“My point here is every single dollar matters when you’re selling your business and everybody’s going to exit their business someday, so you pay attention to those little details.’’
If you want to exit an online D2C business, you can’t just start pitching to VCs. There’s got to be a method to your madness! No matter how promising your industry might sound and how profitable your path to massive growth looks like, the buyer needs certain fundamentals in place to even consider buying your business.
There’s also an option where you can exit the daily operations of the company and become a strategic advisor i.e. you can exit the daily business without exiting the company.
In episode 83 of the Customers Who Click podcast, I talked to Joe Valley of Quiet Light Brokerage about various ways to plan a wealthy exit from your online business and the mistakes to avoid along the path.
Joe Valley is a serial entrepreneur and currently a co-owner at Quiet Light Brokerage, a leading online-focused M&A advisory firm. He has also built, bought, or sold over half a dozen of his own companies.
Over the last nine years, Joe has mentored thousands of entrepreneurs whose goal is to achieve their own eventual exit. He is a Certified Mergers & Acquisitions Professional, and a frequent guest expert in mastermind groups, on podcasts, and at events for entrepreneurs worldwide.
03:44 – 08:52 – What Makes a Business Worth Purchasing? – Growth potential, business risk, transferability of staff, financial documentation, and the person behind the business are the key non-financial points that buyers consider – often unconsciously – when evaluating a business’ value. They also look at financial key metrics such as trends in gross profit, advertising, and discretionary earning – in dollars and percentages.
08:53 – 15:56 – How to Address High Advertising and Customer Acquisition Costs Before Selling? – Over time, high advertising and customer acquisition costs must be balanced with equally stellar numbers for key stats like your revenue & discretionary earnings so your margins don’t shrink. Monitor your ad costs every month so you don’t waste money. Hire external expertise and don’t stress on doing everything yourself when you need help because even the smallest of losses get magnified when you are trying to sell your company.
15:57 – 20:55 – Evaluating People Involved In a Deal – The seller of the business being neutral, likable, and trustworthy increases the selling appeal of the business. This is true for buyers as well. Transferability of the in-house staff and external partners/agencies also matters because buyers want the best people to continue in their roles and not have to hire new people/find new partners.
20:56 – 29:30 – Mistakes by Sellers In a Business Sale – Trying to sell a business younger than 18-24 months could be a mistake. Being dependent on a single HERO product/service that’s making more than 50% of revenue is also a mistake because then the business will be susceptible to problems in the supply chain or the industry. Not having proper financial documentation, having declining annual growth, or no built-in paths to growth also makes selling your business harder.
29:31 – 36:01 – How to Exit Without Exiting – After scaling the business to a certain size, you can pass on the execution of business to someone from within your C-suite team and stay on only as a strategic advisor. You can thus direct it towards higher growth without being involved in the daily grind of the business.
36:02 – 37:32 – More Tips on Buying and Selling Businesses – Using someone else’s exit from their company as a benchmark to attain for your company – without understanding the details of the deal – can overwhelm and confuse you. Growth for the purpose of exit is a marathon, not a sprint.
37:33 – 40:09 – When to Start Preparing for the Exit – 18-24 months is a good baseline duration after which you can start talking exit strategies with a professional like Joe. An unplanned exit – for example when you are burnt out – might fetch you lesser value than having a planned exit would.
Who Would Joe Like to Take For Lunch in the Business World?