Streamlining the business selling process for marketing

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I got a call last week one of my good friends who runs a very successful business and as we were going through the conversation together the topic of selling his business came up and he got nervous he said well I've I've ran this business all my life this is my baby why would I sell this but it was as if he was about to walk down the aisle and give his daughter to somebody I said if he is having so much trouble thinking about selling his own company like most founders and entrepreneurs do there's probably tens of thousands of other people that are going through the same thing why don't we make a video about it whether you're 1928 or 42 years old me you don't run a business you're not a founder not a CEO maybe you're an employee or an executive maybe a salesperson or realtor you are going to long what it is to go through the process of selling the business in this video however if you are the entrepreneur the founder the CEO or a partner in a company and you are wondering should we sell should we not sell some are telling you should sell never sell a business you're gonna get a lot of clarity from this video these twelve points are gonna give you a lot of clarity and some of them are gonna be points that maybe you haven't even thought about yet because look you may have done nine million last year you may have done ninety two million dollars of revenue last year maybe you did 1.6 billion dollars last year what do you do it's a lonely world sometimes right these twelve points are gonna give you a lot of clergy and by the way stick around because at the end I'm also gonna have a PDF for you to download and go through and see if selling your company makes sense to you number one look the first thing you got to ask yourself before even think about selling your company is why do you want to sell in the first place why are you tired or you burned out why are you tired why are you burned out are you not taking some time up with your wife or with your husband how's your personal life is it caused by that are you going through something you know how sometimes people sell a home because they're going through a divorce that they're trying to sell the business is that really the reason it can your marriage be saved is it a tax consequence is it bad financial decisions you made are you being forced about your partner's your vendors maybe one of your investors is buying you out and no one knows about it maybe one of your big customers are saying look you're too big we can't give you this much control we got to buy you out what is the reasoning are you simply just wanting to retire and go live by in a beach house and hang out and have the money and enjoy the restaurant what do you want to do see these are all questions you got to ask yourself um go through by the way some of these I'm giving you believe me a lot of people call me and they want to come and give me $100,000 say I want to sell my business can I sit with you for two hours because I need advice with you my partner's want to come to you this is something you got to do with five other people to sit with who have sold their businesses and afterwards they change their minds and they said I wish I wouldn't have sold it and some that did sell it and they made the right decision I do what you're gonna get a lot of counsel to know whether it's a good time for yourself right now or whether it's not number two so listen once you've addressed why you want to sell the company and you kind of clear about it the next thing you need to do is get educated and the way you do it is by meeting with an M and a broker or a banker this is a merger and acquisition banker this is what they do for a living these are guys who have contacts with lots of money some are billionaires some are worth a couple hundred million dollars and they are looking to buy businesses and this is how simple it is so let's just say I'm Johnny I'm the M&A broker I'm the merger and acquisition broker I know Bobby he's one of my clients is worth a billion dollars Bobby wants to buy businesses I introduced him to Cindy Cindy's business is worth a hundred million dollars Bobby by Cindy's business without me Bobby doesn't meet Cindy Cindy doesn't meet Bobby that a hundred million dollar transaction that takes place I get two to five percent on that deal which means two to five million dollars for making the contact that's what the MMA brokers do so now you realize when you meet with these guys you got to know what they do that's how they make their money so when you meet they're probably gonna ask you a lot of questions tell me about your business how long you've been doing this for what's your numbers look like what's your a bitter what's your profit how many employees do you have who else is on your team what's your executive team they can ask you a lot of different questions who would you compare your business to to other businesses what are they value that what's their numbers what do you think your company's worth what do you think the market things your company's worth you know what do you think sellers think your company's worth what seller would want your business what investor would want your business you go through this process and this entire sit down with three MMA K bankers it's gonna be as if you went to university for three years to learn how to sell your company number three so look once you figure out why you want to your business and you're comfortable with it then you meet with the M&A broker and you're getting educated about what the market looks like right then it's about setting timeline expectations of when you feel comfortable even having the conversation right you may say three years I'll have the conversation five years I'll have the conversation ten years I'm open to it right now I'm very happy I am burned out a little bit but all I needed get away maybe I'm gonna go on a vacation with some family because what I'm doing here with this I'm good though I'm good to go everything makes sense to me great even when you set time on expectations things could change the economy could turn our new president could be elected regulation could change you still have to be nimble enough to know what's going on with the marketplace and knowing that your own timeline could still change but you have to mentally get to a place to say I'm comfortable for this 2023 so now have to work backwards to ask myself where I need to be six months from now twelve months from now 24 months 136 months from now so I'm getting ready for the day that I may sell the company number four so once you've set your timeline you're saying I'm comfortable seven years from now having a conversation five years three years and you know how you need to work back the next thing you need to think about is the following your exit strategy meaning who is an ideal buyer for you is your ideal buyer anybody with a checkbook because you can go to New York and sit down with a PE firm who is willing to cut a hundred million dollar check to you based on the profits that you make they don't really look at your business they don't really look at the heartbeat they don't really look at that stuff they simply look at numbers and they say well you know there's 7 million dollars of profits the industry is typically 12 Exxon 7 million will give you 10 X 10 X on seven million seventy million dollars you want 70 million dollars and that's it or it's a strategic buyer one of the current people you work with you know they need your technology you know they need your shipping you know they need certain things that you have that without you they're gonna be in trouble so they may come in and pay twice as much as these guys are gonna pay because you have something they need but who is that person gonna be for you you need to identify that from now start thinking about that number five so now you have your numbers you know your exit strategy you know who you want to be your strategic partner to buy your business right you're comfortable with that great no problem you know your timeline what do you expect from these buyers what kind of buyers are there by the way there's four different kinds of I've met every single one of them and I've dealt with every single one of them into what this looks like first kind of bar it's a person who's very interested in your business would love to buy it but they can't afford it this is like a person who goes through Ferrari dealership and they want a Ferrari they love Ferraris but they can't even afford to buy it one focus that's the first one second one it's a buyer that can buy ten of you but has no interested in your business no problem third one ready this one's a little tricky this is the one that's disguised like a buyer he comes in so interested he has no interest in him buying your company he only has one thing in mind insider information because he wants to leak it to competitors so they know exactly what's going on they're trying to study or my it's like a realtor that acts like a client and a buyer and walks into the house and saying oh wow this is a nice home so show me so what's this and what do you are they going through a divorce what's going on with the husband wife can you tell me it's a realtor not a client that's what happens with some of these guys as well and last but not least it's the kind you want to sit what's a person who is interested has the money and would like to cut a deal with you that's what you want to meet with but you need to know the different kind of buyers they're gonna sit with you number six so now that you know your exit strategy now that you know what kind of buyers are gonna come knock on your door to want to buy your business what can you do in the interim to increase the value of your business right what could you do it's like I want to sell my house but maybe it doesn't look that good I've got to paint that house I got to clean the garden the backyards kind of messy maybe I got to spend an additional fifty hundred thousand dollars to increase divide the company by four hundred thousand dollars right so in the interim what could you do hire a new CFO that kind of knows what they're doing that's been through this process before and you kind of come in advance for three years so prepare for that opportunity that comes up could it be technology could it be increasing sales could it be extending your contracts with your customers or your vendors or suppliers what is it there are certain things you can do today to increase the value of business between now and the day you sell your business number seven so the next thing is a little dirty because you got to start dealing with attorneys and you know how I feel about attorneys by the way I'm not a fan of 80 percent of attorneys but when you find a good attorney you got to keep them you got to bring your attorney in spend a little bit more money and get the attorney to update every single contract and bring it all in one place because when somebody buys a business they're looking for all the contracts all the agreements this is the stuff they're really relying on sometimes the value of a company is based on the contracts and the agreements that they have with their vendors partners all those different kinds of people you were dealing with if you're wondering how you find a good attorney i sat down with robert shapiro a few months ago and he's one of the most celebrated attorneys in america ranked top 100 and some list top 10 on many other lists he explains three things every entrepreneur needs to know about before hiring an attorney more is gonna put a link below if we're to be able to watch at episode number eight so look now that you dealt with your attorney now we've got to talk to your CPAs and by the way there's a few things you got to be thinking about when it comes down to CPAs here's a couple things one what is the buyer expecting to see with your finances this is what a buyer likes I am NOT a fan of businesses once they cross $10,000,000 your business to still deal with a friendly local CPA I'm not a fan of that a friendly local CPA is good if it's a one office shop and you're doing a couple million you're fine they can handle that 10 million plus you want to get to the next level you need to go through an accounting firm now that's going to cost you five times more but it's gonna save you so much more because of a buy you're saying wow you got audited financials for how many years three years straight very impressive audited financials could cost twenty five two hundred thousand dollars depending on how the business is it could cost millions of dollars but I'm saying a business that that's 50 million your hundred million dollars a year could cost you between 25 to 40 thousand dollars 25 two hundred thousand dollars you're doing but it's audited financials and the more consecutive years you have audited financials the buyer is liking this the value goes higher let me explain it in a way that makes sense to you look if you want to buy a house you've got to get your credit score done earlier to know where you're at because you're gonna know why is my score 620 here why is it 6:30 I know I'm not gonna get the best interest rate and so you first fix you credit then you go see if you're gonna get a proof or million dollar home it's gonna be the difference between you paying you know forty-nine hundred dollars a month for mortgage payment versus $7,300 my for mortgage payment because your credit score right so this is the difference between a buyer wanting to buy your business for 180 million dollars versus buying it for ninety two million dollars that's a big difference I like baseball cards I don't buy baseball cards that are not greater by PSA I don't I don't buy them because that gives me credibility the same goes that a buyer buys a business that has audited financials from a very good size good name accounting firm number nine let's just say at this point you've done your attorney stuff you done your accountant stuff you're ready it's that time you already through the five years from now to go out there and start putting your business in a marketplace right are you ready to tell your story how are you gonna sell your story what is your story is your website aligned with the way you want to tell your story is it updated what does your home office look like is it an updated home office there's a look like the businesses within your industry where somebody comes in and say wow I like the way these guys dress up here what is it do you have proper marketing material you have a pitch deck what does your presentation look like when you go and say hey here you go mark you the material marketing material marketing material marketing material oh wow this is good stuff high-end stuff you may want to spend a little bit more money before you present your business to buyers that you are expecting to cut a big check for you so you got to spend some time getting your story together and your website marketing Home Office all of that stuff it's part of Story number ten so it's that time it's negotiation time this is like fourth quarter type of stuff someone's gonna cut a check what are you doing typically owners take two different routes one is the owner says I don't need anybody's help I don't want to pay nobody a 5% broker fee I know how to sell the business I don't need anybody so and they go by themselves it's one of the ways you could do it the other way is you go and hire somebody you hire a team you hired the M&A broker the banker and they come and help you sell now why is that a good thing well I typically believe in capitalism because a lot of people make money to unit if a lot of people make money together and you put the tiers of bonuses based on what amount they sell it for you're probably going to sell it for a higher number than you thought we're gonna sell it right so I lean more towards this side especially if you're dealing with a hundred million dollar plus check go get a pro some of you that are not good in sales and you're selling for 10 million you still go get a pro number 11 so you start a negotiate you got numbers they're making offers what kind of offers should you expect which one should you take what do you do well there's different kind of offers one of the offers the one that everybody wants cash 50 million but no commitment no non-compete you're good to go if you want to compete with us in the same space we're not worried all the best you that's one c'mon we'll give you 150 million dollars with a 10-year non-compete because you are never going to compete with us in real estate in IT in technology in insurance whatever maybe the next one is they buy and exchange for stock options they give you stock of the company sometimes they'll do 50 percent cash 50 percent stock it's completely up to you do you trust the stock you trust the company is the company trending is the company on a downfall what is it that's on you and last but not least they'll buy whether it's cash stock whatever way it is and they'll tie your salary to you with you sticking around for two years in a non-compete after that we want you to stick around we'll give you a hundred million upfront then we'll give you two years salary of a million dollars per year then we give you stocks at the end and the company performs the next two years we'll give you another 75 million dollars dot-dot-dot another five your non-compete after that that also happens as well so you need to know all your options on how you're selling what you're most comfortable with but those are generally some of the options you'll have when you sell your business number twelve so look everything could go right in the first eleven steps everything could go right and then all of a sudden 80% of the deals don't go through because a twelve step and here's what the twelve step is it's actually the closing part of the sale so as you go through the first eleven steps if you tell any numbers to the buyers that are slightly off the real numbers after they audits your numbers they're gonna say wait a minute these numbers don't match up work we're coming out of this deal right so three things you need to know about one it's called ioi this is indication of interest I am indicating to you that I the investor I'm interested in buying your business very cool open up the books a little bit for us to see something okay cool so next is the LOI LOI stands for a letter of intent you and I you're the buyer I'm the one that wants to invest into your business and buy you right we give you a letter of intent based on this term sheet we're gonna buy your business so for instance we want seven years non-compete you're out of your mind I won't give you no more than three years we can't do that but we want five years okay let's agree on five years we'll give you 75 million in cash in seventy-five million stock I'm not doing that I want one hundred million dollars cash and 75 million dollar stock we're not doing it we'll give you 50 stocks 100 million cash great we agree on all this stuff this is all good but it's still not done until everything proves here based on the audit do with you and in comes a purchase agreement when the purchase agreement comes and you get the call from your guy from your CPA from your accountant that says 125 million dollars is in a checking account your banker from the bank calls you and says you're 17 million is in the checking account here 228 million is in the checking account by the way your checking account has 1.7 billion dollars and you go to the ATM you keep John look at the statement baby we finally did it right or you're gonna wake up the next day and say oh my gosh I can't believe I saw this business this is my baby I just let her go what do I do now but regardless you can have all those emotions anyways these are the 12 steps that you go through and selling your business this alone by its up could be a six-hour course that we couldn't do purely on your selling your business because there are so many different questions you probably want to be asking me about the different dynamics right this is why we get the email saying I'll give you a hundred grand for two hours help us sell our business should we go through shall we not go through it anyways it is to give you an idea about these 12 steps on what you should be thinking about whether to sell or whether or not to sell by the way for some of you that I wanted to raise money you don't want to sell your business but you want to raise money I did a video called how to raise money as an entrepreneur you probably see the thumbnail right here Mario is gonna put a link below for you to go and watch this video I highly recommend you go watch that video right after watching this video and then if you want the PDF from today's video the 12 steps click on the link below as well there'll be somewhere for you to go to my website Patrick better be calm and download the PDF so if you have any questions thoughts comments you can comment below if you want to reach out to me directly on twitter my handle is at Patrick bid David and if you haven't yet subscribed or dis close to a million subs click us up and click on that alert button right next to it thanks for watching Flavio take care bye bye