Build a Business You Can Sell w. Shawn Flynn

If you're building a company to sell, you're building an efficient company. You're building a company with processes. You're building a company that's scalable. And ideally, you're not there running the day-to-day operations. You're actually on the beach collecting money, just checking in.

All right. Welcome back to another episode of the Yes And Podcast. I have a brand new guest to me and to you guys. Well, most of you guys today on the Yes And Podcast. And we're going to be talking about everything around what I hope is an entrepreneur's desire, which is selling your business, what it takes, why you should do it, how you should do it, all of those kinds of things. Plus I have a few little gems to sprinkle in here as well. So without further ado, I'm going to bring Mr. Sean Flynn into the studio. Hello, Sean.

Bunny Young, thank you for having me on your show. This is an honor.

Yes. Awesome. Ooh, I like that. That's some good vibes here. So as we start this off. So I have 5 companies and I've done 14 in the past 15 years of my own companies. I have like a 2-year burn rate, like an 18-month to 2-year burn rate where I just get bored and then I either burn it down or sell it or like I'm, I'm really good at the starting aspect of the company, but it's always been a no-brainer to me to start a company that I could sell or, you know, not have to run. And so I'm curious with the companies that you're helping and that you have in the M&A space, and most people are going to know what M&A is, but for anybody who doesn't, mergers and acquisitions, which is something else we're going to talk about, why is it important to build a company that you can sell?

Oh, great question. And to build a company that you can sell, I mean, there's so many good reasons behind that. I mean, one is if you're building a company to sell, you're building an efficient company. You're building a company with processes. You're building a company that's scalable, that it's not just you doing 100%, that it's you going, okay, I was doing this today. Now this person can do that tomorrow. This other person can do it. And workloads and things You get to step back and to build a company to sell at the very end. Ideally, you're not there running the day-to-day operations. You're actually on the beach collecting money, just checking in. That, that's the idea when you build a company that one day will be sold or will be optimized for an acquisition because the buyer will want to come in and go, okay, let me see the processes. Let me see this blueprint. Okay, let me see when you're out of here that the company's still gonna be growing, still gonna be hitting these milestones. And if you're you're building it for that, I mean, you're just building an overall better business where things are efficient, where you're not— well, you probably are stressing every day because that's part of being a business owner, but you know, you see that progression, you see that the company gets to go where you want it to go, not, not you're playing— you get to be proactive, not reactive, if that makes sense. So there's so many reasons why from day one you should really be thinking, okay, I maybe don't know my exit now, but at least I'm preparing that company, the company for that. So it's in the best position because a lot of exits as well, they're not really planned. And what I mean by that is you might be sick, you might go through divorce, there might be a death in the family. There might be all these unexpected occurrences. And if it's planned to sell, well, when that instance happens, it's still in a good position. It's still in a good position where you can quickly offload it. Whereas if you're not planning for that and one of these instances happen, all those years, you might be left with pretty much nothing. Yeah. So, there's so many reasons why from day one, just to have that in the back of your mind to start thinking about it.

I love that. And as a business therapist, I try not to be stressed every single day in my business. And I find that for a lot of the reasons that you shared, That's what leads to me not having to stress, is the efficiency, is the delegation, is knowing that it doesn't completely depend on me. And one of the most interesting ways that I found to help me with the delegation, and this is one of my favorite things to do, is to actually acquire a company that solves the problem that I'm trying to fix in my company. And that's one of my favorite ways to scale. As well. And what that looks like is, like, I was having this conversation. My friend is one of the leading experts in SEO in the world. Like, he just slays it. And I'm like, well, you've already got this client base, you've already got this audience, why not go into copywriting? And he's like, I don't want to hire a bunch of copywriters. Like, why not just acquire a copywriting agency that's doing maybe a million or less and, you know, doesn't have those clients, but also can't provide— they're really good at copywriting, but they're not great at SEO. And I just, I think that like sometimes acquisition is just like this magical unicorn because in, in another conversation that I had with somebody who had created this really incredible podcasting agency but didn't love it and was just like, I'm going to shut it down, which I've been there, like I've wanted to shut my companies down. My firm belief is that if you have a company that has clients, you can sell that for something.

Yep. I mean, that goes a lot to how to structure the deal, how to be creative with it. But going back to what you said before about the SEO guy and the copyright, I can only imagine the synergies there and the cross-selling. I mean, it's a win on both ends.

Yeah.

Because you're able to upsell here, you're able to cross-sell, you're able to— there's so many positives to that. Either, you know, acquire that copyright or have some type of partnership with a copyright agency or company, or there's so many, so many ways there as long as you're creative and you're open that it, it's a huge win. So, I love that. Yeah. I don't see why people won't—

He hasn't done it yet, but I want part of the deal when he does.

Well, there you go. You're the advisor consultant in it. And don't forget the integration afterwards. You, you get, you're sitting down there looking at the, the models going, you know what? I think you guys would make more money together. Here's my consultant fee.

Exactly. Exactly.

And that's your 16th business there.

Maybe, maybe not. I think that, I, I mean, I have taken cuts before of matchmaking in business and I just think that that's, the way that I think about things. And it— I'm sitting in a company right now that I technically sold. You'll love this. And it was all IP. And like, a lot of people underestimate their IP. And so in Virginia, which is where this company is, there wasn't a coworking space that had on-site childcare.. And it was a huge need that I had and a lot of other parents had. And so I started, rented the coworking building, started the coworking business with two partners. The partners left and I was like, what am I gonna do now? I mean, the, the company was not even like 6 months old. I'm like, do I really wanna run a brick and mortar business? No, but I still think it's a great idea. And so essentially I sold the IP and I sold the assets.. And because sometimes I have a stroke of genius, I kept the actual LLC because I had a lot of losses in it to carry against my other LLCs, but I sold all the IP and I sold all the assets. And that way the new business owner didn't have to inherit the losses as well and take on all of that debt. And so I really do think that people underestimate the value of their ideas and the value of their companies. And I mean, you probably could argue, I want to hear your opinion on this, that people overestimate it too.

Here in Silicon Valley, you can only imagine the amount of value people put on a patent or that, that you go, wait a second, there's no, there's no use case. There's no proven track record in the market. And I mean, Bunny, you've had so many businesses, not always the best mousetrap wins. So, a lot of the times it's, you know, the market and the sales, all that behind it, but looking at IP, okay, you have this IP, but, you know, Oracle or these big companies have something so similar that they don't care that they're infringing or this other thing and you have no money to fight it. So, how valuable is that IP at that, at that time? And a lot of people, a lot of engineers, you'll see them just build, build, build. Put pads, stay in stealth mode forever and not go out there and, and get sales, get clients. And then one day they go, well, you know what, I never got those, but we've already put in $1 million, $2 million in building out this IP, you know, 3 years of engineer hours. We want to sell this company. And you're like, that's great, but do you know how hard it is to sell that? Versus if you had, you know, on day one started having customer conversations, started taking surveys, starting to get feedback, making sure that you designed what you're building for that customer, if they had taken a different path that whole time, then it would definitely be worth something. I mean, your company with the childcare in the shared workspace, that's genius. I mean, it really is. And, and you might be saying you were selling the IP, but you're selling that business model. You're selling something that's proven in the market with surveys, test case usages, all this stuff that one saves the acquirer a lot of time. Saves them trial and error, saves them all these things that you can point value to, real tangible value that's been proven in the market. So, it's not just IP and idea. You had a lot there bundled together in that package that I think if people just listening, they may not catch. Yeah.

Well, it, it was a beast, I'll tell you that. Not something that I want to go through again very soon. And I, I want to take like a commercial break, not for advertising from this conversation, but I want to roll into something that you and I haven't discussed that we're going to discuss. And I want to go back to— after that, I want to go back to this valuation conversation and be able to finish around that, because I think that that's a valuable conversation to have as entrepreneurs, and especially as somebody who owns a tech company. I'm selfishly going to have that conversation as well. So We started talking about your tea when we were offline before we started this podcast, and something that I don't think you know is that I lived in northern China, northeastern China, for a year as a stuntwoman. It's a whole nother story. However, is that where your love of tea came, when you were living in China?

Actually, yeah. So I lived in China for 5 years.

I was like, yes!

And yeah, every morning I Wherever I worked, wherever, you know, I mean, Bunny, you know how it is. You go to a meeting, you go to someone's house, wherever it is, first thing it is, start pouring the tea. So ever since China, anytime I go to Starbucks, Pete's, meet someone at a coffee, it's tea, tea, tea, tea. You buy— I have this huge cupboard in the kitchen of all these teas people have given me over the years. And my wife's Chinese. A lot of our friends are Chinese. So when they come and visit, it's, you know how it is. Here's this from my hometown, here's this from our area, and there's a story behind it.

And yeah, and it's all loose leaf, which we don't do in the States. Like, we do all bags.

Yeah, I was actually at Pete's the other day and I asked him for loose leaf tea and the lady's like, what? And then the other guy, the guy was like, oh yeah, we got that, but no one ever asks. I'm like, what do you mean no one ever asks? Like, I'm looking around. Like, and he had to show her how to open the bag, like put it in with the scoops. And I'm just looking at it amazed. I'm like, that should be the default. What, what is going on here?

I know we have an herbalist. I'm so lucky to have a Chinese medicine doctor here and an herbalist. And so she was making fertility tea. This was a couple years ago cuz I just had my baby in, in December. And it was like bark and leaves and all this stuff that I mean, if you've ever received medical Eastern medicine, it's awful. It is terrible and it works. And so I was taken back to my days when I was in China and I basically got kidnapped by this tiny Chinese woman in our village because I had a migraine. She knew I had a migraine and she made me drink this horrible concoction. Migraine was gone. And like, she thumped me on a couple places. She didn't put any needles in me, but like, she thumped me on a couple places. And here I was, just the American that thought I was gonna put Tiger Balm— which, don't use Tiger Balm if you're an American in China, because Tiger Balm in China is a whole new level of gnarly. It's like Nutella in Europe tastes different. Tiger Balm in China hits different. It hurts. It's awful. And so we— I went to go make this tea, and you've got to boil it down for 30 minutes or whatever it is, and then pour it in this cup, and it's thick and it's disgusting. It tastes like you're drinking bark. And, you know, however long— let's say 15 months later— we have a baby. So something works about it. I just— I love that experience, and I— it's not often that I get to talk to somebody else about being an American living in China and receiving kind of that that cultural experience. Cuz I just, I, you're right. Everything is such ritual and habit before you can get to business.

I wanna hear this stunt woman story.

Yeah. Well that's, that's like a whole nother time. That's, that's a whole nother time.

So, um, I just like the way, and Bunny, I think you'll appreciate when you lived in China, half the stories you tell people that have never been there, like that never happened. But if you talk to someone that's been there, like, "Oh, yeah, well, I could top that with this one." It's—

When we were making the stunt set, when they were creating the stunt set, I will never forget, they had— They don't have plugs on set. Like, they didn't have plugs. They had two wires that they shoved into, like, another strip. And there's a guy using a power saw over the side of a bridge with another guy holding his ankles. So that he can get the right angle. And I'm like, and we're about to do stunts on top of this thing that we're building, like in this man— it was, it was an experience. So that's for another time. And to wrap this up and go into valuation. So a tech company is a different valuation than a coaching company, than a brick and mortar space, than a product space. My understanding is that the highest valuations for companies are SaaS and membership. Tell me I'm wrong.

No, I would say, because if you look at it, you have repeatable revenue. Ideally, the SaaS membership, it's not concentrated customers. Normally, you know, there'll be less than, you know, 5% or so any one customer. So you'll have a lot of customers there. So that's de-risk. Normally the margins are huge once these things get going. I mean, it's not tip, you know, unheard of to hear 80, 90% margins for these SaaS companies, for these membership companies for that. So you got, you know, customer concentration low, you got repeatable revenue. Oftentimes there's the one-time setup fee in that, which then actually covers your costs. And then the subscription after is just gravy. You know, low barriers of onboarding the clients that there's just so many things for those types of companies. You know, you don't have— it's not asset heavy. You're not having to buy a million-dollar machine, you know, to service more and more members. You're basically just scaling the platform that's already there, the foundation. So it's cheap to expand. You're not really location-based either. So when you start looking at all these areas that limit the expansion, increase the risk, lower probability of things happening, they're not there in those types of businesses where they might be at a bakery where it's fixed location, equipment-heavy, skill set. Only a few people have those years of baking versus engineers. You can outsource that anywhere in the world because they have to physically be there in the bakery. There's so many things to certain businesses that people might go, oh, that's mom and pop, that's, that's small. But it's actually so much more riskier than some of these other businesses. Even the startup cost, the equipment, a 5-year lease, all these are 10-year at these locations. Those are all risks for 3 engineers working at home. 2 of them are overseas, one's in the Bay Area raising capital between coding and it's just, it's so different. And having, sitting down and have that conversation with people, a lot of them just shake their head. They're like, wait a second, I thought the gas station would be the safe bet. You're like, with environmental laws, with all these other things, first the, you know, the tech company over here just built a new plugin for WordPress or something like that. It's, it's, it's so different, the two. Um, so yeah, no, I, I think you're, you're spot on.

I hope everybody had a pen and paper for that. Like those are the aspects that we really want to look at in every single company. And I have like this wheel that I've refined in my head and also in some of our programs to explain, cuz business is simple. Making money in business is simple and it's about how to scale that and make it even simpler. And We're not here for my brain. We're here for your brain. So a lot of our listeners are coaches or consultants, and it's the Sean Flynn LLC, it's the Bunny Young LLC. It's, you know, I'm showing up, I'm coaching, I'm consulting, I'm creating programs. How do you ensure that you're creating that company that you can sell and make sure that for these coaches that are like, I love everything that you're saying, Sean, I am the face behind the brand. I am the brand. If I'm not able to do this, everything stops. How do you talk to them today and point them in direction where they are building a company that has the ability to be sold?

Good question. Whew. I mean, that's a tough one. If they— some people see themselves as that brand and they won't let go. Of anything. But if instead of, okay, my picture's there, my face there, let me step back. All these processes are in the background working, onboarding clients, the processes, building out course materials where it's, you know, they click a button, this gets downloaded, these courses they learn from. I would start building out, okay, do I have to actually do, be face-to-face every minute, every hour with the client? Or am I building coach-in-the-background subscriptions? Maybe I have one meeting, but then they do 5 courses in the background. Or maybe it's these different packages, these different layers where all this is going on without my— because time is the real limiter for someone like that. A lot of coaches, they go, I can increase my prices to a point, but even at that, I'm still limited on, on time. So then it's okay, well, Can I have trainees under me? Can I have these courses? Can I have these systems? Can I have these programs? And now you have all these different revenue streams as well, where if, say, you're sick or you get an accident or you just want to take this vacation, these revenue streams are still bringing in money, still pretty predictable money as well. And you can now do an analysis in them and go, okay, this revenue stream is probably worth around this. This one is probably worth around this. Okay, this bundled together is probably worth around this. I have all this data on my clients. I have these relationships. What would it look like to this strategic here if we were to combine? Or maybe then at that point you start acquiring other companies where, yeah, you're, you're still that parent, but you have this company that you just acquired that's filling in this role and this one that's filling in that role. Now you start getting that conglomerate and it starts growing, growing, growing. And I mean, as we talked about, kind of at the very beginning, building things to scale. And if you're thinking this whole time, okay, what's the processes going in the back that I can put in this little almost instruction book that I can just hand someone if I go on vacation? I mean, how many people have a LinkedIn photo that you're like, hey, that was 10 years ago. What have you been doing since then? I mean, everything could be on autopilot in the background and, you know, you could even sell that business for, well, depend on who buys it. They might buy it just for the revenue stream, the partners, the, the clients, all that at that point, and go, we loved your name, we loved your face, but really our much bigger brand, we just want to wrap this, roll this in here. So if you have— going back to, they would do an analysis of the company before the acquisition, go, how much of this company is you? How much of this company is everyone else? And if they see that it's everyone else, all these processes, software, all that, and that you're just there, but you're in a, you know, you're not there day to day and it's proven you're not there day to day. Now there's so much value there. If it's, oh my gosh, Sean is here every day working on this. If he leaves, he could take 40% of the business with him. This thing, we're still interested, but the way we would, and this goes to when you sell a business, there's so much around the structure of the sale. It would be, okay, we'll give him this little bit of cash on closing, but this huge earnout over time for these milestones that would make sure he can't leave. And if he leaves, then he loses all this. And that's how they would structure the deal. I mean, you'd ideally want the deal structured where here's a ton of cash, here's maybe some upside, but here's a ton of cash on closing. And this other is versus, hey, we'll give you the littlest cash on closing and this seller's note, this earnout, all this equity, all these other things because we need to bundle it so you're here because we need to de-risk our side in the purchase by having all the structure that makes it so you're heavily involved. So you're still working for years after. So there's kind of a couple things to, to there. So I'm not sure which way you want to go or if that was just a—

No, I think that those are some great things to think about. And the, the thing that I want to leave on to follow up from what you just said is twice. I've done this twice because I didn't learn my lesson the first time. I've taken that deal that you talked about where I overnight I get cash and I go from owner to employee, and I am a shit employee. Just need you to know that.

It's normally not entrepreneurs.

They're— yeah, I am unemployable. And so I've done it twice in two of the companies that I've sold, and I've learned my lesson that— and when people want to come and buy my consulting agency and they want to do that kind of, oh, well, just for two years, we're going to pay you, you know, your salary or two times your salary. I'm the first person to say, I am a shit employee. You do not want that deal. And I don't want that deal because the energy changes as well in the business when I go from owner to employee. And so, yeah, I just, I think it's, it is wise for me to share that with this audience, to know that like I've personally done that and I don't super recommend it unless you can be an employee. So I'm, I'm not an employee, but yes. So we are going to pop some resources below, um, this episode, and you know, anything that you think that this community should know as a closing note or any resources you want to personally recommend?

One thing, touched on it at the very end there, when looking to sell your business, think how you want to structure that exit before you sell, before you go out to the market. Have those conversations so you know the options out there. 'Cause I'll talk to a lot of business owners, even in these middle market companies that have no idea the structure, the tax consequences, the valuation range that they're possibly going to get for their company. They didn't have the conversation with their wealth advisors, tax planners, their family, all these, all these conversations that if they have a year in advance or at least before, changes so much. Yeah. So have the conversations, talk to the experts, talk to Bunny Young Young, talk to everyone in advance. Find out lessons from others, and then move forward with the, the processes that, that you want in life.

I love that. Thank you so much, Sean, for being here. It's been a wealth of knowledge, and I feel like as much as we focus on the building of the business, exiting the business is something that we need to spend a fair amount of time on too.

Bunny Young, thank you for having me on your show. This has been a pleasure.

Awesome. All right, that is another episode in the books of the Yes And Podcast. Check the show notes below. Below for the resources and links to find Sean and connect. Let us know what you thought of this episode. Leave us a review. Share this with somebody who you love and care about that is an entrepreneur that needs to have this information. And come back and join me for another episode of the Yes And Podcast. Thank you so much.