AI is Awesome - My interaction with Notebook LM

Excited to share my recent interaction with Notebook LM Podcast about my book, "You Don’t Know What You Don’t Know." This dives into the stories and lessons behind the writing, the power of embracing uncertainty, and why asking the right questions can lead to game-changing breakthroughs.

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Transcript

00:00

Hey everyone, welcome back for another deep dive. Always excited to be back. Today, we're going to be tackling a topic that might seem kind of, I don't know, intimidating, oh yeah, but trust me, it's fascinating. We're talking about how to get the most out of selling a business, and even if you're not like, you know, packing up shop tomorrow, right? The insights we're going to cover today can help you build a much stronger business right now, absolutely. Kind of think of it like a sneak peek behind the curtain. Yeah, at what really makes a business valuable, not just to someone else, but period. What I find fascinating is that so many of the principles that make a business attractive to a buyer are the same principles that drive long term success, exactly and to guide us, we've got this book you don't know what you don't know. Great title, a step by step guide for getting the most from the sale of your business. It's great because it uses these contrasting stories of Mark and Bill. Oh, I love that kind of approach. It makes it relatable, right? Two business owners, but totally different ways of approaching how they sold their businesses. Mark is very methodical, strategic. Assembles a team, you know, really assesses the business, negotiates from strength. Bill, on the other hand, tries to go it alone. Oh no, I'm already sensing trouble. Yeah, he makes some costly mistakes along the way. You know, it's funny. It's like watching two people try to climb the same mountain. Oh, I like that. Yeah. One's got the map, the right gear, experienced guide, right? The other one's just winging it, hoping for the best. And as you can imagine it,

01:37

it doesn't go quite as well. Spoiler alert, things go south for that guy, you do. And one of the things the book stresses right off the bat is this idea of being ready to sell, okay? And that's not just about like your financials. Is this whole mindset thing, you know? Okay, so let's unpack that. What does it actually mean to be ready to sell? Well, imagine this, you sell your business, and it's only then that you realize, Wait, what do I do now? Oh, like, I've got all this time, money, maybe, but no plan. It's like you finally reach the top of that mountain, but have zero clue which way to go next. Okay, yeah, starting to see how this goes way beyond just spreadsheets. The book lays out these three crucial questions you gotta be able to answer honestly before you even think about selling. Okay, hit me with question number one. Question number one is, what are you gonna do after the sale? I can see how that would be overlooked so many entrepreneurs their business as their life right to suddenly not have that. I could see it leading to regret or even just like a sense of loss. Absolutely. So think, what are you passionate about? Outside the business, you want to travel more time with family, start something completely new. W Okay, so having a vision for that post business life is key. What's the second question? The second one is, why are you selling? Now, this one might seem obvious, but the book makes a point about your reason needing to be positive. You know compelling. Okay, buyers can sniff out desperation a mile away and they'll use E that in the negotiation. So saying things like, I'm desperate or this business is tanking, that's a big no, no, huge red flag. It's like going to a car dealership and being like, I gotta load this clunker today, giving anything you got you're begging to get low balled. Okay, yeah, point taken.

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So what are some good reasons to sell that would make a buyer more interested? Think about things like retirement. Maybe you're ready to pursue a new opportunity, or maybe the business has simply outgrown your ability to manage it effectively. So instead of saying I'm burned out, you'd say something like, I'm ready for a new challenge. And I know this business can reach even greater heights with fresh leadership. There you go. You're not just selling a business. You're selling a future right now. The third question the book mentions is, are you prepared for this to be personal? This one's intriguing. What's that about? Well, selling a business can get emotional, you know? Oh, absolutely. For the seller, it's often their like baby, years of work, sacrifice their identity, and it's their blood, sweat and tears, for sure, exactly. But for the buyer, it's often seen as a purely financial thing. They're looking at numbers, potential ROI. They don't have that same emotional connection, right? And this difference can lead to misunderstandings, hurt feelings. Oh, yeah, stalled negotiations, even the book really emphasizes separating emotion from logic. I bet this is where winging bill really struggled. Oh, big time he took every low ball offer personally. Got offended. It almost derailed the whole thing. So having that experienced team, they can help you keep a cool head precisely, act as a buffer between you and the buyer, handle the tough stuff makes sense. So being ready isn't just about the numbers. It's the plan for your future, the reason why you're selling nd, the mental game of it all, exactly, and it's about having the right team in play.

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Nice. Okay, so let's talk about that team. Who do you really need when you're selling a business? Well, just like I don't know, you wouldn't climb Mount Everest without a guide, right, right? You need experts to navigate the terrain. This is no different. You need specialists. So it's not just any lawyer, any accountant, any broker will do definitely not. You need people who specialize in business sales. They understand M and A taxes, how to deal with these savvy buyers. So it's like finding a specialist doctor, right? You wouldn't go to a podiatrist for heart problems, exactly. And that upfront cost, it's often offset by the benefits they bring. They can prevent those costly mistakes, get you a better price, yeah, make it all much smoother, makes total sense. So finding that team is crucial. But what about the business itself? What makes a business ready to sell? Well, just like you wouldn't sell a house without sprucing it up first, right? Gotta make it presentable. You gotta make sure the business is in tip top shape. Okay, so Paint me a Picture. What's a ready to sell business actually look like? First thing current, complete and accurate financials. Buyers want to see that the business is well managed. Yeah, and the numbers make sense, right? No one's just gonna hand over a pile of cash without knowing what they're getting exactly, and it has to be all three current, complete, accurate, outdated financials, incomplete records. Huge red flag makes it look like you're not on top of things. Okay? Good financials are a must. What else? Good business records. We're talking contracts, employee documents, intellectual property, permits and licenses, everything related to the business. So it's about being organized, having your ducks in a row, precisely. And it's not just about having them. It's about organization accessibility. Think of it like a digital data vault, where you keep it all secure and ready to share, smart so good financials, organized records. What else is on that checklist? Third thing is that your business's performance has to support the price you're asking in the current market. Buyers want a return on their investment, so they need to see profitability, solid track record and good potential for growth. No one's paying top dollar for a struggling business, exactly. So think about your asking price and make sure your business performance is in line with it. If there are areas that need work, now is the time to fix them, makes sense. So we've covered being ready, both personally, A and D from the business side, we talked about getting that dream team making sure the business is in top shape. Right. Now, I'm curious about the actual selling process. What are the steps to go from like for sale to sold? The book gives us a nice roadmap. It breaks the process down into six distinct steps. Okay, walk me through them. Step one. Step one is team building. We've already talked about the importance of having that team of experts. They're going to be your guides, your broker, lawyer, accountant, they're with you every step of the way. Exactly remember, Mark, he assembled that a team, and it paid off big time. Bill going solo, well, roadblocks and mistakes all over the place makes a big difference that team. Okay? Step two. Step two is assessment. Now that you've got the team, it's time for a deep dive into your business, not just the financials, but everything. This is where it gets juicy, right? Absolutely, this is about those eight dimensions of value that buyers consider. It includes growth, potential, recurring revenue, but also things like how reliant your business is on why you the owner? Hold on. So if I'm the only one who knows how to I don't know make the secret sauce. Or if a couple clients make up most of my revenue, that's a B, A, D thing. It can be the book. Calls it the Switzerland structure. Okay? You want a business that operates independently, like a well oiled machine. Buyers don't want to feel like they're buying a job interesting. So much more than just numbers, it is. So we've got team building assessment. Step three is representations. Think of it like crafting the perfect dating profile for your business. Oh, I like that. So we're talking marketing materials, brochures, presentations, maybe a website, exactly. You wanna highlight the best stuff, strengths, growth potential. You're making a first impression. And this is where those eight dimensions really shine. Absolutely paint a picture of a valuable, sustainable, attractive business. Okay, so we've assessed the business. Got those materials. Then it's time to find the buyers. You got it. Step four is marketing. Get the word out. More than just a for sale sign, though, much more. Remember those different buyer types, lifestyle, economic, strategic, well, your marketing has to be targeted, makes sense. Can't just shout into the void and hope the right person hears you right. A lifestyle buyer might be on those online platforms for entrepreneurs, but an economic buyer, you might need a broker with connections to private equity. Okay, so targeted marketing is key. Then what someone's interested they've seen your stuff. What's next? Things get real at Step five, diligence. This is where the buyer scrutinizes everything, operations, financials, legal.

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Stuff, oh, boy. I bet this is where it gets intense. It can be but if you've been organized, transparent, got those good records we talked about, you're in much better shape. So preparation is key. What kinds of things are buyers looking for during diligence, they'll verify all the info you provided, dig into Financials, contracts, tax returns. Might even talk to your customers and suppliers, looking for red flags, risks, anything that could impact their decision. You've really got to have all your ducks in a row. It seems you said it and again, having that experienced team can be huge. Here. They'll help you manage the process, anticipate questions, address any potential issues proactively. So we've got team building, assessment, representations, marketing, diligence. Okay, that's five. What's the final step? The grand finale, step six. Closing. This is where it all comes together. Paperwork signed, money changes hands. Ownership is officially transferred, like reaching the summit of that mountain, exactly. But even here, you need to be careful. Pay attention to the details. Things can still go wrong. So having your team there to guide you through it, make sure all the eyes are dotted and the ads are crossed. That's crucial. So even at the finish line, you can't let your guard down. Right now, we've covered a lot of ground, but I'm curious to go deeper into each of these steps. Let's start with team building.

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What advice did the book give for putting together that a team?

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Well, it emphasizes that it's not just about hiring a NY lawyer, a NY accountant, right? You need people with experience in business sales, specifically so specialists, people who understand the ins and outs of buying and selling businesses exactly. You wouldn't go to a general practitioner for brain surgery, right? You need the right expertise, okay? But how do you even find these specialists? Is there like a secret society of business sale gurus out there? Not quite a secret society, but the book suggests starting with your network people you already know and trust Exactly. Talk to your current advisors, your accountant, banker, lawyer, see if they've got experience in this area, or if they can refer you to someone who does right. It's all about leveraging those relationships, getting recommendations from people you already trust right. And don't be afraid to interview multiple candidates. You want people you feel comfortable with, who get your business, your goals, and who you believe have the chops to guide you through this successfully, makes sense. So you found your dream team. What's next? Well, that's when we move into the assessment phase. Okay, remember those eight dimensions of value? This is where your team will really analyze your business through each of those lenses, identifying the good stuff, the not so good stuff, so figuring out what makes your business truly valuable beyond just what's on the balance sheet. Precisely. They'll look at everything, financials, customer relationships, intellectual property. They'll help you build a strategy to maximize your value, highlighting the things that make your business irresistible to a buyer. So it's like a full body checkup for your business, exactly, identifying those areas that might need attention, but also highlighting all the best features. And just like a good doctor, they'll be honest, even if it's not what you want to hear, right? They'll give it to you straight. Okay, so honesty is key, but what about those emotions we talked about earlier? It's easy for a seller to get, like, personally attached to their business, right? How do you keep those emotions from getting in the way during this assessment phase? That's where the team comes in. Again, they can provide that objective perspective. Help you keep things in check. Remember, the goal is to get the best possible price, not to get bogged down in sentimentality, right? Smart decisions, not emotional ones. So the team looks at the business through those eight dimensions. Then what? Then it's under representations. This is where you craft those marketing materials. Tell the story of your business in a way that will attract the right buyers. So it's like writing the biography, but for your company exactly highlighting the achievements, the key selling points, the future potential, and this is where those different buyer types come in. Again, right? Absolutely. Remember, lifestyle, economic, strategic, your materials need to speak their language, address what motivates them, makes sense. So for a lifestyle buyer, you might emphasize, I don't know work life balance or the freedom of being your own boss, exactly. But for an economic buyer, you'd focus on the numbers, revenue, profitability, growth, potential, right? Different strokes for different folks. Okay, so we've assessed our business, built that dream team, created some compelling marketing materials. Right now it's time to go find those buyers. What advice does the book have for the marketing phase. Well, like we said, it's all about targeting the right buyers, right? Those three buyer types we keep talking about exactly and where you market your business will depend on who you're trying to reach. For instance, if you're looking for lifestyle buyers, you might want to check out online platforms that cater to entrepreneurs or small business.

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Business Owners. Oh, okay, so websites listing businesses for sale, or social media groups for entrepreneurs, that kind of thing, exactly. But if you're going for economic buyers, you might need to work with a broker who's got those connections, you know, to private equity firms. Investment groups. Makes sense. They're looking for different things. They are. And your marketing message, it needs to be tailored too, right? We talked about how a lifestyle buyer might be looking for a certain lifestyle, whereas an economic buyer wants to see those numbers that profit exactly. You gotta understand what makes them tick. That's the key to crafting a message that'll actually resonate and get their attention. Okay, so you've found some interested buyers. You send them your marketing materials, they sign those confidentiality agreements. Right then what that's when things start to heat up a bit. It's the diligence phase. Oh yeah, we talked about that, where they really put your business under a microscope. It's kind of like that first date, where they start asking all the tough questions, trying to see if you're the real deal. Exactly, honesty and transparency, that's what matters here. They're going to want to verify everything, look through your financials, contracts, tax returns. Yeah, they might even talk to your customer suppliers to get the full picture. Wow. So it's pretty intense. It can be, but remember, if you've been organized, prepared, you got nothing to worry about. And here's where that team we talked about really shines. They can help manage the process, anticipate those tricky questions and even address potential issues before they become deal breakers. So they're kind of like your bodyguards protecting you from those tough questions. That's like that, okay, so you've survived diligence and the buyer is still interested. What happens next? Lay it on me. We're onto the closing stage. This is like the wedding day, you know? Oh, all that hard work has led up to this exactly. You finalize all the legal and financial details, sign the agreements, and boom, ownership is officially transferred. It's like reaching the finish line of a marathon. All those miles have paid off exactly. But even at this stage, you got to be careful pay attention to those details, right. Things can still go wrong, so it's crucial to have your team there to make sure it all goes smoothly. So even when you're celebrating, you got to stay focused right now we have walked through those six steps, but I'm curious

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what are some common mistakes sellers make,

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especially those who try to go it alone. One of the biggest is not knowing what their business is actually worth. They overestimate or underestimate. It throws everything off. So how do you avoid that? Get a professional valuation. Gives you an objective assessment based on the market your financials, everything, right? It takes the guesswork out of it, gives you a solid foundation. Another big one is not being prepared for due diligence. Ah, yeah, that massive checklist, right? If you haven't gathered and organized all that info beforehand, you're gonna be scrambling and potentially miss deadlines, right? Exactly. That can really hurt the deal. It's like showing up for a test without studying. Ooh, yeah, not a good feeling. So preparation is key. From start to finish, it is and again, this is where that team comes in handy. They keep you on track, help you avoid those pitfalls exactly. Okay, those are some great insights, but I'm still really curious about those eight dimensions of value. I want to understand exactly what buyers are looking for and how I can make my business as attractive as possible. Of course, let's start with growth value. This is all about potential. Okay? Buyers want to see that there's room to grow, whether it's new markets, new products, or just doing things more efficiently. So if my business is already growing, that's a good sign, absolutely. But it's not just about the past, it's about that path for future growth. Buyers want to see that. So I need to have a plan and be able to show them how they can grow the business even further. Exactly a solid business plan, market research, even just a clear understanding of trends in your industry, all of that can help demonstrate growth value. Okay, makes sense. What about dependence? We talked about that earlier in relation to the Switzerland structure, right? This one looks at how reliant your business is on any one customer, employee or supplier. The more diversified you are, the less risky you look to a buyer. So if, like, 80% of my revenue comes from one huge client, that's a red flag. It can be, yeah, buyers worry that if you lose that client, the whole thing could fall apart. They want stability, predictability. So do I just like, tell them I'm working on getting more clients. It's more than just saying it. You need to show them you're actively diversifying. Yeah, that might mean targeting new markets, okay, developing new products, or even finding ways to reduce your reliance on that one big client. It's about taking action, showing them you're serious about building a sustainable business, right? And the same goes for employees and suppliers. If you've got one key employee who holds all the knowledge, or a single supplier.

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For something critical that can be a problem for buyers. So it's about backup plans, right? Cross training employees, exploring alternative suppliers, making sure you're not overly reliant on any one person or thing. Exactly. The more diversified and resilient your business is, the more attractive it'll be to a buyer. Okay? What about the valuation teeter totter? I'm not even sure what that means. Think of a teeter totter on a playground. On one side, you've got the money coming in end to the business, the earnings. On the other side, you've got the money tied up in things like inventory, unpaid invoices, basically day to day operations. That's your working capital. Okay, I'm picturing it. So how does this Peter totter affect a business's value. Buyers want to see that earning side heavier, that means the business is generating enough cash to cover its operating costs and still have some leftover. Okay? And if the working capital side is too heavy, we means the buyer is gonna have to pour in more money just to keep things running. Makes it less attractive. So it's all about balance, making sure your business is generating cash as it grows, not requiring a ton of working capital to keep it going exactly now, this next dimension, recurring revenue, it's particularly relevant these days. Okay. Why is that? What's so great about recurring revenue, stability and predictability. Buyers love that. Think subscription based businesses were ones with lots of repeat customers, they know how much money is coming in each month, which makes them less risky, right? It's not just a one time sale, it's that ongoing flow of income. Like those software companies that charge you every month, they have a pretty good idea what their revenue is going to be, which makes them less risky, exactly. And those types of businesses with recurring revenue, they typically get valued higher, makes sense. So how do you increase recurring revenue? Is it all about creating a product or service that people just can't live without? It's part of it. For sure, you want to build loyalty, give amazing customer service, and have pricing models that encourage repeat business. Think about those subscription boxes that are everywhere these days, it's convenience, curated experiences, that feeling of anticipation and that all adds up to consistent revenue. Exactly. Okay, next up, monopoly control. Does that mean I gotta, like, corner the market on something that's what it sounds like, not necessarily. It's more about having that unique selling proposition, something that sets you apart from the competition. It makes it hard for others to copy you. So like those big tech companies that have built such strong brands, it's almost impossible to compete with them. They've got that monopoly control exactly. Buyers are willing to pay a premium for businesses like that. They want something special, something they know can't be easily replicated. Okay, that makes sense. What about customer satisfaction. I mean, obviously happy customers are a good thing, but how does that actually impact the value of a business? Well, think about it, satisfied customers are more likely to come back for more right? And repute customers mean Predictable Revenue, right? But it's also about reputation, word of mouth marketing, happy customers tell their friends, write good reviews. They become advocates for your business, right? So it's not just about keeping your existing customers happy. It's about attracting new W ones through that positive buzz, exactly. And when a buyer is doing their due diligence, they'll look for evidence of this. Online reviews, testimonials. They want to see proof that your customers are actually happy. So it's not just enough to say your customers are happy. You need to be able to prove it right, and having systems in place to track and measure that satisfaction, that shows you're serious about giving them a great experience, which buyers value. Okay, that makes sense. Now, the final dimension we need to talk about is hub and spoke. I think we touched on this earlier we did. This was all about how much the business relies on the owner. Buyers want a business that can run smoothly, even if the owner is not around 24/7 so if I'm the only one who knows how to do certain things or make those key decisions, that's a problem. It can be, yeah. Buyers get worried that if you walk away, the business will fall apart. They want to see a well oiled machine with systems and processes in place, right, and a capable team who can keep things running no matter what. So it's about building a business that can thrive without you constantly being the center of attention, exactly documenting your processes, cross training employees, delegating responsibilities, it's all part of building that Hub and Spoke strength makes sense. So by focusing on these eight dimensions of value, I can make my business as appealing as possible to potential buyers. Absolutely, you're showcasing your strengths, addressing any weaknesses, and telling a story that really captures the true value of what you've built. Okay, that's a lot to digest, but it's incredibly valuable information. I'm starting to see how understanding these dimensions can not only help me sell my business for a better price, but also build a stronger and more valuable business period, and that's the key.

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Takeaway here, even if you're not planning to sell anytime soon, focusing on these eight dimensions will help you create a more resilient, more profitable, more sustainable business. That's a fantastic point. Okay, so we've tackled team building and assessment. Now let's move on to the next step, representations. What are some of the key elements that need to be included in those marketing materials. Well, first and foremost, you need a compelling story. Okay? You need to grab the buyer's attention and make them want to learn more about your business. So it's not just about throwing a bunch of numbers and facts at them. Definitely not. You want to showcase what makes your business unique, highlight those achievements, paint a picture of future success. So it's not just selling a business, it's selling a dream. Exactly, you're selling a vision. Okay, so what kind of information should be included in these materials? Well, you'll want to give them an overview of your industry and where your business fits in. Okay? You'll highlight your key products or services, your target market, your revenue and profitability, and don't forget to talk about your growth potential, right? Got to show them where they can take it exactly. And you'll also want to address those potential concerns, things that might make a buyer hesitate. Think about it from their perspective, like, what are your plans for the future? What are your biggest challenges, right? Or, you know, how does the business actually operate if the owner's not around. Exactly by thinking ahead and answering those questions up front, you build trust and credibility, makes sense. But how do you actually create these marketing materials? Do you need to hire like a professional writer or designer? It can definitely be helpful, especially if you're not a wordsmith or a design whiz yourself. But you can also create some really effective materials on your own. Okay? The key is to keep them clear, concise and visually appealing. No one wants to wade through a wall of text or stare at a boring spreadsheet, right? Gotta keep it interesting. Exactly. Think about using visuals, graphs, charts, even photos of your products, your team, or those happy customers we talked about, Okay, remember, you're telling a story here, and visuals can really bring that story to life. Okay, so we've created those killer marketing materials. Now it's time to go find those buyers. What's the best way to approach that marketing phase? Well, like we said before, it's about targeting the right buyers and using the right channels to reach them. Oh, it's like fishing. You wouldn't use the same bait to catch a trout as you would a shark. Okay, I see where you're going with this. So each biter type those lifestyle, economic and strategic buyers, they're swimming in different waters Exactly. For example, if you're trying to hook a lifestyle buyer, you might want to focus on those online platforms that cater to entrepreneurs, small business owners, that sort of thing. Okay, so like those websites that list businesses for sale, or maybe social media groups for entrepreneurs, exactly, but if you're after an economic buyer, you might need a broker who's got those high level connections right to private equity firms, investment groups, that kind of thing, exactly because those economic buyers, they're usually looking for larger, more established businesses, ones with a proven track record. Makes sense so different bait for different fish, precisely, and your marketing message needs to be tailored to, remember, right? We've got to speak their language like a lifestyle buyer might be looking for, I don't know, flexibility, work, life, balance, that kind of thing, right? Well, an economic buyer is all about the numbers, the potential for profit. You got it. Understand what motivates them, and you'll be able to craft a message that resonates. Okay? That makes sense. So we found some interested buyers. They've seen our marketing materials, they've signed the confidentiality agreements. What happens next? Now it's time for the diligence phase, and this is where things can get a bit, well, intense. Oh yeah, we've talked about this. This is where they really dig in, scrutinize every aspect of your business. It's kind of like that first date, but instead of asking about your hobbies, they're pouring over your financial statements, trying to find any skeletons in the closet. That's one way to put it. They'll be verifying everything you've told them, looking at your financials, contracts, tax returns. They might even chat with your customers and suppliers just to get a feel for things. Okay, so honesty is the best policy here, right? No, trying to hide anything Absolutely. Transparency is key. And remember, if you've been organized and prepared all along, if you've got those good records we talked about, yeah, you'll be just fine. This is also where that experience team can really make a difference, right? They help you navigate those choppy water Exactly. They'll help you anticipate questions, address concerns, and hopefully avoid any major surprises. Okay, so you've made it through diligence, the buyer is still on board. What happens next? Then it's on to the closing stage. All those legal and financial details get finalized. You sign all the papers and officially transfer ownership of the business. It's a big moment. It's like finally reaching a summit after a long, challenging climb. You're probably feeling a mix of A.

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Emotions, right? Absolutely relief, excitement, maybe even a little bit of sadness. It's natural to feel a range of emotions when you're letting go of something you've put so much into, yeah, but if you've done your due diligence chosen the right buyer, you can feel good knowing your business is in good hands. So it's bittersweet, but ultimately a positive thing. Exactly. It's the start of a new chapter, both for you and for the business. Okay, I like that perspective. So we've talked about those six steps of the selling process, team, building, assessment, representations, marketing, diligence and closing, but now I'm curious about those eight dimensions of value. Okay, I know they're important for attracting buyers. But can you give me a real world example of how they actually play out in a sale, like, let's say I'm selling a software company, okay? Great example. So from a growth value perspective, you might highlight your plans to expand into new markets or develop new products, okay, show the buyer how they can capitalize on those opportunities. You're painting a picture of a business with a bright future, not just past successes. Got it so you're not just focusing on what the business is, but what it could become. What about dependence? How would that play out in a software company sale? Let's say your software company relies heavily on one big client for most of its revenue. That could be a red flag for a buyer. They'd worry that if you lose that client, the business would take a hit, right? It's all about diversifying, spreading the risk Exactly. So you'd want to show them you're actively bringing in new clients, maybe targeting different industries, or developing products that appeal to a wider range of customers. Makes sense? You're proving that your business isn't a one trick pony, right? You're showing that it's got a solid foundation and can weather the ups and downs, okay? What about the valuation teeter totter? How would that work with our software company? Buyers would look at the company's working capital, the cash on hand, accounts, receivable inventory, and compare that to its earnings. They want those earnings to be strong enough to cover the working capital needs a and d still make a profit. So it's not just about having a great product. It's about managing your finances effectively. Exactly. Buyers want to see that the business is financially sound, that they won't have to constantly pump in cash to keep it afloat. Okay, makes sense. What about recurring revenue? Imagine that's a big plus in the software world, huge. If you've got that subscription based model where customers pay a monthly or annual fee, that's a big selling point. It means predictable, reliable income. Buyers love that. So it's all about creating that stickiness with your customers making sure they keep coming back for more exactly now, monopoly control in the software world, that might mean having a unique technology, a patent, a proprietary algorithm, something that gives you an edge over the competition. So you've got that secret sauce, that special something that no one else can replicate. Right? Buyers are willing to pay a premium for that kind of differentiation. They know they're investing in something unique and valuable. Okay? What about customer satisfaction? How would that factor into selling a software company well, satisfied customers are more likely to renew their subscriptions, give you those glowing testimonials, right? And recommend your software to others. It's about building that loyal customer base. So it's about going beyond just providing a good product. You've got to create a positive experience that makes people want to stick around Exactly. And finally, we have that Hub and Spoke dimension. This is all about making sure the business can run smoothly without you, the owner, constantly having to step in. So you're talking about having clear processes, a trained team making sure everything can run without you having to micromanage every detail exactly. Buyers want to know that the business can thrive even after you've moved on. Okay? So focusing on those eight dimensions can really make a software company shine in the eyes of a potential buyer. Absolutely. And remember, these principles apply to any type of business, whether you're selling software, surfboards or sandwiches, it's all about highlighting those strengths, addressing any weaknesses, and presenting a compelling story. Okay, that's a lot of great information about those eight dimensions of value, but let's shift gears a bit and talk about those different buyer types, lifestyle, economic and strategic. Sure. Can you break down each type in more detail? What are they looking for? What makes them tick? Absolutely. Let's start with the lifestyle buyer. These are often individuals who are looking for a business that matches their passions, their lifestyle goals. So they're not necessarily driven by making a ton of money, not always. It might be more about flexibility, work, life balance or the chance to be their own boss. Maybe they've always dreamed of owning a bookstore or a bakery, or maybe they just want to escape the corporate world and do something they love. Okay, so what kind of businesses would appeal to a lifestyle buyer? It could be anything really, from a small shop or restaurant to a service based.

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Business, or even an online business, the key is that it offers the lifestyle they're looking for, right? Like that surf shop in Hawaii we talked about earlier that would definitely appeal to a certain kind of lifestyle buyer, exactly. And it's important to remember that lifestyle buyers often don't have a lot of experience buying or selling businesses, so they might need more guidance, more hand holding Exactly. That's where having a patient and experienced team can be crucial. You need to be able to explain things clearly, answer their questions, yeah, and reassure them that they're making a smart decision. Makes sense? Okay? Let's talk about the economic buyer. These are the number crunchers, right? That's right. They're all about financial returns. They want businesses with a strong track record of profitability, solid cash flow. They're looking for growth potential. So they're looking at it as an investment pure and simple, exactly. They could be private equity firms, investment groups, or even just wealthy individuals who are looking to diversify their portfolio. Okay, so what kind of businesses would appeal to an economic buyer. They usually like businesses that are scalable, ones that have the potential to grow significantly. They also look for recurring revenue, strong management teams and a competitive advantage in their industry. They're looking for a sure thing, basically right, something that's already proven itself. Okay. Now let's talk about the strategic buyer. What makes them different? Strategic buyers are looking for businesses that complement their existing operations, something that gives them a competitive edge. They might be looking to expand into new markets, add new products or services, or maybe acquire valuable intellectual property. They're thinking about the big picture. So they're not just looking at the financials, they're thinking about how this acquisition will fit into their overall strategy. Exactly. How will it help them achieve their long term goals? How will it strengthen their position in the market? So they're looking for synergy for a business that will make them even stronger. Okay, so what kind of businesses would appeal to a strategic buyer. It depends on their specific goals. Really, they might be looking for a strong brand, a loyal customer base, unique technology, maybe even a talented team of employees. It's all about finding that perfect fit, that missing piece of the puzzle. So they're not just buying a business, they're buying an asset that will help them grow and compete more effectively, exactly. Now, let's talk about those initial conversations with potential buyers. What are some tips for navigating those early interactions? Okay, yeah. What should you do when you're first talking to someone who's interested in buying your business? Well, first and foremost, be prepared. You need to know your business inside and out, your financials, your goals for the sale, yeah, everything, right? You don't want to be caught off guard when they start asking those tough questions exactly, and of course, be professional, courteous, even if the buyer is being a little pushy, right? Remember, you're in control here. You don't have to put up with any behavior that makes you uncomfortable, okay, but what if they start lowballing you or making unreasonable demands. Well, you don't have to accept an offer that you're not comfortable with. You always have the right to walk away. So it's okay to walk away from a deal, even if it's tempting. Absolutely, in fact, the book suggests that being willing to walk away actually gives you more leverage, really. Why is that? Well, if the buyer knows you're not desperate, that you have other options, they're more likely to take you seriously, and they might even come back with a better offer. Okay, that makes sense, but how do you know when to actually walk away? It's a judgment call, of course, but if you're getting bad vibes, if the buyer is not respecting your boundaries, or if their vision for the business just clashes with yours,

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it's probably best to move on. Okay, so let's say you found a buyer who seems reasonable, someone you feel good about working with, and they make you a decent offer. What happens next? Well, then it's on to the diligence phase, which we've talked about, can be pretty intense, right? The deep dive into your business, exactly. But I can't stress enough how important it is to be prepared. Get all your documents organized, be ready to answer any questions they might have, and be honest, right? It's like studying for a test. The more prepared you are, the less stressful it'll be, exactly. And remember, due diligence goes both ways. Oh, right. You're not just being evaluated. You're also evaluating them, making sure they're the right fit for your business. So it's okay to ask them questions too, make sure they've got the experience, the resources, the vision, all of that. Absolutely you want to be confident that you're leaving your business in good hands. Okay, so you've made it through diligence. Everything looks good and you're ready to move on to closing. What advice does the book offer for finalizing that deal? Well, first things first, make sure you have a good legal team. Okay, they'll review all the documents. Make sure your interests are protected. This isn't the time to try and handle things yourself or skimp on legal advice.

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Price, right? You don't want to sign anything you don't understand exactly. And double check that all those financial details are in order, the purchase price, the payment terms, any contingencies, yeah, it all needs to be crystal clear. So once everything's signed and sealed, is that it deal done? Walk away. Not quite. There's still that transition phase, right? You've got to hand over the reins to the new owner, make sure they know what they're doing exactly, and that might involve training employees, introducing them to your customers, giving them access to all your systems, maybe even offering some ongoing support. So it's not as simple as just saying. Here are the keys. Good luck, definitely not. The smoother that transition is the better for everyone. It's like passing the baton in a relay race. Wanna make sure the next runner is ready to take it and go. I like that analogy. Okay, you've worked with tons of business owners who've sold their businesses. I have what are some of the biggest lessons you've learned from all those experiences? One thing that stands out is that it's an emotional roller coaster, oh, yeah, excitement, stress, relief. It's a lot to handle. Having a good support system to help you through it all is so important. So it's not just a business transaction. It's personal too, very much. So another thing I've learned is that it takes time. This isn't a quick process, okay, you need patience persistence. Yeah. Don't expect it to happen overnight. It's a marathon, not a sprint, exactly. Yeah? And the final lesson, it goes back to something we've talked about before. It's not just tea about the money, right? We've got to find the right fit, exactly. Yeah. You want a buyer who understands and respects what you've built, someone who'll take care of your business and help it grow, someone who will carry on the legacy. Okay, those are some really valuable lessons. Now let's go back to those eight dimensions of value for a minute. We've talked about them individually, but how do they all work together? How do they create that big picture of a business's value? Well, each dimension gives you a different perspective on the business. It's like looking at a tapestry. You know each thread contributes to the overall beauty of the artwork. And when you combine all those perspectives, the growth, the dependence, the financial stability, recurring revenue, uniqueness, customer satisfaction, leadership, transition and the story of the business, that's when you get a truly complete picture of its value. So it's not about being perfect in every single dimension. It's about the big picture, right? It's like a well rounded person, you know? Yeah, they might not be the best at everything, but they have a diverse set of skills and qualities that make them valuable. Okay, that makes sense. What are some of the challenges that sellers run into when they're trying to maximize those eight dimensions of value. Sometimes it's just about understanding the dimensions in the first place. Oh, okay. Many business owners don't even know these factors exist. So knowledge is power. Absolutely, once you understand the dimensions, then the challenge becomes actually doing something about them, improving them takes time, effort, resources. It's a commitment, right? It's one thing to know what to do, but actually doing it is a whole other ball game, exactly. And it's not always easy. It might mean making tough decisions, investing in new things, even changing the way you run your business. Okay, so what advice do you have for sellers? Who are, you know, maybe struggling to improve those dimensions? First of all, don't try to go it alone. This is where your team of advisors can really make a difference. They can offer guidance, support and hold you accountable, right? That's what they're there for, exactly. Another thing is to focus on the dimensions that are most relevant to your business and the buyers you're trying to attract. You don't have to be perfect in every area. Just focus on the things that matter most. So prioritize play to your strengths and address those weaknesses strategically Exactly. Now, you've talked a lot about finding the right buyer for your business. What do you think are the qualities of a good buyer? Well, you've said it multiple times. It's not just about the money. You want to make sure your business is gonna to someone who's gonna take care of it. Right? It's absolutely about finding the right fit. First and foremost, you want a buyer who shares your values and vision for the business. This isn't just a financial transaction. It's about passing the torch to someone who understands and appreciates what you've built. So it's like finding a good home for your pet, not just someone who can afford the adoption fee. You want to make sure they'll love and care for it the way you have exactly. You want to feel good about the person or company that's taking over, beyond shared values, you also want a buyer who has the experience, the resources and the commitment to actually run the business successfully. So they need to be capable and qualified, not just someone with a bunch of cash and a whim. Precisely. Think about it. You've poured your heart and soul into this business, and you want to see it continue to thrive, not flounder under inexperienced leadership. Makes sense? Anything else that's important when choosing a buyer, I think trust is essential. You want to feel comfortable working.

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With this person or company, knowing that they're going to be honest and fair throughout the process. Selling your business is a big deal, and you're going to be sharing a lot of sensitive information, so it's crucial to have a good rapport and a sense of mutual respect. It sounds like you're advocating for building a relationship with the buyer, not just treating it like a cold, impersonal transaction. Absolutely. The more you get to know the buyer, the better equipped you'll be to assess their character, their intentions and their ability to carry on your legacy. Okay, let's shift gears a bit and talk about the legal and financial aspects of selling a business. What are some of the key legal documents that sellers need to be familiar with? Well, the purchase agreement is the big one. This document outlines all the terms of the sale, including the purchase price, the payment terms, any contingencies, and the representations and warranties that both the buyer and seller are making. So it's like the rule book for the entire transaction, making sure everyone is on the same page and understands their obligations Exactly. And it's incredibly important to have a lawyer review the purchase agreement, carefully making sure your interests are protected and that you understand all the legal ramifications. Okay, so what other legal documents are important? You might also encounter non disclosure agreements to protect confidential information, letters of intent to outline the basic terms of a potential deal, due diligence checklists to guide the buyer's investigation and closing documents to finalize the transfer of ownership. Wow, that's a lot of paperwork. It sounds like having a good lawyer on your team is absolutely essential. It can't be overstated. They can help you navigate the legal complexities, ensure that all the documents are in order and protect you from potential risks or liabilities. Okay, so we've covered the legal side of things. What about the financial aspects of selling a business? What are some of the key things that sellers need to consider? One of the first things is to determine the value of your business. We've talked about those eight dimensions of value, and it's important to understand how those factors translate into $1 amount that a buyer would be willing to pay. Right? You need to know what your business is worth, not just what you hope it's worth, or what someone else tells you it's worth. Exactly. You can get a professional valuation, of course, but you can also do your own research, compare your business to similar businesses that have recently sold, and use online valuation tools to get a general idea of your business is worth. So it's about being informed and having a realistic understanding of what the market will bear precisely. And once you know how much your business is worth, you can start thinking about your financial goals for the sale. How much money do you need to achieve those goals? What are your tax implications? How will you manage the proceeds from the sale. Okay? So it's not just about getting the highest price possible. It's about aligning the sale with your overall financial plan and making smart decisions that will benefit you in the long run. Exactly you need to think about your long term financial well being, not just the immediate windfall from the sale. Okay, that makes sense. Now, what are some common mistakes that sellers make when it comes to financial aspects of selling a business. Well, one of the most common and potentially most costly mistakes is not seeking professional advice. People often try to handle the financial aspects themselves, either because they want to save money or because they think they could figure it out on their own. But the truth is, selling a business is a complex financial transaction, and there are a lot of potential pitfalls that you might not even be aware of. So it's like trying to fix your own plumbing. You might think you can save a few bucks, but you could end up flooding your entire house Exactly. It's worth the investment to hire a qualified accountant or financial advisor who could help you navigate the complexities, minimize your tax liability and make smart decisions about how to manage the proceeds from the sale. Okay, so professional advice is essential. What other financial mistakes do sellers often make? Another common mistake is not having a clear understanding of the tax implications of the sale. Different types of sale structures can have very different tax consequences, and it's crucial to work with a tax advisor to understand your options and choose the best strategy for your situation. So you need to talk to a tax expert, not just rely on your gut feeling or Google searches. Absolutely, tax laws are complex and constantly changing, and it's essential to have a professional in your corner, who can help you navigate those complexities and minimize your tax liability. Okay, what other financial traps do sellers often fall into? Another common mistake is not having a plan for how to manage the proceeds from the sale. People often get so caught up in the excitement of selling their business that they don't think about what they're going to do with the money once it's in their bank account. I account. So it's like winning the lottery without having a plan for how to manage that sudden windfall. Exactly. It's important to think about your long term financial goals, retirement investments, charitable giving, estate planning, and develop a plan that will help you achieve those goals. Okay, that makes sense. So.

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Let's shift gears a bit and talk about the transition phase. We've touched on this briefly, but I'd like to dive deeper into some of the challenges that sellers might face during the handover process. Well, one of the biggest challenges is simply letting go. It can be incredibly difficult to hand over the reins to someone else, especially if you've poured your heart and soul into the business for years or even decades. It's like watching your child go off to college. You know, it's the right thing to do, but it doesn't make it any easier to say goodbye, exactly. And it's important to remember that the new owner is going to do things differently. They're going to have their own vision for the business, and they might not always make the same decisions you would have made. So you need to be prepared to step back, trust the new owner and resist the urge to micromanage or second guess their decisions. Absolutely, it's their business now, and they need the freedom to make their own choices, even if you don't always agree with them. Okay, so letting go is a big challenge. What other hurdles do sellers often face during the transition? Another challenge is making sure the new owner has everything they need to run the business successfully. This can involve training employees, transferring customer relationships, providing access to key systems and data and even offering ongoing support or mentorship. So it's not just about handing over the keys and walking away. It's about setting the new owner up for success and ensuring a smooth handover of responsibilities Exactly. The more prepared and organized you are during the transition, the less stressful it will be for both you and the new owner, and the greater the likelihood that the business will continue to thrive under their leadership. Okay, so what advice would you give to sellers who are struggling to let go or who are worried about the transition process. Well, first, remember why you're selling in the first place. Are you ready to retire? Pursue a new passion, spend more time with your family, focus on those goals and the excitement of this new chapter in your life. So it's about keeping your eye on the prize and the reasons that led you to this decision, exactly. And secondly, focus on the positive aspects of the transition. You're freeing up your time and energy, you're giving the business a fresh perspective, and you're potentially creating new opportunities for yourself and for the people who have been a part of your business journey. It's about embracing the change and seeing the possibilities, rather than dwelling on the loss or the fear of the unknown precisely, and remember, you're not disappearing entirely. You can still stay involved with the business in an advisory role or even as a mentor to the new owner, if that's something you both agree on. Okay, that's really encouraging. Now, throughout this deep dive, we've talked about the book you don't know what you don't know, a step by step guide for getting the most from the sale of your business, but even if you're not planning to sell right now, what's one key takeaway you hope our listeners will walk away with? I think the most important takeaway is that the principles that make a business attractive to a buyer are the same principles that drive long term success. By focusing on those eight dimensions of value, growth, dependence, financial stability, recurring revenue, uniqueness, customer satisfaction, leadership, transition and your overall business story. You're not just preparing for a pencil sale. You're building a stronger, more resilient and more valuable business that can thrive in any market condition. So even if you're years away from selling, or even if you never plan to sell, you can still benefit from thinking like a buyer and applying these principles to your business today. Absolutely, it's all about creating a business that's built to last, whether it's under your leadership or someone else's. That's a great point.

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Well, that's it for today's Deep Dive. We hope you learned something new and maybe even got inspired to take your business to the next level until next time, keep learning, keep exploring and keep diving deep and.