Ken Galecki Talks About What It Means to Be A Business Broker
June 27, 2018
Erik Wolf: Welcome to another action-packed edition of The Denver Executive Association Trusted Advisor podcast. Today I’m coming to you live on audiotape from the lovely Highlands Ranch Golf Club where I’ve been sipping coffee, pinky out, alongside 30 of Denver’s top business executives. We talk, we share knowledge, we schmooze, we connect and we share business. And twice a month, one of them is contractually obligated to sit down with me and my microphones. My name is Erik Wolf and I’m with the digital marketing agency estound. We serve small and midsize business owners as nearby as Denver and as far far away as New Zealand with CMO level digital strategery, website design and development, Search Engine Optimization, pay-per-click advertising, marketing automation and so very much more. But today my guest is Ken Galecki, managing director of Galecki and Associates. Ken grew up in Michigan as one of six boys. Oh boy, that’s rough. He graduated from Michigan State University with a business degree, moved to Colorado in 1990 and fancies himself something of an outdoorsman. So the Front Range suits him well. Over the years he’s owned and operated three different businesses and it turns out that he likes selling them more than he actually liked running them which is why he is now a business broker and we think he’s one of the best. So welcome Ken.
Ken Galecki: Thank you, Erik.
Erik Wolf: So first of all Ken, if you don’t mind, give me sort of the 101 class on what does a business broker do. How are you different from say a real estate broker or any of the other brokers that we deal with in our daily lives. What’s the basic thing that you’re doing?
Ken Galecki: Correct. So it’s interesting that you mention real estate brokers there are currently about 43000 real estate brokers that are licensed in Colorado. And the Colorado Association of Business Intermediaries, which is the Business Broker Association of Colorado, we determined that there are about 100 active business brokers that do this full time.
Erik Wolf: And how many good ones?
Ken Galecki: Out of the 100 probably a handful.
Erik Wolf: Like two. You and maybe there’s like another guy in Durango.
Ken Galecki: Correct. And the way that we differ from real estate brokers, whether it’s commercial or residential is that we really zone in on the business itself and what we do is we work with business owners to get them as much cash as possible for the transaction and maintain confidentiality. so we keep confidentiality with their employees, with their clients, with their vendors and with their competition.
Erik Wolf: How did you first become a business broker? I mean I’m not sure that that’s the sort of career that somebody just trips and falls into. So what made you a business broker and I like the part about, well selling the business was fun, running it maybe not so much, but how do you make that leap and actually decide, “Hey I’m going to be a business broker!”
Ken Galecki: Right. Not a lot of people know what a business broker actually does. In fact, when I go to parties people think I sell commercial real estate. That’s what they see a business broker being. As you stated in your introduction. I’ve owned three businesses in the past. And I enjoyed selling them and I like selling large ticket items. And this is about as large of a ticket item as you can sell. I’ve got an extensive management background where I’ve managed up to 200 people at one time and as my career developed, I realized that I’ve gained a lot of experience working with business owners and now wanted to work with them directly instead of managing large numbers of people. And so I knew 10 or 15 years ago that I wanted to be a business broker and then I got licensed by the state of Colorado and here I am today.
Erik Wolf: So we talked about briefly the 100 folks in Colorado that are actively doing something similar to what you do and we made a joke about it. But what truly does make you different from the others, the other 99 in Colorado. Is there a specialty for you, is there a type of business that you excel at, so when do I call Ken?
Ken Galecki: You know that’s a good question. I think what makes me different than the other business brokers is that all of my leads are referral based. So I work closely with business attorneys, CPA’s, bankers and wealth managers and they send their clients to me. And because of that, everybody needs to perform, but I’m held accountable for getting those businesses sold professionally and handling their clients professionally so I’m very much in tune with the whole process. A lot of business brokers will take on 10 different listings at one time and hope that they sell four of those listings. I take on a more manageable amount of clients, typically five is a good number, and I work very closely with those five clients. So the communication is there, my marketing expertise is there. I don’t just put companies on websites and hope that somebody calls me and inquires about that business. I actually actively market to many different areas including industry buyers. And so between the communication and the marketing skills and then the integrity would be the third piece. Making sure that I’m doing what’s best for the seller and not being focused on any type of commission.
Erik Wolf: I imagine that as you’re as you’re going through and vetting the companies and the business owners that you’re going to work with, I imagine that you have some people who, hey this one looks like a home run. And then you’ve got others that maybe come in with a few problems. Give me an example of a time that you really helped a business owner out of a tough spot and either helped them close that really great deal or maybe helped them get over that hump, over you can’t sell the business in this condition. We’ve got to do X Y and Z. Give me give me a good Ken-hero story.
Ken Galecki: OK. You know recently I’ve worked with two different business owners that wanted to sell their business. They thought it was time. And this goes back to the integrity piece. And I actually coached them into not selling the business because they were making excellent money, they weren’t ready to retire, they didn’t have a backup plan. And so I worked with one plumbing company that the owner wanted to sell. I actually listed his business for him, for a different firm that I was working with at the time, and I guided him into what to do to make the business ready to sell. He followed all my steps and all of a sudden he realized that he really liked the business because it was easier to manage. He hired a general manager, he focused on certain parts of the business and he called me and said, “Ken you’re going to kill me but I don’t want to sell my business now. You told me how to make it better. It’s great. I’m happy.” And to me, that’s a win. Yes, I didn’t get a commission off of that. But that’s not what I’m doing the job for. And then I had another seller a couple of months ago that wanted to sell his business, it was a landscaping business and he’s making a lot of money each year. He doesn’t have employees so I told him to ride it out for five more years and then let’s talk in five years. And he was very happy with that advice and he thought that was very unique in that I was promoting him to keep the business rather than selling it.
Erik Wolf: Because a lot of guys would just say well hey let’s get this baby sold.
Ken Galecki: Right. And they would market it at a lower price so that they can turn the business quicker where I try to get as much money as possible.
Erik Wolf: Even if it takes longer.
Ken Galecki: Correct.
Erik Wolf: Well, you’re a good guy.
Ken Galecki: Yes I am.
Erik Wolf: I like you. You’re a mensch. So this is the trusted advisor podcast and so I am obligated under the severest penalty to ask you to be my trusted advisor. What’s one quick tip? What’s the first thing that you would tell somebody who says, “Hey Ken, I’m thinking about trying to sell my business.”
Ken Galecki: I would tell them nothing sells businesses.
Erik Wolf: And how much can you get me for mine. We’ll talk. Ok Nevermind. Go ahead.
Ken Galecki: No I’ll start with the first part and then I’ll transition into the second question. I would tell the seller that nothing sells businesses quicker and for more money than clean financial statements. So I would work with them and I have advisors that I work with, I send them to certain CPA’s or consultants to get their books in order so that they have something to sell. So that would be the first step is to get your financial house in order and then the second part of the question, How much is my business worth? It depends. I know nobody wants to hear that but I can sit down with somebody for 15 minutes, ask them 10 different questions and really kind of get a ballpark range of what their business is worth. But until I look at their financial statements, I can’t tell concretely.
Erik Wolf: Valuation is sort of, it’s art and science right? It’s not just oh well you take this number and you subtract 12 and multiply by 6. There’s a lot that goes into that. Well, what do you typically look at and sort of your mental formula for valuing a company?
Ken Galecki: It goes back to the clean financial records. It goes to the industry. There are some industries that sell for more money than others. For example, manufacturing always gets a higher multiple of net income then maybe a new construction company that does residential homes for example. So it depends on the industry, it depends on their management structure. If they have a general manager in place the business typically sell for more. And then how long they’ve been in business, how profitable they are. So there are many different factors that I look at.
Erik Wolf: Well Ken I really appreciate your time. I appreciate your being here. How can folks get in touch with you?
Ken Galecki: The best way to get hold of me is to call me. My phone numbers 303-257-1620. Or you can email me at can email@example.com.
Erik Wolf: Awesome. And that phone number that’s good. Day or night, correct? If I’ve got a business to sell at 3 in the morning like that, that’s all right?
Ken Galecki: Please call me. Weekends are fine too.
Erik Wolf: Okay excellent. Thank you so much, Ken, we really appreciate it. Thank you for being part of the Trusted Advisor Podcast and thanks to everyone listening, we appreciate it!