What happens when a founder’s vision is carried forward by the team they helped build? In this episode, we share the story of a successful management buyout, where two key leaders purchased the firm from its founders. The founders are still involved, but now report to the next generation.
This wasn’t just a deal. It was a thoughtful transition rooted in trust, continuity, and shared values. The handoff preserved the company’s culture, honored its legacy, and positioned it for long-term growth under new leadership.
For founders exploring exit options, this episode offers a compelling model: a high-integrity transfer of leadership to a trusted internal team. Whether you’re planning your own succession or building the next layer of leadership, this conversation delivers practical insight and inspiration.
TRANSCRIPT
Greg Alexander: Hey, everybody. This is Greg Alexander, founder of Collective 54. You’re listening to the Pro Serv Podcast. If you’re new to this show, this show is for exclusively founders of boutique professional services firms. So if you’re in the expertise business and you want to make more money, make scaling easier and someday get to an exit, this show is for you. And on today’s episode, we’re going to talk about a certain type of exit. And this is when the founder of the firm sells the firm to the next generation, the management team. And this is a viable exit path for many, but it is often overlooked. And I want to make sure that we spend some time on this. And we have a Collective 54 member who has recently chosen this path, and they’re going to share their experience so that we can all learn from that. So Mike and Steve, it’s great to see you guys. Why don’t I start off by having you introduce yourselves and your firm to the community? And, Mike, I’ll start with you.
Mike Braun: Excellent. Mike Braun, co-founder, started the business with my brother in 2008, and to put it in a nutshell, the business was really designed to work with mid-market companies on solving what we call the sales leadership crisis. We had a lot of — poor is probably the wrong word — good people that were running those businesses without the tools and knowledge they need to run those businesses. So we built a business around how do we go in and work with that leadership, give them the tools and education they need, so they just run outstanding sales teams.
Greg Alexander: Okay, very good. And Steve?
Steve Hoeft: Yeah. So I joined Mike and Gary, which were affectionately known as the Braun Brothers. Pivotal was their company name. Back in 2016 I had been in the sales training world and heard of them, a local company. My prior life, I was in the service in the Marine Corps, had always loved leadership and always loved sales, got into sales training and always felt like I was a Ferrari — eight-cylinder Ferrari — running on two cylinders. I could only teach people how to ask open questions so many times. And when I sought out Mike and Gary, they had an opening for a senior advisor position. I didn’t have any gray hair at the time, but I thought I had a lot of gumption, so I said I want to join with you guys and come on board. A few short years later I became a partner and then took over the delivery team. All the senior advisors, senior sales ops advisors report to me, and I’ve learned and been under mentorship of Mike and Gary for a number of years now.
Greg Alexander: Okay, sounds great. So the structure to this conversation is: I’ve got three questions for each of you. And I’m going to try to sequentially go through this just to keep everybody grounded. I’m sure we’ll probably get off track, which normally happens. But when we do that I do want to remind you that you’re also going to be on the member Q&A session, where we’ll have lots of opportunity to go deeper than we’re going to go today. But I’m gonna start with Mike. Mike being the co-founder — or in the context of today’s conversation — the seller. And Mike, I’m going to ask you these three questions one at a time. And I’d love to get your answers, okay?
Greg Alexander: All right. So the first question for you, Mike, is: What was the moment you realized that selling to your management team might be the right exit path for you?
Mike Braun: Pretty quickly after we made Steve a partner. So Gary and I talked early on about we are never gonna take on any other partners. As brothers, we’ve been arguing since he was born. We know how to do it, we know how to still have a nice Thanksgiving at the end of the day. And if we kept it between us we would just have no issues. Steve came across, and then Elizabeth — who you’ll meet in the Q&A session, I think — came in later. And we decided if we want to scale, we need other people. When they came in as partners and we got the full breadth of their thinking, that became the first option pretty quickly: Is there a way that we can let them grow into the business, continue, take more and have this be a future exit strategy? Just because we align value-wise, culturally, in a lot of different ways. They were just the right people. Didn’t know if that would work, but pretty early on that was path number one.
Greg Alexander: Yeah. Okay, so the lesson for the audience here is that you want the option, right? So in Mike’s case, or the Braun Brothers’ case, they gave themselves this option. And you all know at some point you’re going to sell your firms because you’re going to retire or you want to do something else. You need as many options as possible. If you’re pigeonholed into selling to — I don’t know — a PE or strategic, and you don’t have this option, the exit might be more difficult. So do what the Braun Brothers did: bring in the next generation and set yourself up for having that option. Okay, let me go to the second question.
Greg Alexander: So how did you structure the deal to align incentives while managing your risk, Mike?
Mike Braun: Be more about me. What do you mean by managing incentives?
Greg Alexander: So the mechanics, equity debt earnouts, you know. How was this? How were you ensured that there would be a win-win.
Mike Braun: It was pretty simple, and we we went through some some challenges, and I don’t want to get ahead if that’s your 3rd question, but we went down this path as our Number one option until we figured out at 1 point Steve and Elizabeth had interest, but no money. Right. And then we went down another path, and we did go outside. Get a broker. Try and bring an outside. We were looking for a strategic buyer. We got family offices and so forth. In the end the structure. And again we can get deeper later. But in the end the structure was relatively straightforward. Be interesting to see how you see this, Steve, but the way I saw it is a pretty discounted price over what we thought the valuation was, or what we were even being offered by other people in exchange for all the money upfront.
Greg Alexander: Okay, got it. So this issue of selling to the next generation in your case, Steve and Elizabeth and them being the right people to sell it to for all the reasons you mentioned earlier. However, you know they’re earlier in their careers. and they don’t have the dough to do the deal right? So this this happens a lot. So you chose to lower your purchase price so that they could afford it relative to the alternatives which was selling to a family office or somebody like that. How come.
Mike Braun: It. It came in a def. It wasn’t my intent to try and sell the business for lower than I thought it was worth right but we talked about seller financing. We talked about installment structures where they would buy over time, and and what that kept coming back to for me was, no matter how I do it, I’m still kind of in the business, even if I’m out, I’m I’m still there’s money there. There’s expectation to make that all work. You were talking about a relatively long timeframe for that to work. I also put on. If I’m gonna sell or finance certain caveats we call them Mike Mike Covenants instead of bank covenants and and Steve wasn’t super thrilled with the Mike covenants, and in the end it was him who came back and said, I’ll figure out how to get the money and pay it upfront. Let me lead, and then you can move to the background the way you want, and be an advisor. But I get to run the business, and in all that we got to you’ve said it before Greg. The price was pretty easy the the terms and negotiations were not so.
Greg Alexander: You know. So the lesson there is Mike made a judgment call a value based call, and that was the to get a higher price required a lot more structure. Where, therefore, required Mike to be in the business more than he wanted to be. So the value call the judgment call was okay, I’ll take less. But this is what that does for me. I can be out of the business, and that’s a personal decision, you know, and everybody has to make that decision for themselves.
Mike Braun: Let me add to that just a sec, Greg. Cause I think it was 2. Yes, that was good for me. I also think, because we all 4, where we were always aligned, was probably best for the team, probably best for the clients. Business, as usual, continue the path, but do it in a way where I’m I’m a fan that if you’re driving a business you gotta have that 10 year vision of where it’s going. and my runway was less than 10 years. So I’m not the guy to do this anymore, and it’s time to move on. And it was important to be able to do it well for everybody. We had sucked into the business, and you know, made promises to.
Greg Alexander: Yeah, you know. And the mistake I would like people to avoid making is sometimes people in Mike’s shoes go to maximize the price. And someone in like Steve’s case goes out and raises a bunch of money to hit that price, and then, after the deal is done, the business is left with a huge debt burden. And all of a sudden, now the business gets shaky, and in their ability to service the debt. So then they go to the clients and raise prices. and the clients get angry and leave, and the business falls apart. So if you’re going to execute a transaction like this where you’re selling to the next generation. Check the greed at the door, and remember that, you know it’s got to work for everybody involved the sellers, the buyers, the clients, everyone. All right. One last question for you, Mike, and then, Steve Hoeft, I’m going to bring you into the equation here.
Greg Alexander: So, Mike, when you look back on it. What do you wish? You would have done differently in preparing Steve and Elizabeth for ownership?
Mike Braun: Boy, that’s a really good question. We’re pretty transparent. So they were involved in, you know. really, all the decision making all the direction, all the strategic planning. There weren’t very many decisions
Mike Braun: that we didn’t either eventually get to agreement on, or they weren’t even involved or making. So there was a lot of that. I think I think one we probably have could have done better on is bringing them a little bit closer to the details of the finances. You know, we’re looking at reports. We’re watching money. And I think, Steve, you probably would say, even now, having having been in a different position for a few months now. The the depth at which you’re looking at those things is a lot different than when you were just doing your job and reviewing the monthly report. And we would say things like, Well, we need a report that does this and this and this, and in my head. I’m going. You mean the one we look at every month that you’re now actually so it did. It did change the importance, and we probably could have brought that in into really understanding how the cash flows, how the money moves outside of just doing good work for our clients and and moving forward. Because I think I think it changes the perspective.
Greg Alexander: Yeah 100% it it it. It allows the new management team to really put that owner hat on. And you know, understand that, you know. Damn, I gotta make payroll every month. Like, how am I gonna do that? Right? It’s it’s a it’s a whole new lens to look at things. Okay. So, Mike, thank you for that, Steve. I’m gonna shift the conversation to you. I have 3 questions for you. So my 1st one, which is the doozy of them all? Which is what gave you the confidence? The guts to say yes to becoming an owner. And what scared you the most.
Steve Hoeft: When I when I joined Mike and Gary it, there was a mentorship in place, so I knew that there was always a path to to do this. So I think what happened was when I was able to get in, hire a number of people take over the team for Mike over the last few years. There was a point where Mike started taking, you know. He started going to Palm Springs every every winter, and he wasn’t here, and he left me a lot of the decisions. And I started making a lot of those decisions. And there wasn’t. The feedback wasn’t as often it wasn’t as much. And it left me to go. Okay. I made these decisions. And even though they grew this business before me, I’m making the decisions now with my partnership team, and I started gaining a lot of confidence there and then, as it evolved I always knew that I could run a business and own a business I was never confident I could do with with the team like I always felt like if I failed. No big deal, Steve, a fails. But when you, when you take on a team and you take on responsibilities of all these other people that was incredibly burdensome, so I didn’t understand finances and money enough. So when I started understanding and talking to people about how to do it, how to structure a deal, how to put a deal together, how to pay for the the business after the brains, the the smarts, the equity that Mike and Gary are putting into the business on a daily basis. When I talk to a lot of peers that have done it, I started getting a lot more confidence. And quite honestly, Greg, as I look back, one of the things when I did this kind of like 20 points of making this deal one of the big deciding factors, because I really feel this underneath this professional services organization. The landscape is shifting tremendously. C. 54. When I went down to Dallas that cemented me, going forward with this because I finally got around a bunch of people, and this is honest. I finally got a bunch of people that were of the same caliber of Mike and Gary. I’d never been around people like Mike and Gary that had that insights, that intelligence, the wisdom, the collective wisdom. And that put me over the edge, and when I shared that with my partner, Elizabeth and I told her that this is what we’re going to do, and this is how we’re going to do it. She was all in, so that was the final nudge, and we, Mike and I, went down there and to Dallas, and we really pretty much sealed the deal down, and we had some late night conversations where everyone else was maybe hanging out. We were in a in a hotel room talking to the the last details, and I thought, if I have this backing of this collective wisdom, I know we can do it.
Greg Alexander: I appreciate you saying that you just made my day. And I remember you guys coming down there, and we were eating barbecue together. And you guys were kicking this around. Yeah, that was a lot of fun. So that’s good to hear. Okay, let me go to the the next question, which is, you know, you got to come up with the money to make this happen. So how did you finance it?
Steve Hoeft: Quite honestly, ignorantly at first. So I’ve always like. Obviously Mike and Gary, they can. They can come up with numbers in their heads, and I can always get the same number. It just takes me twice, maybe 3 times long with the calculator. So I had to go find resources and money people that understood it. And my 1st pass. I trusted someone, and I still trust that person. But it led down a path. And they basically guys said, I’ve invested in other business, but I never invested in professional services. So even though they they gave us all the guarantees upfront when it comes to signing the paperwork. They said they pulled it off from underneath us. And it was a huge hole like it was a gaping hole, and it went against my collective wisdom. It went against Mike’s advice we should go out and get 3 different people. So we went back to the table and looking at seller financing, and I think what happened in the seller financing is. I wanted Mike’s and Gary’s best wisdom on our business, and I didn’t want them to be tied to the wisdom they’re giving us tied to being paid out. So I thought. having a certain level of empathy where they’re at, I want to make sure that in Elizabeth and I both agreed that they get paid, and they can give us a collective wisdom. As we have the continuation plan. The succession plan all in place. They’re they’re not looking at it from a financial aspect. They’re looking at it from a you know, from wisdom. So I had to get really boned up on finances and education, of businesses and transactions, and all the nuances of the deal. So I went out and saw my kind of Key 3 mentors, and then went out searching for the best partner in a bank to go ahead and do that, and then went back to Mike and Gary and said, Hey, we’ve kind of went at this a couple of different ways. Here’s a final push I want to make. What do you guys think.
Greg Alexander: Interesting, you know. So my part of that question and I’m gonna double click on it because of that story you just told me, which I didn’t know prior to this conversation, is that you went. You got a bank to loan you the money. Did that require a personal guarantee? And if so, what made you willing to do that that usually scares people away.
Steve Hoeft: I don’t scare very easily. Personally. I have a high risk tolerance. My partner, Elizabeth, has a very low risk tolerance, so I was actually more surprised when she decided to do that.
Steve Hoeft: the the personal guarantee, the way I looked at it, the fundamentals of our business, the way that we’ve been mentored for the last 8 or 9 years. One of the things that banker told me—didn’t sell me. He said, we have a lot of high trust in going forward this loan because you guys aren’t people off the street going forward with this. You’ve been in this business collectively for 17 years. You know all the ins and outs. You know where everything is buried. You know everything about the organization. You guys have made great decisions. At this point, you guys can go forward with that. So the personal guarantee is like, it’s really not a big, not a big deal, I guess to me the mindset it probably was more for Elizabeth.
Greg Alexander: Okay, very good. Well, I’m glad to hear you say that, because that usually scares a lot of people away. And and I will tell you. Having done this now for quite a while. I am at the point where I’m having conversations with the Steve and Elizabeth after the debt has been satisfied, and the burden of the personal guarantee goes away, and they feel great about the fact that they had the courage to bet on themselves, because once the debt’s paid off. Now you and Elizabeth own this thing free and clear, right. And then you’ll probably do what the Braun brothers did. You know? You’ll probably recruit in the next generation, and the cycle goes on and on and on. So Pivotal Advisors becomes this wealth creation vehicle in perpetuity for multiple generations. Right? That would be the goal. I hope that works out for you.
Greg Alexander: All right. My last question for you, Steve, is so, you know. Now you’re the big dog in the big seat. So what’s changed, or is is everything still the same.
Steve Hoeft: When the final conversation with our lawyer broker, who is kind of brokering this deal for us, I remember driving 4 94 eastbound to take my daughter to a wrestling tournament, big State tournament, and the lawyer called me up and says, Do you have any final requests? I said. I have just one final request, and if we do this, I just want to be done. And I remember turning to my wife and saying, I think we just bought a business, and I’m ready to take a nap. And everyone said, everything’s gonna change. Everything’s gonna change. Everything changed for me a year and a half before, so I started looking at the numbers. I started getting intense with it. Every decision I had. I try to be as very calculated as possible. And I’m a big believer that you make really, really big decisions. And then you never look back. You can’t. You can’t look back once the final decision is made. You can learn from it, but you can’t go back and go. Oh, I wish I’d have done this. I wish I’d have done that. It’s lessons for the future. Our clients are gonna be better off. My kids will be better off. The people we work for will be better off, because those learnings and some of those scars and some of the really high points and the decision making process. Now, I always tell people it hasn’t changed. I’ve always been one that collective wisdom get from a lot of different people, and then to be able to make a final decision. It is kind of nice. I remember at one time going. Mike, C. 54 is holding a session for how to write a book. Would you like to take some of our money now, and go write in Texas? And I remember when he did that for me. So that was a that was a kind of a passing the torch, and it was kind of fun to do that. But the decisions they’re collective, you know, with the team, I’m not going to make anything without anyone involved. It just I don’t think it works out well.
Greg Alexander: Great. Well, listen, on behalf of the entire community. You know, you guys have been great members for a long time. This is a fantastic story. We played a small part. It was our privilege to play a small part, Mike, I wish you the best of the most happiness in your next chapter, whatever that is. And, Steve, the entire group is here for you. We’re behind you and Elizabeth, and going to do everything we can to help you guys be successful. So thanks for coming on the show and thanks for doing the member Q. and A. and sharing the story. We really appreciate it.
Mike Braun: Thanks for all your help, Greg. You were a great sounding board through the process.
Greg Alexander: Okay. Great.
Steve Hoeft: Thank you so much, Greg. You and your team. Amazing.
Greg Alexander: All right. So for those that are listening to this couple of calls to action. So if you’re a member, and you want to hear more about this story, and you know the podcast only allowed me to ask a few questions, as many more to ask. Please look for that meeting invitation, and you’ll be able to ask your questions directly of Mike and Steve. If you’re not a member. And after listening to this, you think you might be curious about becoming one. Go to Collective54.com and fill out an application, and we’ll get in contact with you. But until next time I wish you all the best of luck, as you try to grow, scale, and someday exit your firm.
Note: This transcript was generated by Zoom.