Nate Lind sells companies like realtors sell homes. He is a business broker at Website Closers, the largest marketplace of $1 million to $150 million dollar Internet, Technology and E-commerce businesses.
Nate’s Website – Interested in buying or selling online businesses?
Maximum Exit – Read Nate’s book for FREE!
3 Value Bombs
1) If you don’t have financials, get them. Get your income, all of your income itemized and categorized in QuickBooks. Get all your expenses into QuickBooks. Make sure that whatever it is you’re thinking about selling, it has its own bank account.
2) It’s going to be based on profit. If you want to start to get into the leagues where your sale is going to mean a potentially big windfall, then get yourself up to a quarter of a million dollars a year in profit.
3) Buyers will pay only as much as they feel the business is worth in terms of risk.
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**Click the time stamp to jump directly to that point in the episode.
Today’s Audio MASTERCLASS: The Life-Changing Benefits of Selling Your Business
[1:05] – Nate shares something that he believes about becoming successful that most people disagree with.
- You should sell your business when you don’t want to. When it’s so successful, when things are effortless, and when you don’t have any idea that you even want to sell it… That’s the time to do it.
[1:50] – Market demand definition.
- The inventories are cash-flowing, mature businesses. These are internet, technology, and digital businesses – or one ring out from them.
[3:33] – How much will buyers pay for a business?
- Buyers will pay only as much as they feel the business is worth in terms of risk.
- We’re trying to answer the question “What’s in it for me?” in the buyer’s mind, and what’s in it for them is the highest return on their investment.
- Buyers could buy based on the last year’s worth of profit, times a multiple, and that multiple could be anywhere between three times that trailing 12 months number and could be upwards of six times that trailing 12 months number.
[5:20] – How do we find out how many buyers there actually are out there?
- It’s not too different than if you were to list your house with a realtor. You need to find a marketplace to list your business on so that you can reach the broadest network of buyers.
- You have to get your business listed. Spend time “showing it to buyers”, just like a piece of real estate.
[6:51] – Finding out if actual buyers are interested in your company.
- If your business has been around for at least two years and it’s making a quarter of a million dollars in cashflow, Website Closers would love to chat with you.
- It’s going to be based on profit. If you want to start to get into the leagues where your sale is going to mean a potentially big windfall, then get yourself up to a quarter of a million dollars a year in profit
[9:23] – A timeout to thank our sponsors!
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- Elite Singles: Busy, successful professional looking for a partner who shares your drive and values? Then Elite Singles is the perfect dating platform for you! Sign up at EliteSingles.com/fire, complete your personality test, and start making meaningful connections today!
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[11:21] – The amount of cash to expect at closing.
- One can expect about 70% of the enterprise value. That’s the total amount of the transaction in cash at closing.
[12:08] – What are other cash payouts or scenarios when selling a business?
- He is incentivized based on his commission to make sure his client gets cash at closing.
- He bans buyers who do 100% seller finance, or even the majority seller finance. Those types of buyers are a waste of time and it doesn’t end up being a transaction that’s worth it for his client.
[13:53] – Ways buyers typically pay for a business.
- It’s like mortgages for houses.
- For transactions over $5 million, we have to work with the capital markets
[15:33] – The first thing that buyers look for in a business.
- Buyers usually want to see something like a business summary. It includes a bunch of information – Q&A about the business that’s prepared ahead of time.
- The buyer is also going to want to see financials for as far back as you can go. But at least the last two years.
[16:30] – What to do before starting to sell your business.
- If you don’t have financials, get them. Get your income, all of your income itemized and categorized in QuickBooks. Get all your expenses into QuickBooks. Make sure that whatever it is you’re thinking about selling, it has its own bank account.
[17:29] – Nate’s key takeaway and call to action.
- Nate’s Website – Interested in buying or selling online businesses?
- Maximum Exit – Read Nate’s book for FREE!
[20:18] – Thank you to our Sponsors!
- Liquid I.V.: The category-winning hydration brand fueling your well-being! Grab your Liquid I.V. in bulk nationwide at Costco, or you can get 20% off when you go to LiquidIV.com and use code FIRE at checkout!
Light that Spark Fire Nation JLD here and welcome to Entrepreneurs on Fire, brought to you by the HubSpot Podcast Network with great shows like Marketing Against the Grain. Today we'll be breaking down the life changing benefits of selling your business to drop these value bombs I have brought Nate Lind into EOFire Studios. Nate sells companies like realtors sell homes. He is a business broker at Website Closers, the largest marketplace of 1 million to 150 million internet technology and e-commerce businesses. In today Fire Nation we'll talk about supply and demand, how much buyers will pay, how to find those buyers. We'll talk about how much cash you can expect at closing. We'll talk about the first thing buyers look for when it comes to our businesses and so much more.
And a big thank you for sponsoring Today's episode goes to Nate and our sponsors. Business Made Simple hosted by Donald Miller is brought to you by the HubSpot Podcast Network. The audio destination for business professionals, Business Made Simple takes the mystery out of growing your business with episodes like How to Get Out of the Day-to-Day Operations Without Crashing Your Business. Listen to Business Made Simple wherever you get your podcasts.
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0 (1m 30s):
Nate, say What's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.
1 (1m 38s):
Hey fire listeners, thanks for having me. I believe you should sell your business when you don't want to. When it's so successful, when things are effortless and when you don't have any idea that you even wanna sell it, that's the time to do it,
0 (1m 53s):
Man, I love that advice. And if people have taken your advice in Crypto NFTs and really pretty much any regional bank stock, then they, they they'd be, they'd be loving this advice right here because Fire Nation, sometimes when things are going good, you just think they're gonna be going good forever and everything is a cycle for sure. Cuz we're talking about the life changing benefits of selling your business supply and demand runs everything Nate, so I wanna get specific here. What exactly is market demand?
1 (2m 24s):
Well, in our case it's exactly what you just said. Our inventory are cash flowing and mature businesses. Now these are internet technology, digital businesses or one ring out from them, the companies that service those. And if they're a couple years old and they're cash flow positive, that's my inventory and that's a seller. And then on the buy side right now I've got tens of thousands of buyers looking for those businesses. It is still, it has been for years and it is still a seller's market right now. So for those of your audience and Fire Nation that have a cash flow positive and a mature business, it's a seller's market if you ever wanna take it to list.
0 (3m 6s):
Well I like hearing that being a very cash flow positive business. In fact Nate, I know this is something you can't expect from basically anybody you work with, but we publish these monthly income reports and we're a very, very small team and and we're a different kind of business than I know you usually deal with. But we are typically hitting between 80 to 90% net profit margins off of our gross revenue, which is just insane in insane a lot of ways. Insane. And, and and believe me it's insane because we are choosing to stay small, to stay agile, to stay lean. We could grow our our revenue numbers for sure and and you know, make more money for sure, but we've just kind of found that space that we love right now.
0 (3m 48s):
So I mean for you Fire Nation, it's like what are you trying to do? Grow a business to sell, grow a lifestyle business like and that's things we'll be talking about here today. Cause I think one thing Nate, that people wanna find out is how much will buyers actually pay for a business?
1 (4m 5s):
They will pay only as much as they feel the business is worth in terms of risk. So they will assess the business based on a number of factors, the biggest of which is just like marketing. We're trying to answer the question, what's in it for me in the buyer's mind and what's in it for them is the highest return on their investment with the least amount of risk? Generally speaking, in the lower middle market, which is what I serve, your business would fall into that probably most of your entrepreneurs would as well. So this is lower middle market is under a hundred million is the final enterprise value in the exit price. They're going to trade based on the trailing 12 months. So the last year's worth of profit times a multiple and that multiple could be anywhere between three times that trillion 12 months number and could be upwards of six times that trillion 12 months number.
1 (4m 57s):
That's pretty much generally what buyers are going to be looking for and what they're gonna be willing to pay. And there's a variety of factors. It gets a little bit more complicated, but at the end of the episode we'll make sure that your listeners have access to my multiple evaluation spreadsheet and some of my tools so they can figure that out for themselves or they can reach out and just ask me, oh well
0 (5m 16s):
I'll be getting my hands on that as well. And one thing I want you to remember, Fire Nation, and this is just in life in general, but specifically what we're talking about here, everybody's favorite radio station is W I I F M. What's in it for me? So believe me, nobody's going to intentionally do you any favors out of the goodness of their heart. They're going to say what's in it for me? And hey, if that matches up that is good for both of you, then you might figure things out. But just remember that at the end of the day and what if we are looking for that demand? How do we find out how many buyers there actually are out there in this crazy, fun, scary world?
1 (5m 55s):
It's not too different than if you were to list your house with a realtor. You need to find a marketplace to list your business on so that you can reach the broadest network of buyers. And there's a lot of, there's a lot of marketplaces out there in the 1 million to a hundred million range here at Website Closers. That's a boutique focus that we specialize in. If you've got a business smaller than that, you may be better served going to Biz by Sell or flip a or one of the smaller marketplaces. So you have to get your business listed, you gotta spend time showing it, showing it to buyers just like a a piece of real estate. You gotta share with them the financials of the business. So you have to have a professionally prepared balance sheet and income statements that you can hopefully just export outta QuickBooks.
1 (6m 40s):
And when you've got that, you start showing the, the business to buyers and we get anywhere between 50 and my, my record is 274 buyers looking at the same asset, the same, you know, one business for sale at a time. So it's a massive demand. My my inbox gets flooded every time. All the ones I've had this year have been just inundated. I've been inundated with buyers looking for a chance to talk to the seller. They wanna get to know the, the owner and try to you know, make a deal happen. Hey we gonna
0 (7m 11s):
Put our money somewhere and it's not in regional banks these days, Fire Nation. So how can we find out where would be buyers and like if they'd be actually interested in our company, like how can we find out, you know, if actual buyers like people that have the money to do it would be interested in my company And by my company I mean the listeners companies,
1 (7m 35s):
This is super simple. If your business has been around for at least two years and it's making a quarter a million dollars in cash flow, my my Marketplace Website Closers would love to have you. That's it. You just need to be making a quarter million dollars a year and be two years old and we will get you listed and bring tons of buyers. If you're smaller than that, that's where things could be maybe not quite as interesting or maybe super interesting blogs and website and just, you know, smaller websites sell all the time. Usually it's on a smaller marketplace. So that's where you need to go to to flip a or you need to go to biz Buy sell or somewhere like that to list it again, it's gonna be based on profit from what I understand, even those smaller marketplaces, they need to be making some money.
1 (8m 21s):
The smaller blogs you can get away with just having some revenue, you may not need a whole lot of profit, but if you wanna start to get into the leagues where your sale is going to mean a potential big windfall for yourself, get yourself up to a quarter million dollars a year in profit and two years old and you will be, there will be buyers interested. It's not which buyer, it's which one do you want to sell your business to or how many buyers are out there. There's going to be plenty for you.
0 (8m 50s):
Fire Nation, this is exciting information. I hope you're kind of salivating right now thinking how can I get to those numbers if I'm not already there. And if I'm already there, how can I get to Website Closers to start this process? Cause’ hey, just like not everybody ends up selling their house that lists their house, you can find out what's there for you and then say, you know what, it's not the right fit, it's not the right time, but at least I know what to expect maybe a year, 2, 5, 10 years down the road when I'm in a little better situation or I'm just in a different place in life. And we have a lot more to talk about when we get back from thanking our sponsors.
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0 (12m 22s):
Nate, we're back. I wanna talk about cash. We're talking dollar, dollar bills. How much cash could one expect at closing?
1 (12m 32s):
My average is about 70% of the enterprise value. That's the total amount of the transaction in cash at closing. So use usually a wire boom day of closing you're get 70%. So if you've got a million dollar transaction, 700,000 of that you're gonna see in your bank account the day after closing. That's my average. I've done almost a hundred million worth of transactions these last couple of years. So that's based on smaller, larger and medium sized businesses from from 1 million, the largest transaction I've done the last year is closer to 30 million. So it's pretty much around the gamut. 70% is what you'll see cash or closing.
0 (13m 9s):
I think a lot of people have this thing in mind where if they sell their business like they're gonna get like maybe a a poultry like 10 to 20% upfront and then there's gonna be like this payout over time and then inevitably that business that bought it runs the business into the ground because you know, no longer is that initial entrepreneur running the business and it's mishandled and then they end up getting like essentially none of their money and then they, you know, don't actually get out what they were hoping to. And, and by the way, in a lot of these cases, and I've talked and interviewed to a lot of these entrepreneurs, they've gone back and bought their own company back at pennies on the dollar and then try to revive it and a lot of times been successful of it and sometimes not. Cause it's already like a dead horse.
0 (13m 50s):
What do you have to say about that?
1 (13m 53s):
That's a great myth. You know, and I'm sure that's going on out there, but for my clients that's not the case. I'm actually incentivized based on my commission to make sure my client gets cash at closing and I like to do a good job for myself. I like to do a great job for my client. So it's in my, my best interest, it's in my client's best interest to make sure they've got a large amount of cash at closing. And I see that happen time and time again. I, us, I regularly ban or blacklist buyers who are trying to do a hundred percent seller finance. Yes, or even the majority of seller finance. I just have found that those types of buyers are a waste of time and it doesn't end up in being a, a transaction that's, that's in the goals of my client and harmonious for a long term transaction.
1 (14m 37s):
So I see that and I hear about that, but that doesn't happen on my marketplace and it sure doesn't happen with my, my clients and
0 (14m 42s):
I'm glad you blacklist 'em cuz a lot of times they end up like bidding up the price and getting out real buyers who actually have real money to get that 70 plus percent at closing. So when it comes to the money actually being transferred, let's talk about how buyers typically pay for a business.
1 (14m 59s):
Yeah, so as the smaller transactions, if it's under $5 million, we do everything we can to prepare the transaction for, for a small business administration loan. The seven a loan program, it's like mortgages for houses, it is to business acquisitions, what mortgages are to the housing market. It gives us the opportunity to go find a buyer who's well qualified to put down 10 or 20% on the business, get a loan for 80% of the business and pay it off over 10 years just like a mortgage. And that's what happens for a lot of the transactions. Under $5 million. Over $5 million, we usually have to work with a capital markets partner.
1 (15m 38s):
These older businesses, typically they're bigger businesses and then the buyer is able to use a non-traditional financing option in the capital markets to get a combination of debt. And sometimes they have to come out of pocket of a deal with some equity to lure a, a private equity fund to help finance the deal. Almost all of these deals have some kind of financing and if you're talking to somebody, you're trying to do this on your own or you're working with a broker who has no idea how to help the buy side get their financing, it's not gonna close and you just wasted a ton of time.
0 (16m 12s):
So if our listeners are listening and potentially salivating because they're thinking about, hey, how can I get my business to a place where we can start talking to Website Closers where we can start, you know, having great conversations and you know, maybe there's another part of the listeners who are like, I'm already there, but I want to, you know, continue to grow and to build and to even look more appealing when the time comes. Let's talk about the very first thing the buyers look for when it comes to our businesses.
1 (16m 41s):
The first thing they're gonna ask me for is they're gonna wanna see something prepare like a business summary, which we prepare, we create the, what we call an offering memorandum and it includes a bunch of information, some, some questions and answers q and a about the business that we've prepared ahead of time that my client has answered. And then the buyer's also gonna want to see financials for as long ba as long as far back as you can go. But at least the last two years. And it, it's pretty simple. It's an income statement and it's balance sheets. It's by month for as many months back as we can go. And that's all the preparatory work that I do with my client. Free of charge by the way. We don't, we only get paid when the deal actually closes on the back end just like a realtor.
1 (17m 22s):
So we're doing all this work knowing that, you know, we're gonna get everyone through the finish line at the end and get the deal closed. But the buyer, first thing they wanna see is the financials.
0 (17m 31s):
Is there anything that Fire Nation should be doing before they reach out to a company like yours to start this process?
1 (17m 39s):
If you don't have financials, get 'em, find a cpa, find a bookkeeper, hire 'em off of fiber. I, my bookkeeper is off of fiber. It's not that complicated. Get your income, all of your income itemized and categorized in QuickBooks. Get all your expenses into QuickBooks. Make sure that whatever it is you're thinking about selling it has its own bank account, preferably its own LLC or some kind of business entity. If you've got a lot of things going on, you've got a bunch of businesses that you're juggling and they're all going into one bank account, immediately get, get yourself multiple bank accounts for each potential asset that might actually ex, you know, change hands in the future. That's gonna save us a ton of time cuz it's so much harder to pull that stuff apart than it is to just add it all together.
0 (18m 24s):
Fire Nation, what are you waiting for? If this is something that you're listening to and you're like, hey, let's just start the process, let's just see what happens. Nate, what is your direct call to action for these individuals?
1 (18m 36s):
NateLind.com and if you go to natelind.com/gift, I'll give you my book. Cool. Maximum Exit. It's the definitive guide for internet and technology focused business founders. I talk about what you're multiple, who's buying, how much they're paying, and I answer 12 other questions that you need to know to get top dollar for your business.
0 (18m 54s):
Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with NL and JLD today, so keep up that heat. For links to everything we talked about, visit eofire.com, type Nate, n a t e in the search bar, the show us page will pop right up. Nate Lind, l i n d.com. natelind.com/gift. Those are your two calls to action. Nate, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute your brother and we will catch you on the flip side.
1 (19m 27s):
0 (19m 27s):
Hey, Fire Nation, a huge thank you to our sponsors and Nate for sponsoring today's episode and Fire Nation. Over the last decade, I've interviewed more than 3000 of the world's most successful entrepreneurs and I've created a revolutionary 17 step roadmap to your financial freedom and fulfillment. I put it all into my first traditionally published book, The Common Path to Uncommon Success, which is personally endorsed by Seth Godin and Gary Vaynerchuk. The Common Path to Uncommon Success is the step-by-step guidance that you need to achieve the lifestyle of your dreams. Visit Uncommon Success book to order your coffee today and I'll catch you there. Or on the flip side.
Hubspot (20m 3s):
Business Made Simple hosted by Donald Miller is brought to you by the HubSpot Podcast Network. The audio destination for business professionals Business Made Simple takes the mystery out of growing your business with episodes like How to Get Out of the Day-to-Day Operations Without Crashing Your Business. Listen to Business Made Simple wherever you get your podcasts.
Liquid I.V. (20m 22s):
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1) The Common Path to Uncommon Success: JLD’s 1st traditionally published book! Over 3000 interviews with the world’s most successful Entrepreneurs compiled into a 17-step roadmap to financial freedom and fulfillment!
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