The Life Changing Benefits of Selling Your Business with Nate Lind

0:01Light that spark fire nation JLD here and welcome to entrepreneurs on fire brought to you by the HubSpot podcast network with great shows like Marketing Against the Grain. Today, we'll be breaking down the life-changing benefits of selling your business. To drop these value bombs, I brought Nate Lind into EO Fire Studios. Nate sells companies like Realtors Sell Homes. He is a business broker at Website Closers, the largest marketplace of$1 million to$150 million internet technology and e-commerce businesses. And today, Foundation, we'll talk about supply and demand, how much buyers will pay, how to find those buyers.

0:37We'll talk about how much cash you can expect at closing. We'll talk about the first thing buyers look for when it comes to our businesses and so much more. And a big thank you for sponsoring today's episode goes to Nate and our sponsors. Business Made Simple, hosted by Donald Miller, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Business Made Simple takes the mystery out of growing your business with episodes like how to get out of your day-to-day operations without crashing your business. Listen to Business Made Simple wherever you get your podcasts.

1:08Liquid IV is the category-winning hydration brand fueling your well-being. In just one stick, you get five essential vitamins and 2x faster hydration than water alone. Grab your Liquid IV in bulk nationwide at Costco, or you can get 20 % off when you go to liquidiv.com and use code FIRE at checkout. Nate, say what's up to FIRE Nation and share something that you believe about becoming successful that most people disagree with. Hey, FIRE listeners. Thanks for having me. I believe you should sell your business when you don't want to. When it's so successful, when things are effortless, and when you don't have any idea that you even want to sell it, that's the time to do it.

1:52Man, I love that advice. And if people are taking your advice in crypto, NFTs, and really pretty much any regional bank stock, then they'd be loving this advice right here. Because Fire Nation, sometimes when things are going good, you just think they're going to be going good forever. And everything is a cycle for sure. Because we're talking about the life changing benefits of selling your business. Supply and demand runs everything, Nate. So I want to get specific here. What exactly is market demand? Well, in our case, it's exactly what you just said. Our inventory are cash flowing and mature businesses.

2:31Now, these are internet technology, digital businesses, or one ring out from them, the companies that service those. And if they're a couple years old, and they are cash flow positive, that's my inventory and that's a seller. And then on the buy side right now, I've got tens of thousands of buyers looking for those businesses. It is still, it has been for years and it is still a seller's market right now. So for those of your audience and Fire Nation that have a cashflow positive and a mature business, it's a seller's market if you ever want to take it to list. Well, I like hearing that being a very cashflow positive business.

3:10In fact, Nate, I know this is something you can't expect from basically anybody you work with, but we publish these monthly income reports and we're a very, very small team and we're a different kind of business than you usually deal with. But we are typically hitting between 80 to 90 percent net profit margins off of our gross revenue, which is just insane in a lot of ways. And believe me, it's insane because we are choosing to stay small, to stay agile, to stay lean. We could grow our revenue numbers for sure and make more money for sure. But we've just kind of found that space that we love right now.

3:48So, I mean, for you, Fire Nation, it's like, what are you trying to do? Grow a business to sell? Grow a lifestyle business? And that's things we'll be talking about here today. Because I think one thing, Nate, that people want to find out is how much will buyers actually pay for a business? They will pay only as much as they feel the business is worth in terms of risk. So they will assess the business based on a number of factors, the biggest of which is just like marketing. We're trying to answer the question, what's in it for me in the buyer's mind? And what's in it for them is the highest return on their investment with the least amount of risk.

4:24Generally speaking, in the lower middle market, which is what I serve, your business would fall into that. Probably most of your entrepreneurs would as well. So this is lower middle market is under$100 million is the final enterprise value and the exit price. They are going to trade based on the trailing 12 months, so the last year's worth of profit, times a multiple. and that multiple could be anywhere between three times that trailing 12 months number and could be upwards of six times that trailing 12 months number. That's pretty much generally what buyers are going to be looking for and what they're gonna be willing to pay.

5:02And there's a variety of factors. It gets a little bit more complicated, but at the end of the episode, we'll make sure that your listeners have access to my multiple evaluation spreadsheet and some of my tools so they can figure that out for themselves or they can reach out and just ask me. Oh, well, I'll be getting my hands on that as well. Well, and one thing I want you to remember, Fire Nation, this is just in life in general, but specifically what we're talking about here. Everybody's favorite radio station is WIIFM. What's in it for me? So believe me, nobody's going to intentionally do you any favors out of the goodness of their heart.

5:35They're going to say, what's in it for me? And hey, if that matches up that is good for both of you, then you might figure things out. But just remember that at the end of the day. And what if we are looking for that demand? How do we find out how many buyers there actually are out there in this crazy, fun, scary world? It's not too different than if you were to list your house with a realtor. You need to find a marketplace to list your business on so that you can reach the broadest network of buyers. And there's a lot of marketplaces out there. In the$1 million to$100 million range here at Website Closers, that's a boutique focus that we specialize in.

6:12If you've got a business smaller than that, you maybe better serve going to BizBuySell or Flippa or one of the smaller marketplaces. So you have to get your business listed. You've got to spend time showing it, quote unquote, showing it to buyers, just like a piece of real estate. You've got to share with them the financials of the business. So you have to have a professionally prepared balance sheet and income statements that you can hopefully just export out of QuickBooks. And when you've got that, you start showing the business to buyers and we get anywhere between 50 and my record is 274 buyers looking at the same asset, the same one business for sale at a time.

6:55So it's a massive demand. My inbox gets flooded every time. All the ones I've had this year have been just inundated. I've been inundated with buyers looking for a chance to talk to the seller. They want to get to know the owner and try to make a deal happen. Hey, we got to put our money somewhere. And it's not in regional banks these days, Fire Nation. So how can we find out where would-be buyers and if they'd be actually interested in our company? How can we find out if actual buyers, like people that have the money to do it, would be interested in my company? And by my company, I mean the listeners' companies.

7:34This is super simple. If your business has been around for at least two years and it's making a quarter of a million dollars in cash flow, my marketplace, Website Closers, would love to have you. That's it. You just need to be making a quarter million dollars a year and be two years old. And we will get you listed and bring tons of buyers. If you're smaller than that, that's where things could be maybe not quite as interesting or maybe super interesting. Blogs and just smaller websites sell all the time. usually it's on a smaller marketplace. So that's where you need to go to Flippa or you need to go to BizBuySell or somewhere like that to list it.

8:13Again, it's going to be based on profit. From what I understand, even those smaller marketplaces, they need to be making some money. The smaller blogs, you can get away with just having some revenue. You may not need a whole lot of profit. But if you want to start to get into the leagues where your sale is going to mean a potential big windfall for yourself, get yourself up to a quarter million dollars a year in profit and two years old. And you will be, there will be buyers interested. It's not which buyer, it's which one do you want to sell your business to or how many buyers are out there is going to be plenty for you.

8:49Fire Nation, this is exciting information. I hope you're kind of salivating right now thinking how can I get to those numbers if I'm not already there? And if I'm already there, how can I get to website closers to start this process. Because hey, just like not everybody ends up selling their house that lists their house, you can find out what's there for you and then say, you know what? It's not the right thing, it's not the right time, but at least I know what to expect maybe a year, two, five, 10 years down the road when I'm in a little better situation or I'm just in a different place in life.

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11:16That's elitesingles.com slash fire. Health and wellness is one of my biggest priorities. I love being outside, going for long walks and jumping on the rower in my gym. And because I live in a hot climate, hydration is key. Lucky for me, there's Liquid IV, the category-winning hydration brand fueling your well-being. In just one stick, you get five essential vitamins and 2x faster hydration than water alone. Liquid IV is easy to pack with you on the go, and their flavors are super tasty. My favorite is lemon-lime. But don't worry, they've got 12 delicious, refreshing flavors to keep your hydration routine exciting.

11:52Liquid IV's five essential vitamins, including B3, B5, B6, B12, and vitamin C. Make it a great travel partner. Or if you're feeling run down or you know you're in for a tough workout, then Liquid IV has your hydration needs covered. Grab your Liquid IV in bulk nationwide at Costco or you can get 20 % off when you go to liquidiv.com and use code FIRE at checkout. That's 20 % off anything you order when you shop Better Hydration today using promo code FIRE at liquidiv.com. Nate, we're back. I want to talk about cash. We're talking dollar-dollar bills. How much cash could one expect at closing? My average is about 70 % of the enterprise value.

12:35That's the total amount of the transaction in cash at closing. So it's usually a wire, boom, day of closing. You're at 70%. So if you've got a million-dollar transaction,$700 ,000 of that you're going to see in your bank account the day after closing. That's my average. I've done almost$100 million worth of transactions these last couple of years. So that's based on smaller, larger, and medium-sized businesses from$1 million. The largest transaction I've done the last year is closer to$30 million. So it's pretty much around the gamut. 70 % is what you'll see cash at closing. I think a lot of people have this thing in mind where if they sell their business, like they're going to get like maybe a paltry like 10 to 20 percent up front and then there's gonna be like this payout over time and then inevitably that business that bought it runs the business into the ground because you know no longer is that initial entrepreneur running the business and it's mishandled and then they end up getting like uh essentially none of their money and then they you know don't actually get out what they were hoping to and and by the way in a lot of these cases and i've talked and interviewed to a lot of these entrepreneurs they've gone back and bought their own company back at pennies on the dollar and then tried to revive it.

13:45And a lot of times been successful of it and sometimes not because it's already like a dead horse. What do you have to say about that? That's a great myth. And I'm sure that's going on out there, but for my clients, that's not the case. I'm actually incentivized based on my commission to make sure my client gets cash at closing. And I like to do a good job for myself. I like to do a great job for my client. So it's in my best interest. It's in my client's best interest to make sure they've got a large amount of cash at closing. And I see that happen time and time again. I regularly ban or blacklist buyers who are trying to do 100 % seller finance or even the majority of seller finance.

14:24I just have found that those types of buyers are a waste of time and it doesn't end up been being a transaction that's in the goals of my client and harmonious for a long-term transaction. So I see that and hear about that, but that doesn't happen on my marketplace and it sure doesn't happen with my clients. And I'm glad you blacklist them because a lot of times they end up bidding up the price and getting out real buyers who actually have real money to give that 70 plus percent at closing. So when it comes to the money actually being transferred, let's talk about how buyers typically pay for a business.

14:58Yeah. So it's the smaller transactions. If it's under$5 million, we do everything we can to prepare the transaction for a small business administration loan, the 7A loan program. It's like mortgages for houses. It is to business acquisitions what mortgages are to the housing market. It gives us the opportunity to go find a buyer who's well qualified to put down 10 or 20 % on the business, get a loan for 80 % of the business and pay it off over 10 years, just like a mortgage. And that's what happens for a lot of the transactions under$5 million. Over$5 million, we usually have to work with a capital markets partner.

15:38These older businesses, typically, they're bigger businesses. And then the buyer is able to use a non-traditional financing option in the capital markets to get a combination of debt. And sometimes they have to come out of pocket of the deal with some equity to lure a private equity fund to help finance the deal. Almost all of these deals have some kind of financing. And if you're talking to somebody, you're trying to do this on your own, or you're working with a broker who has no idea how to help the buy side get their financing, it's not going to close and you just wasted a ton of time. So if our listeners are listening and potentially salivating because they're thinking about, hey, how can I get my business to a place where we can start talking to website closers, where we can start having great conversations?

16:24And maybe there's another part of the listeners who are like, I'm already there, but I want to continue to grow and to build and even look more appealing when the time comes. Let's talk about the very first thing that buyers look for when it comes to our businesses. The first thing they're going to ask me for is they're going to want to see something like a business summary, which we prepare. We create what we call an offering memorandum, and it includes a bunch of information, some questions and answers, Q &A about the business that we've prepared ahead of time that my client has answered. And then the buyer is also going to want to see financials for as far back as you can go, but at least the last two years.

17:06And it's pretty simple. It's an income statement and it's balance sheets. It's by month for as many months back as we can go. And that's all the preparatory work that I do with my client, free of charge, by the way. We only get paid when the deal actually closes on the back end, just like a realtor. So we're doing all this work knowing that we're going to get everyone through the finish line at the end and get the deal closed. But the buyer, first thing they want to see is the financials. Is there anything that Fire Nation should be doing before they reach out to a company like yours to start this process?

17:38If you don't have financials, get them. Find a CPA, find a bookkeeper, hire them off of Fiverr. My bookkeeper is off of Fiverr. It's not that complicated. Get all of your income itemized and categorized in QuickBooks. Get all your expenses into QuickBooks. Make sure that whatever it is you're thinking about selling, it has its own bank account, preferably its own LLC or some kind of business entity. If you've got a lot of things going on, you've got a bunch of businesses that you're juggling and they're all going into one bank account, immediately get yourself multiple bank accounts for each potential asset that might actually change hands in the future.

18:18That's going to save us a ton of time because it's so much harder to pull that stuff apart than it is to just add it all together. Fire Nation, what are you waiting for? If this is something that you're listening to and you're like, hey, let's just start the process. Let's just see what happens. Nate, what is your direct call to action for these individuals? NateLind.com. And if you go to NateLind.com forward slash gift, I'll give you my book called Maximum Exit. It's the definitive guide for internet and technology focused business founders. I talk about what your multiple, who's buying, how much they're paying.

18:48And I answer 12 other questions that you need to know to get top dollar for your business. Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with NL and JLD D today. So keep up that heat for links to everything we talked about. Visit eofire.com type Nate N A T E in the search bar. The show notes page will pop right up. Nate Linde, L I N D.com. Nate Linde.com slash gift. Those are your two calls to action. Nate, thank you for sharing your truth, your knowledge, your value with fire nation today for that. We salute your brother and we will catch you on the flip side.

19:25Boom. Hey, fire nation, a huge thank you to our sponsors and Nate for sponsoring today's episode and Fire Nation. Over the last decade, I've interviewed more than 3 ,000 of the world's most successful entrepreneurs, and I've created a revolutionary 17-step roadmap to your financial freedom and fulfillment. I put it all into my first traditionally published book, The Common Path to Uncommon Success, which is personally endorsed by Seth Godin and Gary Vaynerchuk. The Common Path to Uncommon Success is the step-by-step guidance that you need to achieve the lifestyle of your dreams. Visit Uncommon Success Book to order your coffee today and I'll catch you there or on the flip side.

20:02Business Made Simple, hosted by Donald Miller, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Business Made Simple takes the mystery out of growing your business with episodes like how to get out of your day-to-day operations without crashing your business. Listen to Business Made Simple wherever you get your podcasts. Liquid IV is the category-winning hydration brand fueling your well-being. In just one stick, You get five essential vitamins and 2x faster hydration than water alone. Grab your Liquid IV in bulk nationwide at Costco, or you can get 20 % off when you go to liquidiv.com and use code FIRE at checkout.