Blake and Tim explain how to make an online business sellable: remove yourself from ads and delivery, convert contractors to employees, switch to a 12-month subscription model, and document that revenue repeats annually. Recurring revenue demonstrated over multiple years dramatically raises what a buyer will pay.
Chapters
Can you outline sort of like the specific changes you made in terms of model or the customer relationship when you realized you wanted to sell and you're like, wait, I'm just selling one time. What are the changes that you made? And then we'll come back to the process.
Yeah, it was like turning a cruise ship 180 degrees really fast. It was a fine line of knowing all this stuff and going, cool, let's just do that. And then, and then having everybody fall off and the ship is now sinking. It's finally between that and like, oh, we have to get there. I wish we could do it now, but we gotta turn this in a way that nobody's gonna fall off. So really tangibly, the way these info products businesses are set up, generally speaking, is tons of contractors, if any, right? It's usually just you, a VA, maybe one closer, et cetera, et cetera. But if you were like us and had like a team, gosh, at one point we had like 33 people working with us. Have a big team and you hear, oh, you need to go W-2, what you end up doing is, oh, maybe I shouldn't sell the business. You just change your mind because of the complexity. And then you all, there's all these things I need to change in the business. Tim's point is 100% true. You need to 100% have conviction that you want to sell it, not if you can sell it or anything like that. Do you actually want to sell this business? Because once you realize you got to do all these other things, you start questioning, well, do I actually want to sell this? And that amount of flexibility doesn't serve you when you're making those decisions. So after we got a conviction, yes, we got to sell it. There were some pretty crucial things that need to happen, which was, okay, remove key person risk. So I needed to get out of all the ads, out of all the content, even the program itself I needed to get out of. Which means that these people on the team needed to build the program, which means I need to give them profit share. Okay, I got it. Am I going to give them profit share in a contractor or as a W-2? Another conversation we had to have. Another big change that people need to think about, which we had to do, was most of these businesses are set up to do one-time payments or like 2 pays, 3 pays. You're kind of rewarded for getting cash collected upfront. And you should be, these are cash flow businesses. But if you want to sell this business, you don't want to do that. So at the very least, God, I remember having these debates and these conversations. I basically said, okay guys, cash collected, cash collected, cash collected. We minimized the team down to, you were fired if you didn't get X amount cash collected. I mean, we were really aggressive on that. And then for me to sort of sheepishly come out of the woods and say, hey guys, we're going to go back to 12-pay. They're like, damn it, Blake. And they're going, why? And I can't tell them because we're looking to sell the business and we need to promote yearly recurring revenue and sort of model out some sort of subscription type thing. I couldn't tell them that. It was difficult. And so I had to tell a few key leaders, Because we're looking to do some sort of strategic partnership or maybe be acquired. We don't know yet, but we need to show some sort of sustainable revenue that's recurring and predictable. Oh gosh. Well, what about all those people we let go? Well, I was wrong. So like introducing 12 pays, which means close rate. I know I'm getting in the weeds here, but which means close rate goes up. Cash collected goes down, profit goes down, revenue goes up. The experience of the closer now, you don't have to be that good because you have 12 pays and the whole business just sort of like starts getting shaken up just from that one change alone, right? That was one thing we had to do. And then the other thing was like we had to put titles and positions onto these people instead of just being, you're a contractor, you're a content person. It's like you're the general Right? Or you're like head of content, et cetera, et cetera. And now you have to promote these individuals as assets in your team, not just these people that can be replaced like that. They're like fundamentally core. They're the fundamental core of the business, if you will.
Powerful.
Yeah. And like the hours, billable hours, all that stuff. Like I need to, I remember filling out these like time cards and sheets during this process of like, Like, you can't show more than like 4 hours a week on your involvement. Well, like, okay, what— how's the business gonna run anyway? So those are just some of the things we had to do on a granular level to change the ship around.
And I would say a couple things. One, we didn't have the full 2 to 3 years to do this. So that's optimal. Second, I think the 12-pay thing is still like a— when I'm saying you need more recurring revenue, I don't mean that you need to go from collecting all your cash upfront to a 12-pay. What I mean is that you actually are like selling something every single year to your clients.
Right.
Not just that it's spread out over 12 months, but like January 1st, 2022, sell them something. January 1st, 2023, sell them something. January 1st, 2024, sell them something. That history of like recurring purchases is super important to potential buyers. That's the thing that moves these businesses from like selling for like 2 times earnings towards 5, 6, 7 times earnings. If you can't demonstrate that over a multi-year period, like you're stuck being a 2 to 3 times business.
