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The Scale Your Agency Podcast | Bright Ideas

Mar 9, 2021

Episode Highlights 

[3:16] — John shares the current trends on how to sell a business

  • They analyzed the data on pre-COVID value builder questionnaires last November. 

  • The results showed that the pandemic had made material differences on how to sell a business.

  • Business owners are looking to sell 20% sooner, and they’re looking to sell to a third party.

[4:50] — John identifies the biggest mistakes in selling a company

  • His book's whole idea was to provide a playbook on the best practices in selling a business.

  • The most common mistake is getting lured into a proprietary deal. 

  • In this kind of deal, the buyer offers lower, knowing that there is a lack of competition. They may also protract diligence, leading to retrading or value diminishing.

[7:00] — Why businesses should create a market for their company

  • Creating a market for your company will guarantee that the offer you’re getting is fair market value.

  • Two to three legitimate buyers are enough to ensure a fair offer.

[9:44] — John shares the effective process of planning and preparation

  • He uses the analogy of staging in home selling. 

  • Doing a "renovation" is a valuable strategic process. It is building a transferable business.

  • Process documentation is a big part of the renovation project.

[11:17] — John explains pre-diligence

  • Pre-diligence is having answers to all the questions you might be asked when marketing the business.

  • Doing a full pre-diligence project ensures that the due diligence goes smoothly. Also, it signals to the acquirer that they have to compete with other potential buyers.

  • Pre-diligence is having all possibly necessary documents on hand and in one place, such as your leases or employee agreements.

  • Documenting your processes prepares you for pre-diligence and due diligence.

[20:26] — What’s the importance of having SOPs in how to sell a business?

  • Having SOPs eases fears that business buyers have.

  • Massively-acquired companies have tremendous resources and people, making it easier to run after the acquisition.

  • Individual investors, who often acquire small businesses, need the checklists and a manual on how to run it themselves upon acquisition.

[22:42] — The three types of buyers

  • Individual investors

  • Private equity groups

  • Strategic investors

[24:30] — How to gain leverage during the negotiation phase

  • Signing a no-shop clause will make you lose your leverage in the negotiation. 

  • Before signing a letter of intent (LOI), ensure that the acquirer is aware of the other competing offers.

  • Make sure you negotiate any conditions that are vital to you before signing the LOI