need to become okay with accepting that your team at best will do things 60 to 70% as good as you would do it, 60% to 70% as fast as you would do it. If you cannot grasp that, and if you cannot accept that, we may as well stop working with each other because you will never scale. You will always take this work back. You are the visionary. You are the person that's going to grow this business. But the more you answer phone calls and go call the carrier because someone lost their insurance card, the less you are working on growth strategy, you will stay stagnant and you will never grow. And so that's where the work started.

Tim Fitzpatrick
And how long did it take you working with him before you were able to identify that fundamental conversation?

Anthony Fracchia
It took It was one of the first things we did. And I think it's one of the first things he did with all of his clients, which is brilliant because you want to know what the problem is as soon as possible versus wasting time, putting effort and energy into what might not be the core issue. That's the brilliance of it is identifying it first and saying, great, now we understand where the log jam is. Now we're going to break that up. Now we're going to put effort and energy into strategies and tactics to break that up and free your time to go do those things that are going to help you grow. That took about 2-3 months. It took a while. Not being a generally patient person. Why is this taking so long? He's like, Just trust me. It'll be worth it when we figure it out because you don't want to rush it. You don't want to identify the wrong fundamental conversation, and they'll go off down that path and understand that it wasn't really truly the issue to begin with.

Tim Fitzpatrick
We have to have patience. It's really hard. I'm not very patient either. But these things take time. As you're sharing this, I'm thinking, he's just peeling the layers of the onion back to get to the heart of the matter. Sometimes you can't rush that. It just takes conversations. But my guess, and correct me if I'm wrong, but my guess is there was one day where you guys had this conversation and something came out and he was like, Oh, my God, that's it.

Anthony Fracchia
I really believe, and I don't know if you'd ever admit this to me, I think he knew it way earlier than when I figured it out just by getting to know me because we knew each other for about a year or so before I actually... We were friends and colleagues and we'd see each other at events and things like that. We were friends before we started, and he's a very intuitive person. I believe he knew this before I figured it out. And that's the thing that I really appreciate. It was that he forced me to figure it out because if he just gave me the answer, I'd be like, No, I never do If I get to that on my own, I'm like, Oh, my God, I do that. Yeah. I really do. And it's like, Oh, my God, this is really the issue. And he allowed me to get to that point with guidance, but allowed me to get to that point. I think it had a much deeper meaning because of that.

Tim Fitzpatrick
At that point, were you building the company thinking that you were going to sell it?

Anthony Fracchia
No, I wasn't. I'd say probably for the first year, no. Then I had colleagues in the business, not only in the state of Michigan, but in other states. Private equity, I'd say, Gosh, probably about seven, eight years ago, just got heavy into residual revenue-based businesses, which is what insurance is. It's similar to a SaaS software as a service model where you're paying a monthly fee and getting services or getting access. These revenue models are very attractive to private equity. They stumbled into the insurance industry and the multipliers on EBITDA started going up and up and up. It wasn't until probably the fourth or fifth colleague of mine sold their agency in their brokerage that I was like... They would come to me saying, Anthony, you guys do a very good job of what you do. If you're ever considering this, I can get you in touch with the group or the broker I worked with or the group that acquired me. I'm like, No, I'm good. I enjoy this. I'm going to keep doing it. But then it gets to the point where you have to realize, and I realized, this was around the time where government intervention in the insurance business was at its highest point. We went from a non-governmental I mean, we're always regulated. We have to be licensed. But with the advent of the Affordable Care Act, government intervention in our business got much more substantial and significant. And that just at some point, concerned me a little bit. I just didn't know, you start to lose a little bit of control when that happens. The more government gets itself involved in a business or a market, it's natural for that market to have less control. Not knowing where that was going to end up going I started to... I would never take the calls. I would never answer the emails. I was getting pursued nonstop because other people that would sell would say, Hey, this is another very successful business in this space. That might be interested. And so it's like turning 65 and going into Medicare, you're getting hammered with documentation from the time you're 63 because it's going to happen. So, yeah, that's how it started. And then I started looking at these multipliers just ratching up, going from 3 to 7 to 10. And now there's multipliers in the 14, 15 X on EBITDA range today. You can't ignore that.

Tim Fitzpatrick
Yeah. You guys were selling benefits. It was B2B. We're not talking consumer property casualty.

Anthony Fracchia
No, it was both. No, it was health life disability, individual personal lines, as well as employee benefit structuring for employer groups.

Lessons from Selling a Business

Tim Fitzpatrick
Okay. Well, so you guys were selling a lot of different types of insurance. You worked with your coach four years, and then you sold, right? It was about that. You worked with him the entire time, and he was helping you just continue to build, continue to build. When you decided to sell, what did you learn from that experience and transitioning then to work for the company that bought you? A lot of people don't realize that. It's not like you just get bought and ride off into the freaking sunset. I don't know. Maybe there are cases like that, but that's rare. Usually, you get bought. You've got a time period where they want you to stay on. There's learn out money so that if you don't maximize, you're leaving a lot of money on the table. Share with us what that was like.

Anthony Fracchia
When I made the agreement with myself that I will start to entertain some of these solicitations I was getting, I had no idea what I was doing. Like, Hey, you want to talk about? Let's talk, right? I'm going to give a plug here to a gentleman who's got... You may have heard of this podcast called Built to Sell, John Warlow.

Tim Fitzpatrick
I believe I have heard of that.

Anthony Fracchia
It's a great podcast. I did a show with him, and I ended up reading his book that he wrote, which I told John in his pocket. I'm like, I really wish I would have read your book before I sold business because there are a few steps I probably would have taken differently. I would have prepared myself a little bit differently. What I was doing was I was just having conversations with anybody that wanted to have a conversation about it. While that's good from an exposure perspective, what's not good, if you don't have a goal in mind or if you don't establish non-negotiables, things that are going to be deal breakers at some point down that path. Because diligence, these things take three, four, five, sometimes six months. You're doing financial diligence, you're doing legal diligence, you're doing contract negotiations, all these different aspects of a successful acquisition that you don't want to go four months into it and find like, Oh, no, there's a thing that we're not agreeing on right now that I should have said from the beginning and saved ourselves all this time. I went down the rabbit hole with the first conversation and realized that there was that ultimately my team, their livelihood would have been put in jeopardy. They had the group I was talking to was basically like, Hey, we have our own team. We're going to buy you. We're going to own that company, and we'll try to find a spot for your employees. I'm like, That's not good enough. I'm not going to ride off and leave my team holding the back. They're the ones that got me here. So right after that, I was like, Okay, I need to put together some non-negotiables. So right on the bat, right on the first conversation, Yeah, we can have a chat. These are the things I have zero flexibility on. And if we're okay with that, then yeah, we can continue that conversation. But if not, then I appreciate the interest, but we're going to pass. I should have known that the first time, learned it after the first time, and then incorporated that, had two very short conversations following the first one because of those non-negotiables, and then ultimately met, was approached by my parent company now, which is Reliance Global Group, where they were open to an accepting of all my non-negotiables. We pursued that and had a successful acquisition.

Tim Fitzpatrick
I love this, man. Thank you for sharing this, Anthony, because as you're talking, I'm thinking about this like buying a house. When we go to buy a house, there's must haves, there's the wants, and it would be nice to have, right? When we're thinking about selling our business, we have to have that stuff lined out.

Anthony Fracchia
It's got to be intentional. The more intentional it is, the more successful it's going to be for you, the person who is being acquired. The less intentional it is, the less intentional you approach that environment, that situation, the more beneficial is going to be for the acquirer. Because if you don't know, they are going to put language and aspects in place that are going to be in their best interest and not necessarily yours. And so that's a big lesson that I learned, and I'm glad I figured it I use the phrase I force, come to my way into that and before I actually went through with the acquisition.

Tim Fitzpatrick
You need to have a clear idea of what you want.

Anthony Fracchia
Right. Also, the one thing that I will pull from John Warlow's book, which I think is brilliant, is I didn't really create a competitive market for my business. I was having one conversation at a time time and until failure and then starting the next one. As any good business owner knows, which I should have known is, you want to create interest. It's even better for me as the company being acquired, if I were to create interest from multiple companies where they could outbid each other and create somewhat of a bidding competition for the business. Because if someone wants it bad enough, they'll throw an extra X on that multiplier to put themselves in a favorable position. The way John Warlow puts this in his book, which I thought was brilliant, is put together basically a cut sheet, put together a one-pager, which highlights the information that any prospective inquireur wants to know. You want to talk about top-line revenue, expense ratio, cost of goods solds, what are your margins, what does your client profile look like? Meaning, do you have seven big clients where if you lose one of them, Is your revenue is taking a one-seventh hit, or is it spread over hundreds or maybe thousands of clients where a couple fall off? It doesn't matter because you're bringing more on exponentially than the ones that are falling off. You want to show, Hey, here's a trailing three years, right? Trailing three years of revenue growth history. What is your growth rate at? That is another big thing that comes into play. If you can show that you're growing year over year over year for three to five years in succession from potential acquirer, that looks amazing, right? That means you're not just sitting back on your lawyer. You're always challenging yourself. You're always growing. So I would have done that, right? Had I gone back, I mean, I talked to John after I sold, and then I read his book and I was like, oh, good Lord. Opportunity missed, but I'm not... That's the only thing I would have done different. I worked out a great deal with my parent company. I'm not disappointed by the deal that I ended up making, but it would have been nice to have a couple of other players in game to see what we could have done.

Tim Fitzpatrick
Yeah. Well, it goes back to the house analogy, right? As a seller, maybe you want multiple buyers. It creates that frenzy. I love the idea of having that one sheet. Does he talk about on the book, at what point do you share that one sheet? Do you have a letter of intent or a memorandum of understanding? It seemed to me like that's important information, but you I don't want to just start freaking throwing that around with people that aren't serious either.

Anthony Fracchia
You typically want to do that before the LOI, because once you enter into an LOI, there's usually constraints inside that letter of intent that are going to restrict you from speaking to other people and pursuing other potential suitors.

Tim Fitzpatrick
Got it.

Anthony Fracchia
That's general information in LOI. From my perspective, I would have had I done it, after I got past the non-negotiables, did a little bit of diligence on that company to see if it was a cultural fit. That's very important. Learning as much as I can about that company to see is, is this ultimately going to mesh with the environment and the family mentality that I have with my team? Or is it more rigid corporate structure where they're just a number and they're disposable? Get past some of those big things. And once you do, then you can say, Hey, I'm going to give you basically, for lack of a better term, a a prospectus of my business that hyphenates everything you need to really know. I can provide supporting documentation to substantiate any aspect of that cut sheet. If you want to see the financials, here's my PnL, here's my statement of cash flows, here's my balance sheet. They all line up to the penny. I would give it out then. I would only do it. You don't want to make a mess of it. You don't want to just start, like you said, throwing it out to everybody. Two or three, four people in the mix that you think are going to be good fits that are going to help you grow post-acquisition. That's another big deal because you mentioned something, and we talked about the earnout period, and I did. I had an earnout period of three years. And additional money in your acquisition figures are tied to your earnout. You have to hit certain growth metrics in an earnout. There could be reasonable expectations of what growth numbers you have to hit. There could be unreasonable. You have to pay attention to those things. Because if a company is like, Hey, you need to grow a minimum of 10% year over year, and you're clipping 20 right now, okay, that's not a big deal. But what if it's the reverse? What if you're growing at 5% to 10% and their expectations are 20, and they're going to I'm telling you something like, Well, we've got this machine that's behind you now that's going to help fuel that growth. Okay, that's great, but it has to be a realistic number because if you don't get them, you're not getting paid. In general, depending on how you negotiate your deal, you could get 70% upfront, could be cash, stock, a combination, that's upfront money. The 30% or the 40% or the 20%, you're not getting that money until you hit those goals. If you're talking about a two, three million dollar operation, it's looking at a 10X multiplier, that's $30 million. 30% of that is $9 million. That's a lot of money that you'd be walking away from that your company is valued at, legitimately, and you're not going to get that. You got to pay attention to those things. Once you find a few people that are going to fit within the parameters that you're defining for yourself, then you give that cut sheet. Then the LOI comes in when you're in negotiations and you're having conversations and you're saying, Hey, I like what you're offering. I like your structure. I think we can grow with you. This is where our best bid is at. It's got to be above that. And you negotiate.

Conclusion

Tim Fitzpatrick
If you had to pick just one factor, what do you think was the biggest driver of your success?

Anthony Fracchia
I'd have to say never being satisfied with what I've achieved. I have this mindset where it's growth. I have a growth. I don't know if I learned it somewhere. I don't know if it was a God-given attribute of my personality or my core wiring. I don't know what it is, but there was just no stop in me. There was never a point where I'm like, I'm cool with this. Let's just put this on, cruise control, and everything's fine. Again, I played sports my whole life. I am an incredibly competitive person. It's not even about money because what I've earned over my life and what I've achieved, if you were to come hang out with me, Tim, you would see that that does not match my lifestyle. I can live off $50,000 a year and be fine. I don't care about that. I'm not driving expensive cars or doing these things. It's a metric to measure, did I do something better this year than I did last year? That's the mentality that has been inside of me that I've fostered and nurtured. My business is a very competitive business. Specifically for some reason in Michigan, I don't know why. We work with carriers that are national, right? And they've always come back and said, We've never seen a competitive marketplace amongst general agencies like there is in Michigan. I'm like, It's a freaking knife fight in a phone booth in Michigan. Very aggressive with our competitors, trying to take clients, trying to take agents, trying to one up each other. And some of it's done above board, some of it's done below board, right? We always pride ourselves on trying to stay above board with those things, but it keeps you on your toes. When things are calm and silent, that's when I get worried. I'm like, I need to figure out a way to just keep moving forward. Whether or not someone's coming after me or not, it's something that's innate. I was never Whenever we achieve something, I think that's what drove my dad crazy. And that's what allowed him to say, Yeah, I'll sell to you because I don't know what's wrong with you. It was always like, Great. I'm glad we did this. What's next? And I gave no time. And that's not a good thing either. You should take time to appreciate and revel in what you've achieved and celebrate that with your team and your family. And I just didn't do that. It was like, What's next? And It just kept growing like that.

Tim Fitzpatrick
I wanted to ask you, there's anything you do differently? You already touched on the fact that in the selling phase, you would have pitted multiple buyers against one another. Anything else that comes to mind, and or your experience that you might do differently?

Anthony Fracchia
I think I would have... Because of the way I did things, it was it's always a very manual process. I think I would have embraced technology earlier before getting to that point, because I'm realizing that now is that technology in our business has evolved at such a rapid pace that it's allowing business owners in the insurance space, whether it's P&C, health life disability in the financial services business. It's allowing people to scale exponentially without having to scale human beings in sync with that. It's just with the advent of AI. It's funny. I just had a conversation with somebody today about AI applications in the insurance market and how that's going to change the game. I think I would have embraced technology a little bit sooner. It was just one of those things where I was always just so busy. I didn't want to commit the time to say, okay, if I'm going to do this, I have to be very invested because that's what I did in consulting is I installed large scale enterprise systems at Fortune 100 companies. That was my job. And I knew the amount of time and effort it took to do that and do it right. And I was always struggling with finding the time to do that. But I definitely think embracing technology sooner would have been the one thing I would have done differently.

Tim Fitzpatrick
Anthony, this has been awesome, man. You and I could chat for days here. Thank you so much for sharing the experience. If people want to connect with you, best place, LinkedIn?

Anthony Fracchia
Yeah, absolutely. Linkedin. Anthony Fracchia got all my information there as well as my charity, which you and I talked about a little bit. But it's been great talking with you, Tim. I enjoy these forums to have a Q&A because I have to learn. I have to prep for stuff like this and make sure that I'm a good guest. So this is fun.

Tim Fitzpatrick
That's awesome. We will make sure the link to your LinkedIn profile is in the show notes. Anthony Fracchia. And last name, Fracchia. I don't know how many Anthony Fracchia's are on LinkedIn. Probably not many. Look them up, Altruist Advisory Group. Anthony, thank you for taking the time. Those of you watching or listening, thank you. Hope you got some takeaways. I certainly did. If you want to connect with us, you can do that over at rialtomarketing.com. The other resource we've got for you is over at revenueroadblockscorecard.com. If you want to know which of the nine revenue roadblocks are slowing down your growth, you can find that out in less than five minutes over there. So go check it out. Thank you so much. Until next time. Take care.


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About the author, Tim Fitzpatrick

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