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#64 Joe Valley – How to Execute the Ultimate Exit Strategy

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Joe Valley is the best-selling author of The EXITpreneur’s Playbook and Co-Founder of Quiet Light Brokerage – one of the leading online-focused M&A advisory firms in the world. 

After facilitating nearly half a billion dollars in exits, he wrote down his 5-step process for how to execute the ultimate exit strategy with the highest possible value for the seller, and he published it in detail in The EXITpreneur’s Playbook.

In this podcast episode, Kris and Joe talk about where it all began for Joe to now having written a best-selling book that helps thousands of entrepreneurs get max value out of selling their businesses.

They dive into the four pillars of value: risk, growth, transferability, and documentation, how to know when it’s the right time to sell your business, and the important role an entrepreneur plays in the valuation of their business, to name but a few key topics.

Stick around until the end to get a FREE PDF version of The EXITpreneur’s Playbook.

 

This is what you can expect to hear in episode #64:

  • 2:53 – Joe’s background, starting in 1997 with the first website he built for $50
  • 5:40 – Joe had over 8k one-on-one conversations with entrepreneurs, which led to him writing all the lessons he had learned in a book
  • 6:13 – The contents of The EXITpreneur’s Playbook
  • 7:30 – What Kris has learned from her own entrepreneurial journey; from career waitress to Founder and CEO of a digital marketing agency
  • 7:57 – All entrepreneurs should be thinking about their exit strategy from the beginning
  • 8:50 – Being EBIT focused vs. being ROAS focused in terms of your overall KPIs for your business
  • 9:28 – Joe’s first business goal was to make $50k and he ended up with 10x more
  • 9:47 – Joe’s first missed opportunity where he ended up pivoting to product marketing and built a brand instead of selling for millions
  • 10:13 – For most entrepreneurs, their business is their most valuable asset yet they don’t understand what it’s worth
  • 10:43 – Start by setting proper goals, then reverse engineer a path to reach the goal you’ve set
  • 11:35 – Understanding the seller’s discretionary earnings and how that impacts a business’s valuation
  • 12:17 – Is it possible for an eCommerce founder to set a benchmark in the beginning and then use that to gauge how close they are to reaching their goal?
  • 12:49 – There are too many variables that go into assigning value to a business, so basing your exit strategy and ultimate goals on initial benchmarks isn’t ideal
  • 13:36 – Why you need to do an add-back for cashback monies, in reference to ad spend
  • 14:37 – You need to understand how valuations are done instead of relying on your own benchmarks
  • 14:50 – An exploration of the four pillars of value: risk, growth, transferability & documentation 
  • 15:40 – The four pillars are based on what buyers find important
  • 16:20 – Even though documentation is the fourth pillar, it’s something you need to think about right from the beginning
  • 16:35 – Why you should hire a bookkeeper early-on
  • 17:00 – There are six levels under each of the pillars
  • 17:09 – The hero skew is an important risk factor you need to look at
  • 18:13 – It’s a risk if your business is too dependent on you as the owner or founder
  • 19:08 – The most important thing for business owners to think about in terms of the four pillars, is not to ignore them just because they’re not mathematical pillars
  • 19:33 – Transferability is simple: if the business assets that drive revenue are not transferable, you do not have a sellable business
  • 20:56 – The gist of the growth pillar is to sell the business while it’s growing, not declining
  • 21:58 – The average timeframe for an exit deal to close is roughly 89 days, from listing a business to money in your pocket
  • 22:25 – Why it’s important to think about selling your business for a long time before jumping in head first
  • 22:56 – Read the book before selling to an aggregator, or at least make sure you’ve spoken to other potential buyers too
  • 24:50 – How someone who knew nothing about eCommerce bought an eCommerce business and scaled it 10x, selling it for $15MM 30 months later
  • 27:12 – Finding the right people is a large part of a business’s success
  • 30:20 – How Sugatan creates viral social media ads
  • 33:50 – Joe’s advice about how to keep revenue up when running ads is your primary source of revenue
  • 35:38 – If you’re a business owner who is fulfilling most of the roles inside the business yourself, those skills are harder to transfer and can be a warning sign for a buyer
  • 37:17 – Don’t think you can outsmart a buyer by cutting costs to increase your discretionary earnings
  • 43:08 – The bigger the buyer pool, the better the valuation your business could get
  • 44:50 – It’s okay to adjust your goal as time goes by
  • 46:40 – Why Joe’s agency, as representatives of sellers, like it when buyers use companies like Centurica to do a deep dive into their due diligence
  • 47:20 – Why advisors want to see untouched monthly PNLs 
  • 48:50 – You, as the owner/seller, are really a fifth value pillar
  • 50:32 – The common traits Joe has recognized in entrepreneurs who have built great businesses
  • 55:05 – Why your online presence and the message you send out about your business is super important
  • 59:47 – It’s really about trust between the seller and buyer at the end of the day
  • 1:01:04 – Understanding your own level of incompetence can lead to finding the right time to sell
  • 1:02:10 – How to recognize the signals that it’s time to sell your business
  • 1:04:00 – Just because you can do something, or learn something new, or expand your business, doesn’t mean you should
  • 1:06:35 – Go to www.exitpreneur.io/sugatan to download a FREE PDF version of the book

 

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