- Are you thinking of selling your company someday?
Or maybe you're already in the process
of looking for buyers to exit, or you are a startup
and someday you have this dream, you have this goal
that you could sell your business, your company
for a massive windfall, right?
That's kind of what a lot of entrepreneurs dreamed about.
Now today, I'm gonna share five strategies with you
on how do you sell your company for massive money.
Now, I've had the privilege of learning from my mentor,
Dan Pena, the $50 billion man.
You might have seen some of his videos on YouTube,
on social media and he taught me a tremendous amount
when it comes to M&A, mergers and acquisitions
and acquiring companies and selling companies.
Now in my career, I have sold a handful,
a couple of companies for decent amount of money
making a decent amount of profit.
I've had some horrible, horrible exits
where I basically gave my companies away,
because I didn't wanna run them anymore.
And there were some deals that I sold
and I kind of broke even.
So I wanna share some kind of hard-learnt lessons with you,
the to do's and what not to do
and hopefully you won't make those mistakes.
So, strategy number one and that is EBITDA.
In case you don't know what EBITDA means,
it means earnings before interest, taxes, depreciation,
amortization.
So once you understand that, they look at your earnings,
meaning the more earnings that you have,
the more you can ask for the purchase price, right?
So it's very, very critical.
So if you are planning to sell your business,
if you want to get the maximum amount of money,
you want to have steady growth,.
So there're potential buyer
looking at your financial statements,
you're not at a decline.
Most business owners, most entrepreneurs,
they sell their businesses too late.
And I made a mistake,
they wait till the business plateau
or it's actually at a decline, they want to get out.
Not exit at the top
but they wanna kind of get out of the business,
then they try to sell, they are still struggling.
You don't wanna do that.
You want your business to kind of going up,
it's an uptick, uptrend.
And it's this year, this year and the last three years
and you see this kind of steady growth.
Then a potential buyer looks at that and say,
hey, this is pretty good, there's still potential.
This company is growing, the industry is growing.
You will be able to ask more money for them.
Strategy number two, risk.
Now, a potential buyer, business buyer
would also look at your business in terms of risk.
So let me give you some different forms of risk.
It could be concentration risk,
meaning maybe you are operating,
let's say you're selling retail business
and you have one location
and all your business comes from just one location.
Well, that's a concentration risk, right?
Because you're limited by that geographic area.
Or maybe it's there's some other developments
around the area
or you can't allow your business from schools hypothetically
and then the school is going somewhere else,
that's a concentration risk.
Or maybe you have 40, 30% of your business,
your revenue comes from one client or one business account.
Well, that's a concentration risk.
Because if that client leaves your business,
now you're in big trouble.
Let's say you're selling B2B
and your biggest customer is Walmart
and if Walmart stops buying from you, guess what?
You are in trouble, that's a concentration risk.
And there are many, many other forms of risk.
Maybe in terms of your technology, you don't have a patent.
Maybe a lot of technology that you have,
that you are using right now, you don't have any protection.
Anybody can come and kind of knock off your idea.
Well, that's also a problem, right?
That's another form of risk.
So a potential buyer will look at,
hey, how much risk am I gonna have when I buy this business?
What's the downside?
They will look at that not just the upside
but what's the downside.
Strategy number three and that is types of revenue.
Now, not all revenue is created equal.
Now, I've looked at business before
where this business is doing very, very well.
But there's one problem, there's one thing
that I really didn't like about the business.
The business will make a lot of money in certain months
and then a big chunk of year, they're like dead.
They're like this, like it's almost dead.
So they make all the money for the year in a couple months.
Now, that to me is a problem.
Because it means if there's anything that happens
within a couple months, maybe you miss something,
maybe If you are in farming hypothetically,
something happens where the weather or whatever it is,
like a lot outside factors affects your revenue.
Now that's a big risk, right?
On the other hand,
if your company has a lot of what I call, recurring revenue,
that to an investor, to a buyer, that's very attractive
because they know,
hey, every single month, you're gonna have recurring income,
recurring revenue coming in,
that tells me how stable the company is.
So if your company has certain windfall revenue
but you have a lot of recurring revenue,
suddenly you can ask for a lot more money.
I mean, a lot more money for your business.
So think about what you could do
to create more recurring revenue
if you're thinking about selling your business
or other types of contracts
that you have coming down the pipeline like
hey, I've got two, three, five, six big deals
coming down the pipeline that hey,
if we close those, that could be a worth a lot of money.
Now a good investor, a good buyer is like a candle there.
But it's like icing on the cake.
Hey you know, maybe in three, four months
there's some windfall that's coming in.
Strategy number four, your management team.
You could ask for more money
if you have a strong team in place.
So then a potential buyer,
they're not just buying your product
and not by just buying a business,
they're not buying your revenue,
but they also buying, acquiring your team.
So you put a great team together
so the buyer could just take over
without hiring a lot of new people,
without changing the entire management team.
What does makes it a lot more attractive?
However if your business depends 100% on you,
that you are the main driver, hypothetically,
you have a small business,
where you have a new consulting business and it's just you.
First of all, that's not sellable business,
no one wants to buy it because it's all you.
You are the one that has all the relationships
with all the clients and customers and accounts.
You're the one that's talking to them,
you're the one that's doing fulfillment.
Well, that's not a scalable business.
But if you take you out of the equation,
everything else, the team, the product,
everything that you have, that part of it,
if you take you out equation,
it is producing a lot of revenue or even more revenue,
you've got a very, very attractive business
that can ask for a lot of money.
Strategy number five and that is don't get greedy.
Leave some money on the table.
One of the mistakes I see business owners make,
entrepreneurs especially, they get too greedy.
So let's say this is your business
you get a debt at this point,
everybody wants to sell at the peak, right?
You wanna get the most, most amount of money,
maximum money for the purchase price for your business.
Don't do that, right?
Don't do that.
Just like, you know you could ask for this much,
it's just need some money on the table,
Leave some money on the table.
So then the buyer could see hey,
if I buy this, there's still a lot of upside,
that if I can improve certain things,
may improve customer service, bring on better people
or improve your marketing, I could take this,
maybe I could increase the revenue by 10, 15%
in the next 12 months.
That's a lot of upside for a potential buyer
versus you try to squeeze every dollar out of them.
Leave some chips on the table let them hey,
you know, I think we've got a great thing going on,
I think we've got a great business, got a great team
and I think there are still so many things so much potential
that we could squeeze out the business
and here's the plan.
There are 20 things you could do the next 12 months
that would actually really move the needle.
The potential buyer looks at this like this is great.
Not only am buying a proven business, great product,
a great brand, a great team,
also you've given me a great plan.
Now they calculate the number and say,
hey well, I could potentially recoup most of my capital
in certain period of time.
Maybe it's three years, is a four year deal.
We keep all my investment.
Now they say hey, this a great deal, it is a win win.
That's what you wanna do.
So don't get greedy, leave some money on the table
at the end of day cause you want to sell the business.
You spent a lot of time nurturing your baby,
your business is your baby.
So you wanna kind of give the baby to someone
who you know would take this baby
and grow it into a teenager, grow to an adult and nurture
and take it to a whole new level.
You don't want someone to buy the baby
and just kill the baby, that's not nice, that's not pleasant
unless whoever's buying it, that's the strategy
which sometimes happens by the way.
There are companies out there, they buy you out
just to take you out of the game
because they want to eliminate competitions.
That is a viable strategy
but for most, I'm talking for most,
we want someone to hey, this is my sweat.
For most this is my sweat, blood and tears
for the last five years, 10 years, 15 years,
I want someone to take care of this.
I want my people to be taken care of,
I don't want someone to come into company
and fire everybody else, right?
By all the people have been with me for 15 years,
I want someone hey, you're gonna take care of my people,
they're gonna take care of my team,
will still have a great job, a great place to to work in,
hopefully to take it to a whole new level.
So those are the five strategies
that I wanna share with you.
If you're thinking of selling your company
for maximum money or on the other hand,
you're thinking of buying a business, acquiring a business,
those are the same five factors that you should look for.
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