How to Sell Your Business: 5 Things You Must Start Doing Now

your business? And if you have given thought to that, just know that there are some steps that you must start doing now in order to prepare for that eventuality, if that's indeed your plan. So today we are talking with Erin Austin. She's going to share with us the steps, the 5 things that you must start doing now if you want to be properly prepared to sell your business in the future. Erin, great to have you on Cash In On Camera today. You're a strategic lawyer and consultant and obviously help people to better position themselves to sell their businesses. What do you find is the case today with entrepreneurs, coaches, consultants? Do the majority of people think about selling in the future, or is that a missed opportunity?

Unfortunately, it is often a missed opportunity. They're not really thinking about, you know, the thing about when we're using our expertise, you know, it's great income generator, right? And so we're not really thinking about building assets in the long term or thinking about serving our clients. And, um, and when we're in the service-based business, we don't think about, uh, when you have physical products, you think about your inventory, you think about your real estate. In the service-based business or the expertise-based business, we're not thinking that we have assets. We think we have what's in our head and the service that we provide. But we need to start thinking about actually building assets in our business, which is what we're going to talk about. So that we will have something that we can sell someday.

Well, I think a lot of service-based people also go into this industry and go into this world because they want to build a lifestyle business. So they're not thinking about the long term. They're just thinking about the more immediate time in their lives. And I think I'm one of those people. When I started to start my video agency consultancy, I was thinking about it more from a lifestyle perspective. You know, where was I in my mid-40s, mid to late 40s at that time. And, you know, I knew that I just didn't want to be doing the commuting anymore and all of that. And I've never really given thought to selling in the future. So that does make a good point. But in terms of what the steps are to prepare yourself, is it ever too early? Like, even if you're someone who's not, who has a lifestyle business, hasn't given thought to it, Should we be doing certain things to position ourselves should we decide to change our mind in the future?

Well, the answer to that is no, it's not too early because the same things that make a business saleable someday— and we'll talk about why I use the term saleable instead of sellable— um, are the same things that make your business scalable, more profitable. And so putting those things in place help you while you're running your business, making it a more enjoyable, sustainable, and scalable business. And those are the things that will transition you into building a saleable business as well. So it's never too, too early.

Okay. You did hit on something there, the difference between sellable and saleable. I'd love for you to explain that because they, to me, sound like they're synonymous, but it sounds like they're different.

Yes. So I like to use the car analogy. So let's say you have a car, you own the, uh, the title, you know, you're of legal age, uh, nobody else is on it. You don't owe anything on it. You can sell that car. That car is sellable. Now let's say that same car, you know, can't pass inspection. Its bottom is rotting out. Mice have, you know, taken up residence in the engine. Is it sellable? Yes, it is. Is it saleable? No, because it has no value to a buyer. So for something to be saleable, there has to be value that somebody else is willing to pay you for. So that's why, you know, we can have businesses that we own and we absolutely have the right to sell them, but does it have value to a buyer? Is it something that someone who wants to acquire a business, they're going to look at and go, yeah, I, I find value in that. So, so that's why we want to build saleable businesses.

I see. I love that. So on the path, let's say, to becoming a saleable business there are some steps that we should be thinking about now in preparation for that. And by now, I mean, is this potentially like we're talking about selling your business in 20 years from now, 10 years from now? Give us a timeframe when you say that what you need to be doing now in preparation for an eventuality, like, are we talking many, many years in the future or 2 years in the future?

Yeah. I mean, the sooner you do it, the more value you can build into your business, just like, you know, a savings account. Like, you know, you can either put in the $100 a month and then have the million bucks when you graduate— I mean, when you retire, or you do it all, try to figure it all at the end and fix everything at the end. And so it certainly makes it easier again to set up systems and have a process in place for this. But to go to the question of whether or not you're building a business that you could sell someday. When a buyer is looking at expanding their business, you know, whether they are, you know, have no business right now and they're looking for a new one, or they have a business and they're looking for something to supplement it, to add in something to combine it with the current business. What they're going to be asking themselves is, okay, should I buy somebody else's business, or should I build it on my own? Should I just build my own from scratch? And so if you want them to, uh, answer the question with yes, I want to buy your business, there are some essential characteristics that the buyer will be looking for. And the two big buckets are exclusivity and predictability. And within that are the five elements that we're going to talk about one by one. But overall, exclusivity means that you have something that the— that would either be impossible, very difficult, or overly expensive for them to build it themselves. So it makes more sense to buy you than to do it themselves. And predictability means that they have to be confident that if they buy your business, that they will be able to, to grow it. Like, it's that they can look at your financials and go, yeah, that makes sense, and I can do that and have that same success. So exclusivity and predictability are the big buckets. And, uh, and then under that, um, these are the 5 things that you need to make sure you're working on now. And you do want to start working on them again. You know, these are going to help you grow your business now, whether you want to sell it in 5 years, 10 years, or 20 years.

Okay, awesome. So let's go into the steps. This is really intriguing to me because, I mean, um, exclusivity I think is also an interesting concept, right? It's like, how do you almost like differentiate yourself amongst whatever else is going on in your market? That's what I hear there. Is that what I'm hearing?

Yeah, you're absolutely right. Well, the two elements on exclusivity are Um, uh, sorry, assets, and the other is your positioning. So let's talk to positioning first, which is what is your unique positioning in the marketplace? And so how— what niche do you serve? Like, that niche is who you serve. And what is your specialization? You know, how do you serve them? And maybe you have both. Maybe you have both a niche and a specialization, but especially when you're small, The more focused your positioning is, the more valuable you are. You know, it back to that, um, buy versus build question. Like, let's say you just— I'm a web developer and I can develop websites for anybody. I do it the same way everybody else does it. Well, why would somebody need to buy you? They can do that themselves. And so having that strong positioning as, you know, let's say I'm a web developer who works with e-commerce sites to make sure that they never go down, you know, on, you know, Black Tuesday— that's a Black Thursday— Black Friday. Black Friday. They never go down on Black Friday. And so then, like, okay, like, I can try to, you know, I'm that buyer. Okay, can I figure out how to, like, be as effective as they are in their specialization and with the, the way that the reputation, the marketplace is? Or can I just buy them, you know, and just have that automatically? And so that's the positioning piece. The other piece is the assets, you know, and I am an intellectual property lawyer, and when we're in the expertise space, our assets are generally intellectual property. They aren't all, but generally they're intellectual in the intellectual property, uh, space. And what is intellectual property? It is a legal monopoly. So that is Monopoly is, you know, exclusivity. The only way somebody else can have access to your intellectual property is to either buy it from you or license it from you. There's no other way for them to get it. So that is an instance if you have that valuable IP, the only way that buyer can get it is to buy it because they can't reproduce it without violating, infringing your rights. So those are the two elements of exclusivity.

Just a question before we move on from assets and that IP and protecting that IP. And maybe this is a conversation for another day and we could have you back to dig into that. But the legalities around that, are you talking about trademarks and registered and registered trademarks and things of that nature?

Yeah, I can just do a high-level overview of intellectual property. So basically there's 4 buckets of intellectual property in the US. I'm talking about US only here. So that would be copyrights. And those are the things that are original expression that we put down in concrete form. So when you write something, paint something, sculpt something, photograph something, those are things that you can protect with copyright. Trademarks are things that signify origin of a good or service. So logos, colors like, you know, UPS brown, you know, things like that, sounds like the NBC, doo doo doo, you know. And so those are trademarks that say if you see or hear taste, maybe even something that you know where it came from. So that's trademarks. And trade secrets are those things like the Coca-Cola formula or Kentucky Fried Chicken formula. Those are things that are kept secret, and the value in them is that nobody else— is the secret is literally the value in them, and that we protect those with with confidentiality agreements and by keeping them under lock and key. And, uh, and then patents is the fourth, um, uh, area. So those are your inventions, you know, machines, pharmaceuticals, things like that. So those are the four areas of intellectual property. Now we can have intellectual assets that aren't IP because those— IP is just short for intellectual property because IP is just those four categories. So there may be other things that aren't tangible, like, like your desktop or whatever, that are still very valuable. And so some, some of those— and they're still considered assets. So things like your relationships. Let's say you are the preferred provider for a large client. Back to that buyer conversation. Well, you know, the only way for me to get in on that great preferred provider relationship with you know, FedEx is to buy your company, right? So that's another asset that's, you know, it's not IP, but it is something that your company has that, that's a value to a buyer. Or maybe you have a great community, like a great online community of people that's a hard-to-reach population perhaps, but you've, uh, they trust you when you have their information. And that would be something— people love data, right? And so that's something else that might be of value to a buyer as well. That'd be very hard for them to build that new relationship with your community from start.

So on our path to becoming saleable, um, the first two things that we must be doing now is looking at our assets, and we need to be looking at our positioning.

Yes. And so in particular, like, making sure you're developing assets, that you're thinking about your IP, protecting it, and on your positioning, that you making sure you're building a specialty in a niche so that you're not just a generalist.

Okay, great. I love it so far. This is fantastic. And so what leads us to the next thing we must start doing now?

Yeah. So the second bucket is the predictability. So that buyer wants to know, okay, you've given me these projections. How do I know that once I buy it, that I'm really going to be able to realize that or even do better? Obviously, they want to do even better than you could. And so the 3 elements of predictability are independence, leverage, and protection. So on the independence side, especially if you have a very small business, is the business just you and your brilliance, or is there a real business there that is independent of you as the owner so that when you sell it, that all of the clients won't go away, all the employees won't go away, all the vendors won't go away. Make sure that there are— there's a real a business that operates independently from you as the owner. And so you would do that through creating systems. You don't have to have employees, but you do need to have processes that could be transferred to a third party who could implement them without you because you don't want to sell yourself because that means you have a job with your buyer.

Right. This is an important one because especially for the coach consultant person, in many cases, especially when they're growing their business, it is about them. They're selling themselves. And so what I'm hearing you say is that you want to build out your systems and be replaceable within the confines of your own business. Correct.

Yes. Like, could someone else do what you do? I mean, doesn't mean— I mean, obviously, as the originator of a methodology or some training materials, Are you the best person in the world to deliver them? Probably. I'd say yes. But does that mean that other people couldn't provide the same value to your clients that you provide to them if they were trained on your system, they owned your system or trained on your system? Good one.

I love it. I love that independence.

Yeah, that makes a lot of sense. Yeah. And then the next one is leverage. So we want to make sure that you're decoupling your income from your time. So it's not that it's impossible to sell a business that has an hourly billing model, but that's obviously much more difficult to scale. And a buyer wants to know that they can build on that. And so if, um, uh, you know, recurring revenue is kind of the gold standard of separating your time, your income from your time. Um, so if you have something that is, you know, repeatable type of business. But even if it is project-based, you know, if you have long-term engagements, let's say you have retainer, um, uh, clients, or, you know, if you're a trainer that you have, you know, clients that continuously bring you back, um, over and over, um, then, you know, the, the buyer can look at those projections and feel like, okay, I can see where the numbers are coming from. I can see that she has these long-term engagements.

I can see Oh, we just paused for a moment. Well, we'll just hang on a second. Let's see if Erin comes back.

You know, you know that when you do a webinar, you know that you're going to bring in clients, or you have a sales process or an onboarding process. So something that shows that buyer that it's not just like let's hope and a prayer that the next client is going to come in. Yeah, I love that. And that the revenue is going to come in.

Well, and I think that that leverage piece really also makes us think about our offers and how we're structuring our offers. So you mentioned about like MRR, right? Monthly recurring revenue, having those type of models where you're leveraging yourself. It's not just you're the only person who's doing one-to-one service-based things, but that idea of expansion. And that really starts at the offer level to look at what kind of model have you chosen for your business. So it's an important decision.

Yeah, absolutely. Looking at the revenue model that you have, like how do you charge for the value that you provide to your business, whether it's one-on-one or some sort of productized service or some sort of product are all options for figuring out how to decouple that income from your time. And then the protection piece, you know, I personally think I— what I do is everywhere, but the most obvious piece that people think of when they think of a lawyer is a protection piece. And of course that is contracts. You know, when you are again in the intellectual property space, contracts are very important. And so if you want to make sure that you own the intellectual property that you are having commissioned for, you know, you. Like, let's say you are hiring someone to help you create some part of your training program. Maybe they're providing the graphics or they're providing, you know, voiceovers or something. Make sure that you own that. You make sure you have those documented with contracts. And when you're working with clients and you have deliverables, you want to make sure that, uh, you aren't giving away your intellectual property to clients. A lot of You know, the default and the typical client services agreement will be that they own everything that you deliver to them, and you want to make sure you're carving out your, your, your own, uh, pre-existing intellectual property. And, and from the buyer side, they want to know, like, if you say, okay, I've got these projections, well, one of the ways that you back up those projections, of course, is with, with your contracts as well, that they're going to be able to collect on your account receivable. Yeah, and then, you know, and the likelihood of, uh, no lawsuits. Of course, they always want that. And they want to know that your employees have signed, um, employment agreements that show that they're not going to walk away with your expertise and start competing. Now, by the way, I am okay with people using their own, uh, expertise to create, you know, going out on their own and starting their own businesses. Um, but obviously you don't want them taking your stuff with them, so you do want to have agreements in place for that. Uh, and then insurance is just, uh, I just—

oh right, it's true.

People who don't have insurance makes me insane because it really, it, you know, it really typically is not that large of a percentage of your revenue compared to the value that it provides. Obviously, there are certain industries like gynecology and things like that where malpractice insurance is super high, but for most of coaches, consultants, trainers, it's just not worth it to not have that insurance in place.

Yeah, that's a really good point. I mean, if we're helping people with certain projects and certain things, In the case, and I have to admit this is not something I've really ever thought of, but what would be a circumstantial example for a coach or consultant where insurance would be a valuable thing to have? Is it somebody who comes back and says, oh, I didn't get the result that you had promised, or what might be the scenario?

More often it's going to be some harm that they have suffered. So let's say maybe— let's go to, to the web designer example where somehow you used something that belongs to a third party that you don't have a right to. And so you've incorporated that into that deliverable, and the client gets, you know, a cease and desist from the person who owns it. And, uh, and if, you know, depending on the nature of it, if there is a lawsuit— I mean, you don't use insurance because you comply with the cease and desist. You use insurance because somebody sues you, right? And, uh, and for whatever reason that escalates and it becomes a lawsuit. Um, you know, if you provide professional services like a lawyer or an accountant or an architect, of course you would have malpractice insurance in case you do something that you give bad advice.

So yeah, that is fascinating. I just love these tips and, and what I think you've done is really paint a picture of how, well, what steps would need to be in place in order to get the maximum benefit or be able to sell your business for what it's worth. If that were to come along, whether it's 5 years, 10 years, it doesn't matter what the timeframe in the future might be. Regardless of the timeframe, these things need to be in place to appeal to a buyer.

Absolutely.

Absolutely.

And to help you grow in the meantime.

Yeah, that's right. It's great. Erin, I'd love for you to share something that's helping you to market yourself for the year that we live in right now. So what's something that's helping you to market yourself?

Well, it's funny that we're here live on that. One of the things that I've added to my business, I mean, I have been practicing law for quite some time, but going, doing lives, LinkedIn Lives, webinars, I really, really enjoy that interaction of of connecting with people in that way that you just couldn't do 20— is it 23 years ago? 1999? Oh my goodness.

Yeah, let's not do the math because then— yeah, let's not even do this.

As a lawyer, I don't know, I can't know how long.

It was a while ago.

So yeah, so I love the ability to connect with people around the country in this way now. So I Enjoy it and use it a lot.

Yeah, thank— that's great. And I love that you're on here and sharing these tips. It's really valuable. Where can people learn more about you?

Ah, well, this is my website. It's thinkbeyondip.com, and you can see that there's a free resources button. I like to consider myself a graphics queen, so I love to take legal concepts and put them in kind of a graphic form so that they're understandable, digestible. And so from on there, you can get access to those. And you can also find out I have a podcast that you can connect to from there as well. And yeah, thingsbeyondmyfeet.com.

Yeah, I love that. Well, thank you so much for coming on the show today. We really appreciate your insights on how to sell your business, the 5 things that you must start doing now. And this made a lot of sense. I took notes. Many of these, I'm like, I don't have those things in place. Okay, some work to do. Because Erin said so.

Absolutely.

I appreciate it. Thank you so much. I think our whole audience— in fact, I would actually encourage whether you're listening to the audio right now or maybe you're watching the video, come back and leave a comment below if you can find this on your social platform of choice, because we do broadcast Cashing on Camera to multiple platforms. We'd love for you to leave a comment below. What was your biggest takeaway from this one? Because I think there's a lot that you've unpacked for us. Thank you so much, Erin, for coming on the show today. We really appreciate it. Thank you for having me.