Tips & Strategies To Run A Successful Marketing Agency That You Can Scale (Part-2)

Thanks for having me back.

There’s a lot, and there are many ways of this mountaintop. And I have to preface everything I say here. It’s like none of this is financial advice or legal advice. This is just my viewpoint on it. And I am not giving anybody financial or legal advice because a lot of these things that you will deal with or wrestle with will end up being legal and or financial issues, and you’ll need to get advice from an advisor. You’ll need to get advice from your attorney, especially. So, this is going to be more of just sharing my own journey assurance within the scope of what I’ve done in my three exits over the last couple of decades. The first issue, I think, is just the idea of whether or not you want to sell it. Like why would it make sense to sell? Just the very idea of selling itself, and you might not think that’s something you’d even question. Well, of course, I want to sell. People out there may think, well, of course, I would want to sell it. Well, you know, if you could back out of business in such a way, we talked about delegation last time. We talked about the idea of stepping back into the business and just running it from the top. But you even take that a step further where you could literally as you want. Basically, you want to run yourself out of a job. That’s the idea. You’ll get rid of all your jobs and hold onto the ones you like, or they will still serve you. But if you think about backing out all the way of an agency. You could back out all the way to theoretically 100% ownership. Other people run the business, and it’s just a cash cow for you, and it’s passive. Now, that has a strong requirement of having a super person like there is a complete manager, essentially a replacement. Now finding that person is not going to be easy, but they do exist, and they might not want to own it, or you just golden handcuff them. I saw a great quote actually earlier today. It was Alex Hormozi’s quote. He said that the biggest mistake I made was not paying a tier A player one and a half times what they were worth versus going to a tier B player, and I made five X more over paying a Tier A player versus a tier B player. So, his thing is like completely overpay the better person, and it’s akin to an old sales riddle which is like you have four territories or like a quadrant of four of your best customers from best or worst. You have your two salespeople from best to worst. And then it’s like, how do you optimize with these four quadrants in the four quadrants of the customers? And the answer is you take all your best salespeople, and you put them on your best customers. So, it’s a very simple trick, and the trick is to take the awesome person, overpay the heck out of them, and bring that back to this previous discussion. The idea will be if you are so blessed as to find somebody who is that great and could actually run the whole agency or top-level manage it like you do, in other words, do all the things you’ve been doing. Give them whatever you like, and take equity in sacrifice. Give them equity, overpay them their salary, whatever you need to do, because think about what you’re buying. You’re buying back your freedom and now what you’re buying is a passive income stream for your business. People always say I want to buy a cash-flowing business that I can sit back and passively. It’s like, Oh, what about your own business?

You know, it’s my baby syndrome, which we all suffer from, right? And so this is where you have to be willing to let go. You have to think about if you’re willing to exit. You’re already willing to sell your baby. So, why would you be willing to own your baby? Why not own it and not touch the day-to-day operations? So, that’s another tier I think a lot of people don’t give consideration to. And again, I understand that a lot of times it’s going to be like, well, I just don’t have anybody that could do that. Well, you could look for somebody like that. And the question may be, why wouldn’t they own their own business? Well, you know, maybe they’re already working with you, and they’re willing to step up and take more responsibility, or they just know business ownership is not for everybody. So, if you’re kind of giving them a guaranteed paycheck, they’re not worried about the ad as it flows, or as you said, you cut them in on the equity that way that they’re a manager owner, and then they’re your business partner. And I think that’s good, especially at that level of involvement where they’re literally running the agency. It would make sense for it to be an equity deal. So, I shouldn’t say you keep 100% equity in that scenario. It’s like you’re keeping whatever you guys can work out. Everything’s up for negotiation, and I think that’s a very worthy scenario. I say this because it’s one of the things that I now think about. Maybe I should have done that a couple of times, but I didn’t. And I think I was very myopic, and so I’m offering that to people because I did not myself entertain that enough in the past. So, that’s one. But now let’s just go for whatever reason, you just said, no, I’m going to do a traditional sale. I want to sell it. Within that, you have a lot of options. If you really think it through, you have a lot of options. Option number one is you put it on a marketplace. Well, actually, you could use a broker as a broker. I’m not a huge fan of brokers, and no offense to brokers out there that are listening. They can do a good job. A good broker can be good, and so forth. And with certain businesses, it’s a great way to go, but you’ll pay a fee, and I have used a broker in one transaction. I didn’t use a broker in other transactions, and I was no happier using the broker. Now, your mileage may vary there. There might be complexities involved with the brokers and help you, and maybe you wouldn’t even find, like for my second sale, the broker found me, but the broker was really the other guy’s broker.

He had a broker who was looking for businesses for him to acquire. So, we would have never connected if it wasn’t for the broker. But for me, as a business seller because I have been around the track a few times. I feel comfortable not using a broker. If it’s your first time, you might not feel comfortable with that. Again, this is a very personal decision, and I would never tell anybody not to use it. I’m just going to say when you’re experienced, you might not find that’s a necessary thing, but you got to look into that. But you’re going to pay a fee if you want to use it when you’re going in there. And they vary widely in terms of their talent levels and abilities.

So, this is the broker saying believe that at that. Now, there we have other questions like this is going back: what involvement do you want to have to go on in the business? So, this is huge, right? This goes back to, like, scenario A, which is a more traditional scenario, you sell the business completely, and you’re out, but you’re going to almost always, in almost every sale I’ve seen of this type of like an agency sale, there is going to be a period where you hang around whatever you call that clause. They want you to continue working. Its transition period is what it’s called. Transition into the new owner, and that’s to help the new owner. And that’s important for a new owner because they’re going to be like, you know, you got to tell me the dashboard of the console and the lights and what all the levers do, and you know how to figure that out. So, that’s going to be important. Now, what I’m going to recommend from the owner’s standpoint, I’m talking to the agency owners who want to sell here. You want to minimize that period as much as possible, which starts with how you build the business. So, unless you’re desperate to sell, which hopefully you are not, I would get all your ducks in a row with everything. And I think we talked a lot about that last time, and maybe I’ll highlight some of the most important points. Obviously, having your books in order is a gift, as having a management tool, fulfillment structure, organizational documents, whatever management and CRM, all the things that go into managing the business. Your slack and your communications are like everything is super well documented, managed and works very well, and you can easily explain it to somebody. So, preferably it’s completely documented, like how you run the business. So as in life, what do I do? How do I do it? And hopefully, it’s not struggling. If it’s struggling, you should take as much struggle out as possible, because let me tell you, either you’re an ally of the person which you don’t want to do or about how hard it is, or they’re going to figure it out, and they’d be like, this is a mess. You want it to be like, Wow. You want them to feel like they’re just grabbing the reins and going with obviously your support next to them. Until you’re like, okay, you’re good, and now I’m going to sunset at this point. So, that’s how it should feel to them, and you want to feel like you have a sunset period that’s reasonable for you, that you’re not staying on too long. I will tell you that the more roles you have in the business and more up in the business, mucked up in the business you are, the more dependent the businesses on you, the harder that will be, and the longer that will typically take because you can unwind yourself. So, it’s better not just for selling, but it’s better to unwind yourself anyway. Just because now, you have a really efficiently well-run business. Which may if you do that in preparation for sale, may make you not want to sell it, which is okay. You might go, I’m doing this to package it up for sale, and you might end up going, wow, I kind of like this new phase of the business where everything’s really clean, I’m only managing it from a top-level, and all my systems are working really well, and it’s postured well for somebody to dressing up a present. Once you do that, you might fall back in love with it. But assuming you don’t and you’re still like, okay, now I want to sell it. It’s going to be so much easier for you to transition out of it and now to the transition period. Make it as short as possible.

I have never gotten out in less than ten months, personally. Please beat me, and I will beat you next time. My next one is going to be like three months. And that’s going to be my job to do. I’ve got to set that bar, so it’s like I have to make it so I can get out in three months and not have it hurt the business. So, that means like, for example, things that I’ve done like I was doing sales, and that was the one thing I held on to, which was doing a lot of the sales, was in the end to handcuff. Everything you choose to do will handcuff you in the end.

Yeah. Because you’ll have to replace yourself. So, it’s basically like anything you have to replace yourself with, you’re going to have to do, and it’s not easy to do sales.

Great salespeople fall off trees all the time now. Anyway, that’s a very specific thing. But regardless of what it is, let’s say that you do all the web development, or you do all the customer service, or whatever it is. You just need to make sure that you want to line all of that up beforehand and really make it so that even before you sell it, you just know, here’s exactly who we’re going to or I already have them waiting in the wings, or I already hire them, whatever it is. What do you want to feel when you’re buying a business? You want to feel like this business is well run. This business, this owner is not stressed out. There are redundancies in places like fail-safes and backups to service providers. Because a smart person buying a business will say, well, what happens if that person leaves? What happens if that person quits? What happens if that vendor goes out of business? These key managers or things like that, they’re going to look for single points of failure again if they’re smart. So, you for yourself again. Doesn’t this make sense for you anyway in your business before you would even sell it, and even if you don’t sell it, to have those things? So, I’ve done those things in my businesses, the most recent business I exited, I had back of vendors, not because this would look good to a buyer, but because I wanted to sleep at night. I wanted to know that, well, what happens if my PPC vendor goes out? So, I had those people lined up, and I even would go so far sometimes as to give them a project to work on. It’s almost like a Hotspur in using my 90-day parlance, and it’s an hour’s drive. You know, my reiterate fails to pop in an hour’s drive, and I know it’s a nice pair. It’s ready to go. I want to have that to have continuity in the business. A smart buyer is definitely going to ask you about this and probes. They’re going to probe all the areas during discovery. All of these things are going to come up. So, don’t think you’ll dodge a bullet unless you just get a really dumb buyer, which would be sad for them. So anyway, those are some of the considerations. Now going back to the partial equity scenario, there are scenarios where you could also this is kind of akin to the employee person who comes in and gets equity. But in this case, it’s the same thing where you do a split equity scenario and maybe even a totally passive equity routine retainer scenario with an external party. So, for example, this is going to be rare because most owners are going to want to own it outright. They’re going to be 100% so. But you might find somebody that says, no, I’m willing to, I’m going to come in, and I want you to own 25% of it as I want your golden handcuffs on this business, and yeah, I want to be able to call you and stuff. So, there are flexible scenarios like that. You’re not going to get as much cash. Again, there are a lot of variables here. It’s like, how done are you? How ready are you to start another business? Do you have time for this? Do you want to keep this? Is the business cash flowing really well? Are you foreseeing that either in your life there’s a change coming up or in the industry there’s a change coming up that you don’t want to be around for because you don’t want to gamble on it? You’re just kind of like, I think it’s time to sell. There are a lot of different environments where people sell. Some are where you’re like. This business will keep on rocking and may even grow. Maybe you want to hang around with some equity. Or if you’re like, you know, I feel like in two years this industry will be total crap or this niche that I work in or something like that. I think I’m scared by what I’m seeing. I want to be out now. I just want to cash my checks out and go. So, you have to know, you have to consider those types of factors when you’re making this decision again. So, that’s why there’s no like one. Hey, here is the definitive script on how to sell a business.

Yeah, but I want people to be wondering about or pondering these different options. So, there are many ways to do it, but yeah.

Absolutely. You could retain 49%, or you could retain 5%. You’re all going to be in lockstep with how much money you get because that’s different equity percentages that you’re getting paid out differently. So, it kind of depends on how you feel about it in the future as a bet, like, you know how much cash you want versus equity in your future. And it also depends on how much you believe. So yes, to everything you said, that’s a correct recap, and things you’ll consider in that is like, how much do I trust this other party? Let me give you an example of a scenario where you’d really want to hang on to some equity. So, you have a small agency that’s done really well in a niche, and let’s say that it’s a medical niche agency and some really big player who wants a strategic acquisition and has a proven track record of just blowing up businesses. They’re really well funded, and you’re a huge acquisition, and you, after doing your discovery with them, what you should be doing and will be doing, you’re like, these guys are going to triple this business or even like somebody just comes in, and you can see that they are hungry to go way beyond what you were ever going to do. They’ve got a team there. You’re just like blown away. You’re like, wow, you’re going to do what I always kind of dreamed about doing but wasn’t willing to do or whatever. It is not equipped to do, and if you really believe in that and they can show you demonstrably they’ve done that, that’s their track record. Yeah, you might be one to be the one pigeon for that and not trying to sell 100% of it because if you make a bet on them to take your baby, which is hopefully well run, and then there’s three, you’re going to throw gas on that fire for you, and then you ride that elevator up with them.

That might make sense in that scenario. if It’s a scenario where it’s kind of like Atlas handing Hercules the world kind of things. You’re kind of like, here’s this heavy thing. You hold it. If you feel like please take this burden for me and you’re like, Deuces, I’m out. If that’s how you feel about your business, then obviously, none of that applies. And you should just get completely cashed out. This brings us to another critical decision point.

We talked about the transition period, which is typically also connected with earnout. It brings up the topic of Earnout. So, what’s an earnout? Right. Earnouts are present in the majority of these deals that I’ve seen, both my own and others, because usually, people don’t want to give you 100% cash or they can’t, so they want to finance a portion of it. So, it’s basically a way for the seller to finance a portion of it, and the way that’s done is, is myriad. You have, for example, in SBA loan scenarios which have been quite common with all the money that’s been floating around from the SBA in the last few years. They don’t like side deals. You’re not allowed to make a side deal where, for example, you would sell a portion of the business, and then you would be paid out. They want the new owner to own the business completely. Essentially, it’s like you can’t do that. But self-financed, where they’re self-financed purchases or other loans where there’s not as much restriction around that, you can have things where, for example, you get $3 million, and then you get, $100,000 or you get a percentage of the business the growth over time, there are a million ways it’s structured. But the bottom line is that a portion of your money for your agency is going to get not paid out immediately. It’s going to get paid out later.

This is really tough.

Yeah, I’ve learned the hard way on this one. I’ve done this twice. Let me tell you about time number one. This was back in 2005. So, an individual is an old blueblood old money guy who went to business school. He was a really, really smart guy. He definitely had a bit of a chip on his shoulder, but was very knowledgeable of the business, didn’t know my industry, but he fell in love with it. And so, then he bought it, and we structured it because I was young and naive at this point, and I was just like, it all sounds good. I’m sure everything will be great. The question is not entering my mind. I was not in any way cynical. I did not have the experience to say maybe that won’t work out, the earnout portion. For example, maybe he won’t continue to go up, or maybe the business won’t even exist at a certain point, or things like this were not in my mind as a younger man. And so I happily said, Yes, you can pay me a bare minimum X amount upfront, and then you could pay me a bare minimum or the greater of that or some percentage of the delta as the business grows. So, this is where the new owner, the new owner, says, if you’re so confident about this business, and then you’re selling it. There’s a growth potential because that’s what your job is. It’s your business, and you’re not going to sell them a dead weight. They don’t want to buy that. So, now they can either flip that back on to you and say, well, so that’s true, actually, I want to compensate you. I want you to ride the elevator up with me as this business grows. That’s tough because it’s like, okay, well, wait, now you’re banking on another person with no control over the business continuing to grow the business, and guess what? Maybe they won’t be good at it. The two people I’ve sold my businesses to struggled beyond what I thought they would struggle, even after teaching them. I am not good at everything in this world, but I am a damn good teacher. I taught my whole life. I’m really good at it, and I’m very motivated with the money on the table to be a great teacher with this. It doesn’t matter if they’re new to it. It’s not their business. It’s not their baby, and market challenges also occur. There’s just the X factor, and who knows when happening as it’s a challenging time. It’s a challenging time for every businessman. There’s a transition. We’ve all seen this. We’ve all seen businesses changing. It’s a very high-risk time for a business, regardless of how well you plan it, how well you train the new owner, how well you transition well, and how many people stay, it’s still challenging. So, you should not go into it thinking that everything is going to be good and if you really want that money, like the money that’s in your head, in your earn out calculation. But you know, whatever that money is, you need to assume the worst-case scenario. I hate to say this, but you need to assume the worst is out of business and then you have to say is it still worth it for me to sell this business. Assume the worst-case scenario. It sounds like Littlefinger in Game of Thrones reference number two. It’s like, I assume what’s the worst motivation this person gets. But his version of that, it’s like, what is the worst possible thing this person could do with my business? Because I’m telling you, I’ve made a well-vetted business, and I’m talking yearlong vetting processes with attorneys and discovery and bookkeepers and multiple and dozens of hours of Zoom calls and in-person meetings and like a transition up the wazoo and everything. And still, it did not go well. It still was challenging. It still did not hit the numbers that it should have had in both cases. Without going into the details, like I didn’t get out of it what I wanted, and they didn’t do the job that they wanted. The first guy I was in a core business with. He wanted to make his mark on the business in the world, you know, like ego comes into play when somebody gets in because they’re like, I’m going to do this my own way. I will bring it into it, which is fine because it’s your baby now. So, I get that smart person to go, and I will leave this alone. It’s like in martial arts, and we say a black belt, get to have an opinion. That’s what a black belt is. You have the right to initiate.

I’m going to keep this business exactly like it is until I have the right to an opinion and I know what I’m talking about and then I want changes. But unfortunately, guess what, Matt? That’s not what happens.

Men, especially, are bad at this. They tend to be arrogant and prideful in business. Women are much smarter. They don’t play with, and that’s why they’re better golfers, too. Often, they’re just even-keeled, and men get in their ego in golf and business. They will go in, and they’ll be like, I’m going to do some stuff really aggressive too, too soon. Anyway, the first business I sold. That guy started a women’s lifestyle website when it was an I.T based business and had nothing to do with women’s lifestyle. I mean, that wasn’t even on the radar screen. There was a core niche business that was extremely niche. A niche within a niche, and he went out into outer space with it.

He ignored the core business that was literally 100% of the revenue. To this day, I just am in disbelief about it. And this is a very smart, well-educated person. He just wanted to start another project. So, it’s not that he intended to destroy the business. I’m sure he would use that fund, and in his mind, it all made sense. I’m not here to make fun of what he did. It’s just like he had a plan, and he got ended up on a quixotic mission that drained his time and energy, and money resources away from the core business because that pie only slices so many ways, and he had a finite number of team members and money. He’s paying out the note on the business because you have debt servicing as you just bought a business for however many million or whatever. So, long story short, I found out less than a year later that this is happening in the core business is tanking. And guess what? My earn-out competition had to buy it.

I had friends who had similar things happen, and a different version of this happened to me. Even in my most recent acquisition but luckily, I didn’t do it the same way. So, all I’m saying is assume the worst-case scenario and don’t get sold on this. Because what the owner is going to do is they’re going to write numbers, and it’s not that they’re trying to deceive you. They’re hopeful, and they’re Pollyannaish. They’re saying everything’s going to be awesome. They’re all so naive in many cases, and so it sounds weird, but you have to assume your business goes into complete shitter. Here’s my saying, unless you are with somebody that qualifies. As I said earlier, this is somebody, some group that just does this all the time, who has an amazing track record. You know, if you’re some ironclad thing, then maybe do a little mini or now that you keep a hand in it, but get as much of your cash upfront as possible. That’s my new thing. I am not even going to do an hour and out next time. Unless I’m being bought by Amazon or something extreme. But if you’re being bought by just another person who’s like you but just maybe a little bit ahead of you or has a little more cash in you or whatever, especially somebody who is not in this business. You should support them and help them and hope for the best. But hope is not a strategy. You should assume that they know and get as much cash as you can, and hopefully, you have a marketable enough commodity that you can get what you’re asking for because that becomes a pressure point. That’s a leveraged negotiation point, they’re going to say, well, you’re going to look at the deals on the table, and the best offer wins. So, hopefully, you’ll get an offer that gives you what you want, but you may not get what you want, and you might be forced into an earnout scenario. But I’m going to say, all things being equal, get all your money upfront and only in a situation where some huge company with a track record can show you on paper, should let you call people and say this company, this group, bought my business and took it three X in a year or something.

Yeah, a business baller or something like that. But short of that, if it’s just like just a person or just a group, then don’t do it because you might be very frustrated later if you don’t get what you want out of it. And again, keeping a small percentage of the equity might make sense in those situations as well. But I just want to say that because I’ve really learned that lesson the hard way, I’ve learned that painfully twice now over many years. Now I’m disabused of the notion I’m not doing it anymore. Because it doesn’t matter, it’s not about me. It’s not about you and how good your business is or what you do. Human beings are flawed and make mistakes. And beyond that, things happen. Recessions occur.

A recession occurred after I sold my business. So, is that my fault? No, but it happened, and that could affect you because you could sell your business, the economy, that industry could tank, or something collapse and your earn out is now affected by that. So, I’m just saying get as much cash as you can upfront and get out if you can. Then use that money somewhere else because money in your pocket is always better than money plus a little bit more down the road, in my opinion. That’s my opinion, and it’s also, of course, advice. But that’s what I’ve learned. I’m kind of done with it. It’s not worth the risk anymore for me. All right. Yeah. So, anyway, that was a lot to unpack.

That’s right.

I’m sure it’s degrees. I mean, it’s not black and white. It’s degrees of gray. So, I think it kind of hearkens back to what I said in the beginning, which is just like achieving as much of that as you can because we don’t have infinite time and money, and skill sets.

You should get it to the point where both within your own operation and ownership of the business and in an exit strategy. Try to take that as far as possible because it will pay you back quite a bit. Another thing we should probably talk about is how to dress the business up before you sell it. There are these things like mental numbers that people have. There are these artificial points of success. For example, $50,000 a month, $100,000 in revenue. I talked to several people in the last few years who were interested in buying my business, and they’re like, we’re not really talking to anybody who isn’t doing $100,000 a month, which at that time, several years ago, I hadn’t been doing that. I later achieved that, and I had one guy I got pretty far with, and I really wanted to sell the business to this guy. This was years ago. He was like, you guys are just a little shy, and you really need that 100,000-level point. So, even though, what is the difference between 192 or whatever, or maybe it’s not 100, maybe it’s 200 for you. But those like 50K, I don’t know why, but I have found multiple people who are buyers that like just get really hooked on those levels, and for them, it’s important, and they assign value to it. So, it puts you in a better position. What I’m saying is if you’re at like 38, get to 50 before you sell. If you’re all to 82, get to 100. That was just something I noticed, and I took note of it multiple times, and I just feel like people get hooked on these numbers. And I don’t know why I’m not here to explain that, but I definitely witnessed it. To try to get those even boundaries of whatever the boundary is like, if you’re at $2.72 million per year in revenue, you get the 3 before you sell it. Hit the mark, hit that obvious thing that’s like right there because somehow, some way, I expect it’s going to affect you, and you’re going to get less money. Like it’s almost like it unlocks a new level of value in terms of the multiple that you’re getting for revenue.

Now segue to that. How much money should I get? What’s the multiplier? Is it a multiple of revenue? Is it a multiple of EBITDA, which is earnings before interest, taxes, depreciation, and amortization. There are lots of ways to do it right. The best way to do it is to go out and look in the marketplaces. I happen to use bizbuysell.com myself.

Now I haven’t used many of those sites, so I’m not going to say Biz Buy Sell is the way to go. I used it, and it worked for me. I don’t know if it will work for other people, but it did work pretty well for me. I found it to be a fairly good experience. Like any advertisement, you have to really see the right things. It’s copywriting. So, if you’re a marketer, this is where your copywriting skills come into play. What you say, and then you want to hit these types of points, right? I’m not going to go into an in-depth treatise on it. But you might say the things that reflect what we talked about already in this conversation, which are things that they want to hear, like turnkey business, and well-documented systems, which hits all those notes, hopefully, because that is what a buyer wants. They want to hear that it’s going to be easy and clean. Those are the things that will affect when you write your copy, and that will also affect how many inquiries you get. Luckily, I spent some time on it, and I really nailed it. I was also just really blessed and fortunate. But I got a lot of interest. I mean, I got like 100 inquiries in the first couple of weeks. This now leads me to another thing: if that happens, you should plan on it. If you do all of the above rights and your price is right, the Roku copy and your listing, your business is, in fact, well run and has all the tools, hands you the keys, and all this wonderful visual imagery that you’re going to put into your ad. Prepare for your second full-time job, full-time job number one, running your agency. Full-time job number two, dealing with people on the phone all day. I was literally on the phone all day. I remember just being up at the bar upstairs. I work out of my house, and I was just sitting at the bar with my laptop on the phone all day. I was on the phone for like 8 hours a day just talking to people. Now, this is also a broker-related thing. I chose to do that, but people got excited. I should mention this, and the broker segment was like, are you the broker? and I was like, no, I’m the owner. And they were so excited. They were like, we never get to talk to the owner. So again, I’m not giving legal or business, or financial advice. I’m just saying I had more engaged conversations with people because they were so relieved. Now maybe that’s what you shouldn’t do, and you should have a broker, but it worked out fine. I liked it, and I got people going. Wow, this is so cool. And they like dug in. I felt them lean forward on the phone because you can tell them, but they’re usually used to saying, tell me about this opportunity, and they talking to a broker. And now they were talking to the owner, and that’s so awesome. So, I didn’t expect that as I had no idea because I didn’t know what the norms were. But that’s something I experienced, and I’m glad because I wanted to go direct drive. However, the price I paid and what a broker would have done for me and that I would have paid for if I wanted to do that, was handling that for me. Bird dogging, filtering, like boiling it down. So again, not one right answer there, but if you just choose to go direct drive, you now have, my friend, a second full-time job, and if you’re too wrapped in your business, or you’re too your business is too reliant on you, your business is going to suffer during the negotiation when you’re interviewing people. That will then hurt your numbers, or could. If you do so, you’ve got to plan for this. That means if you’re going to list the business and you’re lucky enough to get what you want. Be careful what you ask for, there are a lot of inquiries. It doesn’t end there because you’re going to talk to hundreds of people, maybe, like me, I talked to 115 people or something like that. I don’t have the exact number, but It was over a hundred, and this is just in the first couple of months. Then I have like 10% of them going to go to the next level. And then, you know, 50% of them will get to that level beyond that, or maybe 25%. And you’re going to get in-depth, you’re going to get into due diligence, you’re going to be writing LOIs, letters of content, and It’s just going to be tracking. It is going to be like, another business is tracking. What have I said to whom and provided information.

So, another thing you’re going to want to do in preparation for all of this, in addition to preparing your team to let them know you’re going to be busy. I’m not saying you tell them I’m selling the business because that’s up to you. I wouldn’t generally recommend doing that, but you need to make sure that it’s like you’re going on a vacation in terms of the business being ready for your absence or your partial presence. The other part is building essentially like a deal, a documentation center, or a deal center for everything that you’re going to need because they’re all going to ask you for the same stuff. They’re going to ask you for panels for the last few years. They’ll ask you for a list of client accounts and recurring revenue and all this stuff. I’m going to get too deep into that, but there’s going to be a set of documentation you’ll want ready to go before you even get on the phone. So, you’re not like, I’m scrambling.

Yeah. And just like everything is properly blurred out and placed. I mean, you’ll have to redact certain information that you probably should until the very end. I wouldn’t share certain information until you have a signed letter of intent. Again, not legal advice, but for myself, that’s my decision. Most people I found do that where you want to get to a certain level of commitment and interest before you’re sharing with others. So, you give them a new ten, and you open the kimono more and more as they get in and they’ve shown more commitment. So, that LOI is kind of like the first level. Now again, this is not legal advice. I’m just saying. An LOI is not worth the paper it’s printed on, and you know, it’s a formality. So, I’m not saying do it. I like them, and you should do that. It’s like a formal handshake. It doesn’t mean anything in terms of legally binding or whatever. But it’s a formality that reflects interest and so forth. My understanding of it is that you can’t take it to the bank unless it’s written in a special way. So, it’s just kind of like a formal way for somebody to say, I am genuinely interested.

Yeah, some people think a letter of ten is like, I intend to buy your business. Well, that is what it’s saying, but it’s contingent upon everything, like discovery and all this stuff. You can walk away from it, and sometimes what you do and what buyers will ask for is a lock-up period. Be careful with that. Lock up period is I want to be the only party you’re exclusively negotiating with. Now that is, as I understand, legally binding if you say that right. So, you have to be careful about if you’re signing off on something like that.

Yeah. And you could ask for that from somebody who’s really interested because what they don’t want is they don’t want the deal taken out from under them. You should not give that away liberally, though. You should only give that away in a situation where you really like this party, and you’re willing to have to say no to other people. What you can say to other people is, I can’t talk to you until the 25th. I am under Lock up, and I can’t discuss this kind of thing. But you could lose that person’s interest, so don’t give that away too freely. But you might need to do it in certain circumstances. I did not do that. I did not do a lock-up period until the very end, and I’m not sure if it was in the context of the LOI or the asset purchase agreement. The asset purchase agreement will be if you sell it as an asset. There’s a stock purchase agreement, which is somebody buying your company or buying the stock of the company essentially versus the purchase agreement where they’re buying, for example, this pen, right? I’m extracting the client list and the goodwill, and I’m selling this piece of my business, but I’m retaining the corporate structure. So, those are different things, and I’m not going to get into that discussion. But I personally have done asset sales, and for me, I like that better personally, and in my case, I retain the LLC or whatever one-time it was.

Yeah. So anyway, I didn’t do the lockup period until I got deeper into that, so I just didn’t get artificially locked up and lose time. Yeah. Screw around somebody that maybe it wasn’t, it wasn’t working out because, because there’s going to be a negotiation period when I think it was developing the APA. Yeah, it was a lockup period developing the APA because you’re not just going to go well unless you’re really lucky. You’re not just going to go well. Here we go, and here’s the first draft of the APA. We’re both good, and let’s sign. You know, my first one was over a year of developing the APA and the second one was, it’s almost like I don’t even measure it in time because it was like a pain of emails, and the person I was working with was very detail oriented, to say the least. And I think we probably had 100 emails back and forth. It occurred over probably a four or five-month period and probably five months. So, my APA development periods were between 4 and 13 months.

Yeah, because the more that’s on the table, unless your business is so small, then it’s like, you know, you don’t want that again. But if, if you have a sizable business in any way and by sizable, I mean even doing like, I don’t know, I mean, that’s arbitrary. But, like, you’re, you know, if you’re doing less than $1,000,000, and you still may be in it because it doesn’t move in lockstep. It’s basically like once you’re, in my opinion, over like a half million dollar a year business or a half million-dollar sale or more, people take their money seriously. They don’t take it any less seriously. Like, you know, at 500 versus 1.2, most people and your attorneys will rightfully have you cross every T, not every I, and so forth. So, there are some standard documents that you can buy. It’s like the American Business Association. I am not sure. I’d have to look it up. But there was some organization that my buyer had. It was a very standardized business, APA, and we used that as a blueprint, which was good because we heard many bases. We still had the custom rate, so many things like schedules and this, that, and the other thing. But it still took time. You might be able to reduce your legal fees to minimize them by starting with a document like that. But at the end of the day, I am definitely going to recommend it. If you ever sell a business without an attorney, that should be obvious. But definitely work with a business attorney who has done this before and knows their way around it, and really has a good track record because every single line in that thing will come up later. I mean, that’s funny because at the time we wrote it, I never thought some of these things would ever see the light of day or will these things ever become an issue. But every one of them did, every minutia, every section, every paragraph, subchapter A. This might be a little bit of a function of the person I dealt with, but everything has been reexamined and looked at since then. It was all-important. So, take it very seriously. Take your time. Spend the money because…

Oh, I would even go so far as to say it will. It’s more likely that it will than it won’t.

Yeah. So you just can’t. It’s the best money you’ll spend.

Yeah.

Some of them eliminated themselves. I have a piece of advice on this, too, it’s something that I thought of at the time I should have done better. But so, to answer your question, you’re going to have a spiral down, and you should have notes. You should have a standard spill, literally like a two-minute elevator speech that you give people, and you’ll develop it anyway. But keep notes and go through them. So, here’s what I want to tell you about my business. Now, if you want to do it. Record a video after they signed the. By the way, the first step for me is to sign an NDA where you get into a conversation. I’m not giving advice, just saying what I did. This is what I mean to typically sign the NDA, then you get on the call, or you have them watch the video. You are on camera with a screen share showing everything you want to show about the business. I told my friend to do this. He sold his business after me, and he saved a lot of time that I didn’t because he followed my advice, which is he did the video, and he used that. So, that was the first step. That way, you’re not dealing with the riff raff. Eliminate tier one.

Make sure it’s good. And then they’re hooked, and then they want to talk to you. And, you know, they’ve already seen it. It’s like funnel marketing, right? So it’s low effort. These are top-of-funnel people. They watch the video, and they’re like, okay, cool. I watched it, and I’m really interested. I’m ready to move forward and talk to you. Then you can just say, well, I’m assuming you’ve watched the video, and you require that I’m not going to be on the call, and like you even do a form and say, I acknowledge that I’ve watched the video before I’m talking to you. Like I’d put it in there, then you get on your zoom call, you do a 30-minute discovery call or a review of whatever you want to call it. Then you discuss the business, and you answer their questions because they should be and get off the phone if they haven’t watched the video. If you really want to save time. I would say I really need you to watch the video. It’s all in there. Then hopefully, what they’re doing is saying, Hey, Matt, I saw your video. I really like it. Yeah, I have some specific questions that my partners and I have come up with an eBook, and now you’re having a more material conversation, and then you’re going to get into the deeper tier two level right now or middle of the funnel with them. And then, from there, you’re going to talk about pricing. You might talk about deal structuring and how they might do it. It’s a bit more of a ‘get to know you conversation. It’s like you make them sell, and you’re just selling them. The way you should posture and the way I postured convince me why I should let you buy my business. I’m not kidding, and it wasn’t it wasn’t false bravado. For me, my business is my baby, and the people that work in the business as my team and my clients are friends of mine, or they’re close to me, or people I care about, and I certainly care about their being taken care of. So, who buys my business is very important to me ethically, personally, and with integrity. So, when I’m talking to somebody, it’s like, prove to me that you’re going to take good care of my team and my clients. I’ll say it that way but essentially, that comes up. They get that message because not only is that really the right way to be, but also, they’re going to be impressed by that because they’re going to be like, wow, like this person takes the business here. This is a good quality business because this person cares, and that care is in the business. Hopefully, again, that’s true. So, they should be there on the hot seat, the power equation, posture yourself saying, hey, I got to tell you, first of all, I’m getting a lot of interest in the business, and I’ve got several options. I’m looking for a really good fit. Tell me why you think you guys might be a fit. Like, put it on them right off the bat.

And I will tell you the way the power dynamic in that conversation is going to change because if they’re acquisitive, they’re hungry. I didn’t get anybody who was like, let me tell you what a favor I’m doing to you. They were trying to sell me because they understand that it’s a market and you’ve listed it publicly. It’s not a big leap for them to understand that you might be getting really a lot of interest, which is true. And that you’re already talking to several people, and you’re still talking to people. You haven’t made any decisions, but you’d like to hear what makes them feel that they would be an ideal suitor. And the other thing I will do is, and I won’t be dishonest, but I will say, well, this is kind of the number I’m currently talking to people about. And that number could just be what you’re asking for. You don’t have to say I’m getting this number, but I want to be here, and this is the area I’m playing in with the current conversations I’m having. Whatever that number is, like, whatever your structure is, you should know that, by the way, what is your number, and you won’t accept less than a number.

So, if you’re trying to get 3 million, you shouldn’t say you are willing to take 2.5, and if you want 2.5, conversely, you should probably say I’m really looking for 3. That’s what I want because probably what’s going to end up happening is you might get 2.5 plus $500,000, earn-out, or hopefully 9, and you get it all from but whatever. See, I’m saying just that’s the bone and even go a little above blink because unless we’re never really sure. Beauty in the eye of the beholder, and you’d be amazed at what people will pay because you know it’s just not a fixed thing. It’s not like a schedule where we go and say, Okay, this business is worth exactly this. It’s a very gray thing, right? It’s a very nebulous thing. Now, obviously, there’s a range in which it’s nebulous. It’s not like you have to, or you could get ten now, but you could get 2, or you could get 3.5. That’d be a bit of a stretch. Now, the X Factor, and you know what my friend Zach would say? You can’t sell a business without this proprietary technology. First, we talked about monthly recurring revenue in the last call.

Yeah, and the only revenue I consider real is recurring revenue.

Everything else is fake.

If you have a web development business, I’m so sorry to say this to you, but you’re going to get screwed because if you made 30,000 last month and you made 5000 the month before. That’s going to look like this one. They’re going to be like, I’m assuming the worst case. In fact, I’m assuming worse than the worst case. So whatever it is, you have all these monthly recurring revenue wrangler recurring revenue figures. You have some argument to say you can expect this income because those people could still quit unless they’re locked into contracts or whatever. But even then, they could try to quit. So again, that’s a fundamental dynamic of the business, as a premise, but I wouldn’t do it any other way. Where was I going with that? I was also going to ask you about the monthly recurring revenue cut.

Oh, yes, thank you. Proprietary technology.

Yes. In addition to monthly recurring revenue is that there is system software, custom things, develop tools. Custom systems could be custom client fulfillment systems, or it could be SAS software that you’ve built into your business. It could be a variety of WordPress plug-ins that you use for your client’s sites that aren’t licensable by anybody else, whatever it is. I’m just like coming up with a proprietary technology that adds value to your brand and the sale that will give you so much more money. I would do that even if I wasn’t sure of a place for it, or I’m going to build that into my business and make it useful before I sell it because it will add a lot of value, and you’re going to get lowball.

Yeah. I mean, just so you’ll get money, but it won’t be nearly as much as if you add into that, and of course, how much more it adds depends on the value of that and what it went into. There are huge variables there, but I’m just saying, like, if you can.

Yeah, I learned all these very misleading things, and I’ll be honest, I didn’t have much. I had a little bit of proprietary stuff, but not at the level which my friend Zach would say. Like he builds SAAS platforms. So, next time I will definitely have more than that. My new business is selling data to improve ad campaigns called identities. You know, we’re going to build custom dashboards and iterations that are on top of the data we’re selling because we’re selling data, and that data is pretty cool, and you can’t get it anywhere, but it’s just data. You can buy it even if it’s not as good, but if we build in proprietary systems and everything, then that’s irreplaceable. Unique to us.

Exactly. And so, I was going to offer something else too.

Yeah, well, that’s a great example. I love hearing that, and it doesn’t surprise me at all. I’m seeing this with some of my friend’s businesses.

So, I will share and chat, and maybe you can put it in the show notes.

This is from Teamwork.com. I didn’t write this, but this is really nice going back to that idea of the video. This is a perfect accompaniment for that. So, this was something they had an article about selling your agency, and number three was to build a pitch deck for your agency and use that pitch deck in the video. Then maybe also cut over to showing screens of other things that you want to show. But you could use that PowerPoint or that Google slide deck as a driver for the video, and I just copied it into chat. Credit to Teamwork.com in there, but it has suggestions for the slides that we use, like meet us, why we’re looking to sell. This is exactly how these conversations go when you do the level two conversation, tier two competition. This is where you say it’s funny because this sounds exactly similar to what I naturally came up with. So, like, you know, meet us, our history, how we did this, why I built this business, why we’re looking to sell, what our core values as a company, what have we accomplished today? Our financials, what are our awards and accomplishments? Where are we located? What’s the opportunity here? Where do we see ourselves in the future, where do we see the business in the future, and where do we need help? But I’m like, that’s exactly how that conversation goes, and that’s why it’d be ideal if they watch the video with the piston. So, if they have additional questions because you’re not going to cover all their questions, but at least they have some grounding, and then they can drill in deeper into the areas that they want to know more about.

Yeah, well, if you think about that, I’m trying to sell my agency to you and what makes this agency unique is me, who is leaving. You really need to downplay yourself. I think this is obvious, but you really need to. And again, when I say downplay, what I really mean is you need to get yourself out of the business before you’re selling it. And any remaining vestiges of it you will have to do in transition. But the more out of it you can be, and it’s so top-level that you’re just handing somebody the keys. It’s not like a burden, right? It’s just like, oh, you just have the keys to the kingdom. That’s what they’re going to want to feel like because that’s what they prod. That’s what they drill into small businesses that are usually owned by one person or they’re going to say, what are you doing? They’re going to ask you a lot of questions about that because they want to know how wrapped up in the business, how much of this business is you. It’s a fair question for them to ask.

So, you should be ready to answer those questions and make it true that it is plausible for them to be successful in this business. Because if it’s not, they shouldn’t be buying it from you.

This brings up a couple of thoughts, Matt. So, the first one is, I love this expression where I’m paraphrasing, and probably you don’t get it exactly right. When people show you who they are, you should believe them. Have you ever heard that one?

So, do not ignore clues early in your relationship in this process if you get the instincts to trust them. Trust your instincts with people. Think about during the wine and dine romancing phase, if you’re feeling like icky vibes, you know, and you’re going, oh, that really bugs me. I’m not saying have snap judgments and walk away from people. No, really. But if you get into it and there’s things that are bugging you, that’s when things are good. Never mind when things are not good, and you’re like, they’re unhappy, or they’re just working in the business. Like those things are going to come up, and you should really be able to convince yourself in the privacy of your own life that this person really is going to be great for your business and your team. And I am assuming you care about these things. You know your clients and the employees that are working for the business. So, just trust your instincts. People will give you signs early on, especially if you talk to them, which you will. If they actually buy your business or are on that journey to buy your business, you’ll talk to them a lot. You’re going to get to know them. I mean, you guys are going to say you can talk more than you talk to your spouse or your girlfriend, your boyfriend. You’ll spend a lot of time with this person over several months, and just don’t ignore it. Don’t get so greedy that you ignore your good instincts. Don’t be hooked on the money because what happens is you start to get attached to the sale. Think about it, you got all these people, and you start making decisions in the funnel. You said whittle down. How do you know you whittle down, right? So, we whittle down to say there’s like five people, and then there are three people, and there are two, and then eventually there will be one. And you’re going to say no to people. When there’s like three that are like money on the table, they will have different flavors. If you’re lucky, you’ll have some consternation about who I should sell it to. And if you only have one choice, that’s bad because you’re now not making a choice. You know, you only have one. So, I’m hoping you have multiple choices. But at the end of the day, you’re going to make a choice. And what now? Here’s what happens. This is what happened to me in all three deals, but especially the last two. You’re invested now. It’s like sunk cost fallacy. You’re like, I’ve spent the last four months on this or five or eight months on this. I mean, I had it at a point where I was in a year into it, and I’ve not grown the business the way I could have because, hey, let’s face it, you are not going to grow the business if you’re responsible in any way, shape or form for the business growth, which you probably are, in most cases, you are not going to grow the business at the same rate that you would have if you were not heavily involved in negotiations for the last 4 to 12 months. Reality.

Okay. Let’s just be real. I’m not saying it will be like decimating your business or whatever, but there’s some percentage of your time and energy, and it’s okay. So that said, you’re going to feel like, oh my gosh, like, I can’t handle the thought of this falling apart, which puts you in a weak bargaining position.

You’re not in it. You’re not negotiating from a position of strength anymore the deeper you get into it, and that’s just going to naturally happen. So, you want to try to get through this as quickly as possible, and hopefully, God will help you. I hope it doesn’t take a year, and I hope it doesn’t take six months. Try to fast track it to getting to the point where, you know, if this is real as quickly as possible because the longer you get into it, and especially deep with one party, the tendency is to start feeling that sunk cost fallacy and the tendency is to start weakening your own bargaining position because you’re too far. And now what you’ve done is, again, going back to exclusivity deals and things like that, you’ve locked out other parties. That party is, at some point, going to say, well, listen, we’re dancing the dance here. I want to put a ring on it. I want you to tell me that I’m the only one and you will have a lot of pressure to do that. So, you’re going to get pressured into this, and it’s just going to naturally happen. So, you can’t avoid it. It’s hard to avoid, I should say. So anyway, I’m just warning that these are the things that could happen to try to get through that process as quickly as possible to where you’re talking turkey, you know, don’t let them teaspoon it out over time. You want them to move quickly for many reasons. I mean, obviously, everybody wants to get paid quickly and have it be over with, but it also can really become a quagmire. You can get bogged down in it, and that’s not good as it really weakens you.

Well, you certainly should be discovering their ability to pay, like right off the bat. That’s one of your lists of questions. You should have a list of questions, and I didn’t talk about that in this so far, but you should have a list of questions you want to ask, and you shouldn’t be shy to ask any of them. You should be asking, who will be operating this business? I remember my conversations at the end.

My refined version of it later. So, are you calling on behalf of another group? Are you going to be an owner-operator in the group? Oh, you are. Because I sometimes was surprised by the answer. So, Okay. You’re part of the group. What is your role in the group? Who are the people that are going to be running the agency and taking care of the clients? I want them on the next call. I had this one guy who was not even in the business, but he was talking as if he was the guy who was buying the business, and it turned out it was like his brother or something. So, yeah. All these kinds of things happen. Just assume nothing.

Exactly.

Yeah, well, in this case, the guy was like a commercial real estate guy, he was the money guy, and his brother was just like the agency guy, but he’s not even in the agency. So, I’m talking to the wrong guy. Like I’m throwing my pearls before swine, not that he’s a pig. But because they can’t even appreciate what I’m saying now. Like, he doesn’t know anything about agency business, so establish who this person is. Are you a broker calling on behalf of the buyer? What is your role like? Just say I’m just filling notes, and it’s not confrontational. It’s just like, I want to know who you are in-depth before I have this conversation. Know that before you say anything else and then say, if we were to work out a deal, how would you expect that you’re financing the deal? Ask that right off the bat. You have every right.

If you want to buy somebody’s house, what’s the first thing that happens you’ve got to go get qualified for? Yeah, they want to see you got the papers. If you’re qualified to buy it right and you need to have your letter. So, that’s the same thing. It would be nice to know that there is a pre-approval, they have the loan, but you can get into that deeper. But yeah, just knowing exactly if it’s an SBA loan, knowing if they’re self-financing it. I found that 85% of the people that I talked to were SBA loans, maybe 90%, which was a bit of a function at the time. But I think that’s still going to be true in many cases. That money is not as free in this economy. Anyway, so find out and give deep priority to people that can pay cash on the barrelhead. Because if you can find that, that’s awesome because you just skipped this whole SBA deal. You’re writing that, too, as that affects you as the seller. There has to be because the buyers are beholden to it, and the SBA has very strict terms and regulations for how they structure and how they do it. And those will affect you as the seller, even though it’s not your financing. I mean, you’re not getting the loan. It affects you because of the buyer. It puts requirements on the buyer with how they conduct themselves with you.

Right.

Yeah. And even when people go to their bank. Oh, I’m going through my local bank. Well, often, there will still be an SBA loan, and they just kind of rep it through their bank. But it’s still an SBA. So, maybe don’t just go, oh, I’m working with my local bank. It’s like, well, ask if it’s an SBA loan, and I’m not saying it’s bad. I’m just saying it’s good to know. But anyway, needless to say, just find out how they’re financing it. Try to think if there are any other questions. So, who are you? What’s your role? What is the timeframe in which you’re looking to purchase the business?

Because they might be like looking for a year or two years down the road.

They might even be somebody that I hate to say, but I didn’t have this happen. But, well, to my knowledge, it could be a competitor trying to cash in or a secret shopper. So, you can have that. But anyway, just try and find out as much as you can about that buyer entity and ask them what their feelings are about your ongoing role in the company. For example, do they have requirements for your ongoing role in the company that are hard set? You know, they might say, well, that’s all negotiable. And no, we don’t have any hard ideas about that. Well, that’s true, but it’s good to know if they say, oh, yeah, no, we’re only looking for a deal. Like, for example, this happened to me. I had an all-cash buyer that looked like a unicorn. I was so excited. I mean, this was like this young guy and the old money guy, and he was looking really, really good and everything. We got so far down the road before that money guy came in, and he was treating it like a business opportunity for me to stay in business, and I’m not sure I remember. This is crazy. I was like, what are you talking about? He just completely changed the premise. They were very deceptive in what they said. Whether it was intentional or intentional, I don’t know. But they basically changed their story completely once we got through. We were literally at signing the EPA. By the way, this was not an early conversation.

Yeah, it really deflated me because I thought they were perfect, and then it just turned out like that. What it was, was he said he had the cash to buy it himself. And then he said, well, okay, so I like the deal, and this is weeks into it. He’s like, I love everything we put together. Now I’m going to go out and shop this for potential investors. I’m like, what? you said you had the cash yourself. He was acting like this. I have a yacht and this and that.

Yeah, he was talking Mr. Big Money, and suddenly, he’s like, No. The way we structure these deals is that we go out and we present the opportunity to our investing group. So, in other words, now I get to go and be part of your dog and pony show to go push this in front of people who have no idea about this, and we’re starting from scratch. So, there are all types out there.

Oh, yeah, I was. Luckily, I hadn’t locked up an exclusivity period with them at that point. But it was more just really deflating because they were my buyer. The one guy was the money guy, but the younger guy was like an agency guy, and he’s been really successful, and he apologized to the other guy. He said I’m really sorry because he did this to me on a few deals. So, he was actually not in the know about it. I didn’t blame him. This other guy just kind of was just being shady about it or whatever he just was in his own world doing. I think it was more just one of those things where he thought he could do that, and it should be okay, and nobody would question him. And it was like, wow, you actually have a real problem with that, and I’m not interested in what you’re offering, and I wish you had disclosed that from the beginning. So, the story’s point is that you’re going to run into things that I haven’t run into. And so, getting the clarity upfront is always good, and just assume nothing soon.

Yeah, it will pay you back. And I hate to paint it like be cynical, everything’s going to be terrible and all that, but you really do. You got to put on your big boy, and big girl pants with this and just assume like this shit’s going to hit the fan and everything. And then from there, it’s like you got nowhere to go but up. But you have to assume all these things are not going to go the way you want them to so that you can be properly prepared for it to create a good deal for you.

Hope for the best.

Hope is our strategy.

And again, I want to go back to the first thing I said.

I can’t believe I’m saying this because I wouldn’t have said this a year ago, but really think about whether or not you really want to sell it. Like, engines are good. Cash engines are good in your life. We should all build cash engines, and sure, everybody wants passive income. I mean, I know I do. And I’m trying to build some myself. But you’ve already built this business. So, see if you can convert it from an active engine to a more passive engine where you still have a financial interest and possibly a managerial interest if you want to. It depends on what you want to do, right? Again, I can’t speak for everybody, but see if you can convert this into a cash engine to fuel the rest of your life and fund it versus just being latched on to the idea of artificially, you know, that you want to sell it because maybe that’s not the best idea. So, open your mind to these other avenues and really think about it because I can tell you, here’s why this part I know better on when you sell your business, and I don’t care how much money you get because the tax man is going to come in and dinghy hard and the most important thing is income, and you’re going to lose your income when you sell the business. Unless you work it out so that you’re getting ongoing revenue, which is another reason why you might want to have a good buyer that you could do that with. But that’s a little bit in the face of what I said earlier, the point being that whatever money you’re making monthly out of your business, assuming you’re extracting where you’re going, your lifestyle could become somewhat accustomed to that rate. I mean, hopefully, you’re not living too close to the bone, but what’s going to happen is you’re going to have an income gap because even if you get a big chunk of money, again, taxes and this and the other thing, and then at some point you’re going to taper down to much less than you had already in most cases. And you don’t have any income, monthly income, and cash flow, right?

And what I’ve done in the past, they say, well, but you’ll have so much in the bank that, you know, it goes so quickly, and you’ll be reinvesting in things, and your financial guy will come in, and tell you you’ve got to put some of that money way to defer taxes and you’re going to have tax strategies. Unless you blew it up, and you got like $20 million in the bank or whatever. You’re probably going to need to get back to work, and you’re going to start your next thing, and cash flow is king. So, because those bills will keep coming, your business bills for your software, your systems, your mortgage payment, and your electric electricity. None of that stops and so what you’re going to do is you’re just going to burn. It’s just going to burn all negative. So, this comment goes to structuring the deal in such a way that you maintain cash flow but also in such a way that you position things. You give yourself a runway down to maybe relax and go like we did, like go travel. We traveled for almost five weeks in Europe and did some nice things, the family and everything. But then you have to back up time, right? You have time to ramp back up and start a new thing, or what have you have time to build it unless you already have something wonderful if you can just kind of jump from one canoe to the other. But in my case, I had to start something new and that takes time, and there are no guarantees.

You’re going to miss that cash flow. So, that’s why I say if you can maybe just convert it into something where the cash flow you have now, you just get a big majority of it, but you’re completely free to start another thing that’s the most intelligent, in my opinion. I haven’t done it, and I will probably do it next time. Turn your own active income business into a passive income business and keep the interest in it and then start another thing. Then you just have all these engines spinning, generating cash for you, and you don’t really ever leave. You know, you never have to announce to anybody, like, oh! I sold that as a service because you just stepped back.

It’s an infinitely deep well. So, I think that covers a lot of the major things.

That is right. That is exactly right.

Yeah. You are blessed to have somebody that qualifies for that. And again, I don’t want to make it sound like this is easy because this is actually pretty rare. It’s why most people sell because they don’t have somebody like this. But if you are somebody that can actually imagine a person again that you know who’s in the business or whatever, walking in, taking it over, and running it, who would be interested and qualified to do that? If you’re that lucky, you should definitely be considering turning it in. I did not have that. I did not have somebody who would have been like an owner-level person. I have great team members, really smart and great at managing and doing all that. But this is another level, like they need to be willing to shoulder the entire burden, like be you, and take emotional ownership and logistics ownership of the business. I see this all the time when I see people say, well, that’s my business partner. Like, I know these investor guys that are like, oh yeah, I have the pest business. It’s like, he’s a contractor. I’m like, you have time to run a pest business as well. I’m just like a salon owner and like, you know, this guy is my partner. I bought the business and let him run it. So, he goes in, buys the business, and leaves the owner there. So, there are so many strategies that we’re talking about. But doing it the other way, you go in and buy a business and convert the person, but you gotta have the capital for that. But just having that person where you guys are partners, but they’re the one running the business, you’re just there’s the money person. That’s what you could become if you have that, but it’s hard to find them. They don’t grow on trees.

But thanks, Matt. I appreciate it.