11 Concepts You and I Can Learn About the Market & Selling a Small Business From How2Exit's Interview With Lane Carrick - Serial Entrepreneur W/ Multiple Exits: E13 Watch Here
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: Discipline And Planning Are Key
Discipline and planning are key to success in any endeavor, and this is especially true when it comes to managing money. This is the lesson that Lane Carrick, a serial entrepreneur who has started, grown, merged, bought, and sold multiple businesses in his career, has learned.
Carrick was born in Memphis, Tennessee in 1958 and was adopted at two years of age. His father was a home builder and one of the first franchisees of Holiday Inns. His father told him to go to college and study what pleased him, and when he graduated he'd come into the family business. Carrick studied philosophy and psychology and his father sold the business his senior year.
Carrick went to work for a Wall Street brokerage firm and managed money for clients as a stock broker. He then established the Aviation Administration, which was the first multifamily family office in the Memphis area. He decided he didn't want to work on the commission model, so he built his business, Sovereign Wealth Management, into a national company. He became the family office for some ultra-high net-worth families and his service offering was writing investment policy statements.
Carrick's counsel to the families was to apply the same discipline to managing their liquid money as they did when they were running a business that produced that money. He advised them to capture that in a plan and follow that plan and amend it as necessary. This is the lesson Carrick has learned: discipline and planning are key.
This is an important lesson for anyone who is managing their money. Whether you're a business owner or an individual investor, having a plan and sticking to it is essential for success. By having a plan and following it, you can ensure that you are making the most of your money and reaching your financial goals.
Concept 2: Dealing With Human Emotions
When it comes to dealing with human emotions, it can be a bit more complicated. We all have our own beliefs and biases, and this can lead to irrational decisions when it comes to money. For example, when it comes to mergers and acquisitions, it can be difficult for a business owner to accept a lower offer for their business than what they believe it is worth. They may be anchored in their belief system and unwilling to accept a lower offer.
It is important to remember that when it comes to dealing with human emotions, it is important to be aware of the biases and beliefs that can lead to irrational decisions. It is also important to be aware of the impact that these decisions can have on your finances.
One way to manage your emotions when it comes to money is to have an objective third party, such as a financial advisor, to provide you with unbiased advice. This can help you make better decisions and avoid making emotional decisions that could have a negative impact on your finances.
In conclusion, dealing with human emotions when it comes to money can be a tricky process. It is important to be aware of your own biases and beliefs and to be open to the advice of a financial advisor. By doing so, you can make sure that you are making the best decisions for your financial future.
Concept 3: Market Sets Business's Value
When it comes to setting the value of a business, the market will always have the final say. No matter how much a business owner believes that their business is worth, the market will ultimately determine the true value. This is why it is important to work with a broker or financial advisor who can help you understand the true value of your business and set realistic expectations.
It is also important to be aware of unscrupulous business brokers who may try to inflate the value of a business in order to make more money. While it is tempting to take the advice of a broker who tells you that your business is worth more than it is, it is important to remember that the market will ultimately determine the true value.
Finally, it is important to remember that the success rate of businesses sold through brokers is only around 30%. This is largely due to unrealistic expectations on the part of the seller. By working with a broker or financial advisor who can help reset expectations, you can increase your chances of successfully selling your business.
Concept 4: Asset Bubbles Due To Money
With this in mind, it is important to consider the current state of the small to medium-sized business market. According to Professor Jonathan Hensley, who specializes in mergers and acquisitions, this market is defined as businesses with less than a million in annual revenue and profits. This is known as the micro private equity space.
The biggest challenge for businesses in this space is getting bank financing. This is why the government is doing everything in their power to make capital available to small business buyers. Interest rates are at historic lows, making it easier for small businesses to access capital. The government is also loaning up to 90% of the purchase price of the business, which is historically been 80%.
What is driving this market is the fact that the government has printed a lot of money. This money is chasing stocks, pushing bond yields down, buying up Bitcoin, and pushing up real estate valuations. As a result, family offices are allocating a record high percentage of their portfolios in direct operating businesses. This is because of the relative valuations of other asset classes.
It is clear that asset bubbles are forming due to the amount of money that is being pushed around. This is why it is important to work with a financial advisor or broker to help reset expectations and increase the chances of successfully selling your business. With the right guidance and resources, you can make the most of the current market and find success.
Concept 5: Seller's Market For Quality Businesses
In the current market, there is a seller's market for quality businesses. This means that if you have a business that is profitable, has clean books and records, and is growing, you can get a premium multiple for it. This is due to the fact that there are a lot of potential buyers looking for businesses to invest in, both experienced and inexperienced. However, there is a caveat. The inexperienced buyers may not be aware of the mechanics of doing a deal, or the amount of regulation involved. Therefore, it is important to work with a financial advisor or broker to ensure that you get the best possible deal.
It is also important to be aware of the dangers of asset bubbles. When too many inexperienced buyers enter the market, they can drive prices up to unsustainable levels. This can lead to a market crash, which can hurt business owners and the market as a whole. To avoid this, it is important to be aware of the signs of an impending bubble, such as the shoeshine boy giving stock tips.
Overall, the current market is a seller's market for quality businesses. This means that if you have a business that is profitable, has clean books and records, and is growing, you can get a premium multiple for it. However, it is important to be aware of the dangers of asset bubbles and to work with a financial advisor or broker to ensure that you get the best possible deal.
Concept 6: Research Multiple Business Brokers
When it comes to selling a business, it is important to research multiple business brokers. This is because each broker will have their own unique approach to the sale process, and each will have their own fees and commissions. It is important to understand the terms of each broker's services and to make sure that they are in line with your goals and expectations.
When researching business brokers, it is important to ask any potential broker questions about their experience, their track record, and their fees. It is also important to ask them questions about their process, such as how long it usually takes to close a deal, how they handle negotiations, and how they handle the paperwork. Additionally, it is important to ask about their marketing strategy and how they plan to get the word out about your business.
It is also important to research the market for similar businesses to make sure that you are getting a fair price for your business. You should also consider the current economic climate and the potential for future growth. This will help you determine a reasonable selling price and will help you negotiate with potential buyers.
Finally, it is important to research the legal aspects of selling a business. This includes understanding the tax implications of selling a business, as well as understanding the process of transferring ownership and any other legal documents that may be required.
By researching multiple business brokers, understanding the market, and researching the legal aspects of selling a business, you can ensure that you get the best possible deal for your business. This will help you maximize the value of your business and ensure that you get the best possible return on your investment.
Concept 7: Know the Market Value
One of the most important things to do when selling a business is to know the market value. Knowing the market value of your business will help you determine if you are asking too little or too much for your business. A good business broker will be able to tell you what businesses like yours sell for and keep you from setting unrealistic expectations. It is also important to ask questions like how the broker arrived at the number they presented, if there are any hidden fees, how long the process will take, who the buyers are, and how the broker finds them.
It is also important to do your own research. Researching multiple business brokers and understanding the market can help you make sure you are getting the best possible deal. Researching the legal aspects of selling a business can also help you ensure that you are not taken advantage of.
Finally, it is important to remember that the process of selling a business can be long and arduous. It is important to be patient and to remember that the outcome could be the best possible outcome or the worst. By understanding the market and doing your research, you can ensure that you get the best possible deal for your business.
Concept 8: Multiple Expansion Possible with PE Firms
One of the most important aspects of a successful sale is the multiple. This is the ratio of the sale price to the earnings before interest, taxes, depreciation and amortization (EBITDA). A higher multiple means a higher sale price for the business. However, it is not always easy to get a higher multiple.
One way to increase the multiple is through private equity (PE) firms. PE firms are typically large investors who buy businesses with the goal of increasing their value and then selling them for a profit. They often have the resources and expertise to increase the value of a business, either through increased revenue or cost savings.
A PE firm may be willing to pay a higher multiple for a business if they believe the business has the potential for multiple expansions. This is when the PE firm believes that the sale price of the business can be increased by taking advantage of synergies between the business and the PE firm's other investments. For example, a PE firm may be willing to pay a higher multiple for a business if they believe they can reduce costs by combining the business with one of its other investments.
When selling a business, it is important to consider the possibility of multiple expansions through a PE firm. By understanding the market and doing your research, you can ensure that you get the best possible deal for your business. It is also important to remember that the process of selling a business can be long and arduous. It is important to be patient and to remember that the outcome could be the best possible outcome or the worst.
Concept 9: Humility, Respect, Feedback, Open-Mindedness, Greed
When it comes to buying and selling businesses, it is important to remember the importance of humility, respect, feedback, open-mindedness, and greed. Humility is important because it allows us to recognize our own limitations and to be open to advice and feedback from others. Respect is important because it allows us to recognize the value of others and to treat them with dignity. Feedback is important because it allows us to learn from our mistakes and to grow as investors. Open-mindedness is important because it allows us to consider different perspectives and to be flexible in our decision-making. Greed is important because it allows us to take advantage of opportunities and to maximize our returns.
It is also important to remember that there are always bigger fish out there. It is important to recognize our own limitations and to recognize that there are always bigger players in the game. It is important to remember that it is often easier to maintain a business than it is to turn it around. It is important to buy a business with stable positive cash flow and to be realistic about the potential returns.
Ultimately, it is important to remember that buying and selling businesses is a complex process. It is important to remember the importance of humility, respect, feedback, open-mindedness, and greed. It is important to recognize our own limitations and to be open to advice and feedback from others. It is important to remember that there are always bigger fish out there and to be realistic about the potential returns. By understanding these concepts and applying them to our investment strategies, we can ensure that we get the best possible outcome for our business.
Concept 10: Smart People Drive Markets
Smart people drive markets. They are the ones who recognize opportunities and act on them. They are the ones who understand the complexities of the market and the risks and rewards associated with any investment. They are the ones who are able to analyze the data and make informed decisions. They are the ones who have the experience and the know-how to navigate the market and maximize returns.
The market is populated by exceptionally smart people. They come from the top universities and they spend their days analyzing the data and investing based on their research. It is unlikely that any individual investor can outsmart the collective intelligence of the market. Therefore, it is important to recognize the importance of doing one's homework and researching the business that one is investing in. It is also important to understand the risks and rewards associated with the investment and to develop a strategy to minimize risk while maximizing rewards.
It is also important to have a good team of advisors and lawyers. These professionals can help investors understand what they don't know and guide them through the process. They can also help find solutions to potential problems. For example, a lawyer may be able to suggest a deal structure that solves an impasse between the buyer and seller.
In conclusion, smart people drive markets. They are the ones who recognize opportunities, understand the complexities of the market, and make informed decisions. It is important to recognize the importance of doing one's homework and researching the business that one is investing in. It is also important to have a good team of advisors and lawyers to help guide investors through the process. By understanding these concepts and applying them to our investing strategies, we can ensure that we get the best possible outcome for our business.
Concept 11: Take Action and Get Results
Taking action and getting results is the key to success in any endeavor. Whether it be investing in a business, starting a business, or even pursuing a personal goal, it is important to take action and have the discipline to see it through. Taking action involves setting goals, making plans, and taking consistent action towards those goals. It is also important to have a good support system in place to help you stay focused and motivated. This could include friends, family, and even a mentor.
Having a plan and taking consistent action towards it is the key to achieving results. It is important to break down large goals into smaller achievable goals and to create a timeline to complete them. It is also important to have a plan in place for when things don't go as planned. This could include having a backup plan or adjusting the timeline. Having a plan and taking consistent action towards it will help ensure that the desired results are achieved.
Finally, it is important to recognize and celebrate successes. Celebrating successes, both big and small, is a great way to stay motivated and continue on the path to success. It is also important to take the time to reflect on what has been accomplished and to learn from any mistakes made along the way.
Overall, taking action and getting results is the key to success in any endeavor. It is important to have a plan and to take consistent action towards it. It is also important to have a good support system in place to help stay focused and motivated. Finally, it is important to recognize and celebrate successes, both big and small. By understanding and applying these concepts, anyone can achieve success in their endeavors.
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