Exit Ready vs Exit Trapped: Why Most Founders Get This Wrong

Selling your business isn't just about the number on a check. It's about years of groundwork that makes that number even possible. Because if you wait until buyers are knocking, you lost leverage and very likely have left money on the table. So the argument is the smartest founders don't wait until they are ready to sell. They build exit readiness into their business years in advance, making it independent, systemized, and attractive to potential buyers from day one. Here's a couple of things you can expect from today's discussion: why exit readiness is a long-term play and not a last-minute sprint, how to make your business independent so buyers see opportunity, and not risk, systems, talents, and cultural rituals that lift your valuation now and at exit. Hey, what's going on everyone? I'm Mike Sirius and this is Mastering Tech Growth. Every week we chat with industry leaders to bring you no-fluff tips on how to grow. If you enjoyed the show, please do me a favor, leave us a review and drop us your biggest growth questions in the comments or visit us at masteringtechgrowth.com. Today I'm joined by Jordan Calderón, a two-time exited founder, current president of StratDev, one of the top 100 marketing firms in United States. Jordan built multiple companies from ground up, scaling all of that without any VC funding. Great to have you, Jordan.

Thank you so much. Super happy to have you here, Mike.

So we'd love to kick with this one. When I say mastering tech growth, what comes to mind?

Being profitable. You know, a lot of businesses have this idea of growth, growth, growth, growth, growth. We work a lot of, you know, VC-backed tech companies in my company StratDev, and we see this big mindset of let's grow as quickly as possible, but usually with no concern for what the bottom line looks like, just what that top line looks like or user growth or whatever that might look, you know, that main KPI is. You know, for me, I have always built my businesses with the cognizance in mind of building profitable businesses, right? That is how I sustain lifestyles. I'm a bootstrap founder as well. I don't exactly have VC money to rely on for a salary or a paycheck coming in. I have to earn the first dollar and then also earn the first profitable dollar as well. And so, you know, with that, having an idea of what my numbers look like at all times, how we grow and how we continue to keep that profit in an up and right direction as we do our top line as well.

Could it be an outcome of the fact that you are bootstrapped? And because I heard that from other founders who bootstrapping their ventures as well, because they bootstrapping, they don't really have that excess of cash to just, you know, spend, right? They're very cautious about making money and being profitable. Where if you talk with the VC-funded founders, they go like, you know what, we got $2 million. you know, spend, spend, spend. So they, they less concentrated on that profitability angle, but more of spending and actually growing. Is that like, like, what's your point of view? Is like, why profitability from, from your point of view?

100%. And I think that you, uh, partially answered that in your own question in the sense that VC founders have this safety net and blanket knowing that, okay, if I'm not— if I, if I invest money into X area and I don't see a return, I always have a VC partner or an angel investor or an external source of capital to come back to. And whether the company succeeds or not, I still get paid in the form of a paycheck, right? A salary, being on salary. Now, it's usually not the biggest salary, but usually, you know, anywhere between $8,000 and $15,000 a month, which is a sustainable lifestyle for most people, as long as you don't go spend on big yachts in Miami and things like that, right? For a bootstrap founder, we don't have that safety net, right? Right? And so if we go and fail, that could be our house on the line, that could be our kids and, and, and food on the table for the— on the line, that could be a relationship on the line, that could be yourself from just a difference of, of going homeless or not, or having a car to drive to and from the office, you know, with on the line. And so the stakes are much higher. Um, I believe that if you are, uh, and decide to become an entrepreneur, that you need to have a little bit of risk-taking. You need to be a little bit more risk-seeking versus risk-averse. I think being a bootstrap founder really challenges that very early on. And I'm not saying that taking VC money is a bad thing by any means, Mike, right? There are absolutely certain industries that 100% need VC funding, like if you want to build a social media company, or if you want to do something in, you know, biotech or manufacturing, that's very, you know, capital expenditure expensive, uh, and high in the beginning. Um, but some of these other things like building, for example, an agency, right? I started StratDev with a beginning spend of $500. There was no need for me to take external funding, but I still do see a lot of agencies take external funding. It's more elective than not, and I think it really is just you know, being a little bit more risk-averse rather than the risk-seeking, you know, spending other people's money rather than your own. So it's a personal preference, it's a personal flavor. I like the risk, I like roller coasters, and I live it on a daily basis.

So are you a little bit like an adrenaline junkie?

A little bit. I like to jump off of airplanes for—

Oh, right.

And I take it into my 9-to-5.

It's like come to office. Hey guys, we gonna do this today. Everyone's like, whoa. Okay. Well, let me, let me rephrase this a little bit. So from all the things that influence a company's growth and let's keep in mind like tech ventures growth or tech agencies, from all the things you can do, sales, marketing, hiring great, you know, people, all other things. What do you think is number one for you when it comes to directly influencing company's growth?

I mean, uh, that's a great question. Uh, most minds would go to marketing and sales, right? Because without a marketing sales function, you can't increase revenue. However, um, similar to the Leaning Tower of Pisa, if you continue to invest just in your marketing and sales, yeah, you can grow really, really, really big, but you're not going to grow in a, in a, and build a strong foundation. So you could grow really quickly and then you can go and topple over if you don't invest in your operations and your fulfillment, in your people, your HR. So all these different departments all together are facets and features of a singular function, which is a business. You go invest in and you work out your left arm really, really, really hard and you don't work out your right arm, you're going to look really lopsided. It's going to look awkward, right? You got to invest in your full business and all of those different functions within the business as well. So To answer your question, head-on and directly, marketing and sales. But I would also argue focus on everything collectively to make sure that you can sustain that growth.

That's just a much healthier picture, right? If you're looking at everything, usually sales though, they take that winning priority, I want to say, because again, if you bootstrapped, you do care about bringing in the cash flow, right? So you're going to be like, let's just go out there, let's just try to close deals. It's just, it just always gets a lot more attention because at the end of the day, you have to sell to actually have a business, right? So that's a great shout, right? Okay, so let's go and talk about why you should be looking in preparing your business in advance, right? So I have this quote from Exit Planning Institute, which basically goes like this: Owners who start exit planning 1 or 3 years ahead see significantly higher business value and are better positioned to choose the ideal buyer when they're selling the business. So the question is, in your experience, Jordan, what does it make to— what does it take to make a business truly exit-ready before you even thinking of a sale?

Yeah, great, great question. I'll give you another quote as well, which is actually from one of my advisors named Dan Sullivan. Dan is an ex-executive at Netflix, is very intertwined in the M&A space and has, you know, previously helped me through, you know, thinking through acquisitions. And what he said, which essentially comes to the same outcome as your quote, is don't try to just work to sell your business, but work to build a sellable business. And what he means by that, and what your quote means as well, is investing in making sure that you have a buyer-ready business. And we'll explain what that means in just a second, but but a buyer-ready business can increase valuations, make sure that there's no rockiness when you go through the M&A process, and maximize your chances of hopefully a bidirectionally successful, uh, uh, deal, uh, and transition or transaction between, you know, you being the seller and then the, the new entity coming in, which would be the buyer. So it's important to understand really what goes into mergers and acquisitions. I found that many people don't really understand. Most people think it's just signing of a paper and boom, it's handed over and that's that. It's not the case at all. Usually what happens is that it's not a point in time, but a period of time. And so you start off the process by, you know, either through a private channel or public channels, through an investment banker, through a broker, reach out and essentially solicit the solicit the business, say, hey, hi, we're gonna go and sell our business. And you have, um, something called a CIM. It's essentially a memorandum, uh, that shows some information about what that business is, some high-level, uh, KPIs about the business, growth metrics, financials, so on and so forth, and then an asking price. And you'll have some initial conversations, um, and do what's something called pre-due diligence, which is some quick back-and-forth questions and answers with the potential buyers or suitors that are interested in the business. If they're interested, they would submit something called eventually an LOI, which stands for a letter of intent. It's non-binding, but essentially what this means and says is, um, hey, we are interested in your business. These are the rough terms, uh, that we want to go into this opportunity to explore further with. We are very serious. If you sign this, we get exclusivity, which means that You can't talk to anybody else but us for a certain period of time while we do something called due diligence, which is essentially where they look through every little corner of your business and whatever you told them in the beginning, they go verify and make sure that it is accurate to what you had said. So they bring in auditors, accountants, lawyers to make sure that everything is good. And during this period of time is probably the most critical. 'Cause everything is fun and games, it feels really good being the seller, right? When you have a lot of suitors saying, I wanna buy your company for this amount and this amount and this amount, it's like, wow, this is amazing, everyone's so interested. The second that you sign that LOI, the rules reverse, right? Because now they have you in like handcuffs and they know that they have you, I know this is a little bit grotesque, but like by the balls in certain sense, right? By the balls. They overwork you, they overwork you. You'll be answering questions till midnight every single night. And at the end, you know, they'll make sure everything is all good. And if it's not, they'll do something called a retrade. Which is essentially where they say, well, we're going to go and actually reduce the price down because we found XYZ red flags, or you, you, uh, represented the company in this way and it's slightly incorrect, it's that way, but that brings up a certain level of concern and therefore we're not willing to give you the original prices as we want it. That's totally okay. Again, that LOI is non-binding that you signed, and so we can bring down the price. At that point, you are tired, you are exhausted, You have the ability to say no to that, but then you had to go start the process, you know, from the beginning and you've already spent 6 months of your life sometimes, right? Going through this entire process. It's exhausting. It's like marriage or having a kid. It's exhausting. And so with that, you know, most people just say yes. I've heard many horror stories. There's one company that I'm thinking of in particular that had an initial purchase price of $50 million. And through an 8-month due diligence period, they got to the last day, uh, before signing, uh, uh, the, uh, the purchase agreements. And, uh, the buyer basically said, well, there's these really big problems, we're gonna reduce the price from 50— 5-0— $50 million down to a little over $1 million, $1.2 million. And at that point, that's insane, 15 times less than what you would expect. Exactly, exactly. The buyers were so exhausted, and it was already a little bit of declining business during this month period of time where they said, screw it, we'll just take it. So they thought that they were going to go, you know, uh, uh, retire from Bora Bora in a little mansion that they have on the side of the beach, drinking mai tais every single day. That turned from that all the way to, well, yeah, maybe I can afford a small house in the Midwest, uh, which is a very, very, very different retirement that they were originally planning. And the reason why is because they were not prepared. And so that goes back to your question here, Mike. How do you prepare yourself and to ensure that you get the best terms possible and that you also again make the buyer as happy as possible too. How do you create a sellable business rather than just work to sell your business? And it really does come with, with preparation. Um, looking, you know, ahead, I think you're right about 1 to 3 years is, is the right, you know, timeline, uh, uh, to look, look at. So, you know, most buyers, just, just by being prepared, you're 10 steps ahead of, of most sellers. Most buyers want to see a handful of things. Um, the first thing that they want to see, and probably the most important, is sustainable growth. So not just growth, but sustainable growth. So if you're looking at, for example, the past 3 years of financials, you want to make sure that that is up and to the right consistently, that there's no really big jumps or really big, uh, uh, uh, valleys as well, but rather consistent growth for a 3-year period of time, and that it doesn't taper off at the end or it doesn't go exponentially up to the top at the end. Because if it goes up really quickly, it looks inflated. And if it tapers off, then they're scared that the other continuation of that graph will be a down curve. And so, um, it takes a lot of coordination with your sales team specifically, uh, to ensure that you can keep that growth. And so that's arguably the most important thing, um, especially to get the best multiples. Mm-hmm. A second thing is having a really well-oiled machine that works without you. Uh, so founder dependency is, uh, a really big question that comes up in businesses, mostly small businesses. So when people want to sell their company, most people want to exit their company, leave the companies. When they sell, they leave. It is customary to have some transitionary period anywhere between like 2 and 6 months where the founder or the founding team will stay on to make sure that there's a smooth transition. Expect that. That is, that is, that is standard within the M&A world. You can't really get out of that. But there are certain things called earnouts, which is a way to structure a deal where certain revenue or, or, or sale price amounts are contingent on hitting certain KPIs. And so we call that being in the golden handcuffs. That is a way for them to keep you on working for them for 2, 3, 4, 5 years sometimes, because they know that you are the only one that can go and achieve these goals, and you won't want to leave because you don't want to put those goals in someone else's hands. You want, as a seller, to have the highest chance of hitting those metrics so you get paid out the most, as much as possible, and so you'll stay on. Again, that's why they call it the golden handcuffs. So how we avoid this is by making sure that your business is not founder-dependent. So a great way and a great exercise to think of, and maybe listeners at home can think about right now, is If you got hit by a bus tomorrow and that was your last day, could the business still survive without you? What would falter in the business? Would there be any shakiness? And if there's any level of shakiness, then your business is still dependent on you to some extent. How then do you remove yourself from those areas? For example, a lot of small businesses, the founder does accounting. Um, can you hire an accountant? Can the accountant take over that finance function, or they do payroll. Can you bring on somebody to go and run your payroll? Or for sales, sometimes founders will be the main driver of sales through their personal network. How do you remove yourself, create a channel that can send opportunities or leads or new business to you without your, your, your, you there, right? Some founders are part of the fulfillment as well. They promise themselves as part of the work for some of you know, the service or product that they're offering. How do you remove yourself from that as well? So we want to think of those questions. How do you remove yourself completely? And so I think this does two things. One, immediately if you do get hit by a bus, the company will do well and the buyer will see that too, knowing that when you leave in the business, which is a much more realistic example, that nothing will falter when you leave the business and sell the business. Also secondly, I think a good output of this is that you get to go on vacation more. You get to go live your life more. You don't have to worry about your business 'cause the business doesn't operate codependent with you, right? So that's the second thing. And the third thing that I see, Mike, is SOPs, which stands for standard operating procedures. So having really well-documented operations and workflows and processes and procedures. Having good SOPs, we see in the market increase the, valuation multiple by about 1x. So let's just say your business is doing $1 million and your business is valued at a 3x multiple on that million dollars, which means your business is valued at $3 million. If you have really good SOPs, um, we see usually that bumps you up by an additional million dollars. So boom, you are making an additional million dollars pretty much snap and exist out of thin air just by having really good SOPs. So documenting every little procedure that you do. Me and my company, we document all of our team members' procedures from what they do on a daily basis, weekly basis, monthly basis, and every little angle of how they do as well. So under the same vein, right, if any of my teammates unfortunately get hit by a bus, that we can bring somebody else new on and take over the role. Or maybe something more realistic, if they leave, right, or if there's a departure of their tenure at Strata or any of my companies for that reason, that we can go bring in a new individual and there's no shakiness, but a seamless transition all the way through. A great exercise and way to think about this is go make an SOP for a certain process within your business. Go to Starbucks or a coffee shop and go down and just ask somebody, "Hey, I'll buy your next coffee or give you $5 or whatever it is if you can follow this process." And if you can follow this process without any worries or any issues, then you are good to go, right? And it tells you, okay, well, we just made an amazing SOP. Somebody who has never seen this before followed the rules of this document, the SOP, was able to complete this function. And if they weren't able to complete the function, then ask them, hey, okay, you got stuck on what area? This area. Okay, well, we need to detail this better. And so you go back to the drawing board, right? And then go rewrite that and go test it again. And it costs you $5 to go test this with somebody and it costs them 5 minutes of their time. They get a free coffee out of it. If anything. And so you really want to dumb it down to really be something that anybody can do. And so that's how you know that you have very well-documented processes and procedures. And it takes a lot of time. Trust me, when we built out our first SOPs, the first time that I did it, I remember I was spending every night with my VP of Operations for, I don't know, 3 months, weekends included, documenting as much as we possibly could. But it's helped out in terms of just significantly increased valuation. So, you know, there's many other things that we can talk about here. Those are really the core 3 things. You just wanna start off and get some really good launchpad or directioning of building that sellable business and really the most highest impact activities as well. But there's many others that we can talk about.

Okay, let's unpack this. There's a lot of gold here. Let's just go back to the beginning.

Sure.

Retrades. When you say one thing, when you said retrades, you know, two things in my mind. One was like, that's a good negotiation tactic just to drain the energy of founders and then just lowball the offer at the very last minute. Feels bad, but I do see, you know, people doing M&As professionally, you know, doing that. Second was, did you ever get retraded with your exits?

Yeah, so I've sold 2 businesses so far. Um, the first one, yes, was, was retraded, and it was because I did not know what I was doing, um, in, in, in real time. And so, uh, you know, just to speak honestly, Mike, it was very disheartening. Um, I was angry. I, I didn't want to move forward with it, but I knew it was still the right decision to do, um, uh, based off of just a couple of other factors. At that time, I was focused on another business, um, and this one was, you know, I wanted to to sunset at least my tenure. And so, um, with that, I sought out and said, okay, well, if I sell another business, I know exactly what the buyer didn't like. I'm not going to do that again.

Okay.

And so I wrote it down in a notebook, and I followed it coming into my second, uh, sale, where, um, you know, I think, uh, we got 4 or 5 different offers. And so it was actually quite opposite, uh, of, of the last or the prior sale where we had options. And so What we did before we signed the LOI is we basically took the highest offer and we shared it with everybody else and said, okay, well, this is the highest offer. You want to go match it? You want to get as close to it as possible? We would build alliances. It was a fun time, but we built alliances with certain buyers saying like, hey, like, we want you to really buy this. This is how you preempt the deal. This is how you take, take the cake. We need these certain terms that make them feel good about it. It's a little bit of emotion, a little bit of psychology, a little bit of kind of playing cat and mouse with that as well. And so we ended up getting actually over asking for that sale and we told them when they signed the LOI, that the eventual buyer, we said, hey, um, if you tried any funny business to retrade this, we will exit the LOI. And so we actually put in the LOI, if any of the terms change, um, then the other party can immediately back out of the deal. So we basically said, hey, we have these other offers on the table. We told them that we are going to call you the second that, you know, if this deal goes through, we're going to call them and we're going to move over to somebody else. So basically kind of, um, set the stage and gave them a baseline saying, okay, well, to the buyer, um, thinking to themselves, okay, if we go change the deal on them, then they're gonna leave and we're gonna lose the deal. And so, um, it, it, it, that was much, much more helpful. And so yeah, there was no retrade. Um, maybe they wanted to, right? Maybe this, that was, that was part of it, but we set the stage and said, we're not going to move forward if you even change it by a penny. So yeah, um, that, that was helpful and, and a very different experience. And Going forward, I hope to sell other companies in the future. I definitely do hope that we follow the same pursuit. I think—

Jordan, do you mind sharing what was the reason of the retrade in the first deal?

Yeah, I have to be careful because there are certain NDAs in place.

Right. Okay.

Well, but essentially there were certain expectations, uh, or assumptions made, uh, in the beginning when an LOI was, um, sent over. It's not that we were not, um, uh, upfront and forthcoming about it. We just didn't know that we were supposed to talk about these things. So it was kind of like, uh, okay, uh, guilt by omitting something.

Yeah, yeah, yeah, I get you.

It's not that we misrepresented, it's that we just didn't represent certain things. And so, um, you know, that, that was, uh, that was more or less the reason.

So you mentioned sustainable growth. 100%, I agree with that. Where with the VC-backed funding, you have this growth at all cost situation. So usually you see that exponential growth. But if you're looking at the very nice picture, you see a great market-accepted growth in a business. I do as well personally like seeing a stable business, right? So it's like if you look at the cash flow for the last 3 or more years and it's just like You know, maybe it's not growing, but it's not going down. It's basically just stable. So this, you know, you could buy that business just for the sake of buying a steady cash flow. So from your point of view, like from the business you sold and, you know, and all your sort of knowledge you have, how much multiple gets affected by how that growth curve looks like? If it's going steady up, if it's exponential, if it's plateau, or if it's going down? It's like What is the multiple valuation just based on that?

100%. That, that's a phenomenal question. Um, it depends actually more on— from at least what I've seen, um, I'm not a business broker myself, but just from what I've seen, um, it depends much more on the industry, um, than, than, than, than the, uh, financials, if it's going up, sideways, or down. Um, for example, right, we see especially during the early uh, you know, 2010, some, some crazy multiples on software companies where they were—

that was insane.

They IPO'd for, uh, 130x multiple on, uh, revenue. That means that buyers expected that the average customer would stay for 133 years. Yeah, crazy stuff.

Crazy stuff.

Exactly right. And so, so we saw those crazy multiples where, like, I don't think that mattered if it was up, sideways, or down. It was just the fact that it was a very hot topic. Nowadays we're seeing this with AI companies where they haven't really sold just yet because they're early on in their, their, their, you know, life cycle, but we see them being valued in fundraising rounds at very crazy high multiples right now. And so, you know, with most businesses in this, you know, in, in the United States, most of them are either mom-and-pop shops or, you know, small, medium-sized, you know, digital companies with a product or service. Mostly those—

bless you—

a little bit of allergies here. Thank you. Uh, most of those products or services don't have any, you know, hard software or, or unique IP behind them that, uh, calls for, uh, or constitutes for a higher valuation multiple. So what you can really usually expect is if your business is doing anywhere under like $2 million a year in EBITDA, um, it's usually a valuation multiple of anywhere between like 1 4x multiple. Maybe call that like 2 to 3 to, you know, put you in the middle 50. So if your business is doing $1 million a year in EBITDA, um, um, so earnings before taxes, interest, depreciation, depreciation, um, uh, uh, you know, you're looking at somewhere between $2 and $3 million, um, somewhere around there. Um, if you, uh, kind of pass this inflection point of $2 million, then it usually calls for a higher multiple. We see usually anywhere between like 4 and 8x. So if business doing $2 million a year, then you can expect, you know, to sell that for anywhere between, uh, $8 and $16 million. So it definitely does jump up, and so there's incentive to do that. Um, now to answer your question, if it is going up, then what we can do is look at not just, uh, for example, the last 12 months of, of, of, uh, uh, EBITDA and put a multiple on that, but rather maybe— and you, you can negotiate this with the buyer, obviously, you know, uh, this the sale price is determined on who's going to take it, right? The buyer really sets the price, not the seller. Um, but you can take, for example, the last 6 months of upward growth, and then you can take the forward-projecting 6 months of growth, add that together, and then put a multiple there. You can do something like that, right? And then, you know, if it's, if it's declining, um, then usually buyers would call for the same, right? Okay, we're not going to take the 12 months of growth because it's declining, right? The most recent month is lower than a month, 12 months ago. So with that, they will want to do forward projecting and definitely account for that lower cost. If it's steady and, you know, not moving, then they'll usually take the past 12 months. By the way, it's called trailing 12 months or TTM as a metric there. And that would be standard. Usually there's no negotiation of, you know, should you call for forward projecting or not because it should be the same. More or less. I like to build up and to the right because you get some future projections baked into your sale price. It calls for a higher multiple because you're multiplying that multiple on a higher number, if that makes sense.

Exactly that. You probably shouldn't be thinking about selling if you're going down. I mean, that's not gonna be a pleasant process.

A lot of people do though, Mike. I've seen it a lot, especially founders that are burnt out. You know, you'll work so hard to go up and up and up, and then you see things going down, you're like, screw it, I don't want to fix this and build it. I'm just going to go hand it off to somebody else. And so what your business was worth just 6 months ago, now it's worth a fraction of. And so, um, a PE company takes advantage of this all the time. Yeah, they find a distressed business, they go buy it for pennies on the dollar, and then they'll go strip it for parts or connect it and roll it up to a bigger entity and then, and then make their profit in between.

So I mean, for them it's a, it's a, you know, have a field type of day. It's, it's great. That's how they do money. But for the For the founder selling, that's going to be very emotional and, you know, not great, just not great to be in that position. I was in that once, you know, with one of the businesses, and we went from highs of making a million annual recurring revenue to selling that business for like $50K. And it was just, yeah, it was just terrible. I mean, the whole situation was terrible. Lots of learnings, but emotionally—

Can you share that story? I'm curious, Mike.

So it's just before COVID we did very close to a million and we went into like a sales phase. But, you know, here's a mistake. We didn't prepare the business to be sold, right? Like it was not exit ready. So we just decided to sell, right? Actually, the board and the founders decided to sell. So they went into an active sale. Of course, lots of scrambling, a lot of situations. COVID came, a couple of flagship clients moved away. So we're talking about yearly contracts, 50-60Ks, took away from that annual recurring revenue. So it started to decline. The whole process expanded. It was very hard to find a broker and the buyers, and everyone's got I want to say stressed. Other mistakes followed, you know, uh, decreasing the prices and just, just down and down and down. And then big player came in and they were like, we're just gonna buy your clients, we're just gonna buy active contracts basically, we don't care about anything else. And it was like game over type of situation because everything came out of the COVID and the board and the founders just didn't agree with stuff, so they, they started fighting with each other. Which meant the deals and decisions just wasn't made and it just went in nothingness effectively. Very sad story. Lots of learnings, but it was such an unrewarding almost 5 years of pure groundwork to take it from 0 to 1 million recurring revenue and then it just poof, just gone.

Yeah, yeah. I mean, I hear those stories all the time. It's tough because, you know, I think you did come out of it with something very valuable. You know not to ever do that again. And sometimes you have to learn those lessons. Yeah, I learned it with my first company. I sold it for a hell of a lot less than I would have wanted to. And so, you know, you learn those lessons, apply it to the next venture and come out 10 times better as a result.

I think it made me risk-averse, though. I think it injured me emotionally to the point where I'm less inclined to take more risk now.

Yeah.

So I'm seeing that in myself. Like, you know, if I think about, you know, buying a business now or launching something, I'm a lot more critical about pretty much everything. I almost became this like, I call them problem spotters as a character trait. You know, like when you lead the teams, you try to not put labels, but you try to understand what is the strength of every individual. So you have a great team, right? So I have this definition which is called a problem spotter, where any situation you give to a person, they're going to be like, what about this? What about that? What about— and it's always risk, risk, risk, risk, right? It's just like spotting problems everywhere, right? I became like that. Like, my personality changed after that situation.

Totally. So, so I was a boxer in my, in my early days from like 7 years old to 17 years old. So about a decade of my life. And I was trained under an individual named Dubuana Clark. He was out of, you know, Mayweather's 20 different boxing coaches in his career. Dubuana Clark was his first boxing coach. And so Dubuana Clark is like a second father to me and really took me under his wing. And he taught me a lot of lessons inside and outside the ring. I actually credit him to having me be a little bit more risk-seeking. But I think of boxing and the lessons that I learned in boxing and how I apply them to just how I think about business. One thing about boxing is, you know, you're taking punches all the time, right?

Yeah.

And you can decide to do two things with those punches. One, you can, you know, get hit and let it, let it, let it affect you and bring you down and you lose the fight, right? You can put your hands down, you can give up, you can go like this, you know, you can give up. When you see this, especially with a lot of younger fighters, the more experienced fighters will take a hit and use it and have it fuel them. And that makes them go 10 times harder, right? Yeah. And essentially turn, turn, turn the stages. And so You know, to use that analogy over to boxing— or sorry, to, uh, to, to business here, right? Um, failures are part of, of, of being an entrepreneur, right? That's why I say like you have to be really, really, really comfortable with being risk-seeking and having those roller coasters. Roller coaster is not the up and down ride, that the bottom is failing, right?

Yeah.

So, you know, we talk about the two successes that I had, the two aces that I had. I've built, Mike, uh, probably a dozen different companies, and all those dozen companies failed less than two of them, or maybe three, right? And so there's a lot of failures that we don't really speak the audience also does know, like, there's also, there's a lot of failures, you know, um, uh, uh, that, that most entrepreneurs, you know, do have. I use all those failures to then fuel me to get to the next step, right? And so, um, even with my first company that I sold, um, it was in the e-commerce space. I had 3 e-commerce companies before that. And so the first one, built it, started it, failed. Second one failed. Third one failed. I use all those lessons, right? So then go start the fourth one. And if I did not have the failures of the other 3, I promise you the company that ended up selling would not have gotten to the, to the levels that I was able to grow it at. And so, um, I, I understand that, uh, you know, for you that, that experience made you, um, kind of pull back a little bit, bring up a guard, and be a little bit more risk-averse. For me, I listen to that being, oh man, that would fuel me, that would piss me off in all the best ways, right? I just want to go do it again and do it right.

Yeah.

Um, and so, you know, I, I think it's a level of difference of mindset, but I don't know if I'm crazy by saying that, but it's just how I think.

It's a great assessment and great advice. I didn't want to hide in my room. I just became a lot more risk-averse. That's at least how I feel in general. I mean, I still buy crypto, so I don't know if I'm actually that risk-averse.

You're used to the rollercoaster rides.

Yeah, so I don't know if that risk-averse metaverse, right? But, but it's just, yeah, I'm just seeing, um, I'm just seeing more. I think, I think, you know, there was definitely blinders, uh, which was pure, you know, purely based on that unicornish thinking, entrepreneurship. Like, I'm gonna, you know, like co-found this and we're gonna be the next, you know, Netflix or whatever, right? You have these dreams of building something huge, and then when you get into that multiple years of grinding and success and growing, and then suddenly someone knocks you down, you go like, oh shit, I didn't see that coming. You didn't even thought about this. So, it teaches you to really look at situations from risk perspective and just do a proper risk assessment in situations and not just to ignore that, right? Because business continuity or just in general thinking about risk is really important because that's effectively your safety net. If you miss something, that might be just a hole, and if you dropping from heights, that might just sort of kill you. So, um, I want to talk about SOPs a little bit, Jordan, as well. So this is, uh, standard operational procedure documents, right? Like, this is very well known, uh, within industries that this is exactly what you need to, uh, have if you're hoping to just hire a virtual assistant or talent offshore, you know, offload some cost, have better margins. Like, you need to have these documents and be able to onboard people into your business operations as efficiently and as effective as you can, right? So from your perspective, like, what is a good SOP? And you mentioned going to coffee shop and, you know, giving someone and asking if they can do this. So is it as simple as a document with bullet lists? You do this and this and that and that. Or is this more like a visual workflows? You know, do you use any software to manage a database of SOPs? Or is it just a Google Drive? Like, can you just tactically walk us through like what you guys did with your SOPs in those 3 months? Yeah, yeah.

Good, good, good question. So we started by hiring a consultant because we didn't know which direction to go. And so we hired an amazing consultant specifically for agencies named Mike Cozuel. Big shout out to him. If you're ever looking for work, he is phenomenal and really takes a deep interest in his clients as well. So he ended up actually giving us a level of framework to use. For building out those SOPs. Essentially what it was was a Google document in a hierarchical structure in a Google Drive, but, and, and you would go and make copies of this template and then go fill it out for a certain process and procedure. You know, this was a couple years ago, so I have to think about it, but I remembered a couple of kind of pointers that he gave before we started this exercise together. The first one is don't try to document an entire job within one SOP. Document it into certain functions. So for example, um, you know, your, your, uh, sales lead, um, starts his day, uh, or starts their day by going into the CRM and doing a certain level of work for about an hour. Go document that. That's one SOP, right? Because it's repetitive, um, and it is a, a, the same thing every single period of time for a dedicated period of time. And so we go and make a function of that. And then later in the day, he goes and sends his follow-ups, and he has a certain process and procedure that he follows for the follow-up at noon. Go document that. Separate SOP, different document. Um, go, go follow that. Don't try to, to, to, um, uh, uh, create an SOP out of somebody's entire day because there's so much variability that comes into that. Just certain functions of, of, of their job and then start there. Um, the second thing is, um, don't think of it just from that individual's job because with us as, uh, uh, social creatures, right, sometimes there's cross-collaboration. For example, Um, when that same salesperson goes and closes a deal, what happens? They probably send it to somebody, right? They, they circulate the information. And so, um, with that SOP, don't just document it from one person's eyes, document it from some other people's eyes. So certain SOPs might not just be for one role, it might be for a couple of roles, right? Um, first half of it is a salesperson, then it gets pushed off to fulfillment or whatever it is, right? Then fulfillment is the second half of that SOP, but it talks about that transition and what both of the parties need to do to make sure that what happens or what needs to happen happens. Um, the next thing is, um, don't be shy with adding, uh, uh, other external resources that might be needed. For example, um, looking back at the CRM example, um, the CRM has credentials, um, and maybe a certain workflow to use there as well. So kind of like Wikipedia, um, connect certain things together. Uh, we use, uh, 1Password in our thing, we can create like an encrypted key that's like a link to send the username and password. So we'll go and take that link and say, step 1, log into the CRM here. Here is the encrypted link to go retrieve the username and password. Boom. There. And then if you've never used a CRM before, follow this other SOP that talks about how to use the CRM or like a walkthrough of the CRM. And then it will link over to another SOP. So essentially what we're doing is creating kind of like a spider web of all of these different SOPs. And so they're not standalone, but as you continue to build it out, you will have references to other tools or pieces of collateral in your business or other SOPs that have relevance to— again, kind of like a Wikipedia page where you can just go into a, you know, click on other things and go from tree to, you know, flower to earth to you know, whatever it is, right? And so, you know, that also helps make sure that we can use those SOPs as a one source of truth for the business and that they don't have to go scramble to find all these different resources from these different, you know, areas of your business, but rather they can look at the SOP and they have everything that they need to be able to do that job.

So is this, Sergio, very quick, is this, are these SOPs then almost like read it once, understand it, and then you never come back to it?

No, it definitely does require updating as you switch out from one pass to last pass. You want to go switch out those credentials too, or when you, you know, make a change to the process, instead of handing it to this teammate, you hand it to that teammate, or one role to another role that you want to go and, you know, adjust it there too.

Yeah.

With that said, you will go crazy if you go and try to readjust the SOPs every time you make an adjustment in the business, especially as a startup company where you're making so many changes at all times. What we do is we try to look at it annually where we'll go in usually towards the end of the year because us being B2B service, everyone between November and December, like from Thanksgiving in the United States to Christmas, people just don't want to talk to their marketing agency, especially in the B2B space, which is where we work in. And so they're off with their families. We'll use that time to look internally and okay, let's go clean everything up for the next year from an operational perspective. And so we'll take the opportunity to go and update SOPs at that point. Okay. Yeah, good question.

Okay, so we're building this. If I take a step back and We talked about founder dependency being a red flag to any buyer, which makes perfect sense. And often what I see is that people do something very well as an individual. They become self-employed, if you might call it. They start just working for themselves. They get clients and they're doing a great job. Maybe they hit the market very well and then there's just more work, more work. They start hiring more people and suddenly they somehow end end up, you know, being an agency or a, you know, dev shop or something else, right? But then the founder is still, you know, the operation, right? So at some point, you know, he or she, her wants to start sort of removing themselves and making the situation better, right? So they would start by going and creating SOPs for every function they do, right? And then, then go like, who can do this instead of me? And the second question which I have, uh, is how much of these SOPs you actually automated?

Great questions. Um, yes, the, the, the idea is, um, build out SOPs, so of certain roles that you don't have to do, so then you can go and delegate it off to somebody else. Um, I think it's always easiest to create the SOP before hiring somebody. Um, if you go hire somebody, then for example, if it's employee number 1, then you have to go teach them manually all of these things. If you write it down, then you don't have to manually teach it to them. You can say, hey, okay, for the first couple of days, study this. This is your Bible. Uh, learn it from top, top, top down, bottom up, um, and then come to me with any questions. And so it saves time for training purposes, for onboarding purposes, um. And let's just say that employee leaves and you got to bring somebody else in. If you don't have the SOP, then you're gonna go re-teach the same thing to the same person, and it's very repetitive. And so an SLP saves that time. Um, in terms of automation, uh, you know, this is with the dawn and inception of AI specifically, um, which I think is a blended role between automation these days. Um, it's coming very quickly. There's a new tool that comes out every single day. It's happening fast. And so, uh, So with that, investing in, you know, these automations and tools and these things is super important. Actually, in— what was it? This past May, we hired a full-time individual whose sole job at Stratt Dev is to increase— his KPI is increase efficiencies through the usage of AI or automation tools. And so what he'll do is he'll go test all of these different automation tools or AI tools um, understand what works and what doesn't, uh, from an internal standpoint, and then implement the tool if there's value behind it. Hey, I went and tested it. I used this 14-day free trial. We were able to create this instance on this tool and we've increased efficiencies by 7% or reduction of time by 14% or whatever it is, right? Uh, and so that has been tremendously helpful having a dedicated resource that just consistently does that. I understand that I'm coming from a point of privilege, having the ability to hire a full-time individual to go do that. What I would recommend for folks that don't have the funds to be able to go hire a full-time individual is look at social media, Reddit specifically, because they're ruthless there. I think that if you're trying to understand what is a good tool or not good tool, Reddit has a great community. Of startup business owners that will essentially talk about their experiences. Hey, I use XYZ tool for this certain function. It worked well for this reason, or it sucked for this reason. Yeah. And they don't hold back by any means. And as a result, you know, you're able to kind of vicariously skip the R&D process through these other individuals. And that might be a great resource for you as well. I think it is tough, honestly, at this point to to find really good tools just because, Mike, we've established that it, uh, there's a new tool that comes out every single day. A lot of them are gimmicky. A lot of them are ChatGPT wrappers with no real, um, substance or differentiation behind it. Um, and so, I mean, I can even tell you, uh, uh, you know, since May, my individual, uh, my teammate has, has, um, probably tested, you know, just south of 100 tools at this point. We've probably moved forward with with like a handful of them. Most of them are not good fits. And so there's a lot of crap that's coming out these days. Definitely, you know, rely on, you know, word of mouth and, and what's worked for others, um, rather than just trying to operate in a vacuum if you don't have the funds to do so.

I love you calling that out. I mean, I 100% do agree. There's 99% of the tools which is wrapped on top of ChatGPT or another open source LLM and they, they're trying to cater a certain problem, and it just becomes a tool for that. And then no one lives in, you know, in a space of one problem. Like, we all have multiple challenges within our workflows as a business owner or as a business operator or whatever function you have within the business. Like, there's not one, it's like, it's more. So the best solution I found And this is sort of, you know, how I get efficiencies to actually use AI agents or actually use a platform which gives ability to use AI agents, right? So effectively what happens is that you can have a dedicated AI tooling, which is effectively AI agent for a certain problem spaces or challenges you have. And then you can train them on your data. So it, you know, it becomes an actual value add to you rather than just having using, you know, multiple tools, which pretty much is the same. You can look at the tool as an AI agent at this point in time. That's what I'm seeing. So I was like, you know what, I don't want to have 12 tools. I just want to have 12 AI agents, one for this, one for that, one for that, right? So it's good to see you guys. So you have efficiency. You hired a person dedicated to increase efficiency. I love that. What is the title of that role? Like what's official title?

We made up the role. I think we've changed it a couple of times at this point. We've gone to Startup Operations Manager.

Okay.

Is the role. Does it have any weight or reason behind it? No, but it's Startup Operations Manager.

Okay. This is actually, you are a second person telling that this is a function within the business, which I really love. Another person was, there's a platform called Buildkite, which is continuous delivery deployments. It's fairly big in that space. So we had their CTO on the show and they have a role which they call a leverage finder or something like that. It's basically, again, a person dedicated to just constantly doing research within the company and externally to find what leverages or levers they can pull to get an actual edge within operations or anything else. So I think it's pretty much the same, but it's just cool to see that, you know, businesses go like, you know what, like, like that's a full role, you know, like we're not, we're not going to be better if someone is not investing constantly to making, you know, us better, finding tools to make us better. I love that. And another quote which I wrote down while you were talking, Jordan, that Buyers set the price, not the sellers. I really love that, and I want to dig into that. So how do you— like, when you go and, and set the price as a buyer, right, you're going to look at stuff, you're going to look at the business, and, and you're going to be like, you know, that's— here's the risk, here's the good things, you know, that, that's market multiples, you know, whatever. This is, this is, this is what I'm offering, you know, to buy your business, right? So can you just go in and just lowball that? And almost make it like a bargain. Like, is there, as a business owner, did you have that? Because I know you had like 11 offers which you declined for Stride Dev. So I'm very keen to understand where they just like, you know, like offers which is just lowballed because someone is going in and trying to do like a buying spree or where there's any reasons, other reasons why you sort of declined them.

It wasn't ready. Oh, it wasn't ready.

Okay.

Yeah. So I'll answer that from a couple of different angles. Firstly, most sellers are first-time sellers and M&A is its like whole unique world and it's very different from how the rest of the world works. And I've learned these things just by being a part of it a couple of times now. With that said, I have a significant— let's just say, you know, I, I list another business or I sell another business, I have a significant upper hand because I've been through it. Most sellers don't. Um, and most sellers, uh, usually the reason why they sell is because they're tired and they're not very prepared. They're like, I just want to retire, I just want to move on and close this chapter of my life. And so it's a very emotional reason why they're selling, and before they come in with the motion behind it too. When it comes to, you know, setting your price, because the seller, the seller technically sets price, but what I think you understand where I'm going, but the buyer really decides the price.

Yeah.

Um, is, is, you know, there's, there's oftentimes, you know, misalignment. I, um, you know, have some good friends, uh, uh, from acquire.com, um, uh, a guy named Kai who's, uh, a senior, um, uh, analyst there, and then also Andrew Gitskettie, who's the CEO as well. Um, you know, I've, I've heard from them that, uh, a lot of buyers will come in— or sorry, a lot of sellers will come in and for their billion-dollar-a-year business want $10 million. And, um, there's no rhyme or reason to it. It's like, I've built this business for 25 years.

Yeah, exactly.

$10 million from it. There's a level of deserving of, again, emotion behind it and for these businesses. These businesses are the business owner's babies, and so they, they value it at a premium. That doesn't mean that your buyer is going to value it at a premium as well. A lot of these buyers will come in very calculated, will run it by the numbers. Like, they won't even care about your business. You're like, your business is a, is a math function to them when they decide to put in an offer or not. Um, and so, uh, they completely remove the emotion you know, out of it. And so it definitely does create a little bit of, uh, tension sometimes, at least from what I've, what I've heard. Um, you know, to answer your question head-on and directly, um, uh, no, we listed it at a fair value of what, um, it was. It was, uh, I don't know what the right word is, but, um, uh, we didn't list it— we didn't list the name, we listed the idea of, um, because we wanted to keep a level of anonymity. We had two 2 rows of NDAs. First NDA was you still don't get to know the name of the business, but we'll give you some information, further information, financials. And then if you want to submit an LOI, there's something called an IOI, an indication of intent. At that point, you will also sign a second NDA saying, okay, we'll give you the name of the business, but with the intent that, with the expectation that you're going to, you know, submit an LOI just to do your own due diligence and make sure that it's good from a reputational standpoint. We got a great reputation had no problem with that. And so we ended up getting, uh, uh, yeah, 11 different LOIs. Um, I mean, some of them were shitty offers, you know, I'll say that, but some of them were pretty good offers. Um, and you know, with 11 offers as well, we could have played the bid-up game. Um, it was really at that point a bet on myself. The reason why, um, we were open to the idea of offers was really just to understand— actually, it was for me to understand Mike if what I was building had tangible value, if people were really interested in what I was building. The answer was yes.

Nice. Okay.

We had built a great enough company where there were 11 entities that gave their vote of confidence in the form of an LOI to me saying, yes, Jordan, we are validating what you have been building. We're willing to put money down for what we're building. And so we were in a hypergrowth state at that point. It would've been a very bad idea for me to sell unless I believed that the growth would not continue. And so I had faith in myself that it would go and continue. Um, I rejected all of the offers. We went and continued, and this was 2 years ago. Where we are now compared to where we were valued 2 years ago, we have increased the value by a little bit over 2x at this point.

Okay.

And so if I, you know, uh, uh, if I would have sold 2 years ago, it— I would have gotten less than half. Of what I would get if I were to sell today at a reasonable, you know, not super, you know, shoot for the stars and also not super cheap.

I mean, it's great you were able to double the value, you know, the value in 2 years. That's a success, right? I mean, not necessarily others who will not sell when they have an actual offer will achieve the same thing, right? It could have been opposite, where the value went 2 times less. Right. So it's good to— it's good to hear that, you know, you were actually successful with that.

Yeah, absolutely. And so, yeah, I mean, it was, it was, it was more of an experimentation, if anything.

But okay, I love that.

Super low price. Another thing I will also say is I have also learned that if you give buyers a, you know, if they ask what are you looking for, If you give buyers a range and say, well, I'm looking for anywhere between $1 million and $1.5 million, just as an example, right? They will not hear the higher number.

They'll hear the lower number. Oh yeah. Oh my God.

And that is the number that you just gave them.

That's such a good—

Do not give them a range. Yeah. Whatever your number— I'm not a broker, and so I— but I give, you know, 6-foot distance advice to some of my friends who are selling their businesses. Whenever they list, I basically say, okay, whatever your number is, multiply it by 50% and then go give them that number because they're going to bring it back down. If you give them your real number, like, good luck, it is only going to go down from there.

Oh yeah, that's such a great advice. And I think people may be listening and going like, I'm not sure about that. Well, I'll give you an example which you probably can relate more if you never sold the business, which is timelines of any project you do. So if you manage projects and you, you know, you build stuff and you know the timelines, if you talk with sales or marketing teams and you say like, hey, you know, when is, when this is gonna be ready? And you give them two dates, you know, from July until August or whatever, guess which date will get chosen and used in, in all the papers and all the planning? It's gonna be the sooner one. It's gonna be the lower one. It's just, I feel like it's just how people's minds work. It's like, I don't want to hear, you know, the higher ones or the later ones. I'm just going to choose the lower one. So that's a very strong shout. Don't give numbers, you know, increase it by 50%. What about if you don't give numbers at all? It's like if they ask you, you know, what's your range? Can you just go like, you know, like, I don't have range, you just give me an offer. Yeah. Give you 50% less from what they actually want to pay.

It— yeah, if, if you leave the number to the buyer, it'll, it'll likely do one of two things. One, it'll frustrate the buyer where they're just not even gonna put an offer because they don't want to play a game of cat and mouse. Most buyers, you know, are, are again very strategic where they want to have some ruling and understanding like, hey, if I go submit an offer, is it going to be something that you accept? Because if it's not, I don't even want to put it in an offer. It's not worth my time. It costs money on their end to draft up an LOI with legal fees and, and, and obviously time as well. And so, um, it could just frustrate or turn off the buyer to the point where that's that, you know, not that. Second thing is if you don't, you know, put an anchor to the price, yes, they're going to go for the lowest amount possible and you're going to be very disappointed, if not offended, by, by, by the offer as well. You know, another thing that you can go and do as I'm thinking about this is instead of, you know, if somebody asks, if a buyer asks you Hey, what is, you know, the, the range that you're looking for? Don't say I want, uh, between $1 and $1.5 million. You can say, well, the market says that the average is between $1 and $1.5 million, or $1.5 to $2 million because you want to increase it by 50%, right? And so you, you, you could say that. And so it kind of, you know, doesn't sound like you came up with the number, but rather the market came up with the number and, um, give it— gives them a better price.

Research-led number. At least sounds like it. I, I, while you were talking, Jordan, I remember there's a scene of a movie, and I don't remember the actors, but it's, it's one of the business movies. And they were at the table, you know, two owners sort of negotiating, and it was back and forth, very quick, very nice scene. I think it was a short I've seen somewhere on YouTube, right? And one is the seller, one is the buyer. But effectively, they go like, you know, here's my price. It was like $325 million, you know, the buyer goes like, no, $315 million. And he's like, no, no, no, I'm not going to take less. And they just sort of go back and forth and they go like, deal. And it was like $275 million or something like that. And then when they shake hands, you know, the deal is made, the seller goes like, how high would you have, you know, went to the buyer? And the buyer goes like, how low would you have went to the seller? And, you know, and their ages is basically different. And it just shows that when people come in, you know, they still have this like, I'm just not going to entertain anything below some type of line. But you don't really go and start conversation with that line. You know, you add a huge margin above that. And the same, you know, for the buyer, you know, they go like, I'm just not going to pay more than that. And they start a lot less than that line. Okay. So, yep.

You never, you never know because, because the buyer might, you know, see so much value in your business where, you know, you, you bring up that huge margin and, you know, you end up getting that, that, that deal, they might say, okay, well good, let's, let's do it there. I, I have a friend that sold a business that, um, uh, we, uh, had really undervalued the business. Um, you know, I, I had kind of given him certain, certain value metrics and there was some IP. I thought the— I personally thought the IP was worth this amount. He didn't go consult a broker, he went and self-brokered it. And so, um, you know, he went out to the market and, and similar to you, was basically giving certain ranges And they're like, okay, well, we'll send an offer tomorrow. And so, you know, he came back to me, he's like, why are people moving so quickly? I'm like, I don't know, maybe because we undervalued it. And we realized sure enough that we did. And so, you know, we readjusted it and he ended up getting at least what he was expecting coming into it, a much higher number. He ended up selling the business for what made him very happy.

That's a great success. Yeah, I got one to add to the things you listed as a main or the most important one to make the business exit-ready, and you need to think from the beginning. We talked about having a growth in the sales, we talked about SOPs and not being founder-led or founder-dependent. Sorry, founder-dependent. It can definitely be founder-led. Another thing which I'm keen to get your views on, which I feel is a very strong one, is ability to hire. Remote talent or being able to offload work, as in capture the sale in a strong economy or a more paying economy and service the delivery of that work in a less expensive economy, right? So you get much better margins. I feel like that's, if you have that baked in within the business and operational, as in it works well, I feel like that's a huge green flag. Something which looks tasty. What's your take on that, Jordan?

If I understood the question, essentially sell contracts in a hot market and then fulfill them in a colder market or lower cost market? Yeah. Did I get that right?

Yeah.

I've never thought of that. And the reason being is because it's similar to the stock market. You can't predict if things are gonna go up or go down. You'd be taking a massive risk by preselling, hoping that certain costs go down. If anything, right, there are different markets in the entire world. And so to kind of go back to your, your, um, something that you brought up earlier in the question, which is remote talent, um, you know, to, uh, increase our, uh, uh, margins, we do leverage, um, you know, nearshore and offshore talents, uh, for that matter. We have found amazing teammates, um, that, uh, from a salary perspective are significantly less than what we would pay for the same level of talents in the United States or onshore to the United States and get the same quality of work as well. You know, one thing that's important to us is also culture and community. We have really built an international culture and community. We used to have office space in Los Angeles before, and on the early stages of COVID it ended up not being worth it because I was the only one coming in. I was only coming in like 3 times a week at that point. And so, you know, getting rid of the— getting rid of it, then we moved to a fully remote work-first policy. You know, we had teammates that went and spread it, you know, around the world or United States at that point, and then started hiring internationally as well. I love it because now we're not just limited to the talent pool within Los Angeles, but now the entire world. Anyone who's, you know, speaks strong English and has worked in an American business is kind of the, you know, baseline requirement as well as obviously others based off of the job description. But, uh, uh, uh, you know, we, we found great talent that has allowed us to essentially, um, call for American prices but fulfill it through non-American prices. And so that protects, you know, uh, as well, it also allows us to be able to, um, invest in a better experience, in a better product, um, for them as well, because we can allocate more resources to that same project, which maximizes their chances of success, um, with the same cost. For example, right, um, you know, a client is paying us, call it $10,000 a month, um, in the United States, that will probably, you know, pay for one full-time resource's time allocated towards that project. Now for the same price, we can go hire 3 people's, uh, full-time allocated resources or time and attention to that same project. So they get more for the same, more value and output from those efforts. And so we've been able to create world-class products and services within our company and be able to sell them for relatively reasonable prices because we have that ability within our margins to play around with.

So are you fully remote? And like StratDev doesn't have any offices, like you fully remote online business?

Fully remote online business. Uh, all we need is an internet connection and a computer. I'm not even at, uh, uh, you know, I, I, we have a, I have a personal small office space, um, in my home, but I'm currently at my girlfriend's house as we're moving. So we're moving some stuff around, and so I just have my little setup here. Um, I have my backpack right here as well, and so I can— no mad— everything, everything in my backpack, uh, It takes me about 30 seconds to pack everything up, 30 seconds to set everything up as well. It's easy and super mobile. But yeah, no, I take good advantage. Our team does too. We travel all the time.

How many offshore or nearshore staff you have, as in percentage-wise, not the headcount, but like just interesting to understand how much of your staff is with you in states or how much is other countries, and which countries as well?

Yeah, about, about 50%. Um, a majority of those individuals are in Latin America— Colombia, uh, Mexico, Brazil, and Argentina. Um, we have a couple of individuals from the Philippines, um, and then we have, uh, one person from Japan, and then we have one person from Nigeria.

Okay, so that's a decent spread. So I would assume you hired them yourself, or did you use like a, you know, like a staffing, remote staffing company which just deals with the payrolls and everything and you just pay them directly, or did you hire the people directly yourself?

Yeah, good question. So we have leveraged like headhunters for, for some of the roles. However, they just headhunted and did the placement. They're not the EOR or employer of record. We are, uh, for all of our, our teammates. Um, uh, and then, you know, for the others, we, we hired them internally, um, within StratDev, um, in our instance. So we have leveraged, uh, wellfound.com, uh, we've leveraged, uh, uh, LinkedIn, uh, jobs, and then Indeed. Um, You know, all these three platforms are very globalized. I've learned that a lot of people don't realize that you can hire, uh, individuals from outside the United States, um, on these platforms. You can go, you know, do a job listing out in, you know, call it Buenos Aires, Argentina, and then get a ton of responses and replies, um, on all these platforms. So yeah, we just use the standard platforms, standard recruiting platforms, and, uh, bring people in.

Okay, 100%. Okay, let's go into a rapid question round, 30-60 seconds per question. Your point of view. What's the single biggest risk that kills business valuation at exit?

Founder dependency will kill it as well as keep you in golden handcuffs.

Okay. How small can your core leadership team be before it becomes a red flag to buyers?

I don't think— as long as there is one singular figurehead, that is, that is okay and acceptable, especially with small businesses.

Okay.

Obviously, the bigger the business, the more C-suite or leadership that you need. But as long as there's somebody driving the train, you're more or less okay.

Okay. Many founders aren't strong with financial metrics like EBITDA. How big a problem is that when selling? Just in general, like financial understanding. And all the what accountants do. If you're selling a business as a founder, if you don't really get that, like, what's the risk you're dealing with here?

Getting screwed on deals. Know your numbers. One thing that I know is my numbers. I know them like the back of my hand. I study them like a kid in school. And that has helped me so many times. I cannot tell you how many times in both of those deals that buyers would be so impressed by me knowing my numbers. And I think that subconsciously it allowed me to call for a higher purchase price and higher valuation because I knew my numbers like the back of my hands. Don't know your numbers, especially these PE companies or family offices or buying conglomerates will take good advantage of that.

Okay. What's the fastest when you, you have seen that boosted valuation in under 90 days?

SOPs. Build SOPs. It usually adds an added multiple to it. It is literally snapping and creating free money out of thin air.

Free money out of thin air.

Money doesn't grow on trees, but SOPs do.

You still need to extract the cash out of that, but okay, that's a good shout. SOPs. During due diligence, How do you share enough client information to satisfy a potential buyer without actually giving them, you know, the names of your clients? Because that could be just a competitor fishing for stuff, right? It's like you mentioned a couple of cases. Is that just purely just NDAs?

Uh, uh, no. So I've always followed the rule of sign an NDA, you get to know our company's name, Sign an LOI, get to know our customers and our team members' names. So what we do is we'll redact it. So if we're talking about a certain teammate, we won't call them by their name, but rather, okay, their job title or function. And same thing with the client. Um, what, what, what one additional thing, which is also very important that you brought up, is, um, uh, could be a competitor phishing for information. Um, if something feels wrong about a deal, it likely is. Drop out. Uh, uh, it feel very right. It should be two parties collectively working towards a singular goal rather than not. And so trust your gut.

Trust your gut. I love that. So if your gut is telling you something is off, just pull it out. Just don't deal with it.

It probably is.

Yeah.

And depending on how big your company is, you'll have a broker or you'll have an investment banker working with you, they've gone through hundreds of deals prior. They can also sniff bullshit, you know, probably better than you could. So, you know, rely on them for making these big decisions too.

Excellent. What's one inexpensive system you can choose as OPs every founder can build today to reduce buyer's operational risk?

I probably, you know, I'm going to switch it up for you. Agentic AI. I, I really, I really, I really love, I really love how you brought that up. The one thing is that I will just put a little asterisk on because it's something that we are actively going through, is if your Agentic AI is handling not just yours but your customers' data, make sure that you have certain governance and protections behind that. Because if something gets leaked or is used incorrectly, it can come and bite you in the butt. Thank God we haven't had that problem, but our customers are asking about it, so I know that's top of mind for a lot B2B companies.

Yeah. And for our listeners listening to this episode, check the previous episode where we talk with the Personal.AI CEO and co-founder literally about that, agentic AIs and how they can help business operations, right? How do you signal cultural strength in global remote team during an exit process?

It is usually not customary for non-leadership team members to know about the acquisition until the acquisition actually happens. They know once things are signed. At that point, whether they're international or not, it shouldn't matter. I think making sure that there's alignment between the buyer and your team members are really important. As founders, sometimes we get really excited about the purchase price that you see. Oh my God, I'm gonna be a millionaire overnight or whatever it is. Exactly right. You're thinking thinking, well, this is my exit, this is my sale. It's not. It's not your sale, but it's also your entire team's sale as well. And so to be a good founder also means to put your team's wants and needs, you know, sometimes ahead of yours as well. And so when you're negotiating those deals, negotiate for your team as well. Make sure that it is going to a good buyer that cares and is going to continue to nurture and invest in that culture, in that community, in the happiness of your teammates. Because when that transition happens. You want to make sure, maybe even working with them, at least for me, it's my family, right?

Yeah.

I want to make sure my family is well taken care of. And so, you know, advocate for them. And so in all of my deals, I've advocated for certain provisions, you know, post-acquisition saying, okay, well, when this happens, you are going to give this person a pay raise, or you're going to allow this person to do this thing, or take a certain amount of time off, things like this to make sure that they're going to be happy.

Yeah, I love you calling that one out. That's, I want to say that's like should be given, but at the same time, I've been in a couple of M&As where the transition period effectively just made everyone redundant and that's it. So people exited, cashed out, and everyone just got made redundant. I feel like, you know, just, yeah, it's just a bloodbath at that point in time. What do buyers really mean when they say founder-dependent and how bad it is really? I feel like we discussed this a little bit, Jordan, but how bad it is? Are we saying the business is not sellable at all and you should just not expect to sell it if the business is dependent on you as a founder?

Well, founder dependent, it's a sliding scale, right? There's, there's, there's, it's not black and white. There's, there's a grayscale in between. And so it really depends on where you are on that spectrum. If it is very dependent and And it is, you know, if there's like 3 things that are the case, then yes, it's probably not a sellable business. If the owner is, or founder is needed to close new business, then it is probably not a sellable business. If the buyer, or sorry, if the founder is required to keep customers in the business, then it's not a sellable business. So for example, If that founder leaves, will the customers leave with that founder? Not a sellable business. And the third thing is, is the founder needed in day-to-day operations or fulfillments for the product or service? And if the answer is yes, then it's not a sellable business. If you are one of those three or more of those three, you do not have a sellable business. You need to remove yourself from all three of those things at bare minimum.

Okay, that's a great answer. I just remembered what I wanted to add before in the previous answer. You know, there was a lady, I can't remember the name, but there was a big, you know, deal about she's selling a business. And it was, I think it was like $700 million, something like that for the exit price. And they had like 7,000 employees, you know, like a lot. And then when the exit happened, she gifted everyone $10,000. $100,000 in cash, literally every single employee, doesn't matter what they did. And then everybody got as well paid first-class tickets to travel across the globe. And then just for an interest, I just took that, you know, amount of employees and then, you know, the gifts they got, just multiplied, you know, cash. And effectively she dished out about 10% of a sales price of that deal to all employees. Which I felt like was nice.

You know, as a founder, we always, we always forget, we always, we always take wins as just ours, but it's also our teams as well, right? I would not be in all of my sales if I did not have other people in my business. I would not be able to get to where I was able to get, right? And so, and so, you know, we gotta be thankful for our team as well, 'cause they were, they helped us get there, right?

100%, Jordan, 100%. And we had a couple of guests when we asked the question, you know, what's the one thing you would choose as a main factor for the growth? We had a couple of guests going people as the lowest denominator of any business being the people. Like if you don't have good people, unlikely you're going to have a good business. Right. Last question. Sorry, two more. If you had to pick one metric to improve before selling, what would it be? One metric?

Churn. Reduce churn, increase retention. That tends to be a very big red flag for buyers if churn is higher than industry standards. That is usually a deal breaker or non-negotiable for most buyers.

What if your churn is, you know, 2 times less than you closing deals?

Uh, it's if, if you're bringing in more water into the bucket than water leaking out. Yeah, um, you, you usually a good, a good sign, but also the worry is if the water stops to come, stops coming in, um, how quickly will, how quickly will the business drain to zero? Essentially, if there was no further business coming in. So yes, you can make that claim, you can make that argument. Will some buyers take it? Yes. Will some buyers not take it? Probably also yes. And the thing to mitigate all that as a whole is to make sure that bucket is as little leaky as possible, to make sure you have a very sustainable business, assuming that there's no further business that comes in.

So we're saying that there's a potential, there's a point of view, but if we generalize that point of view, the buyers will see the risk of not getting deals closed or selling higher than you being able to fix the churn problem.

Mm-hmm.

Okay. When scaling, should a founder hire talent directly or work with a remote sourcing partner that supplies and manages global talent and why?

It's fully based off of preference. I don't think that there's a right or wrong way to do it. I personally, we personally prefer to hire internally and the reason why is so we can build the relationship. From a starting point rather than have an external person build a relationship. And at the very end, we get connected. I feel like it's— I don't know. I feel, I feel like, I feel like especially if you're trying to build a really strong culture, that that culture starts, that relationship starts on the first point of contact in the hiring process. And so that, you know, with that same mindset in mind, we make sure to tell everybody that goes through our hiring process If they didn't make the job, we send them a, you know, hey, I'm sorry, you know, we're not moving forward with your application. And that is such a big thing. Most people just get ghosted going through the hiring process. And so that just makes sure that we are honest and true and build a relationship because you never know, maybe they will reapply and it ends up working out, but they'll think of Straptive in a positive manner rather than negative. Yeah, knowing that we at least closed that door and gave them closure. And so, you know, with everything that we do, we treat them as if they were already a teammate. And give them the respect of time from day one.

Okay. So we had a couple of episodes around remote work. We actually had a couple of company CEOs who run remote agencies. So one of the main reasons why companies would look to use a staffing partner in remote territories is effectively the laws and taxing and all the intrinsic elements which you might not know about the jurisdiction you're hiring from, let's say Philippines, and somehow not pay out salary in the right ways and then causing some issues to the person or something like that. You never had the situation like that, that never came up?

No, no, no, it absolutely has. We bear the burden of that internally rather than push it off to an EOR. Which is an employer of record. EORs are, are very expensive. So like Rippling is a great example of that, um, or, or Payworks or Paychex or something like that. Um, uh, uh, you know, let's just say that they're, you know, salary is $10,000 a month, expect to pay the EOR 20 or 30% of that, um, on top of the, the $10,000 to do all of the paperwork and stuff like that. It's really not that hard for most countries. There are certain countries that have some very strict labor laws to be considerate of, but for most cases it's relatively easy. Just make sure to also just treat them well, whether they are an international teammate or even a US-based teammate, right? Treat your team well and, you know, things won't come bite you in the butt if you, you know, treat your team well. If there's nothing—

Excellent.

People about.

Thanks for sharing that, Jordan. I felt like maybe it's a, you know, it could be a challenge, but basically you guys saying you just took it internally, not a big challenge. And yes, you're right, 20% to pay, it just eats away from your margin. It's like almost like, you know, to some extent defeats the purpose of going to, you know, other markets to hire, right?

20 to 30%. So you took the lower number rather than the range.

Should have taken higher. Yeah, just making the point. You're just making the point we made it before, right? Excellent episode, everyone. Uh, hopefully we landed a couple of things to you guys today, which one is that it's a long game, right? It's a year if you concentrate, and it's probably a couple of years if you do it unconsciously. Concentrated when it comes to being exit-ready, you know, as a business. There's a couple of things you should be looking at at the very top: founder dependency, no SOPs, remote staffing. And then, you know, the culture, the talent, you know, the systems— that, that's all, in my view, comes with maturity as you advance with the business. But if you keep them in your mind as a green flag for any buyer. You want to concentrate on that and make that happen. If you have a person in your network thinking about the sale or talking about the sale, share this episode with them. I'm sure it will have a value. And Jordan, before we part, any thoughts, ideas, links, anything you're doing, anything our listeners should know about?

Yeah, absolutely. If you're looking for great marketing work, go check us out at stratdev.co. We work with B2B SaaS and service-based companies digitally to help them for profitable and scalable growth and achieving just that. If you wanna connect with me personally, I have a personal website, jordancalderon.me. You can check out all the things that I'm working on these days as well as get in direct contact with me to chat about whatever you'd like. But thank you very much, Mike, for having me on the show. I, I really enjoyed it.

Thank you, Jordan. The links are in the show notes. If you're listening, scroll down, you'll find them. And as always, guys, until the next time, stay safe and see you online.