11 Things We Learned About Selling a Business By Interviewing Alex Nghiem - Global Exit Expert E103 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 crude, you're reading our notes, so. yeah. -Ron
Concept 1: Cashflow is Key to Success
Cashflow is a key factor in achieving success in business. Whether you are buying or selling a business, understanding cashflow is essential for making informed decisions. Cashflow is the movement of money in and out of a business. It is the difference between the money coming in and the money going out. In businesses with high cashflow, the money coming in is greater than the money going out.
For those looking to buy or sell a business, cashflow should be given serious consideration. When buying a business, cashflow is important to understand the financial health of the business. It is also important when selling a business, as potential buyers will want to know the cashflow of the business to determine its value.
Alex Nghiem, an exit specialist, and M&A advisor, knows the importance of cashflow. He specializes in digital world, digital agencies, B2B consulting, and software as a service. He has spent many years in the industry and has learned that cashflow is a key factor in business success. He has advised many clients on the nuances of buying and selling a business and has noticed that money is made when the business is exited.
In order to have a successful exit, Alex recommends connecting with different types of buyers, such as family offices, private buyers, and PE firms. Each of these has their own nuances and understanding how to talk to them is essential for a successful exit. His technical background in computer science and his experience as a chief technical officer has given him an advantage in understanding the nuances of digital businesses and software companies.
Cashflow is key to success in business. Whether you are buying or selling a business, understanding cashflow is essential for making informed decisions. Knowing the nuances of different buyers is also important for a successful exit. With the right knowledge and understanding, cashflow can be used to achieve success in business.
Concept 2: Global economy opens opportunities.
The rise of the global economy has opened up a world of opportunities for those looking to buy and sell businesses. With the internet, the world has become a much smaller place. Buyers and sellers now have access to a much larger pool of potential partners. This means that buyers and sellers can now look to other countries to find the perfect deal.
Take, for example, Alex's story of one entrepreneur who had a deal with a buyer in the US, a seller in Australia, and himself in a different part of the US. None of them had ever met, yet the deal was still closed. This is a testament to the power of the global economy. Deals can now be done without the need for physical meetings. This opens up a world of possibilities for buyers and sellers, as they can now look to other countries for potential buyers and sellers.
The global economy has also opened up opportunities for those looking to travel. Many entrepreneurs now have the freedom to travel the world while still running their business. This is possible thanks to the internet and mobile technology, which allow entrepreneurs to stay connected to their business no matter where they are.
The global economy has opened up a world of opportunities for those looking to buy and sell businesses. With the internet, buyers and sellers now have access to a much larger pool of potential partners. This means that buyers and sellers can now look to other countries to find the perfect deal. Additionally, entrepreneurs now have the freedom to travel the world while still running their business. The global economy is an exciting place, and it is only getting bigger.
Concept 3: Build Rapport With People
However, this new world of opportunity also comes with its own set of challenges. One of the most important of these is the need to build rapport with people. Building rapport is essential for any successful business transaction, as it allows buyers and sellers to develop trust and understanding. Without a good rapport, buyers and sellers can quickly become suspicious of one another, leading to a breakdown in the relationship.
Building rapport is not always easy, but it is an essential part of any successful business transaction. The first step is to get to know the other party. This means learning about their background, their goals, and their motivations. This can be done through conversations, research, or even through social media. Once a buyer and seller have a better understanding of each other, they can then begin to build a stronger relationship.
The next step is to be open and honest with each other. It is important to be clear about expectations and to be willing to compromise. This will help to create an environment of trust and understanding. Additionally, it is important to be respectful of each other’s opinions and to be willing to listen to each other’s ideas.
Finally, it is important to be patient. Building a strong rapport takes time and effort, but it is worth it in the end. It is important to remember that the goal is to develop a relationship that is mutually beneficial. This means that both parties must be willing to work together and to put in the effort to make the deal successful.
In conclusion, building rapport with people is essential to any successful business transaction. It is important to get to know the other party, to be open and honest with each other, and to be patient. With the right approach, buyers and sellers can develop strong relationships that will stand the test of time.
Concept 4: Sell When Momentum Is High
When it comes to selling a business, timing is everything. The best time to sell is when the business is at its peak, when momentum is high and the business is performing optimally. This gives buyers the confidence that they are making a wise investment, and sellers the assurance that they are getting top dollar for their business.
Unfortunately, many business owners wait too long to sell their business, and by the time they decide to do so, the business has already begun to decline. This can significantly reduce the value of the business and the potential buyers. When a business starts to decline, only the most adventurous buyers will be interested in purchasing it, and they rarely pay top dollar.
To avoid this scenario, business owners should periodically assess their level of enjoyment with running the business. If they find that their level of enjoyment is waning, they should consider selling the business. It is also important to be aware of any life events that could affect their ability to run the business, such as a partner starting a new business or an employee leaving.
By taking the time to assess their situation and plan accordingly, business owners can ensure that they are selling their business at the right time and for the right price. Selling when momentum is high is the best way to maximize the value of a business and get the best possible return on investment.
## Do your due diligence.
One of the most important steps in the exit process is due diligence. This is the process of thoroughly researching and analyzing the business before making a sale. It is a critical part of the exit planning process and can help to identify any potential issues that may arise during the sale.
Due diligence is especially important for businesses that are being sold to an outside investor or an acquirer. When an acquirer is evaluating a business, they will look closely at the financials, operations, and legal aspects of the business. It is important for the seller to make sure that the financials are clean and that all of the operations are running smoothly. This can help to ensure that the acquirer is getting a good deal and that the seller is getting the best possible return on their investment.
In addition to the financials, it is important for the seller to understand what the acquirer is looking for in a business. Understanding the acquirer’s needs and preferences can help to ensure that the business is presented in the best possible light. It can also help to avoid any potential red flags that could lead to a lower offer or even a failed sale.
Due diligence is an important part of the exit planning process. It is important for business owners to take the time to thoroughly research and analyze the business before making a sale. Doing due diligence can help to ensure that the business is presented in the best possible light and that the seller gets the best possible return on their investment.
Concept 5: Proprietary Processes Yields Success
In the podcast, the speaker talks about a company that was trying to exit but ran into a problem. The due diligence company couldn’t confirm a certain amount of EBITDA in earnings before taxes. To solve this issue, the parties involved decided to use a 12-month moving average to release the funds. This allowed the parties to maintain the original deal without having to revise it down.
The speaker then goes on to discuss how some camps recommend changing the business model to maximize the exit. In this case, the business was a creative agency with a high churn rate. To maximize their exit value, they should have added in additional services such as a media buying arm. This would have allowed them to maintain ongoing revenue for as long as the ad was running.
The speaker also mentions that for some people, a transition like this can take a while. It is important to balance the time frame with the likelihood of success. For some, it is not possible to make the necessary changes in such a short time frame, and they would rather sell knowing that it is possible.
One way to increase the success of an exit is to develop a proprietary process. This is something that the speaker was able to do with their business, and it was a big reason why they were able to get acquired. A proprietary process can set a business apart from its competitors and make it more attractive to potential buyers.
Developing a proprietary process can help to increase the success of an exit. By taking the time to analyze the business and develop a unique process, business owners can maximize the value of their business when they decide to sell.
Concept 6: Reinvent for Higher Valuation.
Reinventing a business for higher valuation is a process that requires dedication and foresight. Business owners must be willing to invest in the necessary resources and make the necessary changes to their business in order to increase its value. This process can include developing proprietary processes, trademarking processes, and white labeling software. Additionally, it is important to consider the buyer’s timeline when making changes to the business. By taking the time to develop a unique process and present the business in the best possible light, business owners can increase the success of their exit and maximize the value of their business.
Concept 7: Domain Expertise is Valuable
One of the most valuable assets a business can bring to the table is domain expertise. Domain expertise is the knowledge and experience gained through working in a specific industry. It is the ability to understand the nuances of the industry and to apply that knowledge to the development of solutions. This expertise can be especially valuable to buyers looking to enter a new market or to expand their offerings.
For example, in the podcast, Alex discusses the acquisition of a small IT consulting company. This company had developed a proprietary process for a particular type of project. This process was only worth so much to the company, but when acquired by a larger company, the value of the process was much higher. The larger company was able to leverage the process to land bigger projects and generate higher profits. The smaller company’s domain expertise was the key to its success.
Domain expertise is also valuable for companies looking to develop software products for a specific industry. By leveraging their knowledge of the industry, companies can develop solutions that are tailored to the needs of the industry. This can give them a competitive edge over other companies that may not have the same level of expertise.
In conclusion, domain expertise is an invaluable asset for businesses. It can be the difference between success and failure in a new market or industry. By investing in the necessary resources and taking the time to develop a unique process, businesses can maximize their value and increase their chances of success.
Creating an assembly line process is a great way to do this. It ensures that tasks are completed efficiently and effectively, freeing up resources for other tasks. It also helps to reduce the risk of errors and mistakes. Furthermore, it can be used to create a unique product or service that is tailored to a specific industry or market.
For example, Alex recently spoke to the founder of a company called Go High Level, who had raised $50-60 million. He told me that in the past, if a company didn't own the intellectual property, it was a major red flag. However, because the world has moved so quickly, acquirers are now more willing to accept this as long as there are strong agreements in place with the development partner.
This is a great example of how a unique process can make a business more attractive to potential buyers. By creating a vertical-specific solution and partnering with a software development company, the company was able to demonstrate stability and show that they had the necessary domain expertise.
In my own experience, Ron states "I have used an assembly line process to manage my podcast." By creating a list of people to interview and assigning tasks to my virtual assistant, I have been able to produce two shows every week with just one full-time and one part-time VA. This has enabled me to free up time for other tasks and even open the door to potential acquisitions.
In short, creating an assembly line process is a great way to maximize a business's value and increase its chances of success. By investing in the necessary resources and taking the time to develop a unique process, businesses can create a unique product or service that is tailored to a specific industry or market. This can help to make the business more attractive to potential buyers and increase its chances of success.
Concept 8: Price Realistically to Sell
When it comes to selling a business, it is important to price it realistically. Setting an unrealistic price can be a major deterrent for potential buyers, as it can make them feel like they are overpaying for the business. Additionally, setting an unrealistic price can give the impression that the business is not worth the asking price. It is important to do the necessary research to ensure that the price is accurate and reflects the true value of the business.
When pricing a business, it is important to consider the market, the industry, and the competition. Researching the competition can provide insight into what other businesses in the same industry are selling for, which can help to determine the appropriate price for a business. Additionally, it is important to consider the financials of the business, such as revenue, profits, and expenses. This can help to determine the true value of the business and can help to ensure that the price is accurate and realistic.
It is also important to consider the potential buyers and their needs. Knowing the needs of potential buyers can help to determine the appropriate price for the business. Additionally, it is important to consider the potential buyers’ ability to purchase the business. Knowing the potential buyers’ financial capabilities can help to ensure that the price is realistic and that the buyers are able to afford the business.
Overall, pricing a business realistically is essential for a successful sale. By doing the necessary research and understanding the needs of potential buyers, businesses can ensure that they are pricing the business accurately and realistically. This can help to increase the chances of a successful sale and maximize the business’s value.
Concept 9: Understand The Buyer's Risk
When it comes to understanding the buyer’s risk, it is important to understand the buyer’s perspective. Buyers will typically look at the financials of the business, the industry, and the competition. They will also consider the amount of time they are willing to invest in the business and the amount of money they are willing to pay. It is important to understand that buyers may not be willing to pay the full asking price and may be looking for a deal. Therefore, it is important to be realistic in pricing the business and to understand the buyer’s risk.
It is also important to understand the buyer’s expectations. When it comes to pricing a business, it is important to be realistic and to understand the buyer’s expectations. For example, if a business is expecting a buyer to pay a certain amount, it is important to understand that the buyer may not be willing to pay that amount. Therefore, it is important to understand the buyer’s expectations and to price the business realistically.
Finally, it is important to understand the process of selling a business. Business owners should understand the process of selling a business, including the steps involved, the timeline, and the strategies for marketing the business. It is also important to understand the buyer’s process and to understand the buyer’s needs. By understanding the buyer’s needs, business owners can ensure that they are pricing the business accurately and realistically.
Overall, understanding the buyer’s risk is essential for a successful sale. By doing the necessary research, understanding the buyer’s perspective, and understanding the buyer’s expectations, business owners can ensure that they are pricing the business accurately and realistically. This can help to increase the chances of a successful sale and maximize the business’s value.
Concept 10: Consider Selling For Lifestyle Jump
When it comes to selling a business, it’s important to consider lifestyle jump opportunities. Selling a business can provide an opportunity to make a significant jump in lifestyle. Many successful entrepreneurs have made a significant jump in lifestyle by selling their business. It’s important to understand the dynamics of the market and the types of buyers that are actively looking to buy a business. It’s also important to understand why people buy certain types of businesses. For example, agencies, consulting companies, and SaaS companies have different dynamics and different types of buyers.
It’s also important to understand that it’s hard to be objective when selling a business. Emotional attachment can make it difficult to remain objective and make decisions that are in the best interest of the business. It’s important to bring in an experienced advisor who can help to mediate and ensure that the best interests of the business are kept in mind.
Finally, it’s important to understand that selling a business is both a financial and an emotional decision. Business owners have spent years building the business and it’s often difficult for them to let go. An experienced advisor can help to guide business owners through the process and ensure that they make the right decision.
In conclusion, selling a business can provide an opportunity to make a significant jump in lifestyle. It’s important to understand the industry standards, the dynamics of the market, and the types of buyers that are actively looking to buy a business. It’s also important to understand that it’s hard to be objective when selling a business and to bring in an experienced advisor to help mediate and ensure that the best interests of the business are kept in mind. Finally, it’s important to understand that selling a business is both a financial and an emotional decision and an experienced advisor can help to guide business owners through the process.
Concept 11: Know When to Seek Help
When it comes to selling a business, it is important to understand that it is not always an easy task. It is a complex process that requires a lot of research and analysis. It is also important to understand that it is not always a black and white decision. There are often a number of different options to consider and evaluate. This is why it is so important to seek help when selling a business.
Having an experienced advisor to help guide you through the process can be invaluable. An experienced advisor can provide the necessary insight to make sure that you are making the best decisions for your business. They can also provide a more objective perspective on the market and the potential buyers. This can be incredibly helpful in making sure that you get the best outcome for your business.
An experienced advisor can also provide guidance on the financial aspects of the sale. They can help to ensure that you are getting the best value for your business. They can also provide advice on the best way to structure the sale to ensure that you are getting the most out of the transaction.
In addition to the financial aspects of the sale, it is also important to understand that selling a business is an emotional decision. It can be difficult to let go of something that you have put so much time and effort into. An experienced advisor can help to provide guidance and support during this emotional process. They can provide advice on how to best manage the emotions that come with selling a business.
Overall, it is important to understand that selling a business is not always a simple process. It is important to seek help from an experienced advisor to make sure that you are making the best decisions for your business. An experienced advisor can provide invaluable insight and guidance to help ensure that you get the best outcome for your business.
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