The Exit Engine Podcast Episode 33: Build to Sell!

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Welcome to the Exit Engine Podcast, episode 33.

Yeah, absolutely.

And I think that's, that's, that's, that's exactly the kind of thing I was thinking about. It's like, for sure, like, this is, this is, this is the thing. So, you know, so for everybody, you know, by the way, Welcome to the Exit Engine Podcast. I'm Joe. That's Jon. I want to talk today about, you know, Jon, we talk a lot to people and we say this almost every podcast about how important it is for you to be able to be the kind of business owner that is creating a business that you can walk away from and that the business can then be owned by somebody else and can continue, right? Because obviously, when When someone is buying your business, their expectation is that this business is going to now be theirs and it's going to run, and that they're not just going to be having a cash flow thing from this business, right? But that they're going to actually grow this business and be able to grow this business into something else or into make a profit on it. Exactly.

Yep.

So today what I wanted to talk about was let's get really specific about this, because I think that one of the things that we're getting feedback on is like, that's great. But 2 questions keep coming up. The first is, you know, when is the right time to start thinking about this stuff in terms of my exit and how I create a business that is sellable in this way? And then the other thing is, is what— how do I do it? Right?

What are the actions? And the most important part is, how do I start? Right? Like, what's the first thing I do in order to make my business more saleable?

That's exactly right. And so today, I think what we want to do is we want to introduce you to a, uh, to a book and an author. And we're hoping that we're going to actually get this author actually on the podcast at some point soon, and we'll let you know when that happens. But right now, we want to talk to you about this book right here, this, this book called Built to Sell.

And this was, yep, by John Werlow. John, this was just, just shout out. I'm not going to give his last name, but shout out to Madison for giving, uh, Need this recommendation. Go coach. So thank you for that.

So thank you.

He's listening. That's why I'm shouting him out.

That's awesome. And again, so around this kind of— this book is really about how to create a business really from wherever you are, okay? Whether it's that you're a startup or whether you're an existing business, whether you've done this for 20 years, it's never too late to start trying to build this business in a way in which it's going to be sellable. Right. So we know, we know that a lot of, a lot of people struggle, okay, with making their, you know, a company independent, right, from them, right? We know that your value, your sellability, your ability to scale are all kind of tied to how much you as the original owner are tied to the business, right?

Yeah, exactly. And, and that is a you know, when you're the chief cook and bottle washer and doing everything and to start your business, we get it. We understand. And the book goes into, oddly enough, a gentleman by the name of Alex, last name Stapleton. Yes.

No relation.

His same name as Jo Stapleton, which is kind of crazy, goes in. And what he does is he realizes that, you know, when you're talking about the book, when you're talking about what Alex has done to build this business, is he's done everything to build the business. And he's taken, taken on clients, taken on, on projects, and he said yes to everything, which makes sense when you're starting the business. But when you want to sell the business, and he does this in the book, is you need to focus your business on the core things that you do well and focus on your competitive advantage and what you do well better than your competitors, what you, what you can deliver better than anyone else.

That's exactly right. So What we're going to focus on today is based on this book. We're not going to quote it directly right now. We want to have John on hopefully someday to be able to explain this for himself. But what comes out of this book are 10 steps to creating a business that can thrive without you. And again, why is this important? Why does a business have to be built to sell, John? What are the things that we're seeing kind of over and over again that make it so important that the that the business be purposely built in order to be able to be sold.

Because what that does for the buyer is it provides the buyer with options, right? People like options. They don't like to be pigeonholed. They don't like to be forced to do things, especially when they're buying something voluntarily. And they also want to buy a business that they can do whatever they want with, right? Do they want the owner involved after they buy the business? I mean, think of it. Would you want that to happen? If that's an option for them, sure, they'll take you up on that option. But they also want to have the option to say, no, I want to buy a business. I don't want to create a relationship too. I'm going to buy a business that's sustainable, that goes without its owner, and I can make the decisions on where we move geographically and where we move from a product side. If you tie your business or you tie the business you buy to the old owner, then it's your You're not flexible and you're not creating freedom for the buyer to do what they want.

So the reality is that what we see is that your ability to be able to separate yourself from the business is the most— one of— it's actually, it's the most important.

The most one. Yeah.

It's the most important thing, hands down. And I think what's fascinating about this business in general is that— is how many people do not realize that. And I think one of the things is a psychological situation, right? That if there— we have been taught and modeled over time, and certainly we were growing up, and I'm sure the generation before us has. Maybe it's less with the future, with the newer generations, I hope. But the reality is that we were taught that if you're not doing this and not working on this every single second of your day and every single second of your life, in, in multiple ways at the time that you're not doing, that you're not being a good CEO or that you're not being a good business owner. And the reality is, okay, is that that might work for a short period of time.

Jon, your favorite phrase is, what got you here won't get you there.

Exactly. So that might work for a period of time. Okay. Besides the burnout that comes along with that, and we're going to do, by the way, we're going to do an entire episode in a couple of weeks on burnout. We've got someone, a specialist we're going to talk to about burnout because it's incredible. It's a real thing. And it's one of the reasons why most people exit and also the reason why they exit badly. But the idea is that you are— we are constantly being told that if we are not doing this and not involved in every aspect and controlling every aspect, then we are not doing a good job. Now, there are personalities involved. Okay? Some people are hands-on people to begin with, right? And I do all these things myself and I never ask for help. And You know, and that's a, that's a very common personality. Other people are lucky enough, I think, to be able to be the kind of thing where they say, hey, look, I, I don't— I know what my strengths and weaknesses are, and I know from the beginning that I'm going to need help doing this and this and this, but I can do this by— Key thing here is to be able to— is that there is a— at the very least, there is a shift that must occur At some point, and sooner rather than later, where you start to plan and then execute your way of being able to stand back.

Yeah, and most people, you know, most people get this when we point it out to them, but it's a surprising number that, that have not, have not done anything to, to alleviate this concern. And it really comes up to, you know, it comes into focus, I should say, when someone comes to us and says, Joe, John, I want to sell my business. You're like, okay, great. Like, well, and this being one of the ones, one of the first questions that we ask them is, you know, how reliant on your business is you? And we have this as one of our assessments. I'm going to throw a quick plug for our assessment, but you can go to assessment.myexitengine.com and take this assessment. That's one of the questions that we ask you. And the question is, you know, so important the answer is because A lot— most people, entrepreneurs, have a lot of pride. I'd say all people have a lot of pride in their business and they're growing it. They've done— they can tell you all the things they've done, that they've stayed up late, they've gone in to fix servers, they've done anything that they've had to do to make their business successful. And that's good. However, when you're trying to sell your business, that isn't a positive when all the questions and all the answers and all the knowledge is concentrated in you who's gonna be leaving for their next business venture or going to Cabo. When all that knowledge is concentrated in one person, that's a huge risk. It's like all the concentration is like, oh, we have a million in revenue. $800,000 comes from one client. Oh my gosh, that's not good.

Right.

When 100% of the knowledge of the business is in one person, not good.

And the knowledge is one thing, and that's obviously a lot. The other thing is that if you have a client-focused business, right, or a service business, If you are the person that the clients rely on on a day-to-day basis for doing what they're doing, that's a real problem. Huge.

Yeah, huge problem.

So I mean, the reality is if I can't separate you now, you might be able to make a deal, okay, on some level with a strategic buyer or something like that to be, you know, to stay on and be an account executive or to be the client service person or whatever, if that's what you're really into, that's cool, right? But, but in general, nobody wants to look at this. If you have to be the person who the, the client can't make a move unless they talk to you first, that's going to be a problem for any buyer that comes along. No question about it.

Full stop. Yep.

So let's talk about 10 steps. Okay, so the good news is we're at— we are at, John, and we are nothing here at Exit Engine if not actionable.

Okay, there you go.

Things we pride ourselves on. So we're gonna hit right now, okay, we're gonna give you 10 steps To create a self-sustaining business. Okay. Step 1, find a niche and standardize your offering. Okay. So what does that mean?

This is so important because again, you're what, because, you know, when you specialize in your business and you're able to differentiate yourself from competitors, you're, you're by definition, you're narrowing the focus of what you're doing, right? You can't be all things to all people, right? There, you know, I live in New Jersey and there's wonderful diners in New Jersey and the menus for diners are, are incredible. I can't believe the cooks in these diners. And, but those are like super people. I wouldn't— restaurant business is tough. But if you think of restaurants, right, the diner offers everything and all the stuff is pretty good, right? The food is good and really good diners have a lot of good stuff. But when you think about a restaurant, right, you've— they're specializing. Most really high-end restaurants specialize in one or two things, right? A fusion or Italian or Chinese or Japanese food.

And their menus might even be like reduced, like, right? They have like 4 things on the menu, right?

Exactly. And what they, what they've done, and, and you should do the same thing, is if you can narrow your focus and you're— you can really specialize in one thing. Again, not to go back to the book too much, but the book has Alex doing everything for all his clients and doing vastly different things. Now, He can't when he's the center of the of the business, but he he has to really focus, and he figures out that he has to focus on one or two things of doing things because his attention and his his um his skills are being diluted by doing all of the things for all his clients all the time, especially the one big client that's mentioned in there. So when he specializes, you're able to focus, and you're able to really define. what you do and get better at it over time as you do it.

And what also comes as a result of that is you start to standardize what you're offering. And when you do that, okay, what you can do then, and this kind of goes into actually number 2, which is to focus on a productized service model. So the idea here is that if you can say, hey, look, we only do this one thing, we do it really well, Okay. And by the way, what we're going to do is take, instead of services being customized all over the place, oh, you need this, you need this, you need this. What we're going to do is we're going to productize the service. So you may buy service 1 and service 1 is a product and we do this, this, this, and this. Or you may, for more money, you may buy product 2 and product 2 is where we give you this service and this service and this service. Right? So that You're— what you're doing is keeping— and what is that? What is that actually doing? A, it's easier to manage, right? So, right, you're not in a situation— 2, it's predictable, right? In other words, you know what it costs. You know how much it costs you to— costs you to provide the service, right? Your customers will know exactly what they're going to expect, and everything's much easier to track, much easier to, you know, to, to, uh, you know, to, uh, to reconcile at the end of the month. You know, everything just becomes a little bit easier to do. Yeah, that also becomes easier for the next owner to do if it's—

Exactly. And you can hire differently, you can focus your marketing differently, you can be very clear with what you do. So, you know, we had a, we had a situation where we had people, we focused the, the, the efforts on do they want to buy a house back in a real estate business. It's like Yes, we got the people who wanted to buy a house right at that point, which is a very narrow focus, but we also got rid of the people who did not want to buy a house in the next month. And that allowed people to say, I know what this business does. I know what this program does. And this program is really for people who— and we productize the service, right? We productize buying a house for a specific group of people. And it was like, we can help you if you're looking to buy a house in the next— 2 weeks to a month. And that's the way we focused the service offering. So anyone who wasn't interested in buying a house in the next 2 weeks or a month, bye, they would leave. And that would allow the agents to focus on people who did want to buy a house.

You're not spending— you don't have to spend advertising money on people who are never going to convert, right? You don't have opportunity cost.

It's the old opportunity cost you learn in business school. It's like there's only so much time in the day. And when, when we would send these leads to these real estate agents, They would— we would put them in touch with the people right away. And the takers, the people who wanted to buy, great. I can take— I have time on Saturday, Joe, if you're looking to buy this house in the next week. Danny, you're looking to sell in 6 months? Call me when you're ready to buy. And this is different than other home buying processes, but what it does is it focuses the offering. It allows you to create a clear and repeatable process. It allows you to say, yes, my Saturday is open because my Saturday is open, or my Saturday is open because I focus on those people who want to buy or sell a house in the next 2 weeks to a month, just as an example.

And you're only focused on therefore, and so, you know, you have clear boundaries in terms of where you're going to spend your time and effort and money, right? And so, when you do that, now you have to have a good offering, right? Like, this isn't automatic, right? The, the, the service and the product that you're offering has to be something people want and all that stuff. And again, If you've been in business for, you know, even for a couple of months, you're going to start to learn exactly what this stuff is. So if this is an e— relatively easy thing to do, if you— especially if you've already been in business for a while, because you can take the things that people are often buying and the— and you have, you have data, right? You have actual historical data that says these clients who are this type of client usually buy these kinds of things. If I now package this together, and understanding that I know now how much it costs to deliver these services and all that stuff. Now I've got to be able— and now I've got a product I can actually go out and sell. And my marketing dollars become more efficient. My ROI gets better. Therefore, my revenue raises. My profitability is better. Everything becomes better.

Yeah. And in the book, they go into this. And Alex's company focuses on logos, right? They're, you know, it's a defined product. He's able to reduce the cycle of how long a logo takes. He's able to specialize in just doing those things. And you think, oh, a logo's not a repeatable business. Like, wait a second. No, it is, because he finds all sorts of ways to say, like, to sell different logos to the same client for different products and services. So it's a good example of, hey, focus your efforts from delivering every type of service to your client to, hey, we are a This is the product we deliver. Outside of that is sort of not for us. Being able to define your client and being able to find who's not your client is so important for marketing, sales, the whole thing.

No question about it. And then of course, what happens sometimes when you can productize this stuff, now you have the opportunity, at least in some cases, many cases, to start generating recurring revenue. Okay. So that's number 3, generate recurring revenue. Right. The idea is anything that you can get into a situation where people are paying you on a steady, regular basis. Okay. That's why we, you know, in the, in the consulting business, right, we've all— and advertising agencies, we all love retainer fees. All right. And then why do we love retainer fees? Because it's, it's consistent cash flow that we can rely on. We have a contract for a year with a client, and that money is going to be paid in monthly installments every month, blah, blah, blah. And that's something that I can actually predict. And now, and I know that I can now operate my business and make my own business decisions because I know where my money's coming from, you know, on a regular basis, right? So any way you can, what are some other examples of recurring revenue?

Yeah, I mean, one of the businesses that I was involved in early in my career was a consulting business where it had to do with stock prices and identifying the shareholders of a business. And And people would always come to us and say, I just had a huge movement in my stock. Can you identify the buyer and the seller of the movement on this particular day? Sure, we could do that. But we would say, yeah, but what's going to happen in 3 months when your shareholders sort of turn over? You really need a month. We structure our agreements where there's— it's a monthly agreement, an annual contract where we deliver services and we deliver a shareholder report on a weekly basis, summing it up on a quarterly basis, and doing an annual report where we, you know, do the shareholder change over time. And the way we sold that and the way that people bought that was, hey, it's great to know who bought and sold your stock last week, but you really need to know who's buying and selling your stock on a monthly, weekly, annual basis to be able to track your meetings. And so that's an example of recurring revenue that makes sense for both the seller of the product as well as the buyer of the product because, hey, you need to know that stuff on an ongoing basis to manage your management meetings. And we had all sorts of other things that went along with that that actually were true, which is good, and actually helped them manage their business and improve their communications with their shareholders over time.

So yes. Right. And another really good example, right, of recurring revenue, right, is anything that's in the SaaS space. So Software as a service, right? That's why, that's why SaaS companies, right, sometimes regardless of revenue, okay, are actually why they're getting 6, 7, 8, 9, 10x.

Yeah.

Right. Because of their predictable recurring revenue. They're all subscription-based. Very few hands have to touch it. It's all automated, right? Everything that happens is there's not a human being that has to touch it. They can have, they can be lean. They can have very little staff. They may need some customer service. They may need some— obviously, the technical staff is important in those businesses, right? But the reality is—

You make the product once and you sell it a million times. You have a predictable amount of cash that's coming in on a monthly basis, and you have a churn rate which can be applied. So, there's a churn rate for everything. Even Microsoft has people moving off their products. Even all sorts of people have people moving off their products. But you have the cash that's coming in monthly. You have a churn rate. It's an easy way to predict the future cash flows of that business, which is why, again, as Joe said, they get a high multiple to their EBITDA when they're sold.

So that's, again, anything that you can do to create that recurring revenue is going to be really important. All right. Number 4. Okay. We'll keep this moving. Number 4, create a process that others can follow.

Sorry, I'm jumping in here because this is so important. There's 3 parts of every business that are important: people, process, and product. Really great companies have 2 of the 3. Exceptional companies have 3. And I've noticed in my world is, in my experience, I should say, is process is the one that often falls down. So if you can create a process to create a business, a product, deliver a business or a product to companies, man, you are ahead of the game because a lot of companies have a great product and great people. But when you add process in between those 2 things, You make your business invaluable.

Absolutely. Because why? Because it's someone, some, it's something that's built that someone else can take and just run. Right? And, and the idea is that that makes the, the, the value and the saleability of the, of, of your company much greater. Right? I can, if I have, I have not, not only, not only just being able to document, uh, processes and have those processes in place, But to be able to do that, but at the same time, to be able to actually have your, your, that business be teachable and being able to be trained to somebody else relatively quickly, right?

Yeah, it's like, it's like if you have a friend, like a franchise, there's all sorts of companies out here that do this, and it's, it's franchises. And what they're essentially selling, what franchises are selling, to let you know a little secret, is they're selling you process. You go find the people, you go find— and we'll deliver the product. You go find the people We have the process and the product documented, but if you can create a franchise within your business that can be repeatable and saleable and, and, and documented, man, you are ahead of the game because you can, you could garner all that benefit and revenue to yourself.

That's right.

By having standard operating procedures, anyone who comes in can follow how to make the fries, as an example, without saying what company it is or You know how to make the donuts. Look, right, that's the reason.

So that's it. And, and, you know, that, that ability to be able to— what, what a franchise, we always say, right, is, right, is made up of 2 things: a strong brand and a repeatable process. Oh, right. Yes, that's, that's what a franchise is. That's why a franchise can succeed, because it is exactly that. It is taking a model with a process and a procedure and training And a strong brand and marketing. Okay. And now you've packaged that together, and now I can sell this to Bob, and I can sell this to Steve, and I can sell this to Mark, and everybody can buy these things. It's the exact same thing. And so when I walk into that company that sells with the big giant arches, whether I walk in there in Basking Ridge, New Jersey, or in Sacramento, California, or frankly in London, England, The fries taste the same. Right, exactly.

You know what you're gonna get. And that's why consumers went, you know, that's why people who travel and they want to, they want to, they want a burger or fries, they know exactly what to get when they're in Kuala Lumpur, as an example.

That's exactly. And so those, those processes that others can follow become really, really important. So think about how you can create that process if you haven't done so already. All right, number 5, stop being the rainmaker. Oh man, it's so hard because I— because so much of us start in a way where it's just us, right? And the ability to be able to have somebody else be the person who's bringing— who's, who's in charge of new business development can, A, be a really difficult thing to let go of, right? A. And B, it could be the kind of thing that is Is that your removal from that psychologically can be, you know, potentially can be kind of like, like a, like an anxiety-producing situation.

Right, when it shouldn't be. And it should be a situation where, like, again, early in my career, when we had the president come along to do a sales meeting for us, he was the relationship guy. He was the person that was, that was there to demonstrate to the prospect that they're important. But he wasn't doing the sale, right? He wasn't there to close the deal. He was there as a helper to the salesperson closing the deal. And that's the position that you need to be in when you're the owner of a company is you might have generated and garnered 100% of the business. But at the point that you need to be when you're trying to sell your business is you can go on those meetings still. It's not advisable, but you can go on those meetings still. You can't be the center of attention. You can't be the one demonstrating the product. You need to be the one that steps back and thinks about the business as a business above it and thinking about the, about selling the business to somebody, not selling the product or service that your business sells.

That's right. Not being the, not being the, like you said, you don't have to be the closer, right? You need to be the person who, again, who might show up every once in a while because there's a difficult And there might be a trust issue or something like that. That's fine. Now, I would also say that the only time it would ever be advisable to be the person who closes these deals is if you are interested in continuing to do that after you sell the company. And again, it would be a rare instance, but I think that there is a possibility that you come in and say, hey, look, what I really love is I love the thrill of closing the deal. You know, that's OK. If you know that about yourself, then ask for that as part of the transition. But understand that it's going to be hard for you to even get to that point, right, of having that option if you haven't at least taken steps to show that I have, that I, that this could run if I wasn't here.

Yep.

Right.

Number 6 is hire and train seconds in command. Right. So seconds in command. And the reason I pluralize seconds in command is If you're doing everything, if you're the finance person, the salesperson, you can't do that. You need a solid leadership team. You need people that are the experts in their functional area. Depending on your business, it could be a finance person, it could be a salesperson, it could be a director of operations. Those people need to be, need to answer questions and need to be the subject matter expert when you have a problem. It can't all come to you. First of all, it's exhausting. when you get every single call of the business. Jo's been there more than I have. I have— I've been there a couple times, and it's— you get a call at 10 o'clock on a Saturday night that you got to solve a problem. It— when I had to go in and do that with Cisco and do Cisco routers, I'll be honest with you, it sucked.

Yeah.

So, so, so train, develop people internally. This is why, like, succession planning is not just for big companies. People think succession planning, oh, they think of The transition when the CEO of like, you know, a huge company is retiring and what's going to happen. You need a succession plan. You need people to fill those leadership positions because people turn over. Inevitably, people leave companies. You need to have the next person in line down the chain in your org chart be able to step up and be the next director, be the next CFO.

Yeah. By the way, there's one, there's one other reason why that is so important. And that has to do exactly with the— actually with this transition, because you really don't know, okay, until it happens, who will actually stay. Okay? So you can't necessarily rely on— now you can have relationships and you can be— maybe you're talking about this process with your top-line people or whatever so that they're aware of what's happening. So you may have a good idea going into a sale that, you know, or through the sales process that you may be in a situation where someone's going to be leaving. Okay. But again, that's another reason why you need to have that next level too, because it may be that the transition itself, that the sale of the business causes people to leave for whatever reason, not because it's bad, but because they, there's an opportunity for them somewhere else or something else happens.

Yeah.

So, so being able to make sure that this person leaving doesn't kill the deal, you need to have the next level, at least in transition, or have a plan for how leadership is grown.

Totally.

Right. Um, financials.

Yeah, get your financials in order, right? So the one of the first things that we do, and everyone— I think too many people default to financials as like they just want to see the financials and they think they can understand the business just from the financials, and we know that's not true. However, you need to have your financials in order because it's one of the first things that buyers are going to focus on, and if they're screwed up Like we had, we've had clients, I say screwed up when they're not optimized, right? When they're, when we usually bring in someone from the outside to look at a company's financials because they're experts in that, they're accountants, they're forensic accountants. But when your business is in order, you can explain it, right? It makes sense. And also it helps with planning, right? We've had clients where the financials are not wonderful. Like they don't tell a picture of what happened in a good way in 2020, what happened in 2023 or 2024 was positive. However, what you can do is when you have those financials done, you can analyze them. You can say, we need to reduce our costs. We need to increase our revenue. We need to work on these specific components. And so when you're looking at financials, you really need to have the items broken down in a way that, that can be managed and can be looked at individually. And components of costs are an example. The delivery expenses, all those types of things need to be broken down to their component parts so that you can manage and measure them individually and make improvements on them.

And I think that that's a key thing to know, right, is that it's not about getting your financials in order when you're ready to sell. It's too late at that point. Okay. I mean, it's not too late, but it's very hard. And what happens is that now you're in a situation where you don't have something, the buyer's asking for something, doing due diligence, and you can't find it or you don't have it, or or you are not aware of, of something that might actually be like something bad, right? So getting your financials in order starts now, okay? Well in advance of selling. People like, like Exio can help you do that. There are lots of people out there, your accountant, whatever, okay? But understand that you— that it— that the more your financials are in order today, the more you can spot things or uncover issues that you can fix, or at least Say you understand this exists and this turn that what needs to be fixed into an opportunity for the next buyer.

And the example, one of the examples is all your supplier relationships show up in your financials, right? Your supplier relationships, your supply chain, all of your costs of delivery of your product or service eventually make it into your P&L. And when you're looking at the things individually as an individual component of the total cost, it allows you to say like, Wow, like, I wonder if we can get our whatever it is, whatever. I wonder if I can get our meat, if you're a restaurant, cheaper. I wonder if we can get our alcohol cheaper. I wonder if we can get our rent— is difficult, but when you look at those component costs, you can look, you can, you can make business decisions and improve those businesses and say, hey, if we can remove our, lower our warehousing fees, then we will be able to realize a huge profit because that profit, that cost just drops directly to the bottom line and increases your profit margin.

So yeah, I think about the beverage industry, okay, where, or any kind of packaged goods situation where the cost of goods sold is so important, right? And reducing, and often what happens is that at the beginning you're trying to find any supplier who will work with you at all, right? Because you don't have a track record, you don't have, you know, anything, whatever. You may not even have any financial history. And getting people to be able to work with you often comes at a premium, right? But that over time, the number one goal, okay, over time in a packaged goods company is reducing your cost of goods sold.

Yeah.

Right? And so that you're constantly looking at that. And again, if you are in— and but again, your cost of goods sold still applies to if you are a client service company, okay? And if you can get yourself into a product situation, Even if it's a service as a product, as opposed to just customize everything or whatever, just hourly rates or whatever it is, then you're gonna have much better, cleaner, predictable financials that are going to now be something that a buyer is going to feel a lot more comfortable with, right?

Yeah. And transitioning to the next one, this is something that you can do. It sort of has a fairly defined period of time. Some of the things that you'll do as a result of getting your financials in order will take some time. But like diversifying your client base is not something— this is number 8— it's not something that you can do overnight, which is why you need to get started on it now, right? The example of what we talked about earlier was with, you know, in the book, and also he has a big client. But also, if someone's responsible for north of 40% of your sales, even 30% of your sales, that's something you need to worry about because the buyers are gonna look at these things and say, well, if we lose this client, then the multiple that we're gonna pay you or the valuation we're gonna pay you goes a lot lower. So they'll often, what buyers will do is they will discount, if revenue is over 40%, they'll discount that for evaluation purposes and give you less money for your business. So If you are able to, and you should be able to, is— Sleep Number's new collections are designed to adapt to the changing nature of your life and your sleep needs. Whether it's the personalized comfort of the Comfort Mode mattress, the targeted pressure relief of the Comfort Next mattress, or the Climate Collection that actively cools or warms to help you fall asleep and stay asleep. And now get early access to our biggest sale of the year. Save 25% the new Comfort Next Luxe for a limited time, only at a Sleep Number store or sleepnumber.com. Don't rely on too many big clients. And if you do, if you do that now, fix it. And it takes time, it takes effort, it can take strategies to incentivize salespeople, as an example, to get new customers, or to, you know, um, so that you pay them more money from new clients as opposed to getting additional revenue from additional clients. But it's something you really have to work on.

One of the things that we do often, and we've got a partner who helps us do this at Exio, is that, is that, is that to help examine your client base, right, for where the profitability is.

Yeah.

What a lot of people don't realize, because again, it's a matter of, you know, any money coming in over the fence, you know, is always thought, you know, any revenue coming in is thought to be good, right? The problem is, is that again, the top-line revenue and the profitability on that revenue are 2 very different things. And so if you have a— if you don't have right now, as an example, a productized service model, okay, if you don't— haven't standardized your offering, right, if you don't have a repeatable process, right, if you are, you know, if you don't have your financials in order, okay, then what happens is, is that now what could be happening is that you could be spending more money To get less clients.

Yeah. And also in the book, 100% agree with Jo. And in the book, clients know when you are, when they are a big component of revenue. And they oftentimes, like in the book, they hold it over you. And they say, well, we're a big client of yours, you know, Alex. And we, so we want you to do this project for us. And when you're in that position, that That someone is a big component of your revenue and they're hard to deal with and they have you over a barrel, it's just another reason to diversify your revenue because you don't want to deal with people that think that they have leverage over you. Because frankly, they do. And then when they hold it over you to do— to get you to do projects that you don't want to do is a spot you don't want to be in.

That's exactly right. And of course, anytime you're in a situation right now early on, Same, right? This is, this is very—

Got it. Yeah, right.

To be clear, nobody faults you for, for having to do it this way at the beginning, okay? The same thing happened to us. It's just the way that it works, especially when you're talking about a collective client base as opposed to a customer business, right? So the reality is, is that you are— sometimes that's what happens at the beginning. But again, start today. Understand that where you want to get to, the trajectory you're on to sell your business, must include a diversified client base for you to have the greater chance of being able to sell. You can start that today. And again, we've got a product that will help you. We've got a service, rather, that will help you actually identify the clients that are profitable and compare them against the clients that aren't so that you can then have a decision to make, right? What to do about it. But again, these are the kinds of things that should be looked at right now. Yeah. Your sales and marketing systems, right? We're in a day and age, dude, where There is so much marketing automation right now available at a relatively inexpensive cost, right, that there's no reason why you shouldn't have automated sales and marketing systems in place. I will say this to you guys right now. If you don't have somebody working on automate— on marketing automation, let us— send us an email at info@myexitengine.com, and we will put you in touch with someone who can help you right now. Because it, this is so important. There is no excuse, okay, for manual anything. There's no excuse for being able to, you know, to, for having to, you know, rely on human beings to write content alone. With the AI and the SaaS model software that is out there from a, from a, from, from a sales and marketing standpoint, there's no reason why you can't have a repeatable lead generation process in place right now.

Yeah, and in addition to that, we have tools and systems and people that can do that. We also have services that we've engaged for certain clients where they can augment your marketing and your sales processes and people to bring you temporary systems and tools that you can run. And then if you want to continue with them, you can continue with them. If you want to— I want them to leave and take them in-house. But the point that Jo's point earlier is you need to have these things as set it and forget it, and you need to invest in them. Because when you have these automatic systems in place and tools in place, it becomes just— it's more clients. It's there. You're exposing yourself and exposing your company and your services and products to people all the time with a system on a monthly basis, on a quarterly basis. So they're seeing your business, and that helps generate things on, on the web with regard to search engine marketing and search engine optimization. People are going to be continuing to see you over time and you'll have impressions. It often takes between 7 and 8 impressions for a customer to buy your product or service. So if you do it once, it's not gonna happen. If you do it twice, it's not gonna happen. Do it 6 times, it may not happen. So when you do these things and you have it as part of a process, you're much more likely to get business from it.

And not only that, again, your trajectory, right, is at the end is the buyer now is doing due diligence and says, you know, how are you, how are you doing this marketing stuff? And sees these great numbers and says, oh, it's because we have this great system in place. And when we do this and this, this, and we only takes one person to manage this entire system and everything flows through here. And we've got follow-up and we've got CRM and we've got everything that we need and it's all automated. Because this is totally possible today, right now. There is zero reason for you to be out there creating ads by hand Trying to get ads out into the marketplace by hand, by, by doing any of this stuff. Okay. Now, look, there are things that will work for you better than others. It takes some investigation. It might take some trial and error, but the— at the end of the day, another reason to start now and not wait until there's a deal on the line.

Right? Totally. I love this next one. This last one, the 10th. Its headline is, Test your business independence, but I like to call it the vacation test.

This is awesome. What happens if you go on vacation, John? What's gonna happen to the company? You and I have never experienced vacation, but one day— no, that's not true. We all need vacation. And again, we're gonna talk about burnout and the ways to avoid burnout in the next couple of weeks. But it's such a real thing. But look, you know, if you can't go on vacation and remove yourself from the business for like 7 days, then you are not ready to sell your business. Yes.

It's like if you're, you know, not to reference The White Lotus, but I'm going to reference The White Lotus and TV shows. We always reference them. That guy, and I can't think of his name, Timothy, I think, who goes away and has a crisis. And that's a little different because he's, you know, on the front page of The Wall Street Journal. But if you can't go to Florida or Aruba or wherever you want to go, if you're a skier person or you want to go somewhere cold, preferably somewhere which doesn't have good phone connections. But if you can't do that and get away for 7 days, that's a problem that you have, not anybody else, right? You set that situation up.

That's it. And, and, and, and much of the time without realizing it, we set it up on purpose. Okay. It's the truth. Right? We want to feel— oh, I, I need to feel like I'm still connected. I, I have to make sure. This is a control freak issue. This isn't about reality.

No.

If you can't be in a situation where you can go away for 3 or 4 or 5 days— I'm not saying you don't check in, right? We're not saying I don't— you know, I'll check for something. You might have some big thing happening in the— you know, what always seemed to happen to me was that there was always— every time I had a vacation plan There was always some big thing also going on at work, right? So there are times and places, I think, where this stuff happens. But on a regular basis, if you can't take a weekend off or 4 days away without being reabsorbed in some kind of crisis at work, then that is the test. That is the lesson for you that sums up all 9 of these other things. Because if you can't do this, then, then you really need to start looking at the other 9 things.

Yeah, exactly. It's, again, it's gradually reducing your involvement in the business to prepare for an exit because everyone's going to appreciate that. You, you're going to appreciate that. Your partner, husband, spouse, whatever is going to appreciate that because you'll have more time at home and the buyer will ultimately appreciate it because you're not going to be around after they buy the company unless there's some sort of, you know, in most cases. You want to give them the option to say, thank you for your service, go, I want to run this business now, and have the availability to have you be around, but you're not going to be calling the shots and running the show anymore. So, you know, removing yourself from those day-to-day decisions, it's ultimately beneficial for everybody.

That's exactly right. And again, the most important thing is that you are setting the trajectory, okay, for an increased valuation and salability. And that, at the end of the day, are the keys to being able to actually sell this business and, and make what you, what you're hoping to make from it, right? So real quick, we've got about 5 minutes left. Here's what we're gonna do. Um, what can you do right now? Okay, so the first thing is that you need to self-audit. You need to look at your business holistically, okay, and try to identify areas where your business is overly dependent on you, okay? Look at those things. How do you do that? Right? You're gonna have— if I stepped away for 6 months, would revenue continue? Would the business completely fall, fail, right? Would everybody be going crazy and quitting and stuff because things weren't getting done, right? You can use— we can— you can use our TE, our Total Exit Value system, okay, at Exit Engine. Again, at assessment.myexitengine.com. Take the assessment and, and ask— and this takes you— it will take you 2 minutes to to answer a bunch of slider cut questions. Okay, you're going to give it a category and you're going to find out for yourself. If you answer it honestly, you're going to find out for yourself where you, where you, where you are on the salability and growth potential. And one of those specific questions is going to ask you about your, about your connection to the business. Bottlenecks in operations, sales, right? The decision-making. Does, does every decision that's made in the company require That's a problem.

If the answer is yes to that question, that's a problem.

That is a real problem. That's a huge bottleneck. So again, if you're on vacation and something happens and you need approval on spending money or approval on, right, on someone's vacation days or whatever that is, dude, you are way too involved. Way too involved, right? You can't— if you can't rely on people to decide whether or not A check gets cut today, something like that. Then you need to really step back. Okay? So identify where the bottlenecks are. Where where are you a bottleneck to the operation of the company, to the sales process, to the any kind of the decision-making things, right? So as we walk away today again, remember, you can right now build a business to sell. I want to thank specifically John Warlow. We're hoping that we're going to have on the podcast very, very soon to talk about this stuff. This book, his book is called— it's called Built to Sell, right? It's going to give you a step-by-step guide on basically how to— on all the things we talked about today that are going to get you, get you to a place where your business is more valuable and sellable because you are less a part of it. All right, remember our takeaways. We want to delegate key— one, if you can start today, Start delegating one key function to somebody else.

Yeah, that's a great, it's a great first step. Um, again, reach out to us if you have questions at jo@myexitengine.com or john@myexitengine.com for questions. Um, that's the first step, but the ones to take, in which order you take them, call us, let us know, we can walk you through it.

Absolutely. John, thanks again for today. It was awesome. Another awesome session talking with you. The book is John Warralow's Built to Sell. Check it out. Check us out at myexitengine.com. You can look at our— at Exio, at exioadvisors.com as well, our main business. You can follow us here, actually, and wherever you get podcasts, here on the Exit Engine Podcast. Follow us on LinkedIn. LinkedIn is a great place to connect with us. We are always open. Our DMs on LinkedIn are always open. So if you've got questions and you don't want to send an email or whatever, then, you know, coming and finding, you know, us on LinkedIn, ExitEngine on LinkedIn, will be the best way to do this. Guys, this is a huge thing. If you can start today to be able to remove yourself from the business, over time you're going to have a much easier time and probably actually make your business more valuable, believe it or not. Thanks again, John. Thank you. Appreciate it. Have an awesome day. We'll talk to you soon.

Sleep Number's new collections are designed to adapt to the changing nature of your life and your sleep needs. Whether it's the personalized comfort of the Comfort Mode mattress, the targeted pressure relief of the Comfort Next mattress, or the Climate Collection that actively cools or warms to help you fall asleep and stay asleep. And now get early access to our biggest sale of the year. Save 25% on the new Comfort Next Luxe for a limited time, only at a Sleep Number store or sleepnumber.com.