Designing your exit with Ryan Ray

Every business owner will exit their business at some point—the only question is whether it happens by design or by default.

In this episode, Morgan talks with business strategist Ryan Ray about how to approach exit planning with intention. They go beyond valuations and deal structures to explore the deeper questions: Why is it so hard to step away? What does “ready” actually look like? And how do you balance financial goals with the life you’re trying to build outside the business?

Ryan shares how he helps owners identify where they’re stuck, remove themselves as the bottleneck, and begin building systems—and teams—that can operate independently. Along the way, they discuss the role of fear, the myth of perfect timing, and the tradeoffs every owner has to navigate.

Whether your exit is years away or not quite on your radar yet, this episode offers a framework for thinking about it on purpose. 

Connect with Ryan on Linked https://www.linkedin.com/in/ryanraysr/ and learn more about his business here: https://rgahub.short.gy/webinar 

Thank you for listening!

Visit my website to learn more www.MorganRanstrom.com... or keep up with the latest via social media:

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Transcript

SPEAKER_01 0:03

Welcome back to Morgan on Purpose the podcast. Today we're diving into a topic that every business owner will face at some point: exit planning. How do you step away from the business you've poured your life into without hurting yourself, your family, or the business itself? So to help unpack this, I'm so excited to have Ryan Ray on the podcast today. Now you'd think that a North Dakota boy, I live in Minnesota, but I'm a North Dakota boy at heart, and a Texas guy would have very little in common other than maybe a love for wide open space and cattle. But we both share a love for our favorite, the best NBA team ever, the Minnesota Timberwolves. So I'm doubly excited to have Ryan on. Ryan specializes in helping entrepreneurs and business owners get out of the bottleneck and create a business that can thrive without them. Ryan, welcome to the show.

SPEAKER_00 1:05

Yes, excited to be here. And uh it's good to connect. And uh yeah, so uh thank you for that introduction.

SPEAKER_01 1:11

We'll try not to make this a Timberwolves hot take episode. Oh well. And we'll stick to the topic.

SPEAKER_00 1:18

Okay. We will do our best.

SPEAKER_01 1:20

So yeah. Yeah. Um look, so I've been looking forward to this conversation about exit planning. Uh it's not just about finances, right? It's not just about the business finances, the personal finances. It's also about mindset, identity, preparation. Uh many business owners struggle to detach themselves from the company they've built. Uh and your experience, why is it so hard for owners to step back even when they know they need to?

SPEAKER_00 1:53

Yeah. Oh man, there's a lot there. Um I think it for each owner it's gonna be different. Um but if as humans, we think that people think about us more than they do, right? And so that's just our tend our tendency. Whether it's our our spouse or our kids, we presume that they think about us more than they do. And so the more involved in your business you are, you begin to presume that your customers, your employees, they think about you more than they do. And this is not to be derogatory, it's just saying that, hey, you're important. You're providing a paycheck or a service or a product, and that's really important. But you know, once you die, it's they're not gonna think about you that much. Your family and friends will for a little bit, but your employees, they're gonna go, oh yeah, I work for so-and-so. And if we just pause and said, well, let's name all the teachers through grade school, through high school that we had, we'd struggle to do that. And they were very influential. That we spent an hour with them, a day learning a subject. We couldn't even name probably 30 friends from high school. We can't name our neighbors from 15 years ago. So if we start to look at it, and once we realize that, we go, okay, wait, I need to provide a really good uh business that provides good employment and a good product or service. I'm not diminishing that. I wanted to do that. But also, I got to realize that it's not a meocentric universe. Like people won't think about me that much. And I'll I'll end with this. My grandfather was a civil engineer. And the city that I grew up in, he designed, uh, helped design a bunch of stuff, and he was a city engineer of Monroe for a period of time. And if you went back to Monroe, Louisiana today, there's no statue of him, and no one would know who he is. And he only he's only been dead 10 years ago. And he's designed a lot of stuff tied to the city, not you know, 100%, but you know, some key buildings and stuff like that. But people don't know who he is. And I'm not saying that, and I thought he's a great dude, my grandfather, I love the guy, right? But people just don't know. And so once you begin to realize, okay, hey, my job is to provide a good product, service, and wage for and and uh and uh opportunity for my employees, that's my job. Let me do that. And by removing myself from the business, I can do that, and oddly enough, I can go do other things. And and then if you want to be impactful in the community, you now have the time to go do that in a way that's not tied to your product services. So I'll I'll stop there, but that's some of my thoughts. I hope that makes sense.

SPEAKER_01 4:14

Yeah, uh, I mean, so well said, I I often think of this within virtues and anti-virtues, just because that's kind of how how my brain works. Uh but I I what I heard from you was there's an element of hubris thinking that it's all about you, or it has to be all about you. And then to move beyond that, there's a strong element of humility, right? It's like we have to learn humility uh to elevate others and uh detachment, right? We have to detach from this idea that we have to be 100% involved. Uh that said, it's not just about virtue or emotional attachment or whatever. Uh, it can also be very practical. Uh so owners often feel like they are the bottleneck. In fact, they often are the bottleneck. I am an owner of a business and I feel like the bottleneck all the time, and it drives me nuts. Uh, so everything goes through them and they're critical to every decision. Why do you have to weigh in on this? Uh whether that's because you're micromanaging or just because you just haven't built team or systems. Anyways, how do you help your clients untangle themselves so the business can run independently or run without their day-to-day effort?

SPEAKER_00 5:38

Yeah. Well, and I think we should pause here just for a second and say that, you know, I'm a solo practitioner. So if you're hearing this, you're going, Ryan, are you not the bottleneck? And I'm like, well, it depends on what we mean by bottleneck, right? So a lot of owners don't really have the end goal in mind. And once you have the end goal in mind, you can then begin to figure out where you want to be involved in the business at. But because we don't have that, we don't really know what's going on. And so for me, my play is I'm investing in certain stocks and perhaps real estate. That's kind of my play. I don't really want to build a sellable business. I've done that before and I've exited that. I don't want to do that again. That's not what I want to do. But a lot of owners I talk to, they don't understand that they built something that is a trades-based business, let's say, but they build it more like a lifestyle business, and then they go to exit, it's just not worth what they need to be worth. That's the worst spot to be in. So you gotta understand what's your goal. Like, what is my goal? How do I get there? And then um, when you when you think about removing yourself from the business, I use what I call the focus flow grid. And so it's got four grids. Uh the top I can send this to you when we get off if you want it. Um, but the top right is what I it's called the flow zone. The top left is called the grind zone. Now, those two zones you can't escape because um if you think about the grind zone, an owner might be doing taxes, which are really high ROI, you got to do those, you know, even if you think don't think about uh making money prevents you from going to jail. Uh taxes, it could be HR, it could be legal, um, it can be stuff like that. And the, I'm sorry, the top, let's stop left. The top right is the flow zone, and that's really where you want to be at. What happens is on the bottom left, I have the drain zone. And so what we do is we say, well, I want to be involved in closing sales. Like that's my specialty. Well, we go and set the appointments, we send the cold emails, we do all the stuff along the way that really is in the drain zone. It drains us from being the most effective we can. Instead of going, wait, I don't got to do market research. I need to know this thing about market research. I need to know, you know, what the best script is or what whatever it is, depending on the industry. Um, I can pay someone to go do that for me. But we we seep into that drain zone, and then we we're supposed to be in the flow zone, right? And so we don't really know what our end goal is. So for me, as someone who's a solo business, I um use contractors to help me stay out of that drain zone as much as I can, right? Or I'll use automation or AI. If you're a bigger company, you go, okay, well, where is the flow zone at? And what I tell owners is let's say you're a trades company, the flow zone right now for you might just be uh you need to focus on closing deals. Great. But as you do this, the real flow zone for you might be going to meet with city council, the mayor, not to promote your business, but to be that local authority in the community where people go, wait, the new sprinkler system law or whatever the law is, you know, so-and-so company just talked about that. And they come to you to hear about whatever that new change is because you interviewed the fire commissioner or whoever it might be. And so the flow zone can move up as you replace yourself. And then all of a sudden, we talk about 8020, it changes where you're at. And so you you go, well, you know, I was doing sales, that was important, but now I'm meeting with certain people, I'm having podcasts, or doing this. And so it moves up the value ladder and you've replaced yourself in the sales. And so that's where you want to look at. And when you understand the end goal and you kind of work it backwards, you kind of figure it out, that's where you kind of had. So I use that, uh, that the focus flow grid, but I know we'd have an example of it, but that's I'll use that a lot for stuff to help.

SPEAKER_01 9:00

It's kind of like a moving target, right? Right? So as your business evolves, as you evolve, uh you're you're gonna be in flow doing different activities. Yep. And the things that are draining you, as I'm hearing, uh, that's a good sign that, hey, that that can be delegated somehow. Let's figure out how to delegate that.

SPEAKER_00 9:19

Yeah, and so, yeah, exactly. So I'm pulling the grid up here so I can kind of talk through it as I as I'm looking. Um so like let's say uh, you know, I've you've heard me say this before. I think I think more businesses should have a fractional CFO. I'm not one, so I'm not self-promoting here. I'm just saying, like, I think that's a big need. Okay, but right now you've got your taxes, you've got to figure out your accounts uh balances, your cash flow, all that stuff. Well, that's a high ROI activity. And maybe you can't give that up because you can't afford a CFO or a fractional CFO or a controller. Um, but it doesn't mean that all of that work has to be done by you. You can then delegate it. So I really, when I start working with a client, the first two or three weeks is really miserable because we're tracking their time in 15-minute increments and we're grading it based upon the zone and the dollar amount. And then we're saying, okay, well, hey, you know, uh what I see a lot of times is people will say, Well, I, you know, I did this for you know an hour. It's like, well, hold on, let's break that down. What did you actually do in that hour? Well, I did this, this, this, and this. Like, right. So two of those things we could have delegated, we could have hired out, we could have outsourced. The other two that you need to do, I'm not, I'm not saying don't do the legal work. Uh, you're not a lawyer, but don't do the work that you need to do. Uh the other thing is the fun zone. The fun zone is a distraction because we'll have a brainstorming session, and we love those. Like, who doesn't love a brainstorming session with no outputs? Well, brainstorming without outputs is just a waste of time. And so, like, when I look at the stats, I did a last three months yesterday. The stats say that owners waste an hour and a half a day. And I think that's a lie. I think they waste a lot more than that. Not being degrading. I'm just saying we're not honest. Like, I waste more than an hour and half a day. And so, yeah, I really want them to think about these zones. Where are they at? Where can they delegate? Where can they hire? And then how do they ascend the zones so that they are actually doing the most impactful thing? And for some, that's fully, I say fully leave the business. It's kind of a myth, but you know what I mean? It's really removing themselves from the business. Um, for some, it's they still want to do high-ticket sales. Cool, that's great. They, but they understand the end goal is that they're going to sell for less, and so they got to extract more now, or whatever it might be. But they understand those dynamics. And that's it's really a conversation, and each owner is a little bit unique because I've got I'll wrap up here. I got a client right now. He said, I want to work till I die, right? So the strategy with him is a lot different than someone who's wants to sell. And so you just got to understand where they're at and what they're willing to do.

SPEAKER_01 11:39

Yeah. And so if you're listening to this, we'll figure out a way to get uh that in the show notes, Ryan's Ryan's sheet. I'm sure I'll say to you. We'll get a link or something like that to that. Um, let's talk about timing uh of business sale. Uh, some business owners think they need to wait until everything is perfect before stepping away. Uh, obviously, perfection is a moving target, right? What does that actually mean? Um, how do you advise people on when it's the right time to exit or at least start delegating key responsibilities?

SPEAKER_00 12:12

Yeah, I love this question because we we talk about the Timberwolves, right? And the goal for the Timberwolves is to win the NBA title, right? So they understand to win the title, they have to make the playoffs. Right? They have to make the playoffs. They can't win the title without making the playoffs. And to make the playoffs, they have to hit these benchmarks. And then the better those benchmarks they hit, the odds of winning the title go up. So they understand all of that. And as an owner, if we don't stop and say, my goal is to either uh shut this thing down, I've extracted all the wealth out and put it in stocks, real estate, whatever, or to exit, then we wait too long and we find out, oh, we weren't even playing the right game. We were playing in some other league, we didn't even know that that league doesn't even have this thing. So um it depends on the owner. I'm saying a lot, it depends. Um, but it depends on the problem. So if it's customer concentration, let's take that, I see that a lot, customer concentration, which means that one, two, three customers or a huge percentage of your revenue. That can take years to unwind. It can take years. Because let's say you're doing seven million in revenue and you know two customers or four million of or combined four million revenue, right? Well, to lower that down, it's gonna take a long time because not only do you have to find new customers, you have to show that they stay around and you gotta keep them. So that's gonna take a few years just to get that process worked out. Um, if you're below the SBA range, my my advice is always to talk to an SBA lender to see what they will lend on the business, because they will tell you, we will lend X amount of dollars on your business today if you had a buyer. And that kind of doesn't mean you've got to go for that, but you know the numbers. Um, if you're above that SBA range, uh, it's a little bit different. Um but for the SBA guys, I found that's the most effective thing to do is for send them to the bank because that's not me, it's not the broker, not the buyer. This is what the bank's gonna lend. It doesn't mean you gotta take it, but you understand now if I want more, you understand the math at least, how I gotta fix this business to make it sell for more.

SPEAKER_01 14:12

Yeah. Yeah.

SPEAKER_00 14:13

So so the answer is it depends, unfortunately, but it could be years depending on the issue, right? It could it could be six months. You know, I've seen them closing from the first time I talked to an owner to I mean, I had a deal last year. Uh it's 52 million by the time it's all settled, but uh it closed for 40 million cash on clothes, uh clash cash on day clothes, and that was like a nine-month process. But that's a big business, right? They had moved through a lot of stuff to get there. A lot of smaller businesses that we deal with, they don't have that kind of uh runway to get 40 million bucks. You know, they're not ready for that because they haven't built stuff outright.

SPEAKER_01 14:46

Yeah, and obviously it's gonna depend on the industry, it's gonna depend on the size of the business, it's gonna compare on how you compare to other businesses and owners in your industry. Um, and and so everything is unique. Uh which brings me to another one is is how do you balance, and I think this is something that I'm passionate about, obviously, uh, in my seat as a wealth advisor, how do you balance uh okay, success of business, business goals with making sure that family's also taken care of, family goals are taken care of. Something that I know you care a lot about is balance, right? Being there with your family as well, uh being a full person. Uh in your conversations with owners, how do you navigate those types of things as well?

SPEAKER_00 15:34

Yeah, man, you're asking some some good questions. And um if you're an owner, first thing I would say is there's no one size fits all answer to these questions. They're always nuanced. And that's the thing I hate about uh I love these type of things because they show this, but I hate about social media content because you gotta be very generic, very bland, and it's just like you can't get the depth that you need. Um okay, so family time. The first thing is, you know, for me, um, to your point, a family time, you know, I try to do my client work on Monday, Tuesday, Wednesday. I'm not saying as always I have Thursday and Friday open if I need it, but I try to do that. Um and so if you're an owner, if we go back to kind of that grid I was saying, the first thing I'm gonna do is say, hey, well, how much time are we actually just spending on things that people are better at than you? You're not the best at sales, legal, ops, finance, HR. You're just not. No one is. No one is. Uh I'm not, you're not, we're all, no, no one is. It's cool. We can just take that and own that. That we're not the best. So who can we afford to hire? And depends on how much um, you know, what what the owner's netting and so how much leverage they have and staff and stuff like that. Um the next thing is, well, you know, I had an owner the uh the other day say, well, for your fee, I need a 10x ROI. And I was like, well, it depends on what you mean by 10x. If you want 10x cash in your bank, great. But what about the stress relief? Because you told me, you just told me that you're stressed about cash flow. Well, what if I put you in contact with someone, a fractional CFO? What if I put you in contact with someone who shows you that yes, it's not a problem or no, it's not a problem. Is that what is that worth? How do you measure that? So I don't like um, I don't like trying to be, hey, uh, I'm I'm, you know, pay me whatever. I'm uh I want them to understand like how we measure ROI is a little bit different, I think, than what the what the uh the online space teaches you. And so I'm trying to show owners uh a big thing I don't like is I'm trying I'm selling time for money. I don't like that because we're all selling time for money. If you buy a Powerball ticket today and you win a billion dollars, you had to have the money to have the gas, the car, the resources, the time to go buy that Powerball ticket. If you invest$1,000 in the VTSAX and it compounds, you had to have the time. You know, so what I want to do is show owners we want to make this too hard to calculate. That's really what we're saying. We want to make it too hard to calculate. And well, how do you calculate your family time? I that's I mean, I took my daughter, I took my family yesterday. The new Mario movie came out. We're recording this on April 2nd. So it took him yesterday to see the new Mario movie. My daughter's birthday is tomorrow the third, she turns seven. How do you value that? Like, how do you value that? There's no value there. So if you're struggling with how do you delegate, well, how do you value taking your daughters, your family, to the opening day of a movie? There's no value there. So I really want owners to understand the online talk has to be pragmatic because this is short. You can't get into nuance, but the real world is not that way. So if you really value family time, well, let's sit down. What is the value of that? How do you value that? Taking your wife on a date, going to uh coaching your son's team, stuff like that. So there's no ROI metric for that. That's just whatever you want to put on it. Okay, well, going back to the grid again, the odds are for anyone listening, including Ryan, we're doing stuff in the drain zone that we can delegate. And the more meticulous we are about tracking that, the better we can remove that from ourselves, and the easier we can find time for our family, and we can provide good jobs to people, right? So we're going back to that thing you said earlier, you can provide a good job to someone if you realize that you can't do it and they can do it better than you, right?

SPEAKER_01 19:06

One thing I love about that framing is well, a the intangibles of life are what matter and they're what gives life meaning and they're what you're gonna value over the long term, especially looking back, which is there's that you know covey exercise of uh being on your deathbed. What do you regret? Right? Who did you wish you could be? That sort of stuff. I also love the framing of uh I I think in big business, it corporate business, it can feel very personal, right? And that it is all about the numbers and the money and all that stuff. Um small business is so personal, right? And the opportunity to give someone a good job uh that you love working with and love work loves working with your business and loves the customers or the work or whatever it is, like that is that's priceless. It's priceless, right? Especially when you and even if we can make just a business argument of like the cost of turnover is ridiculous.

SPEAKER_00 20:03

Yeah, oh yeah.

SPEAKER_01 20:04

Right? You know, if someone's underperforming, like why not just have a hard conversation with them as opposed to firing, trying to get in the next person or whatever it is, right? Like uh there are solutions to this when we just confront reality because we're all trying to achieve, we're all kind of the heroes of our own journey, right? And someone else, uh it's not antagonism to you, it's it's a hero of their own journey as well. Um for listeners thinking about their own exit. Uh, maybe they haven't started to articulate this to their team, uh, to other professional partners. Uh, what would be the first three steps you recommend they take to get themselves and their business ready? If you're gonna simplify it all, three steps, what would you do?

SPEAKER_00 20:50

Okay, three steps. Um I'm gonna assume for this three-step model that they played, they understand the end game. So, right, so that's the because if they have it, there'd be different three steps. So they've understand the end game, uh, what they're working towards. Um, the first step is they need to have their team, and I say their team, this could be depending on the company, the size, either could be key staff or larger team, they need to have bonuses set up. Bonuses that are tied to the key staff or the whole team, depending on what's going on, that are tied to the exit of the business, right? So we want to sell for seven million bucks. Uh you know that you need six million, just to make some numbers up. Great. You're your people are gonna work hard and you're gonna set up bonuses that are gonna incentivize them to push harder to get you what you want and them what they want, right? So you want to have that in place. Um, so that's number one. You want to have that as far as uh the partners go. That's that's too much nuance to say on a podcast. I maybe tell them, maybe don't, it just depends on what's going on. But your your key employees, that that's number one. Um number two, number two, you need to understand what the levers are that you can pull to improve your business and how fast they actually can be pulled. Going back to customer concentration, that can take three, five, six years, depending on what's going on. It can take a long, long time. Um, if it's something like you just haven't updated your financials, maybe a year, right? You know, so you got to understand that. So get those ducks in a row. It's not hard to find out what those things are. It's just understanding them and then how long it takes to improve them. Uh, the third thing is we've talked about it a bunch. The more that you're not important to the business, the more it sells for. I mean, because you it's very pragmatic when you work it out. You're less likely to have customer concentration if you have one employee managing it because that employee could leave and take your customers. You're gonna have more SOPs if you're not involved because you now don't want to know everything. You want your employees to know stuff. And so, so the less you're involved, the more you can sell for. So I would say, hey, set the bonuses up. You're gonna have you're gonna ask them to get you a bunch of money, pay them as well. You can actually increase your product value a little bit of what you want to get because you're gonna get bonuses. Um understand the levers you can pull, and then remove yourself from the business because that on itself is going to raise the valuation that you get.

SPEAKER_01 23:08

No, I love that. Uh and I would just I'm gonna add one more that almost like is is a pre-number is get your team, your professional team in place. Because the only way you're gonna know what levers to pull in your business to increase valuation are with another good professional telling you what's what. Uh, it could be that fractional CFO, it could be someone like Ryan. Uh, the only reason you're gonna know how much you need after the business exit to fund your lifestyle is uh with some hard math from professionals uh and really optimizing that. Um, you know, talking about like incentivizing team. That might be like uh incentives consultants or something like that. So the the only way you're gonna know this stuff is start putting the professional team together that's gonna help you and help you think about the business. Um and think the example I always give is sometimes it takes a bird to tell a fish they're in water, right? And it's when we're when we're in in the day-to-day as a business owner, you're just always in the weeds. You just always are. And you need people who can pull you out to help you see what they see. You may agree, you may disagree, that's all okay. Yeah. That's all okay. But you need to have the conversations.

SPEAKER_00 24:18

I just tell owners all the time you're an expert at roofing or manufacturing or whatever it might be. That's your expertise. I'm not gonna tell you how to do that better. What I'm gonna do is tell you what I understand. And then we're trying to mesh those two, and then we've got to understand what you're trying to do, right? So it's a very much a okay, here's the levers that we have, and each owner has unique levers that they can pull. They're unique in the sense of um one might have great talent, but he hasn't figured out customer concentration. Okay, well, that's a unique lever. It still falls on those buckets, but it's like, okay, well, okay, you know, and going back to sports, I would just finally say this that if you watch sports, and you don't see this as much anymore, but I always use Rich Rodriguez. When he left West Virginia, went to Michigan, he tried to bring the West Virginia system to Michigan, and it didn't work. Instead of saying, okay, here's Michigan, we're gonna build to what we used to do, and then have that work, he tried to implement day one. So there is no cookie cutter framework. It's trying to understand the players on the team, the the division, the all this stuff, and then build it a little bit to tweak for what the owner has. And if you don't have these experts, you haven't done this stuff, you're gonna just buy a framework or get something and go, okay, cool, I did that. It's like, no, it's a little bit more complicated, a little bit more nuanced than that. So I agree.

SPEAKER_01 25:31

It's your most important asset. It's okay asking for some help, frankly. Uh giving it the care and intention it deserves because it can benefit you, just like some of the examples you shared on this podcast. So um, hey, Ryan, thanks so much for joining us. This was awesome. I've been looking forward to this episode for a long time, and uh it was fun to finally get a chance uh to talk to you. Um, we'll share uh some some links about Ryan uh in this in the episode notes, the show notes. Um so check those out. Maybe we'll get a be able to get to that that PDF he mentioned. Um and then obviously thank thank you for all you're listening. Please subscribe uh and we'll be back here in a couple weeks.