Jun 23, 2020
Inspired by a video course that we had to re-record this week, we
are going to discuss the top five ways buyers can gain instant
equity. Tune in to hear these great tips on how to maximize your
business. Topics:
- Why an Ecommerce business may be undervalued.
- What makes it hard to identify gross profit trends.
- Rewards vs. cash back credit cards.
- The less-than-obvious ways to gain instant equity.
- Examples include:
- Renegotiating costs.
- Net 90 terms.
- The China Magic Mastermind’s methods and why they’re so
effective.
Transcription: Mark: So, Joe,
recently Chris Moore, our chief marketing officer, came up here to
the Twin Cities. He rented an Air B&B and he and I sat down for
a day to record or rerecord the course that I recently put together
on how to sell a business for six, seven, or eight-figures. I got
to tell you, I'm not a fan at all of recording things at least in
video format. I know you're a natural at it. You used to do
commercials; direct commercials?
Joe: I wouldn't
say I'm a natural. I've seen you and I've seen me and I think you
do a great job.
Mark: Well, that's very political
of you. But you know something during the course that I wanted to
get across because I was going through some of the tips that we've
talked about for sellers about how to maximize the value of their
business and one of the points I wanted to make is that a lot of
maximizing the value of your business isn't so much taking an
accounting trick and it becomes magically more valuable. It's more
about not artificially or accidentally discounting your business
because you just don't know what you're doing, right? Or you don't
know how to run the right financials or you don't know how to do an
add-back calculation. Well, on the buy-side; this is two sides of
the same coin. On the sell-side we want to make sure that we aren't
artificially discounting our businesses and that we're taking
advantage of some of the really natural, low hanging fruit that we
can do to make sure that that we're getting full value or capturing
full value for the business. But on the buy-side sometimes there
are opportunities when somebody doesn't want to put in the work,
for example, to switch from accrual to cash, which we've had. Some
people say it's just not worth it for me to take that time. So
today, I think you and I, we're going to talk; I mean I’m going to
bug you and pester you with questions and grill you as much as I
can about ways that the buyers can add some instant equity, get
that instant jump in valuation by buying a business with certain
characteristics.
Joe: Yeah, and then for sellers
it's important to listen too because if you ever think you're going
to sell your business either through Quiet Light or on your own;
especially on your own, you need to pay attention to this because
you don't want to be taken advantage from by the buyers that are
listening to this. If they're listening now, they're going to learn
some things and potentially buy your side, they're going to learn
some things that if you hang up halfway through you're not going to
understand and make sure you're maximizing the value your business.
And every time I say that I feel a little wonky. Really what you're
doing is you're not jacking up the seller's discretionary earnings,
you're actually getting what you deserve. You're learning to
understand the true value of your business, which is your most
valuable asset more than likely so pay attention to it and make
sure you understand what they are. So it is just Mark and I on this
podcast and we're going to talk about maybe five things that buyers
can do to gain instant equity in their business. And the first one
that; and this is me thinking if I'm out there buying on my own,
which I'm not given the role that I'm in, but if I were, this is
what I would do. And the first thing I would do is look for
businesses that are presented for sale on a cash basis. Now, it has
to be a business that's growing rapidly, and let's talk specifics
here. This is a physical product e-commerce business that's growing
rapidly and using cash accounting. I don't love accounting either,
folks, but it's one of the most important things to pay attention
to when you are buying a business or when you're selling your
business. If the business is growing rapidly, you're trying
desperately to keep up with inventory needs. And in doing that, if
you're buying it on a cash basis, you are continually taking money
out of the business to support the ever-increasing need for
inventory volumes. So you may be spending $10,000 this month on
inventory but you haven't sold it yet. That's going to depress your
net income or your seller’s discretionary earnings. It gets to a
point where; I sold a business recently, it was Brian and Janine,
they were on the podcast three or four weeks ago. They went from
something like 270,000 in revenue the first year to 1.5 million the
second year to 5 million the third year. And Janine kept writing
bigger and bigger checks, they’re actually wiring more and more
money to China and kept saying to Brian where's our money? We keep
giving everybody else our money, but we're not taking any. And it
was because rapidly growing businesses like theirs was such a cash
requiring machine. So if I'm a buyer, I'm going to look for a
business that's growing rapidly and is presented on a cash basis
because discretionary earnings is going to be artificially
depressed, it's not the right way to present a business for sale.
On the flip side, if a broker is listing a business for sale with
declining revenue on a cash basis you're overpaying for the
business because it's not requiring as much cash to buy inventory
because it's less and less inventory. It's just the opposite. So
you've got to look for businesses if it's presented properly, is
going to be accrual accounting, if it's not presented properly
they're doing cash. You could gain instant equity by buying the
business on a cash basis.
Mark: Yeah, I'll take on
it and say absolutely, a quickly growing business in the e-commerce
world on cash basis is typically going to be undervalued for the
reasons that you stated. But the two warnings that I would give on
this would be one that you already said, and that is if it's
declining and particularly if the seller or the business owner has
decided to take their foot off the gas; they're not looking for
more inventory. The inventory that they're having in stock is
either aging out or running out and they're not reordering. Now,
you're going to have an artificially high gross profit on this
business because they're not buying more inventory. The second
thing that I would just caution people against is on a cash basis,
you can't really identify what the gross profit trends are, except
by taking some really large timelines and using that. So take a
look at unit cos1ts at that point to see what the trends are if you
can get that level of detail just to make sure you're not in a
business where gross profit margins are getting squeezed by huge
amounts because that'll be the other risk and the other major
downside to cash basis accounting is you just don't get the same
insights into your gross profit margins.
Joe:
We're going at math here. I know it's nauseating but real quick
math folks, I've just seen a jump in discretionary earnings
flipping from cash to accrual by $70,000, $100,000 in some cases.
And so the instant equity here is if you're buying a business that
you find some inexperienced person selling on a cash basis and it's
depressed by even just $20,000 because it's cash instead of accrual
and you're buying it three times, you've just gained $60,000 in
instant equity in the business; simple math.
Mark:
Yeah, and I think one of the objections to this and I've heard this
from buyers that are evaluating e-commerce is okay that's great but
why would I want to buy a business with paper profits and really no
cash? The cash basis is the amount of cash coming in and out of the
business. And you brought it up Joe that you were speaking to
somebody recently that said where is my money? I keep giving
everybody else my money. But what I think a lot of sellers miss and
I would encourage sellers to think about this as they're growing
and evaluating an exit and for buyers as well, as far as what's a
good entry point is that there does seem to be a transition point
in the growth of many of these businesses where they stop becoming
these cash hungry machines and the growth levels off a little bit
and you get to a certain size where even if you are still growing
and still investing disproportionately in inventory, you start
seeing some of that money accumulate in a bank account. It does
happen. There is a pivot point. Have you seen that as well Joe?
Joe: Oh, yeah. There's no question about it. I've
said way too many times that when you're working the hardest in
your business, you’re usually making the least amount of money.
It's usually in those early years. At some point; I guess it's that
tipping point, the business starts to generate more cash flow. It's
not as much of a cash sock because the growth has actually slowed,
strangely enough. But it's bigger. It's larger, and you're able to
take more cash out of it. I definitely see that change. I want to
move on to number two here, Mark. The number one thing that I see
people miss when selling or buying a business is cashback money
from credit cards. And I think the reason they miss it is because
they think they're being sneaky and cheating on their taxes so they
don't want to talk about it. And the reality is that the IRS
doesn't know how to tax cashback from credit cards. It's actually a
discount on your advertising. So you spend a million dollars, you
get one and a half back on your cashback credit card. You've got
$15,000 there that you're sliding with your personal account that's
not on your P&Ls. That's $15,000 owner benefit cash in your
pocket and you're thinking I don't want the IRS to know. The IRS
doesn't know how to tax it, first of all. And I've talked to my CPA
about this. Most people will miss that. So there's $15,000 that
winds up in your bank account. That's real money somehow. Mark, is
that an add back or an owner benefit and should be on the P&L
in your opinion?
Mark: Absolutely.
Joe: Right. Most people don't put it on a P&L
and that's okay because the IRS don't know how to tax it anyway.
But when you sell your business or buyers when you're buying a
business, look at the advertising spending. I talked to someone the
other day. They were spending about two million dollars a year on
advertising. They had an agency that was doing it for them. It was
all Amazon FBA stuff. And I said, well, what kind of card are you
using; how are you paying for that spending? They're like, what do
you mean? I’m like well, how are you paying for advertising? We
just let Amazon deduct it from our account every couple of weeks.
Once we get to a certain level, they just deduct it from our
deposits. I’m like that's very kind of you to let Amazon do that
but what you're missing out there is two million dollars in ad
spend, 1½% cashback, $30,000 cash to your bank account. So you've
just lost $30,000 a year. Then you sell your business; this was a
sizable business with incredible growth, probably I’d call it a
simple math three-time multiple or might be four but now you're at
$90,000 to $120,000 lost value on the business. So buyers look for
these types of things. If you are buying a business and they're
spending lots of money on advertising, even if it's a million
dollars in advertising, you're buying it at 1½% percent cashback.
That's $15,000 cash in your pocket times a three-time multiple so
it’s $45,000 instant equity. So between number one and number two,
there's about $100,000 in instant equity depending on the size of
the business. This one is the one that is absolutely most missed.
Mark, you and I just switched company-wide; we just switched to
American Express gold cards because we get four times the points of
$250,000. We use points and rewards instead of cashback because we
go to events and we travel and it's going to help pay for the team
to travel.
Mark: We don't go to events and travel
right now.
Joe: That's right. We're recording on
June 16
th, 2020. We're absolutely not going to any
events. But there's often the question about, well, what about the
rewards? How do I calculate the rewards? I love doing that instead.
And I've talked to Jeremy from eCommerceFuel, that's what he does.
And he thinks it's funny that people take the cashback because you
can get a lot more value with rewards. But there's a conversion to
the rewards, right? I think with American Express it's 1%, right?
Mark: Mm-hm.
Joe: So you might
lose some if you do the conversion to other rewards. You can still
accumulate the rewards on a monthly basis and do the conversion
calculator of 1%. What you cannot do is say, well, I upgraded my
plane ticket to international first class. The cost of that is
$10,000 therefore I want a $10,000 add back. You can't do that. But
you can do the cashback amount conversion. So for buyers, yeah,
absolutely if you're looking for a business to buy and they're not
utilizing the cashback benefit or the reward benefit and converting
it, you can find some instant equity in there as well.
Mark: Yeah. I want to speak to my people real
quick. My people are the people that don't like details and don't
like to sit there and calculate your tip down to the penny. That's
my type of person. That's who I am. I can't be bothered for that.
When I go to dinner with a bunch of friends, I'd rather pick up the
tab than sit there for five minutes trying to figure out who owes
what down to the exact amount. And so for a long time, this whole
discussion of cashback and points and everything was just like,
forget it, I don't want to be bothered with this. I mean, we're
talking 1%, 2%, who really cares? But here's the thing about this,
there are people who delve into this and understand the conversion
ratios and they understand how to game this system and maximize it
out and they do think of it just as a game. And then there are
other people who are going to take advantage of it to some extent.
And what I would just say is this, don't let the perfect be the
enemy of the good here. If you're the type of person who has bigger
fish to fry and have bigger things to do, this is really low
hanging fruit and if you don't get the absolute perfect optimized
setup with cashback, that's okay. But from a buying standpoint and
what we're talking about here; how can you gain instant equity into
a business this is one of those areas that you absolutely can gain
instant equity. You can instantly gain extra cash flow for your
business as well by just putting something in place, even if it's
not perfect, and then you can optimize later. Or you can hire a
consultant and you'll pay them some money but the long term is that
you'll benefit from it more than you pay them. So if you're one of
those people like me, just do it. Don't sit there and get all
frustrated by it. Just do something and then refine later on.
Joe: Yeah, definitely take advantage of whatever
you can there; simple math. I'm with you on the tipping, by the
way. I just round it up to 20% and I’d rather pay the bill than
figure out who owes what. Let’s jump to; I think we're up to number
three here. We've given a couple of good options in terms of how
buyers can find instant equity, and it's important for sellers to
understand that as well so they don't get taken by buyers if
they're selling on their own or having an experienced broker. But
why anybody would ever go to Quiet Light, anybody but quite if
they're listening to us right now it would be confusing for me. But
here's one that I've seen recently. One question if you're buying
direct or from another firm; if you're a buyer listening to this
podcast and you really want to buy from Quiet Light because we do
an amazing job putting packages together, building trust, making
sure that you're making a good investment and our buyer is getting
a fair value and our seller is getting a fair value as well. It's
got to be a win for everybody. But in the event that we have not
produced enough listings that are going to be a good fit for you,
one of the questions you always want to ask is when was the last
time you renegotiated cost of goods sold on any of the SKUs, have
you done that in the last 12 months in particular? The reason for
this is because it's instant equity if they have but did not do an
add back adjustment. I guarantee you if you're buying direct from
somebody and they're not selling through a broker or a qualified
experienced adviser, that there's not going to be an add-back
adjustment for that. And here's the simple math, they're selling a
thousand units a month on a product that costs $10. They
renegotiate that down to $9 but they just did it in the last two
months. They're so excited to; yeah, no, absolutely, definitely we
renegotiated two months ago and that's why you should buy this
business, profits are just that much better. And then they put a
period at the end of that sentence. What they're missing is the
add-back of the previous 10 months of a thousand units a month or
10,000 units at that dollar savings. So it's another $10,000 that
is instant equity to the business. You're buying that business. And
the reason is because that expense that was there before that's
not; I know this is confusing. There was a dollar expense per unit
for 10 months on the P&L times 10,000 units that's not there
anymore. That expense is not going to carry forward to you, the
buyer of the business. Therefore, it is an add back. So it's a
$10,000 instant equity if you ask that question and you see it
there. And it's boosting the value of your business when you go to
sell. I think it's really important. I think most people don't ask
that question. They don't look at it. They focus more on the top
line. And what is it that Mike and Dave say from Ecom Crew, revenue
is vanity profits are sanity I think. Most people don't focus on
the profits. They just talk about how big their business is and how
much revenue they did instead of actually focusing on things like
renegotiating cost of goods sold. So that is instant equity and it
can be found if you're buying a business. It's the work, obviously,
that the seller might have done prior but you can always ask about
those questions if they've ever renegotiated cost of goods sold or
even how often they've gotten on a plane to go visit their
manufacturer wherever they are in the world.
Mark:
Well, again this is something that even if you don't ask,
hopefully, shows up in the P&L as well. You should be able to
see some of these changes when you get down to some of the granular
stuff, assuming that the P&L is good. And the only thing I'll
add to that because I think you made a point well, Joe, the only
thing I would add, though, is don't look at just the vendors
providing products. Take a look at all the vendors that are out
there. It can be anything from an accountant or bookkeeper or the
person providing the cardboard boxes if you're not using FBA or one
of those avenues. There's a lot of vendors for every type of
businesses. It’s not just the people or the products and there's a
lot of places where you can get some of the additional equity,
especially if it's not been worked into the overall financial
picture used for the valuation at the end of the day. So that's a
great tip. The next tip, so that's three, right? We have look for
cash-based P&Ls and quickly growing businesses. Two, take a
look at companies that either are not using cashback points on
credit cards or have not added it into the valuation because that's
money that just simply hasn't been captured in the valuation
picture. Three, renegotiating costs of goods or negotiated vendor
services that are ongoing expenses would be another area where once
again that's not captured in the valuation process. The next one
would be flying to China if that's where the vendors are or meeting
their vendors. And not every vendor is in China. I just had a great
call with somebody yesterday; a UK person who found her vendor in
the UK and they had a Canadian sister company as well so pretty
cool there. But meeting with the vendors in person and taking that
opportunity to discuss potential renegotiations, not necessarily on
price but that's a natural area to go but also on terms to make the
cash flow of these businesses somewhat friendlier. I know
oftentimes vendors that have good relationships or long history are
willing to offer net 30, net 60, net 90 terms, which can really be
a huge relief on a quickly growing business.
Joe:
You don't take what Mark just said and send an e-mail off to your
vendor saying you want net 90 terms. It's not going to work.
There's a process to get through that. It's something that anytime
I'm talking to buyers they ask me how flexible is your seller on
the price? I’m like you know what? I don't know. I determine the
price. We agree on it together, but they're never going to tell me
their bottom line. Well, do you think they'll accept X? I don't
know. What you need to do is get on a good conference call with the
seller. Get to know them. Have a good relationship with them. Have
the call end with them going man, I love that person. I just really
want them to be my buyer. And then you can ask for what you want
and at the very least, you'll get a counter. When you ask for
something and they don't know who you are and you don't have a
relationship, the answer's always going to be no; as simple as
that. So that's why you should if you can at any time get on a
plane and go visit your vendor face to face; your manufacturer. I
have a client right no; they're still my client. They're my
friends. I sold their business in January. They bought a business
since. I talked to them the other day. They were on their way to
Ohio, move driving from Massachusetts to Ohio because they're going
to meet the manufacturer of one of the products that they sell.
This is talking about getting a plane to go to China more than
anything else. There's a couple of podcasts that we've had recently
that focus on this specifically. One was Dan from Titan Network
talking about how to work with your Chinese manufacturer and
renegotiating terms. The reason you do that is, number one for this
cost of goods sold, but also because it improves your cash flow.
And when you have more cash flow and you do get the terms that Mark
just talked about you can spend more money on advertising. And when
you can spend more money on advertising you're going to get more
cashback so these are all tied together and they're all critically
important. One is not more important than the other; all critically
important. It's little details but they all add up to a lot. The
other one that we had a podcast recently was Athena Severi from
China Magic. She's also associated with Titan Network. And she
talked about the China Magic trips that they do. Of course, again
right now no one is going to China, but it will resume again in
2020 we hope; I’m sorry 2021, where you're able to get on the plane
and go and meet with the vendors directly, get to know them, spend
some time with them, do the renegotiation that Dan talked about but
with China Magic, they're talking about exactly how to work with
your vendors and how to communicate with them. And then they have
Masterminded events every single night for everybody that's there.
They bring experts on the trip to talk about how to work with your
vendors and get the most out of the trip including the cultural
aspect but in terms of building that relationship. So you want to
do what you can to build the strongest relationship possible with
your vendor, get to know them, have them really understand what a
strong entrepreneur you are. As a buyer, this is after you buy the
business, of course, what you bring to the table and how important
terms are so that it increases your cash flow and you can spend
more money and buy more products. It's all tied together. You can't
do it right now, of course so, Mark, do you think any of this is
happening via Zoom and Skype and that a lot more of this is
happening that way?
Mark: Well absolutely. And
look I mean everybody has the same motivation and that is growth.
So I would say obviously you need to make that personal connection
and you want to make a personal connection with your vendors.
That's going to help you, in the long run, to know that you can
trust them and they can trust you. But you can also pitch growth. I
had a client who negotiated these types of terms and was able to
explain some of the growth that they had in mind; this expansion to
Europe that they were going to be rolling out or other growth
plans, new products that we know are going to be a hit and we want
to place them with you Mr. Vendor; the vendor that's been working
with us and in manufacturing our product. We want to place this
with you and here's what we need to be able to get there. We really
want to invest heavily in this so that we have a good supply going
on in this area so it plays in their benefit as well. And right now
Zoom or Google Hangouts or whatever you want to use for your video
service, it's there. People know it. So making those connection is
absolutely huge.
Joe: Yes, so that's tip number
four for instant equity and it's more about renegotiating cost of
goods sold and the terms on your payments that will increase your
cash flow. This business is growing rapidly, cash flow is tight and
squeezed and that cash flow will help you spend more money, which
ties back to tip number two, which gives you more cashback on your
credit cards. Number five is interesting. You touched on something
a little earlier, Mark, which was when I talked about renegotiating
COGS on number three, you said, go beyond that. Go look at your
vendors, look at the services that you're spending money on, the
bookkeeping, the accounting, that SaaS product times 10 that you
signed up for that you forgot about but they're kindly charging
your credit card every month. Trimming the fat is really instant
equity. We always ask what type of SaaS products are you using,
what are you subscribing to, what's the purpose, and how much is
the cost every month? And the reason for that is that a lot of it's
just wasted. And sellers will say to me, well, I don't use that can
I just make that an add back? I’m like yeah when you stop paying
for it and prove that you haven’t used it for a period of time.
Buyers can use math and logic here and look at the different
services that the seller signs up for. We all try new things,
right? I signed up for The Monthly Fool and I'm not cutting on The
Monthly Fool; this is more me. They offer great services. I paid
for it. It's an annual renewal. I'm going to forget about it.
Except that I put a reminder on my Google Calendar next April to
cancel it. I signed up for it two months ago. I get the e-mails. I
don't have time to look at them. I'm not going to be that investor
that's going to make decisions on my own. I have an advisor for
that. But if I'm not careful, I will add up 10 or 15 of those
things. I try every year, often without great success, to go
through my SaaS subscriptions on a personal level. We do it
occasionally, Mark, on a business level and just sort of trim that
fat a little bit. I think that's a good way to gain instant equity.
It's not a huge instant equity, but it does add up. Every little
bit of this adds up. Can you think of any other areas where you
trim some fat?
Mark: There's a lot of these little
areas and you kind of have to be creative in looking for them and
not discounting any expense category as being too small. So, for
example, if you're selling overseas, internationally, international
transfer rates and what are you getting there? What are your
merchant processing or transfer rates? And there are a lot of
services out there that are designed specifically to maximize that
for you and reduce some of those expenses. Secondly, understanding
Amazon's FBA storage fees and the various fees related to that or
processing, sometimes you can gain a lot of instant equity by using
an Amazon FBA pre-processing center and other 3PLs that will work
in that regard. You talked about canceling different SaaS
subscriptions. The other element I'd look at would be wasteful ad
spend. We all have it. And look, how many times are you going in
and checking on this? Now you might say, well I have an agency. I
guarantee that agency is not looking after the account as closely
as you might want them to do so. So I would say the advertising
spend and last I would say would be just taking a look at the fat
with SKUs and ASINs on the account. I have worked with several
buyers who have looked at larger ASIN companies with a larger
library of products and said the first thing we're going to do to
grow this business is get rid of 20% of the products because we
know that these products are making very, very marginal gains. If
they're taking up cash flow for adding new inventory, they're
taking up cash flow for advertising that isn't really paying out.
And we can put that effort into either new lower hanging fruit on
new products that will have better margins and really focus on
those instead. So number five is kind of this grab all and it’s
don't count any category on your P&L as being too small to
really look at and optimize. Keep in mind, when we're talking about
adding instant equity, we're talking about the value of your
business so we're talking about a multiple of this. You add $10,000
in earnings by removing $10,000 in expenses you're adding $30,000
to $40,000 of valuation to the company itself. And oftentimes with
these businesses that are doing one million, five million, 10
million, 20 million in revenue, these small changes, these small
percentages that we're shaving off here and there translate to
quite a bit on the bottom line for you. So kind of a catch-all.
That's a cop-out, right Joe? It's a cop-out on our part.
Joe: It's not. It's real dollars. The trimming
advertising spending we are really focusing in Mark, that's really,
really hard because you've got an expert telling you that you need
to spend all this money on long-tail keywords that over the course
of 36 months, you're going to make a profit on that keyword. It's
just going to take 36 months to make a profit and it's agonizing.
We had Rocky Kliburn on the podcast. A tough name like Rocky he
bought a jewelry business, right? Low cost, lightweight product,
shipping thousands of them every single month. The first thing
Rocky did was renegotiated the shipping rates. Actually, he changed
shipping companies. I think he switched from FedEx to USPS and got
the packaging for free and shipped it off. Essentially, he saved
about $2 a unit. It’s Rocky Kliburn he was on the Quiet Light
podcast at least a year ago. But Rocky ships, 2,000 or 3,000 units
a month times $2 we're talking about $75,000 a year in savings
instant equity. That is simple math, simple logic. I would focus on
all of those things first. The advertising thing is critically
important but we've talked about my story when I got mad at
American Express because they back in the last economic downturn; I
think we're going to have a pretty big one here coming up but my
average spending went up. I was spending 60,000 a month on PPC and
they said, oh, we're going to freeze your account to pay off your
balance because your average is higher than the last three months.
Are you kidding me? And so I went in and I slashed advertising
because I was mad at America Express. I'm like I’m going to show
them. I didn't do it very wisely. There are wise ways to do stuff
like that. So you remove the emotion. And that's why I always talk
about math and logic is because of emotion. Emotion gets us up in
the morning, as an entrepreneur, we get excited about our business
but with these little details, all these five ways to gain instant
equity as a buyer in your business really requires a lot of math
and logic. So focus on those and if you're a seller and you've
gotten all the way through this and listening don't let somebody
take advantage of you because you didn't pay attention to these
little details. They all weave together. They all are tiny. As Mark
talked about in tipping what is it? The details are for the greater
good; I forgot exactly what you said, but pay attention to all of
it at times. Don't get so ingrained in it that you get lost
completely on it for a thousand dollars a year. But if you can add
up those numbers and multiply it times three or four, you will find
more value in your business that you do deserve. And buyers, you're
going to get some instant equity that's going to make a big
difference in terms of buying your business.
Mark:
And you are like about all five of these tips show? None of them
require that you grow the revenues. None of these require that you
just magically grow the business. Because we all want to have a
better ROI with our acquisitions, that's the entire reason that we
do these things. It’s to get a return on our investment and
maximize that return on investment just like with a website and
conversion rate optimization services, which is a great way to grow
revenues if you have a traditional website, is really focus on CRO.
This is just optimizing the financial picture. That's really all it
is. And look for those of you on YouTube, if I were to have my
camera go around my office, what you would see is just a lot of
little clutter that's kind of built up over the years that I've
grown comfortable with. And I think with businesses, you have to do
the house cleaning. You said that we do it once in a while with
Quiet Light Brokerage in our SaaS subscriptions. There are areas to
optimize businesses all the time, but you kind of lose sight of
that when you own a business over time. You lose sight of it
because you focus on the big picture. Well, as somebody acquiring a
business, it's a great time to clean house, get rid of some of that
wasteful spend, optimize some of those terms, and without growing
revenues, at all, you can buy a business for 3x and get an
effective multiple lower than that by a significant margin at the
end of the day. So I love these tips. I love the fact that we're
focusing on this topic as far as how to grow a business without
changing the revenue picture at all.
Joe: It's a
great way to sum it up, folks. Obviously, Mark and I didn't have a
guest here, so we've responded to some of your requests that Mark
and I talk about some of these things in more detail ourselves. If
you have any topics that you want us to talk about, please shoot an
email to either of us;
mark@quietlightbrokerage.com,
joe@quietlightbrokerage.com
or if you have a guest or you think you can contribute to the
podcast, either as a seller, a buyer, or talking about some of your
experiences or somebody that could help other listeners or the
audience reach out to us. We're happy to help. Thanks for all the
feedback on the podcast and the good reviews.
Resources: Quiet Light Podcast@quietlightbrokerage.com
