How To Build A Business That Will Sell For $$$ (12 Month Plan)

There is a step by step process to build and sell a business for millions of dollars. In this video, I'm going to share the 14 ingredient recipe to build a business that you can sell for millions. Imagine this is your business. You've got products, you've got cash flow, you've got sales. If you want to be able to sell it for millions, your business needs to look more like this. So today we're baking the cash cake. You insert the right ingredients, follow the correct recipe and you will have a million dollar business to sell. When I went to sell my first business, we went through this process. We are going to show you exactly how we did it and how I started Contrarian thinking with this exact same idea built to sell. Do yourself a favor and before you even start a business, make sure you do it right, not wrong. Ingredient 1 Set your goals and valuations. Your goals and objectives will tell you what you want out of a sale. You have to start with the end in mind. Normally people start businesses and they think they're gonna run them forever and then they get bored at some point and they want out. Because running a business after a long time is miserable, let me tell you. And so if you start early, then you can build to a sal and you can actually sell before you're miserable. Well, Cody, the goal is obvious. I want to make as much money as possible. And that's sort of true. It's usually actually two things. You want money and time. So you want to make a lot of money, but you want to make it without, for instance, having to stay at the company forever. So here's my CT goals Matrix money. I wouldn't sell Contrarian thinking for less than $100 million at least today. We'll see how I feel in 10 years. Transaction timeline. I don't want to sell for at least five years. I want to build this business up quite a bit. Team. I want every person who works for me to become a millionair transition. I wouldn't want to stay on for more than a year if I was going to sell the business. I don't want somebody else to be my boss. Legacy. I'd only sell to a company I respect. I wouldn't sell the TMZ for instance, but maybe I would sell to Netflix or Paramount for instance as a media company. There's my objectives set in gradient one. Now, at this stage you got to also figure out what's the value of your business. So most small businesses are sold for a multiple of revenue or profit. If you're dealing with the typical types of small businesses that I invest in, laundromats, car washes, et cetera, they sell for 2 to 3x profit or 2 to 3x revenue. And it really depends a lot. Let me show you why. You have to figure out how much you want for your business, how much your business is actually worth today, and then what's a plan to bridge the gap between the two? The gap is the rest of this video. Let's give an example for contrarian thinking. First, I'd go to something like Statista and I'd say, what is this industry worth? You can see here if I consider this an entertainment business. Entertainment businesses sell for somewhere between, let's call it 16 and 23x profit. Profit is basically a simplified version of EBITDA. Now, does that mean that I can sell contrarian thinking for If I have $1 million in profit, $16.7 million or $23 million? Not likely. But let's go to second step and I'll show you why. Now, I typically phone a friend and ask somebody who's in the industry, ideally if they've sold a business, but could be anybody in the industry, what is a company worth in this industry? In my case, media. So let's call Alex Lieberman. Alex sold his business to Business Insider for tens of millions of dollars. Here's what he has to say. What do you think you could sell a media company for as a multiple of profit?

My conservative guess would be 10 to 12 times.

10 to 12 times EBITDA, or do.

You think, okay, if it's high growth, should get somewhere around 3x revenue. If it's slower growth, closer to 2 very strong EBITDA multiples, like especially in this market, would be anything higher than 14. And I would say you're on the smaller side is like 10 to 12.

So what he tells us is that if we at CT can make up to 2 to 5 million in profit, then we can actually sell for 10 to 12x profit. Maybe not 16, but 10 to 12x. So that means we'd be selling for 22, you know, maybe up to 30, 40, 50, 60 million dollars, which is pretty good. Now I know what the business is worth, I know what the industry sells at, and I know that if I can get my business up to over 2 to 5 million dollars in profit and I can sell for a really high multiple if I get it up to 10 million in profit, we're talking a nine figure deal. But that's not always the case. I learned this the hard way. One of My very first businesses I bought cost me around 200k all in and I couldn't even sell it for 100k. This is called Threads Refined. Threads Refined was a fashion stylist marketplace. But the problem with this business is everything that's wrong with most businesses and what we're going to fix today. I couldn't sell it because I didn't have a business. I had a job. It was a barely profitable job and nobody else wanted it. Most businesses end up closing. Only 20 to 30% of businesses that are even on the market end up selling. Most businesses never even go to the market. So even though 80 to 90% of business owners have their financial wealth, all their cash flow locked up in companies, they'll never actually sell it. Which is the entire point of this video. Ingredients 2 through 8 are how to build a business that sells relevant to anybody even if you don't have a business today. Ingredients 9 through 15 are a deep dive into the selling process. What you do when you actually get ready to sell the business and the very last step of all is the most important one that almost everybody skips. You cannot ignore because this is where all the cash is. So make sure you hang out for the rest of this video. In my years of buying and selling businesses, I've noticed there's one thing that businesses always undervalue their brand. This is one of the perks of buying a business. Instead of building from scratch, you're buying the assets trust marketability that comes with an already existing business. Stronger the brand the more you can charge for it. And HubSpot's free brand building guide. They found that brand consistent activities will increase revenue by 33%. You should check it out here. 33% more revenue will drastically increase how much you can make from your business when you sell it. I've spent tens of thousands of dollars on various businesses testing and figuring out how to nail the brand. So I think you should steal mine and HubSpot's homework for free. 99 the guide includes a checklist for content audit and metrics to track for brand performance. Also teaches you how to create a brand strategy and the content to execute on it. We create an insane amount of content. It was crazy to read HubSpot's report that said 78% of a brand's assets go to waste. Don't waste any of that time or money. Download HubSpot's free guide on how to build brand consistency today. Link right here. Ingredient 2 tracking and documentation every single thing we have is documented. If you See here, this is what's called our wiki. And a wiki inside of notion basically has anything that we do at the company, can we write it down? So if Tanner, my main man who's filming this, gets run over by a truck, hopefully not. Then he's got every single thing in this SOP that he did so we can pass that off to somebody else. I start with something called the rule of three. So if it has more than three steps and you do it more than three times, I made a standard operating procedure for it. I didn't come up with this. This was one of my mentors in private equity that required every single one of our businesses before we sold to have it. One of the pro tips that another friend of mine told me to do, his name's Nathan Barry, was film yourself doing the steps and then hand it off to somebody else to turn it into a checklist. Here's how it works. Three steps. You, inside of your business, post newsletters like I do. And in order to post to the newsletter, there are definitely more than three steps. So I write all those steps down. Then I record myself actually doing the steps on a screen just like this. Step one, step two. Click, click, click, click. Then I hand the written process off to a team member with my video and see if they can follow directions and get it done. If they can't, I take it back, I walk through it again, and I give it back to them until they have perfected the process. Then I have them hand it off to somebody else and see if that person can follow their practice. The two of them work together until it's been fully outlined. This is awful in the beginning of your business, but it is so important. I use the 8020 rule here. What 20% of the processes you have are the most important. Think like sales and sending newsletters. If you're a newsletter company that drive 80% of your profit, set up those first. The key here is set this up way before you want to sell. If you're not sure whether you want to sell your business or not, do it anyway. Because worst comes to worst, you keep your business forever. But you hand off the operations to somebody else and you don't have to do it yourself. The next thing we did is we got a P and L running immediately. This is called a profit and loss statement. Every single business needs to have one of these. If you don't have one of these, you don't have a business. You have a hobby. One of my favorite mentors told me this. You need it cleaned up and to look at it weekly. It doesn't have to be that complex. You can click here, you can download our exact copy. But what gets measured gets managed. And if you pay attention to your cash, it turns out she hangs out with you. We even have a process for how we track it. So I call this Financial Fridays. Every single Friday we have a leadership team meeting on which we go through our financials. Did we hit our goals one way or the other. Next thing we do is we have a current dashboard with everything drilled down by business unit. We didn't come up with this. I actually stole it from Apple. Apple obsesses on five key performance indicators. These are them. Every single business has one of these. If you know what your North Star is, ours at Contrarian Thinking is two things. A revenue number and a total follower count. We want to have everything we do track to those two numbers and Apple's no different. Then you can look at these across almost every industry. Most of them are the same. Here's our high level scorecard at Contrarian Thinking. This is what we go through from a leadership perspective every single week. On the left hand side you see that we kind of bundle them. So you could double click on these and there would be more underneath them, but we keep it clean. Because my rules for scorecards is if I'm going to sell to a seller, that seller is going to get 60 seconds to kind of like review the overall thing and they need to be able to understand it without talking to me. I also like to have on the right hand side status. So how are we doing on a weekly basis? Are we going to hit our monthly goals or are we behind? And you can see here we have a bunch of goals that are green or light green, meaning we're going to hit them or we're going to crush them. And then we have a couple that are yellow, we're at risk. And anything that's yellow, that means I double tap on. And I go to my leaders and say like, what's going on in this business? Anything that's green, I say, cool. I'm not going to worry about it because you got it covered. Ingredient three Diversifying or baking powder. This step is all about de risking, which is really what the word diversifying means. I have two rules I like. The first is diversified client base. I use the 15% rule, which means make sure that no one client makes up more than 15% of your revenue. I also have a rule called the diversified product rule rule or the 60% rule. Make sure that no one product makes up more than 60% of your revenue. This isn't always possible, but I like this because God forbid, for some reason you have one product and that product tanks. I don't like that kind of risk. Let me show you how we did this at Contrarian Thinking. So today we service more than 5,000 clients a year. That means our business has very little concentration risk. This is ideal, but it didn't start out that way. In fact, we. We started out with only advertising revenue. That was 20 clients a year. People like HubSpot, et cetera were our main advertisers. And if advertisers pulled or didn't put their advertisements in the newsletter that year, or didn't put them in YouTube videos, our revenue tanked. Here's the problem. Look at the volatility in advertising revenue. You can see this graph right here. Down 31% year over year or month over month. Those are scary numbers that I don't like to have. And with only four to eight slots in my newsletters back in the day for advertisements, we didn't have a lot of wiggle room. That's why we moved to having info products as well and businesses that we own. We need to even out those revenue streams. The second type of risk isn't necessarily just your clients. It's diversifying risks of two different areas. One is your payment processor. We have this company called Biscout, and the company was on Stripe and Stripe, actually in the very beginning, early days of this business when we had very few sales, gave us a few chargebacks, and before we know, it had cut off all of our revenue at Bizkout and told us we couldn't take any of the cash out for 90 days. Now, thankfully, the business was small, and I just ended up funding that business and the operator, regardless. Kind of a hysterical story because then Stripe put this fake notice up there and basically blamed the business for them holding our capital. And you can kind of see the comments. There are thousands and thousands of people that have had the same thing happen to their business. Now, it's not necessarily Stripe's fault. They just said, hey, you fall outside of our range, and so you've got to go. But what they don't realize is the average small business only carries 30 days of cash. And so if this was a normal average small business, it would have been out of business because they kept our cash for 90 days. And just like that, a huge behemoth kills your business. That's why now we have multiple payment processors for every business that we have no more, only Reliant on Stripe. The second type of risk I'd like to diversify away from is platform risk. So in your business you're usually going to have a few main platforms. For contrarian thinking, in the early days that was a platform called Substack. This was where all of our newsletters got sent out. From one day though, Substack sent me a lovely little email and in that email it said, we have now taken all of your email subscribers. You can no longer see them, we've shut you off from the platform and you can no longer send newsletters. So they killed my business overnight again. I took to Twitter and went to war with them. And they basically said inside of their documentation we were not allowed to sell a community outside of Substack. They wanted their 10% cut or whatever it was that Substack takes from all of your business. Now I saw a community being different than a paid newsletter. So I said wait, wait, wait, it's not the same thing. We don't have a paid newsletter. We have a community that has all of these different services. So why would I pay you 10% on that? And they said, too bad, you broke our rules and regulations. We're kicking you off the platform and keeping all your emails. I had to fight with these people publicly and in my DMs to get it back again. They're just trying to run a business, but they could kill yours. So ask yourself, do you have a payment processor risk and do you have a platform risk? And then diversify those reoccurring revenue ingredient number four. Now this part's really interesting because we essentially want to come up with a process to continue to get paid after we've sold the clients wants. The general rule is basically this. There's six types of reoccurring revenue and your business should have at least three of them in my opinion. The first type is long term contracts. And then there are three subcategories. There's retail. Think your three year phone contract with AT&T, you a normal consumer with a big company. There's B2B. That's a contract like Contrarian thinking my company has with HubSpot. And then we've got the government a contract for for a street cleaning company to clean up the streets in Washington D.C. that is the most valuable. A business contract is the second and a retail contract is the third. Then the second type of reoccurring revenue is called an auto renewal subscription or an evergreen revenue. The same as above, a long term contract. But this could be monthly or annual. And it renews without you having to go and re renew it. Think like the Wall Street Journal. I get it every single month. They keep billing me for it. Then we have the third type, which is sunk money subscriptions or it's called replenishment. Let's say you buy a new air filtration system for your house. You also get air filters for that every three months, right? So that's auto subscriptions. Then there's Keurig, which is worth about 18 billion when they merge with Dr. Pepper. It's not for the machines. It's because once you have the machine, you're going to on average have more than 100 Keurig Cups over a year. That is a great replenishment system. Then you have a pay as you go subscription subscription sort of for a set period of time. I've seen subscriptions for like teeth whitening, veterinarian visits, Botox, or even, let's call it like those dog or beauty subscription boxes that you get. You kind of do it as you need it. Then you've got loyalty programs, loyalty programs such as the airlines. That loyalty program is worth more than almost anything else in the airline business because you use those points points and you continue to come back to the airline. And then finally you have simple consumables. These are one off products, but bought repeatedly through customer loyalty. Think coffee shop regulars and Starbucks, who has billions and billions of dollars in people coming back to their store. Here's the benefit to this. So when you have a reoccurring revenue model, you have scalable income, you have freedom of time because you don't have to keep chasing customers. We have increased value. When you go to sale, you have increased lifetime value, which also increases your ability to sell your business for more. You have more stable cash flow because you have subscriptions continuing to come on board as opposed to net new customers, which often go like this. And you have predictability. Usually when people buy a business, the more predictable, repeatable and expected you can make your business, the more money they're going to pay for it. At contrarian thinking, we have annual, not monthly subscriptions because annual's more valuable than monthly since it has more of an expected and predictable revenue stream. And then we wrapped a process around following up with them prior to renew, what's called a re engagement sequence to make sure that they keep using the product and they stay with us. At our laundromats, we have monthly memberships and weekly memberships for wash and fold and delivery. They auto Renew, they get charged even if they don't use them for our automatic and their pay as you go, they can get in bulk or three or six month memberships. Then we wrapped a process around following up with them prior to renewal as well to make sure that they could even extend like hey, you have a month to month. What about an annual process? That means we get the revenue all the way up front. Cause they pay right away and we don't have to deliver the service until the rest of the year. Means my business is more valuable. All right. Repeatable sales process ingredient number five. This is key because if you are the only salesperson, you don't have a business, you have a job. And if you only have one salesperson, you don't have a sales team, you have a liability if they leave. And if you have two salespeople, you don't have a sales team, you have a group that needs to be managed. Ideally, you need a sales leader and a sales team. Your buyer wants to know that the sales will continue without you. And this is one of the most important aspects of a sale. Sales drive predictable revenue streams. If you want to sell, build a reoccurring sales model and you'll sell for more. Now what gets measured gets managed. In sales. You need to be able to tell a buyer really quickly what your success rate is, how many people you close, what your outreach is, how many people you reach out to, the total number of businesses, clients, et cetera, that could be potential clients, so that you can determine what your total market size is. The more data you can show them on what your average avatar is for your purchaser, how often you can get in touch with that avatar, and how often you close that avatar, the more likely they can forward, project their ability to sell more and thus pay you more money for your business. The other thing a lot of people forget about is sales enablement, which basically are the resources that your salespeople use to convince people that what you're selling is worth it. And most sales teams hire great salespeople. That's what they focus on. But here's the thing, it's a lot easier to find a bunch of donkeys than it is a unicorn. Meaning you can have good salespeople and not have to have great salespeople. If you have good enablement, that's like things to handle objections, resources, testimonials, reviews. All of those can turn donkeys into unicorns. And that's really important if you go to sell because it's really hard to hire unicorns. And no buyer wants to have to find them. For example, when I first started Contrarian Thinking, we used ads and had sponsorships and I would like literally DM reach out to the companies on Twitter and and close them. And now we have a sales and sponsorship team and we also had an agency that does that. This allows us to have a process that doesn't really include me at all. In fact, we have more inbound than we even take. The other thing that's really important is to name your channels and tactics. You need to have at least two or three diversified ways you sell. It could be content marketing, SEO, PPC ads, cold calling, door knocking, affiliate influencer, the list goes on. But you need to have multiple channels and a process for each one that they follow. That way your process is one that they purchase. So this is our content flywheel at Contrarian Thinking. One of the ways that we sell is we create content that drives people to us and they then do an action that we want. So my content often gives me deal flow into businesses that I want to buy. I don't have to go out and cold call a million businesses because I get hundreds of them that email me. Then I pick which ones I want to buy. This is really important to have some sort of flywheel for your process. We also use ads. I like ads because they're repeatable, quantifiable and measurable. So you don't have to have a bunch of top tier unicorns selling things. If the ads drive people for a set amount of cost every single time to buy something that costs more than the cost of the ads, it's a really scalable process. Step 6 Productized Service this is critical. I don't like to buy services businesses. I buy service businesses and I turn them into product and systems businesses. So if your business is not teachable, reputable, defensible and valuable to customers, then you sell a service, not a product. So there's a couple different things we do almost immediately off the board. We come up with a proprietary name for our product and service. We have a unique process that is just for us and is named. And we outline exactly how how we are different than everybody else through our methodologies. Let me give you an example. This is a bad agency. Sorry, whosoever this is. Look at all the things that they do. Email marketing, branding, web design, association management, editorial. All of these services mean they have no proprietary processes because they're something to everybody. They have to do a bunch of RFPs, they have to quote individual jobs, they customize too much, they they have variable pricing and they have no set product because they have all the services. Services agencies trade at a lower amount than the other businesses and they're harder to sell. A good example would be a company that I own part of called Viral Cuts. Viral Cuts offers three things and they're all video editing. They edit short form video and you can have three different price points. That means that we have built in reoccurring revenue because it's charged every single month. Less friction for customers because it's automated. We have a set process, the Viral Cuts way that we do for every video. We don't do RFPs, we don't do custom pricing. This is a clear example of if you are a good client, this will work out for you. If you're a bad client, you'll know because you'll want a bunch of custom things and we won't do it for you. This allows this business to scale up to multiple hundreds of thousands of dollars a month inside of 90 days because it's a set system every single single time. At Contrarian thinking, it should be really obvious who's a good fit for our customers too. Do you want to buy a business? Are you capable of it? Do you fit our application criteria? If you're not a good fit, you'll know it and we'll tell you because we don't allow everybody to come in. So no customization, no one offs. Everything is set, which is actually a better experience. People think they want customization, but how can you be excellent at something if you change it every single time? All right, step seven. Turning a cash suck business into a cash flow business. This is the sugar. One of my favorite parts, the main reasons why small businesses fail is they run out of cash. This is a huge problem that a lot of businesses could fix if they knew what I'm going to tell you about next. And most businesses do not. Here's the difference between a good business and a bad business. A cash suck business provides a service, then gets paid. They make money just a couple times a year maybe as opposed to every single day, week, month. They maybe have one big client and if they leave, the business is in trouble. A cash flow business gets paid up front, then provides the service, makes monthly reoccurring revenue, continuously has lots of clients. And if this is your business, you get to decide when you charge for your product. So charge up front or in milestones to create a positive cash flow cycle. Think about it this way. If somebody comes to buy your business and they have to float the business For a certain period of time, AKA they have to infuse money into the business so the business can keep running. They're going to pay you less money for it so buyers will pay more for cash flow. You can use this 13 week cash flow model to see if you are actually working on a cash flow negative or positive business. I had a couple cash suck businesses. We have one business called Approachment that we've since turned around and they used to do custom work before we took over. Now they require payment upfront, they set tiers so there's no customization and they have a very clear value proposition. This business isn't out of the woods yet, but we have changed it where we get paid before we provide the service because we're good and we help small businesses close anywhere from 2 to 10x more just from responding to leads like this. If you have a good business that allows people to make more money, you should charge for it. Number eight, key man risk. This is the eggs. So a business that's reliant on its owner is not really a sellable business. So right now, for instance, Contrarian thinking has a lot of key man risk. But there's a few ways that we're moving away from that. First of all, I didn't call the business Sanchez Inc. Don't name your business your name. You want brand loyalty, not personal loyalty. At the start of your business you're going to be like me at Contrarian Thinking. I did all the content, all the newsletters, all the community building. Then you hire your first executive. Then you build a team of teams. Then you outsource marketing. You slowly take yourself out of the content creation of the business until like me, you go to San Diego for two months and the business runs without you. What you need to do next is you need to build a management layer. You have to have a team of people because team is bigger than me. You can see ours here at Main Street Holding Company, our holding company. We have people that if I was to fall off the face of the earth, could continue to run the portfolio companies and continue to invest. Now the question becomes how do you keep these people post sale? And there's really three ways. You give them equity in the company. Equity vests over time. A little bit each year you give them profit sharing. That's what they had at Vanguard when I was there. They get a percentage of the profits after you go through with the sale for a continual amount of time. You put a pool aside for that or there's a bonus pool at Goldman and most finance companies, this is how they do it. You get a bonus at the end of the year, let's say, but that bonus gets put into a pool that you can access one third of it each year. I hated this when I worked at Goldman because when you leave, you always leave two thirds of your money on the table. So now we're getting into the part where if you don't have a business yet, this next part will apply when you get one. Everything up until now applies to anybody if you want to build a business. Now we're really getting into the meat of how do you sell a business for millions and millions of dollars? Step nine, buyers. Remember the sales matrix that I told you guys about in the beginning? It looked like that. All right, put this thing back up on stage. Your goals for your business will determine the buyers that you need to pursue. And there's kind of usually two different types of buyers. There's financial and strategic buyers. I like to create a list of the strategic buyers because they pay more. Financial buyers just want to cash flow off your business just like you do, so they're going to pay a lower valuation. Strategic buyers look at your business and say, wow, we could actually pay more than it's worth today because our business combined with this business makes it more valuable. That's what I'm looking for. If you want to increase the value of your business, you use a controlled auction. Basically helps to increase the sales price because you have a bunch of people all bidding on your business. We'll talk a little bit more about how to do that later. But I want to talk about the difference between financial and strategic buyers. So When Facebook bought WhatsApp, it was making like, I don't know, 15 million in revenue. And they lost a bunch of money, hundreds of millions of dollars a year. Facebook bought that business for $22 billion. Why? Because they were strategic buyer. Another strategic buyer would be like Mr. Car Wash, where typically car washes trade at 3 to 5x profits, but because Mr. Carwash buys them, they might be able to pay 7 to 12 to 15x profits. A financial buyer is going to be somebody like me who buys a car wash. I want that individual car wash to operate all by itself and to make sense. And if it doesn't, then I'm probably not going to buy it because I don't want to think about the future earnings of a business in my current costs. We actually had a business that we had called Sublime back when I worked in a private equity fund in cannabis. And when we were Looking to sell the company. Here's what we did. We made a list of all the top MSOs, these are in Cannabis, the buyers of this type of business. And we put together a list of them all in California, where it was located. Then we put together a list of all the product companies that could potentially buy them. And we targeted this list that we thought was big enough to find a buyer who could pay us an outsized multiple. What we ended up doing is actually combining Sublime Harborside and this other company, Urban Leaf. And that company is now publicly listed and does hundreds of millions of dollars a year. But if we had just taken Sublime and given it to somebody based on cash flow, that business wasn't making money, it was losing money. So we certainly wouldn't have gotten as good of a deal. STEP 10 Broker or intermediary A little milk. Finding the right broker is really important, but you really break it down by size. If you have a business that's doing $10 million or less, you can go with a business broker. If you have a business that's doing $100 million or less, usually go with an M and a advisor. And if you have a business doing $100 million or more, you go with an investment banker. Just different terms. Kind of goes with sophistication level. Investment bankers are Goldman Sachs. Business brokers are individuals or people with groups like Transworld. And here's how they get paid. If you have a business that's like a million bucks or less, you might be paying a 10% commission. If your sales price is, let's call it $5 million or less, you might be paying something called a double lehman, which is how they determine the commission. Once you get to that higher tier and anything that's like above $30 million, you're probably paying somewhere between 1 and 4%. Now, this can all change, but these are good models to have. How do you find the right broker to sell your business? Well. Well, you need to interview a bunch of them. Now you know the levels and the title for them. But you want really a couple things. One, an advisor that's done deals in your niche before. Even better if they specialize. Like if they only sell media companies, if they only sell car wash companies, you want to interview all of them and probably do quite a bit of asking around. In competitive shopping, these guys can make or break your deal. And then you want to make sure your incentives are aligned. Like, are they actually just representing somebody who's a. Who's a buyer of a company like yours? And so they want to get them the best deal, not you, the seller. It's really important that your incentives align. They should only have one goal. To sell your business at the terms that you want and get the most money out of it for both of you. Step 11 Business plan or the vanilla. This is where you create your one and three year business plan. It doesn't have to be crazy. This is sort of an example of what a one year vision might look like. Your goals are pretty simplistic. You want to write down who is your customer, what are their problems, what solutions do you offer that are uniquely you? Why now makes sense for this business to be even more successful and why you and your team are going to be the only deal that they should do. What you are really doing is you're selling the dream for the buyer. And inside of this business plan you want to outline everything we've talked about in the slide steps up to this day. The more processes and the more de risking you can do, the more you can sell your business for. And then you want to look forward and you want to have like three year financial projections. This is where you say, man, if this business had these resources, this fresh blood, you're a brilliant mind buyer. Look at what this business could do or under both of us. If I was to stay on, I'd get this business here anyway. But you get the opportunity to do it. It's kind of like having a crystal ball for your buyer. Step 12 the seller story so institutional investors and strategic buyers see lots of deals a year, 2000 plus deals a year. How do you make your story stand out? You have to talk about why you've been successful, why it's going to continue to grow and be even more successful under them or at least continue at the same rate. Where is future growth going to come from? Give them a plan that makes them confident. Confidence in your ability to predict the future because that's their ability to make money. Now when you talk to buyers about buying your business, you gotta be honest, kind of you want to explain to them that the company is ready for more, that you're really proud of where you come from. But you know, you might need to take a little liquidity off the table. You want to see the company grow under a bigger team. You will continue to run the business regardless. But you think this might be a good time for exiting. One of the biggest mistakes that you could make when selling your business is saying like, oh my God, I hate this thing. I got to get out of here. Not the right answer. Oh My God, I can't wait to sell. Not the right answer. Now, you don't want to lie, but you probably, if you're considering selling, have a little itch. The buyer knows that your job is to not scare them off and to show that you've put in the work where you could continue to stay on in this business. Let me tell you what most people do when they look to sell and that is they feel, they feel a little bad about it. So they're like, well, you know, I want to retire, I want to go do this. And they're almost selling themselves on the dream of leaving the company as opposed to selling the buyer on buying it. Sell the buyer. Do not feel bad. You have spent years in your business building it. By now, make sure that you show the other person what you've done. All right, step 13, setting up your team for the sale. You want to tell your team, but you don't want to tell them too soon. You don't want to keep them out of the deal too long, but they need to believe that they'll be better off without you when you tell them. You have to sell the dream externally to the buyers and internally to the team because I can pretty much guarantee you they're going to be scared and worried. That's very natural because we've got current state and unknown future state. Current state. Everybody feels more comfortable with the. This has uncertainty and anytime we have uncertainty, what do we do? We have more risk. So you want to make sure that your team has a plan. You need a plan for how you're going to tell your team to make sure that they're excited about it. You need an incentive structure so that they can benefit from it. So that might be similar to your leadership team. You might have a profit share, you might have equity, you might have a bonus pool, you might have a one time bonus if the deal closes. You might have a forward advancement that you give them if the deal closes. At these terms, I like to have my main leaders have some skin in the game and bonuses that are paid out over time. I'm really careful on stock because if you've seen anything happen in the last 10 years, you can't eat equity. And so people think they want stock, but what they really want is to be compensated well and to know if you sell, you're going to make as many of them millionaires as you possibly can, which is the most important part. All right, step 14, due diligence. Due diligence typically takes 60 days at a minimum. I use this for all of my buyers to buy businesses. This is our due diligence checklist. So you may as well use this as your seller due diligence checklist. Because if you follow this template and you put this all together with the eye of what a buyer wants, you're going to be 10 steps ahead of most other sellers. I would have this done all before you go to market. Also, a couple little caveats. The number on the loi somebody sends you for what they're willing to buy your business for, probably not the number they're going to buy your business for. That's almost like a negotiation start point. And if everything goes perfect, they might buy that amount. So keep that in the back of your head and don't get distracted and upset when that number changes in negotiations. Now, you don't want a ton of retrades. That means they keep changing things. But ask them to kind of do a comprehensive due diligence, come back to you with all of their questions and concerns at one fell swoop, and then you can move forward. What you want to be careful of is when you take the eye off of your business, it's kind of like a baby. They know it. They start running after electrical units and trying to stick their fingers in there and electrocute themselves. And the business is no different. And so if you're going to sell your business, make it have a process that's really efficient, probably largely run by your broker or intermediary so that the buyer can interact with them and you don't take your foot off the gas. Here's a nice little timeline for typically how this works. Preparing to sell for one to two months. Marketing the business two to three months. Closing the deal, three to six months. Transition period, one to three months. Sometimes longer. The bigger the business, the longer the transition period they're going to ask for. All right, so the last thing the cake needs. Time. Most important ingredient. It takes 55 minutes to bake a cake at 350 degrees. You can bake it for 20 minutes at 600. But you think that'll work. Same with this process. You need 12 to 18 months. Give yourself that and you can double or triple your sale. Building a business that will sell for millions isn't going to be a cakewalk. You see that pun right there? But this recipe will put you on track. My hope is you get to learn from my mistakes so you can make money right off the bat.