Episode 88: Exiting Your Business With Joe Valley of Quiet Light BrokerageSeptember in Ecom-Crew-Podcast
On today’s episode, Dave and I speak with Joe Valley. Joe works for Quiet Light Brokerage and is the Director of Business Services for the company. He joined their ranks back in 2012 after being one of their customers. Since joining Quiet Light he has closed 35 million dollars in transactions.
One of the key things to keep in mind in business is nothing lasts forever. Eventually, you will have to sell your business. Joe is here today to tell us how to make a business valuable to a future buyer. Both Dave and I have been through the selling process, so we have some insight on this subject. Dave has worked with Joe before when he sold a past business. We sort of use that as a reference point in our conversation. If you are considering or planning to sell your business, today’s episode is a must listen!
Here are today’s conversation points:
- Introducing Joe Valley.
- What gives your business value?
- Why you should give yourself at least 12 months to prepare to sell.
- What is an “add-back?”
- How to wisely cut expenses to increase value.
- What is a “multiple?”
- Why you need to hire a bookkeeper.
- There is a buyer for every business.
Resources Mentioned Today:
If you have any questions or anything you’d like us to discuss on the podcast you can now email us directly at ecomcrew.com! Just send those emails to [email protected]. Also, we would really appreciate if you would leave us a review on iTunes. Thanks for listening!
Full Audio Transcript
Mike: This is Mike Dave.
Dave: This is Dave.
Mike: And welcome to this edition of the EcomCrew Podcast. We’re not quite sure what episode number this is going to be; this is one of our pre-recorded episodes. Dave and I have a bunch of traveling going on, so we put this episode out when we’re somewhere over the air going to China or something like that. But yeah, we got a really cool episode this week.
We have an interview, which we love doing interviews, and I love having Dave on the show, and in particular this week because the interview that we’re doing is with Joe from Quiet Light Brokerage. Tell us Dave why it’s good to have Joe and you on the same podcast together.
Dave: Mr Joe Valley helped me sell my company last October. And so for about eight months, me and him were buddy buddies going back and forth through telephone calls, it seemed like probably every day, yeah for eight months kind of working out a little bit harder deal than normal. We finally ploughed away through, and actually sealed the deal.
Mike: Cool. And I think this is going to be a great episode because one of the things that people don’t really think about when they’re in their day-to-day business is, the exit strategy, right? You’re eventually going to sell those and everything. And I do think that it’s really important as I’ve been kind of pondering what we want to do with our business, I do think it’s important to be looking at ways to sell your business at some point. I think that some businesses are good to have for long periods of time, and don’t necessarily have a direct reason for an exit. But an inventory based business I think is very different.
And when you are accumulating assets in the form of inventory that are kind of locked away that you can’t ever touch as you continue to run this inventory based business, the only way to really unlock that earnings potential, and get your assets out of the company is to sell it and get paid for the inventory that’s also on the shelves. So I think this will be a great episode. It’ll get people thinking longer term what they need to be doing now, even though they might not be selling their business for a while to put themselves in that position. Do you think that’s pretty fair Dave?
Dave: Yeah, I mean that was definitely one of my big motivators was like you mentioned. When you have inventory tied up in your company, that’s money that you can’t take out. It’s basically your retirement savings just sitting there, in my case in a bunch of boating products. And so no matter what your inventory is, that’s basically your retirement right there. So the only way you’re really ever going to get it back is to either sell through that inventory, wrap up your company, or ideally sell it.
Mike: Yeah, and the great thing about when you do exit, the inventory component when you sell is already — you’ve already paid the taxes on that, right? I mean, at least in our case as our inventory, and whenever you purchase inventory, it’s not a write off until you’ve actually sold it. So anything that’s sitting there, we’ve already had to pay the taxes basically on that money. So the time when we do have an exit, that’ll be a nice little windfall for us.
So with all that said, let me do a quick bio on Joe here. Joe Valley is an equity partner in Quiet Light Brokerage. And again that’s the firm that Dave used to sell his anchor business, the boating business. Joe has been with the firm since 2012. He joined after selling his own e-commerce business through Quiet Light Brokerage. And since then Joe has personally closed over 35 million dollars in total transactions, and is now officially the director of business services at Quiet Light Brokerage. And with that, welcome to the podcast Joe.
Joe: Thanks guys, good to be here.
Mike: Definitely great to have you. And you were kind of listening to that introduction, do you think that all I said there was fair as far as thinking about positioning yourself for a sale even though you might not be thinking about it today?
Joe: Oh absolutely. Look, when I sold my business in 2010, I was emotionally tired and worn out. I took it through the best of and the worst of the economy. I came out the other side going, “What the hell am I doing? I’m tired, how do I get rid of this?” And that’s the absolute wrong time to sell the business. Not only that, I didn’t know how to calculate seller’s discretionary earnings, and what the multiples were.
But I learned quickly, I spoke to every possible person in the industry that I could. And the one call that I had with Mark Daoust kind of sold me. Mark is the original founder of Quiet Light, now my business partner. He gave me some advice which basically was go away. He said, “Joe your business is coming back from the economy, it’s climbing, your month over month revenues are growing. And with each month that grows, the value is getting higher, and those weaker months during the recession are dropping off.” Basically he said, “Come back in about six months or so, and you’ll make another 100,000.” And that’s what I did, it worked out very well.
Mike: Cool, so let’s kick the thing off here and kind of go down a timeline. If you’re let’s say two to three years away from wanting to have an exit, this is when you’re still excited about your business, and you aren’t really at that burn out stage, but you know at some point it’s coming. Let’s talk about that time frames particularly, what’s a good thing to be thinking about when you’re a little bit further out on that selling journey?
Joe: Well, there are some basics that you have to understand first. I know that both of you guys understand it at this point because you’ve sold. But so many people don’t including myself. I had a very successful business, but I didn’t understand the basics. And I talk to people that are doing 10, 20 million dollars in annual revenue, and still don’t know how to calculate some of the basic things. They’re great at what they do, they’re experts at what they do, but it’s not what I do.
So it’s not a fault of theirs, it’s just it’s not their expertise. So the first thing they need to understand is what is creating the value of the business. And it is seller’s discretionary earnings, which is when you run a profit loss in Quick Books, you get net income or zero, you get that net income line. You got to create an add back schedule to add back those personal benefits, like your salary, the meals and entertainment, your mobile phone, the travel, things like that that most entrepreneurs run through the business.
It’s a combination of that net income plus the seller’s discretionary earnings that equals — plus the add backs — that equals the seller’s discretionary earnings. That’s the basic thing that people need to start understanding when they think, you know what, I want to exit down the road.
Mike: Yeah, and just [overlapping 00:06:25] disrupt and cut you off there, because I hear this a lot. People are like even if you explain it that way, they still don’t quite understand it, just to throw like one more wrench in there. You know basically, it’s what you can convince the buyer that the business is really worth, I mean in the conversation as well, you know my salary should not be a part of that, the meals and vacations I might take and our car lease, or interest on money that I borrow should not be factored into the calculation.
So your net profit, what you’re paying taxes on might be one number, but then you get to add these numbers back, and that’s why it’s called the add back. And then it creates that seller’s discretionary number that you’re hearing a lot. And I think that that’s important just to kind of throw those extra things out there, because I do hear a lot in different conferences, and when I talk to people they don’t quite get that. So I just want to throw that one in there.
Joe: That’s great, it’s complicated, right? It’s simple for me, it’s simple for you, we’ve been through it, but to get the concept is a little difficult. But it’s critical when people are thinking two or three years down the road, five years down the road, six months down the road. You’ve got to know what that number is because you may have an idea in your head what you what you want to exit with, what you want to walk away with. And if that number is not right, times the multiple which gets you to the list price, then you’re going to have to wait, or you’re going to have to make some adjustments and make some shifts along the way. And that’s why I prefer always talking to people well in advance of selling their business.
Mike: Yeah, and so Dave and I have talked a couple times about this in this podcast. When you’re preparing to sell, we’ve always kind of taken this 12 months in advance approach. Or the last 12 months before you sell, you really want to kind of tidy the ship up and really get your net profit numbers up as high as possible by cutting frivolous expenses and all that, and get rid of maybe some side projects that you had that aren’t really adding a lot to the bottom line. Do you think that’s a fair strategy, or is there other things you should be thinking about as you kind of lead into that time when you actually put the business up for sale?
Joe: Well, I think it’s fair in the words that you used, which were frivolous expenses and side projects. But, realistically even if they were frivolous expenses like your car, or a side project that is the next business that you’re launching that is not competing in any way, shape, or form, we can add those back. But I think it’s important, the cleaner financials that you can present, the more confidence you’re going to instill in the buyer. And the more confidence you instill in the buyer, the more money they’re going to want to pay you.
Mike: Yeah, it makes a lot of sense.
Dave: And I think from my experience too where people do overspend in that 12 months is definitely advertising. And that’s where I really trimmed it down in our company is just getting rid of a lot of the advertising. I think a lot of times as business owners we think, jeez, if I just spent a bunch of money on advertising and I overpay for customers, eventually my lifetime value is going to be so great that these customers are going to pay themselves back a million times over.
It seems though that when you do that you never do actually get that whole value out of those customers. We just convince ourselves that lifetime value is higher than it really is. And that’s one thing you can’t add back is advertising into your seller’s discretionary income. So it is my experience, that’s one area where I think people can trim down a lot.
Mike: I think another is shipping, you can probably go through and negotiate the contracts and stuff like that, get a quick win, things you might not have the time to spend as you’re going through your day-to-day business. But if you’re going to position yourself to sell, it might be a good time to be thinking about.
Joe: Yeah, I would much rather see someone negotiate their cost of goods sold down by 5%, or the shipping down, because that’s an immediate bump in the value of your business. If you’re doing it a year in advance, imagine if you can save $100,000 on cost of goods sold, and now your business is three or four times. That’s $300,000 or $400,000 added to the value of your business, and you made another $100,000 along the way.
The advertising is tricky. Dave and I went through this, because if you trim it down too much, your revenue is going to dip, your profit is going to dip, it gets a little tricky. What you want to avoid if you can imagine a graph on this podcast that your revenue is climbing down, and your discretionary earnings are climbing up. They are converging graph lines, and that’s what you kind of want to avoid. And that’s what will happen if you cut that advertising too much. So it’s very, very delicate.
Dave did it very well and his graph lines were not converging. But I think you’re right, shipping, cost of goods sold. If you’ve got that employee that’s just not really doing the job, and too many of us do, we made that first hire, we get too loyal to that individual. If that individual is costing you an extra $20,000 a year, and they’re not really producing, then you either cut their time, cut their salary, or let them go, because they’re not just costing you 20,000, they’re costing you 60, 70, 80, when it comes time to sell your business.
Mike: I’m moving to wherever Joe is so I can get $20,000/year employees.
Joe: Maybe 20,000 extra on top.
Joe: I know they like Southern California.
Dave: But I think that is all the fun part when do kind of have that little bit of runway to start thinking about exiting your company, every dollar figure that you think about like Joe has mentioned is times again by three. So saving $100 a month on a merchant provider, times that by 12 for your yearly fees or 1,200 bucks, then times again by three. That $100 you can save in a month actually really adds to how much you’re actually going to get for your business. So having that little bit of runway, 12 months, that kind of get rid of some of those costs, and like Joe mentioned renegotiating really pays dividends at the end.
Mike: Yeah, and we keep on talking about this like three times thing and the word multiple. Let’s kind of dig in for people that aren’t familiar with that terminology, Joe you’re probably the best one to explain it exactly. What is the multiple on a business, how does that work?
Joe: Okay, so we’ve defined what seller’s discretionary earning is. The multiple is a number that’s applied to the discretionary earnings, and it becomes the list price of the business, and it’s usually a range. When I have a conference call with somebody and we just do a brief valuational review, I can give a ballpark range of the value of the business. And it’s a multiple of a certain number. Everyone wants to know what are they selling for? Every business is different, so they vary greatly.
But in general, these physical product businesses, let’s say that if it’s a 100% Amazon business which many, many are, the average multiple of the trailing 12 months seller’s discretionary earnings on closed transactions, for me personally and for Quiet Light in general, have been in that 2.5 to 3.1, 3.2 range, if it’s 100% Amazon business. But you get to that higher level there, and you’ve got to have some serious runway behind you in terms of age, three plus years; you know businesses that’s 24 months old, you’re probably not going to get that three time multiple. Maybe can list there if there’s a lot of growth opportunities, but you’re probably not going to get there.
And the key thing is this; we talked about so many things. I don’t want to overwhelm people, but let’s just say that we’re going to do simple numbers. If someone has $100,000 in trailing 12 months seller’s discretionary earnings, and we put a three time multiple on it, the list price of the business would be $300,000, and you can change those numbers any way you want. But it’s $300,000, plus the cost of good sellable inventory on hand at the time of closing.
So as you said earlier Mike, if you’ve got 50,000, 100,000, or half a million tied up in inventory, it’s the purchase price plus that inventory. And that inventory level has to be in balance of course with the value of the business. But can we touch on inventory for just a minute?
Joe: Too many, too many entrepreneurs, myself included don’t love accounting, but accounting will make you more money.
Joe: It’s incredible what it does. I had a listing come to me 18 months ago at this point, and they had shopped around at different brokerage firms, and came to me with a value in mind for their business. And I don’t like that personally, because I like to determine the value of the business. I don’t want you to tell me what you think the value is, because ultimately the buyer is going to ask, and I want to say I don’t know. But they came to me with this value, and I ran through their profit loss statement, and I looked at their cost of goods sold and the way that they were using it, putting it in Quick Books in accounting. It was cash based.
99% of the people I talk to are cash based accounting. What that means is that when you wire those funds to China, or write that check to your vendor, you enter it in Quick Books the day that you do that, and then it spit out that way in a profit and loss. So it’s up and down from month to month. As a percentage it might be 20% one month, 60% the next, in a third quarter it’s really high because you’re building up for the Christmas season. That’s cash based accounting.
When you have a company that is growing like crazy, you’re just taking so much of your working capital from the company and putting it right back in the inventory. That will depress your net income with cash based accounting. So that particular company I said, look, this is wrong. We need to flip it to accrual. And we figured out how to get the accrual number and replace the cash with accrual in their profit and loss statement. And it made a difference of about $250,000 in the list price of their business.
Mike: Yeah, that makes perfect sense.
Joe: So a lot of the folks that are listening are probably cash based accounting, and they want to try to figure that out. I’d be happy to walk you through the formula, but it’s probably too much for something like this. But hire a good group of people that can help with it, it makes a huge difference.
Mike: Yeah, I’m actually surprised to hear that so many people are on cash based accounting, because we’ve been doing accrual since day one. But I’ve also run other businesses. I knew that that’s the way we really need to be doing it for an inventory based business, because you’re not allowed to write off the purchase of the inventory as an expense like that. So if the IRS ever came knocking, I don’t think that they would be in compliance anyway.
Joe: Well, the CPA does an adjustment generally at the end of the year.
Joe: Mine was cash based, and then they wanted — it’s basically beginning inventory, minus ending inventory, plus purchases, that’s the accrual number. And the CPA generally does it at the end of the year; so that we should do cash based accounting.
Mike: I see.
Joe: We need to get that number and put it in the PNL, and I can do it. I just need to get to the bottom line numbers with the clients.
Dave: Yeah, I think that’s one of the things that I learned to do too on my business is I have this idea that I can always sell the business at year end. So I never realized that you can kind of sell a business even if my year end is December 31st, I can sell it in June, and make my trailing 12 months June, say 2016 till June 2017. So it doesn’t have to be based on your yearend, it can be based on whatever, like you mentioned Joe, the trailing 12 months are. And that’s probably something that I shot myself in the foot a little bit with, because I was trying to get my business all ready to be ready to sell on December 31st thinking that I had to have it only as the year end to impact the sale price.
Joe: Yeah, I remember very specifically for those listening, Dave and I, what we did was we pushed the price up, as you recall Dave on your listing so that it wouldn’t sell quickly, so that you could get through some of that spring and summer season and capture some of that earnings while still getting the listing closed. And you know what, we worked together and it was magic, it worked. We didn’t close until October, so it worked out very well. You got through the full summer season.
It took you know, he talked about eight months. Normally, it’s 90 days before something is under contract, or 30 to 45, and then can close within 90 days. We intentionally pushed the value of Dave’s business higher Mike, so it would take longer, so he could capture that summer revenue.
Mike: Yeah that makes a lot of sense, it’s pretty cool. So one of the things I want to talk about just real quick, let’s just talk about multiple when selling your business here. You were mentioning that an Amazon exclusive business sells in like the 2.5 to 3.2X multiple. One of the things that we’ve been working really hard on here is developing things that can get us closer to that four or maybe even Nirvana 5X which I think is tough.
But I think that would be really helpful for our audience. I mean as you’re kind of planning your business and again you might be depending on where you are at in your timeline, you may be far away from an exit. What are things that people can be doing to get closer to that four or even five X number?
Joe: Well, let me touch on that in two different ways. First, thank you for bringing me back around, because I wanted to say, if you’ve got that same business but you’re 50% on Amazon, 25% Shopify, 25% email marketing, you are immediately going to get a 15 to 20% bump in value in your business when it comes to list price, because you’re not 100% dependent on one stream of revenue. You’ve got three or four or five, which means that it’s more balanced and less risky for a buyer. Again the less risk, the more value, the more they’re willing to pay.
You got to always think about the buyers because they’re putting their life savings on the line and doing the right thing for them, and that brings more value. So how do we get to four or five times? It’s a great question, and the answer is you need to get bigger. I just did a survey Mike, and I pulled every listing that was online, 100% online businesses for sale for discretionary earnings that were north of a million dollars in the trailing 12 months. And the average multiple was just over four times, it was 4.4 times.
So when you get bigger, the multiples jump. If you’re in that hundred to three, four, five hundred thousand dollar range, you’re going to be in that two and a half to three and a half time range if you’ve got a true multi-pronged e-commerce site with different streams of revenue. But when you jump closer to that million dollars in discretionary earnings and you creep it down a little bit, you’re immediately going to get a bump in that four to five time range because you’re simply bigger, more established, and in many ways less risky for the buyer.
Dave: So what is the sweet spot as a price point to kind of be thinking about selling your business at? Now I think like you mentioned a million dollars plus in profits per year, would I be right to assume that you’re kind of attracting an institutional investor at that point, somebody that maybe a small equity fund?
Joe: Yeah, it could be a small equity fund; it could be a group of folks that have pooled their money together that are Internet business buyers. The last one I had listed in that range, I had two offers from publicly traded companies. You don’t know who your buyer is going to be, you just want to be able to cast the broadest net. As far as the sweet spot Dave, really it’s different for everyone. Everyone has their own personal goals, and their own objectives. And in order to reach those goals, you need to know where you are, right?
We all write down our goals, a successful entrepreneur will write down the goals, and look at them every now and then, and someday they go, oh my God, I surpassed them all, that’s incredible. You don’t know if you can get to those goals unless you figure out where you are right now. So once you figure out the value of your business today, and you can set that financial goal to reach it, the sweet spot is when you reach that. It’s not a million dollars or two million dollars or four million dollars, because everybody’s goals are personally different.
Dave: Where does Quiet Light see most of their business sale price points kind of falling in? Is it kind of in the half a million dollar range, or is it up, a million dollars and above, where are most of the sales kind of falling in for Quiet Light?
Joe: Year to date our transaction, our average close transactions have been $850,000.
Dave: So roughly about a quarter million dollars a year in profit, a little bit higher maybe?
Joe: Maybe a little bit higher, it depends. But I’ll tell you right now that changes from year to year. Last year was actually bigger, but we brought on three new advisors, all who had sold their businesses recently, they’re all entrepreneurs, lifetime of experience. And when you bring on new advisors, they get scrappy, they take on smuggled listings. So it brings that $850,000 number down. The year before, it was higher. My average transaction last year was about 1.1 million, this year it’s tracking a little bit more.
Dave: Is there a market or a smaller company maybe doing, 50, $60,000 in revenue, no employees, basically a solopreneur? Is there a market for that? Is Quite Light the best company to list their company through?
Joe: There’s a buyer out there for every business that exists, right? Every single one there’s a buyer out there for it; you just got to price it right for you to find them. For Quiet Light, our average listing size- on the small size we try to keep it north of $150,000 on a listing size. But if we’ve got newer brokers, and again I say new, but they’ve got 20 years of entrepreneurial experience. They’re guys just like you that could do what I do with great deal of confidence because you’ve been through it. They may take on the smaller listings early on.
I’ve taken them on, I love them. It all depends upon who the client is. My largest listing size right now is five million dollars. My smallest I think is $239,000, and it’s quite a range.
Dave: Is the commission that you’re taking the same no matter the size and also on that point, what is kind of the average commission that a broker is going to take?
Joe: It’s a great question. I’m answering that with a smile on my face because we just had this conversation last week. It seems as though everyone charges more than Quiet Light Brokerage does. Silence, pin drop, yes I know. We will be reassessing and readjusting, but currently our broker fee is 10% of the total asset value of the sale at closing on the first million. After a million it drops to 8.5%. The smaller transactions, there’s a minimum fee, and depending upon how small the transaction is, that 10% may rise depending upon what the close transaction value is.
Dave: Got you and that 10% is strictly on the sale of the business, not the inventory included?
Joe: Right. I think I charged you 14% though, didn’t I?
Dave: I think you did, and you promised me a dinner, and it never quite happened, so you owe me two dinners the next time we meet.
Joe: All right, you got it.
Mike: If you use the referral code EcomCrew, then when you go to Quiet Light, it’s only 5% commission. So definitely make sure you got the referral code.
Joe: Yeah, you’ll be editing that out.
Dave: Totally against — I did pay, I paid 10% with Joe, and I hated every second actually paying 10%. But at the end of the day it actually was the best 10% I could have spent. When I listed my company for sale, I actually envisioned giving about 5 or 10% percent discount ultimately to the buyer. That’s just kind of my mindset, I always negotiate. Joe managed to actually get me three grand above my asking price. So technically he got me above my asking price, but overall I mean he basically, the 10% that I paid, I could not have saved that if I tried to list it myself.
Joe: Well, and it goes back to the exit planning too, and looking two or three years in advance. We do our job very well, we earn it every penny of it, there’s no question about it, and I’ll fight that tooth and nail, especially when I work with a client six, 12, 18, 24 months in advance. And we look at the PNL, and we help point out those things where they can improve their discretionary earnings, like renegotiate shipping, renegotiate your cost of goods sold. Tell me about your staff, do you have five people that are driving you crazy every day? Can you get rid of them and ship them off to the Philippines — the work — off to the Philippines and save a whole bunch of money and be happier?
All of those things are critical when it comes to building that seller’s discretionary earnings. And it’s part of what we do all along the way for that eventual sale and close transaction.
Dave: So, me, and Mike just had a podcast on the topic of offices and warehousing. Now, I’m kind of a guy who has micro businesses. We had an office, moved out of the office, just work remotely. Now, my new business working from my bedroom. Mike has the office, the big warehouse space. Is it a turn off or turn on to have warehousing and office space, are people looking for kind of location independence, are they open to the idea of offices and warehouses? Basically, is an office and a warehouse that attractive to a buyer, or does it have no impact at all?
Joe: Well, the first thing we talked about clean financials, and that the second thing that makes a business valuable is the transferability of the business. There’s again a buyer out there for every business, and when you get to a certain size, that million dollars in discretionary earnings, you’re really getting to a different caliber of buyer. They are serious business owner, and they’re willing to warehouse product and have staff. They are not a solopreneur like yourself that’s willing to work from home from a spare bedroom.
Eventually you’ll grow and you’ll have to — you’ll get kicked out of the house, because your wife will tell you to go away. But for serious businesses, it’s okay to have the warehouse, it’s okay to have the staff. The goal is can it be transferred? How do you — if you’ve got a business in Boise, Idaho with a warehouse and staff, how do you transfer that to Charlotte, North Carolina? Will those staff members work remotely, or are we going to go through a 90 day transition period while they’ll still work for the new business owner while the new business owner finds new folks in Charlotte?
We got to entice those people with a bonus so they stay the 90 days. But there is a buyer out there for every business, and you’ve got to run it the way that you’re successful at running it. You can’t start chopping off warehouses and getting rid of inventory and shipping it to FBA just to sell it. You may cast a broader net if it’s 100% FBA, or 100% 3PL, because some people don’t want to ever see or touch the inventory. But others only want to see and touch the inventory; they want to control all of it.
So you can’t choose who your buyer is going to be, so you’ve got to run your business the way you are able to run it most successfully. Work on those expenses that are truly discretionary that you can get rid of to build value in your business, and you do it two or three years in advance, and it’s incredible what it does for you.
Dave: Yeah that makes complete sense. Mike, anything, any thoughts?
Mike: Yeah, I mean I just – I was enjoying listening to the conversation. Unfortunately we’re like almost our time array. So, maybe kick it back to Joe and just ask a couple of closing thoughts, things you think that if we just extend this episode by a few extra minutes, what are some like really good tidbits, some things to be thinking about when people are looking to sell their business?
Joe: We’ve got to always think of it from a buyer’s point of view. Is your business one that you would invest in yourself? Would you put your life savings in this business? I know you have already, but from an outside view, would you do that? Are you doing the right thing, is this business going to succeed with the next person? If the answers to all those questions are yes, then the value of your business will be higher. Buyers are smart. If somebody has worked hard all their life and they could strike a million dollar check for your business, they’re not idiots. They’re going to figure out if somebody cheats along the way; they’ll figure that due diligence and the deal will fall apart.
So always run your business professionally, run it right, full disclosure. Do the right thing and the value of your business will be there if you decide to sell. You may reach your financial goal and say, you know what, I wanted to be able to sell it for two million dollars, I’m there now. I know the value of my business is two million dollars, but I’m happy and I’m not ready to sell. I’m going to push that number higher, and we’ll revisit another in eighteen months.
Without knowing the bottom line’s starting points, you can’t get to that two million dollar mark, that’s the key. Two other tidbits real quick, seriously think about collecting sales taxes because everybody is asking about it now. And then the fun one, don’t ever hire somebody you can’t fire, that means your mother, your father, your sister, your brother, your cousin, your uncle and so on and so forth.
Mike: And Dave had an aunt?
Dave: She is highly transferrable, you cut it on my paycheck though, she is very keen to work with the new owners.
Mike: My favorite thing that you mentioned there, this was don’t try to pull one over on somebody. As someone who’s bought a lot of businesses and looked through a lot of listings out there on the marketplace, there are just so many, like scammy, scummy people out there that are just trying to pull one over on people and get away with stuff.
I mean when we sold treadmill.com, I was just incredibly forthright with like why we were selling the business. It’s like I hate running this business, it’s a drop ship business, like people are always angry with us and you know I’m a customer service pleasing kind of person, and I no longer want to be in this business. That’s like exactly why I want to sell it. And I actually made sure that I had a conversation, put it in writing with the person I was selling it to. So there was no — you know so they basically didn’t go through what I went through, the school of hard knocks of like learning what was kind of wrong with the business.
I think that type of stuff in life is just so important. I mean you can easily hide things or throw under rug and try to get away with it and feel like once you’ve collected that check from someone that that’s gone over with. But I don’t know, karma kind of has a way to catch back up with you.
Joe: Absolutely, I think the only answer to the questions like why are you selling, what’s the problem here, what’s problem there, are honest answers, because the truth will come up.
Mike: Yeah, I agree. Cool, all right man. It’s been awesome having you on. Before we run, what’s the best way for people to get ahold if they’re looking to sell their business now or in the future?
Joe: Well, they can just go to the website. It’s quietlightbrokerage.com. They can find us there, they can find me there, and get bios on all of us. You can learn all about us. And you can just quickly fill out the valuation form, or just shoot me a note at [email protected].
Mike: Excellent, and it’s L-I-G-H-T not the L-I-T-E version.
Mike: So Quiet Light Brokerage. And man it’s been a pleasure having you on the show, and I hope to catch up with you again at some future conference somewhere out there.
Joe: Me too, I hope to see you both soon.
Mike: Cool, thanks so much man.
Dave: Thanks so much Joe.
Outro: Thanks for listening to the EcomCrew Podcast. Follow us on Facebook at facebook.com/ecomcrew for weekly live recordings of the EcomCrew Podcast every Monday. And please, do us a favor, leave an honest review on iTunes, it would really help us out. Again, thanks for listening, and until next week, happy selling!