The Exit on How2Exit's Interview W/ Jay Rodgers - 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
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About The Guest(s):
Jay Rogers is an entrepreneur, author, and seasoned mergers and acquisitions professional. He has started and sold about 20 companies and is dedicated to helping other entrepreneurs grow their businesses.
Summary:
Jay Rogers is an entrepreneur and author who has started and sold about 20 companies. In this episode, he shares his insights and experiences in the world of mergers and acquisitions. He emphasizes the importance of entrepreneurs in driving employment growth and strengthening the economy. Jay also discusses the rule of 40, which states that the percentage of annual growth plus or minus the percentage of profit should equal 40 or more for a company to be in great shape. He highlights the value of clean books and the benefits of getting a quality of earnings report before selling a company. Jay also shares the lessons he has learned from his successes and failures as an entrepreneur.
Key Takeaways:
- Entrepreneurs are born, not trained or taught.
- The rule of 40 states that the percentage of annual growth plus or minus the percentage of profit should equal 40 or more for a company to be in great shape.
- Clean books add value to a company and make it more attractive to buyers.
- Taking vacations and stepping away from the business can increase its value and show that it can run without the owner's constant presence.
- The best deals are made with smart people who can add value to the business.
Quotes:
- "Entrepreneurs aren't trained or taught. They're born." - Jay Rogers
- "Clean books add so much value in the buyer's eyes." - Jay Rogers
- "The more vacations you take, the more your company will bring." - Jay Rogers
Article:
How to Exit: A Comprehensive Guide to Selling Your Business
Welcome to the How to Exit podcast, where we delve into the world of small to medium business acquisitions and mergers. In this episode, we have the pleasure of speaking with Jay Rogers, an entrepreneur's mentor, author of "The Bet," and a seasoned mergers and acquisitions professional. With his vast experience in starting and selling multiple companies, Jay shares valuable insights and lessons learned that can help business owners navigate the process of buying or selling a business.
The Importance of Entrepreneurship
Jay emphasizes the critical role that entrepreneurs play in driving economic growth and job creation. He highlights the decline in the number of startups in recent years and the need to support and encourage small and medium-sized businesses. Jay believes that entrepreneurs are born, not made, and recommends Gino Wickman's book, "Entrepreneurial Leap," as a self-assessment tool for aspiring entrepreneurs.
The Journey of an Entrepreneur
Jay shares his personal journey as an entrepreneur, starting and selling multiple companies. He emphasizes the importance of knowing when to step aside and let professional management take over the reins of a growing company. Jay also discusses the concept of timing the sale of a business, highlighting the importance of selling before reaching the peak of growth.
The Rule of 40
In the world of mergers and acquisitions, the rule of 40 is a crucial metric to consider. Jay explains that the rule of 40 states that if the percentage of annual growth plus or minus the percentage of profit equals 40 or more, the company is in great shape. This metric helps potential buyers assess the company's growth potential and profitability.
The Value of Clean Books
Jay emphasizes the importance of maintaining clean and accurate financial records when preparing to sell a business. He advises against hiding personal expenses within the company and overpaying oneself, as it can negatively impact the company's value and make it harder to justify a recast. Jay also recommends obtaining a quality of earnings report to replace three years of audited financials, which can add value and attract potential buyers.
Lessons Learned from Failures
Jay believes that failures can be valuable learning experiences for entrepreneurs. He shares stories of his own failures and highlights the importance of learning from mistakes. Jay encourages entrepreneurs to focus on the lessons learned and to always strive for continuous improvement.
The Bet: A Guide to Entrepreneurial Success
Jay's book, "The Bet," offers valuable insights and lessons for entrepreneurs. Each page provides practical advice and real-life stories that entrepreneurs can apply to their own businesses. The book covers a wide range of topics, including the importance of working with smart people, the value of vacations before selling a business, and the significance of serving an underserved or unserved market.
Conclusion and Future Outlook
In conclusion, Jay Rogers' extensive experience as an entrepreneur and mergers and acquisitions professional provides valuable insights for business owners looking to buy or sell a business. His emphasis on the importance of entrepreneurship, clean books, and learning from failures resonates with aspiring and seasoned entrepreneurs alike. With his book, "The Bet," Jay offers a comprehensive guide to entrepreneurial success, providing practical advice and real-life examples to help entrepreneurs navigate the challenges of building and selling a business.
As the business landscape continues to evolve, it is crucial for entrepreneurs to stay informed and adapt to changing market conditions. By leveraging the knowledge and experiences shared by industry leaders like Jay Rogers, entrepreneurs can position themselves for success and make informed decisions when buying or selling a business. The future of entrepreneurship is bright, and with the right guidance and support, entrepreneurs can continue to drive economic growth and create opportunities for themselves and their communities.
Key concepts:
Concept 1: Entrepreneurs Are Born, Not Made
In the podcast, the topic of discussion is entrepreneurship and the idea that entrepreneurs are born, not made. The host and guest discuss the decline in the number of startups and the aging population of business owners without succession plans. The guest, Jay Rogers, shares his own experiences as an entrepreneur and emphasizes the belief that entrepreneurs have a natural inclination towards entrepreneurship rather than being trained or taught.
According to Rogers, entrepreneurs possess certain innate qualities and characteristics that drive them to start and run businesses. He mentions a self-assessment tool recommended by Gino Wickman, which helps individuals determine if they have the entrepreneurial mindset. Rogers suggests that those who do not possess this mindset should surround themselves with the right people to support their entrepreneurial endeavors.
The host, Ron, agrees with Rogers and shares his own experiences as an entrepreneur since childhood, participating in activities like lemonade stands, mowing, and sales contests. He believes that his entrepreneurial nature has always been a part of him and has contributed to his success.
Based on the podcast, the essay topic "Entrepreneurs are born, not made" can be explored by highlighting the following points:
1. The decline in the number of startups and the importance of entrepreneurship in economic growth.
2. The aging population of business owners without succession plans and the need for a new generation of entrepreneurs.
3. The concept that entrepreneurs are born with certain innate qualities and characteristics that drive them towards entrepreneurship.
4. The idea that entrepreneurship cannot be taught or trained but can be supported by surrounding oneself with the right people.
5. Personal experiences of the host and guest as evidence of their innate entrepreneurial nature.
Concept 3: Sell Before Reaching Peak Growth
One key takeaway from the podcast is the importance of selling a company before reaching peak growth. This concept is illustrated through the example of a SaaS company that had the opportunity to either grow 5% and generate $1 million in profit or grow 40% and generate $300,000 in profit. The board of directors chose the latter option, recognizing the potential for continued growth and success.
The podcast host emphasizes that the period of rapid growth is when owners may develop the bad habit of "smoking their own dope," meaning they become overly confident and fail to see the potential decline ahead. This is why it is crucial to sell during the growth cycle, rather than waiting until the peak and risking a decline in value.
The host shares his personal experience of making money by selling too soon and too cheap. He compares it to day trading, where trying to time the peak can result in significant losses. Instead, he advises entrepreneurs to sell well into the growth cycle, allowing buyers to see the potential for further growth and success.
Another interesting observation made in the podcast is the importance of leaving room for improvement when selling a property or company. By leaving some units or aspects untouched, the buyer can see the potential for increasing value and be more willing to invest.
The podcast also touches on the importance of having audited financials before selling a company. While traditionally, three years of audited financials were required, the host suggests that a quality of earnings audit can be a suitable alternative. This type of audit can provide a deeper understanding of a company's true revenue and profit, potentially even revealing that they are higher than reported.
Concept 4: Quality Of Earnings Report Importance
The podcast discusses the importance of a quality of earnings report when selling a company. It explains that when potential buyers are considering purchasing a company, they have to invest a significant amount of time and money. A quality of earnings report helps to establish the credibility of the company and assures buyers that it is worth their investment.
The podcast host shares their own experience of selling a company, stating that they had 67 non-disclosure agreements signed by prospective buyers before the sale. They believe that the quality of earnings report played a significant role in attracting potential buyers and generating interest in the company.
The conversation then shifts to the importance of keeping clean books and avoiding personal expenses being mixed with company expenses. The host emphasizes that clean books add value in the eyes of buyers and advises against overpaying oneself as it can make it harder to justify a recast. They also mention the option of borrowing money from the company at a low interest rate and paying it off at the time of sale, which can result in capital gains instead of ordinary income.
Concept 5: Prepare For Successful Business Exit
The podcast emphasizes that preparing for a successful business exit involves several crucial steps. Firstly, it is essential for the owner to work themselves out of any reoccurring job within the company. This means delegating tasks and responsibilities to capable employees, so that the business can run smoothly without the owner's constant presence. The hosts stress that potential buyers will be more interested in a business that can operate independently, without relying heavily on the owner's involvement.
Another important aspect of preparing for a successful business exit is taking time off and allowing the business to thrive in the owner's absence. The podcast suggests that the more vacations the owner takes in the last year or two before selling, the more valuable their company will become. By demonstrating that the business can continue to thrive and even improve while the owner is away, potential buyers will be more confident in their ability to take over and run the company successfully.
The hosts also discuss the concept of "stair-stepping vacation," which involves gradually increasing the length of time the owner is away from the business. This strategy allows the owner to gradually reduce their involvement while ensuring that the business continues to operate effectively. By the time the owner is ready to sell, they should be able to take extended periods off, such as a month or two, without any negative impact on the business's performance. This not only demonstrates the owner's ability to step away from the business but also increases its value in the eyes of potential buyers.
Furthermore, the podcast highlights the importance of education and continuous learning for entrepreneurs. They mention an education company that helps business owners understand how their businesses should be run and provides valuable insights into the world of entrepreneurship. By seeking knowledge and guidance from experienced individuals or educational resources, entrepreneurs can better prepare themselves for a successful business exit.
Concept 6: Opportunity Lies In Underserved Markets
One key takeaway from the podcast is the idea that opportunity lies in underserved markets. The host and guest discuss the importance of identifying gaps in the market and finding ways to meet the needs of customers who are currently not being served or are underserved. This concept is illustrated through the example of the Ford Motor Company's failed attempt to market the Edsel, which was considered the world's most expensive flaw. The lesson here is that by targeting an underserved or unserved market, entrepreneurs have a better chance of success.
The podcast also touches on the experience of starting a business based on a personal need or desire that is not being met by existing products or services. The guest shares a story about starting a business selling handmade made-to-measure cowboy boots in West Texas. Despite initial skepticism from potential customers, the business was able to thrive by catering to individuals with specific foot needs and preferences. This anecdote highlights the importance of understanding the unique needs of a target market and creating a product or service that addresses those needs.
Furthermore, the podcast emphasizes the significance of continuous learning and education for entrepreneurs. The host mentions a year-round program called the Business Owners Ed Program, which provides entrepreneurs with valuable resources and mentorship opportunities. The program features weekly events with guest speakers who have successfully taken a startup or stagnant company to mega millions. This emphasis on education and mentorship underscores the importance of seeking guidance and learning from experienced individuals in order to maximize entrepreneurial potential.
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