Navigating Small Business Transitions: Insights from Michael Reed’s Journey

Are you feeling the pressure of preparing for an exit strategy, but not seeing the results you want? Maybe you’ve been told to just focus on running your business and everything will fall into place. But let’s be real, it’s not that simple, and the stakes are high. If you can relate, then you’re in for a treat. Stick around to learn about the importance of small business exit strategies and how to improve your business transition and stakeholder communication.

Welcome to the podcast that’s dedicated to helping business owners prepare for exit so they can maximise value and exit on your own terms. This is the Exit Insights podcast presented by Succession Plus. I’m Darryl Bates-Brownsword and today, I’ve got Michael Reed.                     

Now, Mike’s got a fantastic backstory. It’s the second time or maybe the third time I’ve a chat with Mike, and I always leave a conversation with Mike, highly energised and excited for what’s next. So, no pressure, Mike. Mike has built a business, sold the business, and then circled back to help other business owners learn from his mistakes, basically. So welcome, Mike.         

Thanks for joining me today.

Thanks, Darryl. Thanks for having me.

Hey, mate. My pleasure, Mike, why don’t you start by just introducing the business that we’re talking to and just tell us a bit about the story of that business and how you came to own it.  And what have you.

Sure, I’d love to do it. And again, thank you for having me. It’s an honor. I currently own a consulting firm by the name of Smith Reed Partners.

My wife and I are in that together. She has a very different life in politics and otherwise and leverages that consulting firm to help businesses that are looking at sustainability issues in transportation. But for me, my primary focus is as an M A advisor. I have five certifications. As an M A advisor, I specialise in post-merger integration.

And, Darryl, I’ve also just announced my role. I’ve just joined Republic Capital Group, which is based in New York City. I am now a partner and managing director of that firm and will be opening their Palm beach office. So we’re an M A advisory firm focusing on wealth and asset management. And so, my days are spent working with companies, either helping them get positioned for an exit or helping them position themselves for internal succession or do an acquisition or handle a post-merger integration.

Okay, and, Mike, what were you doing before you were involved in the m a world?

Well, so that’s an interesting story, and I’ll try to be very brief. But the reason I’m here doing what I’m doing today is because of the experiences that I’ve had in business. And I fell in love with the process of preparing a business for a proper exit and then handling a merger and then making sure that it’s a success. It’s very much like a marriage.

So, ensuring that the marriage is successful after the ceremony. So, I actually did my undergraduate training as a physical therapist. I came at it, though, with the idea of becoming a spine surgeon and from an entrepreneurial standpoint, I felt that if I had a degree in physical therapy, that I could integrate that service line into my practice as a spine surgeon in the US. So, I did my pre-med work getting ready for medical school, and then I did the physical therapy degree as sort of a byproduct of that. Well, that led to.

I did well in that, and that led to an opportunity to go to Australia and do a residency. And I was out there for a period of time, and I saw a very different business model, a very different approach to the care process, which was much more integrated and collaborative. I came back to the US, and I looked at the landscape and I really wanted to have a differentiator. I wanted to do something. I saw a gap in the US as it relates to collaborative care in spine.

And I actually felt, geez, I think I can have more impact instead of being a spine surgeon by focusing on the entire process as what we call a perioperative specialist. I actually was one of the people that coined that term, perioperative spine specialist. So I went on and earned a master’s in orthopedics, a doctorate in perioperative care, or operational management as it relates to the spine surgery experience. And I opened practices in South Florida, which is a very busy space. There’s a great deal of affluence in this area and a great deal of opportunity as it relates to medical tourism.

And that’s really how everything started. I built a great practice. I felt wonderful practice. We had about 30 people on staff, and we developed an international reputation. We had people coming from all over the world.

And all of a sudden, I got a phone call one day from one of the most prestigious orthopedic surgery centers in the world, that being hospital for special surgery in Manhattan. And they made an offer to buy my firm. And what they wanted to do was to establish a footprint in Florida, have some opportunities in Central America, South America and the Caribbean. And they knew of my reputation. They knew that I had a fairly deep Rolodex.

And they made an offer to buy my firm and I would become an executive on their executive team. For me, I never identified as a practitioner. And I think that was a very smart move for me as a businessperson to not pigeonhole myself as a practitioner. I always thought myself as an entrepreneur. I was certainly providing very high-quality care.

We were concierge, a VIP. We had taken ourselves out of the traditional insurance game and we were directly working with patients. They weren’t using insurance coverage to pay for our services. So, I was very entrepreneurial in that way, but I didn’t identify necessarily as a practitioner, and I think that put me in a position for an opportunity like this. It’s kind of like what you manifest, and that really was the turn.

So, I went through that process of an acquisition.

So, let’s summarise, because you just shared a whole lot with us, and let’s see if we can recap. So, you’re a specialist in the medical industry with back and spine surgery. Exactly. You’re in Florida, and one of the key things about the market in Florida is that.        

What would you call it? You call it medical tourism, which a lot of people were going to Florida, and I guess because of the weather, it’s a nice environment to heal.

Yep, exactly.

So, everything’s good. You evolved the business to the point where, how old was the business when you exited?

So, I had been practicing at the time for about 20 years. The business was about ten years old.

Okay, so you got the business about ten years old. You’d built a reputation for the business. You’d got it to the stage where you weren’t taking any insurance work.        

So, any work was basically private work or self-funded direct to the clients. So, no middleman, which makes a nice, easy business model of people coming in and dealing directly with clients. You weren’t the practitioner or a practitioner. You were just focused on running the. Business, if I understood correctly.        

Yeah. Brilliant. And a bigger player had heard about the business, and they wanted to get involved in the Florida market, and they came and basically tapped you on the shoulder out of the blue, and said, mike, we want to buy your business. So, you didn’t see it coming. Had you done any preparation before they approached you?        

None. Zero.

So, you were just day to day running the business as you normally were, and an offer came out of the blue, totally unsolicited because of the reputation that you’d built. So how did that unfold? Like, if you didn’t see it coming, did you have to stop and think, or did you go, no, we’re not selling it, or how did you handle that alpha?     

Darryl, one of the biggest mistakes of my career was not being ready for that day. That was a huge mistake. Huge, massive mistake. I left money on the table.

I didn’t handle the transition correctly. And despite the international reputation of this 140-year-old institution that approached me, despite their remarkable reputation, they had never done one acquisition in their history. So, they were new to this as well. And they didn’t have an integration process in place. They didn’t sort of envision some of the things that we might come up against.

And even though I had done a couple of acquisitions in my firm, tuck ins, buying small practices or bringing them in, I wasn’t properly prepared for that phone call. And here’s where it hurt me, Darryl. Number one, I didn’t realise until we went through the appraisal process that my business model actually devalued my firm. If I had been associated with insurance companies and had carriers, my firm value would have been greater. And if I had been wise enough to have an outside advisor coach me and help me understand that I would have been much better positioned.

Now, I may not have changed my model, but it certainly would have better aligned my expectations for that day when. You’d have been informed. I would have.

Mike let’s dig into that for a bit, because you just almost flippantly said I wasn’t ready. A couple of minutes ago, you said I wasn’t ready for that call.        

Looking back, what could you have done. To have been ready for that call to be on the front foot rather than the back foot. Reacting to the call going, it’s almost, you could have been on the front foot. Well, I’ve been waiting for you to call. How could you have been ready?       

What could you have done differently?

Okay, so, Darryl, it’s a great question. And now in my current position, I see others that are very similar to me. So, here’s the first thing. Don’t ever think, you know,

You’ve got me leaning in by the listening.

Don’t ever think, you know, more than anybody else. I was riding high, Darryl. I had a practice. I had a firm that was well known internationally.

I was on boards. I was speaking all over the new. I knew it all, Darryl. I didn’t need to have any advisors. I didn’t need to have anybody telling me what to do.

Stupid, stupid move. I should have spent the money. I mean, it would have been compared to the money that I lost, that I potentially lost in better aligning myself for the phone call. It would have cost me, what, 5, 10 thousand dollars a month to properly position myself. That to me would have absolutely paid for the mistake that I made in not positioning myself.

I needed to have a wise counsel that had a different perspective on my business. I thought I knew everything. I thought I had the world figured out, and I was just very naïve. And it not only cost me money, but it also, with respect to the integration process and the transition, it hurt me with my staff. I lost a number of staff members because of that transaction.

And I just didn’t have the proper perspective.

So, let’s see if we can frame that up for the listeners.        

If we’re going to sell our business, we need to not only understand a business from the current size that we’re operating at, and if you’re in the business, running the business, even as a remote CEO or chairman type role of your own business, you’re very familiar with how a business works at the current size of your business because you’ve grown up to that size. What I think I’m hearing here, Mike. Is one way you could have prepared. Better is to know if a business is going to buy yours. They’re probably going to be twice the size of yours or bigger so that they can afford to acquire your business.        

So, it probably helps to understand the. Next step up in magnitude of size of the business and how a business, the next scale up or the next level up operates and the issues that they have in a business of that size so that you can relate to what’s going to go on and what’s going to happen next in your world, especially if you’re going to have some sort of ongoing involvement in the business moving forward. Is that kind of the essence of. What you’re sharing here?

That’s exactly right.

That’s exactly right. Like in the game of soccer or football, I was playing the game where the ball was. I wasn’t thinking about where the ball was going, and I didn’t have the proper control. And remember, I was a practitioner. Now, I have had a lot of business experience and I have a lot of degrees now as it relates to business.

So, I’m much better positioned now. But back then, I was a practitioner who had success as a small business owner, and I thought that made me business savvy. I was not. I was not looking at my business in a way that represented the next level up that you just represented. I needed to have a proper board of directors, proper governance.

I needed to have a leadership training program to envision succession. I needed to have some other things in place. I needed to protect my intellectual property better than I was doing. These things. This level of organisation and structure that a lot of practitioners who become CEO, they name themselves CEOs, but come on, they’re really still sort of practitioners running a small business.

If I had someone who was experienced as a true CEO in business, someone who runs business as well, they would have told me all of these things that I didn’t know that I know now, and I would have been much better off. I would have been positioned for a really nice experience.

Now, I’ve benefited from that because now I take all that I’ve learned, and I help my clients and I help the people I work with. So, they’re the beneficiaries. But boy, it sucked for me.

Darryl:

Sure, every day is a school day, isn’t it? If your mind’s open, every day is a school day.                  

So, the key point, I guess, that for the listeners of the podcast is if you’re going to exit your business and you’re looking for a strategic type of exit or you’re looking to be acquired, it’s going to be a bigger business. So, think about what they’re looking for. And the best way to do that, that you’re suggesting that would have been helpful, Mike, is to invest in some sort of board or coach or mentorship from someone who’s going to keep you accountable and keep pulling you up and looking forward rather than looking in of the business. And that would have brought the skills and some of the strategies to keep you being aware and observing what needs to be done next, rather than just constantly running and those incremental growth issues and hurdles that you were dealing with.

Darryl, you are so good at summarising these ideas.

That’s exactly where I was coming from. And the one thing I would say is I think that small business owners or even people that are in the lower middle markets, but they’re practitioners that have become CEOs, they need to decide whether they’re going to remain as a practitioner or they’re going to run the business. They can’t do both.

Yeah, that’s a really good point. And this is, let’s call it exit planning or whatever, but we need to think about what’s going to happen before it happens.        

We know that business owners who have a business plan in their head can’t even fill a page with their business plan because they just haven’t thought it through. Beyond I want to grow my business, and it’s the same with an exit plan. If you haven’t written it down, the reality is you haven’t done any thought beyond the point of I want to sell my business. And to your point, when I sell my business, do I want to keep working? Do I want to leave?        

Do I want to run and just. Sit on the beach and drink pinacoladas? What do I want to do next? What’s my involvement? What’s my vision for my next challenge?        

I need to put some thought into that so I can prepare for that, so that I can be ready. The business is ready, and the money works for a deal to happen. And if I’ve got those three things in place, then something’s likely to keep moving forward. Okay, so, Mike, we’ll keep moving forward and a deal was done, and we can go back over, unpack all of that. But I think the real story here.        

That we want to bring to this podcast is what happened after the deal and the integration of the two companies, because we had two newbies together making it up as they’re going along. And it sounds like there were some, I guess, more issues to overcome.

Tremendous challenge, and I don’t necessarily blame the buyer. Hospital for special surgery. Great organisation, phenomenal, world renowned, great people.

And I love the senior management team that I was working with. Fantastic. And I love my team, but we didn’t take enough time to think about the impact to the other stakeholders. So, the stakeholders being my employees, my clients, and my reputation in the community, my referral source sources, both locally and nationally, all of that potential impact. The other thing that we didn’t properly consider was the employees on the buy side.

Oftentimes we don’t remember that those employees want to be informed. They want to know what’s going on. They want to understand the why of the acquisition because they feel they have a stake in it. So, it’s really important to consider from an empathetic standpoint what that impact is going to be. And here’s what we this is probably going to blow your mind.

I signed because I had a very small minority interest that I had given to someone that I had brought in, and that was of no consequence, really. The hospital for special surgery, we signed an NDA and they did not want this to get out. So, they asked me not to tell my staff.

Yeah, but you know what, though. In a practice like this, in which I was running it much like a family, these people, I loved these people, and I think they cared very much for me. They couldn’t imagine that behind the scenes I was orchestrating an acquisition of the firm that would change their lives. And I purposely negotiated better compensation packages for them. And it didn’t matter.

They were so upset. They weren’t excited. This is a nationally known institution that was buying my firm, and it still didn’t matter. It was very disruptive. I would have done that differently.

If for nothing else, I would have done the acquisition. And before we made it public, I would have brought them into the fray a little bit before we made it public and helped them to understand I didn’t do that well. And it was very difficult.

At least let them know before everyone else. Exactly right.        

Treat them with a bit special and with the respect that they deserve after being loyal and culturally aligned employees on part of the team for so long.

That’s exactly right, Darryl. That’s exactly right. So that was probably the biggest thing. The second thing was we had developed.

This can be despite the fact that we had referrals coming from all over the place, it’s still a bit of a cottage industry. And there were people locally that were very proud of the brand that we had developed. Well, when this acquisition came down, it was overnight. They wanted to change a name and gone with the old, in with the new. And the local community didn’t like that.

They didn’t like that at all. It wasn’t a smooth transition. They were worried about me. They were worried about the quality of the care. It was a very difficult thing.

So, given the industry you’re in, there was a lot of concern around what would happen to the position and the reputation of the business. Okay, so looking back because hindsight’s always wonderful, isn’t it? Yes. Looking back, what would you have done differently? If you could have a do over, what would you do differently, Mike? 

What I would have done differently now, knowing what I know, I would have sat with the senior leadership team of the buying entity and really talk through a post-merger integration plan and really think about the stakeholders, what are their thoughts going to be? Because when you announce that you’ve been acquired by a firm, let’s just talk about your clients. The first thing that they think about is, well, what does this mean for me? And then the second thing they think about is, well, what does it mean for you? Because I love you, I have a relationship with you, so is it good for me and is it good for you?

And it goes from there. And if you can think that through and answer those questions before they’re asked, you’re going to be fine. And we did not do that. We should have done that.

Yeah. So, you got to preempt the fallout and address it before it becomes fallout so that you can prevent it.

Yeah, that’s exactly right. And because we had an NDA in place, we needed to do that for my employees as well. Didn’t do that.

Okay, so there’s what we do. So, we’ve now moved into the transition. We’re integrating the two businesses. What happened? What was the fallout, shall we say? I think you said there’s a couple of people upset, and you’d lost some credibility and respect because they felt.        

That. They weren’t treated fairly by not knowing what else happened. Mike.

Yeah. So, to the credit of hospital for special surgery, we all realised this early on, so within the first couple of weeks, we realised we needed to reset.

And so, we worked very hard together on aligning those employees. We did lose a couple. They just decided they wanted to go elsewhere, and that was a byproduct of sort of the miscalculation. But we worked very hard to get them on board, and we rallied the troops. The other thing that we did was we worked, again very hard on the messaging within the community.

So, I spent a lot of time out in the community, meeting with referral sources, going to community events, and reassuring everybody that, hey, this is a great thing for you and for us and for this community, and it’s all going to be good. It was a lot of effort. It was very stressful. There were a lot of sleepless nights, but that’s what we had to do.

Yeah.        

And from a buyer’s perspective, they wanted to make sure that that revenue was going to continue as per the forecast and the previous years so that they get a good.

Exactly right. Exactly right. And I wanted that for them.

What was your commitment, Mike, post deal?    

Did you have to stay on? Did you have an earn out without giving us any numbers? What was the structure of the deal for you?

Yeah, I had an earn out, and I was locked in for three years.

Three years. How did that go?     

So, one of those other external factors that impacted us in this space, they wanted to develop a standalone hospital under their banner in the southeast. So, in our area. So that was one of the goals was to develop a specialty hospital for them in the Palm beach area. And we hit a number of regulatory barriers and, of course, pushback from the local hospitals in the community.

So, it became very difficult to get that done. And in South Florida at the time, there’s what they called. At the time, there was what is called a certificate of need. So there had to be an established need for the new hospital that no longer exists. Fast forward.

Today, hospital for special surgery has a beautiful presence here in South Florida. In Palm beach, they have their own specialty hospital, and they’re doing great. So, I’m very proud of that. But in those three years, we couldn’t really get much in about. At the two-and-a-half-year mark, I was offered the opportunity to become CEO and executive director of the North American Spine foundation. And it was an offer that was just phenomenal. And I decided to move.

Okay. And I take it you’re not with them anymore now.

I’m not associated with hospital for special surgery.

I’m not associated with the North American Spine Foundation. I was there for three years. I helped them build that. But I do keep in touch with the former CEO of HSS. We’re good friends, and that was one of those relationships that I will always value.

Wonderful. So, Mike, looking back now, and there’s no point in living life and not learning lessons. How do you apply what you learned? Let’s summarise first over that whole process of exiting the business and going through the earn out and all the things you learned along the way. How would you summarise the learnings from that process for yourself personal?      

I think the first thing is, I think it’s important to not create or identify yourself as a practitioner. You need to be a practitioner but identify as an entrepreneur. I think that’s an important distinction. I think also.

You’re running the business. Not running in the business, so to speak.        

And if you don’t have a desire to run the business, you want to work in the business, then find someone who can run the business for you. I think that’s a really important point. That’s a good point, yeah. And the second thing is always be prepared to exit. You don’t know.

I mean, something could happen to you medically. There could be an offer like I received. If you’re not thinking for that potentiality, you’re not prepared and you’re going to really disadvantage yourself and you’re disadvantaging your employees, you’re disadvantaging your family, you’re disadvantaged your clients. If you’re properly prepared for the potentiality of an exit, no matter where you are in your growth process, you’re doing yourself a really great service. And having outside advisors, people who can look at the world differently and look at your business objectively is just so important.

Yeah. So, plan for an unplanned exit.

Plan for an unplanned exit because they happen all the time.

Beautiful. So, get ready, get on the front foot, always be there. It doesn’t mean the business is finished, but it always means that you’ve got all your ducks in a row, you’ve got all your information, you’re just at the tiller.        

You’re steering the business rather than being in the engine room of the business. And you’re that guiding light, steering the business, and navigating the business. And always be ready because who knows what’s happened. You could have an unplanned exit for any number of reasons. You had the best reason, always be.        

On the front foot. So, Mike, what are you doing now? Like you mentioned earlier that you’re now in M. A. So, I’m reading between the lines.        

You’re taking all of those life experience, documented everything that you did badly, and got some sort of manual for business owners that you’re working with to go, here’s how you need to do it differently. Don’t make the same mistakes.

Yeah. You know, Darryl, I think sometimes adversity and making mistakes in life create opportunities for you to have a differentiator and to have an edge. I now am an m, a advisor in the wealth management, asset management space.

Being a former caregiver, I bring that element to my relationships. I’m a caregiver. I look at things holistically, and I’ve made those mistakes. I can help my clients avoid those things. I love it.

It’s just. It’s for just. I have a blast every day seeing people succeed and position themselves. Yep. It’s great.

So, Mike, let’s pull this whole conversation together. We’ve talked for about half an hour now on all sorts of what’s. If you were to speak to a listener of the podcast, what would be the one key message you’d love for them to take away from our conversation today?      

I’d like them to know that they don’t know everything and to find either one, two, or a little group of advisors that they can meet with periodically, once a month, preferably or maybe once a quarter, to look at the business objectively, to shut up and listen to their advice, because they’re missing out on some great opportunities if they don’t do that.

Yeah. Make sure you’ve got something from the outside looking in who’s not attached to your business, providing some insights. Mike, that’s brilliant. Really appreciate you sharing your exit insights with us today.   

Great. Well, thank you, Darryl. It’s been a pleasure.

Wonderful.      

Michael Smith Reed is a strategic executive with experience in C-level leadership, financial services, and concierge healthcare. Michael drives success through inspirational team building, organisational efficiencies, and scalable company growth to generate stakeholder value. Michael’s expertise lies in serving as a subject matter expert regarding operations, mergers and acquisitions (M&A), change management, business development, and corporate governance. Michael’s management style is characterised by a keen focus on cultivating team collaboration, assimilating innovative solutions, troubleshooting high profile issues, and ensuring comprehensive enterprise growth.
Michael is currently Co-Founder and Senior Consultant for Smith Reed Partners LLC where he built an advisory partnership with the Mayor of Palm Beach Gardens, FL. He works with entrepreneurs, executives, and business owners to streamline core operations and position for growth. Michael’s compassionate relationship management has assisted a wide range of companies with strategic plans, internal alignment, operational architectures, and M&A approaches.

In association with Smith Reed Partners, Michael served as fractional Chief Strategic Officer and Chief of Staff for Cary Stamp & Co. While there, he built a comprehensive M&A strategy for the firm, a robust pipeline of opportunities, and mission-critical planning for this dual-registered wealth management firm. Michael worked tirelessly to establish seven viable acquisition opportunities totaling $1.5B+ AUM and secured a signed LOI on a $125M+ firm with closing in early 2024. In addition, Michael served as fractional Director of Operations for Volo Foundation Inc, an M&A Advisor for Health Data Science LLC,
Prior to establishing Smith Reed Partners LLC, Michael co-founded, planned, launched, and managed one of the fastest growing wealth management firms in the country, Dakota Wealth Management. He directed all aspects of the business, including operational leadership, financial obligations, cross-functional coordination, and C-Level decision making. Michael provided comprehensive management of a governance structure, including a Board of Directors, Executive Committee, Management Committee, and Senior Leadership team.
At Dakota, Michael held direct responsibility for the creation of an eight-person operations team, including all organisational efficiencies, team leadership, and business growth. He inspired comprehensive company expansion from an AUM of $150M to $2.5B within a five-year timeframe. He established and fostered development of three subsidiaries, including two registered investment firms and one tax services entity. Michael collaborated with a C-Level team to drive 12-fold growth in enterprise value through direct oversight of ten transactions, six tuck-ins, and the onboarding of 65 employees in 14 offices, nationwide.
Michael has held prestigious positions such as Executive Director/CEO of the North American Spine Foundation where he secured a congressional resolution, H.Res.432, in the 114th U.S. Congress. In addition, he served as Director of HSS Florida for the Hospital for Special Surgery where he helped to establish a footprint for this prestigious organisation in the South Florida market.
Michael holds Master and Doctoral degrees, an executive certificate from Yale School of Management, and five advanced certifications as an M&A Advisor.

If you would like to learn more about how to start preparing your business, then you can get more information here: It All Begins with Insights.

Darryl Bates-Brownsword

CEO | Succession Plus UK

Darryl is a dynamic, driven Business Mentor and Coach with over 20 years of experience and passion for creating successful outcomes for founder-led businesses. He is a great connector, team builder, problem solver, and inspirer – showing the way through complexity to simplicity.

He has built 2 international multi-million turnover businesses; one now operating in 16 countries. His quick and analytical approach cuts through to the core issues quickly and identifying the context. He challenges the status quo and gets consistent, repeatable and reliable business results.

Originating in Australia, Darryl’s first career was as an Engineer in the Power Industry. Building businesses bought him to the UK in 2003 where he quickly developed a reputation for combining systems thinking with great creativity to get results in challenging situations.

A keen competitive cyclist, he also has a B Eng (Mech) Engineering and an MBA.