If you’re thinking about selling your security or life safety business, the biggest mistake isn’t timing—it’s misunderstanding your options.
In this episode of Entry & Exit, Stephen Olmon and Collin Trimble break down the real-world exit paths available to business owners—and the tradeoffs that come with each one. From all-cash walkaways to structured deals, earnouts, and rolled equity, they unpack what actually drives valuation, risk, and long-term upside.
They explain why you can’t optimize for both price and terms, how deal structure impacts your final payout, and what separates a clean exit from a costly one. Whether you’re ready to sell now or just planning ahead, this episode gives you a practical framework to think through your endgame.
They cover:
- Why all-cash exits typically lead to lower valuations
- The key tradeoff between deal terms and purchase price
- How holdbacks, seller notes, and earnouts actually work
- Why trusting the buyer matters more than maximizing cash upfront
- The difference between platform vs tuck-in acquisitions—and why it changes your involvement
If you run a security, fire, or service business and are considering an exit—now or in the future—this episode will help you understand your options, avoid common pitfalls, and structure a deal that aligns with your goals.
Stephen Olmon — https://x.com/stephenolmon
Collin Trimble — https://x.com/TXAlarmGuy
More Entry & Exit — https://www.entryandexit.co/
If your goal is to sell the business for all cash, you're going to get a lower valuation because there's there's no risk mitigation for the buyer of the business.
It's continuing to kind of escalate your risk appetite and how much you're trying to kind of maximize the full potential value. If you have a little bit of leverage as a seller, you know, like, hey, I'm the really pretty girl at the dance. Let's be honest. You can probably be a little more aggressive in your app.
Not selling the whole value of your business. There's a reality where you could just sell a minority share of your business.
It's like owning the whole grape or half the watermelon. Welcome to entry and exit. My name's Steven Ullman, and I also have
Colin Triple with me, who is my business partner and co-host. We created this podcast to provide practical and tactical advice to people trying to grow and scale security and life safety businesses.
What I think our listeners should know is that we just did four and a half takes to try to get through this opening, even though we've done how many videos at this point? Do you think how many? We've done how many episodes? 30? 25. Yeah. I have a lot on my mind. And you crushed the takes every time, but we did a few. There was bird noises involved. I'm not really sure.
Okay.
Slight enough little bit. All right. Uh okay, we're jumping in. Uh, so this morning we are we this is a spun out of a conversation that we've been having with a lot of uh folks in the industry that we've been uh just got back from ISC West, but also even before that, like we just have this conversation a lot. And folks ask us a particularly the folks that are thinking about selling their business, they're saying, Hey, what are the various options when I'm selling like what are the various exits that I have when I'm selling my business? Uh I think a lot of owners think or think, hey, I I'm gonna sell my business for all cash. I'm gonna have some very short transition period, and then I'm out. And a lot of owners think that that's the only option, and maybe they don't like that. Maybe they actually do want to stay involved. And and other owners think that that is the only option, and that's absolutely what they want, and that's really not that realistic. And so we're gonna kind of talk through today the various exit scenarios for a business, like what some of that structuring can look like and um what you should expect and sort of the trade-offs of some of that. And we're gonna do it on the in like the form of a spectrum. So it's like, hey, the least involved uh exit all the way to what is the most involved and and what that looks like. So anyway, I'm really excited to jump into this. Um, Steven, talk to
us about option one. What is the least involved? What is the like kind of step first step in this?
Yeah, so I would say on average, this first option is uh most common with the older the owner is. So like yeah, just typically, right? So the older the owner is, the more likely it is they want to just go play with the grandkids. Yeah, they're ready to kind of hang it up, they've worked in the industry for decades, they've loved it, but they are ready to go ahead and move on. And so that most typically is going to have uh less structuring, meaning uh, and we'll talk about different types of structuring as we go, but um, it's probably more cash heavy. It might mean that it's a lower overall multiple or a lower overall purchase price, the more that you know someone's demanding all cash, no seller note, no earnout, you know, no um, you know, rollover equity, anything that you might, you know, kind of have as a part of a structure. They're just looking for cash, they want to go play golf, they wanna, you know, play with the grandbabies. And so there's like Colin said, trade-offs. And where you're typically gonna trade the most there with as little involvement post-sale as possible is your headline purchase price. Yeah, is we're probably gonna sacrifice a little bit there.
Yeah, I think that um the like key phrase to remember here is you can dictate price or you can dictate terms, which you're probably not gonna be able to dictate both. Um, and so I would even just just as an aside, from a structuring perspective, irrespective of age, if your goal is to sell the business for all cash with not with no structuring, meaning no hurt, no earnout, no holdback, no seller note, no rolled equity, um, you're going to get a lower valuation. Uh, because there's there's no risk mitigation for the buyer of the business. And so I would tell anybody selling their business, unless you need all of that cash on day one, which there are good reasons for that, by the way. Like if you have a financial reason that you need the full purchase price, then that's fine. Do that. But I would say if you don't need all, like if you're gonna sell your business for $3 million up front, and it's like, okay, I could either sell it for $3 million up front or I could get $4 million over some period of time, I would say always go for the larger um for the larger amount. Not always, but under the right circumstances. And I think it's also important to realize that that's dependent on your specific financial situation and also your level of trust in the seller. And what I think we hear, or sorry, in the buyer, what we hear a lot from sellers is well, I want to do all cash because I don't really trust the buyer. Like I'm not really sure what they're gonna do with my business. And so then I my argument would be then don't sell to them. Like if you don't think that they're a good gonna be a good custodian of your business, go find somebody that is gonna be a good custodian of your business that is almost certainly going to get you to that valuation that you need to be able to hit your thresholds. So uh option one, all cash, no consideration and uh a very quick 90-day transition. Um, but I probably wouldn't do that unless you absolutely need that cash up front. Um and that that and I would make sure you're kind of really vetting who you're selling to. So that that would be kind of the first step. That would be that that very far end of the spectrum. Uh taking the next step forward, Steven, would you say would be like a more classic deal, especially in the RMR space, which would be, you know, we'll
say 75% of it in cash, and then the remaining amount would be in some uh holdback of of some type, right? Like an RMR holdback would be uh would be like a traditional way, right?
Yeah, if it's a more RMR specific deal, it's you know, the the value, um the valuation method for the transaction is RMR, some multiple of RMR, then you're typically gonna look at 10 to 15 percent holdback, and then based on the size, maybe there is some additional structuring in there that could be uh part of a seller note or you know something like that. Um, but you'll typically it maybe if you have some issues around contracts or if there's there's some uh heavy revenue concentration, actually we've seen that before where it's a standard RMR deal, but guess what? Their largest customer makes up 34% of their RMR. So there might be a larger holdback, yeah, 25%, or even I've even seen deals where they're basically matching the holdback to that really intense revenue concentration um or getting close. So um that is kind of the the next step. Now, um that doesn't necessarily impact like post-sale activity, which we talked about, and we'll talk about a little bit more in more depth in the next one or two scenarios. Yeah. Um, you still in that in that case might be you know doing a 60, 90, 120-day transition, um, maybe a little longer. Like with alarm masters, when you know we did our original acquisition, the owners like love them to death. Uh, they were around, if you kind of average it out around for six months or so. Yeah, yeah. Um, one of them was around a little bit longer than the other. Yeah. And so um, there's a lot of variety within that, but the amount of holdback doesn't necessarily change what that timeline would look like.
Yeah, I think one caveat before we move on to the next next window would be um if you're selling your business and your business is going to be a platform business, meaning you're selling it to, like, for example, we're pursuing deals in Dallas right now. Those are gonna be platform businesses for us. Those are we're gonna keep the employees, we're gonna keep the branding, like that's gonna be a brand new platform. It's and it's not gonna be rolled into necessarily like the Alarm Master's umbrella being supported by Alarm Masters employees. Um, there will certainly be some like uh back office support or whatever, but you've got to be thinking about that because those are very different, right? So, like if if I'm purchasing a business in Houston and I'm tucking it in or adding it into Alarm Masters, the amount of help that we need from the seller is gonna be really low because we really just need help getting data and getting some clarification on some very account specific things, but it'd be like really 30 days. And then after that, it's it's really just one-off stuff.
Trails off, yeah.
Yeah, but if you're selling it as a platform, your expectation should be, and again, that's gonna be dependent on who your buyer is, right? So if you're selling it on a platform, you're likely gonna get a better price for your company, but you're also gonna have to be more involved. And by the way, anything you're doing, whether or not you're staying on as an employee or a consultant, which you should totally like there's pros and cons to being a consultant or an employee, and you should like check with your uh attorney on that. And I we've had sellers be like, no, we have to be W-2 employees. I don't know that you act like I don't know that there's a tremendous amount of reasons for that. There's some tax-specific reasons that you may want that, but honestly, it's usually cleaner if it's a consulting agreement. But either way, you want that transition agreement very well documented. And if you've got a good transaction attorney, they're gonna make sure that that is documented. Um, and usually it works like hey, 90 days of transition at low to no cost, and then consulting on an hourly basis after that is very standard. Yeah, agree or disagree.
Yeah, no, I agree. I think that um that kind
of captures that second type of scenario pretty well.
Yeah. Okay, scenario three. Talk to us. What's scenario three?
Scenario three is going to be uh I would say like I want to maximize the value. So like someone who's focused on maximizing their purchase price or um capturing as much potential upside as they can short of actually rolling equity business. Yeah. So heavily structured. In this heavily structured, in in this scenario, the most the the two most common things that we'd be talking about are a seller note. So um you're you're carrying some part of that purchase price. Typically it's like simple interest over a period of years that you are kind of acting as the bank. There's some tax advantages to that, like Colin said earlier. If you don't need all the money right now, and we can create a structure that gets you more over the course of time, yeah, you're also gonna spread your your tax hit there, which is kind of nice, and you're paid an appropriate amount of interest as well for kind of acting as the bank. And that's typically not contingent. There are contingent seller notes, um, but most commonly that's there's you know no contingency within that seller note structure. It is a kind of guaranteed um note. So there's that. So let's let's kind of make something up. And I'm you know, this isn't inherently like a structure we've used, but I'm gonna make it up so it's like extra simple. Yeah. So let's say it's a business being sold for four million dollars, yeah, and you're going to be paid and and it might really be worth more like three and a half, but you really are trying to get to that four million dollar number. So you're willing to be a little flexible and take a little bit of risk. So in that scenario, two million dollars, two and a half million dollars of cash at close, let's do that. So let's say two and a half million cash at close. Yeah, a million dollar seller note. Again, it's not contingent, it's it's guaranteed at and it's over a period of three years, four years. Um, paid typically quarterly or semi-annual, could be annual if you came to that agreement. I would say semi-annual is probably the most common.
Yeah.
And then um the last piece of that, so you got to three and a half, where's like, where's the other 500k? Yeah. Um, is most typically based on the performance, um, however, the transaction was valued. If it was an EBITDA-based sale, then it's probably most typically based on earnings for that next 12 months post-sale. And um, you can capture up to 500,000 additional dollars that would be paid typically 30 or 60 days after that 12 month period, and you do a look back and yeah, it's audited, whatever. And so that's how you could capture additional upside. So again, if you go back to scenario one, you're like, no, seller note, crazy earnout, even crazier. Well, congrats. Like, yeah, you probably sold your business for three to three point two million dollars. Yeah, and you know, go play golf, go, you know, swim in the pool with the kids, yeah, grandkids. Um, so then the uh so the risk is escalating, so to speak, which again goes back to your point. Yeah, who am I selling to? Do I believe that they are a good steward of my business, right? Yeah. Um, and and then the last scenario, which we'll go to in a moment, is just it's continuing to kind of escalate your risk appetite and how much you're trying to kind of maximize the full potential value.
And there's there's a lot of levers in that. So, like A, um the seller note, most commonly a non-contingent seller note, the risk is pretty low there. What you're really going to be looking for is where do I sit in the debt stack? Uh, you're mostly almost every time you're gonna be less than subordinate to senior lender. That's just common, it's the way it is. Um, but the other thing you really are worried about in that scenario is is this company and are these operators going to totally tank the business? That's really what your your fear is. And if that's a very, very low likelihood, then a seller note is usually gonna be in your favor because you're gonna get a little bit of interest, not a lot less than you think. You're thinking it should be seven, nine, seven to nine percent. It's probably gonna be three to five percent. And it just, I mean, again, that's negotiable.
Depends, yeah, depends on where we're at from a macroeconomic perspective.
Yeah, but that's a fair point. Um, but then the earnout is another thing where it's like you're probably gonna have to have an earnout. Uh again, it depends on your type of business. And again, you can you can negotiate on that. That a lot of times it's built on an EBITDA basis, but you may say, hey, I don't want it to be based on EBITDA because they're gonna invest a bunch of cash into the business and they're not can they're not managing for earnings, they're managing for growth. So in that scenario, you wouldn't want to do it on an EBITDA basis, you'd want to do it on a gross profit or a revenue, and there's some different things you can do there, right? Like there's some you can structure that earnout to be as protective or complex as you need it to be. Um, and again, it goes back to your relationship with the sellers and sorry, the buyers. And and that's really important. And the other thing, I think a couple other levers when you sit in this world of heavily structured, now you're getting into like, hey, start negotiating on work working capital. So that's the amount of money that you are required to leave in your bank account. Like if you're selling as a platform business, especially if you're selling on an EBITDA basis, you're gonna have to leave some cash in the bank account as a working capital to make the business run. And there's some kind of industry standards for that. Um, but you can negotiate on that. You could say, hey, I'm willing to leave more working capital in the business to get a higher valuation. Again, it depends on how much cash you need up front. Uh, and then the other thing is is uh an employment agreement. Um, I think I think a lot of sellers anticipate that if they're gonna have an employment agreement, they're gonna be paid the exact same that they were paid before the sale. And that's almost certainly not gonna happen. Again, everything is negotiable, but um, you can't have price in terms. So uh you've gonna have to pick somewhere in here. It's like, hey, I'm we're not gonna do an earnout. We are gonna do a seller note. I'll leave a decent amount of working capital in, but I want a high salary or I want really good benefits because I'm waiting to get to something. Like all of those things, these are all levers you're gonna have to give somewhere. The seller, the buyers are gonna have to give somewhere. Like it's just all negotiable.
So I would also say, frankly, the the larger your business is, the more competitive uh processes, or um, you know, in you we know that certain types of RMR are more sought after, you know, like fire is is you know, yeah, uh heavily pursued and and typically competed on and you know those deals. So if you have a little bit of leverage as a seller, you know, like hey, I'm the really pretty girl at the dance, yeah. Let's be honest, yeah. You can probably be a little more aggressive in your asks, you know, um, within reason. Yeah. Uh the and then the last thing I'll say is not always, but more often when there is a fairly significant earnout, a lot of times that looks like the seller being involved for a longer period of time. Yeah, that might be a year, yeah. During during that year earnout period, you may be you know more engaged than you would if you were just uh had a more simple structure for a slightly lower price and you were walking away.
Yeah, yeah, I think that's a really important call out. Yeah, and I think that it's important to realize too that like you can go again, all of it's a lever, so you should go shop this around. You should go interview a bunch of different sellers and buy sorry, buyers keep saying that you should interview a bunch of different buyers. And if you're really passionate about a certain buyer, but they can't get to the dollar again, you've got to decide what's the most important thing to you and like what is your risk appetite, and probably you're not gonna get all of the things. And um, I think isn't the like the adage like a good deal is one where everybody walks away a little bit unhappy. Isn't that like the yeah?
So I think that that's like a really one uh one other thing that we didn't talk about, but I do want to bring up because we've had it come up so many times, is um maintaining the brand or company name as a part of a a term. And so again, there's all these different elements price term, um, you and you have to really decide what hill you're gonna die on or what thing you are, you know. Um we had a deal last year that did not pan out because the seller late in the process decided I just cannot stomach an earnout. Yeah. And it was pretty sensible to us based on a lot of things. Yeah, there was some revenue concentration there, and earnout was pretty appropriate. Um trying to be as unbiased as I can be. Yeah, and it it it blew up the deal. Yeah, and so you've got to figure out, you know, hey, I will not sell to someone who's gonna wipe my dad's name off the sign. Yeah, okay. Well, then you just decrease your your kind of buyer
pool sum. Yeah, but there's a lot of people like us, like we we see a lot of value in legacy brand names. Yeah, um, it might have a tagline, you know, an alarm master's company, but we like to keep the kind of core brand name. So that's just another example.
Yeah. No, that's a great example. I totally agree. I think that the next category that's really important to talk about is um this would be maybe a the the scenario for people that are maybe um not as far along or like they're not ready to retire, right? So they're they're and again that yeah, so they may be ready to retire or not, but this is gonna give you the most upside. And this is typically uh reserved for when you're joining a larger platform-based company, right? So, like this would be all of the structuring is still probably gonna be involved, and one element would be also rolled equity, which would mean instead of taking some of that in cash, some of that in a seller note, or some of that in an earnout, you're actually gonna still be an owner in that business. Yeah, all the this is where the the spectrum just unlocks because you could there's so much levels here. Um, you could be you could have voting or non-voting shares, uh, you could be on the board or not on the board, uh different classes of stock, different classes of stock, pref uh pref payments that are coming out. Uh, there's there's so many things that are involved in that. But if you really believe in the platform that you're selling your business to, and they've got a track record of growth and a good plan, and they've got an exit, again, that's the big one, right? It's like if they've got an exit criteria of when they want to exit, then rolling equity is a really good option, especially if you don't need the cash right now. Um, where the rolling the equity thing gets really tricky is if you're, you know, you're buying it to somebody like that's it's their first business. You know, it's like, hey, that's you know, it's a searcher. It's somebody that's looking to buy their first business, they've never stepped into the waters before, they don't have a track record of success or growth, they want to hold it for a long time. And it's like, well, I don't want to hold the business for 10 years because then the value of your equity is pretty worthless. If you aren't getting a prep payment and they're not going to sell it for the next decade, uh, that rolled equity is just paper. Um, so you've just got to really be specific if you're rolling equity on who you're selling to and what their track record is. And they don't have to be a big private equity buyer. If it's, you know, like if it's a deal where you there's somebody buying, if you've got a company that's trying to expand from Oklahoma into Texas or whatever, and it's like they've got a track record of growth and they're a major player in their market. Like, that's great. You should consider that.
Yeah. I I think that uh you'll hear the phrase second bite at the apple. So that that concept is I'm going to take A lot of chips off the table now. And then I'm hoping that you know a lot of rolled equity is in that fifteen to twenty percent range. It can be higher, uh, but I would say the standard you'll see a lot of like twenty percent. And so you you are essentially uh making an investment forward into your buyer, yep. You know, is how to think about that. Uh because you believe that it's like owning the whole grape or half the watermelon, right? That you know, that ultimately the way that nets out, you win because you made more in the end. And you had the time. Like, is an 80-year-old owner going to roll equity? Probably not. Like it's happened before, but it's it's less likely. Is a 45-year-old owner going to consider that more who still wants to stay in the industry? And yeah, it's more likely, more common sense that you might consider more if that's where you are right now.
So I think there's one other tier, which we didn't talk about this because I'm throwing a curveball, but I actually think there's another tier, which is not selling the whole value of your business. There is a reality where you could just sell a minority share of your business and stay on as the majority owner, the CEO. You continue to run the business, you take some chips off the table. Maybe you use some of that cash to inject growth to go buy another business. But you're you're you're saying, hey, I've been in this industry for 20 years. I'm growing. I don't necessarily want to sell my whole business. I really like where it's going. I really want to actualize the value, but I do want to take some chips off the table. Like I want to mitigate. I want to go fund my kids' college fund. I want to go buy that vacation house. I want to set myself up basically for my emergency parachute. So if all things go wrong, I've got that cash. There is another scenario where you sell a minority share of your business. And what is almost certainly going to happen is the person that you sell minority share to is going to have a first writer refusal to buy the remaining equity in your business. So you really want to make sure you trust that group and you have that structured, right? Like you have some amount of like, what does that right of first refusal actually look like? What are you actually bound to? Um, and you're gonna, there's probably gonna be some pref payments involved in that. You're gonna be paying that um stockholder some dividend. So get ready to share in some of the spoils of your business. But there is that intermediate step that I think a lot of people don't realize that you can you can do that. If you want to sell your business in 10 years from now, you can take some of those chips off the table today and still run the playbook. You you're confident, you've got that track record of success, you've got that uh historical compounded annual growth. Like that is an option that I think exists on the table that a lot of you know folks don't realize is available.
Yeah. That's that's I'm glad that you brought that up. I would say that's probably less available to our friends that are doing 240k of net income annually. Yeah, it's going to be a little more available of an option if you're doing a million plus of earnings, north of a million of EBITDA. Yeah. Yeah. Maybe 800k or something like, but most typically, you know, a little over a million plus is where that could start to be a real option for you. So that's a good addition.
Yeah, I agree. That's that's a fair point. Um, so I think I think the moral of the story is if you're thinking about because because like again, on the last episode, we talked specifically about like you've got to decide what the end goal is for your business and the timeline. Like we have no plans to sell the business in anytime soon. So our goal is we're gonna always have our business in a place that it could be sold because I think that's a healthy business. But that our frame of reference is a longer term than somebody else that maybe is trying to sell their business in two to three or even five years. And so I think that having knowledge of these scenarios and a good broker, if you're using a broker, can help educate you on some of these things. Uh, but again, you should go in educated, you should go in knowing what your options are so that you can speak um, you know, a little bit more intelligently and you can kind of protect yourself. And again, obviously getting a good transaction attorney is gonna really help some of that. Uh, that not not the person that's doing your alarm contract and not the person that's doing your HR disputes, and not your family attorney, an actual transaction attorney. Actual and if you're if you're gonna use a broker, use a real broker, like don't use somebody that you know that has helped like use somebody that's got a lot of transactions under the belt, and and having that team is gonna help you kind of work through some of that. Yeah, any closing thoughts?
Um, my my last thought is if you are in this place to also go speak to friends in the industry that have sold. Yeah, I just think that you're gonna learn a lot, glean a lot from talking to people who have gone through that whole process. And so that's another, you know, kind of good action item.
Yeah, and and also like reach out to us, we're happy to help. Uh, we have not sold our business and have no plans to do that, but we have bought a lot of businesses and have a lot of discussion with folks and know a lot of people who have sold their business and can make recommendations on great brokers and transaction attorneys and kind of ping pong some of these things that you you may have. And like we're happy to chat through that. And while you're doing that, if you could subscribe, like our videos, just engage with our content in any way is always super appreciated. Um thanks for listening. We appreciate y'all.
