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How to Sell Your Business for SERIOUS Change

by bizgrower
17 replies
Looks like an interesting webinar, and the idea has been talked about recently here on the forum.


From Dave Dee at Glazer-Kennedy:

The Exit Strategy Master Plan


(Borrowed the headline from Dave's email.) :<)
#business #change #sell #serious
  • Profile picture of the author Oziboomer
    Yes...building value in your business so that you can sell for a reasonable return is what I think most people who go into business would aim for.

    The question all business owners need to ask themselves is...

    Do they have a business to sell?

    Usually you would need to have systems in place --think franchise model--

    Many small businesses may never sell or when they do sell they may sell for significantly less than the owner expects.

    In my personal example I've always run my businesses to give me freedom and return a reasonable income to support my family and lifestyle.

    If I wanted to be aggressive I could...and I have looked...at acquiring competitors, expanding my systems into acquired entities, reducing operating costs across the group and then positioning the business to be acquired by the bigger players who want to look at vertical integration.

    My enjoyment and the ability to spend time with my young family tend to push me towards the "relaxed" rather than the "aggressive".
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    • Profile picture of the author bizgrower
      Thanks, Ozi.

      I'm not sure what all the webinar will cover.

      There is a Denver, CO based small business attorney who does a lot of work based on the legal and accounting issues that make a business something that is sellable or something you can will to heirs... He also does a lot in the area of succession planning.

      Anyway, I think there are a lot of things structurally, staff, legal and accounting wise that people can learn to fold into their business and planning. Valuation and marketing of a business for sale is very specialized.



      Dan

      Originally Posted by Oziboomer View Post

      Yes...building value in your business so that you can sell for a reasonable return is what I think most people who go into business would aim for.

      The question all business owners need to ask themselves is...

      Do they have a business to sell?

      Usually you would need to have systems in place --think franchise model--

      Many small businesses may never sell or when they do sell they may sell for significantly less than the owner expects.

      In my personal example I've always run my businesses to give me freedom and return a reasonable income to support my family and lifestyle.

      If I wanted to be aggressive I could...and I have looked...at acquiring competitors, expanding my systems into acquired entities, reducing operating costs across the group and then positioning the business to be acquired by the bigger players who want to look at vertical integration.

      My enjoyment and the ability to spend time with my young family tend to push me towards the "relaxed" rather than the "aggressive".
      Signature

      "If you think you're the smartest person in the room, then you're probably in the wrong room."

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      • Profile picture of the author Oziboomer
        Originally Posted by bizgrower View Post

        I'm not sure what all the webinar will cover.

        There is a Denver, CO based small business attorney who does a lot of work based on the legal and accounting issues that make a business something that is sellable or something you can will to heirs... He also does a lot in the area of succession planning.

        Anyway, I think there are a lot of things structurally, staff, legal and accounting wise that people can learn to fold into their business and planning. Valuation and marketing of a business for sale is very specialized.
        You can bet there will be a pitch for a DK product at the end of it.

        I've used some software by a company called Maus for writing Operations and Policy manuals for my business over the years and I just jumped back into their stuff to have a look if they had anything on Exit strategy and tools to use.

        This is what I found which could interest some readers of this thread.
        Exit & Succession Planning Software | Write an Exit & Succession Plan in minutes!

        They do have a free trial and I'm sure just taking a tour would set people on the right path.
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  • Profile picture of the author yukon
    Banned
    It's not complicated, a buyer is looking for income and/or assets.
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    • Profile picture of the author Oziboomer
      Originally Posted by yukon View Post

      It's not complicated, a buyer is looking for income and/or assets.
      From a physical sense it is easy to get a value of the assets but in most digital businesses how would you value the customer list?

      It is obviously an asset...offline measured as perhaps "Goodwill"..but how do you think a business valuer would ascertain the true value of such an asset?
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      • Profile picture of the author savidge4
        Originally Posted by Oziboomer View Post

        From a physical sense it is easy to get a value of the assets but in most digital businesses how would you value the customer list?

        It is obviously an asset...offline measured as perhaps "Goodwill"..but how do you think a business valuer would ascertain the true value of such an asset?
        Assets are easy. Customer lists... well, not so easy. They are priceless to you, and to the next guy, not worth a dime. Now the system that you use to get the customers.. aww there in lies the value.

        effective WORKING funnels are not cheap. If you can put $1000 in one end and pull $10,000 out the other.. that right there has value. if you have the structure in place to upsell the $10,000 and turn into $100,000... Son, you have the license to print money.

        The Mario's, the Digitalkickstart's, The Deiss', the Cordone's of the world... they have that exact machine. All they do is turn it on. There are those around here that don't understand it. If the system ( they are selling this week ) worked why would you be selling it for $27? Why? because that is putting $1000 in advertising and pulling $10,000 out the other side. and once you have that aspect done, now you take the next $1000 in, add the list from all previous efforts and now you are pulling $100,000. Its called business. and from the looks of it, Good business, because they have been doing it a while.

        And it aint just the digital world. Water bottles.. the stupidest thing ever... before bottled water we all did what? we drank from the faucet. Now? they put $1000 in and are pulling millions out. the machine is all around us. every where you look. Replicate the machine, and your business takes on value!
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      • Profile picture of the author roger h
        Originally Posted by Oziboomer View Post

        ...It is obviously an asset...offline measured as perhaps "Goodwill"..but how do you think a business valuer would ascertain the true value of such an asset?
        I'll take a limited perspective bite at it...

        If there were evidence of a buying frequency of that list ?
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      • Profile picture of the author yukon
        Banned
        Originally Posted by Oziboomer View Post

        From a physical sense it is easy to get a value of the assets but in most digital businesses how would you value the customer list?

        It is obviously an asset...offline measured as perhaps "Goodwill"..but how do you think a business valuer would ascertain the true value of such an asset?
        As a seller you aim high & expect a counter offer, a counter offer might never happen but price accordingly, that's a typical sell for most things in life. If you have historical financial data to back up a list that's generated income you'll obviously be in a better position to haggle on price.

        In the end you will only get a dollar amount that the buyer is willing to pay, it doesn't matter what you're selling.
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  • Profile picture of the author bizgrower
    Years ago Bed, Bath, and Beyond (or similar retailer) had figures that each customer on their list was worth something like $16.87 - meaning that every time they emailed a deal to their list, it returned $16.87 x the number on their list.
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  • Profile picture of the author bizgrower
    I found this to be interesting, especially because a lot of people here are in similar or the exact type of business:

    Online Marketing/Web Design, Growing 150% Denver/Boulder, 59K Earnings: Business For Sale in Denver, Adams County, Colorado, United States on BizBuySell.com
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    • Profile picture of the author Oziboomer
      Originally Posted by bizgrower View Post

      I found this to be interesting, especially because a lot of people here are in similar or the exact type of business:

      Online Marketing/Web Design, Growing 150% Denver/Boulder, 59K Earnings: Business For Sale in Denver, Adams County, Colorado, United States on BizBuySell.com
      On the high side but a good indication what a broker will push a business for.

      The US is also set for a growth spurt so the opportunity will be attractive to a prospect but when I read...

      "They have a very effective and inexpensive way to market themselves through in house Google positioning"

      When a business value depends on Google positioning that flags a bit of warning for me but maybe that is a selling or buying point for someone else.

      THIS....

      "The growth should continue at a very rapid pace. They are currently billing $35K a month on average now and believe that they can be billing closer to $60-75K per month within a year with a greater profit margin because they have lots of room to raise their prices. A year ago they were charging half of what they do now for the same work and still feel they are 50% less expensive for the same quality of work compared to their competitors. They have an 80% close rate with new potential clients and get 65% of their leads from search engine optimization, 30% from referrals, and 5% from social media like LinkedIn, Facebook, etc. They have also developed relationships with several local and national advertising and development agencies that are sending them a growing amount of white labeled design and development work."

      Speculation of doubling turnover in 12 months is optimistic.

      Words like "They Feel" they are 50% less expensive...

      65% of leads come from SEO....another warning sign with algorithm changes.

      Also "Their team is extraordinarily talented"....

      ...what happens when the "TALENT" leaves.

      Sounds more like a business that would sell for a lot less than the asking price but then I'm just a cynical old bugger who has seen people lose money plenty of times.
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  • Profile picture of the author bizgrower
    Good points there.^^^^

    Also bothersome:

    The owner is selling to get back the profit he invested for fast growth.
    Sounds like a grow, churn and then not care way to make a living.
    It's not a retirement level chunk of change.

    Buyer does not need a particular background? Allowing that to be posted by
    the business broker makes it seem like the seller does not really care about
    alignment with a buyer for retaining talent and customers.

    >

    I always wonder why an employee, or group of employees, does not
    want to buy the businesses for sale that I see on business broker sites.
    And, why it is not offered to them. (Although one I saw, a 30 year old
    commercial glass business with long term employees sounded like
    most of them were ready to retire.)

    Finally, how loyal will customers be after the old owner leaves?

    It's possible that the business might be a good thing for someone who wants to
    grow such a business - expand their own similar or related.

    If the seller does build and sell businesses for a living, he might as well do as Bergeron
    is suggesting. Spend the same time and energy building something that is sellable for a lot
    more, such as Bergeron's 10 million target. (That's only about five hotels like I run. Hmmm)

    Dan
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    • Profile picture of the author savidge4
      This is one of those deals I look at, and there simply is no viable assets there at all as in NOTHING.

      A web design firm and they don't even have computers as assets - the employees supply their own. That means there is no software.. no systems what so ever - oh im sorry there is a floor to ceiling white board.

      They LISTED there is only $3000 in hard assets. with the lease and the utilities at an estimated $28,000 per year It just doesnt look good... then you get into the inflow structure. They report they get 65% by web leads, 35% by referral, and 5% by Social.. why do they have 3 sales people? That's 2 they employ, and the owner is a salesman by trade.

      Then it gets real interesting.. your not buying 100% of the business. every employee has at least 1 share that you would have to buy out. "AT LEAST"? LOL

      At $1000 per job the 2 coders and the what I will call an intern are producing 178 sites per year. That's basically a site every 2 days... but they are not charging 1/2 of what they should? so are they charging $600? So now the 2 guys are at 233 sites per year. - with no systems and no standards in terms of software and work flow - ok the white board.

      I think the owner is a moron to think its worth anything, and I think the Broker... if there was a license to do his job, it should be revoked.
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  • Profile picture of the author fasteasysuccess
    The key is systems and showing value. Once you have basically systems set in place, it's easy for somone to come in and continue.

    It was way easier back in the day to sell online businesses, but can still be done.

    My first internet advertising company started (kinda was the auto trader on steroids back in the day) for a couple hundred bucks, turned it into a nice six figure business and within 2 years sold it for 800 times my investment, but...

    It was easy because had everything in place, tested, proven and brining in money constantly.

    Plus, had traffic, sales and showed how the business operating on under 2 hundred bucks a month (phone, internet, autoresponder, website hosting, and other costs to keep the biz running monthly).

    When sold business, sold domain as extra change and offered consulting for a year after (which guy never used once). The other online business i passed off to a broker and he pretty much did everything for me but still was easier because had marketing and sales systems in place, traffic, value and proof of everything.

    To sum up...create easy to duplicate marketing/sales systems for the business, keep accurate records of traffic, sales and expenses and you are going to be able to sell your business for a lot more and a lot easier than without these for sure.
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