How & When To Sell Your Brand For A $10M Payday

The market right now is a complete seller's market. There's so much money in the economy floating around when interest rates are so low that people with a little bit of extra wealth and they're looking to invest that money. You know, looking at the stock market, looking at real estate investments, the returns right now are just lower than they've been in my entire life. So people are looking to put that money into businesses and take on a little more risk and get a little more return. So it's a really hot market for sellers right now. There's much more buyers than there is sellers.

You're listening to Freedom Fast lane presented by capitalism.com this is the show about building businesses and investing the profits so.

That you can live life on your terms.

And now your host, the future owner of the Cleveland Indians, Ryan Daniel Moran.

Hey, fastlaners, Ryan Daniel Moran here. And today I'm gonna be talking about selling your business. If any of you have a business that is, you know, at or near that million dollar point or above, you might want to start thinking about the payday that you are going to get at the time that you decide to sell. And for a lot of you, that might be sooner than later. Right now things are great. I think we're in the ideal time to sell a business. There are more buyers than there are sellers right now. It definitely factored into my decision to sell in 2017 and now I'm set for life. And yes, I could have continued to operate the business and grow the business and.

Grow and do all the things I was doing. But times are special right now and I think it's time, if you run a seven figure business or an eight figure business to think about cashing in some chips. You can always start another business. And the person that I'm going to be chatting with today does this full time. His name is Logan Karodi and his runs a business called bizsold.com obviously he's a little bit biased in terms of should you sell your business or not because it's what he does for a living. But he's also done this three times himself, meaning he's grown businesses and sold businesses. And I have found that there are not a lot of brokers, there are not a lot of people in the marketplace who are willing to educate physical product sellers and brands about what does it look like to sell a business? How do you maximize the amount of money that you get when you do sell and even evaluate your business and say, is this worth selling? What kind of numbers are you are you going to be looking at? I asked Logan to come on because he talks a lot about how to properly valuate your business, how to increase that valuation. And we talk a little bit about specifically for Amazon sellers and physical product sellers. What does the market look like right now? What are the buyers looking for? How do we position it to them so that there are buying wars? Rather than us trying to convince them to take to give us money, how do we position it so that they're trying to convince us to let us give us money? So we talk a lot about that and we talk about in this window that we have of these businesses doing well, how do we operate our business so that it maximizes the amount that you can sell for even if your exit isn't for a couple of years. So if you sell anything on the Internet and you want a big payday one day, you are really going to enjoy this chat with Logan Karotte.

Today I am joined by someone that I'm very angry with. It's Logan Kirodi. Logan, thanks for coming to Freedom Fast lane.

Hey Ryan, my pleasure.

Yeah, I know what I'm gonna beat you up about.

I know that Logan has sold three seven and eight figure Internet companies. I've only sold two. So Logan, I don't like being upstaged on my own show. How does it feel to be 50% more successful than me?

You know, hey, I got a few years on you. I think, I think I'm, you know, I'm 35. You got a few years, I'm 30.

So I got to have one more exit in order.

There you go.

To be as, to be as good as. Logan, Logan, you are, you're, you're a business broker and you got into this business of buying and selling e commerce businesses because you had a couple exits yourself. So you've been through the ringer a couple of times and you know, I know you know a lot about selling physical products businesses and Amazon businesses. I was hoping that you could tell us a little bit about the state of the market. Where do we stand right now? You know, what are people sitting on and what's the opportunity that's going on in the market right now?

Yeah, absolutely. That's a good question because I think a lot of people don't realize what they're sitting on right now. And when I say a lot of people, I mean a lot of e commerce business owners, people that own online businesses. The market right now is a complete seller's market. There's so much money in the Economy floating around when interest rates are so low that right now private equity firms, people with, you know, a little bit of extra wealth, cash sitting around, they're looking to invest that money and they're looking to make it work for them. And you know, looking at the stock market, looking at real estate investments, the returns right now are just lower than they've been in my entire life. So people are looking to put that money into businesses and take on a little more risk and get a little more return. So it's a really hot market for sellers right now. There's much more buyers than there is.

Sellers and we're seeing valuations on companies for the amounts that would make Bernie Sanders roll over in his grave. When he finally dies, he's like a thousand years old. But, but specifically with Amazon businesses, we know that these are hot because.

In my experience private equity groups have said, hey, this is, this is the emerging trend, so let's get a piece of it. What have you seen be the market or the interest in physical products, brands specifically?

Yeah, that's exactly it. I mean private equity groups, investors five years ago, they didn't really understand the whole market and they still don't fully understand it, but they're starting to see these $1000-000500-00000 companies and acquisitions happening. So it's catching their eye. And private equity last three years has really started just taking a huge interest into E commerce space. They see the potential. Amazon, Walmart, these places open up marketplaces. With Walmart opening up.

It'S a golden opportunity that E commerce and online people can jump into. And it wasn't there five, six years ago. So it's a huge market right now.

I've seen five, six years ago, most of these businesses in our community did not exist and now we've helped incubate hundreds of seven figure businesses. But in your experience, especially with what you've seen at Bizsold, your brokerage, when do you think is the right time to say, you know what, maybe it's time for me to take chips off the table. Maybe it's time for me to cash this in. When do you think that is in most of these e commerce companies?

You know, that's a good question. And it's one question we get a lot. And it's the hardest question for business owners to answer themselves because you know, when, when the time is to sell is usually when you're doing the best, you know, so your business is growing year over year, you have huge growth rates, you're just really knocking it out of the park, and that's when you really want to sell. But it's the time that you're usually least thinking about selling, right? When you're doing really good, you're like, hey, I'm not going to sell this. The cash cow, we're cleaning up. So that's when you want to start thinking about selling. Because as soon as you start, you know, if you have a bad year or you start trending down, it can make your business unsellable or almost worth nothing. So, you know, every situation is a little different. But private equity guys, they'll come in, investors, they'll look at a business, and when they see that you have a down year or that you're trending downwards, it's just a huge red flag for them. So when you have nice growth year over year and you're really knocking it out of the park to say that's the time to sell, because you can demand what you really want. And obviously there's multiples and the market's going to really get you what you deserve. But you can be pretty picky about what you want and you're going to have buyers lining up when you're year.

Over year growth at what level? What top line, what bottom line? Where's the point where you say, okay, I can at least know I'm going to get a deal if I've met these numbers, right?

So, you know, there's buyers for smaller businesses, obviously, and if you're doing 50,000 a year net, there's going to be buyers out there. But what we really focus on is companies doing around 250,000 a year plus in EBITDA. So smaller companies we definitely look at and we work with them. But when you get over a million a year in ebitda, that's really when and when I say ebitda, earning before interest, taxes, depreciation. So when you get over that mark, that's really when private equity groups are going to take a keen interest into you. So if you get over a million a year cash flow, you're starting to rake in that money. That's the time you really want to look at selling.

And have you seen a difference in the multiple that you'll get at different checkpoints in ebitda? For example, I've seen that when you're under a million, the multiple is lower than when you're over a million. And that seems to be kind of a magic point because different types of groups will want to buy. We'll just say, I only want a million dollars. In ebitda. I'm curious if you've had the same experience because you've.

That's exactly the case. So over a million is what I want to say. Probably 90% of private equity groups are looking for. I mean, we get inquiries every day from two to five private equity groups emailing us saying, hey, we're looking for businesses doing 1 million a year in EBITDA. Plus, you know, here's our criteria. But they all want that 1 million a year in EBITDA. And that's, once you cross that line, you start, your multiples start going up because there's such a demand for those businesses that you can really, you can really ask a higher multiple. For example, like, you know, just a brick and mortar business doing a million a year. EBITDA is probably going to sell for like a 2, if they're lucky, 2.5 multiple. E commerce is almost double that. So, you know, that kind of gives you an idea of the state of the market when you can get double what a brick and mortar business is getting.

So I'm going to make some claims and you can tell me if I'm violating any legal restrictions here. So what I'm hearing you say is that an Amazon only physical products brand that is doing at least a million dollars in EBITDA will typically sell to someone in your network. And based on your experience doing this, a bunch of times that business is going to sell for between four and $4.5 million. Am I running the numbers correct?

Yeah, I would say 3 to 4.5 to be conservative. I mean, you know, some of the factors that are going to determine your multiple is like how much reoccurring revenue you have. So if you have a lot of subscribe and Save customers and your reoccurring revenue is really high, you can even push above, you know, let's say you're doing a huge amount of subscribe and Save. You have a supplement business and you, you know, a big chunk of your revenue is coming from subscribe and Save. You could be pushing 5 million in a sale, you know, and then your growth rates are going to determine your multiple. But yeah, what you're saying is pretty, it's pretty close to accurate.

It's 3 to 4.5 and based on what time frame? Because there's, there's, you know, there's Christmas rush, there's Prime Day, and Amazon is growing so quickly that if you were to evaluate it based on the last three months versus the last three years, those last three months look pretty darn Good. In terms of multiple, so what time frame are you usually evaluating that, that EBITDA?

We're usually looking at a trailing 12 months. But like you said, because sometimes there's such huge growth spikes, you know, you can, here's what you can do is sometimes you can take a projection so you can take your last three months and then you can project those out. But you have to be willing to carry more.

When I say that, we're getting a little more technical, but what it means is you can use a projected cash flow based on what you think future growth is, but you have to be willing to take that as an earn out. So over time you get paid out that amount. Typically, most private equity firms are going to try to value your business on the trailing 12 months and that's what they're going to put the valuation at. So that's usually what we go off of, is trailing 12. But if you have huge growth and you're starting to pass three to six months, your growth is just doubling. That's what you could make a case to say like, well, we're going to use a pro forma for three months out and you may have to take an earn out for that pro forma portion of your sale.

And what types of structures are you seeing be popular right now? For example, I sold a majority stake in my business and that gave me the eight figure check. But I, but I maintained a position in the company so that we could continue to grow together and I can serve as an advisor. But I'm out of the day to day, which was the exact type of a deal I wanted. Right. And I feel very, very grateful that I found a partner that was willing to customize it for what I wanted. So what are you seeing be the structure that is popular right now?

Yeah, that, I mean that exact structure is most popular with private equity groups.

They like to see a seller retain some equity and then stay involved or at least carry some equity at a minimum. Because you know, if you look at it from a buyer standpoint and you're going to come and write a check for $10 million, it makes you a little nervous if you're going to write that check and the seller is just saying, I'm out of here, I don't want to maintain any equity and they just want to kind of flee the country or something. So private equity groups love when the seller will retain a little equity and it can get you a little more valuation on your business as well. So that's really the, you know, the structure they're looking for is, hey, you know, at a minimum, they like to see, I'd say 10 or 20%, but it really varies on the deal. But, you know, if you start to get in the 20 to 35% range, you're really going to attract way more buyers.

And what about in terms of, of involvement after the sale, for example? You know, I, I did not stay on in an operating role because I didn't want to. I wanted to pivot to an advisory role. But not everyone is ready to make that transition. Some private equity groups say, we need you to stay on. What's been the structure that you've seen be popular in these types of businesses?

Yeah, every case is really different. You know, it's if you have a, like, you know, your business, Shear Labs was really good. You know, you guys had a quality brand. If you have a good brand, a good strong.

Brand built up with good marketing, I mean, you can really demand, you can kind of dictate the terms of what you want. So a lot of sellers don't want to stay involved anymore in the day to day. And that's kind of like the entrepreneurial curse, right, Is you built up a business and you're just kind of burnt out with it. You don't want to grow it anymore. And that's, yeah, you know, a lot of the reason we see people want to sell. So in that case, private equity guys get that. They're like, you know, we don't want you to stay on if you don't have a real passion for driving this and you don't want to be involved in the day to day. So, you know, we just sold a business where the buyer stayed on as a board member. You know, he has an advisory role, but he's not involved in the day to day. That's pretty common, you know, but again, it's, it's all up for negotiation, really.

And one of the beauties of this market right now, now that America is great again, is that since there's more buyers than there are sellers, the seller can kind of be choosy into the type of structure that they want. So I have a good friend here in Austin who just went through an acquisition and he had three offers on the table. One had more money up front, but it required him to stay in the business for two years. And the other was less money up front, more potential upside and allowed him to exit day one. And he went with the one that gave him the ability to exit and more upside because he was confident in the team that he had in place. So it's been, it's been my experience that you can be choosy with the type of deal that you want because there's so much money out there. And, and Logan, I want to ask like to the. I learned what private equity was and what they wanted by selling a business to private equity. But before that, I didn't really understand what they wanted or what they did. So would you help us understand the psychology or the mentality of the groups that are buying these businesses?

Yeah. Yeah, that's a great question because. Yeah, you know, every time you sell a business, you kind of learn more and more about what's going on in the process. So a lot of people probably don't understand what private equity is. And private equity groups are a group of people or a firm that's raised money. Usually they've gone out and let's just say they raised $100 million. They're going out to deploy that capital, buy businesses, run those businesses and then flip them in a five to eight year time frame is their goal. Private equity goes as small, usually as about a million a year in Ebitda up to there's $500 million billion dollars deals that are being done with private equity groups. And they're kind of like house flippers for businesses.

Their goal is to buy a business, take the dividends, flip it for a profit, and then move on to the next one and get their investors a return on their money that they can get outside of the stock market or just low interest rates right now.

And so is their model to make money when the business is resold or is it to maximize the profits? And I'm asking this because if we know what the, that the buyer is looking for, we can customize our strategy to be a little bit more attractive to them. So go into, you know, what their financial model is in order to maximize their earnings.

Yeah, so it's both. They want to make money when they sell the business and they're looking to tighten up, grow the business and make it more attractive for a sale. So usually they're looking for a business that they feel they can come in and add some value in, whether it's putting a management team in, whether it's bringing that business to maybe brick and mortar retail. Each private equity firm usually has a good niche. So we just sold a business where the private equity firm's angle was that they have ends with Target and Walmart on the retail side, brick and mortar. So they felt they could really take this business from 8 to 10 million to 15 to 20 million. And so they'll come in, they'll buy the business, they'll usually put in a management team and they'll try to increase profits, increase revenue and in that sense then sell it.

Hey guys, this is Ryan. We're going to take a quick break and we'll return to the show in a second.

Hey fastlaners. Ryan here and I wanted to take a second and brag on one of our backroom members. Our backroom is our mastermind, really. We're focused on getting to $10 million in top line revenue. And I wanted to brag on athletic greens. They're in the back room and they have just absolutely killed it, not only with expanding their sales but really by making incredible frickin products. So the products were made out of need by the founders and as a result they've been featured on Tim Ferriss, they were featured in the four Hour Body and you've probably seen them all over the web. The reason why I'm telling you about them today is because I want to support them by encouraging you to go over to athleticgreens.com Amazon obviously you know that I am really big on maximizing your Amazon presence and I also just really believe in the product. So for example, I like to wake up in the morning, put my greens in a water bottle, add in some creatine. Sometimes I add in a fat burner. If I'm on a cut, shake it up. And that's sometimes my morning pick me up if you've ever heard me talk about my tribe. 5. I have five habits that I practice on a daily basis. My B point every day is getting to the gym and having my greens. And when I don't have time for a big salad or making a smoothie, I supplement with athletic greens. So I'd highly encourage you to support them. Head over to athleticgreens.com Amazon and give their 30 day packs a try. All right, let's head into the episode.

You mentioned earlier that if you've got a strong brand that will do better or be more attractive than a business that is just selling a bunch of products. Would you? I have my opinion and I feel like I preach this from the mountaintop, but sometimes it feels like it falls on deaf ears. So to someone who brokers a lot of these businesses, what does that difference mean to you?

Yeah, I mean that difference is huge. You know, you have to think too when you go to sell a business, if you kind of put yourself in the mind of a buyer and what they Want you kind of think, you know what, what is really valuable here and branding a brand name, something that has repeat customers. You know, someone that, because private equity guys, these guys, some of you guys have $500 million sitting in a bank account, they need to look at your business and say, hey, I can't do this myself. This guy built up a brand, he built up a reputation, he's put in the work. So we're going to come in and take that to the next level. But he's already put in the groundwork, you know, the ground floor for it. So.

Having a brand is really huge. I mean it's, you can sell business. You know, there's businesses doing 100 million a year that are just selling random products. But your multiple is going to be much more when you're selling a brand. Right?

And what defines a brand to a private equity group? I know what it means to me and the freedom, fast lane community and us greedy capitalists. But to a private equity group, how do they evaluate that?

So what they're looking for is a trademark, is ip. They love ip. So any intellectual property, you have a customer raving fans or fan base, you have, well, packaging that separates you from the group. So you've really, you know, you're like a McDonald's on a smaller scale. You've started to develop a niche for yourself, you started to develop a following, you really started to get your name out there in the market and people are buying your product because they like your brand. So obviously we all start out businesses. You kind of start with selling to a lot of people. You're selling to whoever and your marketing is selling it. But over time you start to get brand followers and people that are buying your products because they like your brand. And when you start to get in that phase, that's when really private equity takes a keen interest.

I have to work with a lot of entrepreneurs and remind them that they're building an asset, that everything that they do builds the equity in their business. It's not just how much money this is going to put in your bank account, you're going to have an exit one day if you do this well. And I have to remind entrepreneurs of this and I don't think that they realize what they're sitting on. You look at this from a different perspective. In a lot of times there's value that the entrepreneur doesn't see in their business that they're overlooking that if they knew that was valuable to someone else, they could highlight it or maximize it to sell for more Money. So what are some of the things that E Commerce and Amazon based businesses a lot of times are overlooking that's valuable to someone else who's thinking about buying it?

Yeah, really good question. So you know, I 100% agree with you that a lot of business owners, they're running their business and they're just putting the money in their pocket and you know, this is great, I'm making a big payday, but you don't realize what you're sitting on. And the more you reinvest your business like we talked about earlier, you're going to get three to five times that out when you go to sell. So you start reinvesting, you start building a brand, you're sitting on a huge asset. And what a lot of these PE firms and a lot of the buyers main things they're really going to want to look at is your intellectual property. So trademarks you have add value to your business. Your books, your financials, how clean your records are. So that's, we see tons of sellers get tripped up on this is they come to us, they want to sell their business and their books and their records are just a mess. So you got to keep really clean books and you got to keep clean records. One thing we recommend doing is getting reviewed financials every year so you can find an account in a CPA firm outside of your normal CPA firm. You get reviewed financials, it just adds huge value to your business. And when the private equity groups come in and they see this like, okay, these guys got their stuff together, we can't mess around trying to lowball these guys. Or you know, it adds a tremendous value, that reoccurring revenue, you know, that's the number one thing that I think a lot of entrepreneurs overlook is reoccurring revenue is going to add, it really jacks your multiple up. So you know, software companies, SaaS, services of software, you know, those companies can sell for six to seven times earnings or sorry profit because they have the reoccurring revenue model. So with subscribe and Save, you know, I tell all Amazon sellers that you should really be pushing hard on the subscribe and Save.

That's, that's really interesting. And, and it makes sense for the buyer because that's basically like their hedge. That's the predictable revenue that they can, that they, they know is going to be there unless something goes to, you know, absolute hell, if you will. Logan I have a bit of a New Year's resolution which is I need to teach less and I need to tell more. Stories, because people learn by stories. So would you help me out and share a story or two of one of your clients who sold for more than they expected and tell us a little bit about how the situation played out?

Sure. Yeah. So actually we sold.

A little less than a year ago. We sold a supplement company. Supplements are obviously a hot space to be in. Very competitive, though. And you know, people, we always tell sellers we will want to go to market. A realistic expectation. If you go to the market at five times your ebitda, you're going to turn off a lot of buyers. What you want to do is create a bidding war that's, you know, so you go to market at below or at what you're valued at. And like we talked about with the sellers, it's a seller's market. You're going to get a bidding war. So, huh. You know, that company, we took the market at 10 million, ended up selling for a little over 14.

We had eight offers. So you know a little bit about the process. Usually you go to market, you'll start getting interest, you'll get what's called a letter of intent. And Ryan, you know this, but I'm just kind of giving it to your followers here. So you'll get a letter of intent, lays out the terms, purchase price.

You know, all those, all the things we talked about, like whether you're going to stay on. Here's our terms. You accept one of those letter of intents. The idea is you want to get four or five of those to really, you know, let each buyer know, hey, we have another letter of intent. You need to come to the table with your best and final offer and sweeten the pot here for my seller because he's got several offers on the plate. So you get to that point and then you go under Loi and the buyers are going to do what's called due diligence. So they're going to go into your business, review your books. They might have a CPA firm or auditor come in and tear through your books, look for any discrepancies, look through your bank accounts, check your trademarks, make sure you don't have any outstanding lawsuits. Just make sure that they're buying a good investment.

Due diligence can last anywhere from 30 days to six months, depending on the size of the deal and how clean your records and your books are. And from there, you'll set up a closing date.

So, Logan, before we go there, what level did you say that business was at in terms of profit?

I think they were doing close to 3 million. And they had a good chunk of reoccurring revenue.

So they sold for a little over four times. But you strategically went to market a little bit low in order to create a bidding war, which is an opposite strategy from what I have heard. That. That's interesting. And, and what was it about that business specifically that was compelling to get eight offers on the table? Was it the recurring revenue piece?

Yeah, that one.

Tell us about that.

Yeah, they had about 280,000 in reoccurring revenue from subscribe and say that they had just signed up with. So they really had a ton of reoccurring revenue coming in in a short amount of time. And that like I said, I mean that is just like a huge sell to buyers because, yeah, they say, hey, we buy this next month, we're just going to be collecting this money next month. After that we're collecting it. I'm sure you're going to have people dropping off, you're going to have people signing back on. But the reoccurring revenue, it just really boosts up your multiple and it attracts a ton of buyers.

That makes total sense. I want you to comment on the difference in spaces. Are some markets more attractive than others? Are there some that get higher valuations than others? Like do supplements do better than bike stuff or cooking materials? Like does food do better than, you know, where I'm going, certain markets that do better than others.

Right. And yeah, there is certain markets do better. And the markets that are really hot right now are, you know, lower cost inventory items. So if you're selling a $500 bike, you're still going to have some buyers, you're still going to have people interested. But you know, when you have $2 million in inventory sitting in your warehouse or sitting at FBA, it kind of turns off some sellers or buyers because they're not as interested in like having huge chunks of inventory sitting out there. So you know, supplements, skin care, smaller products, some electronics are hot. But you know, electronics is not going to be as good as supplements or skincare. Things that people repeat purchase. So personal items, consumer goods that people use over and over again, those are the really hot industries right now.

Yeah, I've notice that there's a bit of a balance here. Of the things that are the easiest to recur, like a supplement, for example, they tend to be harder to brand, but so you get the recurring revenue. But on the other side, physical products that are not as consumable are easier to brand, meaning easier to create a valuable brand. So there's a bit of a balance between those. But if you can do both or you can tip your cap at both, if you've got a business that is one time sales and you can work in some recurring revenue products or on the other side if you sell a commoditized item but you can create a little bit of a brand about it, either one will dramatically boost your valuation to a potential acquirer. Have you seen the same thing, Logan?

Yeah, that's exactly the case. You know, it's and I think a lot of people looking to get in on Amazon businesses and start an E commerce business, they look at it the same way as like, hey, you know, it's easy to start a business selling fidget spinners or some widget that's not super competitive. But on the flip end of that it's probably easy to start that and not competitive for a reason. And you know that's there's always good niches to get in on. And I'm not saying that's the case everywhere. But yeah, when you go to sell fidget spinners and then you go to sell your company and it was kind of a fad item that was hot one and done, you're not going to be worth as much as someone that has, you know, selling supplements that gets reoccurring revenue and has repeat customers. But on the flip side, the supplement market is very competitive.

Logan, when would you say a deal is done? And the reason I ask this is because going to market is one thing. Signing an LOI is one thing. Getting the check is one thing. When, when do you consider a deal done? Along the process that you outlined earlier?

Yeah, I always tell people not to get too excited when they get an LOI because it's a good feeling and you're going to get an loi. Letter of intent seems like a contract that's pretty formal, but in reality, Lois, don't mean much.

The deal is not done until you get the money wired to you. Another reason why I said it's so good and so important to have your books clean, good records is because these deals fall apart. You know, private equity guys come in, they start going through your books, they're going to want a ton of data from you, you know, and one strategy and this is good for your followers to know. And one strategy private equity groups and savvy investors will use is they'll come in and they'll try to wear you down as the seller. So their goal is to ask you tons of requests, get you under an loi. And they start, you know, asking you for all kinds of data, all kinds of information. And their goal is to just make you fed up with the process and say, okay, I'm done. I'll sell. Let's just get this over with. And so the more organized you can be and the more put together you are, really is going to benefit you in the long run. And, yeah, I would say a deal really isn't done until you got that check in your hands or the wire in your account.

I just feel like I want to. I don't mean to go against Logan, but I want to publicly say that my deal was not like that. In both instances where I sold my companies, it was a very collaborative process. The companies that bought us wanted our companies. They wanted Zen Active Sports. They wanted Sheer Strength Labs. And so it was not. I did not get beat up in the process. I had buyers who were working alongside with me who, yes, some of it was a very painful process, especially for my operating partners who did all the work. So, like, cleaning up those numbers, that was very tedious process, but it was collaborative. It was not. We. I'd never felt like I was getting beat up. There were times it was frustrating, but it was not. We didn't get beat up. There wasn't trying to, you know, knock down our valuation, although we did have to make some adjustments based on cleaning up the numbers. But I did not have that adversarial process. And I'm. I'm now partners with those buyers rather than adversaries. Logan, what have you seen when you get the check? When the buyer or when the seller gets the check, what do you see happen next? Like, I know what happened for me, but you've done this a bunch of times, so what do you see happen for the seller? How does their life change? What's their reaction? Tell a little bit about that.

Yeah, and I, you know, I've done it, too, so we both done it. I can give a little my experience and then share what I've seen. But, yeah, you know, it's an exciting time, you know, selling a business. It's. You've built something up. It's kind of your baby. It's an asset that you've put all this time and money into, and you. You're letting it go. So it's, you know, that part is sad. And you see people kind of like, oh, this is a little. A little bummed out. But then you put that big check in your account and you're feeling pretty good and having a good. A good few Months. And then, you know, my experience was I got a little bored after I sold my company. I said, you know, hey, this is like in my early 30s. I don't think I'm old enough to really retire. And golfing and fishing every day wasn't as fun as I thought it would be. So you know, you see entrepreneurs after they sell, they start to get that itch again. You know, you get burned out. People get burned out, they don't want to do it anymore, they're sick of the day to day, they exit. And then a few months later you start to see them get that itch to get back into it and do it over again.

And what does that often look like? Do you, do you see entrepreneurs jump back into the game and start similar businesses, different businesses? I'm just, I know what, I had another business to go right into and now my full attention is on capitalism.com. but not everybody has the next thing lined up. And yeah, my partner and I had this conversation, he was like, you know, I don't know what I'm gonna do. You're gonna go into capitalism? What am I gonna do? You know, so, so what have you seen people do?

Yeah, I think you're fortunate in that because I think that is a big issue for a lot of people. And most buyers are going to want sellers to sign a non compete. So that kind of locks them up from two to five years depending on again that's all up for negotiation. But 99% of time you're going to have to sign a non compete. So afterwards it's kind of like, yeah, what do you do next? Because this is what you know and usually non competes are pretty tied to like the product or that industry. So it's not going to prevent you from getting back on Amazon or getting into the e commerce world, but it's probably going to prevent you from getting back into that exact same industry like supplements or skin care. So you know, we see people take off and then they get, you know, people do get frustrated and they try to figure out what's next. But we've seen a couple success stories where guys come back in and they start other successful companies and some guys just take off and you don't hear from them and they have a nice time sipping margaritas on the beach, I guess. Yeah, right.

Would you comment on the economics, the sale for example.

In most cases, do they see a lot of cash up front and then an earn out? Are they seeing it come in installments? Typically, especially right now with all this money Floating around. When does the seller get their money and how is it usually distributed to them?

Yeah, and typically, I mean still right now, even though the market's a big seller's market, it's still a lot of earn outs. So you'll get, you know, 70 to 80% up front and then you'll structure an earn out with the buyer. So, you know, earnouts can be structured as a seller note where it's paid at a percentage over a course of a year or course of two years, or it can be structured based on performance metrics. So, you know, if you hit 15 million next year, we're going to give you this much of an earn out. You know, there is deals where it's all cash up front and that's the end. I would say the majority of deals we see an earn out in. And that's just because.

Buyers like to have that comfort knowing that the sellers have.

A little bit still hanging on in there. They're not just dumping like a bad business on them.

That makes sense. And in your case or what you see, do you see earnouts ever being a problem? And the reason I ask is because I know a lot of sellers who are a little bit hesitant to turn their baby over to a private equity group that's not necessarily in this business, then wonder, am I going to get that other piece that I held onto? So what have you seen be the case?

You know, and that is a good, it's a big concern and it's a legitimate concern. I can tell you on the first business I sold my own business, I didn't get paid the earn out and it got kind of messy. And then my other businesses, I did get paid. So we see both, you know, and people get concerned about that earn out. And there's reason, you know, you could have $2 million tied up, that you're not going to get paid for a year to two years. But at the same time, it gives the buyer a lot of comfort knowing that, hey, this guy still has a little bit of money hanging out here. He's not going to just leave us high and dry. And like you said, you had a good experience with your buyers. You know, you guys were working as a team. That's the relationship you usually want to get into. Because then you can still work with the buyer, counsel them, make sure they're doing all right and then you get paid your earn out. You know, if you just jump dump a bad business on a buyer and you just kind of ride off into the sun, probably not going to get your earn out. So it's good to make sure you're just upfront with everything. Everyone knows what they're getting, knows what they're selling, and everyone's on the same page. And it just makes for a smoother post transaction.

You know, this is kind of a mysterious area for a lot of people have not gone through this before. After going through it, it's very clear. And all of a sudden I have this realization of like, wow, there's a lot of money out there. I've only scratched the surface. I can see my plan to own the Cleveland Indians now because there's so much money floating around. So what do you think entrepreneurs that if they knew would make them better entrepreneurs, what don't they know that, you know, that would make them a better entrepreneur?

I mean, I think you hit the nail on the head there. There is just a ton of money floating around right now. I think a lot of entrepreneurs are sitting on huge assets or they're building huge assets and they don't realize that. And I think the big things I keep hitting on this, but I think it's just vital for entrepreneurs is, you know, I know myself and I know a lot of other entrepreneurs. You know, you kind of. You love getting that product out there. You love selling it, you love marketing, you kind of love building the business, but you don't love the books, your financials. You don't love messing with that stuff. And it's so important to get that stuff organized to keep it clean. But you're sitting on it, you know, as you're building your business, it's good to put money back into the business, grow the business and just realize that you have something valuable and you have an exit sitting there at some point, if you take care of it and nurture it.

Like you said, there's tons of money. Interest rates are so low right now that there's never been a time in history where there's been this much money thrown at business sellers. The whole market, we see bidding wars that are just unheard of.

Yeah. And you sell when things are good. You don't sell when things are going terribly. You sell when everything is going awesome.

Exactly.

That's when a deal will most get done. Well on the other side of this, Logan, there's a lot of mystery around.

The process of selling. Is my business sellable? What's my valuation going to be? And you do this for. This is your gig. Would you talk a little bit about what you do at Bizsold and talk a little bit about how can entrepreneurs who are maybe thinking about this, even if it's Sunday, dip their toe into the water to see when it might be appropriate for them to sell or take some money off the table?

Yeah, absolutely. And what we do at bizsold is you may not be to the point where you're like, hey, I want to sell yet, but if you come to us and we'll give you free guidance and like, hey, here's the things you need to do to really get prepared for a sale. And here's where you would be at if you sold now, and here's where you'd be at if you got to hit these benchmarks. So we have an in house CPA that works with us and we do free valuations for people. So if you're interested in selling your business, what we'll do is put together like a valuation report showing, hey, here's recent transactions we did, here's recent transactions in the market, here's the multiple you're going to be looking at. And every business, there's a buyer for every business. You know, we're talking a lot about like private equity and, and bigger deals, but there's smaller deals, there's people that, you know, got an inheritance, they quit their job, they're looking to buy a smaller business. So whatever level you're at, there's a buyer for you. It's just a matter of, you know, do you want to put in the work to get to that stage and make the exit. So after you do evaluation, we'll look at going to market. You'll go to market and within, you know, depending on the business. But within the first week, you'll start getting conference calls, meetings with people, you know, tons of interest. Some people fly out, they want to meet with you. So it's a pretty labor intensive process when you get into the actual sale of it. As you know, Ryan.

You start talking to a lot of people and you start getting a lot of interest in your business. So, you know, there's a balance of you got to keep your eyes laser focused on your business, but at the same time work with these buyers to get your business sold. And that's kind of where we come in and help in that process as well, is we don't just throw bodies at you. We, you know, we qualify people, make sure they actually have the funds or they're approved by a bank to get your business. And then you'll set up conference calls and you'll start working through with these buyers on which ones are going to be a good fit, which ones you want to work with. You know, like we said, seller's market. So you kind of pick, hey, this, this guy seems like a great fit for my business. I'm comfortable doing a little bit of an earn out with them. You'll get the loi, negotiate that and then the due diligence phase and you'll kind of proceed there from closing and due diligence. You know, like you said, you can, it can be a good experience like you had, and it could be, you know, a pretty bad experience for people. And again, it depends on how organized you have or what, what your team looks like. If you have a team that can, you know, get yourself organized, get the numbers that people are asking for, get the documents, that helps.

I would say I had a good experience, but it was still exhausting. A good night out with friends is still exhausting sometimes. So it could be a good experience and an exhausting experience. And I would add to this, if this is something you're thinking about in the next 12 months, start kicking tires sooner rather than later. And by this I mean, for example, let's say you had a conversation with Logan and Logan had a buyer who might be a fit along with, along with your business. When you see a valuation on paper, it changes your brain. It changes the way that you think about your business. So if a private equity group's group comes to the table and offers you $10 million and that's a lot of money to you, then even if you don't take the offer, knowing that you are building something that has a payday changes the way that you operate your business. It changes the way that you will look at every decision that you make. So I say start the business selling process earlier than you would expect. And you can always say no, but it allows you to see what's possible and then make the changes in your business that allow you to have the biggest payday possible. Logan, would you agree or disagree with me?

100% agree with that. Yeah. And there's, you know, if you've never sold a business, there's a ton of stuff you probably don't know that you need to get together, that you want to get prepared. And that's, you know, even if you're not ready today, we tell you, hey, here's stuff that's going to help increase your value. Here's stuff you should start working on. You know, this looks really great, but you should get a trademark on this. You should try and get some IP or at least get the process going on this, because these little things that people may think, oh, this is not a big deal, it might be a big deal when it comes to the sale of your business to a buyer. So it's important to start that process earlier than later, for sure.

Well, Logan, if people do want to start the process, how do they find you and how do they get ahold of you?

Yeah, absolutely. So Our website is bizsold.com if you go there, like I said, we have an in house CPA who does valuations. We don't charge anything for that. We do free consultations. Even if you're just thinking about it or you kind of want to know what your company's worth, we're happy to give you out of that free valuation and see where you go from there.

Yeah. And, you know, if you're ready to sell and you're thinking about it, we're happy to assist you.

And I would say, like, go find out what your company's worth and you might be surprised at the numbers that you're looking at. So, Logan, look, my life changed when I had a sale because now I get to impact more entrepreneurs. I get to be totally within my unique ability. And I know that happens with a lot of entrepreneurs who sell their businesses. So thank you for carrying the torch and helping so many entrepreneurs live better lives. Keep on changing the world, buddy.

Yeah, you know, my friend, I would agree. I think, you know, when you sell that business, it's a, it's a game changer to put some money in your pocket and it changes the way you think, it changes the way you conduct business going forward. So it's nice to, nice to get that safety net. If you don't have it, well, they.

Can find you@bizsold.com and they can find out what their company is worth. And if it's a right fit, then you might be having the same kind of experience I had less than a year ago. So, Logan, thanks for sharing so much with us and thanks for helping so many entrepreneurs.

You got it, Ryan. Thank you, buddy.

I honestly felt immensely proud after recording this podcast episode with Logan because there are some of you who are listening to this and you have no idea what you're sitting on. And a couple of years ago, you had no idea the path you were about to go on. And like a, I'm super proud of you and I'm super proud to be leading a message that you follow about building these brands because you are, you are making a meaningful impact in the economy and in the world. And if you're thinking about selling, there is a good chance that there is a payday on the other side of what you are doing if you do this well. If you follow the trainings that we do here on the podcast, like, there's some really exciting things happening right now and it's just so gratifying to hear some of the stories and to be part of some of your journeys. If you're at the part point where you're over $1 million, you're thinking about selling in the next 12 to 24 months, there's a couple things you could do. One, you could find out what your business is worth. You could work with someone like Logan. He does those evaluations where they put, you know, a sniff test on what they think your company could be worth. And that's@bizsold.com you could also apply for the back room. The back room is where we work with seven figure entrepreneurs. We help them scale to eight figures, that's $10 million and above. We help them increase their valuation. We also give them the investment connections so that when they sell, they are set up to be in a position to increase their wealth and their cash flow so that you never have to worry about money again. That's what we do in the back room. We open up new investment opportunities. We help you sell for the most money. We have capital sources to fund your growth. We have access to people who want to buy businesses. And you'll be in a network of peers who, who are running alongside you. If there are businesses in the group that complement yours, we can even partner them together as part of a portfolio so that you sell for even more money. So this is about increasing your wealth, increasing your cash flow, increasing the paycheck that you get. At the end of the day, that's what we do in the back room. So if you have a seven figure business, you can apply@freedomfastlane.com backroom and that is where we'll look at your business and see if it's a fit to go from seven figures to eight. Sell and invest it well so that you never have to worry about money again. If you are building up physical products brand, you are sitting on something very special. Don't squander this very unique opportunity that we're in, this very unique economy, this very unique set of circumstances that have allowed you to grow so quickly and to be building something real. If I can be part of that journey, I'll consider it a privilege. Thanks for listening to the show. I'll see you guys on the next episode.