I sold 3 companies for 50000000 by age 297 tips to sell your business for millions

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I sold 3 companies for $50,000,000+ by age 29…[7 tips to sell your business for millions]

Summary

  • As the co-CEO of acquisition.com, my portfolio businesses generate about $85 million a year in revenue.
  • Recently, we sold two of our main businesses in the last 10 days, which was a hectic but a valuable experience.
  • In the past year, we sold three businesses: a software company, a physical products business, and a service business to focus on our holding company.
  • It's crucial to build with a sellable business in mind; this realization came after dismissing the idea when first starting out.
  • Selling a business requires preparation; it took us two years to make our service business a truly sellable enterprise.
  • Understanding financial performance is vital. High revenue and good margins demonstrate strong sales abilities and potential for investment recovery.
  • The growth potential must be evident for a buyer; sell when the business is thriving, not when it's struggling or no longer interesting to you.
  • Diversification of the revenue stream, both in terms of clients and sales channels, minimizes the buyer's risk and increases business appeal.
  • Cash flow importance: Healthy net free cash flow indicates that a business can finance its growth and service potential debt, making it attractive to buyers.
  • Recurring revenue suggests business stability and prospective long-term success, making your business a safer investment.
  • A strong, unique value proposition sets you apart from competitors, whether it's through product distinction, pricing strategies, or marketing.
  • A robust and autonomous team ensures the business doesn't rely solely on its founders, making it a stable and sellable asset.
  • To prepare for a future sale, even if not imminent, focus on enhancing the seven areas: financial performance, growth potential, revenue concentration, cash flow, recurring revenue, a unique value proposition, and team strength.

Video

How To Take Action

I would suggest implementing these actions to build a sellable business:

  1. Track Finances: Start by understanding your financial performance. Focus on increasing revenue and maintaining good profit margins. This shows you're good at selling and assures potential buyers they can get their investment back.

  2. Plan for Growth: Leave room for potential growth in your business. Aim to sell when it's doing well, rather than when you're no longer interested. This attracts buyers looking for a successful and growing business.

  3. Diversify Revenue: Make sure your income doesn't depend on just a few clients or one sale channel. Spread out where your money comes from by finding more clients and using different ways to sell, like online and local stores. That way, one change won't hurt your business too much.

  1. Improve Cash Flow: Make sure your business has healthy cash flow. This shows it can pay for its growth and handle debts well. Buyers like businesses that don't need extra money to keep going.

  2. Increase Recurring Revenue: If you can, set up ways to make money regularly, like subscriptions or repeat services. This makes your business seem stable and a safe bet for the long term.

  3. Stand Out: Have something special that sets you apart, like unique products, good prices, or cool ads. This makes your business more appealing to buyers.

  1. Build a Strong Team: Make sure your business can run without you. Hire good people and train them well. If your business works great even when you're not there, it's more likely to sell.

Remember to always think about these things, even if selling isn't your plan right now. Next time you have a business meeting, ask yourself how you can make improvements in these areas. It will help you create a business that's valuable and can be sold if you decide to.

Quotes by Leila Hormozi

"We did all this because we want to consolidate down to just our holding company acquisition.com"

– Leila Hormozi

"Revenue is important and revenue growth is important because it shows that you have the ability to sell"

– Leila Hormozi

"The best time to sell is not when you want to sell, it's often when you don't want to sell"

– Leila Hormozi

"Net free cash flow is the number one metric that he always measured"

– Leila Hormozi

"Having a unique value proposition so what differentiates you from your competitors"

– Leila Hormozi

Full Transcript

what's up welcome to my channel my name is laila hormozy co-ceo of acquisition.com which is portfolio businesses that does about 85 million a year in revenue and i don't do coaching i don't sell courses i don't have like anything to advertise to you on this channel uh i just make this because i like documenting what i understand and i like sharing things that i think i know something about and so that being said i wanted to talk today about something that's really top of mind which is how to create a sellable business and uh this video will be coming out after the news that we have sold two of our main businesses in the last 10 days and so it was [ __ ] nuts and i have a lot of videos to make on the topic and if you saw like the public release that went out and stuff you know we kind of said a blurb about it there but in terms of what i wanted to do to provide value to all of you is i want to share with you what i wish i had known before selling a business which is it's really interesting because this past year we actually sold three businesses we sold software business a products physical products business and a service business and so it's been nuts and we did all this because we want to consolidate down to just our holding company acquisition.com um and really focus in there and have practice what we preach which is focusing and so that being said i wanted i put i wrote down seven things that if i had known when we first started the business i would have focused on more than because i'll tell you this which is when we started our business i remember someone saying one day you might want to sell and i thought to myself because you know i'm in uninformed optimism land of this is [ __ ] awesome i was like oh my god i would never want to sell i can't believe you didn't even say that i'm almost like offended i'm never going to be one of those people as time goes on you kind of realize things about yourself and like one thing i know about myself and alex is by himself is like we like to build things and we're really great builders i'm not necessarily i can maintain and i can actually be an excellent maintainer but i do not enjoy it as much i think at a certain point with every business that we've had we're kind of like okay you know it's kind of in maintenance incremental improvement mode but we really like getting [ __ ] fixed i like fixing broken stuff and i like building new stuff and for me it's mostly teams and infrastructure that being said i remember the beginning you know we were kind of like pooh-poohed that like we're never gonna sell business so why don't i give a [ __ ] anyways and i wish i hadn't because you know later on in 2019 march of 2019 is when we said let's figure out how to sell this business it took two years to get it to a point where it was truly sellable and i will say that one main reason is because like our service business is you know it was a dancing mickey mouse character guru business and so we turned it into a real sellable enterprise enterprise i think it was a really cool process and it was a lot of fun and it was really challenging but i'm really proud of the work that we did and i'm so proud of the company it is now and i'm [ __ ] stoked to take over the industry and take it to the next level but i want to share the the seven things that i learned along the way and that we really honed in on so that we could create a sellable enterprise an asset a true business that we own not a business that owns us so that we have a job in let me go through those seven things with you the first one is financial performance what i mean by this is what do your margins look like what does your revenue look like that's the most obvious thing but here's why it's important is it shows your ability to sell that's the first thing revenue you know people like why is revenue important and this seems really really elementary and obvious but think about it like this revenue is important and revenue growth is important because it shows that you have the ability to sell and to sell more over time and so that's actually what people are looking at is like how strong is the ability for you to sell your product to the market now the second thing that goes with that is how and what is your ability to create margin and the reason that margin is so important is because people that buy your business will know they can recoup their investment because most firms out there want to know how long it will take to recoup their investment and if your margin is slim or next to nothing right and you can look you can google and see what your industry averages are to figure out your margins and what they should be and what's ideal and what's you know optimal the higher your margin is the more likely they're going to think your business is appealing because it says one you know how to sell revenue right and you know that you can continue to sell more and more because you have strong sales abilities and then two is margin which is they can recoup their investment and so they feel comfortable pursuing that opportunity i understand and i know that everyone watching this channel knows those things are important robin would margin but when it comes to why those are important when you're selling i think it's very under it it's important to understand the delineation that's the first thing the second thing is growth potential you have to leave meat on the bone of your business and i think that often what people want to do is they want to build their business and they want to sell it when they don't like it anymore you know when you don't like your business anymore it's often when it's sucking and you know when other people don't like your business but it's sucking and so the best time to sell is not when you want to sell it's often when you don't want to sell because when you don't want to sell it means that you have a [ __ ] awesome thing going and other people want to buy it makes sense right it's two that go hand in hand which is they have to see like where's the untapped market if you've tapped your whole marketplace which it's hard to believe anyone would but if you have then why would they have an interest in buying because they're like what am i where's my return going to come from it's only going to decline the second piece of that is they don't want to buy a business that's going down right and so if you know you want to sell your business because now you kind of run out of ideas you run out of spark or whatever it is it's not as fun as it used to be all this stuff it's usually the business isn't good and so people don't want to buy it it's that simple like if you desperately want to sell your business nobody desperately wants to buy your business so instead like if you're watching this video and you're killing it right now and you're crushing it whether you want to or not it's probably one of the better times to sell your business obviously you have to have a track record like if you're in year one i don't care how good your business is it's gonna be very hard to sell but if you're three four or five years in and your business is crushing it and it's murdering it right now that's probably a fantastic time to sell so that's the second thing the third thing is going to be concentration of revenue so if we think about number one revenue is your ability to sell right and so it's showing that you have the ability to continue to sell and continue to compound that selling when you say concentration of revenue there's two pieces this which is most people don't want to buy a business where the majority of the revenue is coming from just a few clients and so i know a couple people who have businesses that are great but they are enterprise and they have like three clients that create like three million a year in revenue and because of that someone's going to look at that and be like and what do i do if that one client leaves like they're [ __ ] and so it's not appealing to especially a financial buyer they're not going to want to do that it's too risky for them they want diversification of revenue which means you have lots of clients the revenue is spread through they also want to ensure that you have diversification of revenue in terms of where the revenue is generated so that can mean a couple things diversification of clients meaning there's not just a couple clients that hold all the concentration of the revenue and then diversification of revenue in terms of where is it coming from are you only getting revenue from facebook if you're only getting revenue from facebook again that's too risky for them what if you have facebook instagram youtube that looks much better and if you want to go a step further than that then it's just um what products do you sell through those multiple channels so you have multiple products on multiple channels with lots of customers and so you have to understand that again this all comes down to risk if you're thinking from an investor perspective they're just thinking am i going to recoup my investment and how risky is this and the less options you have the less options you have proven out to them the less likely they're going to want to buy your business because they're going to be worried that it's too risky so that's number three number four is cash flow this seems obvious again but you know if you look at it actually so if you read jeff bezos's amazon shareholder letters really interesting because he talks about this which is net free cash flow is the number one metric that he always measured and i think that's really interesting we actually started measuring it i want to say 18 months ago and that's like our sole like guiding north star metric in any of our companies but what that does is it determines the ability to finance your own growth as well as take on debt okay so think about what a buyer wants one is they don't want to have to sink more money in to their investment that they just bought which was probably expensive so if somebody buys your business for 10 million dollars the last thing that they want to do is think that i'm gonna have to go shovel out five million more dollars to make this thing actually work that's why net free cash flow is important to them because they want to know that you can sell finance the growth that they intend to put into it now the second thing to that is that if you have healthy net free cash flow ironically then it's more likely that you can get debt because they know that the net free cash flow can cover the debt service people think like oh well if i don't have a lot of cash flow they can just go take a loan it's like you're gonna get shittier loans if you have less cash flow because the bank's gonna look at it and be like you can't even service the debt you have to think about it like that when you think of cash flow that's why it's so important to a buyer the fifth item in terms of creating a sellable business is recurring revenue and this is an obvious one i don't think i need to talk about this one too much but it shows stability and long-term investment and so i'll tell you conversation i feel like i've had like 16 times with 16 different sas founders which is you know that it's typically it's a marketer and then they figure out that they know that they want to create some kind of martech and so they create this martech and their turn is like through the roof it's like you know between 10 and 30 month over month turn but they're like but look at my revenue and look at this man and i'm like good [ __ ] luck selling to anybody because what that tells me is that you have no customers in 12 months and so all that that firm's going to be looking at is they're like cool you have a lot of revenue but i have no customers in 12 months if something if your one channel shuts down and so that's why when there's recurring revenue it means that there's a long-term perspective of the business and there's no rush and rush decisions are honestly not good ones in terms of investments and obviously pe if they buy risks they're going to come in they're going to go quickly but they're not going to be so quickly going to break something and they also don't want to feel like it's a sinking ship if you have churn like that you don't have enough recurring revenue they feel like it's a sinking ship and so they don't want to buy it it's too risky so that's number five now number six is a principle of business that i'm sure anyone watching this channel again understands but you have to understand how it's different in terms of when you're selling the business the perspective which is having a unique value proposition so what differentiates you from your competitors it could be product it could be price it could be promotion i think those are the three most common and i came up with that on my own thinking like those are the three legs of a company but a lot of times it's like where do you fall in terms of uh price you can either be a low-cost leader or you can be the premium leader they definitely want one of those either of those are appealing businesses right premium leader meaning your most expensive most value low-cost leader main uh lowest cost for most value the second is product you can have unique value representative product meaning like uh software you can have patents you can have some special methodology you can there's something with your product that's different with anything like an e-commerce or food it's like you've patented a certain ingredients things like that and then when it comes to promotion it could be that you have a unique marketing hook that you've copyrighted or trademarked or whatever you have something that's working really well promotion and so those are the three things that i've seen that when i've seen buyers look at businesses that they have identified as the reason that business is has wherewithal it's because it has some kind of unique value prop that is one of those things so i can tell you that for our business you know when people are evaluating it everyone said like you're the leader in the marketplace in terms of our business gym launch they're like there's nobody even close to you and that's that like you're the leader in the marketplace and so you can do a lot when you're the leader in the marketplace and now the last piece probably the i mean in my opinion it's the hardest that's probably because i i did a lot of it over the last few years which is the strength of the team the reason for that is that if a company relies on the founders it's not a stable asset to purchase i mean it can be but you're gonna go with the purchase right and so you have to create something that can stand on its own the reason this is harder is because if you look at like the stats in terms of you know ceo succession all these things it's rough it's not that great and so you have to start planning well in advance luckily this is something i think we did really well which is getting in the right people and promoting and investing in the right people and i can tell you that at the at a couple of the meetings that we had where we flew in our executive teams and they met with the buyers after when we had the meeting and they were asking all the questions about the business it was like a six hour day with one of them alex and i didn't really talk and the reason we didn't talk is like we really have moved to like board founder seats and we really did have like a true ceo and ceo and after we you know reconvened with the firm after that meeting they kind of looked at us and they were like [ __ ] like this is one of the best teams we've seen they're like you know most these meetings it's the founders that talked the whole time and the reason that we didn't talk is because we didn't know like we didn't know the answers to a lot of their questions because we're truly not the ones running the businesses anymore and that i think is what creates a truly sellable asset you know it's not like we have um some crazy earn out or have to work in the business for years like it's done and the reason for that is because we didn't have a job in the business we were just advisors and that was probably the part that was the hardest but also the most rewarding is learning to create a team that can truly not just run but grow a business without you and so with that those are the seven things there's financial performance there's growth potential there's concentration of revenue cash flow recurring revenue unique value proposition and strength of team if you're looking at like you want to know at least you're maybe you're like hey i don't want to sell it now but i don't want to eliminate the option then look at those things and think to yourself like okay next quarter in the next six months like right now it's beginning of q1 what are your initiatives that are going to help shore up those pieces so that you can create an asset that if you choose one day you can sell so i hope that was useful for you i hope you enjoyed your walk break from work lunch whatever it may be and i will see you on the next one

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