The Exit: Letting Go To Grow

Foreign. What's up guys? Welcome to the Pelby Biz Podcast. I'm your host, Kelly Alhui. Today I'm going to talk about exiting a business. Some of you all know that I have sold orthopelvic and I've been getting a lot of questions about how do you exit a business? Well, first off, you have to have a business that you can exit. If you are a, I call it a solopreneur, meaning you're the only person that works in your company. Your business is not sellable. Just letting you know, okay, it is not sellable. You typically want to have at least two therapists full time for a brick and mortar. Just so you know, for brick and mortar, two therapists, sometimes even two and a half, three to truly be able to exit your building and a manager and, and or an admin that has been on for a longer than a year. It's typically what they want to see. And I want to kind of walk through the journey of what it's like to exit a business in the grand scheme of things. So traditionally what happens when you try to exit a business is you go and you look for a broker. A broker is someone that's kind of the middleman between you, your business and, and someone else that's trying to acquire your business. So that could be like a large company like PT Solutions or you know, Benchmark or whatever it may be. And what happens is the broker is going to take 10% of the sale. So let's say your business was evaluated at a million dollars. I'll get into evaluation in a second. But your vision, your business was evaluated as a million dollars. They would take $100,000 just from the sell of your business guys and then taxes on top of that, that could be another 2k on top of that. So a million dollar business, you're looking at maybe you're going to get maybe 700,000. That's if you used a broker and with taxes. Now you also don't have to use a broker. Just so you know, you could just find a solo person or someone potentially that works in your company and you could sell it to them. And so this is why you want to ask around to see who is interested potentially in buying a business that you can go to Facebook groups, you can go to other pts or ots potentially that may want to buy it. There are companies out there and even smaller ones not as big as like PT Solution, but that potentially want to by your business. Now what I found during my search of this is when I would call these bigger companies, they were really interested in cash. No, sorry, insurance based models, which I was like, hello, cash base. We have bigger profit margins and insurance base. But it was still kind of a foreign language. So what I was finding when I was going through this whole process was this process was still kind of outdated, to be honest. And most people, the bigger companies wanted an insurance based model, which I found fascinating because I'm like, isn't the bottom line for you guys just about like how much profit you can bring in? Well, this company is bringing in more profit than the one that you're trying to acquire that is insurance based. So I just, again, it was just an interesting observation. A lot of them also were not ready really for a cash based model. And they definitely weren't ready for a cash based public health model. So I found that just very interesting to say the least, because I don't think many pelvic health cash based clinics have sold. And so I feel that it's kind of more on the cutting edge part because many people don't have an experience in that. So I want to kind of jump into like how they evaluate your company and what is an evaluation based on? And this is really, really important for you guys because from the day that you start your company, so even if you're not trying to exit by the day that you start your company to, when you potentially do exit your company, you want to build the company to be profitable and sellable because then you create an asset for yourself. If the thing is not sellable, meaning you're just the one that's in the business and it's just all about you. It is not sellable because when you go away, the company cannot sustain because they don't have you in the thing anymore. That makes sense. Okay, so you want to create an asset that actually doesn't really involve you and that it can run without you. Orthopovic has run years and years and years without me being the therapist in there, being the person that's running the front desk. Like, so I've created an asset. The only reason why I was able to create an asset was because I created systems that did the thing for us and, or taught my people how to perform the task that we, that we needed done to them without me physically having to be in there. And so if you guys have a company right now and you're thinking, crap, I don't have systems that are automated or that teach my people without me, or that things can't run without me, then you don't have a sellable business. So you, the goal is you. And you don't have an asset. The goal is you want an asset that then is sellable and. Or can be given to someone. Whatever, whatever you want. But you want something that is sellable because you have systems in place that do the thing. And it doesn't just rely on you. Because if you're sick, if you're out and the company goes down, then you do not actually technically have a business. You have just another job. And this is what I talk about a lot at pelvis is I call it pelvis for a reason, not pelvi jobs, because pelvi biz gets you an actual business that then allows you to do other things. This is the difference between me and many other coaches. I don't just give you another job working solo. I tend to not work with those people because I need you to move out of that phase so that you can get your time back and your money back. So I know I'm tangenting here a little bit, but that's what you have to understand when it comes to exiting a builder, a business or, you know, understanding how this works. So let me go back to evaluation. So evaluation is based on net profit. Let me say that again. Evaluation is based on net profit. So net profit is. So let's say you pay yourself $200,000 a year, okay? So that means your W2, your paycheck is $200,000 a year. That means whatever is left over in the bank account. Let's say there was $250,000 for the year left over in that bank account. Then that means you do 250,000 times 3 up to 5x. Everyone, by the way, is going to put their own evaluation on the company. The standard is around 3 to 5. So let's do some math here. If we did. Let's just say there was what is left over after you pay yourself in the business bank account. There's $250,000. So let's say there's $250,000. Times, let's just say three. That means your company is worth 750,000. Let's do another example. Let's say there's 250,000 left in the bank account. And you Times that by 5, that means your company is worth $1.1,250,000. So do you see that range? It could be anywhere between 550,000 to $1,250,000. So that is the range that these people will be giving you. Some people Give you more. Some people give you less. Now, I did have Orthopelvic evaluated. I'm not going to say that evaluation, but. But we did have it evaluated, actually twice. So that being said, there was two different numbers. They were pretty close, but there were two different numbers there. And then you have to ask, okay, well, what buyer is willing to pay for this? And if it's a higher number, typically it's going to go to a bigger company. Not always, though. Okay, so just be mindful of that when you're thinking about, well, who's actually going to buy that. And you could have an evaluation, let's just say, of 750,000. But is someone actually going to pay that for your company? And how you get what your evaluation price is is if you have systems and everything built out in your practice to where it's dummy proof. So just so you guys know, I had two offers very, very quickly on Ortho Pelvic. One of the offers was, I'm not going to get into details of this, but one of the offers was solely because of the systems that I had in place. Like, I'm not kidding. And they had ideas that they could do with it. And I didn't like the direction it was going. And so I was just like, nope, I don't like that offer, even though they love that offer. Um, but. And it was a, it was a good offer. Like, the, the price wise was. Was a good offer, but I just didn't feel like it was my vibe or where I saw orthopelva going. And so you just have to be mindful of that. Of like, okay, well, maybe you find the buyer, but then what is the buyer going to do with the company? And. And what does that look like? Because ultimately, guys, this is your company and this is like your baby. You nurse it, you grow it, you spend so much time in it, you spend more time sometimes with it than your house. Like, you nurture this thing from the ground up, right? And so you really have to think about, a, what's the price that you want? B, what are you, you know, willing to sell it for? Like, what's the bottom line that you're willing to sell it for? What does that payback look like? So there's many different ways to structure a deal. Sometimes you have to stay in the business for two months to up to a year. Sometimes you don't have that option and you can be completely removed when the business sells. Sometimes there's a buyback over many years, or sometimes the person gets A loan pays you the lump sum up front and then you get just the cash up front and then they pay the loan off. Sometimes it's just a straight cash, cash deal. What else, how else can you do this? So there's just many different structures that can be had. And basically, yes, you do have to hire a lawyer. It's probably going to cost you about $5,000 to draw up a contract and terms and, and look at that. And by the way, so this is another thing I learned in the cell of the business is your, the things inside the business, like we have a Pilates reformer or like the, the treatment tables and all that kind of stuff, that's actually a different sale that doesn't come with the business. The business is like your emails and your systems and like, that's the business. So you sell the business, but then your assets inside the business, which is maybe be like your iPads and your computers and all that stuff, that's a separate sale. And then what makes it even more interesting, because I did own my office space. The office space, if you guys do own your office space, is actually a different deal. So the person that's buying it or the company that's buying it could get, you know, could take over the building if they wanted to buy it or if you wanted to sell it, then that's a separate deal. Or someone else is going to have to sell it. Like, well, someone else going to have to buy it. I mean, you sell it to someone else. So it can get very interesting with lots of deals going on at the same time. But that's really kind of what it looks like. And just because I just want to be very clear on this. Just because a company evaluates your company at this price, it's just who do you ideally want as the buyer to that? And what price are you willing to like come to and say, okay, I agree to let it go for this, this worth. And so you just gotta, you gotta realize that the other thing I would consider here is you have to look at net profit for the future and you have to say, okay, well, what is it worth if I sell this thing? If I sell this thing, yes, I may get one lump sum. But if I don't sell this thing and keep this thing going, what could it also bring me year over year after year after year? If you have stability in the company, if you don't have stability in the company, that's a different story. But if you have stability in company, what does that look like? And so do you want to sell it? Do you not want to sell it? So there's all questions that you should be asking yourself and if you need help, please just DM me elvybiz and I can talk to you about it. But, you know, I just want to give some real insight because ultimately that's what I'm trying to do is trying to build every single one of you guys wealth and understand that by building wealth you get your time back and you get to choose what you get to do and what you want to do. And that's just really cool when you, you know, are growing in life. So. But yeah, I mean, I'm trying to think of what else. It's just been interesting. It's been an interesting process to go through. And for me personally, if you, if you haven't listened to my last podcast, you go back and listen to it. But basically I exited orthopelvic because I needed to hyperfocus on pelvis and I knew that that's ultimately where my passion was and I had to hyper focus. And so that's personally why I decided to sell and move into the new era of, you know, Kelly Alhue and what, what that looks like. So just wanted to come on and give you guys some insight because I know as I, you know, even explained that in the beginning of the podcast, many people do not know what this looks like in a cash based model, let alone a cash based public health model to exit a business. And I can tell you from speaking to many of these dudes, they were just like, I don't know what to do with this. So just really fascinating and I do have a lot of insight on it. So if you need help, happy to reach out and work with you to get you, you know, the information that you want. So. All right, guys, bye.