#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