Codie Sanchez with a Twist
Your Ultimate Guide to Buying an Online Business: Lessons from the Trenches for Self-Funded Searchers
Searching to buy a business can feel like looking for a shovel buried in the snow in the dead of night. You’re alone, you’re cold, and onlookers think you’ve lost your mind.
I’ve spent the last two years searching for an internet-based business. Before that, I sold over $10MM of software. Before that, I sold my landscaping business.
I know how to negotiate. I know how to sell. And now I know how to search.
But, I’ve had to learn the hard way that buying traditional “boomer” businesses isn’t the same as buying internet-based businesses. Codie Sanchez, an expert at buying “boring” brick-and-mortar businesses from retiring baby boomers, has bought over 25 businesses and is a top influencer in the SMB acquisition space.
Codie strips private equity acquisition of its pretension and leaves you with easy-to-understand yet highly effective methods to search, acquire, and run a business.
I highly recommend taking her course if you’re a first-time searcher.
In this guide below, I’ve curated her hard-earned lessons.
With my two years of searching to acquire an online business and Codie’s decade of excellence in the traditional SMB acquisition space, this guide will help you bypass my mistakes and shave a year off your search. It will be the light that melts the snow so you can find that shovel and acquire a quality business at the right price.
Table of Contents
Unit 1: Laying the Groundwork - Define Your Acquisition Goals
Your Why Parameters
Here’s My Why: Stack Ranked
Your What Parameters
Here’s My What
Size Matters
Inbound
Proprietary Search
Broker Listings
Quick n’ Dirty Deal Calculator
Inputs
Outputs (Return on Investment)
More Information = More Leverage
Deal Structure Levers
What to Bring to the Negotiation Table
Negotiation Frameworks - Mark Yegge
Sell Yourself to the Owner
Unit 1: Laying the Groundwork: Defining Your Acquisition Goals
Start with Your Why
Only you can answer this. Dig deep, be honest. This will drive your search:
Your Why Parameters:
What are your financial goals? How much cashflow do you need?
Where do you want to live?
What are you hoping to gain beyond monetary reward?
Here’s My Why, Stack Ranked:
To cover living expenses
To be able to work from any location
To learn how to run and grow a company
To test out the friendship-building ideas I’ve written about (community-building)
Define Your What
Clearly define the parameters and attributes you’re looking for in a business. This will help to filter through the endless listings you’ll come across. And, it will make it easier for deals to find you once you put your What out into the universe.
Your What Parameters:
Business size (denominated in Profit or Enterprise Value)
Industry (be specific)
Return on Investment. This can be in the form of IRR, Cash on Cash return, or even multiple growth over a certain timeframe. Some people might say they need to see a 35% IRR or they might say 3x on money in 7 years.
Here’s My What:
*Business Size: >$100K in Profit (aka SDE, cashflow, EBITDA)
Industry: B2B Digital product, the less technical the better
Online courses, niche marketplaces, vertical SaaS products
Or anything related to the podcast industry
Return on Investment: >25% cash-on-cash return
*Size Matters
Do you want to be fully involved, semi-involved, or completely hands-off? The size of the business will largely dictate your options:
<250K in profit - you’re working full-time running the business.
$250K - $500K in profit - you can hire a second in command (for maybe $100K) to do a lot of the heavy lifting but you’ll still be tasked with long-term goals
>$500K in profit - you can be a true owner-investor. Hire a talented operator for $250K and still generate serious returns.
Caveat, online businesses are easier to hire for fractional roles. You can use marketing agencies, outsourced HR, and overseas talent through services like Shepherd to build your team on a budget.
Define Your Strengths
Ideally, you want the business you buy to overlap with your strengths. Here are the main 3 in order of importance:
Skills/experience - I’m good at B2B sales. If the business could benefit from a better B2B sales function, it’s a good match.
Network/Partners - My network is strong across all SaaS roles and within the online advertising agency world.
Passion/Interest - My interest is to build tools to spark new friendships and solve the loneliness epidemic.
Unit 2: How to Identify High-Potential Deals
Green Flag Business Attributes
Here are some general search criteria to keep an eye out for when you start searching. Filter for these attributes and you’ll increase your probability of winning.
Older businesses = safer bet (most of the time). 65% of small biz fail before 10 years.
Buy businesses with cashflow, don’t just buy assets.
Buy a business, not someone else's likeness. Worst types of businesses to buy: consulting businesses and personal brands.
Done minimal marketing to date
Scalable (almost all internet-based businesses)
Defensible margins (30 - 35% at least)
Highly Motivated Seller (see Seller Archetypes section below)
Good financing options
A business where you can add value (see Define your Strength section above)
Hasn’t raised prices in the last 5 years and has solid customer retention
This is a great one now that inflation has gone nuts. People expect to pay more now. Long-time owners get nervous and don’t want to increase prices. Easy win, big gains.
Owner wants business to succeed (gives you more leverage to sell yourself and negotiate for seller financing)
Seller Archetypes
Ideally, you're looking for an owner who wants to retire and doesn't have a succession plan. But, this is rare in the world of online businesses. Most internet business owners are not at retirement age yet.
Here are the two most common:
Hustler - looking to maximize sale price, only cares about cashout
Burnt Out Owner - cares about business, but has another opportunity or is just completely burnt out from running the business
You want to buy from the Burnt Out Owner. Typically they are burnt out because they haven't properly delegated, not because running the business is inherently impossible.
Buy from an owner who cares about the business, wants to see it succeed, and has to sell the business because they can no longer run it due to burnout, time restraints, or life event change.
Positive Seller Attributes:
Death, Disease, and Divorce are the most attractive buying situations. It’s uncommon to come across these especially with online businesses though.
Look for an owner that has to sell. Is the owner in a position where they don’t have to sell? Then they’re not a great person to buy from.
Businesses that have been sitting on the market for a while. This gives the buyer leverage.
Unit 3: From Search to LOI
Search Process
The majority of searchers never buy a business because they never move past the phase of scrolling listings on broker sites. Follow the guidelines below to avoid everlasting window shopping.
Here are 3 general search process guidelines:
Look at 200 to buy 1.
Biz buying funnel: Look at 200 companies, talk to 25 owners, and sign 5 LOIs to buy 1 business.
Push to meet with owners early and often.
Don't just look. You need repetitions talking to owners. Practice selling yourself. Practice asking engaging questions and getting a read on owners. It's also a lot more efficient to talk sooner rather than later. You don’t want to spend hours looking at a business only to find that the owner isn’t someone you want to work with.
Get under LOI as soon as possible.
If there's a chance you like it, you’ll usually get exclusivity during due diligence and that will give you leverage.
I made the mistake of doing a lot of my due diligence upfront before signing an LOI. My due diligence uncovered some accounting games that gave me leverage to negotiate for a better price. However, I wasn’t under LOI yet and so the broker was able to go back to other buyers that had dropped out which caused a bidding war. I lost out on the deal. If I had gone under LOI right away, I wouldn’t have been obligated to buy the business and I would have had real leverage when I uncovered the accounting game they were playing. Don’t make the same mistake, go under LOI early and often if you like the deal.
Search Strategies
Inbound
Brand yourself as a business acquirer. Post it on LinkedIn, Facebook, Twitter, and Subreddits. The more detailed your criteria, the more deals will find you.
Play the long game. Start a Substack, put your unique perspective down on paper and publish it everywhere. You only need that one person to connect with your thinking.
This could lead to inbound deals, search partners, or acquisition capital.
Proprietary Search
Off-market businesses you'll get better deals but they’re harder to find. Consider the time (and money) it takes to find an off-market deal vs buying from a broker more immediately. Especially for your first deal.
You’re looking for an owner contemplating selling but hasn't taken the step to find a broker yet. Someone in the pre-contemplation stage.
Brokers will inflate the price and anchor sellers' expectations much higher than if you get there first.
How to Find Off-Market Deals
Small business accountants (lawyers and bankers to a lesser extent) know which owners are burnt out and considering selling. Use these channels to find off-market deals.
Databases and business indexes to identify target businesses.
A-Z databases (free library resource)
Gale Business (free library resource)
Capterra (for software search)
LinkedIn
Proprietary Search Process - Case Study
This Acquiring Minds episode with Josh Medow breaks down how he uses free databases, interns, and cold outreach to targeted businesses.
Download A-Z database, clean it, and upload it to a free Hubspot account (CRM tool).
Run the list of companies and owner names through Hunter.io to get email contacts
Clean this list of emails with spam trap software
First email highly personalized, telling his story, not just some private equity firm, picture of him with wife and dog. Second and third email would say something simple “did you get this?” or “should I stop emailing you?”. People would see that and scroll up to the original email and they would say “oh wow this is a real person.”
25% response rate with 12% positive response rate
Push for a call with the owner right away
Followed a script for owner calls to save time. Be able to disqualify and end a call in under 1 minute if not a good fit. Here’s how:
“I’m looking to buy a company that does $1-2 MM in profit per year, not dependent on any one customer, that is looking to sell in the next few months, would you be a fit for that?”
Owners appreciate that you know what you’re looking for and not wasting anyone's time. No reason to talk for an hour only to find out you’re not a good fit for one another.
The owners that are in that pre-consideration stage have already been thinking about selling so they get what you’re trying to do. The ones that don’t get it aren’t ready to sell anyway.
Tech stack - Hunter.io to identify emails, Free Hubspot CRM account, paid Persist IQ account for emailing, and two Gmail accounts so he could send over 400 emails per day.
Used Internships.com now chegg.com/skills/ to find interns.
72,000 businesses filtered from A-Z Databases > 22,000 qualified businesses with contact info > 2,500 positive responses > 1000 owner calls > 1 acquisition
Broker Listings
Brokers range from highly curated quality listings to the wild-wild west of listings. I’ve listed them in that order from most curated to least:
Centurica (aggregator of broker listings)
BitsForDigits (buy partial or whole businesses)
Here is a fully comprehensive guide of broker listing sites and aggregators. A really impressive list put together by The Business Inquirer, Roman Beylin.
The most quality listings are also the most competitive. Although it takes some work on your end, you can find quality deals on marketplaces like Flippa but you have to do a lot of the filtering yourself.
Broker Listing Guidelines:
Business brokers represent the seller, not the buyer.
Get the broker on your side by convincing them you're playing the long game. You will be buying multiple businesses. People treat long-term contacts better.
Asking price does not equal selling price. Lots of owners have unrealistic expectations that can be broken through negotiation. Don’t let the asking price scare you off.
Personally, I’ve started with mostly high-quality, curated good listings. These are more competitive and expensive but it teaches you what a good deal looks like. Even just reviewing a few CIMs from Quiet Light and the questions they ask the owner is a great guide to doing your own proprietary search. With proprietary search, you have to become the broker and the buyer. Steal other brokers’ playbooks. I recommended Quiet Light. No need to invent your own process.
I started with curated listings, talked to alot of owners. I then opened my search up to Flippa which are still listed companies but there is very little oversight by the broker.
Now that I have more confidence in what good looks like, I’m starting to do my own proprietary search.
Quick n’ Dirty Deal Calculator
You should have a quick and dirty deal calculator that allows you to compare business listings that interest you.
You can get access to my Quick n’ Dirty Deal Calculator here.
Inputs
I’ve made a simple deal calculator that requires just 8 inputs:
Revenue
Expenses
*Additional expenses required to fully automate the business
Offer price
Downpayment (how much cash you’ll put down at closing)
Loan amount (percentage of debt that makes up the rest of the purchase price)
Interest rate (of loan annual)
Term (of the loan in years)
*Fully automated expenses - especially with small online businesses, the owner is usually doing a lot of work to keep the business running. When you’re evaluating a business as an investment, it’s important to estimate how much it would cost to fully remove the owner from operations.
Here’s an example. You might find a business for sale that is doing $100K in profits annually. They are asking $300K to buy it. Assuming you buy it in cash, you would make a 33% cash-on-cash return. But, let’s say the owner is working full-time to run the business. You estimate that with subcontractors or a full-time employee, it would cost you $80,000 to fully automate the business.
After subtracting this additional $80K expense to fully automate, you’re left with $20K in profits annually. Your actual cash-on-cash return is 6.6%. This is about equal to what you can expect from an investment in an S&P 500 fund.
Be wary of this. Many business brokers will not show this expense because the owner is doing all the work for “free”. You want to compare the return on investment to any other passive investment, like an investment S&P 500.
Of course, there is much more risk in buying a small business than buying S&P 500 stock. Make sure the risk is worth the returns.
Output (Return on Investment)
With these 7 inputs, my model tells me the following:
Annual cash-on-cash return
Total return on investment over the next 5 years
Debt Service Coverage Ratio (to know if it has a chance to qualify for an SBA loan)
With these metrics, I can quickly assess if the business is worth buying. I can also compare business listings to see which one is most attractive.
Of course, you can get infinitely more complex. But, the key here is to keep it simple and to be able to compare deals apples-to-apples.
BONUS: If revenue is either shrinking or growing significantly you’ll want to add the following inputs:
Revenue growth percentage
Variable expense growth percentage
Expenses that will grow as a function of revenue increasing are your variable expenses.
Want my deal calculator for free? You can download it here.
Unit 4: Closing the Deal
Build a Closing Team
When you start getting close to LOI, build a team to help you with the acquisition.
You’ll need three key roles: accountant, attorney, banker
Someone to help you audit the deal, protect you legally, and finance the acquisition with debt.
Hire specialists, not generalists.
Rule of 3 - screen three of each to drive price down and value up
Attorney - that wants to keep it simple, simple is better
Banker - SBA or local banker
Accountant - that works with small businesses in the area
You don’t always need these exact titles. For example, when I got close to buying a simple Stripe-enabled recurring revenue business, I had my ex-colleague who specializes in business intelligence and Stripe payment processing audit the revenue. He was a lot more qualified to do this than any accounting due diligence acquisition firm.
Negotiation
More Information = More Leverage
The most important framework to remember when negotiating is to be exhaustingly curious about the seller. The more information you have, the more leverage you’ll have when it comes time to negotiate.
Questions to Ask the Seller:
Why'd you start this?
Why this industry?
What did you do before?
What's enjoyable about this business?
What's the toughest part?
What's the most important thing that you want your customers to know about you?
What does your average business day look like?
Why are you selling?
What will you do with this money?
Ideally, what would happen to the business after you sell it? Does it matter?
What keeps you up at night, competitors, customers, operations, sales, tech?
What is most important to you? (Potential answers)
Legacy, wants their brand name to live on
Customer to be in good hands
Employees livelihood
Money, do they need it all upfront or a stream of income over many years
Why do you need the money? Are they moving, paying for college, retiring, getting divorced?
What are their unknown desires?
Continued involvement by sitting on the board?
That the business keeps growing and doesn't get sold off to some private equity firm?
What sort of income are you looking to get from selling this business?
"I need $1MM out of this business." "Ok, what would you do with that money if you got it all upfront? What if you got $250K for the next 4 years instead?”
An important sales lesson I learned was to ask the most important question as many times as you need to until you get a real answer. Even if they’ve already answered some of these questions in a broker packet, ask them directly to the owner so you can judge their answer. The broker has coached and edited every answer in the packet they provide you so that no weaknesses or potential leverage is shown. Ask them in person or over Zoom so you can get maximum information.
Understanding the Seller Gives You Leverage
Understand if they have emotional attachments, like legacy, so you can sell yourself and insure them you’ll protect it.
Understand their financial motive so you can use that later to structure a better deal
Discover the wedge that can get them unattached from the business and getting excited to sell it
Understand their skill set and compare it to your own so you know what gaps you'll need to fill and where you might be able to improve things
Deal Structure Levers
After you understand the seller’s wants, needs, and desires – you can use that information to structure a deal in your favor. Here are the different deal structure levers that are at your disposal to trade on during a negotiation.
Primary Levers
Price - how much you’ll pay.
Terms - when you’ll pay it.
My price, your terms OR your terms, my price. One or the other.
Want your money upfront? (your terms), then you'll get my price (which will be lower than what you’re asking)
Want your high valuation (price)? Then, you’ll get my terms (I’ll spread the payments out over time via seller financing)
In general, you want to give them their price, and get your terms. Winning on terms is where you can win big. Terms are where you can put little money down and pay off the owner with profits from the business.
Secondary Levers:
Transition plan
How long will they stay on to help you transition to become the new owner? 50 free hours, 100 free hours? 3 months, 6 months?
Milestones/earnouts
A way to give the seller upside and make sure they have skin in the game. Example: Purchase price is $2 million, with $1.5 million paid upfront and $500K contingent on a performance metric like profitability or revenue.
Non-competes
How protected are you from the owner starting a competing company?
What to Bring to the Negotiation Table
LOI/Term sheet
Always ask for exclusivity on the deal during due diligence. If they say no, shorten your due diligence window and ask again.
Purchase price subject to due diligence
Refundable good faith deposit of $1K or more
Proposed financing structure - start with high seller financing at 0% interest rate.
Copy of proof of funds so they know you're serious
Outline your due diligence process and plan to close. You need to have a shared plan to execute the deal.
Here is a non-binding LOI/term sheet for x price, with x financing terms with x due diligence window.
What do you think your business is worth and why?
Old saying in sales, whoever goes first in a negotiation loses. Let them set their price and justify it to you. They might stumble into some gaps in logic that you can use. Come prepared with enough industry knowledge of downward trends so you can use them to set reasonable expectations. Owners are overly optimistic, especially when they're trying to value their business.
Negotiation Frameworks - Mark Yegge
Time - the one with the least perceived time constraint has the most power. Figure out how much time they have to create a win-win.
Ask them what they want, do not assume.
Ask for what you want, do not tell.
Ouch technique - "You’re asking price is 5x on profits? Ouch!" they may come down in price without even having to negotiate.
He who asks the most wins, he who talks the most loses.
Make sure you have an alternative / backup plan. This keeps you from being desperate. Keeps you from getting emotionally attached.
I made the mistake of becoming emotionally attached to a business I was in negotiations with. I searched for backup options which lessened the pressure I was putting on myself to close the deal. A broker or seller can feel your desperation if you don’t have a backup plan.
We learn at the end of our comfort zone, push harder, get uncomfortable.
A sales manager told me once "you don't need the prospect to like you, you just need them to not be hated." We all want to be liked. But this can hold us back from asking the tough questions. Be polite, but push hard. The hotter the topic the cooler your tone.
Sell Yourself to the Owner
Keep their baby alive, preserve their legacy
Most sellers aren’t singularly focused on money. They want to make sure their baby is in good hands. Selling yourself to them is paramount.
I sold my landscaping business to the lowest bidder because I knew he would take care of our customers and was a competent businessman. He wasn't even going to keep our business name but it was important to me that our longtime customers would be in good hands.
Sell your Skills, Network, Passion to the owner. Here’s what that looks like for me
Written about solving the loneliness epidemic through online community building
Owned and operated 110 lawns, managed 15 people, 3 different crews, sold business before graduating college.
Helped build SaaS biz from startup to public company. Sold $10MM in software, grew channel sales from 8 - 40% of total sales, worked on every part SaaS sales funnel.
Tell your story to prospective sellers. You want to be known as much more than just money.
Brand name legacy, customers, employees, a secure stream of income. Figure out what they want and show them you're the best person to deliver this.
If you can figure out what they want, and be the clear winner to deliver above other buyers, you can dictate the best terms.
Due Diligence
Be a client of the business you're going to buy first. Evaluate from the customer experience perspective.
Audit the financial and technical aspects of the business.
Hire experts to do each part of the audit. If it’s a technical firm, hire a technical friend to review. If you don’t have a friend, hire a technical auditing agency.
Financially model the worst-case and see how much it will cost you.
Evaluate based on straight-line growth, don't use their growth projections.
What in the financials will help me negotiate? What are negative trends? Or what doesn't make sense?
Example: Seller cutting long-term investments/expenses (like SEO) leading up to sale of business
Quick and dirty due diligence list:
3-6 years of financials
Expenses and Revenue broken down monthly
Website traffic metrics and SEO credibility
Valuation
Subtract operator's cost from profits upfront to get true profit numbers. How much would it cost to completely remove yourself from the day-to-day operations? To completely automate the business without your involvement?
Seller wants to price his business of 4x profits? How much would it cost to fully replace the owner? Now do your 4x profit valuation off this number.
Keep it stupid simple when modeling a business:
Two most important metrics for valuing a B2B online business:
Customer Acquisition Cost (CAC) - how much does it cost the business to get a new customer?
Lifetime Value - how much revenue does that customer generate over their lifetime? Average revenue per customer per month X (1/churn rate per month)
With these two metrics, you can figure out generally how profitable the business will be. If it costs you twice as much to acquire a customer than their LTV, don’t buy it.
Financing Options
Codie Sanchez the concept of using “OPM” or Other People’s Money. The concept is simple, generally speaking, the more debt you can get to finance the purchase price, the higher your returns will be.
Equity is also an option if you need it to make the debt service work or if you’re looking to align yourself with a strategic investor/partner.
Debt
There are essentially three types of debt available in this space. In order of most attractive to least attractive, broadly speaking, they are: Seller Finance, SBA loan, and Private Lenders.
Seller Financing
With interest rates at historical highs, I’ve found that more sellers are open to the concept of seller financing. The concept is simple, the owner essentially gives you a loan. So instead of paying $1MM upfront, you make a downpayment of $400K and get seller financing for the remaining balance, $600K. You pay back this sum to the owner out of the profits of the company over a defined timeline, usually 3 - 7 years.
I expect the seller to offer some sort of seller financing in this current high-interest-rate environment.
Seller financing is a huge advantage because it aligns the owner with your success. They can’t just dump a terrible business on you if they’re hoping to get paid back with the profits from that business. It’s essential to negotiate for some level of seller financing in my opinion.
Advantages to Buyer
Owner has skin in the game after the sale. Keeps the seller invested to provide value after the transition.
Good negotiation technique to bridge valuation gap. He wants another $200K on purchase price? Let’s do it with seller financing over 5 years.
Creates a win-win, where the owner has skin in the game and maybe some upside via an earnout.
Goal is not to burn the owner, you want them to win along with you.
Quicker than a SBA loan (a lot quicker)
Advantages for Seller
Pay less taxes by spreading earnings across multiple years
Higher selling price
Quicker than a SBA loan (a lot quicker)
Creative seller financing structures
give owner upside if company grows
guarantee payout out of profits but if profits slide down, the payback window is extended. If profits increase, the pay back window shortens.
Typical Terms
Seller financing of 50% - 90% of purchase price.
Rate (0% - Prime rate)
Duration 3 - 7 years
Bonus Seller Financing Structures:
Earnout - Use this to give upside to the seller. If the company performs better than expected, they make more money. This is a great way to entice the owner to stay involved if that’s part of your objective. Or, use it as a negotiation tactic.
“My company is growing at 30% annually. I won’t take less than 5x profits on the valuation.”
“Cool, it’s an unknown so I’ll pay you a 4x valuation but if it grows at 30% for the next year, I’ll pay you 5x”
Holdback - The opposite of an earnout. Use this to maintain leverage after the sale if things go south.
Let’s say your seller financing terms are $600K seller note to be paid back over 6 years, $100K per year. You could add a holdback clause to protect you from downside risk. In this example, it might be that revenue needs to be no lower than 90% what was reported after the first year. If revenue drops below 90% of last year's revenue, the payback period is extended another year. Or the purchase price decreases.
SBA Loan (7a)
Get up to 90% leverage (10% downpayment)
Debt Service Coverage Ratio (DSCR) needs to be between 1.15 - 2.
95% of SBA loans succeed. So if you're able to get approved for an SBA loan it’s a good sign that you’ve bought and structured a winning deal.
I follow this DSCR formula now whether I’m pursuing an SBA loan or not. If a bank is going to fund it, it's probably a good deal. Following their general guidelines with seller financing or a private lender will help keep your evaluation honest.
Top SBA Lenders in online space:
Live Oak Bank - 1.5 DSCR
Webster Bank - 1.25 DSCR
First Internet Bank - 1.15 DSCR
Private Lenders
There are private lenders, most notably, Boopos, that will fund your acquisition as an alternative to seller financing and SBA.
Quicker than SBA loan process
More expensive than SBA (usually)
No personal guarantee
Equity
This article by Mainshares shows the top self-funded search fund investors.
Once you find an acquisition target, you can find equity partners to help finance the deal. There are four main types of investors that can help fund an acquisition:
Friends and family
Angel investors
Search investing syndicates
Managed funds
Sometimes also referred to as, Capital partners, or LPs.
Unit 5: Post-Close Transition and Stability
Your countless hours of searching have finally paid off. You found your target company, come to an agreement with the seller and secured financing.
Now you have to throw away all the search skills you’ve built up to actually do what you set out to do - own a business.
You’ve got to successfully transition ownership from the seller to you as the new owner.
First 90 Days
Get the previous owner to introduce you and get them excited and optimistic about the transition.
Set your employees' minds at ease.
First, I’m here to learn. No major changes planned.
Make the first meeting quick and easy, 10-20 minutes to outline why you bought it, why you’re excited, where you think you’re headed.
You're excited and the future is bright - this is the energy you want to project onto the team. You want them to feel the same way leaving the meeting.
Ask questions, encourage them to ask questions.
They are the experts, you're there to learn.
Show them you’re truly trying to learn by asking them for a small favor. Ask them to answer the following:
What would make your job more enjoyable?
What can be done to make you more effective at your job?
If you were the new owner what suggestion would you have for the overall business?
Expect it by next Friday in a timely manner. This does two things:
Show (instead of tell) your employees that you actually want to learn from them.
Those who do not complete this simple deliverable by next Friday are probably not bought in.
Don't make promises you can't keep. If you don't have an answer, that's fine, you're there to learn. Don’t try to be a know-it-all.
When selling software, it was the same thing. You want to be knowledgeable and provide value but sometimes I would intentionally say, “I don’t know the answer to that.” This establishes more credibility, no one knows everything. And, it gives me the opportunity to do them a small favor by finding out the answer and following up to provide the information they wanted.
Finding an Operator
Codie Sanchez has mentioned that she now find an operator first and then she finds a business to buy that they could run second. Perhaps obviously enough, that’s how important an operator is to the success of the business.
Some of you will want to run the business you bought at least for the foreseeable future. However, there might come a time when you want to wash your hands clean of the day-to-day operations and become a true owner-investor.
To do this you’ll need to find an operator. Below are some tips on how to find that person and the personality types that make for good operators:
Pre-existing relationships are ideal. Trust is hard to come by. If you've seen them react well to adverse situations, this is a good sign. If this is unknown, it's a risk.
Existing employees. The second in command could become your operator. Align their goals with yours, give them equity and upside.
Ex-teachers and Ex-military are great. Both like structure and have dealt with adversity.
Important to ask operator candidates what their 5 to 10-year plan/goals are before putting effort into an individual who plans on doing something else in less than 5 years.
Alternatively, you can help an existing operator buy a business, give them skin in the game. Equity upfront and let them work towards more.
Hi Patrick, this resource has been extremely helpful. Any chance you can share access to your calculator, it says the website expired.
...the amount of info in this is insane...amazing work...