I sold 8 businesses by age 32 [here’s how]

Summary

In this video, Alex Ramsey, an experienced entrepreneur who has sold eight businesses, shares his expertise on selling a business. He discusses the prerequisites for a business to be sellable, the importance of having a defined sales process, and avoiding common pitfalls such as customer concentration and key man risk. Alex provides insights on finding and negotiating with bankers or brokers, the selling process, and the significance of terms, price, and deal structures in achieving a successful exit strategy. His firsthand account of closing a 50 million dollar deal offers a unique perspective on the intricate process of selling a business to institutional buyers.

Takeaways

• 😀 Alex Ramsey, the speaker, has sold eight businesses and owns Acquisition.com, a portfolio of companies with over 100 million dollars in annual revenue.
• 💼 The video aims to guide business owners on how to sell their businesses, especially targeting sales to institutional buyers rather than individual private deals.
• 🏢 Pre-requisites for selling a business include having a scalable and valuable business model, defined sales processes, and a diversified customer base to mitigate risk.
• 📈 Business size, growth, and total addressable market (TAM) are critical factors that affect the enterprise value and attractiveness to institutional buyers.
• 🤝 Selling a business involves various types of buyers, including financial buyers like private equity and family offices, strategic buyers, friends, competitors, customers, and partners.
• 🔍 Due diligence is a thorough process where the buyer verifies the company's financials, legal standing, customer and employee relationships, and overall business operations.
• 📑 Documentation is key throughout the selling process, including a one-page summary, a teaser, a Confidential Information Memorandum (CIM), and a data room for potential buyers.
• 💰 The negotiation process is complex and includes determining the price, payment terms, earn-outs, and the structure of the deal, which can significantly affect the seller's net proceeds.
• 📝 Legal agreements involve detailed terms and conditions, including indemnities, non-competes, and definitions of terms that can impact the seller's future business activities.
• ⏳ The entire process from preparation to closing a deal can take 12 to 18 months, with various stages including preparation, marketing, due diligence, and final negotiations.
• 🎯 The importance of having a clear understanding of one's own business, being prepared for intense negotiations, and knowing when to walk away from the table to secure the best deal.

Q & A

What is the primary topic of the video?

The primary topic of the video is about the process of selling a business, including the steps, considerations, and strategies involved in a successful sale.

Who is the speaker in the video?

The speaker in the video is Alex Ramsey, who has experience selling eight businesses and is the owner of Acquisition.com.

What is the significance of having prerequisites before selling a business?

Prerequisites are essential as they establish the value and attractiveness of a business to potential buyers. They include factors like business size, customer concentration, defined sales processes, and growth potential.

Why is customer concentration a concern when selling a business?

Customer concentration is a concern because if a business relies on too few customers, the risk is high. If a few key customers leave, it can significantly impact the business's revenue, making it less attractive to buyers.

What is the role of a banker or broker in the business selling process?

A banker or broker helps facilitate the sale by packaging the business, reaching out to potential buyers, and guiding the seller through the negotiation process. They are especially important for institutional-sized sales.

Why is it important to have a defined sales process when selling a business?

A defined sales process is important because it shows potential buyers that the business has a reliable and repeatable way of acquiring new customers, which is crucial for the business's future growth and stability.

How does the speaker suggest finding a banker or broker for selling a business?

The speaker suggests networking for introductions to relevant bankers who have experience in the seller's market and business size. This involves reaching out to one's network, including other entrepreneurs and banks, to find the right contacts.

What is the significance of having a growth story when selling a business?

A growth story is significant because it helps potential buyers envision the future potential of the business. It shows how the business can expand and become more valuable over time, which can lead to a higher sale price.

What are some of the deal killers mentioned in the script?

Some deal killers mentioned include being too small, having customer concentration, lacking a defined sales process, not targeting enough potential buyers, getting the timing wrong, overvaluing the business, not growing or having a small total addressable market (TAM), and having key man risk.

What is the importance of negotiating terms when selling a business?

Negotiating terms is important because it can significantly affect the seller's net proceeds from the sale. Terms such as payment structures, earn-outs, and non-compete clauses can impact the final amount the seller receives and their future business activities.

What is the role of a Confidential Information Memorandum (CIM) in the business selling process?

A Confidential Information Memorandum (CIM) is a detailed document that provides in-depth information about the business, including financials, growth trajectory, and market analysis. It is used to market the business to potential buyers and is a crucial part of the selling process.

How does the speaker describe the due diligence process in the business selling process?

The due diligence process involves the buyer thoroughly investigating the business's financials, legal standing, customer and employee relationships, and overall operations to ensure the business is as represented and to assess any risks. It can take 60 to 90 days and is a critical step before finalizing the sale.

What are some key negotiation points in the final stages of selling a business?

Key negotiation points include the price and terms of the sale, the amount of working capital to be left in the business, the amount of any escrow to hold funds as security, and the specifics of any non-compete clauses to limit future business activities of the seller.

Why is it important for a seller to have a strong management team during the business selling process?

A strong management team is important because the business needs to continue operating and growing normally during the lengthy selling process. This demonstrates to potential buyers that the business is stable and can succeed without the current owner's day-to-day involvement.

What is the significance of the video at the end of the script?

The video at the end of the script shows the actual moment of closing a 50 million dollar deal. It serves to illustrate the real-world process and atmosphere of finalizing a significant business sale, providing a tangible example of the culmination of the selling process discussed in the script.