$100M Founder Explains How to Build a Valuable Company

Summary

The speaker, having sold nine companies and one for $46.2 million, shares insights on building a business for sale. He emphasizes the importance of distinguishing between the 'goose' (the core, sustainable, and valuable business) and the 'golden eggs' (recurring revenue streams). He advises against selling the goose and instead suggests scaling the business to create multiple 'eggs' for a larger exit strategy. The speaker also discusses various business models, including event spaces, Amazon stores, and accounting firms, and how to make them more attractive to potential buyers or investors.

Takeaways

• 📚 The speaker emphasizes the importance of understanding the difference between the 'goose' and the 'eggs' in a business, where the goose represents the sustainable, valuable asset and the eggs represent the products or services that generate revenue.
• 💡 Selling the 'goose' is often not advisable as it involves giving up the ongoing revenue stream; instead, the focus should be on selling the 'eggs' or the business's offerings to maintain a continuous income.
• 🎯 The speaker shares personal experience, having built and sold nine companies, to highlight the lessons learned in business and exit strategies.
• 📈 The concept of a 'roll-up' is introduced, where a business aggregates similar smaller businesses to increase value and create a more attractive exit opportunity.
• 🔑 Key factors for a sellable business include it being faceless (not dependent on a single key person), recurring, and having a clear market and demand.
• 🚀 The speaker suggests that businesses should aim to be bigger than the founder's personal brand to reduce keyman risk and increase the business's value.
• 💼 The potential for raising money through a business like 'acquisition.com' is mentioned, allowing for liquidity events without completely exiting the business.
• 🔍 The importance of market research is underlined, by looking at mergers and acquisitions activity related to the type of business one operates to understand what buyers value.
• 🛠️ The script advises on restructuring a business to align with what investors prefer, such as creating a system that can be replicated and sold as a package.
• 🏆 The speaker highlights the power of collaboration over competition, especially in fragmented industries, to create more value and opportunities for all parties involved.
• 💰 The potential for creating a roll-up or aggregation of businesses is presented as a high-value exit strategy, where the collective value is greater than the sum of its parts.

Q & A

What is the main message of the video about building a business for sale?

The main message is to focus on building a business that can generate recurring value ('eggs') rather than selling the core business ('goose') outright, in order to create a sustainable and sellable asset.

What was the mistake the event business owner made according to the speaker?

The event business owner was trying to sell the 'goose' (the core business) instead of selling the 'eggs' (the potential of his business model and system), which could have been more valuable in the long run.

What is the story of the goose and the golden eggs meant to illustrate?

The story illustrates the importance of not sacrificing long-term value for short-term gain, emphasizing the value of a business that can consistently produce ('lay golden eggs') over time.

Why did the speaker advise the Amazon store owner to consider a different approach to selling his business?

The speaker advised the Amazon store owner to consider bundling his students or clients into a sellable asset because the individual Amazon stores are straightforward and faceless, making them more attractive to potential buyers.

What is the significance of the 'goose' being incredibly valuable but not sellable in the context of the script?

The 'goose' represents the core, often non-transferable value of a business. It signifies that while the business may be valuable, it may not be sellable due to factors like being too dependent on the owner or not having a recurring revenue model.

What does the speaker suggest for businesses that are dependent on a single person or 'keyman'?

The speaker suggests that businesses dependent on a single person should aim to reduce this dependency by creating systems, processes, and recurring revenue models that can operate independently of the individual.

How does the speaker describe the process of identifying the 'goose' and 'eggs' in one's business?

The speaker describes it as a high-leverage activity where one must determine which components of the business are creating value and which are the valuable assets that can be sold or leveraged for growth.

What is the role of the 'eggs' in the business growth strategy discussed in the video?

The 'eggs' represent the potential for growth and expansion. They are the assets or business models that can be replicated or sold to generate revenue and increase the overall value of the business.

Why did the speaker sell Gym Launch differently from other businesses?

Gym Launch was sold differently because it had removed the keyman risk, had recurring revenue, and had grown to be larger than the speaker himself, making it a more attractive and sellable business.

What is the importance of understanding the market for your type of business when considering a sale?

Understanding the market is crucial because it helps identify whether there is demand for the type of business you are selling, the typical sale price, and what buyers are looking for, allowing you to align your business model with these preferences.

How can a business owner prepare their business for sale by focusing on the 'eggs'?

A business owner can prepare their business for sale by creating systems, processes, and a model that can be replicated or scaled. This could involve setting up a franchise-like system without the legalities of franchising, ensuring the business is faceless and has high revenue retention.

What is the speaker's advice for a media company looking to become sellable?

The speaker advises the media company to focus on either creating a product that can be promoted through their talent or selling advertising space. The key is to leverage their Impressions and stable of talent to create a product or service that can be sold repeatedly.

How does the speaker view competition in the business world?

The speaker views competition as less important than collaboration. He suggests that businesses often compete against broader market forces rather than each other and that collaboration can lead to greater success for all parties involved.

What is the concept of a 'rollup' in the context of selling a business?

A 'rollup' refers to the strategy of aggregating multiple similar businesses into a larger entity to increase its value and attractiveness to buyers. This can result in a higher selling price due to economies of scale and the potential for synergies.

Why is it beneficial to sell a portion of a business rather than the entire business?

Selling a portion of a business allows the owner to maintain control and continue benefiting from the business's growth while also providing liquidity and reducing risk. It also allows for the injection of capital to fund further growth or acquisitions.

What is the significance of the dental association example in the video?

The dental association example illustrates the power of collaboration over competition. By banding together to negotiate better rates on consumable products, the association members saved more than the cost of their membership, creating a win-win situation.