009 - Holli Moeini, Mergers & Acquisitions Fractional CFO
Corporate mergers and acquisitions are a complex process that many entrepreneurs think they can power through without guidance.
Holli Moeini knows that's far from the truth. Her decades of accounting, auditing, and mergers and acquisitions have sharpened her skills to be among the best at helping CEOs achieve consistently higher returns on the sale of their company.
Holli listens to the story of the business while examining the financial statements, helps the CEO implement systematic and repeatable approaches to accelerate growth and maximize profit, and serves as an ally to sell a company for the highest multiple possible.
I’m Damon Davis and this is my discover diary with fractional CFO and M&A master Holli Moeini
https://hollimoeini.com/
https://www.linkedin.com/in/hollimoeini/
Transcript
009 - Holli Moeini, Mergers & Acquisitions Fractional CFO
[:[00:00:06] Damon: Corporate mergers and acquisitions are a complex process that many entrepreneurs think they can power through without guidance. Holli Moeini knows that's far from the truth and her decades of accounting, auditing, and M and a work have sharpened her skills to be among the best at helping CEOs to achieve consistently higher returns on the sale of their company. Holli listens to the story of the business while examining the financial statements Helps the CEO implement systematic and repeatable approaches to accelerate growth and maximize profit. And serves as an ally to sell the company for the highest, multiple possible. I'm Damon Davis. And this is my discovery diary with fractional CFO and MNA master Holli Moeini.
[:[00:00:56] Damon: I really appreciate you making time. This is awesome.
[:[00:01:04] Damon: Indeed. So, we met in Nashville. We had a great chat. We were at a, what I call a wealth building event. We were with Adam Coffey and JT Foxx. Dennis Masarycki and Michael Burton.
[:[00:01:27] Damon: for anybody who doesn't know you just do me a favor, take us back for a little bit. Tell me a little bit about your professional experience before you started this current business.
[:[00:01:40] Holli: So I started a long time ago, over 30 years, and I was an auditor and a CPA, and I did that because. I thought that I would really understand business and I thought I'd make a lot of money. I mean, honestly, that was the impetus behind it.
[:[00:02:12] Holli: All audits, I would walk into every different kind of industry and I'd learned very quickly and figure out what's happening in the company. And then I also did some fraud auditing, which I think is really helpful. for me even today. So the tools were starting to be gathered at that point in time. And then I went into what I call private practice in actual corporations, helping build.
[:[00:02:56] Holli: Our product was a commodity at the time and [00:03:00] tougher and tougher to make money. And I'd been there. In that space a long time, and then I went to corporate career and I started doing a lot of M and a work mergers and acquisitions, and I would do what I would call end to end. And so I think of me and the CEO as Batman and Robin, and we always went together in the car, And for the adventure.
[:[00:03:43] Holli: I call myself the haphazard entrepreneur, which I would never, ever, ever think that anybody should follow my path. So don't be the haphazard. So one day I was just like, I'm not growing. I'm not learning. I always think in terms of, [00:04:00] What legacy am I going to leave and everywhere I go, and even with people, it's like, what legacy do I want to leave?
[:[00:04:32] Holli: And what I found Damon is that there's a space of companies and their, their startups to, 50 million somewhere around there, maybe even a hundred million Where entrepreneurs get stuck and I've been through that. I've seen it. And so I wanted to be that partner and that Batman and Robin for many, many people so I can leave a legacy for our [00:05:00] smaller businesses that struggle making it.
[:[00:05:04] Damon: I've heard a lot about this entrepreneurship. Endeavor. And when you reach a certain point of success, you stagnate, right? And it's often said, , the things that got you here will not get you there, right? Whatever you would skills you had coming into this, be it a haphazard entrepreneur or not, you're going to need some additional skills.
[:[00:05:42] Damon: Because it doesn't sound like it was a skill that you even had going in.
[:[00:06:03] Holli: There's all kinds of things that you do to devalue and hope nobody sees it. I don't, I don't know. Okay. But, but that little slice of of auditing actually really did help me. And then the other thing that I think, and people don't talk about this, but. In M and a, and I think even our seminar, nobody talked about this, but I will
[:
[00:06:27] Holli: It's emotional. It's seven stages of grief. And I was one of those people that I wanted to hire you and bring you on. And I wanted to hug you and sing Kumbaya and I didn't want you to leave. So I wasn't one of those, what's called the lights off buyer. I was a lights on, let's continue the path together and do it together.
[:[00:07:11] Holli: Emotions and conditions. And I've always been empathetic, but like, how do I help and guide that seller I'm a buyer. So you think I have a conflict of interest, but I never wanted to take advantage of anybody. Our company wasn't like that. So I could gain your trust and I could help you through the process.
[:[00:07:45] Holli: Yes. I mean, I've gained that along the way, just from a personal standpoint to always. Personally improve and then we can show up like that for everybody else in everything we do.
[:[00:08:04] Damon: I have to win and you have to lose. And what I'm hearing you say is that there's space for both people to win. Because what I also think I heard you say was, if I was a, Entrepreneur who built a business to 50 million. That's my baby. I grew that from nothing and now it is not only graduated college, but it's going off to live out in the world without me.
[:[00:08:47] Damon: Cause they are, it's a lot to go into all of that, but I'd love to hear a little bit more about this digging into the books. I want you to give some practical things. If I was coming to you and I'm [00:09:00] selling a business and I knew I was selling a business And I've done some of those things that you said I shouldn't do.
[:[00:09:15] Holli: I love this. This is a, this is a great question. Thank you. So I'm going to start at the point where you wouldn't think, but I'm going to start with the initial conversation.
[:[00:09:45] Holli: Have a love story. They never leave one another, or you can say they have an adventure like Batman and Robin. But I like to say a love story because they meet at the business gala on the exact same day every year. So if it's a 1231 date, you always get an [00:10:00] income statement and a balance sheet. So you take this story that you heard from the CEO not only are they telling you about the financials, but they're telling you cultural things too, that you want to log.
[:[00:10:27] Holli: He starts with the balance sheet. And so we look and say, okay, what's happening on the balance sheet? Cause oftentimes there's a lot of hocus pocus happening there. And that is a very technical term for things not being right. But here's the kicker. This is what, and most CEOs don't even look at their balance sheet.
[:[00:10:54] Speaker: Miscategorization.
[:[00:11:16] Holli: So you your PNL is wrong. If your balance sheet is wrong.
[:[00:11:21] Holli: the other thing that I always do is I, and nobody, Nobody thinks of this, but those people in that financial space, and I'll tell you, you must make sure that your accountant or somebody reconciles. Why is that? So equity is something that really just takes your net income and says, okay, I earned this much more money.
[:[00:11:58] Damon: so you're reducing the value of [00:12:00] the company. To you comes in and they see all of these little dribs and drabs drips going out.
[:[00:12:07] Damon: they're siphoning off from the bucket. The bucket doesn't look as full to someone who's looking to buy the bucket. Right. That's a full bucket for, that's worth a hundred million dollars. But all of these little miscategorizations have got you down to 65 million. I'm going to devalue your organization and you're going to wonder why I'm offering you this crazy number.
[:[00:12:36] Holli: that multiple scales up, the bigger you get, the rarer you get and it gets bigger. But so you're exactly right. That multiple multiple goes down and you're thinking, well, this isn't, I'm not happy now.
[:[00:13:24] Holli: Because it's a one time charge. So when I buy your business, you're not going to buy it with Holli, the business with Holli. And so, so I would strip that out and help your EBITDA. I would boost it by saying that these things are really what we call seller discretionary expenses. And I would add that back.
[:[00:14:06] Holli: So it's then you think, well, does this leader know what they're talking about? So here's the other thing about that. The less. The less ready you are, the less money you're going to get, they are directly correlated.
[:[00:14:21] Damon: I'm so glad you led me to that because what I'm hearing you say is people who come to you too late are going to be under prepared and then undervalued. So it sounds like basically the morning you wake up and think to yourself, I should really sell the company. That's the time to come and chat with you.
[:[00:14:42] Damon: to take a while to get to that sale point and you can help to create some efficiencies, get the books to be correct, make the story of the balance sheet and the P& L and all of those other documents align. Is that what I'm hearing?
[:[00:15:04] Holli: I gain
[:[00:15:15] Holli: If I lack confidence in my mind, I'm discounting it in my mind. I'm like, okay. And your leadership, that's the other thing. Listen, I wanted you to stay on. That's an issue. And so, yes, it's a hundred percent true. So probably Damon, if you thought about it today, you shouldn't. You should have done it probably five years ago, but if you thought about it today before private equity starts knocking, there's a lot of our trades, they're knocking on so many doors now and saying, do you want to sell your company?
[:[00:15:52] Holli: You will, they
[:[00:16:06] Holli: They didn't hire me for this particular thing, but they came to get my advice later. And they were a big company and they were going to sell for 120 million. And this is a lot of money, but they were probably leaving 20 million on the table and their decision making process. Well, somebody came knocking at the door and then they said, yeah, I'm tired.
[:[00:16:43] Holli: Things didn't tie. I mean, because so there are risks. So their price went down. And so they backed away, which I was like, that's a great advice. And now they're Of course you get deal fatigue both sides and they were going through deal fatigue because they'll [00:17:00] say give me your this and it takes a million years to get this and then there's questions back and forth and listen, Adam Coffey says that I mean, I hate to say this, but Adam Coffey says due diligence is like a proctology exam.
[:[00:17:24] Speaker: the converse of that though, is it may feel bad, but it is necessary, right? This is medical prevention. So it might suck, but if you don't do it, who knows what happens on the other end, right?
[:[00:17:35] Holli: one of the thing about that, just sorry to interrupt, but one of the thing about that, I just want to close the loop is, is that preparation also is about boosting. Your EBITDA in a right way, in a proper way. And what I find, what I'm finding in my clients is that there are accounting opportunities that haven't been taken advantage of.
[:[00:18:18] Holli: So we can plan for that and go back and go back and get all your one time charges and go back and get that all in alignment. So you have the highest EBITDA possible, and we can tell the story of the future cash flows.
[:[00:18:37] Damon: Inability for a buyer to trust what they're seeing in the books feels like when you go into a house, you, you said deal fatigue. And I was thinking of people who are shopping for a home. You're going from house to house to house. You get tired. And the lack of trust that you would have in a home where if you walk up to the front door and it feels a little jiggly on the door handle.
[:[00:19:17] Holli: a hundred percent, a hundred percent,
[:[00:19:20] Damon: You let in with a little bit about SG and a describe SG and a, for anybody who's not truly familiar with it. And then talk a little bit about how it is that you can. manage SG and a to be more efficient so that the books look better. The business is more healthy and you're starting to show profitability to in a, in a larger way.
[:[00:19:58] Holli: And then sg and [00:20:00] a should be less than 20%. Now I always try to get it closer to 10, but depending on the industry, depending on the industry you, you can or cannot do that. So, so what I find is that let me define it first. Okay? So sg and A is back office. So it's your insurance, it's your accounting, it's your advertising and marketing, the cost of getting customers.
[:[00:20:44] Holli: That is a problem. That means you're not deploying efficiencies and technology to reduce your SG& A. You're throwing bodies or that you're throwing other solutions at it. You're not renegotiating your insurance. Like one of my clients was like, dude, we [00:21:00] need to re renegotiate this and put out to bed. This doesn't look right.
[:[00:21:11] Holli: Yes. Yeah. And thinking about it this way, this is how I think about SGA, particularly with bodies. It's if I, if I hire this body, what is the return I'm going to get from that?
[:[00:21:41] Holli: So I'd never hire people to do low value work. And so oftentimes some of my clients, I'm like, you should just hire bookkeeping if we can get you a great bookkeeper, hire a bookkeeper. And that's going to save you money. And then let's automate all these, these other things. And you don't need to hire what I'm going to save a person for low value work.[00:22:00]
[:[00:22:00] Holli: I think that that has to be continually looked at annually and SG& A and, and your cost of goods sold. But we're talking about SG& A, you look at it annually, you look at the percent of revenue. So it's take the total. Combined by the percent of revenue, all of these 30, 20, and then 10 percent should be your net income.
[:[00:22:42] Holli: And I'm like, well, is it really? Let's look. Mm-Hmm and recategorize it. And then really it's a cost of good sold problem. Then we have to dig in. That's when the sleeves really roll up.
[:[00:23:01] Damon: On the outstanding balance, right? Your accounts receivable. Tell me a little bit about that other side where folks are just leaving, days and days and days of not accumulating their, their sales.
[:[00:23:21] Holli: And by the way, it's a, it's a metric that everybody should look and trend. Trend it. And it's really just really what, how many days in revenue do you have divided by your, your AR balance? And that will tell you. And so, so, Cash is respect. Cash is health. The more cash you come in, the more you can deploy it for profit.
[:[00:24:04] Holli: because
[:[00:24:32] Speaker: Yes.
[:[00:24:56] Holli: And it takes everybody. It's not the person in the corner dialing and [00:25:00] asking. It takes everybody talking about it because it is about respect. And I think everybody inherently wants to pay and wants to respect one another.
[:[00:25:19] Damon: You're not there part of the team day to day. How do you Get the buy in of the rest of the organization to follow the recommendations that you're bringing in as a potential outsider.
[:[00:25:35] Holli: know
[:[00:25:43] Holli: So for example, I, I had a situation with AR just the other day. And my CEO he's not my CEO is my, I'm his fractional CFO. He said. I think our AR is good. I'm saying, I don't think so, but tell me why explain to me why you think it's good. And we looked at [00:26:00] it together and kid made a mistake in the calculation.
[:[00:26:21] Holli: And I go, let's talk about the process. And we talked about the process for collecting. And by the way, the, the people that were on commission that were getting paid when the AR was collecting. The job was done. They got the money, the ones that weren't on commission, we're getting the money. And that was what was aging.
[:[00:26:58] Holli: To point that out [00:27:00] and push a little bit you that you are not hiring me to be a yes, man. You're hiring me to for my expertise.
[:[00:27:16] Damon: It's, it's clear that you are interested in open, honest communication, getting the numbers to be right so that the person on the other side of the table can feel really confident. That what you are presenting is factually accurately, correct. And they can move forward with their own due diligence, not expecting to find really any gotchas, no pitfalls.
[:[00:27:40] Damon: That's so Holli,
[:[00:27:57] Damon: Just talk a little bit about what some future [00:28:00] trends are for you.
[:[00:28:16] Holli: And I I was always going to the table and saying, Private equity is the big bad people. You want me to buy you. Okay. Because you can, you're still going to be an entrepreneur here. I mean, I would get them on, on board that way. And sometimes I lost, but they were only around 50 percent of the time. Now they're around all the time.
[:[00:28:59] Holli: 4 [00:29:00] million is the first exit point. And if you have the if you have the goals to get with private equity and execute like Adam Coffey did in, and he has three books, I say, read them all, private equity playbook and, and empire builder and what was the other one? Okay. Anyway, so it doesn't matter.
[:[00:29:40] Holli: And I said, I'm going to. Okay. Like pretend I said, I mean, this was awful. Okay. But I said, pretend you're a brain, pretend you're a brain surgeon and I'm going to do brain surgery and you're going to give me a checklist for brain surgery. I mean, and I go, maybe that's a little extreme depending on the business.
[:[00:29:59] Holli: [00:30:00] How can I give a check? I don't even feel confident to give a checklist, and so what I'm seeing is that because there's money here and there's a lot of people that are influencers that are talking about it, then you have people like Adam who really have done it that are talking about it and you have a lot of people trying to get in this space.
[:[00:30:43] Holli: And so those are the trends I'm seeing. Hopefully I get a knock on my door. I don't do a quality of earnings, but like a quality of earnings which is part of the process. We didn't always do it in my company because We, we knew the business and it was like, I could already, [00:31:00] I already knew there was no need to do it bigger transactions.
[:[00:31:26] Holli: I like you. We've broken bread together
[:[00:31:29] Holli: now I'm going to go get a quality of earnings. I'm like, cheapest quality of earnings is maybe 5, 000, but it's usually 10 to 35, 000. Even in our
[:[00:31:41] Holli: And so don't use that money. You better have somebody like myself or get an accountant or your wife is a CPA or your husband and have them take a peek at it because you can see a lot of things just in the very beginning.
[:[00:31:58] Damon: yeah, sound like you're, [00:32:00] they're standing at the edge of the diving board at the deep end and not quite ready to swim. Right. It's, Yeah, I hear you on that caution. That's really awesome. Holli, this has been amazing.
[:[00:32:27] Holli: Thank you so much, Damon, for having me on your podcast. I love your questions. I loved our chat. I hope it provided some real value for your audience. I, I'm excited about it. And anytime you want to have me back, I'm coming. And anybody can find me at Hollimoeny. com. I'm going to spell that it's H O L L I M O E I N I.
[:[00:32:53] Damon: A lot of vowels, a lot of vowels for a lot of knowledge. Holli, you've been amazing. Thank you so much for being here. I appreciate you.
[:[00:33:00] Speaker: Take care.
