EP 55: Liquidation as an Exit Strategy? with Matt Gallivan

Ed Mysogland  00:00
 I was going to interview you. And one of the the first question out of their mouth is explain the chant. What's that origin? Why is it used? And what's its purpose.

Matt Galavan  05:10
And I'll, I'll start by kind of saying that, sadly, the chant is dying. And a lot of industries with all the technology and the change is going to more online sells, we still do live sales, where you do have to have your auctioneer and your chance. But a lot of a lot of a lot of that's changing. A lot of like, the world of tobacco farm cattle, or tobacco auction, cattle auction, auto auction, those are some of the best channels you will ever find. Because those are those are things that people still want to see. You want to look fear in the eyes, when you're bidding on it. You want to stand in front of the car, when you're betting on it. What I love about the channel, is it it excites people, you are not just standing there going 500 500 510 510 520 How boring would that be to listen to for six hours?

Ed Mysogland  06:03
No, I that makes sense. It gives you the ability to

Matt Galavan  06:07
pump excitement into a sale, you get people, you know going to help create competition. And it also helps your auctioneer just be able to continue to move along and speed things up. Because otherwise the sales would go on for 12 hours. No,

Ed Mysogland  06:23
that makes that totally makes sense. I didn't I didn't think of it as a speed thing. But that totally makes sense. There's different types of auctions. Now do you offer every kind of auction available, I have the English auction, the absolute auction, obviously, you talked about the online auction sealed bid, with blind bids and then sealed bid. Second place. I mean, you do all that. We do a wide variety of auctions from strictly live to live with a live online webcast. So you can come to the auction bid at the auction. Or you can sit 10 states away in your office and bid on your computer in real time, while we're selling at the auction, when the how do you do that? I mean, how's that technology work? I mean, do you have a videographer that's that's running? How does that work?

Matt Galavan  07:15
No, we use we use software that allows the people online to see pictures of what we're bidding on the description, the current price, the asking price, just like if you were there listening, and they'll also get audio. So if you if you want to listen to it, you can listen to the auctioneer champ. Sometimes when you're not there, it's a little easier just to watch the numbers change on your screen and make a decision whether you want to jump in or not. We've been using it we were real early on. My father was good. Like I said, he's always really been at the forefront of the technology changes. So when this became an option, he jumped right on it. And we've been doing it ever since. And obviously it's grown and grown and grown throughout the years. As you know, everyone now has a smartphone and they have a laptop and a desktop and the ability to do it is is there. But there are still a lot of your guys in jail that want to touch it, they want to see it, they want to stand in front of it, well, they're buying it, they want to look at the auctioneer, they want to look at the person that they're bidding against. So it kind of gives everybody the ability to participate. So say, say we're in Louisville, and we're selling a machine shop, you know, waves and turret punches and things like that. And there's a guy in California whose company needs one piece, it may be a $40,000 piece of equipment. That's all he wants, is he gonna fly out to the sale, then spend, you know, plane tickets, food, hotel rental car to go. And when he gets that 40,000 He's done, but there's someone who's going to buy it for 50,000 He just wasted two days. And money cannot come to go home empty handed. Whereas now with the online only or the mix of live and online, they have the ability that if it hits 40 $40,050, they turn the computer off or click over to Facebook or whatever they want to do. They don't have to worry about catching a plane and spending more money. So it really gives more people the ability to participate, which is great for our sellers is great for buyers, because they have they have more more chances to bed. And that's great for us obviously at the end of the day. We have we have more participation and higher sales prices.

Ed Mysogland  09:37
Yeah. So these different types of, of auctions. So the English auction is what everybody's familiar with the one and I'm assuming that's the one you do the most

Matt Galavan  09:48
it used to be your quote unquote English auction is your live auction. The one that everyone knows if you've ever seen or heard of auctions you that's what you think of now Those auctions are always considered to be with reserves. Say we're selling 100 pieces for a company. They're liquidating, as but they have they've been given offers on to pieces that are pretty good offers, but they would like to see if the auction will bring more. So what you do is you put a reserve on it. Now reserves are sometimes advertised, they don't have to be advertised. But as long as your auction is not advertised as absolute, or without reserve, do you have the ability to not sell something due to the sale price, that's all dealt with ahead of time and our contract. So you know, the auctioneer knows that if this piece doesn't hit 50,000, it's not going to sell. It also works in a case where say you, you owe the bank for all your equipment except for one forklift, and you owe 20,000 on that forklift. But it's worth 40,000, he will take it to auction knowing that they have to bring more than is owed on it to sell. That's your reserved auctions are reserved and less advertised. Absolutely.

Ed Mysogland  11:10
So I don't understand like the sealed bid auction. So there's two different kinds. And I'm trying to figure out where you fit in with this. So you have a an auction is that for like when you're when you're buying an entire closed entity or I don't understand the point of the auctioneer, the auctioneers involvement other than perhaps the marketing and exposure that you could probably bring to it.

Matt Galavan  11:38
Well, technically, especially in Indiana, if you call it an auction, you better have an auction company like than an auctioneer. That one part where we come into play. The other part is auctioneers are more than just a chant. What I always tell people is we are marketers and advertisers that just happen to do auctions. Because Because at the end of the day, my job is to bring people in to spend their money. And if I don't do that, that auction fails, whether I'm the one bid calling, or someone who's never been called before has done our job is to facilitate start to finish, signed contract to check in your mailbox. That is the job of the auctioneer, we have to properly advertise, put together a package, you know how that goes. That's what you guys do. Right? You know, if you don't, if you don't put if you don't put the package together, you don't put all the information out. You don't get it in front of people, the person who you're selling for should have just done it themselves.

Ed Mysogland  12:41
Right? No, you're exactly right. That's why they bring up in over the years. I mean, I can't even fathom how many pieces of equipment different situations to how do you value and position appropriately. With all of that, you know, it's one thing to value a company and say, Alright, you know, based on the earnings and revenue and industry and so on so forth. I mean, I don't want to say it's, it's easy, but it's fairly straightforward versus I have a million different pieces of equipment that I'm trying to find data for.

Matt Galavan  13:17
Every scenario is different. And that's one of the reasons I love this business. One day, we're appraising old Italian sports cars. The next day, we're in manufacturing plants, doing waves, Mills, press brakes, whatever the next the next day, we're doing farm equipment up in Wisconsin, it's ever changing. And it's what keeps it exciting. Now, to your question of how do you do something different every day? The answer is you gain knowledge for every job you've done. There's very few things that we haven't touched. Now there are certain industries that we will that that are very specific aircraft is one of them. You know, if you're if you're dealing with certain certain types of manufacturing, that are very specific and there may only be for other companies in the world that do it. Helicopters, large watercraft, you know, that are very specific to a purpose. There are people out there for both appraisers and auctioneer but that's what they specialize in. When you get to that point, you do reach out the auction world is mostly friendly. So when you get into those scenarios, yet you reach out you partner with people you just talked with them you bring in you know they're appraisers to help you. But in general metalworking, woodworking, construction restaurants, bottling facilities, tech centers, they're pretty straightforward, both to value as well as to liquidate. Anybody can pull up on Google, type in a Mitsubishi or a cat 246 feet and it'll pull up 100 Prices for you. You When you're valuing items, when we go to auction, you're looking at the condition of it the hours on it the mileage on vehicles. You know, the wear and tear has it has this truck, towed backhoe is its entire life. And you you do your research based on a lot more points than what most people think. That's the valuing side on the selling side. We build a marketing plan for every job from the beginning of the job. They're always different. We don't reuse them, we get we buy new lists, you know, every time if you're doing mailings, if you're doing email blasts, we take new words, you do use different publications, depending on what type of equipment you're selling. That's the main job of an auctioneer.

Ed Mysogland  15:47
Like when we first started in our pregame chat, I've talked to a number of of older business owners that say, You know what, they're gonna carry my dead body out of here. Yeah, that's our strategy for for selling their company whenever that may be. And so do you see that as a legitimate exit strategy?

Matt Galavan  16:07
I would not say it's the best. But there are some people who have owned their business for 40 years, and they built it from nothing to what it is, and God bless them. If they want to run that strategy and hope that they can turn it they can either turn it around, make it profitable, and sell it or turn it around and keep it around long enough for their kids to take it, take it over and try and deal with the negative bank account and the loans and all that it's a viable option. I don't think it's a very good one, though.

Ed Mysogland  16:38
Yeah, me, me either. The funny thing is that, I guess from the standpoint of, you know, if you want to run it for as long as you can, and at the time of your death, your your family knows call Matt and, and away we go well, okay, that, that that's a viable strategy, so long as all parties understand that that's the strategy that you're going to go under, as opposed to hell starts deteriorating. Next thing, you know, you know, I need a premium for my business. I know, I haven't been running it properly and have been milking it down. You know, as, as the trajectory is pointed down. I think it's okay, so long as everyone understands that that's the path you're taking. And that's the path you want. And God bless you. If that's the that's it. And that's fine. One of the things I wanted to ask you is, what is your process I come, I'm a business owner, Ed refers you over to Matt, you pick up the phone, take me through the process to the time I get a check. First off,

Matt Galavan  17:37
I want to know what your business is. And what the situation is. Did you were you given the business when you're when you when your your parents died? Were you? Were you the owner that you started it? And you are, you have no children to give it to? And it's in trouble or it's doing great. Alright, stop. You just

Ed Mysogland  17:56
so why why do you need the situation? What point is that,

Matt Galavan  18:01
because as much of I love doing auctions, and I like selling everything, piece by piece, it's not always the best option for my sellers. And I will, I'll be the first one to tell you that up front. If your company is making money, and you are, you know, 70 years old and yours, you just want to get out of it. And you come to me and say I just want I just want to auction everything. And I do know, I ask you, companies still running isn't doing good. And they go Yeah, company is doing great. I'm just, I'm done, I have my money, I want to sell it, get the rest of my money, retire. And I go well, you can always sell you can always auction it, you can always sell it piece by piece. Or we can call my buddy Edie and talk with him about possibly a better option for you. I'm going businesses, you know, especially if you don't have anyone to pass it on to or family that wants to buy it or some people don't think about that they think well, I'm done. So let's just sell sell the company off, you know, piece by piece. It's not always the best option.

Ed Mysogland  19:00
So I show up and you do a an equipment appraisal, what's that process? Like? Typically, unless we're doing it for a bank, if we're talking strictly from the business owner standpoint, and ask them why they need and why they want an appraisal? Well, because I want to know what what whatever future work. Okay, but you want to go to auction with it? Yeah, my appraisal is gonna look different than than auction results. And that's because not everything is the same. Not all timings the same. You can sell it in one city and 50 miles away selling in a different city and opening a completely different amount of money. Do you sell it in spring, it might be different than fall. So my my appraisal to you, which you're gonna pay for an additional expense. Whereas typically, we will go in and we'll give you a range. You're not paying for the appraisal. We'll give you a range that we think reasonably that these assets will bring in the current market at auction. That's something that we do we do that internally whether you escort that tells me how much I'm going to spend to advertise it. Because I'm gonna spend more on a million dollar job than I am a $200,000 job. You gotta get some more people. If there's 5000 assets, I'm going to spend more to advertise it, then if there's 500 apps, it's all a numbers game. So zero retainers, how does that work? Do I pay you $5,000 To get me started? Or is it everything bet on the or is everything based on the proceeds from the sale, the way we work is, unless we are selling one piece, and it has a reserve. Say I'm selling a manufacturing plant, just the real estate, and you need $500,000 out of it, or you can't sell it, I'm gonna ask you to pay the advertising upfront. Because at the end of the day, if your property is only worth 400,000, and you won't take anything less than five, now I have to try and fight you to get my advertising money. As long as I did my job, and we brought people and the highest offer was less than you accepted. I still want to make sure that I at least get my my advertising funds back out of it. But no, on a daily basis, if I'm coming in to liquidate your company, you know, I know there's going to be enough money there to cover all the expenses, we will forward all that money. So you don't have to come out of pocket anything but your time to show me around and look at my contract. Got it. Our listeners are across the country, actually. They're across the world. How do you find somebody like you? I mean, you guys are on our shortlist, just because I've known you guys for 30 years. If I'm in another part, I'm in California, how to identify a good auctioneer and appraiser? Well, a lot of it comes from Google or you ask your banker. See who who your banker, you know, your your bank in general, who they use and what part of the country. But usually, you know, you get on you do auctioneers of this sort of equipment, and our names out there for everything from from woodworking to yellow wire and to restaurants. It's just the history of all the auctions that we've done. Is there an association, the National Auctioneers Association, the NAA, which we are members of every state has its own association. So where are your board members from in Indiana and in Florida, if you're in California, and you have, let's say you own like an FBO, you know, or you have four airplanes that you ran out, you have a maintenance shop, and you you're looking to sell it, you're looking for an auctioneer? Well, I guarantee if you get on Google out in California, and you type in aircraft, auctioneers, our name will pop up. Because of all the all the advertising that sits out there on the web, even 10 years after we do a sale. And you'll find it and you'll go, oh, well, they did a job in Iowa, they're based out of Indianapolis, maybe I'll call them and see if they if they work in California. Got it. There's no geographic restraint for you guys. You guys can can go anywhere. way I put it, we will do anything east of the Mississippi, unless it's worth enough for you to bring me out. We've done jobs in California, we've done jobs on Texas, Iowa, we will work anywhere. And a lot of our bankers will run us everywhere. You know, we work for banks out of Chicago that do work in Arizona, they'll send us down there, just because they know us they trust us, and they don't have to go find somebody and not know what they're gonna get out of it. Yeah, I get it. I guess the world of, of this service is evolving to I mean, you've alluded to it on several times throughout this visit, you know, so much more of your, of your services done online. Is that helping values? Or? I mean, what does it look like from from your standpoint? Is that a better scenario that you're able to do it online? Other than convenience for the biters and the and you? Or is the business owner maximizing their value out of their equipment by virtue of this online presence? Yes. In almost in almost every case. Yeah. As I said, so we're doing a sale in Indianapolis. Now, if I do it only live. That means whoever gonna come do it has to travel. If you're close enough, and you can travel that morning and go home that night, might not be a big deal for you. If you're 500 miles away, and you have to come stay overnight, go to the auction, stay overnight, and then go home, you're probably going to be less inclined to participate. Now, as I said earlier, if we're doing it live, and online, you have the option to drive 500 miles, come to the auction or you can sit at your desk and listen to the auctions, watch what what people are bidding on what they're bidding and bid right along with them. So I would say in almost every scenario, having an online presence is beneficial. I know we're getting ready to bump up against time. But going to auction implies failure. I don't necessarily think that but but it does that, you know, I'm liquidating my company. I mean, how do you offset that? I mean, what, what's your perception? Again, back back to what I was saying earlier, it depends on this on the scenario, sometimes it is the last, sometimes it is the last ditch option. You know, maybe you've been trying to sell your company for three years, and you haven't gotten one bite on it. And you're in poor health and you you have to do something with it. Maybe they auction isn't the last ditch effort for you. But I would say in the grand scheme of things, an auction is a way as long as you are working with a professional company, and people who know what they are doing is actually a way to turn your equipment, your machinery into the top dollars through competition, as opposed to just throwing your your pieces of equipment out there on credit. And the only people who are searching for that exact piece may come across your listing at an auction, we are blasting nationwide, we are going you know we sell a lot to Mexico and Canada. So your audience at an auction as opposed to just selling it off piece by piece by yourself is much larger, it will create much more competition. And at the end of the day, when you have 150 people bidding on your equipment, you can rest assure that that number that it stopped that was the most of these people were gonna pay for it. And that is market value. I always ask every guest at the as the last question. So from your perspective, what is the one piece of advice that you would give our listeners to that would have the most immediate impact on their business? You mean I'm avoiding having to see me knock on their door? I think I have an answer for you. But But go ahead. I would I would say off the top my head, the quickest thing would be take out the trash. I've walked into hundreds and hundreds of of manufacturing plants, woodworking, metalworking, you know, bronze, brass copper, and they have stuff that has been sitting there work in progress from a client that they lost 15 years ago, and they still have 10 20,000 square feet of stuff that will never get used. It is scrap metal, it is taking up space. The same companies usually have five of them the same machine, they run two at a time. And instead of changing out the tools, they just go use the other two machines half the time. So now you're wasting space. And we all know that that real estate is not cheap. You are you have idle equipment that if you don't use it for six months, and don't take care of it, it's devaluing. And you're sitting on cash, you're you're sitting on, on things that you're not using, or you may use once a year that they have they have value to in cash more than sitting on your, your shop floor, collecting dust and just appreciate it. Same thing with trash and garbage. I we've all seen it you walk through a plant, there's 20,000 square foot of just scrap iron, it sits around it collect dust, it gets dingy, you can always tell those plants, your employees are walking by this stuff, day in day out year after year going, Why do I work in this filth hole? No, I get it. Well, what I thought you were gonna say is that you know what you can maximize your value out of the your equipment by just maintaining it that, you know, the there's a reason why you do preventative maintenance. And this is one of the reasons if in fact, you end up having to call Matt, you're gonna get a premium for for that piece of equipment because it's it's in better shape. Right. And you know, that that is definitely something that I thought about saying, but at the end, at the end of the day, at the end of the day, when you get down to the time where you need to see me or your bank is telling you to call me. It's because you're you're already on your way down. And the first thing to go is maintenance. Yeah, no, you're right, that makes sense. So that no, that totally makes sense. Your your,

Matt Galavan  29:46
your employees have to get paid, you have to get paid, the lights have to stay on. So the first thing to go is maintenance and when that piece of equipment dies and becomes scrapped, it is what it is. Now, a lot of time Um, that's something they can't control. Yeah, I get it. So what's the best way we can connect with you?

Ed Mysogland  30:06
Well, you can always just check out our webpage, nj gallivan.com, or call our office, Facebook, Twitter, Instagram, any which way you can get a hold of me you can call my cell phone day or night. I got it. But we will have your all of your contact information, all of your social sites in the show notes. So I appreciate it. I am so grateful for our time. And because I do think this is a viable exit strategy and an option that business owners need to understand in the evaluation of next steps for them, whatever that may be, especially in the environment we've got going right now that, you know, this may this may be a real important way to to to get liquidity. So I'm really appreciative of your time and I appreciate you being such a defender of business value. And it's been great. It's been fun and if you ever need anything, feel free to reach out. All right, Matt, thanks so much. Tell the old man I said hello. That I will all right about it. Thanks again for your time.