In this episode of Retire in Texas, Darryl Lyons and PAX Financial Advisor Greyson Hanna take listeners through the emotional, practical, and behavioral realities that business owners face when preparing to transition out of their companies. Drawing on years of advising entrepreneurs – and personal experience from a family of business owners – Darryl explains why selling a business is far more than a financial transaction.
They break the conversation into the six phases of PAX Financial Group’s business transition process:
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Phase Zero: Understanding the Owner and Spouse, including personal history, sacrifices, communication styles, and behavioral tools like the Enneagram to uncover motivations and priorities.
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Phase One: Business Discovery & Exit Readiness Assessment, where owners begin evaluating industry dynamics, operational gaps, and qualitative questions that often seem simple – but prove surprisingly difficult to answer.
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Phase Two: Valuation Preparation, helping owners gather the information needed for an equity estimate that provides a directional view of their company’s worth rather than relying on guesswork.
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Phase Three: Honest Conversations & Risk Review, inviting both spouses into discussions about fears, expectations, long-term goals, and the emotional impact of stepping away from the business.
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Phase Four: Strategy & Buyer Fit, covering potential internal and external buyers, tax considerations, tradeoffs, and the importance of allowing enough runway – often years, not weeks – to position the business properly.
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Phase Five: The “Wheel of Life” Transition, where owners begin planning purpose, meaning, and fulfillment beyond the sale, ensuring they enter retirement with clarity, stability, and a vision for how they want to spend their time.
If you know a business owner preparing for their next chapter, feel free to share this episode with them!
This episode provides general educational information only and is not intended to provide specific investment, tax, or legal advice.
Transcript:
Darryl: Hey, this is Darryl Lyons, CEO and Co-Founder of PAX Financial Group. And you’re listening to Retire in Texas. This information is general in nature only. It’s not intended to provide specific investment, tax, or legal advice. Visit PAXFinancialGroup.com for more information. And if you’re looking for a financial conversation, this specific show is really designed to teach you about money by still keeping you grounded on what’s really most important in life.
And so, if that’s what you’re looking for, this is the right place. I’d love for you to leave this show saying that actually made sense. So, we try to keep things simple. And I really feel like if you were to define in my interpretation of the word elegant is taking something that’s completely complex and delivering it in a simple way.
I think that’s the very essence of elegance. And so that’s all we try to deliver. But sometimes these financial topics can be confusing. And so that’s why I brought in Greyson Hanna. And he’s an advisor here at PAX Financial. Thanks for coming in today.
Greyson: Absolutely. Yeah. Thank you for having me.
Darryl: So, what I want Greyson to do is this show is for business owners, but you’ll find some relevance in it, so hang with me. But we wanted to make sure that the business owners in the community understand a process that we take them through to help them think about how to transition their business from where they’re at today to the next phase.
I’ve worked with so many business owners those people that know me, you know, I certainly, you know, started at PAX Financial Group in 2007 with a handful of other guys, and then my mom and dad owned a business. They sold that. My sister has owned a business for years. My brother owns a business, so small business is in my blood.
I’ve lobbied for small business. In fact, this is kind of an interesting factoid on the, not the one big beautiful bill. But there was another bill, like in 2010, Senator Cornyn actually mentioned Darryl Lyons of PAX Financial Group, as some quote that I had about tax reduction for small business. So that’s.
Greyson: Cool.
Darryl: Yeah, it’s kind of cool.
Greyson: It’s a neat shout out.
Darryl: Yeah. So just a really just to say that I been an advocate for small business for a long time. And so, we created a process that we take small business owners through and help them think about their business. But it’s not just quantifiable, like it’s not just numbers. There’s just a lot of factors. And if you’ve sold a business, I know you’re listening.
You’ve sold a business. You realize how emotional this thing gets. So, I look forward to hearing your feedback. If you have any insights that you want to share. But we want to make sure that we are walking alongside the business owners very well. So, we’re going to take you through the process that we take our clients through.
And this is, six stages that we meet, you know, that we have, we call them phases. Six phases. But it starts with phase zero. Can you tell us what phase zero is?
Greyson: Yeah, absolutely. So before doing anything, and in any of the work we do with any of our clients, we need to really understand you. Understand your situation. So that’s exactly what this, phase zero is, what we call it. It’s where we just have a conversation. Have it with you, and we prioritize the spouse as well. It’s obviously a non-negotiable. Spouse needs to be there. Because, quite honestly, you’ve made a lot of sacrifices as a business owner, but I could argue the spouse has made even more sacrifices.
Darryl: Tell them, you know, we do the Enneagram. You know, do you want to mention anything about that?
Greyson: Yes. The Enneagram is interesting. I’ve done it a handful of times. And you really learn a lot about yourself, for better or for worse.
Darryl: Yeah.
Greyson: You really learn what makes you tick. And how you are communicating, how you’re best communicated to. How you best, receive, you know, feedback and, you know, really get a message across.
Darryl: Yeah. And so if you’re listening, you’re not a business owner. Check out the Enneagram. It tends to get a lot of traction within the Christian community. So, I know there’s people that are critics of it, and rightfully so. It’s not definitely a perfect tool, but it’s one that helps me understand people better. And I found it to be very helpful in this stage to introduce that Enneagram.
And just for us to be able to learn what’s most important to the client. Now we’ve got some other behavioral finance tools that we’ll go through, but that’s a good one. And then we give them a copy of Small Business Big Pressure. Right.
Greyson: Great book. Yeah. It’s a quick read. Really powerful read though.
Darryl: Yeah, I probably need to do a revision on that book. That’s one day. Anything else is ground zero?
Greyson: No. Not really. Just laying the groundwork and setting expectations. It’s the big takeaway. Yeah. First meeting.
Darryl: Okay. And then the second meeting, which is actually we’ll call this phase one. What happens at phase one?
Greyson: So we review the Enneagram results. And that’s always a good, an interesting time to just surface some of the things and learn a little bit more about yourself. But then we move on more specifically into the business and do a little bit of a deeper dive. Again, still pretty surface level, but just understanding a little bit more about the industry, some problems that you’re maybe facing, some tailwinds that you might have as well.
And then we’re going to take you through an assessment called the exit readiness assessment. Quick exercise. And again, that’s scratching the surface for the next meeting, which is phase two.
Darryl: Exit readiness assessment. We did that the other day with the client. This was last week and kind of went through that. And that’s basically saying, yeah, I mean, just like it says, are you ready? But it kind of it goes through John Dini did this program and it’s an interesting program because it goes through and pinpoints areas that you can improve to, just to be ready to transition.
I’m trying to think of an example of one area that they might target. Oh, you know, a simple one is like all of your loans are in your personal name versus the business name. That means the business is too dependent on you. And so, there’s some things that some business owners are like, oh, that makes sense.
That’s intuitive. But then there’s some other ones that are like, if you don’t start doing business in a different way, then somebody coming in wanting to buy the business is going to be like, oh gosh, we got to unwind it because the personal stuff and the business stuff is too inner wound. Yeah.
Greyson: And some of these questions that you’re going to be asked seem very obvious on the surface. But you sit back and think about it and you have a hard time answering it. One of them, for example, is, what are you going to do when you exit your business? Like a qualitative answer, you know, what do you do with your time? Some people have absolutely no idea, and they don’t think about it till they’re explicitly asked.
Darryl: Yeah, yeah, it’s a big deal because, a vast majority of business owners, when they transition they’re sad, they’re depressed. It’s a tough deal. So, we got to really unpack that. What are you going to do with your time? You know, there’s only so much Fox News and flower beds you can handle.
Greyson: Exactly.
Darryl: Okay. So then we’re going into phase two, is there, what’s the homework that needs to be done between the phase one and phase two?
Greyson: Well, we’re going to want you to prep for an equity valuation. This isn’t a certified valuation that you can use for, you know, buy sell agreements or anything like that. But what we’ve learned through our experience is they’re pretty darn close. What is it, like, 5%?
Darryl: Yeah, yeah.
Greyson: Margin. So this is just a quick PDF to fill out, and that’ll get us, you know, ready to go through that valuation piece.
Darryl: That’s really important because when we do planning and I’ve you know, as you we’ve done a lot of financial plans in business. Owner says okay, I’m going to use my business equity to amass my retirement. I put everything, I put all the chips on that. And us as advisors, we say, okay, what’s the value business?
And then they just randomly give us a number. We plug that in. And because that’s all we have. So, in this we actually get to do some type of valuation. Not perfect, but at least directionally it gives us an idea. We had a case recently where the CPA said it was X and it was almost half of that. That was and we had to have an uncomfortable conversation, right?
Greyson: For sure. Yeah. You know, a big thing of it is translating business value to personal wealth.
Darryl: Oh, yeah.
Greyson: And you got to know where you are, to know where you’re going to go, and you got to know where you want to go and understand where you’re at, to know how to get there. So, seeing what that, you know, again, 5% margin of error, but directional value of your business gives you a starting point. And if you’re okay with that, then great. But a lot of times people want to grow it from there. And so it helps us have a launching pad there I love it.
Darryl: Phase two. So we’ve had this is our third meeting, but we call it phase two. So, what happens in phase two.
Greyson: So we’ll review that exit readiness assessment. There’ll be a lot of great conversations around that. Again a lot of those results are going to have some quantitative things that we can point out and maybe help you fine tune or think about it from another angle, but it’s going to be a lot of qualitative as well. And a lot of those questions at least just plant that seed to start having those conversations.
From there, we’ll also, walk through an honest conversations exercise. Again, another reason why we love having the spouse involved. What I’ve come to find, not only with business owners, but just with clients in general, when we take them through these honest conversations exercises is they learn something new about their husband or wife. Yeah, they’ve been married for 45 years and they’re learning something new.
And it’s always great to see. It’s always funny to see the spouse’s reaction when they have a new revelation. And so that’s going to be very powerful. So that’s also done in phase three. And then we also just look at some different risks as well. Oh wait.
Darryl: Well yeah. You’re getting ahead. But I do want to double click on the honest conversations because, I can’t reinforce this enough. We call the non-CFO spouse. Many times it’s the wife. Who’s let the, you know, husband drive the business and run the business. And she really, you know, as long as the debit card, credit card clears, I’m good.
I’m going to take care of the family. And. But her role in this decision is really, really important because sometimes she’s the voice of reason. And, you know, I did. If you haven’t listened to the podcast a couple of podcasts ago where I talked about women are better investors than men. Her seat at the table is critical to making the transition work the right way.
And so we really are adamant about not only having that spouse there, but we have a process that’s key. Have a process to hearing from her saying what concerns you? What are you thinking about? What you know, what should we you know, what should we consider doing? And, it’s really important because as men, we have egos.
And so we could, you know, we make a bad decision real quick and then making bad decisions at that point in life. There’s three problems with that. One, there’s zeros on these bad decisions. When you made bad decisions when you’re younger. There weren’t any zeros on it. Two, you make a mistake. You can’t necessarily go back to work all the time.
You know, you’re older and three. You might be in the doghouse. So we want to make sure that you’re sort of, Yeah, exactly. We want to make sure you’re okay. Okay. So, strategy phase three now. So, what are we doing here?
Greyson: Yeah. So, really, what we’re hoping to do through this whole process is solve problems or identify problems that need to be solved. And so, what we’re going to do here in phase three is doing a risk analysis of the business. We’ve actually got nine different risks that we’re going to look at, through different lenses. And just bring them to the surface. And if we can help solve them, great. If not, though, just identifying them is a big part of the equation.
Darryl: It’s a big deal. And just an inside ball game. We have an insurance company here. It doesn’t do like property and casualty, but we do life, health, disability. And I once almost sold that off because there’s commissions associated with that. And I was like, I don’t want anything to do with commissions because I think that’s a conflict of interest.
But I talked to a lot of clients and they’re like, actually, we’re okay. You’re getting paid commissions. We want you to have it here because it’s just easier. So, we’ve kept it here and clients have loved it. And frankly, we get paid a commission to do it. So, it helps our business. But why am I pointing that is that we, some of those risks that we identify, we can solve here, which is kind of cool, like life insurance or disability.
And then some of them we can’t solve. We point them to people that can. So it’s not only saying, okay, here’s the problem, but then us nudging them to say, we’ve got to solve these problems, not just pretend they’re going to go away. Okay.
Greyson: Yeah. And tacking on to the risks, we’ll also start introducing some contingency planning conversation. Into this process because, you know, you’re going to exit your business. It’s not a matter of if, but when. Whether it’s your own accord or something happens. You could get hit by a bus or chronic illness or something of that nature. And so having a contingency plan in place is going to, you know, people always say your business is your baby. And so, you want your baby to be taken care of if you’re not around anymore.
Darryl: Contingency planning, like, who’s the key man and all of that stuff. Yeah, yeah. We even get into cyber stuff, so.
Greyson: Yeah, we get in the weeds.
Darryl: Very important. Okay, now we’re in strategy phase four.
Greyson: Yeah. So, this is kind of what we call our valuation meeting. We’re going to walk through that valuation process that we talked about earlier. We’re going to look at the results of that and discuss the pros and cons of different ways to sell your business, whether it’s internally or externally. And different types of buyers. And a lot of times business owners haven’t even really given much thought of who they want to sell to. They might have kind of a pie in the sky idea, but they might not understand the drawbacks of doing so.
Darryl: One of the things that we run into is like somebody just, oh, well, let me give you an example. So sometimes you just like, I just want to sell it. I had one guy that sold it to his employee, and he sold it on the terms that it was going to be pay. He was going to be paid, the seller was going to be paid a percentage of the profits.
But it was constructed without an advisor, without a CPA. And so, what happened was this transaction turned into an ordinary income transaction, which is a considerably higher than a capital gains transaction. So like, I guess my main point is that we’ve got to figure out not only potential buyers but how to. And we can’t get enough of this because we need attorneys.
It’s beyond the scope, but we can have conversations. We do limit the scope because this if, you know, constructing the whole deal is way beyond this. This is us identifying some of the okay, you need to go this direction or this direction, but at least, having a think partner that can think through the tradeoffs. Another tradeoff that might be considered is you might get X amount of money if you sell it externally and half of that if you sell internally. So is it worth the trade off and just having these conversations, I think is an important part of this space.
Greyson: Yeah. And times your friend here, this is going to be really hard to bring value to a business owner if it’s like, hey, I’m selling in 4 to 6 weeks.
Darryl: Oh, that’s a good point.
Greyson: But if it’s 4 to 6 years, you can think about the tradeoffs. And depending on what your main priority is, we can position again for tax purposes or, just setting your team up for success, messaging internally. There’s things you can do when you have time. A good runway leading up to the decision.
Darryl: Yeah. So what you just said is that you need, you know, a good five years. This process is really designed for somebody who has some time to do some work.
Greyson: At least a couple of, at least a couple of years. If not, you know, a few more than that.
Darryl: Let’s go to the phase zero strategy. Phase zero. So, what do we do in here? I’m sorry. Five, strategy phase five.
Greyson: Yeah, yeah. So, strategy phase five is the fifth and final stage. And this is where we’re going to look at what we call the wheel of life. This is really kind of going off your comment earlier about Fox News and flower beds. You can’t do that constantly. So, what are you going to fill your time with?
And there’s different areas of your life, whether it’s, spiritual life, physical health, emotional health, relational health, areas that you want to flourish in, being intentional about those areas as well, not just, again, selling your business for as much as you possibly can. But setting yourself up to pivot in that next stage of life. With solid footing underneath you and understanding what it is that you’re going to do. Because you always say it. Retiring is
Darryl: The disposal of an asset when it’s no longer useful.
Greyson: So you are still useful. So how do you want to be useful in this next stage of life?
Darryl: That’s great. You mentioned business. You mentioned pivot. So, this is called business pivot planning. And so, for those that aren’t business owners maybe you can pass along this episode to your business owner friends. And then hopefully you glean a few nuggets as of the process that we take people through in the scope of work that we do for business owners, because we really do care about the business owners in and around our community.
And frankly, we’ve got business owners all across the country that do this with us. So, it’s a fun service that we offer. We’re really passionate about it. And thank you for giving us insight.
Greyson: Absolutely, thanks for having me.
Darryl: Yeah, this is fun. And thank you again for tuning in to Retire in Texas. And remember, you think different when you think long term. Have a great day.
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