Only 1% of businesses ever get sold. Here’s the framework I’ve used to sell 4:

The easiest way to become a millionaire:

Sell a business.

Only 1% of businesses ever get sold.

Here’s the framework I’ve used to sell 4:

1/ Positive Earnings

There are two ways to increase the value of a business:

Increase earnings

Increase the earnings multiple (the amount a buyer pays for those earnings)

Buyers pay a higher multiple for more earnings.

Let’s illustrate this.

If your business has low-to-no earnings, you’re selling a headache, not an asset.

Conversely, a slight increase in earnings can skyrocket the value of a business.

Here's how a $100k increase in earnings can lead to an $800k increase in value (because of a higher multiple.)

Every business owner should aim to grow earnings.

Which in turn grows the earnings multiple the business sells for.

This is called multiple expansion.

Understand this topic & you’ll never have to worry about money again.

2/ Clean books

We learned that most businesses sell for 2-5X earnings.

So if you underreport your earnings by $10,000 to “save on taxes.”

Your business will be worth $20k-$50k less when you sell.

Sloppy books also decrease valuations because:

?It’s a sign of a poorly run business

?Buyers are less likely to trust your numbers

So keep clean books!

3/ Non-reliant on you

Most founders act as the mascot for their business.

So customers view staff as substitutes of lesser value.

If replacing you would hurt sales, your presence impacts the business value.

No one wants a business with an “icon problem.”

*you get extra bonus points for understanding the above gif*

4/ Standardized service

For a business to be scalable, the service it offers must be:

1. Teachable to employees

2. Valuable to customers

3. Consistently repeatable

A hard-to-run business is a hard-to-sell business.

Increase the value of your business by:

?Standardizing your pricing

?Delivering consistent service to every client

?Having a written process for everything that happens in your business

Think Mcdonald's, not McKinsey.

5/ Diversified client base

If one client makes up more than 15% of your rev, your biz is less valuable.

I know a lawyer that was selling his firm.

2 clients represented 80% of his biz.

During due diligence, both clients left.

It killed the deal.

More clients = less risk.

6/ Strong management team

A buyer wants to see someone (that isn’t you) responsible for:

? Marketing/sales

? Operations

? Product

? Finance

These people should have a long-term incentive to stay at the company.

Buyers don’t want the headache of filling a critical role.

*no reason for this image other than making you smile!*

TLDR

Only 1% of businesses sell.

To build one focus on:

?Clean books

?Positive earnings

?Non-reliant on you

?Standardized service

?Diversified client base

?Strong management team

Now get building!

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