John Warrillow, Founder, Value Builder System
John Warrillow is an entrepreneur and author with over 20 years of research experience into the small and medium business (SMB) market. He founded The Value Builder System™ to level the playing field for business owners as they approach their exit. Over 35,000 business owners have taken the Value Builder Questionnaire, and with the support of Certified Value Builders™, such as brokers, M&A professionals, and coaches, they’re using the statistically-proven methodology to improve company value by up to 71%.
John’s best-selling book, Built to Sell: Creating a Business That Can Thrive Without You, was recognized by both Fortune and Inc. Magazine as one of the best business books of 2011. In 2015, John wrote another best-selling book called, The Automatic Customer: Creating A Subscription Business In Any Industry.
John is also the host of Built to Sell Radio, ranked by Forbes Magazine as one of the world’s 10 best podcasts for business owners.
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AUTOMATED EPISODE TRANSCRIPT
[00:00:01] You're listening to Scaling Up Services where we speak with entrepreneurs authors business experts and thought leaders to give you the knowledge and insights you need to scale your service based business faster and easier. And now here is your host Business Coach Bruce Eckfeldt.
[00:00:22] Are you a CEO looking to scale your company faster and easier. Checkout Thrive Roundtable thrive combines a moderated peer group mastermind expert one on one coaching access to proven growth tools and a 24/7 support community created by Inc award winning CEO and certified scaling up business coach Bruce Eckfeldt. Thrive will help you grow your business more quickly and with less drama. For more details about the program, visit eckfeldt.com/thrive . That’s E C K F E L D T. com / thrive
[00:00:57] Welcome, everyone. This is Scaling Up Services. I'm Bruce Eckfeldt. I'm your host. And our guest today is John Warrillow. He is founder of Value Builder Systems. He's also the author of The Automatic Customer and Built to Sell. John was on our program. I think it was last year, early last year. And we talked a little bit about what it takes to build a valuable, sellable company. Today, we're going to talk a little bit more about what it takes to be happy after you do that. A lot of research, a lot of insight that's gone into what happens during the selling process, after the selling process. What do you need to do as founder, as CEO, as entreprenuer to make sure that that's gonna be a positive experience for you and what you can do beforehand as you're building the company, actually developing a plan of making sure that you're going to be happy, engaged, thriving on the other side of that. So with that. John, welcome to the program. Hey, thanks, Bruce. Could be. So why don't we talk a little bit about just get people kind of a base understanding of your background and the books for those people that haven't read built to sell the experiences you've had, the methodologies, the insight that you've created on what it takes to build a valuable company that sellable. We'll talk a little bit about this next phase of actually selling it. And what do you need to keep in mind as an entrepreneur, as an owner, to make sure that you're gonna be happy?
[00:02:05] Yeah, sure. So I've been involved in a few businesses that I've built and sold. I wrote a book called Bill to Sell After That and try to codify the learning. And the company value builder sort of came out of that book where we help entrepreneurs improve the value of their company leading up to an exit. We've worked with some 50000 business owners now the last seven years. And one of the things that I found interesting is that in many cases, business owners were striving for the highest possible valuation for their company and then ending up in terribly miserable after the sale. And so they got a check the box on on, you know, got maximum price, but end up being horribly upset and depressed after the sale. So it's a triggered a bunch of research for us. And and I think we learned quite a bit about what makes people happy after a sale and try to codify some of that into something called Prisco, which is Nuccio we launched.
[00:02:58] Oh, awesome. Yes. And I've I mean, I was mentioning before we got on the recording you that, you know, I sold my business.
[00:03:04] I think I went through a little bit a little bit of like, what do I do now? You know, you got this thing you've been working on for a decade and all of a sudden you sell it. You know, you do your transition. You're no longer running it. I think some people actually struggle with that part. Like you zetlin, you're no longer in control, but you're still involved.
[00:03:20] But then, yes, like, what do you do next? You know how you get that out. And certainly many, many people that I've worked with, colleagues of mine, you know, 3-0 through IPO, you know, these groups that, you know, people sell and they they end up in this new context. And if they haven't done some planning and some thinking that it can be it can be tough. So walk us through some of the things that you've been kind of discovering and the research you've been doing in terms of what contributes or what goes into are the factors involved in sort of successful exit successful sales above and beyond just maximizing the financial side?
[00:03:50] Yes, the first one is getting clear on your pull factors. So I think every owner has push and pull factors when they sell their company, right. They push things are things that frustrate you, right? Government regulation and managing employees, whatever the pull factors, the things that you're excited to go do, climb a mountain, lose 10 pounds, write a book, start another business, whatever's on your list or your pull factors. And for a lot of owners, they're all push and no pull. They've got lots of reasons they want to sell, but very few things they're excited to go do. And so I think the recipe for a bad exit is, is being all push, meaning all the things you're you're you're wanting to kind of get rid of. I mean, Bruce, in your case, what were your push factors? The things that you were frustrating you about your company?
[00:04:40] Yeah, it was interesting. There was there was kind of market push factors. We were consulting development, consulting services. And so there are changes in the in the nature of the market that I just found. Our business model wasn't as interesting. The way we were gonna be successful was not a business model and a type of company that I really wanted to be involved in. There was some just personal push factors in terms of, you know, having been at it for 10 years. You know, I was in the company leading the company for 10 years. And at some point you get some fatigue for a change and then you have business partners. And, you know, the way you run into kind of strategic alignment issues and you realize that you're not going to be able to continue in the current situation. And so, you know, exit becomes a way of resolving those things. Monetizing. Giving you some some runway, but yeah, I totally get that. If it's driven by push that there is a I think a natural resistance in our psychology to not want to change. So even if it makes logical sense that, oh, I should sell this thing. If you haven't created a driving compelling reason, something that you're gonna go do that's pulling you into something new, you're going to find ways of reducing it, whether it whether or not you know for sure.
[00:05:46] I'm reminded of a guy named Sean Oshman, who I interviewed for my podcast, built a cell radio. The guy's business was in a funny spot. He was in Colorado. It's called I Support You. And they were in I.T. support services. So you got your computer. You need to network it or get rid of a virus where he builds it up to a couple million in sales and he goes to a broker who says, look, you know, I want to sell. The broker says Weiss as well. I'm thirty nine and by my 40th birthday, I want to be living on a sailboat. And a broker says, OK, well, how much money you need? He says, well, you tell me what it's worth. The broker says once, you know, it's probably worth two or three times what brokers refer to as SD E, which stands for sellers discretionary earnings. It's kind of think of it as your full compensation benefits from the business. So kind of two or three times, Oshman's says, OK, fine.
[00:06:32] But the one caveat is that you've got to get it to me within a year. Because I want to be on my boat. Your broker comes back. That's him. An offer. I'm going by memory. But I think was 2.6 times.
[00:06:42] Stv Guys listening to this podcast, Guys and Ghazals and the Vikings, we'll hear the words 2.6 and think, wow, that's crazy. That's like really low. Why would he ever sell? Oshman Sold. Bought his boat and well-spoken is happy as a clam. Sailing around the ocean with his fiancee, he had a pull factor, right? Something that was excited to go do. So whether he got 2.6 or 3.1. It's a little bit less important than being really clear on what is what's really motivating you next.
[00:07:15] Yeah. I mean, there's almost I mean, not to make it too analytical, but there's almost a there's a value in his mind of being on a sailboat. Right. And that that's worth something. And for him, getting the money, even if it's a lower valuation, getting the money to be able to go to that other thing was in net in total more valuable than maybe taking, you know, getting a higher valuation, but dealing with, you know, not being able to do the other thing he wants to do for a couple of years because he's got to earn it out or it's going to it's going to be paid over time. You know, it's it is this kind of being super clear on what your total value is or what is valuable to and how you're going to offset those things.
[00:07:50] Yeah, how you're quantifying value. It reminds me of a guy that I interviewed who had a swimming pool company and he supplied like lifeguards in swimming pool products and services to condominium buildings that had swimming pools. And he's going about his life. He's happy as a clam that you had a couple hundred part time employees. Neo guy, successful guy. And he goes to an industry conference where he learns that every seven years on average in that industry of managed swimming pools, somebody dies. And he went to bed that night thinking, oh, my gosh, I've been in business for 11 years and we've ever we've never had a drowning. I'm doing it. It was enough to get him to sell his company. Again, going back to what is the currency for you in that case? That's a big push factor, right, that you wanted to avoid. That is a big push factor. But it goes back to the idea of quantifying the peace of mind to know that you no longer own a business where someone could die. You know, I hate to be too morose about that negative. But for him, it was it was a big push factor.
[00:09:00] Yeah, well, I like that idea that it's. I mean, I do this with my clients who sit down and we talk about, you know, where they want to be in three years. We talk about where their company can go, what they're going to sell for less. They always ask this question of then once it's something. Then what if they don't have a good answer to that? Then what? I know that we need to work on that as well, because honestly, I've seen people inadvertently, almost subconsciously blow up deals. Because because they get scared. They get scared of, well, if I sell this, what am I gonna do and what's my worth? What's my value? And they get so tied up into the company as a personal identity that they'll actually sabotage a deal that that can be a great deal. But just cause they don't have a plan and they haven't actually psychologically gone through the process of figuring out what their next phase is going to be.
[00:09:39] Yeah, that was that's number two on our list of kind of drivers of of a happy, lucrative exodus is separating your ego from your company. And there's some things like so some counterintuitive things that are our potential bellwethers of a problem to come. So, for example, if your name is in the company name, it's really difficult to sell.
[00:09:58] Not only does it make it a difficult business to sell because you're obviously you're communicating to the market that you're part of the company.
[00:10:05] But equally, if your trucks are driving around town and it's like Jane Doe and and assisters or John Doe signs, you feel a personal like that's your family name and you no longer control it. You know, one of the one of things we ask. Business owners say, like, how would you be most likely to introduce yourself at a cocktail party? Would you be more likely to say I'm a business owner or I own a business? Those sound like basically the same thing. But there's a subtle but I think important difference when someone says I am a business owner. They're saying that that is who they are as a person. It's like I am a basketball player. Well, that works out really well until you're 28 and you blow out your knee and then you're a ballplayer. It is not so good on the self-worth, which is why so many ex athletes go through. The same thing is as entrepreneurs. Right now they go from having so much of their identity rolled up. It reminds me I interview a guy named Steve Merche. Steve was and is a tremendous successful entrepreneur. He's had four companies. His first one was a company called Vacation Spot with sort of an early precursor to Air BMB, sold it for like $78 million to Expedia. And if anybody on the planet could walk around with his chest puffed out and sort of claim that he is an entrepreneur, obesity. But if you met the guy, it would be the last thing on your mind. He is. When I first met him, he was he was regaling a room on World War Two history. And I'm like, who is this geek? And we've developed a great friendship since then. He is a tremendous World War Two buff. He's a he's an avid cyclist. He's the chef and his family. He's the father of three kids. He's I mean, he's he's got all these hats that he wears, as well as being an entrepreneur. And he, to me, is is the gold standard is separating your ego and your personal sense of self-worth from being a business owner.
[00:11:59] Yeah. Well, the other one that that comes out for me and that is I think a lot of people end up with this. You know, I'm going to build this business. I'm going to work 80 hour weeks. I'm going to dedicate myself, you know, burn myself out to the business, and then I'm going to go relax and then I'm going to sit on a beach or something like that. And I think that's that's a recipe for disaster for most entrepreneurs. I mean, unless I don't know, unless you're, you know, really ready for retirement. But even then, I would say real life for them, whereas I still want to do something pretty intensely as you can to have something you're gonna throw yourself into. Like if you just if your plan is to kick back, I'm not sure that works out very well most times. And I think, yeah, that dedication is important.
[00:12:35] Another fun sort of marker of how well you're going to exit your company psychologically is just how many hours a day do you work in it. To your point, if you're 80 hour a week guy or gal now, you're not going to be able to just go down to zero. But if you've done a good job of cultivating some other interests, maybe maybe you're doing some coaching or maybe you're involved in your community on some level and you're down to like 20, 30 hours, you're going to have a much more successful business. I interviewed a guy named Damian James out of Melbourne, Australia. He runs a company. You're used to run a company called Dimple. They did like onsite podiatry work in old age homes. And he was a classic Ontario guy, actually, hundreds of hours a month. So, you know, certainly 50 a week and kind of got to a point where it was all too much and hired it, too. I see a second in command who we basically gave the operational control of the business to. He kicked himself up to being kind of in charge of vision of values. And the two I see scaled up the company ultimately Damian sold for I think was thirteen point two billion dollars. He was down to one day a week in the company.
[00:13:41] That's a guy who's going to have a much more successful exit than the person is working at eight hours a week. Just just grinding it out, trying to get to the finish line. So hours, the days crude is that is as a proxy, I think is a good one.
[00:13:53] Yeah. Let's. I mean, it's it's almost like a withdrawal. You can't go cold turkey on some of these things. You've gotta wean yourself off of it and start to bring it down. Because if you try to go from under miles an hour to zero, it's going to it's going to hurt and you're going to be loved.
[00:14:08] Ted Cruz. So what else have you found and what are some of the other points that go into, you know, a good plan, like when you're kind of successfully financially scaled the company you're going to sell? What else do you need to make sure that you have in place to to make it a good exit?
[00:14:21] The big one that a lot of entrepreneurs regret is at the a year or two after the fact, they'll they'll have their feet up in the proverbial rocking chair and have the aha moment where they say, Huh, I wonder if I left money on the table. I wonder if I sold for a fair sized regret.
[00:14:40] Yeah. Because, you know, if you get an offer, it's probably more money than you've ever seen in your life on paper. You know a multiple of what your home is probably worth. It can be destabilising. It can be shocking. It can be an emotional rollercoaster where you're like, oh, my God, I'm gonna get paid all this money. But you don't necessarily think, well, maybe there's someone else out there that would pay 10 percent more. And so we get as entrepreneurs, oftentimes suckered in to what's called a proprietary or Propp deal, where a buyer is really only negotiating with you directly. There's no competition. And that's a recipe for regret because if you get sucked. Into a proper deal, although you may get fair evaluation, you'll never know, right? And the only way you'll know way if you got a fair price is if you created some competition. In other words, got multiple offers. You saw what the market was willing to pay. You know, the inverse is is a recipe for disaster. And that's why I think a lot of auctioneers, you know, we do ourselves a disservice, I think, to some extent by by being rigidly almost dogmatically clinging to this idea that it's got to be 100 percent cash at closing. And the problem with that strategy is that it is going to turn off a lot of potential buyers.
[00:15:57] You know, the vast majority of buyers out there are going to want you. The entrepreneur, to do some sort of transition, you know. You know, small earnout. You know, if it's a private equity deal, you'll recapitalization where you keep some equity or carry some equity. These are you know, if you're open to these different structures and look, I'm I'm a big value guy. I want you to get as much cash as you can. But if if you're totally closed down to any structuring at all, it means that a lot of buyers will walk and you may get left with either no buyers or or one. And that's again, when you you have the potential to look up at the end and go, oh, man, did I leave money on the table. And so I would I would encourage you to be open to all different structures. And in a funny way, the more open you are, the more offers you'll get and the more offers you get, the more you'll be able to determine and dictate the terms you want ultimately. But the inverse is not true if you start the negotiation saying it's got to be a hundred percent cash, man, you just you lose a lot of conversations before they even really start.
[00:16:56] Yeah. Well, and I think I mean, for the folks that are listening here. I mean, we're talking about service based business. This is going to be key because unless you're dealing with if you've got some IP or or you're going to basically someone's buying you for your customer base or something like that. And there's really there's no there's no future value that they're paying you for. That's based on the future performance of the business. Like they're just doing a strategic deal to to buy something that you have. And they're going to create the value going forward, not you. Then you can you know, certainly you can push for much more kind of cash upfront deals.
[00:17:26] But anything that service based where you've got a client base services that you are involved in delivering, and any way you're going to have some kind of earnout, you're going to have some kind of proof of ongoing value. And that's what they're buying. Right. They're buying. They're buying the future profits created. And if you're not sticking around to create those future profits, they're just. The value is not going to be there. So you could actually leave a lot of value on the table by by not doing that. Like you're gonna have to take a huge discount. And certainly creating the competitive environment is key. I think it's hard if it's not part of your plan, if you haven't sort of set up a plan to say, OK, look, in the next 12, 24 months, this is what we're going to do, we're gonna go out and sell the company because then you're going to get stuck and either, you know, kind of a fire sale situation where you have to sell for some reason or you're gonna get a situation where someone comes to you with an offer or says, hey, look, I want to buy your business, I'm going to give you X, but now you have nothing to compare it to. And it's you know, usually it takes a little while to get some other buyers to the table. It may be a limited time offer and you're just not going to be able to create that situation. But if you have a plan, I think that's where you can you can create this. Give me a sense on your take on that.
[00:18:30] Yeah, I absolutely agree. And I think, you know, the two most common reasons owners sell or are, number one, they have some sort of health event, which is a push factor, like a heart attack or whatever, or number two, they get approached proactively by a buyer, which leads to a prompt deal, which is again, the recipe for diluting the value of your company. And so in both of those cases, you're on your backfoot. And I agree. I think you want to you want to lead into your exit on your front foot, planning it proactively and just to kind of round out our conversation around the fourth of four major drivers of value. It's being really proactive about your team. So one of the other areas we see a lot of regret from entrepreneurs after they exit is how their people were treated. Right. So it's one thing to have a great exit personally, but if your employees end up unhappy in this situation, it can lead to tremendous regret.
[00:19:26] And for a lot of us, our employees are the people that bring us to the dance. They're the ones that get us even into this conversation. Right. And to feel like you didn't do well by them or they didn't do well by you, I should say, is is a big I remember a woman I interviewed for the Pakistan Connie Fangio, Vancouver, Canada. I think it was Connie who insisted that the buyer keep the head office of her company in Vancouver for I think was two or three years after the sale. It was just because she knew a lot of her employees liked living there. Right. And they and she wanted to give them enough runway that if they were going to leave the company, that they wouldn't be left high and dry. And I think that's that's a biggie for a lot of entrepreneurs who are just myopically focused on maximize value, maximize value, maximize value. But you could do that and end up feeling quite sad about the process.
[00:20:15] Yeah, I think that it's an easy one to forget. I mean, you're at you're in the heat of the. Well, you're you're negotiating the terms, you're looking at the numbers, you're trying to get paper signed like without a little bit of perspective and a little bit of a plan around that, that you could see how that on the other side could lead to some some harsh feelings or some some regret on that you didn't do more. I mean, and it sounds like it's not just money and it's not just. Okay, well, making sure that, you know, everyone's getting a little piece of the action or they're getting, you know, a financial word, but actually thinking through the other kind of risks or impacts a sale can have on on people in an organization, whether it's, you know, where their office is located, how the management structure is in place, what clients you're keeping, what services or products you you keep or don't keep, you know, thinking through that enemy. You know, it may not be a huge amount to have any impact on the terms of the deal.
[00:21:03] I mean, there may be things you could put in there without really having to pay for it necessarily. But just thinking about it and having a plan and being aware of it could make sure you really feel good about the deal based on how you've you've really respected and treated the people that help you get there.
[00:21:16] I agree. A hundred percent. And one of the other elements of it is, is as trivial as it may sound. How are you going to tell them? If I had one question that comes up and this is goofy, I do talks occasionally for entrepreneurs, know groups to self. And I get asked, like, how do I tell my employees, should I tell my employees? And and being again, thoughtful about that is really important. The answer to the questions is no. You should not tell your employees the fastest way to destroy your company in the process of selling it is to tell your employees because employees are employees for a reason, right?
[00:21:49] Like they thrive on on the paycheck. They want to know that it's going to be there and they don't thrive on the the unknowns. Which is what? Yeah. What you thrive on as an entrepreneur.
[00:22:00] And so the first thing they do when they hear you're thinking of selling a company is they brush up their resumes. They get their LinkedIn profile ready to go. And they start reaching out to people in your industry. You know, the people in your industry find out you're for sale. They tell the competitors, they tell the customers, and pretty soon you're destroying tons of value along the way. The other thing to know is that for a lot of businesses that get an A L-l-I letter of intent, they don't consummate into a deal. So if you've never gone through the process, you can think, OK, I've got an why, I'm 95 percent of the way there. I know you'd like 10 percent. I was going to say about six. Yeah, yeah. You're not anywhere close. And there are so many things that can go wrong between Alloway and definitive deal that you have no control over. Frankly, I was just interviewing a guy who was on the precipice, like of selling his company to compact. Remember, compact. They're now since defunct, the big personal computer maker. So he had a definitive or a l.y had gone through 60 days of due diligence and Compaq was supposed to be sending through the signed share purchase agreement, essentially the consummation of the deal. It was a Friday afternoon. He was waiting by the facts. This was during the days of fax or a fax machine isn't ringing use checking the owner and the idea is that it's a full lunch. Yeah, exactly. Yeah. The day comes. No share purchase agreement. And he goes home.
[00:23:25] Weekend is fussing about it. Worry about it. Flips on CNBC on Sunday and learns that HP and Compaq have just announced a merger. Monday morning goes in. The deal with Compaq is off and and he's got nothing. But but if you told all his employees, then, you know, you're you're in a really bad way. So I'm not a big fan of telling employees you're thinking of selling it. It may make you feel like a like you're cheating on your wife or your husband. Well, you walk around your company, but I think you've got to keep it very close to your vest until the check is cleared. The bank.
[00:24:02] Yeah. No, I agree. I would say, you know, you need to. You need to race through the finish line. Right. Like you need to push through until the deal is done, until the catches in the bank, until the ink is dry, like you keep pushing, you run the company. Because anything I think that happens around that is, you know, people end up getting so focused on the deal that they start taking our eye off the ball in the company and then the company performance starts to dip. You know, they're not they're selling. They're not they're managing. They're not they're innovating. And now, you know, either the deal doesn't happen. And so now you've got to go back and pick up the pieces or the deal does happen. And part of your part of your value is earnout. And now you're dealing with a company that's had a blip or is now. You've got to kind of recover from that. So I think figuring out a way and then dedicating, you know, time and energy to keep the company running while you're going through a sale process, it's it's hard, but it's really, really important.
[00:24:49] Yeah. And it's also one of the reasons why a prop or proprietary deal is so dangerous, because here's what happens when you get sucked into a conversation with one buyer. There's a little light bulb goes off in that buyers hands is okay, this guy's not negotiating with anyone else. Okay, let's get him a letter of intent. No problem.
[00:25:05] We'll sell. You know, we want to do our due diligence over 60 days. But again, they know that there's no one else at the table. So 60 days, 60 days turns in a 90, 90 turns at 120. And if you're anything like any human being, you've already cash the check in your mind. But the ski place, you know, you sort of checked a few purchases that you want to make, and to your point earlier, Bruce, there is performs the company may be drifting a little bit and you end up at the end of 120 days or more. And the buyer says, you I said, you know, we were going to pay X, but now we're we're thinking more like 20 percent less than X.
[00:25:37] The haircut. Yeah. And now you're now you're kind of screwed because what do you do? Say no.
[00:25:43] What do you do? Say no. You've invested all this time and money in the deal, you know? And then if you if you've told your employees now, it's even harder to say no. Right. Because, you know, they're they're all checked out. So my suggestion is don't tell your employees.
[00:25:56] And unless they absolutely must be part of the sale process, in other words, the buyer, you know, has to interview maybe one or two of your managers then. I mean, that's a different story. But telling your rank and file employees. No.
[00:26:08] Yeah, I agree. And yes, I mean, everyone smile. There's there's some key employees that have to be, you know, part of the deal process either because they're they're going to be part of the deal in some way. They're going to get some kind of retention agreements and stuff or they're required or they're you know, it's needed information and due diligence. But, yeah, no, that's and that's the classic problem. It's like you get you get committed to that. You get invested in that deal. And the l.y is going to be the best number you ever get. It just it only goes down from there. So, you know, keeping yourself able to negotiate. Able to walk away if you need to is is key to creating that value.
[00:26:39] What else? I mean, I guess in terms of some of the psychological things, anything else that you've seen, good sales, you know, owners that sell other things they do to just kind of emotionally prepare themselves for the other side or things they do in that kind of transition process. That would be helpful for folks here that are, you know, thinking about that at some point selling and things they need to kind of start doing now. That would be helpful for them. Post-sale.
[00:27:02] Yeah. No, I think we we've talked about the four biggies. So to reiterate, you know, figure out your pull factors, what you're excited to go do. Number two, make sure that you have flexibility when you go into your cell. You're open to all different types of of structuring so that you don't get suckered into a proper deal and then add up kind of questioning whether you got full value. 3. Try to get the ego somewhat separate from your ownership of the company and then and then for just being proactive about how and in what way you want to tell your employees you've you're selling the company how you want to communicate that message. What, if any, sort of share you want to give to to employees getting getting really kind of proactive about that?
[00:27:45] Yeah, I think that's a time frame.
[00:27:46] And if someone if they do have a plan or they have a goal to sell their company, when do they need to start kind of thinking about these things or or when do they start working on things that's prepping them for sale? How far in advance? What does that look like?
[00:27:59] Way earlier than you think. Okay, so here's what here's what most entrepreneurs do. I consider myself once. So I you know, I say this with all with tremendous respect. We say, OK, we're going to build this company up until we maximize the possibility of what the potential of a company is. Right. And at the moment, the economy peaks and our business has reached the zenith of what's possible. Then we're gonna sell it. Right. So a couple of problems with that. Number one, the acquirer is starting their marathon just as you're finishing yours. They are starting there. So they want to know that if you got your business to whatever 10 million in revenue, they want to know how they're going to get to 100. And if you sopped up all the market share, then then they're not interested. I'm reminded of a guy named Rod Drury started zero. Before he started zero, he sold a company called After Mail. He got two customers, two charter customers to buy his enterprise software just to them, a million bucks each way, too many hours in revenue. And what most hospitals do at that point is you say, okay, we've got two Fortune 500 companies, let's go soldi that are 498. Rod takes a different tactic. He says, you know what? I don't have any. There's a lot of operational risk in selling the other four hundred ninety eight. KW software already has relationships with all of the Fortune 500 companies when I just sell my business to them. He sells it to Quest's, who pays him $45 million for $2million our company. Yeah. Like it's it's I mean that's not gonna show up any valuation tables certainly. No.
[00:29:27] Yeah. It's just. Yeah. So. Yeah, yeah.
[00:29:29] Yeah. For sure. But the way it was possible was he wasn't greedy. He sold way earlier. The other thing that I think is important, remember when what kind of dilutes the idea of waiting till the market has peaked for businesses like yours. And I got air quotes going in my office is that no matter what market you sell out of, you've got to buy into the same market slick selling a house. Right. So if you sell, you know, out of companies like yours or trading it, whatever, it's 12 times Ibadan. It's the most they've ever traded for. Well, guess what? The Dow Jones is also trading the most insider trading that you've got to do something with the money. And so just like buying a home and unless you're gonna go rent for a while for the market to cool off, but someone's going to write a fat check for your business. Very few people have the discipline to just put it in the bank. You most people are going to go buy bysome commercial real estate, they're going to buy some vacation property, they're gonna to buy some stocks, and all those three things are correlated to the exact same market that you just sold out. Yeah. And so I think waiting until the market air quotes has peaked is a fool's errand from start to finish.
[00:30:37] You know, John, this has been a pleasure. If people want to find out more about you, about value builder, about the work that you be doing, about some of the research you've talked about, what's the best way to get a hold of that information?
[00:30:46] Just head out valuebuildersystem.com.
[00:30:49] I'll make sure that that's in the show notes so people can click through and get that job. There's been a pleasure. Thanks for doing a follow up episode here. Really interesting, really important conversation. I think, you know, people on this podcast who are growing and scaling the business and looking for that sale are going to get some great takeaways and some great value. So thanks for taking time today. Fungibility, Bruce, thank you.
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