How to sell shares of your company
How To Sell Your Business For Millions
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I got a call last week one of my good
friends who runs a very successful
business and as we were going through
the conversation together the topic of
selling his business came up and he got
nervous he said well I've I've ran this
business all my life this is my baby why
would I sell this but it was as if he
was about to walk down the aisle and
give his daughter to somebody I said if
he is having so much trouble thinking
about selling his own company like most
founders and entrepreneurs do
there's probably tens of thousands of
other people that are going through the
same thing why don't we make a video
about it whether you're 1928 or 42 years
old me you don't run a business you're
not a founder not a CEO maybe you're an
employee or an executive maybe a
salesperson or realtor you are going to
long what it is to go through the
process of selling the business in this
video however if you are the
entrepreneur the founder the CEO or a
partner in a company and you are
wondering should we sell should we not
sell some are telling you should sell
never sell a business you're gonna get a
lot of clarity from this video these
twelve points are gonna give you a lot
of clarity and some of them are gonna be
points that maybe you haven't even
thought about yet because look you may
have done nine million last year you may
have done ninety two million dollars of
revenue last year maybe you did 1.6
billion dollars last year what do you do
it's a lonely world sometimes right
these twelve points are gonna give you a
lot of clergy and by the way stick
around because at the end I'm also gonna
have a PDF for you to download and go
through and see if selling your company
makes sense to you number one look the
first thing you got to ask yourself
before even think about selling your
company is why do you want to sell in
the first place why are you tired or you
burned out why are you tired
why are you burned out are you not
taking some time up with your wife or
with your husband how's your personal
life is it caused by that are you going
through something you know how sometimes
people sell a home because they're going
through a divorce that they're trying to
sell the business is that really the
reason it can your marriage be saved is
it a tax consequence is it bad financial
decisions you made are you being forced
about your partner's your vendors maybe
one of your investors is buying you out
and no one knows about it maybe one of
your big customers are saying look
you're too big we can't give you this
much control we got to buy you out what
is the reasoning are you simply just
wanting to
retire and go live by in a beach house
and hang out and have the money and
enjoy the restaurant what do you want to
do see these are all questions you got
to ask yourself um go through by the way
some of these I'm giving you believe me
a lot of people call me and they want to
come and give me $100,000 say I want to
sell my business can I sit with you for
two hours because I need advice with you
my partner's want to come to you this is
something you got to do with five other
people to sit with who have sold their
businesses and afterwards they change
their minds and they said I wish I
wouldn't have sold it and some that did
sell it and they made the right decision
I do what you're gonna get a lot of
counsel to know whether it's a good time
for yourself right now or whether it's
not number two
so listen once you've addressed why you
want to sell the company and you kind of
clear about it the next thing you need
to do is get educated and the way you do
it is by meeting with an M and a broker
or a banker this is a merger and
acquisition banker this is what they do
for a living these are guys who have
contacts with lots of money some are
billionaires
some are worth a couple hundred million
dollars and they are looking to buy
businesses and this is how simple it is
so let's just say I'm Johnny
I'm the M&A broker I'm the merger and
acquisition broker I know Bobby he's one
of my clients is worth a billion dollars
Bobby wants to buy businesses I
introduced him to Cindy Cindy's business
is worth a hundred million dollars Bobby
by Cindy's business without me Bobby
doesn't meet Cindy Cindy doesn't meet
Bobby
that a hundred million dollar
transaction that takes place I get two
to five percent on that deal which means
two to five million dollars for making
the contact that's what the MMA brokers
do so now you realize when you meet with
these guys you got to know what they do
that's how they make their money so when
you meet they're probably gonna ask you
a lot of questions tell me about your
business how long you've been doing this
for what's your numbers look like
what's your a bitter what's your profit
how many employees do you have who else
is on your team what's your executive
team they can ask you a lot of different
questions who would you compare your
business to to other businesses what are
they value that what's their numbers
what do you think your company's worth
what do you think the market things your
company's worth you know what do you
think sellers think your company's worth
what seller would want your business
what investor would want your business
you go through this process and this
entire sit down with three MMA K bankers
it's gonna be as if you went to
university for three years to learn how
to sell your company number three so
look once you figure out why you want to
your business and you're comfortable
with it then you meet with the M&A
broker and you're getting educated about
what the market looks like right then
it's about setting timeline expectations
of when you feel comfortable even having
the conversation right you may say three
years I'll have the conversation five
years I'll have the conversation ten
years I'm open to it right now I'm very
happy I am burned out a little bit but
all I needed get away maybe I'm gonna go
on a vacation with some family because
what I'm doing here with this I'm good
though I'm good to go everything makes
sense to me great even when you set time
on expectations things could change the
economy could turn our new president
could be elected regulation could change
you still have to be nimble enough to
know what's going on with the
marketplace and knowing that your own
timeline could still change but you have
to mentally get to a place to say I'm
comfortable for this 2023 so now have to
work backwards to ask myself where I
need to be six months from now
twelve months from now 24 months 136
months from now so I'm getting ready for
the day that I may sell the company
number four so once you've set your
timeline you're saying I'm comfortable
seven years from now having a
conversation five years three years and
you know how you need to work back the
next thing you need to think about is
the following your exit strategy meaning
who is an ideal buyer for you is your
ideal buyer anybody with a checkbook
because you can go to New York and sit
down with a PE firm who is willing to
cut a hundred million dollar check to
you based on the profits that you make
they don't really look at your business
they don't really look at the heartbeat
they don't really look at that stuff
they simply look at numbers and they say
well you know there's 7 million dollars
of profits the industry is typically 12
Exxon 7 million will give you 10 X 10 X
on seven million seventy million dollars
you want 70 million dollars and that's
it or it's a strategic buyer one of the
current people you work with you know
they need your technology you know they
need your shipping you know they need
certain things that you have that
without you they're gonna be in trouble
so they may come in and pay twice as
much as these guys are gonna pay because
you have something they need but who is
that person gonna be for you you need to
identify that from now start thinking
about that number five so now you have
your numbers you know your exit strategy
you know who you want to be your
strategic partner to buy your business
right you're comfortable with that great
no problem you know your timeline what
do you expect from these buyers what
kind of buyers are there by the way
there's four different kinds of
I've met every single one of them and
I've dealt with every single one of them
into what this looks like first kind of
bar it's a person who's very interested
in your business would love to buy it
but they can't afford it this is like a
person who goes through Ferrari
dealership and they want a Ferrari they
love Ferraris
but they can't even afford to buy it one
focus that's the first one second one
it's a buyer that can buy ten of you but
has no interested in your business no
problem
third one ready this one's a little
tricky this is the one that's disguised
like a buyer he comes in so interested
he has no interest in him buying your
company he only has one thing in mind
insider information because he wants to
leak it to competitors so they know
exactly what's going on they're trying
to study or my it's like a realtor that
acts like a client and a buyer and walks
into the house and saying oh wow this is
a nice home so show me so what's this
and what do you are they going through a
divorce what's going on with the husband
wife can you tell me
it's a realtor not a client that's what
happens with some of these guys as well
and last but not least it's the kind you
want to sit what's a person who is
interested has the money and would like
to cut a deal with you that's what you
want to meet with but you need to know
the different kind of buyers they're
gonna sit with you number six so now
that you know your exit strategy now
that you know what kind of buyers are
gonna come knock on your door to want to
buy your business what can you do in the
interim to increase the value of your
business right what could you do it's
like I want to sell my house but maybe
it doesn't look that good I've got to
paint that house I got to clean the
garden the backyards kind of messy maybe
I got to spend an additional fifty
hundred thousand dollars to increase
divide the company by four hundred
thousand dollars right so in the interim
what could you do hire a new CFO that
kind of knows what they're doing that's
been through this process before and you
kind of come in advance for three years
so prepare for that opportunity that
comes up could it be technology could it
be increasing sales could it be
extending your contracts with your
customers or your vendors or suppliers
what is it there are certain things you
can do today to increase the value of
business between now and the day you
sell your business number seven so the
next thing is a little dirty because you
got to start dealing with attorneys and
you know how I feel about attorneys by
the way I'm not a fan of 80 percent of
attorneys but when you find a good
attorney you got to keep them you got to
bring your attorney in spend a little
bit more money and get the attorney to
update every single contract and bring
it all in one place because when
somebody buys a business
they're looking for all the contracts
all the agreements this is the stuff
they're really relying on sometimes the
value of a company is based on the
contracts and the agreements that they
have with their vendors partners all
those different kinds of people you were
dealing with if you're wondering how you
find a good attorney i sat down with
robert shapiro a few months ago and he's
one of the most celebrated attorneys in
america ranked top 100 and some list top
10 on many other lists
he explains three things every
entrepreneur needs to know about before
hiring an attorney more is gonna put a
link below if we're to be able to watch
at episode number eight so look now that
you dealt with your attorney now we've
got to talk to your CPAs and by the way
there's a few things you got to be
thinking about when it comes down to
CPAs here's a couple things one what is
the buyer expecting to see with your
finances this is what a buyer likes I am
NOT a fan of businesses once they cross
$10,000,000 your business to still deal
with a friendly local CPA I'm not a fan
of that a friendly local CPA is good if
it's a one office shop and you're doing
a couple million you're fine they can
handle that 10 million plus you want to
get to the next level you need to go
through an accounting firm now that's
going to cost you five times more but
it's gonna save you so much more because
of a buy you're saying wow you got
audited financials for how many years
three years straight very impressive
audited financials could cost twenty
five two hundred thousand dollars
depending on how the business is it
could cost millions of dollars but I'm
saying a business that that's 50 million
your hundred million dollars a year
could cost you between 25 to 40 thousand
dollars 25 two hundred thousand dollars
you're doing but it's audited financials
and the more consecutive years you have
audited financials the buyer is liking
this the value goes higher let me
explain it in a way that makes sense to
you look if you want to buy a house
you've got to get your credit score done
earlier to know where you're at because
you're gonna know why is my score 620
here why is it 6:30 I know I'm not gonna
get the best interest rate and so you
first fix you credit then you go see if
you're gonna get a proof or million
dollar home it's gonna be the difference
between you paying you know forty-nine
hundred dollars a month for mortgage
payment versus $7,300 my for mortgage
payment because your credit score right
so this is the difference between a
buyer wanting to buy your business for
180 million dollars versus buying it for
ninety two million dollars that's a big
difference
I like baseball cards I don't buy
baseball cards that are not greater by
PSA I don't I don't buy them because
that gives me credibility the same goes
that a buyer buys a business that has
audited financials
from a very good size good name
accounting firm number nine let's just
say at this point you've done your
attorney stuff you done your accountant
stuff you're ready it's that time you
already through the five years from now
to go out there and start putting your
business in a marketplace right are you
ready to tell your story how are you
gonna sell your story what is your story
is your website aligned with the way you
want to tell your story is it updated
what does your home office look like is
it an updated home office there's a look
like the businesses within your industry
where somebody comes in and say wow I
like the way these guys dress up here
what is it
do you have proper marketing material
you have a pitch deck what does your
presentation look like when you go and
say hey here you go mark you the
material marketing material marketing
material marketing material oh wow
this is good stuff high-end stuff you
may want to spend a little bit more
money before you present your business
to buyers that you are expecting to cut
a big check for you so you got to spend
some time getting your story together
and your website marketing Home Office
all of that stuff it's part of Story
number ten so it's that time it's
negotiation time this is like fourth
quarter type of stuff someone's gonna
cut a check what are you doing typically
owners take two different routes one is
the owner says I don't need anybody's
help I don't want to pay nobody a 5%
broker fee I know how to sell the
business I don't need anybody so and
they go by themselves it's one of the
ways you could do it the other way is
you go and hire somebody you hire a team
you hired the M&A broker the banker and
they come and help you sell now why is
that a good thing well I typically
believe in capitalism because a lot of
people make money to unit if a lot of
people make money together and you put
the tiers of bonuses based on what
amount they sell it for you're probably
going to sell it for a higher number
than you thought we're gonna sell it
right so I lean more towards this side
especially if you're dealing with a
hundred million dollar plus check go get
a pro some of you that are not good in
sales and you're selling for 10 million
you still go get a pro number 11 so you
start a negotiate you got numbers
they're making offers what kind of
offers should you expect which one
should you take what do you do well
there's different kind of offers one of
the offers the one that everybody wants
cash 50 million but no commitment no
non-compete you're good to go
if you want to compete with us in the
same space we're not worried all the
best you that's one
c'mon we'll give you 150 million dollars
with a 10-year non-compete because you
are never going to compete with us
in real estate in IT in technology in
insurance whatever maybe the next one is
they buy and exchange for stock options
they give you stock of the company
sometimes they'll do 50 percent cash 50
percent stock it's completely up to you
do you trust the stock you trust the
company is the company trending is the
company on a downfall what is it that's
on you and last but not least they'll
buy whether it's cash stock whatever way
it is and they'll tie your salary to you
with you sticking around for two years
in a non-compete after that we want you
to stick around we'll give you a hundred
million upfront then we'll give you two
years salary of a million dollars per
year then we give you stocks at the end
and the company performs the next two
years we'll give you another 75 million
dollars
dot-dot-dot another five your
non-compete after that that also happens
as well so you need to know all your
options on how you're selling what
you're most comfortable with but those
are generally some of the options you'll
have when you sell your business number
twelve
so look everything could go right in the
first eleven steps everything could go
right and then all of a sudden 80% of
the deals don't go through because a
twelve step and here's what the twelve
step is it's actually the closing part
of the sale so as you go through the
first eleven steps if you tell any
numbers to the buyers that are slightly
off the real numbers after they audits
your numbers they're gonna say wait a
minute these numbers don't match up work
we're coming out of this deal right so
three things you need to know about one
it's called ioi this is indication of
interest I am indicating to you that I
the investor I'm interested in buying
your business very cool
open up the books a little bit for us to
see something okay
cool so next is the LOI LOI stands for a
letter of intent you and I you're the
buyer I'm the one that wants to invest
into your business and buy you right we
give you a letter of intent based on
this term sheet we're gonna buy your
business so for instance we want seven
years non-compete you're out of your
mind I won't give you no more than three
years we can't do that but we want five
years okay let's agree on five years
we'll give you 75 million in cash in
seventy-five million stock I'm not doing
that I want one hundred million dollars
cash and 75 million dollar stock we're
not doing it we'll give you 50 stocks
100 million cash great we agree on all
this stuff
this is all good but it's still not done
until everything proves here based on
the audit
do with you and in comes a purchase
agreement when the purchase agreement
comes and you get the call from your guy
from your CPA from your accountant that
says 125 million dollars is in a
checking account your banker from the
bank calls you and says you're 17
million is in the checking account here
228 million is in the checking account
by the way your checking account has 1.7
billion dollars and you go to the ATM
you keep John look at the statement baby
we finally did it right or you're gonna
wake up the next day and say oh my gosh
I can't believe I saw this business this
is my baby I just let her go what do I
do now but regardless you can have all
those emotions anyways these are the 12
steps that you go through and selling
your business this alone by its up could
be a six-hour course that we couldn't do
purely on your selling your business
because there are so many different
questions you probably want to be asking
me about the different dynamics right
this is why we get the email saying I'll
give you a hundred grand for two hours
help us sell our business should we go
through shall we not go through it
anyways it is to give you an idea about
these 12 steps on what you should be
thinking about whether to sell or
whether or not to sell by the way for
some of you that I wanted to raise money
you don't want to sell your business but
you want to raise money I did a video
called how to raise money as an
entrepreneur you probably see the
thumbnail right here Mario is gonna put
a link below for you to go and watch
this video I highly recommend you go
watch that video right after watching
this video and then if you want the PDF
from today's video the 12 steps click on
the link below as well there'll be
somewhere for you to go to my website
Patrick better be calm and download the
PDF so if you have any questions
thoughts comments you can comment below
if you want to reach out to me directly
on twitter my handle is at Patrick bid
David and if you haven't yet subscribed
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next to it thanks for watching Flavio
take care bye bye
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