11 Concepts You and I Can Learn About the Market & Selling a Small Business From How2Exit's Interview With Joe Valley Author and Certified M&A Pro: Watch here E17
Here is what my team and I learned from this interview: (These are notes from team members, writers, sometimes AI, and even listeners who submitted what i learned loosely edited and shared here) - If it seems a bit unrefined, you're reading our notes, so. yeah. -Ron
Concept 1: Maximize Business Value When Exiting
When it comes to exiting a business, maximizing value is of paramount importance. It is essential to ensure that the business is sold for the highest possible price, while also getting the best deal structure. Fortunately, there are ways to ensure that you get the most out of your business when exiting.
One of the best ways to maximize business value when exiting is to work with a professional. Joe Valli, a serial entrepreneur and founder of Quiet Light Brokerage, one of the leading online-focused M&A advisory firms in the world, has helped facilitate over a half billion in exits. Joe has written a best-selling book, The Ex-Entrepreneur's Playbook, to help online business owners get the maximum value and the best deal structure when they seek their own incredible exit.
When selling a business, it is important to understand the current market conditions and the value of the business. It is also important to have an accurate valuation of the business and to be aware of any liabilities or assets that could affect the sale. Knowing the current market conditions and the value of the business can help to ensure that you get the best deal structure and maximize the value of the business.
Another way to maximize business value when exiting is to have a clear understanding of the buyer's needs and goals. It is important to understand what the buyer is looking for and to be able to provide them with the information they need in order to make an informed decision. Knowing the buyer's needs and goals can help you to negotiate a deal that is in the best interest of both parties and to ensure that you get the highest possible price for the business.
Finally, it is important to have a well-thought-out exit strategy. Having a clear understanding of the steps that need to be taken in order to exit the business can help to ensure that the process is smooth and that the business is sold for the highest possible price. It is also important to have a plan for what to do with the proceeds of the sale. Having a well-thought-out exit strategy can help to ensure that the business is sold for the highest possible price and that the proceeds of the sale are used in the most beneficial way.
Overall, it is important to ensure that you maximize the value of your business when exiting. Working with a professional, understanding the current market conditions and the value of the business, having a clear understanding of the buyer's needs and goals, and having an accurate ad back schedule are all key components to achieving a successful exit.
Concept 2: Prepare For Maximum Value
When it comes to working with a professional, it is important to find someone who has your best interests in mind. Joe Valley, founder of I Don't One Time, found this in Mark Dowst, founder of Quiet Light Brokerage. Dowst gave Joe advice that was in his best interest, not his own, by telling him to wait six months before selling his business. Joe eventually joined Quiet Light and has since facilitated over half a billion in transactions.
It is also important to understand the current market conditions and the value of your business. In 2010, when Joe was thinking about selling his business, the average deal size was around $125,000. By 2021, the median deal size had increased to $1.8 million. This is due to the market conditions that have improved since the downturn in the economy.
When it comes to understanding the buyer's needs and goals, it is important to have a clear idea of what they are looking for. This could include the buyer's desired revenue, growth rate, and profit margins. It is also important to have a strong understanding of the buyer's risk tolerance and their willingness to invest in the business.
Finally, it is essential to have an accurate ad back schedule. This is a list of all the items that are used to fund the business, such as car leases, cell phone coverages, and Netflix accounts. If these items are not added back in, the seller can lose three times the value of the item.
In conclusion, preparing for a successful exit is an important process that requires understanding the current market conditions, having a clear understanding of the buyer's needs and goals, and having an accurate ad back schedule. Working with a professional who has your best interests in mind is also key to achieving maximum value.
Concept 3: Know Ad Backs To Maximize Value
When selling a business, understanding ad backs and how they can maximize the value of a sale is essential. Ad backs are expenses or benefits that the seller should add back to the profit and loss statement to increase the sale price of the business. These expenses can include items such as owner benefits, one-time expenses, subscription fees, and cash back rewards.
For example, if the seller owns an e-commerce business with a majority of its sales coming from FBA, they may have a subscription to Jungle Scout or Helium 10 which can be added back to the P&L. This can add up to $6,000 a year which, at a three-time multiple, would add $18,000 to the sale price. Similarly, if the seller participates in cash back rewards, those can be added back as well.
Ad backs can also include owner benefits, such as the cost of a website redesign. If the website is redesigned every five years, this could be considered a 100% ad back. However, if it is redesigned every year, it would not be considered an ad back.
When preparing for a sale, it is important to understand the current market conditions and the buyer's needs and goals. This will help the seller understand the buyer's expectations and how to best prepare for the sale. It is also important to have an accurate ad back schedule, as this can help the seller maximize the value of the sale.
Finally, working with a professional who has the seller's best interests in mind is key to achieving maximum value. An experienced professional can help the seller understand the current market conditions and identify the best ad backs to maximize the sale price. Additionally, they can provide advice and guidance throughout the entire process to ensure the best outcome.
Concept 4: Know your business value
Knowing your business value is not something that should be taken lightly. It is an important part of the process when selling a business. The value of a business is determined by a variety of factors, including the financials, the transferability of assets, growth opportunities, and risk.
When it comes to financials, having accurate and up-to-date books is essential. This is especially true if the business is being sold to a third-party. Without accurate financials, it’s impossible to get an accurate evaluation of the business. It’s important to hire a qualified e-commerce bookkeeper to ensure the books are accurate.
Transferability is also key. If the assets that drive the revenue of the business are not transferable, it’s not a sellable business. This is especially true if the seller is the face and name of the business. The buyer needs to be able to trust that the business will continue to be successful even after the sale.
Growth opportunities are also important. Buyers will pay a premium for businesses that have a built-in path to growth. This could be in the form of launching new SKUs or expanding the platform to different countries.
Finally, risk is a big factor. The younger the business, the higher the risk and the lower the multiple. It’s important for the seller to be aware of the risks associated with their business and to take steps to mitigate them.
In conclusion, knowing your business value is essential for a successful sale. It’s important to understand the factors that influence the value of the business and to take steps to ensure the best outcome. Working with an experienced professional is key to achieving maximum value.
Concept 5: Fear Of Obsolescence Key
Fear of obsolescence is one of the key factors that can significantly reduce the value of a business. This fear is especially relevant in businesses that sell electronic devices, such as charging stations, that must be updated or remodeled regularly. The risk of obsolescence is even greater when a business relies heavily on a single SKU, or “hero” SKU. In addition, businesses that rely heavily on a single platform, such as Amazon, may be vulnerable to sudden changes in policy that can have a devastating effect on the business.
In order to protect against these risks, it is important to diversify the business’s revenue streams. This means selling on multiple platforms, such as Amazon, eBay, and Spotify, and developing multiple SKUs. This will help ensure that the business remains viable even if one platform or SKU fails.
Finally, it is important to understand the market and be aware of the potential for obsolescence. Paying attention to trends and staying ahead of the curve can help to protect the value of the business and ensure a successful sale in the future.
Concept 6: Avoid Shiny Object Syndrome
As an entrepreneur, it can be all too easy to get caught up in the excitement of a new venture and forget to do the necessary due diligence. This is known as “shiny object syndrome” and can lead to costly mistakes. It is important to take the time to do the research and understand the risks involved in any investment. This includes looking at the financials, verifying traffic sources, and ensuring that the business is defensible. It is also important to be aware of any potential competitors and the potential for them to enter the market.
Another important factor to consider is the potential for changes in the market. It is important to understand the potential for obsolescence and be aware of any changes in the market that could affect the value of the business. This could include changes in technology, customer preferences, or even changes in the regulatory environment. It is important to stay ahead of the curve and be aware of any potential changes that could affect the value of the business.
Finally, it is important to understand the market and be aware of the potential for obsolescence. Paying attention to trends and staying ahead of the curve can help to protect the value of the business and ensure a successful sale in the future. Taking the time to do the necessary due diligence and being aware of the potential for obsolescence can help to ensure a successful investment and avoid the pitfalls of shiny object syndrome.
Concept 7: Build, Grow, Sell, Repeat
The “Build, Grow, Sell, Repeat” cycle is a popular business model for entrepreneurs who are looking to build, grow, and then sell their businesses. This model is especially beneficial for those who don’t want to be tied down to a single business for the long term. By focusing on building, growing, and selling a business, entrepreneurs can quickly move from one project to the next, allowing them to take advantage of different opportunities in the market.
The first step in this process is to build the business. This involves creating a business plan and finding the necessary resources to get the business off the ground. It is important to have a clear vision of the goals and objectives of the business, as well as a strategy for achieving them. This includes understanding the target market, the competitive landscape, and the potential for growth.
Once the business is up and running, the next step is to grow it. This involves finding ways to increase revenue, reduce costs, and increase efficiency. It is important to focus on developing a strong customer base, increasing brand recognition and loyalty, and expanding into new markets.
The third step is to sell the business. This is the most important step and requires a great deal of planning and preparation. Entrepreneurs need to consider the current market conditions, the potential buyers, the value of the business, and the potential for future growth. It is also important to understand the tax implications of selling a business, as well as the legal requirements.
Finally, after the business is sold, the entrepreneur can repeat the process and start a new business. This cycle allows entrepreneurs to take advantage of different opportunities in the market and create multiple sources of income. It is important to understand the risks associated with each business venture and to be aware of the potential for obsolescence.
The “Build, Grow, Sell, Repeat” cycle is a great way for entrepreneurs to quickly move from one project to the next. By understanding the risks associated with each business venture and taking the time to do the necessary due diligence, entrepreneurs can build, grow, and sell their businesses and create multiple sources of income.
Concept 8: Get Professional Valuation Advice
However, one of the most important steps in the “Build, Grow, Sell, Repeat” cycle is getting professional valuation advice. Without this advice, entrepreneurs may not be able to maximize the value of their businesses or make the right decisions when it comes to selling.
The first step in getting professional valuation advice is to set specific goals. Instead of simply wishing for a certain amount of money, entrepreneurs should be specific about the amount they want to receive and the date by which they want to receive it. Additionally, it is important to think about the emotional impact of selling a business — how will the entrepreneur feel when it is all said and done?
The next step is to reverse engineer a pathway to those goals. This means getting a firm valuation of the business. A professional advisor can help with this process, as they can provide insights into the levers to push and pull to make the business more valuable to buyers. It is also important to remember that the valuation range in the book may change as times change, so it is important to get up-to-date information.
Finally, it is important to find an advisor who is trustworthy and reliable. There are many brokers out there who may be more interested in getting a listing fee than helping the entrepreneur maximize their value. It is important to do research and find an advisor who is willing to work with the entrepreneur and help them get the most out of their business.
Getting professional valuation advice is an important step in the “Build, Grow, Sell, Repeat” cycle. By setting specific goals, reverse engineering a pathway to those goals, and finding a trustworthy advisor, entrepreneurs can maximize the value of their businesses and make the right decisions when it comes to selling.
Concept 9: Do Research Before Selling
Before selling a business, research is essential. It is important to look at similar businesses on the brokerage in order to get a better understanding of the market and the value of a potential sale. Doing so can help entrepreneurs to get a better price for their business and make sure that they are getting the best deal. It is also important to look at the questions and answers that the brokerage provides, as this can provide valuable insight into the process and help entrepreneurs to make better decisions.
It is also important to look into licensing requirements for brokers and real estate agents. In most states, a broker’s license is required in order to be a broker and a real estate license is required to be a business broker. Knowing the requirements can help to ensure that entrepreneurs are working with a qualified professional.
Finally, entrepreneurs should make sure that they are working with a firm that has experience in the field. This can help to ensure that they are getting the best advice and that the process goes smoothly. Working with a firm that has experience in the field can also help to ensure that the transaction is handled properly and that the business gets the best possible deal.
In conclusion, research is an important part of the business selling process. By researching the market, understanding licensing requirements, and working with experienced professionals, entrepreneurs can maximize the value of their businesses and get the best possible deal when it comes to selling.
Concept 10: Format Packages For Ease
When it comes to selling a business, it is important to format packages for ease. This means taking the time to break down barriers and make it easier for buyers to make decisions. This can be done by formatting all financial statements in the same way, creating an interview video to give buyers an opportunity to get to know the seller, and providing detailed information about the business. Doing this can help to shorten the listing timeframe and make it easier for buyers to make decisions.
Additionally, it is important to be cautious when working with a broker. Signing a non-disclosure agreement and looking at packages that other buyers have received can help to ensure that the package is comprehensive and thorough. It is also important to make sure that the broker is not cherry-picking packages, as this can lead to disappointment.
By taking the time to format packages for ease, entrepreneurs can maximize the value of their businesses and get the best possible deal when it comes to selling. Researching the market, understanding licensing requirements, and working with experienced professionals can help to ensure that the process is successful.
Concept 11: Get The Exitpreneur Playbook Free
Joe Valley, the founder of Quiet Light Brokerage, He noted that the company specializes in FBA, content, and SaaS businesses, and that they are sponsoring larger SaaS conferences. He also mentioned that the company has a team of experienced professionals, such as David Newell and Chris Guthrie, who understand the SaaS space well.
For those interested in learning more about the process of selling a business, Valli has created the Exitpreneur Playbook. This 300-page digital guide is available free of charge on the website Exitpreneur.io/howtoexit2 and is also available for purchase on Amazon. The guide covers everything from understanding the market to preparing for the sale.
The Exitpreneur Playbook is a valuable resource for entrepreneurs looking to maximize the value of their business. It covers the entire process from start to finish and provides helpful tips and advice from experienced professionals. By taking the time to understand the market and work with experienced professionals, entrepreneurs can ensure that they get the best possible deal when it comes to selling their business. For those interested in learning more, the Exitpreneur Playbook is available free of charge on the website Here
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