Quantum Health Benefits Founder Jeff Kropholler says he's been told he may be one of the 1 percent of CEOs who will tell people that he didn't have all the answers when he sold his business, Synergy IOM. At the Dallas Smart Business Dealmakers Conference, he shared his experiences, where he felt he went wrong, and what he wishes he knew before he went into his process.

Having grown the company over an eight-year period, he decided it was time to sell because he had other business interests and saw some changes in the marketplace that were coming around. But, he says the main reason he considered a sale process was that he had an opportunity to bring on six surgeons at the same time, and wasn't prepared to take control of the opportunity. The equipment needed for each tech was expensive, so buying six new units, hiring six new technicians or more, and managing that business out of their local geography was a daunting task. And while he was scrambling to try and figure out how to capitalize on that opportunity, the opportunity was passed on to a competitor.

"I have no experience in leveraging money or putting myself in a position to use assets to either buy competitors when they were weak or expand outside of what the growth of our company would do," Kropholler says. "So, because of that, I lost out on opportunities. For me, it was looking at an opportunity to bring on a strategic partner that had the experience and the expertise that I was lacking as a CEO to take advantage of those opportunities and grow. And ultimately, what we did is found that partner on my terms, and protecting my employees and what was best for the business, to where we can expand on those opportunities, and ultimately went into other states."

He worked with advisers through the process because they're able to find the ultimate partner. The more a seller can tell them — what they're looking for, what the perfect scenario looks like — the more they can help.

"If it's a business you started, it's very much your baby," he says. "Most of us want to control things and hold on to the relationships and have our finger on the pulse of everything that's going on. You've got to let some of that go, ultimately, if you want to be successful."

He says he wasn't prepared when he went to sell because it meant taking on essentially another 40 hour a week job. He says owners will spend anywhere from six to 20 hours a week having phone calls, often an hour each, with private equity, family offices, strategics, competitors, and then educating them on the business.

"If it's tree trimming, hopefully it's a shorter conversation," he says. "But if it's brain surgery, it tends to be a little bit longer."

He says those conversations often were around the business, and why he's trying to sell it — conversations he says he had to repeat over and over again.

"That process can be anywhere from six months to two years until you find the right person and the right marriage," he says. "So, understanding that you're going to have to balance that while running your company at the same time is paramount."

He stressed the importance of getting professional help — attorneys, brokers, CPAs and tax advisers. The latter he says is important because what those in private equity are looking for is completely different than what a tax professional wants. And putting the business on paper in a way that is attractive to future buyers is key.

"And realizing it's not always about EBITDA because EBITDA and sale price don't always match," Kropholler says. "You may have an algorithm, a controlling operation or something unique, or even just you yourself — relationships, and experience and background — that the buyer really wants just as much as your EBITDA. And that has value. So, think about that as you're planning for an exit is, one, what do I want? What do I want that marriage to look like? But also, outside of just the profitability to my company, what am I really bringing to the table that's of value as well? And having good partners to help you through that process is invaluable."

He says he turned down a more lucrative offer from a firm because the structure, how they wanted to run the company, and what it would mean to his employees was vastly different than what he wanted to do. Ultimately, he took the offer that was less from a financial standpoint for him, but it was the right strategic partnership to make for the longevity of the business moving forward.

"So, don't be afraid to really stand by what it is you want and be patient," he says. "Because the expectations may be vastly different from what you see happening in the future versus what whoever ultimately is going to try and partner with you is looking for as well."

He says knowing what a future partner has planned for the business is key, so don't be afraid to ask.

"Ask what the expectation is that the private equity firm, or the family office or so on," he says. "I mean, we had guys that basically said, 'I think I can run your business better than you even though I don't understand it. When we buy you, you're getting out of the way, and we're just going to take over.' Literally. It's like, OK, probably not the best fit for my employees, the business, my customers, etc. So, understanding what their expectations are and knowing that once it's done, that's when the real work is going to start from your partners experience because they want it now. The only way they're making money is if it grows, and they can recognize an exit two to five years down the road. So, don't be afraid to ask, 'Hey, what are you expecting of me or my team or whatever after this?'"

After selling his business, he founded a new one — Quantum Health Benefits. Already, he says, he's talked about what an exit for this business could look like.

"We're meeting with attorneys, advisers, market analysts, paying for data to make a good decision," Kropholler says. "I think money well spent is getting data so you can really make an informed decision on what you want to do in the future. So, we spend a lot of time right now preparing our current business and running it as if it's sale-ready today. We're minimum, best-case scenario, 12 months to 24 months away from even what my partners and I would consider accepting, with our growth trajectory, an offer to be purchased. But we're doing everything today to put ourselves in that best position."