The Quiet Light Podcast

On this episode of Quiet Light, we discuss Athena Severi’s immersive Mastermind group, China Magic, and her work as an entrepreneur. Episode Highlights: Being a “connector of people”. The roots of China Magic. Why it’s important to trust the wisdom of others. The China Magic schedule. Splitting the China Magic Mastermind into smaller groups. The Canton Fair. The percentage of women at Mastermind events. Transcription: Mark: I think one of the interesting things about the online world and online businesses is that online business owners tend to be more inclined to be a part of mastermind groups and to gather together and share information with each other. And these groups tend to range from small and informal; I know I’m part of a small mastermind group that would get together like once every few months for lunch to really evolve even to a point; Joe, I know you talked to Athena Severi is that right? Joe: Yeah. Mark: She takes people to China for 12 days as part of her mastermind group to educate and teach people and have people get comfortable with working in China, direct with Chinese manufacturers and teach them how to go about doing that. How did that conversation go? Joe: Yeah, well, great. Look, two things here, number one, it’s so good to have a female entrepreneur on the podcast. There’s just not enough in the e-commerce space and Athena is one of them. She’s a terrific entrepreneur that connected with Kevin King, who we know, the Titan Network and her group, China Magic. At one point, she had an Amazon business and went over to China through a group thing and found it to be not very helpful, essentially abrasive and going about negotiating in a sort of Wall Street manner; the way that it really doesn’t work. So she brought in some experts. She comes from the event planning world and she created China Magic and takes, I think its 50 people over to China for the Canton Fair for a 12-day event. Every night they have a mastermind group where they’re talking about selling on Amazon. They have people go into the fair and walk around with you and help you find products, negotiate and talk with people in a way that builds lasting relationships. They travel to different cities. They do so many things and they brought in some amazing people that are mentors that go on the trip as well. And they also build lifelong relationships with the people that go. To top it off they stay at the Ritz-Carlton at like the 90th floor; it’s pretty amazing. Mark: That sounds fun. Joe: And it’s not unreasonably priced for a trip to China and all you get. I think she should be charging more. But one of the key things that I hear over and over and over again is that for an entrepreneur who has made the trip, made the effort to go to China and meet with their manufacturer, they come out with a better relationship with their manufacturer, better terms that improve cash flow, that allows them to invest more in more SKUs or more marketing. And what Athena does is she takes all the risk and mystery out of booking that trip to China. Personally, I would never want to do it on my own. She takes it all out. I would definitely go if I was an e-commerce entrepreneur through China Magic; I’ll definitely do. Mark: Sounds great. Joe: Let’s go through it. Joe: Hey, folks. Joe Valley here from Quiet Light Brokerage and today I have Athena Severi with me. She is the founder of China Magic. But I’m not going to say much more than that. Athena, welcome to the Quiet Light Podcast. Athena: Joe, it’s an honor to be here. Thanks so much for having me. Joe: I didn’t want to say much more because I want you to tell us who the heck you are. That’s what we do here. I don’t want to read a script. I want you to tell us what your background is, who you are, and then we’ll go from there. Athena: Okay, cool. So I am naturally a connector of people. I build communities. And I’ve always created very unique event experiences where I connect people with people who are very brilliant, intelligent, and successful in their world. And because of that, I created some pretty interesting and unique experiences, including this will be called China Magic. Joe: Yeah, I think Kevin King introduced us for the very first time and he said, Joe, this lady collects people, which is an interesting thing to say. But then we talked about China Magic and you’ve talked about it and look, I’ve not run my own e-commerce site since 2010 when I sold. Now it’s conflict, in my opinion, to online because I’m a broker, I’m between, in the middle. Even if I had my own e-commerce site I don’t know if I’d want to get on a plane and go to China because it’s just so overwhelming. But you kind of run this show and help people get over that overwhelming aspect of it. Can you talk about how China Magic started and what you do for people on the way there? Athena: Yeah. Joe: Because the audience is they’re SaaS and they’re content owners as well but for the e-commerce owners that think and know; we’ve talked about it, how to get better deals is to get on a plane and go to China and negotiate with the manufacturer, meet with them, becomes friends with them, become part of the family. But nobody really wants to do that. It’s a big undertaking. So you help people with that. So tell us about China Magic a little bit. Athena: Sure. So just to kind of backtrack a little bit, I worked for a consulting firm in corporate America for some time and then I got introduced to the Amazon world. And I actually released a couple of products that went well. I actually quit my six-figure job selling on Amazon. So I would struggle quite a bit because I was actually in; I still am in the yoga accessory world and I dealt with fabrics and colors and sizes and different things that communication with China would always just take a long time. I get a sample sent to me if it was a bit off it would take a couple more weeks before they could actually remake it, send it back to me. And I was struggling with my own growth as a business because of that. And also, I always wanted to kind of design things a bit and not be the same as everybody else. So I think because of that, I was actually at a conference and someone mentioned going to China. And I never even thought of going to China before but I realized that’s a big part of being in e-com is the quality of your products, the price point that you can get your products, like your supply chain and the suppliers that you deal with is such a huge factor when it comes to your business. And I noticed that there was a lot of Amazon sellers who were like very successfully and done millions of dollars on Amazon, but they weren’t experts at sourcing and they had never been to China themselves. So I was actually quite intrigued by the idea of going on my own. Joe: How did you pull it off for the first time if you’ve never been, did you go with others or did you go by yourself? Athena: I did actually go with others. So the gentleman who is kind of pitching the idea of China, he really sold me on the fact that in order to really grow my brand, it’s good to go directly and to meet suppliers. So I signed up for this trip and spent quite a bit of money. It was a three-day trip and we went to a place called Ebru. And even before we got there, I noticed there was a lot missing. Like no one told us what to pack, how to prepare for visa, how to connect with the fellow members; like there was missing a lot of pizzazz and being that I actually have a background in events and then networking and then taking care of people; I worked with celebrities, I’ve built huge conferences and events like my whole life; that’s my background. Joe: Are you counting Kevin King as a celebrity right now? That’s obviously… Athena: No. Joe: No? Okay, just checking. Athena: He’s his own world but yeah, yeah, yeah. Joe: Okay. Athena: No, I mean like I worked with artists at a place that’s called celebrities in revert for years so, like, I know how to red carpet people, how to take care of people, I know the power of connection and community so I was really expecting more of that. I was expecting to be mentored. And what I found when I got there is that they had a different point of view on how to deal with China. The person who was leading was talking about how you present yourself, this is big business and you really talk down the price and you go in there very hardcore, very aggressively, very western and… Joe: The opposite of everything I’ve ever heard. Athena: Exactly. So I was sitting there and I was not an expert in China whatsoever but I do know human beings and I thought this is very strange. So I actually wanted to do a test and one of the mentors that were on the trip was supposed to go to and source a few products using that method, going in and being the big dog and talking big things and I was like, you know, I’m going to go the other direction, I’m going to go very human being. So I went in, oh, my gosh, is that your daughter? Oh, how lovely. How are you today? Like actually building rapport and then talking about products, talking about the future, building a real relationship. And then towards the end, when things are already being sort of like that connection is there and the creativity and the future is there then I start talking about how can we do this and how could that work and what price point can we get this at? Do you see what I mean? Like a completely different way. They’re going in and being like, how much is this and what can you do for me? And I was getting much better pricing. I was getting much better inputs and creativity and they were showing me things that they weren’t showing everyone else. They weren’t on the shelves and I was like, this is very interesting. So I noticed that also there wasn’t much mentoring. They sent us out with these guys who were sort of high school students to translate for us and they didn’t have a background in negotiating. They didn’t actually understand sourcing so it’s like I was brand new to the subject of China, these guys were brand new to the subject of negotiating and the blind is leading the blind. And so that was the trip I went on. And so I thought, you know what, this could be so much better. This could be amazing. And I went to the organizers and said, hey this is my background. And as it was, I was already bringing in the groups with me. I was like mentoring them I was keeping them upbeat, I was creating the networking, I was just that’s who I am. So anyway, the point is that I offered to partner with them. I was like let’s get together, let’s make this beautiful. And they’re like, you know what we’re happy with the way this trip is. And I’m like, okay, cool. And I was like I’m going to just do my own. I’m going to bring in some friends and they’re like yeah, yeah, cool. And so my first China Magic I brought 50 people to China and we extended it to a 12-day experience. Joe: Wow. let’s talk about the benefit of going to China for an e-commerce entrepreneur and first, let’s define who they are. Is it somebody that already has an e-commerce business that is going to meet with their manufacturer and work on new terms and so, so forth and find new products or is it, somebody that’s just beginning, doesn’t even have a website yet or a product and they’re sourcing it for the first time. Who’s the ideal candidate to join and go to China on China Magic’s trips? Athena: Sure. So to me, if you want to be professional as an Amazon seller and you want to be able to have that sort of relationship and that creativity, it doesn’t matter if you’re brand new to Amazon or if you have scaled up to doing seven figures, eight-figures. Because what we’ve done in China and I can kind of tell you more about that in a bit is we actually cater to every sort of stage that people are in in their journey because you’re going to be looking at sourcing in a completely different way. So, I mean, China Magic has progressed tremendously. We’ve already done six trips at this point. But to kind of backtrack a little bit and to kind of answer that question a little better I brought in people who were doing millions of dollars on Amazon and because they had never met with their manufacturer, they were actually able to get such a reduction on the cost of their products, such better terms, like these are people who’ve been working with the same supplier for two years, three years, and they would meet with them and by the end, like they were doing, 30% down 70% on shipping and they were able to get that down to like 10%, 20% down and then 30 days after landing, paying another 35% and then the rest 60 days or 90 days after. And what that does for someone’s cash flow is amazing, especially when you’re doing bigger numbers. And obviously coming from your perspective as a broker, that really helps with cash flow and it really helps growth. Joe: Yeah and it allows them to grow the business for sure. I think it’s critically important. I’ve heard so many times how people go to China and really connect with their manufacturer and come up with better terms and better pricing. And even if it’s just a dollar off cost of goods sold that you sell, 2,000 a month of that particular unit, that’s $24,000 a year in savings. And then eventually when you do sell the business if it’s at a three-time multiple, that’s adding nearly $75,000 on the list price of the business. And you can put as many zeros before or after that as you want, it’s important to do. All right so let’s talk about the logistics of 50 people going to China but it’s your first trip? Athena: Yeah, it was my first trip. And because I’m crazy, I booked every single person’s flight myself. Joe: Oh my. Athena: Yeah, like I’m just a wild girl. Joe: You don’t do that now, though, right? Athena: No, no, no. I don’t do that now. Joe: Okay. Athena: Yeah, I mean, I think the thing that was most magic about China Magic is I connected with a gentleman named Marty Sherman who’s been going to China for over 20 years. And this guy understands China on a level I’d never even come across before. And he really believes in developing relationships. And so the very first thing that we do in China Magic is we talk about the culture. We talk about how to really navigate the waters and how to actually approach people. And it’s amazing, again, like these guys are professional entrepreneurs, they’re professional business owners, they think they understand their suppliers, they think they understand how to do business. But then when you actually talk to someone who’s been on the ground in China for over 20 years, the lessons he’s learned and the things that he’s been able to develop is so incredible. So that’s really the power of finding amazing mentors and leaders when it comes to their field because they understand it better than any of us do, just the same way that you understand what you do so much better. Like maybe some guy sold his business or a couple of businesses or whatever versus someone who’s actually seen the sale of hundreds, do you know what I mean? Like their professionalism that you gain from having done something over and over and over again. So what I was looking for when I started China Magic were people who were just absolute geniuses when it came to sourcing. So I actually met a guy; this is a crazy story but have you heard of Kian Golzari, Joe? Joe: No, I don’t think I have. So does that make me uninformed; should I know about this? Athena: No, no, no. You’re wonderful. You know, a lot of people. Okay, so one of the mentors that I had on China Magic asked if this guy could come visit and I was like, yeah sure. And he kind of hung out in China Magic and towards the end of our trip, he’s like, do you mind if I put a little presentation together for everybody? I’m like yeah sure. So on this presentation, he starts talking; the guy’s sources for the NFL, the NBA, Google… Joe: Wow. Athena: Inaudible[00:15:58.3] his own family’s company that has at least 2,500 SKUs, I mean, he’s literally a sourcing guide, right? And he became one of my closest friends and now he’s my other main guys. I have got Marty, the one that’s been going for over 20 years. And I’ve got Kian Golzari because the formula that I always used is like, if you want to fast forward your business a few years then you want to be around people who are extremely knowledgeable and successful because you can’t even put a dollar amount on the value of having gone through so many mistakes, made so many bad choices, learn from all those mistakes; the network of these guys had like it’s just crazy. So when people come to China Magic, a big part of the magic is connecting with people like Kian and like Marty and I think that makes a massive difference. Joe: Well, I just wrote down networking then you said there was connecting because we’ve talked about this before. There’s a lot of time that 50 or 75 or 100 people that are going on a trip like this spend together. And the connecting of those relationships goes beyond just renegotiating or getting better terms and more SKUs with your manufacturers. A lot of people are making lifelong connections on these trips as well with fellow e-commerce entrepreneurs, right? Athena: Oh, gosh, completely. Like we’ve got people who met three and a half years ago at my first trip, they’re still connected to this day. There’s still some of them that have developed partnerships. And one thing that’s very interesting is when you connect at that level Joe when you travel to a foreign country when you’re with each other for that long, a lot of the social veneer comes off. You cannot get that relationship at like a conference in the hallway having lunch here and there. So because of that, people really start to open up and they start to share and that abundance mindset really clicks and that trust really clicks. And so I’ve traveled the world for five and a half years to build up this network. When you walk into China Magic like people come in as strangers and they literally leave as family and it’s just like that gave me goosebumps. It is literally; you couldn’t even; like you have to experience it to see the level of connection people have. And then those relationships are so valuable later on. Like you just see them helping each other and giving each other resources all the time; yeah, so it’s a beautiful thing to see. Joe: So someone doesn’t have to know anything about China; how to get in and out, you help them with that entire process from the visa to the booking of the hotel. So you may not do that yourself for their airline. Athena: Yeah. Joe: Is it you show up, you give them some guidance and they’re off and on their own or is it pretty much they’re told where to go and what to do all along the way? Athena: Okay, so we have kind of perfected this world. It’s almost an art. We’ve got several group flights that we organize. We’ve got one from the UK, we’ve got one from the US, and we’ve got one from Australia. And it just depends on where our members are coming from. And so we organize our group flights. Everyone’s on the same flight and then we have everyone get picked up in beautiful bus freight and then we get to the Four Seasons who love us to death and we are like their favorite humans. And they’re waiting for us with Pellegrino and cappuccinos; they know how to take care of us. And so what we do on our very first day is we go and get everyone to the Canton Fair. We go to the Canton Fair by the way, and we go in there with mentors. I bring a ton of these mentors. And these are multi seven, eight-figure, we even have a nine-figure seller coming on our next China Magic. And so we walk in there with them, show them around; get them what it’s like to see what it looks like. And then on the first night, we orient them to China, to negotiation, and then the next day, we actually go into the fair with them. So we are mentoring small groups of them throughout the trip. And then when they kind of graduate out and they feel confident, they kind of go on their own. But I have my guys on the ground constantly; we have a sourcing team of about 100 people. We’ve got connections to factories that are not on the grid; about 4,000 factories you can’t even find in Alibaba or even at Canton. So if people are having trouble finding something, we actually utilize the vast network that we’ve built. So we really are very present for them the entire time. And a part of China that I didn’t even mention is it’s not just about China like we actually do content every single night about Amazon; so from A to Z, everything from branding to PPC to marketing to every single topic in Amazon is all covered within those 12 days. And we split everybody up into these itty bitty groups, and this is why we cater to everyone. We actually work with like if you’re a top seller, you’re going to want to talk to other top sellers about pain points that you’re struggling with at that level. If you’re new to your journey, you need a lot of hand-holding, you need a lot of help, and also, it’s not going to mix them so we never do that. We have different content for different levels. And so you literally go in there and you’re just going to be with a group of people that are in a similar part of their journey, being literally walked through the journey with some of the top brains in the entire industry throughout the entire 12 days. Joe: And is it always the Canton Fair? Athena: Yeah, so we always go to the Canton Fair. We go to Phase 2 Canton, which is amazing because you go and you’re literally walking through booths and booths and booths of product, you’re connecting with factories. Joe: What does Phase 2 mean versus I suppose Phase 1? Athena: Phase 2 is where you find like a lot of beauty products, a lot of kitchen products, a lot of household products, baby products. Phase 3 is more about travel, about sports, about different; so each phase of the Canton Fair has its own products and you can go to CantonFair.net and actually take a look at which phase is most appropriate. Joe: Okay. Athena: So what happens is like let’s say most of your products are from Phase 2, you would utilize Phase 3 to go do factory visits which is another thing that we talk a lot about. It’s like actually going and visiting with your factory, visiting with your suppliers, and we walk you through an exact way to negotiate and to project the future and create these amazing partnerships. Joe: So Phase 3 is a different China Magic trip where they’re going to visit the manufacturers or was that a part of Phase 2? I was confused there. Athena: Oh no, no, I’m sorry. So Canton Fair is the largest fair in the world when it comes to sourcing and it goes through three phases. There’s Phase 1, 2 and 3. We go to Phase 2 and then we go to Hong Kong for a few days and we go see global sources and do more sourcing there and we do more content there. Then we come back for Phase 3 of Canton. And so that’s just a whole; like basically, they set up, they take away their products, and then a whole new world gets created in that next phase because they just got too many products to be able to do it all at one time. Joe: I got you. What about going out and visiting your manufacturers if they were off the grid or if they’re not at the Canton Fair or are they all there? Athena: Oh, well, it just depends. Some people are there, some people aren’t. But we highly recommend to go visit your factory and then we do a factory visit for those who don’t have a supplier yet. And we actually went to a packaging factory that does packaging for like Adidas, Nike, Nescafe, or they got connections, this amazing world of like factories that we can take people to that we really recommend for people. We actually show them the exact step by step on how to go and visit with your manufacturer, how to go and like see the people that are building your products, how to actually build your products with them so that they can see you on the floors, you get an idea, and then Kian goes into like understanding how to like; let’s say you’re building a backpack, there’s all these components, right? So how to look at each component over the world and there’s ways to increase quality, to get innovative, to save money. So we teach people really that understanding of sourcing at a level to where you become an expert even within the first few days of China Magic. And this is stuff that like a lot of people are missing, like really, they’re missing this within their business and they’re missing a ton of product; I’m sorry, a ton of profit because there might be ways to save a lot of money on their products or there might be ways to innovate them and charge a higher premium for them or because they’re not in there on the floor dealing with their products, understanding their supplier, it really might be leaving a lot on the table. Joe: How much time in advance do they have to plan a trip like this? Athena: I’ve had people sign up as quick as two weeks before but we get sold out so fast; like we’re actually already sold out for our next trip months, months in advance. And the amazing thing about it is it’s mainly word of mouth. We didn’t even do any sort of advertising campaign or anything like that. We literally did a couple of Facebook Lives from China and we got like 90% sold out just from that. Because what we’re doing in China Magic it is magic and I think people want to be a part of that. Joe: Are there any resources I assume on your website; what is the URL for China Magic that might be… Athena: They can go to ChinaMagicTrip.com. Joe: Okay, there’s a trip in there. Athena: We have a waiting list, you can get on that waiting list. Joe: Do you have resources on the website for people that still are too scared to go to China or not ready or can’t afford it yet or just starting out; any information that helps them with negotiation tips and things of that nature and dealing with a manufacturer from afar? Athena: Absolutely. So we do have a webinar series that we put together. So if they go to ChinaMagicTrip.com they can get on our list. And then also if they want to reach out to me, they can just go ahead and AthenaSeveri@gmail.com that’s my personal e-mail if they want to. Joe: Oh you did it; you just gave out your personal e-mail address. Athena: I did. I don’t mind. I have tons of people reach out to me all the time. They can find me on Facebook; they can find me on Instagram. I make myself very available. I actually talk to almost every single person that’s ever been on China Magic. I’ve had a personal conversation with them before they even get going on our trip because I want to make sure that they’re inaudible[00:25:48.6] abundance mindset so yeah. Joe: I don’t doubt that for a moment. I can see it happening. Athena: Yeah. Joe: Every single person; just out of curiosity it’s a woman, female-run operation, which is wonderful in this e-commerce male-dominated world that we live in. Athena: Yeah. Joe: But when it comes to ratios in terms of male versus female in terms of people that go on the trip, is it still heavily male-oriented or are there plenty of women entrepreneurs that go as well? Athena: I’m so proud of this, the trip I was on out of 60 people, three of them are women; the women that went on that wasn’t my own. Joe: Okay. Athena: Today more than 50% of our trip is women. Joe: Beautiful. Athena: Because I take perfect care of them; I princess out the trip for them and they feel confident because they know me. They know I’ll take care of them and I do. So, yeah, we’ve got amazing women on our trip. Joe: Excellent, and you’ve connected with Titan Network as well, right? And China Magic has kind of flowed into Titan. I had Dan on a podcast a couple of weeks ago talking about negotiating terms with manufacturers. Athena: That’s right. Joe: So this is kind of a good evolution too. So what’s the connection between Titan and China Magic? Athena: Yeah. Dan Ashburn is my partner with both China and Titan. So what happened was people would go for those 12 days and they would get so spoiled by the mentoring that we do because we do a lot of hands-on mentoring that the quality of our mentors are amazing. And so the only issue we were having with China Magic is that it would end after 12 days and we would see the amount of progress that was made. It’s not just the sourcing, but like people that understand the rest of it and how to build a multimillion-dollar business; like you get to spend an hour with them talking about your business, the progress you make in that hour is just amazing. So what we did with Titan Network is we actually created sort of that mentoring and the magic of China but we did it all year long. So we added events and masterminds and weekly coaching and a lot of hands-on mentoring and Dan is just a freaking genius; I could not have built this without him. And we’ve basically recruited all of our top mentors from over the years and they’re now part of Titan as well. Joe: Excellent. Let’s answer the question a lot of people are asking; a ballpark, you can’t give an exact figure because it’s changing all the time but how much is it going to cost somebody to go on a China Magic trip, ballpark range? I’m putting you on the spot here I know. Athena: Yeah, because our pricing is changing. Honestly, we’ve been under-pricing for way too long. So I’d say a ballpark is around 8, we’ve done it as low as 6 for our… Joe: I was just going to say, even if it’s 10, it seems like an incredible investment for people to make in their business because they’re going to make that back in better terms, better cash flow, great knowledge, great friendships. And people go to mastermind events and spend an awful lot of money, here it seems like a 12-day mastermind event where you’re really experiencing a completely different part of the world. Athena: 100%. And we also; I didn’t even mention this but even before we get to China, we’re doing training with them or mentoring them. We’ve got a Facebook group for connecting everybody so they actually get to know each other before they even head to China. So that’s all included as well. So, yeah, I really I believe in what we do 100%, the lives we’ve changed; I mean, I have people who came on my original trip and they found a product that has been profiting them $30,000 $40,000 a month since inaudible[00:29:19.1] like it’s just ridiculous that… Joe: I get the feeling, Athena, that you actually get more joy out of helping people than counting dollars, is that…? Athena: Oh, I’m terrible like Dan has to like keep me on track because I just have like a big heart and I’m always like, oh you want to come okay well let’s work it out just because yeah it really is my happiest place. I think my happiest thing ever is seeing these amazing people that are like our mentors leaders, because a lot of them came from my attendees. A lot of these guys were attendees on my trip. They just happened to be more helpful, had bigger hearts, and had amazing success stories. So then I graduate them into being mentors and it’s sort of the circle of life that’s so pretty. And then they go and help other people and like, oh, man, it’s like a dream come true to be in this industry, honestly. Joe: Oh that’s fantastic. I’m going to wrap it up here. I’m glad we finally got you on the podcast. We were introduced I want to say three or four years ago and we keep bumping into each other. Athena: I know. Joe: So thank you for coming on. I’m excited here. Tell me again how people find out about China Magic; ChinaMagicTrip.com or net? Athena: Yeah so it’s ChinaMagicTrip.com if they want to learn about Titan, if they’re too scared to go to China, they can always go to TitanNetwork.com to connect with me there as well. My phone number is out there, like really, I give my heart and soul to my people and make sure that they’re super taken care of. So I’m here for you guys and like I mentioned earlier, if you’re beginning your journey, we can take care of you, if you’re sort of in that intermediate zone looking to scale or even if you’re very, very successful, even if you’re looking to sell your business in six months you’re like coming to China will benefit you in so many ways. Joe: I couldn’t agree more. And for those that are wondering, yes, it is an add-back. If you don’t know what an add-back is, reach out to us, we can help. You should know in an add-back is at this stage of listening. Athena: Joe, I just want to mention thank you so much for all that you do for the industry. You put your heart out there. I see how much value you add. It’s like you could just do the thing that you’re there to do but I see how much you help people grow and expand and it’s just wonderful. So thanks for all that you do for community as well. Joe: Thank you for saying that. I very much appreciate it. Thanks, Athena. Talk to you soon. Athena: Yeah, thanks for having me. Resources: China Magic AthenaSeveri@gmail.com Titan Network Quiet Light Podcast@quietlightbrokerage.com  

Today’s episode is going to be a little different than previous ones: We’re not going to interview anyone. In lieu of a guest, Joe will be discussing three different levels of add-backs. The three levels of add-backs are various ways to add value to your business. Most of these suggestions are fairly easy to enact, but may not have been things you’ve previously thought of doing. Tune in to hear about calculating a seller’s discretionary earnings, where you will make the majority of your money, and much more. Episode Highlights: Where you make 50% of all your money. Calculating Seller’s Discretionary Earnings. Valuation multiples. Making sure the acquirer understands the value of your business. Breaking down expenses. Pros and cons of certain business credit cards. The pitfalls of hiring family and friends. How current tariffs may affect your bottom line. Illegitimate add-backs. Being careful not to erode trust. Transcription: Joe: Hey everyone thanks for joining the Quiet Light Podcast. This is going to be a little bit of a different podcast than some of the others we’ve done. I’m not interviewing anyone on the podcast with Mark. It’s just me. It’s just me talking about something that’s critically important. As many of you know, I’ve been doing this for over eight years now, tracking towards personally 100 million in total closed transactions. I’ve talked to thousands of entrepreneurs over the last eight years. And what I hear more often than not is so the multiple is still around three times and [inaudible 00:01:54.5] is asking me from New England always wants to say it depends upon your definition of three times of what. Most people don’t get the “what” correct so I want to focus on that right now; that “what”, three times of what. It is a three times multiple or four times or five times or two times depending upon the financial key metrics that Mark and I talked about; the four pillars that have been created, and then these three levels of add-backs. It’s a multiple of Seller’s Discretionary Earnings and calculating it correctly and getting it right is one of the most important things you can do for your business. So I’m going to talk about it here. I’m also recording a video for those that want to go to the Quiet Light YouTube channel and look at the video as well. From the video there’ll be a set of slides that you can download from the show notes from this podcast as well. So on to the three levels of add-backs. First, what we want to do is actually define the reality that if you’ve got a physical product e-commerce business, more than 50% of all the money you’ll ever make from your business comes the day that you actually sell it. That’s pretty substantial. And you think about it, we’re all trying to drive revenue and make a living as entrepreneurs but in a physical products e-commerce business and many others as well, most of the money you’ll ever make comes the day you sell it. So you want to prepare to sell all along the way. I know it makes your eyes bleed but if you do the right thing and focus on running the business like a professional and creating a great opportunity for your buyer; and there’s many buyers in this audience that are listening, if you create a great business to hand over to somebody that wants to take it to the next level and do the things that you may not want to because the business has outgrown you, you’re going to get more than 50% of all the money you’ve ever made from the business. Odds are as well that your business is your most valuable asset. And I’d venture to guess that, you know the value of your house within 5 or 10% and your investment portfolio, and your retirement fund, and your car, and your condo, and your townhome, or how much you have in your bank account but you are 30, 40, 50% off in terms of the value of your business. And some of you are running businesses that are completely unsellable even though you’re doing great things with driving revenue. And they’re unsellable because you’re co-mingling too many things with one brand. You’ve got seven brands in an account, you want to sell off one and you don’t use proper accounting software like QuickBooks or Xero. I’ve seen this too many times. Too many people say, oh, okay three times I’ve got this. I’ve got an 18 year old and 16 year old; I hear I got this all the time. Please don’t say I’ve got this. Go through this. Listen to the full podcast. Get these three levels of add-backs right and you will get the real value for your business along with all the other things that you need to do for the four pillars. The real value of your business is important to understand here. We’re not talking about maxing out the value of your business and jacking up your Seller’s Discretionary Earnings; we’re talking about you getting paid for what you’ve created. It’s not boosting or jacking anything, its legitimate black and white add-backs that are owner benefits or one-time expenses. And I’ll go through the whole list that you deserve for the value of your business. If you’re a buyer out there listening and you’re looking at businesses for sale, you can look at some of the add-backs that have been missed by the broker or the individual that’s selling the business and calculate your own instant equity when you buy the business. Okay, so in terms of the valuation and the way that it works, it’s hard to understand, but simple at the same time. The calculation for the list price of a business; it’s the earnings base multiplier approach and you’ve all heard the term at this point Seller’s Discretionary Earnings. Well, the math is simple. The formula is simple but it’s hard to remember. Its Seller’s Discretionary Earnings times the multiple equals the list price. Again, calculating the Seller’s Discretionary Earnings accurately is important and it’s hard and then determining the multiple and what range you’re going to fall in depending upon the four pillars and financial key metrics is hard. But when you get the two of those right and you’ve got the right data, it equals the list price. Plus, in a physical products business, the landed cost of goods sellable inventory on hand at the time of closing. Almost everyone does it that way with the exception of one broker in the sub 20 million dollar range. Some of the larger investment banking firms may be doing something totally different in the 50 to 250 million dollar range. Okay, so to calculate Seller’s Discretionary Earnings first you have to have a Profit & Loss statement. And that’s why I always preach QuickBooks and Xero. I had an email from somebody yesterday and he wrote he doesn’t use QuickBooks or Xero and he’s using other stuff and he says I don’t trust QuickBooks. Well, he doesn’t trust himself then or a bookkeeper that he would hire because QuickBooks is just information that’s entered or imported from the person doing the work. But you’ve got to calculate Seller’s Discretionary Earnings properly. As I said to get the list price, Seller’s Discretionary Earnings times the multiple equals your list price. How do you calculate Seller’s Discretionary Earnings? It’s your net income on your Profit & Loss statement, plus your add-backs. And again, we’ve coined the three levels of add-backs here at Quiet Light Brokerage. And under each level there are six different levels. So there’s a total of 18 points that we focused on for add-backs. So, net income plus add-backs equals your Seller’s Discretionary Earnings or SDE. Now valuation multiples; I’m going to cover them real quickly here because everybody wants to know what multiple ranges are. But that person says so you know the ballpark, multiple ranges three times. Is that right? First question is a multiple of what? Second thing to say is without accurate Seller’s Discretionary Earnings your multiple means nothing; absolutely nothing. So you’ve got to get the discretionary earnings right in order to get the multiple right. Important thing to understand is that the size of the business does impact value. Also, multiple channel revenue versus a single channel of revenue impacts the value. So if you’ve got a business that is less than $100,000 in Seller’s Discretionary Earnings and you are 100% direct consumer brand not selling on third party platforms, let’s say you’re 100% Shopify. If you’ve got a business that’s got all the four pillars that we talked about and good financial key metrics, you’re probably going to be in that three to four time multiple range. That’s a pretty good number. But if you are a 100% Amazon brand and by 100%, I really mean 85 to 90%, you are going to be in a drastically different range. You’re going to be in two to three times. And this is at sub $100,000 in discretionary earnings. And this is all subject to change. It floats and changes depending upon the economy, the type of business, the recurring revenue aspect of it, B2C versus B2B; all sorts of different variables. So this is just general information. So again sub 100,000 three to four times if you’re selling direct to consumers, if you’re a 100% third party platform, two to three times; a pretty dramatic difference in value. As low as 200,000 if you’re 100% Amazon brand and as high as 400,000 if you’re 100% your own you are all selling to the customers. In the $100,000 to $500,000 range, you’re pure B2C brand jumps from three to five times multiple of Seller’s Discretionary Earnings. The Amazon brand jumps as well, but it’s only two to three and a half times. We started at the same floor of two, and then got bumped up to three and a half times. There are exceptions to every rule and it’s a very broad range depending upon trends of the business, how much you’re spending on advertising as a percent of total revenue, how clean your books are, growth opportunities in the business, the transferability of the business; all these different things. But the multiples will overlap as I go through this. Jumping up to discretionary earnings of 500 to a million, you’re looking pure B2C at four to six times Seller’s Discretionary Earnings and on 100% Amazon brand you’re at three to five times. The five times here has to be really, really solid. It’s going to be a great business. But the three times is as low as that sub hundred thousand dollar business because it’s just a broad, broad range. If you’ve got a hero SKU that’s doing 70% of your revenue, that’s going to bring your multiple down; as simple as that. There’s a lot of competition on single channel third party platforms like Amazon that could change your revenue trends overnight. I’ve seen it many, many times. Okay, so Seller’s Discretionary Earnings last level north of a million dollars, you’re looking at a pure B2C, you’re looking at six times plus. Amazon brand you’re at four times plus; a lot of overlap there. Again, because no two businesses are alike and you can’t just make the assumption that you’re going to be at X if you’re doing Y in Seller’s Discretionary Earnings. Again, though, size does impact risk. That’s what we’re talking about here in terms of the multiple ranges and where they go. Okay, so the three different levels of add-backs will be defined clearly; detailed clearly but let’s just define what the heck an add-back is. If you think about it as simple as an owner benefit; something that you personally get from the business, they’re also one-time accounting expenses, they’re one time legal expenses and expenses that don’t recur or carry forward to the new owner of the business. That’s broad, but very specific. The goal of identifying add-backs again, it’s to identify the true baseline earnings for potential acquirers of your business and also for you so you’ll understand the value of your most valuable asset. It’s not to jack up the price. That’s not the point. The point is to make sure you get the true value for your business and so that the acquirer of the business understands the real value of it as well. There are three different levels that we’ve developed here at Quiet Light. The first one, Level 1, they should be pretty obvious. They’re obvious benefits that I think almost anyone could identify. Level 2 are one time and accounting expenses. They get a little bit more complex there. But it’s Level 3 that an inexperienced broker or if you are someone that is selling your business directly to a buyer yourself, you could be losing hundreds of thousands of dollars in the overall value of your business if you’re not focused on Level 3; if you’re not digging deep and I always say using math and logic, it’s not magic. It’s not gray. It’s black and white math and logic in that third level. And we’ll go through some of them right now. But there’s six different points to each level. So let’s talk about this Level 1. I had somebody approach me at a Mastermind event recently and asked me what I thought was a pretty obvious question; Level 1. He said, hey, I don’t make a whole lot of net income in the business, but I do take a $250,000 salary, is that an add-back? Yes, that’s an add-back, that’s an owner benefit; crystal clear owner benefit. So if you’re only making your businesses $10,000 net income a year, but you’re taking a $250,000 salary, your total owner benefit there with those two things alone would be; or Seller’s Discretionary Earnings would be $260,000. The exception here is unless there are two partners that are working well over 40 hours a week combined. We can only add-back one owner payroll in that situation and have to do an adjustment for the second. If you’ve got two owners that are generalist in terms of their skills working less than 40 hours a week combined, then we could add-back both of them. The second one in Level 1; and by the way, with owner salaries, again, there’s little asterisks that I put all over these things. There are exceptions to every rule. You have to talk through each and every one. Estimated income taxes; if you’ve been in business a long time as an entrepreneur probably making quarterly estimated income taxes payments, that’s an obvious owner benefit that goes into the add-backs schedule that your broker or adviser or you if you’re selling your business on your own would create. Owner health benefits; pretty obvious, if I sell my business today, I’m not going to pay for the new owners health insurance. They would have their own. Charitable contribution is number three, pretty obvious. Interest expenses, we see a lot of businesses come through for sale that were purchased years ago with an SBA loan and there’s expenses there that do not carry forward to the new owner. Or if you were a 100% Amazon business owner and you’ve taken advantage of the Amazon Lending Program, there are interest expenses in your P&L as well, those do not carry forward and those are an add-back. Retirement contributions are number five; pretty obvious there. And number six has got a lot of them, it’s little things that are owner benefits, like your personal meals and entertainment that you run through the business, travel that you run through the business. And we’ll get into Level 3, we’ll talk about some travel with mastermind groups and events and things of that nature. Vehicles or miles that you write off on the vehicles. This one should be pretty obvious, but it’s mobile phones. No one is going to buy your online business that doesn’t already have a mobile phone. So if you write off your mobile phone through the business, it is an add-back because it’s not an expense that carries forward because the new owner already has a mobile phone. If they don’t, they shouldn’t be buying an online business. And yes, I’ve had a conversation with people before, a lot less in recent years than seven or eight years ago. If you’ve got a home office and you choose to write off tax for tax reduction that expense does not carry forward, nor do the utilities. So those are the first six in Level 1. Those are the more obvious owner benefits. In Level 2 they’re a little less obvious so let’s go through them again. There are six different levels there. The first one is trademarks, copyrights, patents, logo designs; things of that nature, it’s all centered around intellectual property. These are mostly onetime expenses that do not carry forward to the new owner of the business. And I’ve sold businesses, as many of us have here at Quiet Light where somebody had just gotten a utility patent in the 12 months prior to selling the business and there’s 20,000 dollars’ worth of legal fees there. That’s an amazing thing to have in terms of selling your business; that’s defense ability; part of the risk pillar but it’s also an add-back. So you can put that $20,000 back into your Profit & Loss statement below the [inaudible 00:17:27.5]. Same with logo design, copyrights, things of that nature. The second point here is these other types of legal expenses like a lawsuit. It happens now and then, but it generally doesn’t happen every year so you could do an add-back of that as well. Unless you’ve got a P&L and you’ve been sued every year because of the type of business that you have. We may not sell that. Sorry, no one might buy it. Sorry. But if you try to sell it on your own, it would be an add-back. Enforcement letters that someone would write for you, those are generally one time and don’t carry forward same with incorporation documents. The third point here in Level 2 is the new bookkeeper setting up books and arrears. You guys have always heard me talk about our book keeper referral list. We don’t get paid referral fees from bookkeepers. We keep a list of good qualified bookkeepers because we want you to run a better business and have cleaner books because it’s going to help us help you get a better value for your business. It’s going to help the buyer take something over that is clean and documented well. So sometimes people will come to me and they need to have their books cleaned up. They would hire an e-commerce bookkeeper that would go through the last 24, 36 months of data and pull it into QuickBooks or Xero. There’s generally a one-time fee for that. That expense does not carry forward to the new owner because you’ve already done it. There is a monthly fee that you would pay a bookkeeper that might charge you $500 a month to do your bookkeeping for you but if they charge you two or three or $4,000 to do your book in arrears, that is absolutely an add-back and its money well spent; well invested. It’s fuzzy math to calculate the return on investment on that but you would, in my opinion, get well over 100% ROI if you spent money on hiring a bookkeeper to do your books in arrears. Equipment purchases are generally one-time expenses and often buried in the P&L under office supplies and they’re very often personal in nature. Most of these businesses that are run remotely from a solopreneur that has VAs or even if you’ve got people that work closely and you all go to an office, there’s not a lot of physical equipment that is purchased. So personal computers, we often see the office supplies get bumped up a little bit in the fall or in the late summer when kids are going back to school or during the holidays when people are spending money on gifts or just before the New Year when they’re getting new products for themselves to reduce their taxes in a sense. Those are buried in the P&L; these are definitely add-backs when they’re personal in nature. The last two points here in Level 2, they’re kind of obvious as well but sometimes people don’t catch them. It’s depreciation. It’s an accounting expense, it’s not an actual cash out expense. And the same goes for amortization. Okay, so Level 3, again, thanks for hanging in here, this is the dig deep most important use math and logic part of the three levels of add-backs. This is where you’re going to get the most bang for your buck by taking your time and digging deep and keeping good records so that you can go through these different things. First one is a website redesign. Several years ago, I sold a business that had just spent $20,000 on a website redesign. That business was listed at a 3.5 multiple and the website redesign; the business was maybe seven years old at the time and it had not done a website redesign since the inception of the business. So it’s not going to recur every year. In this case, it’s not going to recur every five years. So we chose to do a 100% add-back of that. So at three and a half times, that added $70,000 to the Seller’s Discretionary Earnings at a 3.5 multiple. It sold at full price and the person that bought that business has been running it since then and is now listing the business for sale in the next few months at a great return on investment. But it’s absolutely an add-back. If in the P&L, it shows that you’ve done this every two and a half years then at the very least, it’s a partial add-back. Point number two on Level 3 is something that most people in the e-commerce world are involved with in some way, shape, or form and that’s Masterminds, events, and related travel expenses to Mastermind. Sometimes there’s a pretty hefty joining fee as well. So if you are part of a Mastermind whether it’s; should I name them all? I’m not going to name any today. You’ve heard me name some of them before. If you’re a Mastermind member, you’re the member, not your business. When you sell your business, that expense does not carry forward. It helps you personally grow your business and gain business knowledge and the new owner of the business may or may not join that Mastermind as well. They may actually be in their own Mastermind and have their own expense because they’re bolting on new businesses to it. So this one is an add-back and it’s missed by most people. The same goes for those events that you may go to. You choose to go to those events that are Mastermind related and odds are you checked out a lot of personal benefits there and travel and sightseeing and things of that nature. The exception to this rule is if your business is similar to Quiet Light Brokerage. We sponsor Masterminds, we sponsor events and we go to them to build our network of relationships therefore, it’s not an add-back. It’s an integral part of our marketing campaign. The other exception is if you brought your CMO; somebody that’s on staff. If you the owner of the business goes it’s an add-back but if you the owner of your business goes and you choose to bring your CMO, that’s a business expense. That CMO is going to move forward and carry forward with the business and would go to that Mastermind every year, so to speak if the new owner of the business joins the Mastermind or has their own CMO because it’s a great way to learn new marketing techniques. That part wouldn’t be an add-back. So there are again exceptions to almost every single rule. Point number three here is pretty important. Most people listening to this podcast that own any kind of online business or doing some form of advertising. The biggest mistake I see people make is with, let’s say, an Amazon FBA businesses, they’re allowing Amazon to simply deduct the ad cost from their deposits every couple of weeks. That means that you are not getting the benefit on your spending. You’re not getting that cash back and you’re not getting the rewards. American Express Gold Card will give you four times the points on advertising spend up to $150,000 and then the levels change. There are cash back cards that you can get 1½, 2% cash back. The IRS hasn’t figured out how to tax this. It’s really; these are discounts, there’s no method for tracking it. So I see a lot of people; it never shows up on their P&L, some people with bookkeeper’s do; that’s an exception rather than the rule. They do an adjustment in the Profit & Loss statement. They’ve got the total advertising expense and then they’ve got an adjustment for it there. But when it’s not there at all; and let’s talk cash back only for now, people just slide it into their personal income and bank account and they use the money for perks. It’s an owner benefit so therefore, if it’s an owner benefit, it is an add-back. The key here is to track it and find a way to convey it to your adviser if they don’t ask; everybody at Quiet Light will but if they don’t ask, convey to them that it is an owner benefit. You do have the data. It’s math. It’s logic. And your buyer will accept it. I’ve had situations where we’ve had $24,000 a year in cash back and tracked it and the business sold for a three time multiple, for instance. So it’s almost $75,000 in value to the business when it’s being sold; a huge benefit there. When it comes to rewards; this is the tricky part, a lot of people use the rewards instead of the cash back, which is really smart because you can get a lot more bang for your buck with the rewards. But you cannot convert that bang for your buck into actual dollars at that high level. So if you are going to travel internationally and use your points that you’ve accumulated to buy a $10,000 first class ticket somewhere around the world, you don’t then get a $10,000 add-back. What you get instead is a percentage of your points. Most of the cards say you can convert them at 1%, so you would simply take the points that month times 1% and that is you add-back amount. That’s a huge one that most people miss and it can add a tremendous value to your business. Now, as entrepreneurs, we first often seek employees that we know and we trust. Those employees are often friends and relatives. First point of advice I’d give you is don’t hire somebody that you cannot comfortably fire and those are usually friends or relatives. Second point is, if you go ahead and do that, try not to overpay them. Because if you’re overpaying them, you’re getting some loyalty there, yes, but when you go to sell your business, you will lose 2, 3, 4, 5 times the value of how much you’re overpaying them. But you don’t have to fire them. My bad, advocated firing people before for this very situation. But you don’t have to be the Grinch if it’s around the holidays. Here’s what I did in a particular situation. I had a business that was for sale, three and a half time multiple, really strong business, ended up getting multiple full price offers and sold at that level. But the owner of the business paid his brother who he loved dearly $20 an hour to do customer service work. Who wouldn’t want to do remote customer services work at $20 an hour? It’s a great deal. His brother loved it. It turned out the brother was really working about five hours a week because he was really good at creating canned responses, most of these; 99% of the communications from customers were via email so he just had a canned response. He was open about it, talked about it. There’s a lot of logic to saying this brother is loved and overpaid excessively so we did a negative add-back, meaning we adjusted his income and dropped down to the add-back schedule and put an expense in for a virtual assistant to do the customer service work. We bumped the customer service work from what the brother said he worked from five hours to 10 hours. And instead of paying that VA the standard maybe $5 an hour if they’re working remotely in the Philippines, for instance, we actually doubled it and made it 10. So we overpaid the VA. We paid them for more hours and this is all on paper, of course, and did an adjustment. We were conservative in our adjustment, but basically it was about a $10,000 add-back at a three and a half time multiple. It boosted the value of business by $35,000. So you’ve got to think through some of those things when you’re making hiring decisions and firing decisions and plan in advance when you’re selling your business. We don’t want you to wake up some day and just be so tired and frustrated and fearful that you’re too overleveraged in your business and decide to sell. We want you to plan it out so we can help you get maximum value for your business, but also have a better business for the buyer so that they can take it on with less risk that they’re willing to pay more and they can grow it someday and eventually exit their business. Okay, point number five, most people miss this. If partway through the year, your cost of goods sold go up by $2 a unit and you’re selling a thousand units a month, do you think your buyer is going to ask for an adjustment in due diligence? Yes is the only answer. They’re smart. They’re going to stroke a check for half a million, a million, to five million dollars. They’re going to hire somebody to do their due diligence. They’re going to pay attention and they’re going to dig deep. You need to do the same thing. So last year, I sold Mike Jackness’ business. Many of you have heard me talk about it with Mike on this podcast. We’ve done many presentations together. Halfway through the year Mike renegotiated his cost of goods sold on his one primary SKU. It was doing about; let’s just call it a thousand units a month for simple math, he’s doing many more than that. And it was more than $2 and a unit that was adjusted, but it happened in the last six months; the most recent six months of his P&L. That savings carries forward to the new owner of the business. So what we did is in the first six months of that year, we took the total number of units that were sold, multiplied it times let’s say $2 a unit. That’s two thousand dollars a month if a thousand units were sold a month or it’s $12,000. And then you multiply that $12,000 times your multiple and you see what added value there is to your business. It’s a legitimate black and white add-back. In Mike’s situation off the top of my head; I’m guessing at this point, I’m going from memory but I think it was about $54,000 that was added to the list price of this business; true, legitimate black and white value. It’s sold. Obviously we know that. The buyer has bought five businesses from Quiet Light Brokerage and multiple others. He’s very, very well educated. He’s very smart. It’s a legitimate add-back. 99% of people that sell the business on their own missed that and I’m sure a lot more with other firms. At Quiet Light Brokerage; and here I am preaching Quiet Light, I’m telling you that you got to dig deep. All right, reduced cost of goods sold. That’s what that is, that definitely carry forward. The other part here is that most people that are listening to this that are entrepreneurs bootstrapped their business and they listened to an influencer, an expert in the space, and they gave it a try. And it turns out all the stars were aligned. They worked hard, they got lucky. And they’ve got a business that is generating revenue for them. And you’re just working like crazy on that treadmill, trying to keep up with growth, and inventory, and cash flow management; things of this nature. You didn’t slow down yet or haven’t had the opportunity to slow down and look at your packaging and maybe working with somebody like Inventus or Gembah to work on repackaging your products and your SKUs. When you do that, if the weight comes down, the pick pack and ship fees at your 3PL or at the FBA comes down and that will carry forward just like reduced cost of goods sold. So think about those aspects of it. They’re all really important. When those savings carry forward to the new owner of the business, it’s an adjustment or an add-back. We’ve all heard of the tariff wars in recent years, months, depending upon when you’re listening to this. We’ve had tariffs that have been; first they were doubled; now they’ve been cut in half. If you’re in the middle of this and your tariffs have been reduced by 50%, that savings will carry forward and you can do an adjustment on that as well. But you’ve got to have the data in order to do it. You can’t ballpark these numbers. You’ve got to have the details and the data and the numbers. You’ve got to dig deep. You’ve got to use all of the math and logic that’s at your fingertips if you’re running your business really well and really focused with data to drive the value where it should be so the buyer can take it over again and do the right thing for the buyer. And that buyer takes it over and again does something great with the business. That’s the third point; I’m sorry, sixth point of Level 3. Let’s talk briefly about an add-back schedule and what it looks like and what it does for this business. For those that have planned in to jump over to video, they can see this in a P&L format, for those that are listening, I’m going to talk through it. The example I’ve got here is it’s got a lot of add-backs in it. Let me make it crystal clear that this list I’ve got up in front of me, not every one of them is on every P&L add-back schedule. It’s kind of excessive. But the point here is to show you how many there are and what the possibilities are. In this example though, the net income, we’ve got $297,000 in this add-back example. The Level 1 add-backs between payroll, payroll taxes, health insurance, charitable donation, meals and entertainment added almost $75,000 back to the net income. At a four time multiple that’s $299,000 added to the list price. The Level 2 add-backs one time legal and professional fees, depreciation, and interest expenses added almost $21,000 back to the Seller’s Discretionary Earnings. At a four time multiple that’s $82,000. Level 3, we’ve got reduced cost of goods sold. You replaced an in-house bookkeeper, you’ve got a new e-com bookkeeper; a negative adjustment there, Mastermind joining fees, travel to events and Masterminds, and then adjustment on cost of the goods sold, cash back there; oh no this one is a cash back on your credit card. All of those total about $62,000. At a four time multiple it’s adding $247,000 to the list price of the business. Between the three different levels of add-backs; $157,000 in add-backs, we started at almost $300,000 in net income and now we’re at 157 in total add-backs, it’s $455,000. All in at a four time multiple, these add-backs; these three different level of add-backs are adding $629,000 to the list price of the business. The bottom line is when you pay more attention to the details of the business your value is going to be much, much higher. Now, what is not a legitimate add-back? These are things that people have come to the table saying, hey, can I add this back? Hey, this is a one-time expense. It’s not going to carry forward or things of this nature. And in most cases, they do carry forward or the math is really fuzzy and we can’t do an add-back. The first one is inventory stock outs; lost revenue because of it. I’ve had people that have tried to talk me into this and in one case he did talk me into it. He was an investment banker, an attorney, an MBA; a really, really bright guy. He showed me the math and the logic behind being out of stock for a particular time in the trailing 12 months and wanted to do an add-back. The reality is that with a rapidly growing business, most people are going to be out of stock at one time or another until we get better at cash flow management. And then you’re not going to be and you’re going to be able to buy more inventory and you’re not going be out of stock. But it occurs in most e-commerce businesses. So it’s not an add-back, mostly because it does happen again and because the math is speculative at least. Okay, failed advertising campaign, point number two here, new advertising is something we all do in businesses. It’s recurring and it’s simply part of doing business and it’s definitely not an add-back. The second owner salary that I talked about at level one in this case, it’s not an add-back. If combined you’re working more than 40 hours or that second owner if you’re working less than 40 combined. If they’ve got some kind of non-transferable skill, let’s say that they’ve developed the backend to your website and that’s their primary role and they’re only doing it 20 hours a week, but they’re really skilled at it. Odds are the generalist buyer is not going to have that skill set. So it’s not an add-back. And in fact, that payroll, you can do an adjustment on payroll if they’re grossly overpaid, but you’re going to have to do an adjustment in an add-back schedule showing the true cost of hiring somebody for that role after the business is sold. Recently fired essential staff is point number five. You want to let 9 to 12 months before adding back essential staff to prove that the business can be operated without them and that the trends and all the work has been separated out between new people that took over their roles. The last is I see this from some people and it’s just not the right thing to do. Recent cost cutting is not a legitimate add-back. Cost cutting critical costs to increase your Seller’s Discretionary Earnings, it’s obvious and it erodes trust. So if you’ve traditionally spent $10,000 a month on advertising over the last 24 months but in the last three, you’ve cut it to $2,000 a month and the logic for you is because you got to boost Seller’s Discretionary Earnings it’s just going to hurt the new owner of the business and that’s going to come back and bite them. And it’s not the right thing to do but these types of things; other cost cutting is critical costs, just cut them to boost your Seller’s Discretionary Earnings is definitely not an add-back. We always talk about black and white math and logic here with add-backs. There’s no magic and there’s no gray. Pushing too hard on add-backs is going to erode trust. We always talk about, again, the four pillars; the risk, growth, transferability, and documentation. Those are the Quiet Light four pillars. There’s a fifth invisible one here and maybe it’s the motor that keeps these pillars together, not a fifth pillar and that is you. That’s the person behind the business that is running it. And if you push too hard on add-backs it’s going to erode trust. And if you erode trust buyers are not going to give you the same value for the business or the deal structure is not going to be one that it could be if they trusted you. The more they trust you, the more they’re going to pay for the business and the better deal structure you’re going to get. So be a good person. Do the right thing. Run a great business. And you’re going to get more value for it. Okay, so just to wrap this up for those that are stuck with me this long, I appreciate it, know your business’ value. It’s likely your most valuable asset. More than 50% of the money you’ll ever make from your business is going to come the day that you sell it. So if you’re a buyer of a business and you’re on the hunt, these things are really, really important. You haven’t bootstrapped, you haven’t scrambled, you’re coming into the business, it’s already established, you could do some of these things and make these things a priority so that when you eventually exit your business; and everybody exits at one time or another, they don’t think they will and they say no, I’m never going to sell. You’re going to die someday; I’m sorry to tell you. So you’re going to exit your business or it’s going to exit you, outgrow you and not be sellable because of downward trend. So number one, know your business’s value. Number two, know your numbers. Review your P&L monthly; Profit & Loss statement monthly. Get the details. The best thing you can do is outsource to an e-commerce bookkeeper or let them just give you that report every month. It takes two minutes to run the report yourself. Your cost of goods sold must be on an accrual basis. If you can get freight in on an accrual basis as well, please do because the businesses are sold on an accrual basis, not a cash basis. When you spend money on inventory and you do it on a cash basis your COGS will go up and down like a seesaw and the timing of the sale of your business will hurt you or hurt the buyer. And if you’re going like crazy and you’re putting all sorts of money into inventory, it’s depressing your Seller’s Discretionary Earnings and that’s simply not the right way to do it. Review your key metrics, your churn rate, your average order value, ACOS or TACOS, your monthly recurring revenue, revenue by SKU, your inaudible [00:41:56.5]; all of these are important. Buyers are going to ask about them. The more detail you have about them, the more that knowledge is going to be conveyed, the more confidence you’re going to instill in them, and the more value you’re going to get for your business. Lastly, number three, track your perks. Personal expenses that are buried in the P&L owner benefits and we want to be able to pull those out of them. It’s important because they are legitimate owner benefits and therefore they are add-backs. Track your cash back and travel points. Travel points can be converted. These owner benefits overall can add hundreds, if not thousands of dollars of value to your business. And you’ve earned it. Get paid for it. Don’t take any shortcuts. There are no shortcuts to getting the true value for your business. Take the time and effort to review these and dig deep and by that, it’s not an hour phone call with somebody that’s trying to sell you on their ability to sell your business. I’ve got the perfect buyer for you. They just made an offer on another business. And I think they’re going to buy your business. Please don’t fall for that. You’re smarter than that. We’re here to help you understand the value of your business first and foremost. If you don’t ever sell, that’s okay. You’re getting benefit from Quiet Light Brokerage, you’re building a valuable business, you need to tell other people about it. Someday you will exit. Someday you will have somebody else that will exit and hopefully you’ll think of us. But the key here is that you’ll have a more valuable business that’s better operated. And better for who? Somebody else; the buyer, and they’re going to pay you more value for that. And someday oddly enough, I know it all comes back to selfishly Quiet Light Brokerage. Someday that buyer is going to sell their business as well. Maybe they’ll think of us. That’s our model. We want to help you first. Please take advantage of it and ask for a valuation. It’s what we do. Don’t say yeah, I’m not ready to sell. We do want to talk to you when you’re ready to sell. We want to talk to you 12 to 24 months before you’re ready to sell. Even if when you hit your target financial goal and you say you know what, I’m having fun. I want to hold on another year. Hold on to your business. You sell it when you’re ready, but plan in advance. The best thing you can do is say, I want to exit; I want to change your mindset here and then I’m going to wrap this up. Change your mindset. Instead of going, how much can I get for my business? Say I want to get X for my business and then reverse engineer your pathway to that number. And the way to do that is a business valuation with a qualified expert at Quiet Light Brokerage. Now I’m pitching, right? I got to stop it. Everything we do is online. Everything we do is in the podcast. It’s on YouTube. It’s on our website. You could do a lot of this on your own. Go to the website, go to the show notes for this and download this PDF that matches this podcast presentation. And you’re going to be able to do a lot of this on your own. If you can’t do it and you don’t want to do it, we’re here to help. There’s no cost to it. We’re going to help you with it no matter what. So reach out. And don’t forget, the most valuable asset is your business and you should pay very, very close attention to it. All right everybody thanks for listening. That wraps up this episode of the Quiet Light Podcast. Resources: Quiet Light Brokerage

One of the biggest challenges we face as business brokers is getting sellers to understand that we too are entrepreneurs. Getting people to do a valuation is one of the biggest hurdles because many think that just staying afloat is the goal, and the rest will come later. Sometimes later is too late. Today Joe and Mark are back sharing how to get valuation right. At Quiet Light we work hard to educate and help people find the growth paths that will get them the most value for their business in the event of a sale. We have a ton of experience in giving valuations and can guide current and future sellers to profit. When you build a great business with buyers in mind it will make the transfer so much easier. Episode Highlights: Why a business owner should plan an exit strategy early in the business building process. The benefits and tradeoffs of entrepreneurship. How long in advance someone should plan their valuation. How much it costs to do a valuation. The threefold beneficiaries of the valuation. The importance of the end goal while building. How the valuation process benefits the potential buyer. Ways selling a cohesively built business creates valuable relationships. The level of detail that is essential to a full valuation. Accounting tips for a better valuation as you go. How the valuation process gives owners paths hidden profits. The other three of a successful business How the invisible fifth pillar makes a difference in the overall value of your business. Mark’s quick wrap-up of the importance of a valuation. Transcription: Joe: Mark, one of the biggest challenges that we have as business brokers is conveying to people that we’re entrepreneurs first. We’ve all been in their shoes. We’re technically still entrepreneurs, right? We run Quiet Light Brokerage. And getting people to get beyond the mindset of running their business and saying I’m not ready to sell I don’t to have a conversation about exiting to actually thinking well in advance of an exit is one of the biggest challenges and honestly, it’s frustrating. It’s frustrating for me and that’s why we work so hard to educate and help and we do this podcast so we can get more people thinking well in advance of their exit. But I want to ask you as the original founder of Quiet Light Brokerage, the man with so many stories to tell, why in your opinion should somebody even plan their exit and give it thought well in advance of selling their business; what are the benefits? Mark: Boy that’s a big question and I could actually give you a number of benefits and since you put me on the spot I don’t have them in order in terms of what I would think would be the most important. But I’ll start with this one which I think might not be the most important reason but I think it might be the most applicable for most people. It will resonate with most people and that’s this, having a business that is valuable in an exit usually means you have a very valuable business to own. That’s the number one reason in my opinion. So let me explain that and flesh that out a little bit. Obviously, if somebody is willing to buy your business for quite a bit of money; let’s say they’re willing to pay a four-time or five-time multiple, what they’re seeing there as a business that is desirable to own, it is going to grow, and it’s going to kick off a lot of cash in the future which obviously if you come to me or come to any entrepreneur and say do you want to own a business that doesn’t require a ton of work has a lot of upsides and is consistently throwing off money most people would say yes, right? If we talk about the four pillars which we do so often here, do you want to own a business that has a low-risk profile and good growth prospects as the two first pillars? Yes, most of us want to. So the first reason I would say is when you go through the process of planning to sell even if you decide not to sell your business the result of it is that you have a business which is more stable, you know the growth paths available to your business, and you have great documentation in place for the business. So that’ll be my number one reason right out the gate. And I don’t know if you want to discuss that or I can give you a couple of others if you want. Joe: Yeah well let’s first tell the folks listening that there is no special guest today it’s you and me and we’re going to talk through… Mark: I’m special Joe. You’re special. I am special. Joe: Actually, I just gave you hosting privileges on this. Mark: So we’re special. Joe: Technically I’m the guest and then I’m not special. Hey, we’re not having anybody on today because Mark and I have a ton of experience at this. We do valuations every day so we want to talk about the reason to have one done and then what we do. We’ll talk about what goes into it, and what we discovered, and what we learned along the way. So yes Mark if you want to talk first about that first example that you gave an elaborate on it a little bit we can do that and then go into some details on what it’s like to get a valuation and what we do here at Quiet Light Brokerage when we put someone through the process. Mark: Oh sure. Actually, I do want to get to the other reason because these are the two that were kind of vying for my attention when you first asked that question. The second reason is that you just really don’t know what the future holds. In the 14 years of doing this; at the time of this podcast almost 14 and a half years that I’m doing this, the number of clients that I’ve run into that are unprepared for the sale is exceedingly high and the number of clients that are unprepared who wish they had planned in advance is almost universal. So if you find that you’re unprepared to sell you you’ve reached that point where you want to and you realize you aren’t there yet there’s often some sort of regret. It’s kind of like thinking about the person who goes into the dentist for a root canal wishing that they had visited the dentist more frequently before. That inconvenience at the time would have paid off. Or for the person reaching retirement age wishing they had done more to plan their retirement. There are so many of these examples where especially entrepreneurs would get focused on the here and now today which is important. Obviously, we need to take care of that without the eye towards tomorrow that when tomorrow comes it often takes you by surprise. For entrepreneurs, we’re in such a really cool spot. We have an opportunity to generate income that frankly people in the regular business world or regular careers don’t have the opportunity to make. The tradeoff is some of that stability that you would get in the corporate office world and maybe some of the benefits and everything else that goes along with that. But for us, the benefit; the gain is the income potential but also what most people fail to see is the value of the asset that they are building in and of its own right and that alone can lead to early retirement, that can lead to being able to invest in much larger projects, that can be catapulted into something significantly bigger. But it does not happen if you build an asset which can’t be sold. And so not only is it good to own a business like this because it follows basic business principles of having a low-risk profile and high growth opportunities and is usually very well documented which is a good thing; it ties into those two elements but it also gives you financial flexibility for the future and also career flexibility for the future as well. And if you don’t do it the flip side is you can build yourself a prison which I’m sure you’ve seen a few people build prisons for themselves and their businesses. Joe: That’s very, very hard. You want the independence and life of an entrepreneur and you’ve built yourself a business prison that you can’t get out of and you just can’t get ahead. But let’s ask this; people ask me these questions all the time, we have a conversation about exits and valuations all the time so I mean I’d just grow you with a few here. Number one how long in advance should somebody do evaluation and plan their exit? We always hear I’m not ready to sell, why should I talk to you now? Mark: At least 12 months, right? I’m working with a client right now and they wanted to do evaluations, see where they’re at financially and I said that’s great send me your P&Ls and your balance sheets and they did which is awesome. I had a chance to review them and I had some further questions for them. Nothing came back so I bugged them about it and nothing came back. I finally bugged them again and they said well you know what we’re doing is we’re actually going through and we’re eliminating some of these discretionary expenses, we’re going to be doing this, that, the other thing and alarms are going off of my head because I see them taking some tax that they probably shouldn’t be, right? Okay, I understand where you’re going. For example one of the things that they’re doing is they’re cutting back on advertising spending in order to grow their bottom-line earnings. Well, let me ask you, Joe, what happens when you cut back on advertising? Joe: That’s a big no-no. It’s convergent graph lines, right? Discretionary earnings go up and your total revenue goes down. Mark: Right. Yeah. Nobody likes that alligator going to the left. Because if you see a graph where the revenue is going down or earning is going up we know that earning is going to go down in the future or to regain the momentum you have to outspend on advertising in most cases. To make it a more efficient one thing but that’s on another. So how long; sorry, you asked me a question and you know me, I won’t shut up. 12 months at a minimum? I would recommend 24, even 36 if you can just because if there’s big changes that you want to make; let’s say that you really want to explore that new product line, give yourself some runway to be able to plan that out. Joe: Okay, how much does it cost to do a valuation? Mark: Well it doesn’t cost anything. Joe: Why? If it’s free what’s it worth. I don’t understand. What’s the business model? You’re doing valuations for nothing. Mark: Oh you convinced me. If somebody wants to do a valuation of myself you’re going to be paying a lot of money. So for us, it makes sense, right? I mean the number of times when I’ve started Quiet Light and was working with clients in the early days so many clients were being turned away because; not in saying I won’t work with you but I would do the valuation. They say I’m ready to sell my business and I take a look at it and Joe you know the conversation. You and I had this conversation. And I looked at your business and I said okay right now it’s worth X but Joe if you wait a little bit time, do some of the things that you’re doing right now, actually, you’re doing a lot of good things, just wait a little bit you’re going to add this much value to your business. Other people it’s a little bit different, right? It’s hey you know what you have your name, you are a doctor and you are selling an information guide about how to take care of athlete’s foot. And your name is plastered all over this. Well, guess what? That’s not a transferable business because everyone’s buying it based on your name. So I’m going to have trouble selling your business and if we do sell it it’s going to come at a discount. But Mr. Doctor athlete’s foot if you take your name off of this and show us that it can run for 12 months just as well if not better than it is right now without your name plastered all over it instead of getting maybe a 1½ multiple you’re going to get like a 3.2 or 3.3. Joe: And who does that benefit? Mark: That benefits the client. Joe: There are three parties that it benefits. Mark: I’m being quizzed here. Joe: You are being quizzed. So it benefits the guy who’s running the business, it benefits Quiet Light Brokerage which is a weird model, right? We do it for free folks but in the long run, it benefits us because you’re going to have a more valuable business. But there’s this third party that benefits as well and that third party… Mark: Is the buyer. Joe: Right. They might eventually become our clients as well too. So it’s an odd model. As my mentor said, Joe, it seems like you guys are giving things away for free on a hope and a prayer that they’ll come back to you someday. And I said exactly Walter that’s what we’re doing and it works very well. We’re building relationships and building trust and we’re helping first. And strangely the more people we help the more our business grows and the more valuable their businesses become and the more buyers buy great businesses. And it’s an endless positive cycle and works very well. With that said I remember being at eCommerceFuel a few years ago and I came back; I sat at the bar with one of the presenters, I cannot pronounce his name. All I know is he swore a lot on stage but he was really good. He was really good and I had a beer with him afterwards and he said something like well I’d have a valuation done but honestly it’s free I’d feel like I’m committed to you. I’m obligated to you because I didn’t pay you. If I pay you I can just walk away. And it’s an interesting viewpoint but we are all about relationships and we want to help. We want to get it done. And the more conversations we can have well in advance of a sale selfishly it makes it a lot easier for us when it comes to the time to list your business. I’m in the middle of a valuation right now where there are two brands in one seller account and there’s a royalty arrangement and they have a coaching business and different LLCs. It’s just a mess and the add-back schedule is getting deep and long. It’s almost as long as the P&L itself which raises the antenna of the buyers. We don’t want that. We want to have this clean business presentation as possible. So I’m with you 12, 24, 36 months in advance. Have the conversation. Get an education on the value and the process of maximizing the value of what is likely your most valuable asset. I was having a conversation with Mike Jackness a few weeks ago and we’re doing a presentation it was actually at eCommerceFuel and he said the problem is you can’t talk too much about exits and planning with these guys. They’re doing all they can just to keep the wheels on the bus, to keep revenue going, and not run out of inventory, and do all these different things. I’m like yes, yes, yes, but when they have a clear vision of the value of the business and the view of an eventual exit when the wheel falls off and they’ve got to put it back on it’s a lot easier because they still know where they’re going. Otherwise, they’re just wandering aimlessly trying not to run out of inventory; solving problems without an end goal in mind which is it’s exhausting sometimes. Mark: Yeah and I want to comment on one aspect here about the idea of benefiting the buyer because if you’re a business owner you might be thinking well I don’t really care about the buyer at the end of the day. I mean I care but when you talk to entrepreneurs and sellers sometimes the approach they take is yeah I hope that the buyer does well with it but that’s definitely a footnote compared to what they get out of the sale and understandably so. I’m not criticizing anyone who has that sort of attitude. But in your opinion, Joe why should the seller care about whether or not the buyer gets a good deal? Not a good deal as far as discounted but a good business that they can make a good return on investment on. Joe: Yeah that’s actually not very complicated. It’s when you do the right thing you will be rewarded. If you build a great business that checks all of the four pillar boxes, that really highlights all of the financial key metrics in a very, very positive way; and these are things that we do in the valuation folks when all of those things are you know 8s, 9s, 10s or a really solid green light guess what? That buyer is going to pay you more for the business. They’re going to pay a higher multiple with better terms and it’s going to be an easier transaction for you. Most people that are selling their businesses sometimes it comes down to okay like Quiet Light Brokerage we had 2½ offers for every listing that we put out there in 2019. So buyers are liking our listings, they’re liking the way the packages are put together because we work with our clients for a long time and sellers sometimes have a choice. And sometimes they want to choose who is going to be easier in the transition afterwards. When you build a great business and you think of your eventual buyer in mind that transition is going to be easy because you’ve got SOPs in place, you’ve got a long communication with your broker advisor here at Quiet Light that’s going to talk to you about all of those different things and making that transition easier because that’s one of the four pillars; the transferability of the business and all the things that generate revenue for it. So now you’re asking a short question and I’m giving you a long answer, it’s the buyer will pay you more, as simple as that. Mark: The buyer will pay you more. I would also add on there that I think we are quick to dismiss the power of relationships and the people that you’re going to meet when you go to sell your business. These are really important things. I had a situation; as you know I have another business besides Quiet Light Brokerage that doesn’t take up a lot of my time but I ran into an issue the other day. It was a really complex difficult issue but the seller and I are friends at this point. We know each other pretty well and I hadn’t run into this before. So I sent him an e-mail and said hey how have we dealt with this before he came back with a nice long response and insightful and everything else. It was a really good resource for me to have and he and I are on good terms because he’s treated me fairly all along and built a business that was worth buying, to begin with. He’s a valuable asset and if I ever want to do new things in this space he would be somebody that I would look to partner with because he’s already skilled in this area. And when you’re selling your business you’re typically selling to somebody who is highly skilled and a successful entrepreneur in their own right. Isn’t that a good person to have you in your Rolodex? I don’t want to overemphasize this point and say this is the only reason you want to do it. I think what you listed Joe what you explained I think that is really where you want to put the focus and emphasis. But there’s a whole host of ancillary benefits to creating a transaction that benefits yourself first, the broker who is going to be working with you and your team your partner with you, and also that buyer making sure that they have a business that they’re going to be able to succeed with. Joe: Let’s talk about what we actually do in evaluation. Mark: Sure. Joe: I’m going to kick this off. One of the first things that; I’ve got a call this afternoon at 4:00 today I’m doing an initial valuation call with a couple of very experienced entrepreneurs. The first thing we need are financials. So as an entrepreneur, as a business owner, if you’re not able to run a profit loss statement with a monthly view going back more than 12 months we’re not going to be able to do a full valuation because the full valuation does a year over year comparison. I’m going to look at January of 2020 versus January of 2019 and hopefully ‘18 and so on. And that’s part of the financial key metrics in terms of where the top-line growth trends are, where the advertising cost as a percentage of revenue is, and where it’s trending. Is it seasonal? We’re going to talk about the timing of listing a business sale. Even if you’re looking three or four years out we’re going to talk about some of those things and we’re going to see all of that with the detailed financials. Now today Walker wrapped up a long email chain between all of us where he had a client trying to do a valuation and get his business listed for sale and all he had were quarterly P&Ls. What’s the problem in your view Mark with quarterly P&Ls versus monthly P&Ls? Mark: It’s just the level of detail, right? I mean I can go backwards. I can take monthly P&Ls and go over to quarterly and I didn’t comment; we had a discussion about this within the company and I didn’t comment on it before everything resolved themselves. There are some businesses frankly that I think quarterlies worked really well for and probably better for; businesses with lumpy income benefit from having a little bit larger of a lens that we’re looking through to even that out so we can see what the real trends are. But it’s good to have that option to be able to go to monthly because you have more detail. What you pointed out Joe and I think it’s a very good point is that when you get into the transaction and let’s say a buyer places an offer we get past a quarter and let’s say that we’re month one into the quarter, most buyers before they close on a transaction want to know what the business has done over the past month and that time that they’re doing their due diligence. Did it completely blow up while they were doing that final piece of due diligence? So they’re going to ask for these updated numbers along the way as they’re going through the process. Well if you have to wait two more months in order to close to be able to get reliable updated numbers that’s just going to extend your timeline, introduce further risk that something happens and the buyer has to pull out and will disadvantage you in that way. And again the lack of detail when I’m doing analysis on a business for a valuation I love looking at the trends I like looking at year over year trends and really I start to look at the different months. And it’s surprising the number of businesses that obviously November December get a spike are pretty high but let’s say like home and garden stores often get a bump right around April or May so that’ll be a second quarter. Maybe it spans two different quarters and you really get a sense for how does this business breathe over the course of a year. Right? Joe: So we’re going to look in great detail at the financials. So we want you to run a profit and loss statement for me to Quick Books or Xero with a monthly view going back as far as you can up through the most recently reconciled month. If it’s an e-commerce business we definitely want to get those P&Ls on an accrual basis. If we can’t get them on accrual basis because you do cash accounting at some point we’re going to have to find a way to flip the land cost of goods sold to accrual. Why? Because if a business is growing like crazy you’re taking a lot of cash flow from the business and putting it right back into more and more inventory and that’s going to depress your seller’s discretionary earnings. And your business is a multiple of seller’s discretionary earnings which is net income plus add-backs equals SDE. Mark: Yeah I want to talk about this accrual basis because I’m seeing this more and more. People are hearing us, they’re hearing this message, and I’m seeing more and more books delivered to us on a false accrual basis is what I would call it. So here’s the problem, bookkeepers don’t like to do accrual basis accounting because it’s hard. It takes more work. It takes more reporting on a monthly basis. They need to dig in, see what you sold, tie that back to the cost of goods sold, and record that. What I’m seeing pretty commonly here is accountants who make a year-end adjustments for the cost of goods sold. And so what you end up seeing is cost of goods sold seems kind of flat or kind of lumpy all throughout the year and then in December all of a sudden everythings out of whack. It doesn’t match up. Speaking about the monthly one of the elements that a buyer is going to evaluate when looking at your business if you’re selling physical products business or even if you’re selling; you can do this if you’re SaaS business as well it’s just a cost of sales numbers out of the cost of goods sold. One of the key metrics we want to look at is your business getting more expensive to run; in other words, if you’re consistently bringing in 5 million dollars of revenue what does it cost to generate that 5 million dollars of revenue? Are your products getting more expensive? Have you had a discount on those products over time? Are there periods during the year where you have to do one or the other? If you are in SaaS business are the cost of sales going up; your commissions that you’re paying out the salespeople if you’re on a commission sales basis. You can’t get these numbers unless you’re on accrual basis accounting. And a buyer, a smart buyer, if you want to sell to a smart buyer will want to see this information to see is this trending in the right direction and if not then we need to work this into the valuation; so monthly accrual. Joe: When this false accrual practice is done it’s generally done by a CPA not a bookkeeper because they’re doing some adjustments for the end of the year. Although just to be clear everyone if you’ve got an e-commerce business with physical products you are going to file your taxes on a cash basis. But when you’re looking at the value of your business we need it on an accrual basis. You should have a CPA for your taxes. You should have an e-commerce bookkeeper for your daily, monthly, quarterly profit and loss statements. You should not in my opinion or view do that work yourself anymore if it takes you three or four hours a month you’re worth more than the $400, $500, or $600 a month that a really highly qualified e-commerce bookkeeper is going to charge you. Mark: Yeah and we’ve made this point before but I’ll make it again. It all depends on how you enter the information or your bookkeeper how they enter the information into whatever accounting software you’re using. If you enter the information as an accrual basis you can flip to cash with a click of a button. It’s very easy to do. Joe: Very easy, yeah. Mark: If you enter your information into your books on a cash basis you can’t flip it to accrual. I mean you can, you’re just going to get the wrong numbers, right? The software is stupid in that way. It’s going to try and it’s going to calculate it but you’ve entered the data wrong. So if you entered it in as accrual you can file in cash, that’s totally fine. But for the sake of accuracy, you should be entering it or having your bookkeeper enter it in as accrual. And ask your bookkeeper this too, when I hired our bookkeeper I asked them; I sent them an interview, a written interview and I asked them to explain what accrual accounting was. I know what it is but I wanted to see could they explain it. And I was shocked at the number of foot keepers that couldn’t explain it in a clear, concise way. Joe: It’s not hard guys. Just we’ll move beyond this make your eye bleed accounting part of the conversation. Look up cost of goods sold accrual formula. That’s all it is. It’s beginning inventory plus purchases minus ending inventory on a monthly basis. That’s ideal. But the point; one last point is that if you spend a million bucks a year on inventory and you’re just doing adjustment or a guess we have to flip things sometimes to accrual. If you’re off by 1½%, that’s $15,000. If you’re spending a million bucks on inventory, you’re spending a lot of money; you may be doing 4 million 5 million dollars a year in revenue which probably means you’re doing $750,000 in discretionary earnings. You might be at a four-time multiple at that point; four times the $15,000 that you got wrong on the inventory is $60,000 that you’re not putting in your pocket in the sale of your business because you wouldn’t spend $500 a month on an e-commerce bookkeeper. Or you’re overcharging your buyer by that 15,000 times four because you guessed on the wrong side and things are going to fall apart or go off the rails in due diligence. So get it right, build trust, and move on. Okay, so first thing we need is a clean professionally done profit and loss statement with a monthly view. We’re going to import that into the Quiet Light Brokerage import system. We’re going to normalize the P&L. If you’ve ever looked at our listings folks you can see they look pretty much the same; our profit and loss statements. We do that because we see them in every shape, size, quantity, format, PDF, Excel. I mean it’s crazy I’m surprised somebody hasn’t mailed in a napkin at one point or another to Quiet Light. Mark: I had a notepad document once on a 20 million-plus business. Joe: We don’t want our buyers to see that so we import it. We have an importing process where we’re going to pull it in and we’re going to analyze the key metrics; the financial key metrics that buyers over the last 14 years have told us this is what we look at. They’re looking at top-line revenue trends. They’re looking at gross profit, trends, shrinking or growing, and then they’re looking at advertising cost as a percentage of total revenue and how it’s trending. As Mark said earlier you could be spending a lot of money on advertising in the last six months to drive top-line revenue or the reverse and it all weaves together in a web, right? I’ve had a listing for sale last year and the seller said I handed my advertising off to a VA in late spring last year and I let him run it and five months in I realize things got out of hand and I pulled it back and took it over myself. We do a recorded interview just like we’re doing right now on Zoom. We do it on video, we do it on audio, that’s part of the package when a business is for sale. And that question may come up then it also may come up in the written client interview and then guess what it all weaves into the profit and loss statements and the financial key metrics when then you can go and look at the advertising trends going yeah look at that Joe was right in July, and August and September the numbers were up and advertising was 17% instead of the normalized 12% that it’s been for the last three years. So you can see those different types of things. I had a situation just last week where I was looking at a profit loss statement where the ad spend went through the roof in December but revenue went down. That tells a story that he’s struggling against competition and it’s not really working out. He’s spending a lot more money but sales are going down and lo and behold January and February are down as well. The numbers tell a story so the first thing we’ve got to get are the numbers, right Mark? Mark: Yeah. And I’m going to share something here Joe that I think was last week or maybe the week before, you actually did a valuation on Quiet Light brokerage. Joe: I did. Mark: Which was done not because we’re looking for a buyer although if somebody wants to offer us 30 million dollars let’s have a conversation. More importantly you wanted to look for areas of wasteful spending on our part and also key trends for the business as well. So let’s think about this in terms of not selling our business, let’s think about this in terms of business owners who want to run their business efficiently. Let’s say you take the last three years’ worth of your P&Ls and they’re done on a true accrual basis and you take a look and you see that your gross profit margins have gone from 60% and they’re dropping down to 52%. Now you might know why that’s happening, you might know what’s going on there but you can also identify that as a trend that if you were to correct that trend it’s going to help the business. I worked with a client; I’m actually in the middle of doing a valuation for them and they keyed in on this on their own. They were very proud of this. They said look our gross profit margins are 42% right now but what we did over the course of the past year our revenue is down because of a very explainable reason but what we did is we found a product line. We found a method here to increase our gross margins from 42% upwards to 54%, 55%. We were able to test this on a singular product and it worked well and we plan to expand this. Well look what happened by looking at their margins and understanding the margins and understanding that’s an area of opportunity they’ve uncovered a huge avenue to growth which is replicable and from a valuation standpoint it’s great but from a business ownership standpoint, it’s even better for them because now they can charge a charge more, pay less. Who doesn’t want that, right? So let’s exercise; again you asked why should we do a valuation beyond being prepared to sell should that they arise? It’s a valuable exercise to do as business owners. Joe: I got an email the other day and it was from somebody named Anthony; let’s leave it at that. And he wrote Joe this is really, really insightful. I had certain financial goals in the business and now I realize I’m that much closer to them than I ever was. This is making it so much more exciting to run my business every day which is exactly what it truly is. In that situation we determined, he determined; he came to the table with they’ve decided to charge shipping on items over a certain dollar value and that was going to add their estimate was $180,000 in additional discretionary earnings over a 12 month period. And then they had renegotiated cost of goods sold, they were going to save about $2 a unit and that was going to add $200,000 in total discretionary earnings over the next 12 months. That’s $380,000 right there and with another $400,000 now they’re at $680,000 they expect to be adding 2020. It’s getting that much closer to their exit goal and it just defogs their window put your high beams on you can really see that much better when you’re running your business it makes it that much more exciting. A lot of the things that we do talk about beyond the financials, Mark; it’s not just about the numbers folks, it really starts with them. It’s funny that it starts with them but that’s pillar number four, documentation. Let’s talk about the other three pillars briefly, Mark. Go ahead and tell me what the other three are. Mark: Risk, growth, transferability. Joe: It took me a while to remember what all four those are and I’m going to hold this up everybody; anybody that’s on YouTube. I still have this on my desk after eight years. It says what they all are right there. Mark: I didn’t make it memorable enough. Joe: Risk, growth, transferability, and documentation. Mark: How are you as a student in school? I’m just curious. Joe: Oh I fell asleep in accounting class I tell that story all the time. And the bottom part of that; oh look at that I forgot to turn my phone off you’re hearing my Twitter. Mark: I heard a bird. Joe: The bottom part of that note there was that our business is relational, not transactional. I need reminders every day. Anyway, risk, growth, transferability, and documentation; we’ve talked about number four, risk. I’ve got a business that should be closing in the next few days and 70% of their revenue is from one SKU. What is that called? Mark: That’s product concentration or a single point of failure. Joe: Or a hero SKU or a bad idea or a unicorn; all sorts of trouble. I had a conversation with somebody; a couple three years ago… Mark: Bad idea. Joe: Actually it’s a bad idea. Mark: It’s not a bad idea if it’s sustainable just to be clear but yeah I get where you’re going. Joe: Well here’s the sustainable part, so there was a gentleman that I was working on a valuation for and he had one SKU that generated 90% of his revenue. And I’m like this is a bad idea. He’s like well it’s a lot less work Joe, it’s very defensible, look at our reviews. I mean he had me convinced that it was actually a good idea. And then guess what happened? Facebook changed an algorithm and they’re their ads that were working with no longer allowed and they never recovered. Their business was worth two million dollars one month and the next month it was worth like one maybe; two million, 50% cut just like that and I haven’t heard from him so I’m sure it’s gotten worse and worse and worse. It’s a single point of failure. It’s a hero SKU. It’s a risk. So, therefore, buyers are going to decrease the value when it comes to the valuation. We’re going to do it for you and we’re going to tell you what buyers think but it’s a decimal point or two or three. So instead of at a 3.2 multiple; I’m going to do some math for everybody, simple numbers at 3.2 if you’ve got $100,000 in discretionary earning you’re at 320,000 in terms of list price. Two-tenths of a decimal point off because of a risk point you go from 320 down to 300 or 300 down to 280. It changes that quickly because of a single point of failure or because of risk in disregard. So that’s part of the risk, it’s the hero SKU; things of that nature. But there’s also age, there are trends, right? So generally we want to have a business that’s about 24 months old at a minimum. We sold them for less. There are exceptions to every single rule we talked about here. But 24 months is when buyers start to have confidence and they don’t discount the value of the business because of age. The other thing to talk about is the trends, Mark, right? I just had a valuation call last night with somebody I’ve been talking to for six months. And I can’t seem to get updated financials on a monthly basis. That’s the challenge. And finally, I get them and we have a conversation. We’re recording this on March 3rd. I don’t have January and February’s numbers. I finally have Q4 and top-line revenues down 25%, bottom line discretionary earnings down 30%. So the value of that business just went from three-point something based upon the numbers down to easily 2.5 on the top side. So it’s risk because it’s trending down and somebody has to jump in and fix that downward trend, right? Mark: Mm-hmm that’s right; yeah, absolutely. And one thing with these downward trends you talked about how quickly the discount, just an observation multiples go down much more easily than they go up. It’s hard to prop the value and that multiple upwards but people would discount much more aggressively when they start to see problems such as the concentration or as you said the bad idea. Joe: So it is a bad idea when somebody calls and says hey I’d like to sell, I’d say hey you really can’t nobody else will buy it. Bad idea. So we touch risk, we touched on growth; these are the first two, let’s talk about the transferability of the business. What are the key components to this pillar? Mark: Yeah, the transferability; the easiest way in my world to think about this is just can somebody step into your shoes today and run the business without having a significant decline. Or maybe another way to think about it would be what’s the learning curve of the business, or do you have documentation in place that will allow people to be replaced if needed? The transferability is just that and it can encompass a number of things first of all that affects all businesses would be procedures. The procedures that you have within your company to run it on a day to day basis; how do you handle returns if you have that sort of business, what are some common customer complaints or concerns or questions and how do you handle those; do you have a process set up for that. If you’re an inventory-based business what is your inventory ordering process and your forecasting process? That’s something that should be in a standard operating procedure. So there’s all sorts of SOPs. Outside of those elements, transferability can come into your customer acquisition process and I brought this example up before during this call. If you’re a doctor and your name is all over the website for your great athlete’s foot cure now you’ve set up a barrier to transferability because you’re selling off your own personal reputation. And unless you’re willing to give your name and reputation to somebody else which most people aren’t and understandably so you need to get that off there and no longer be the key method for customer acquisition. And the last thing would be licensing issues or other requirements to run your business. We’ve seen this before. Joe you had a valuation I remember this clear as day at Rhodium Weekend when they were doing live valuations up onstage and somebody came with a business we were supposed to be working quiet with other advisors, everyone was going to do valuations so we could see what it looked like live on stage and what was the result; it was an e-commerce business, what was the result of that valuation? Joe: It wasn’t transferrable because they were sourcing product from the old; it was the old school, they were required to have a retail space so the business was going to be very, very hard to transfer. And I want to comment on that. Mark: It used to very common where wholesalers would require that you have a brick and mortar store because a lot of the legacy brick and mortar stores were telling their suppliers don’t let these internet people come in and just start selling this and so they would require that storefront but it still exists out there. The other issues that I’ve seen with these licensing issues would be not only the storefront issue but maybe if you actually have to have a license to run the business. And you see this like; we had this with somebody that was selling high-end hair products. And you think well, what’s the problem there? Well in order to sell these hair products you need to have a cosmetology license. And so that’s a transferability issue. It cuts both ways though. Transferability when it comes to licensing and then these hurdles does set you up with some defense ability that can actually help your risk profile be lowered; anytime that there’s a hurdle to jump over a business if you jump over it you’re leaving some of your competitors on the other side of that hurdle, so that’s a good thing. But the element that we started off with the SOPs and the documentation of your procedures, it’s something that everybody should be able to do and should have in place. What are your common procedures, how do you do it, let’s make it easy? I know you have something to say here on this, the last thing that I would recommend people do and I actually just did this with Quiet Light Brokerage for your sake and for other people within the company, diagram your business. Write out everybody who works for your business. Write it out; you can draw it if you like to draw, you can use a graphing software. I used Lucid Chart; very easy to use Lucid Chart for this or just write it out and see who has what roles within your business and how does that look. I’ll tell you what it’s an eye-opening experience because what you find especially in small businesses is you have people who wear multiple hats. You might find some crossover there as well. So that’s where I would put transferability. Joe: Too many people are focused on the top line and very proud of the total revenues that they’re doing. But ultimately we’re running these businesses to make money and to be profitable and we can help you hone in on that profitability and what your business is truly worth. So we’ve touched on what we do when we import and normalize a P&L and look at financial key metrics. We’ve touched on the four pillars which are risk, growth, transferability, and documentation. Within each pillar, there’s five to six different points that we touched on in a valuation process and we really get to know this invisible; I call it a fifth pillar. Mark corrects me every time. You don’t need to Mark, people know this. The person behind the business; the trust and credibility that they have is that invisible fifth pillar. It’s the mortar holding it all together. Are you a good human? Do people trust you? Do people like you? Believe it or not, if you are people are going to pay more for your business. You do make a difference in the overall value of your business. So we do all of these things and then we create a profit and loss statement with a detailed add-backs schedule. We go through that with you and we firm up your seller’s discretionary earnings and apply a multiple range to it. This is where it gets into the weeds and we won’t do it today on this podcast. I’m actually going to go ahead and record a podcast following this one on the three levels of add-backs. There are six different points to each level and it’s very eye-opening. A lot of people don’t understand the importance of detailing the add-backs. A few folks are like why do I need a broker for I’m just going to sell to this consumer group that’s buying up FBA businesses. You need to understand the add-back schedules so that if you choose to sell directly to them you’re getting maximum value for your business or even better the real value for your business; not maximum, the real value. It’s okay, you can choose to sell to whomever you want however you want but make sure you’re getting your own numbers right and that’s what I’m going to share on the next podcast. Mark: Fantastic. Joe: Okay, one more final thing. Mark: I was going to say we’re getting close to time here. People are like my drive is done. I’m at the office. Joe: We are. You’re so eloquent Mark with your words and your e-mails and all this. I say this all the time and people hear you speak. You speak very, very well so why don’t you do one final wrap up on why you think someone should have a business evaluation done through Quiet Light Brokerage and how it’s going to help them in the future and then I’ll give my two cents as well. Mark: Flattery is not going to get you anywhere Joe. Joe: Tell them what I want you to tell them. Mark: Well that I don’t exactly know, I’ll tell them what I think. So the question is why should people get a valuation done to kind of wrap this up. Your business is most likely your most valuable asset and if it isn’t yet hopefully it will be someday and you should know what the value of it is. More importantly, you should understand what drives the value of your business and also what’s holding it back. My favorite part of evaluation when I’m doing one; and actually I’ve got a call here in seven minutes to do a valuation, it’s going to be coming up soon, somebody is taking us up on this. My favorite part of a valuation isn’t telling somebody what their business is worth right now because that’s usually somewhat predictable. It’s being able to tell them what I love about this business and what buyers are going to salivate over is fill in the blank, and this part you’ve done a great job here, the areas where you’re going to have some friction in your sale and it’s going to cause a discount on the business are these elements. Now what I’m doing there is I’m really giving some insight into where the business is today but I’m also laying out a roadmap for everybody that I’m doing that for to say if you want to grow the value of this asset work on these elements and you know what if there’s an element of your business that’s really good double down on it. One of the areas that we’ve talked about in the past is this pillar of growth, we want them to have lots of growth potential for the business; lots of growth prospects for that business and they need to be real. However, if you have easy obvious growth within your business take advantage of it because I would rather multiply a larger earnings number and get that going up because it’s a lot easier to grow your value that way. Doing a valuation will help identify those aspects of your business; where is it valuable right now, what’s holding it back, and what’s the plan to be able to make it more valuable. You don’t have to sell the business. If you do these things you will have a business that is more valuable and you’re going to gain insights that you never really thought about. I will challenge everybody if you don’t do anything else on this call we’ve talked a lot about finances so I’m going to change it up. Diagram your business and then feel free to email me if you thought it was a complete waste of time. Joe: Or you can go at Mark@QuietLightBrokerage.com. Mark: Tell me it’s a complete waste of time. Joe: Mark with a K. Mark: Mark with a K. The only way it would be a complete waste of time is if you have like two people in your company. But then you know what? Joe: Send him an email. Mark: Yeah, right. But then if you’re going to do that diagram out the other people that are supporting you. Your contractors, the vendors, the people that are key for your business to run and take a look at that and you might not gain a whole lot of new insights but you’re going to see your business in a way that you’ve never seen it before. Joe: What you’re hearing here from Mark is that we’re here to help. We’re sharing information with you and giving you tools to make a better decision for your business and for the future when you are ready. If you are ever ready to sell. In no way shape or form are we ever here to talk you into anything. We’re going to share the information with you. And that was the reason I chose Quiet Light Brokerage back in 2010 to sell my own business. I talked to three different firms. Two were trying to get me to sign a contract. The third was giving me helpful information to build a more valuable business to sell when I was ready to sell. And that conversation was with Mark. Lastly, don’t be embarrassed by the size of your business. Sometimes we’ll go to Mastermind groups and someone will; I can tell they’re uncomfortable talking to us because they’re only doing $100,000 in profit. Are you kidding me? You’re an entrepreneur, you’ve built your own business, you’re doing $100,000 in profit which is 40% higher than the national average; I don’t know the numbers, I’m going to get a correction on that Joe@QuietLightBrokerage.com. It’s huge compared to the national average. Don’t ever be embarrassed by the size of your business. The smallest one we sold in 2019 was $28,000. Yes, it was a pocket deal because Brad had a larger listing and the gentleman had two smaller sites he wanted to sell off. They’re all shapes and sizes. Our average transaction size in 2019 was 1.1 million. It grows every single year but we go through all different sizes. We want to help you get from that hundred thousand dollar valuation to a million-dollar valuation. We’ve had clients where they first sold their business at 7,000 then 20,000 then 220,000 and now nine million and the next exit that that particular individual has set is 100 million. We want you guys to achieve your goals and we’re going to help you along the way. But we’re not going to talk you into a single thing. So reach out go to the website. It’s the valuation form or sell form I think it is or it shoot us an email at inquiries@QuietLightBrokerage.com and we’ll hook you up with one of the qualified advisors here who are all entrepreneurs themselves. Links and Resources: Quiet Light Brokerage

Twenty years ago David Wood was ahead of the curve in the coaching space thanks to a workshop that led him to delve into the emotional aspects of business leadership. He is here today to discuss ways owners can use emotional intelligence to overcome the hurdles and valleys of growing a business. David is a high performance life and business coach, working solely with established entrepreneurs. He got his start on Park Avenue at the age of 23 and thought he had it made as a consulting actuary. A mandatory personal growth workshop made him realize that he was clueless about anything emotional in business. Today he uses his knowledge in his own business, Play for Real, to help entrepreneurs and business leaders push through tough scenarios with themselves and others and help them to do great things. David also is a coach trainer, mentor, author, and host of the Tough Conversations podcast. Episode Highlights: Reasons why David is speaking with us today. How he takes surface level goals and delves deeper into them. What questions entrepreneurs should ask themselves in order to get through any growth challenges in their business. David’s focus on goal setting. The difference between a coach and a therapist. Why people seem so eager to move to the next thing when a sale is over. Quick coaching tips for business owners. The 4-step approach David suggests for sellers and buyers. How David’s techniques can help your business and improve your life. Transcription: Mark: So a few years ago Joe I wrote a blog post on the Quiet Light blog and you can actually look this up and it’s called I made a bad website acquisition. It was about a business that I bought and made some mistakes with and subsequently sold later on. At the end of that little ownership period that I had with that; it was a really small acquisition, we’re talking a very small five figure level here but at the end of that period I hated that business. I hated it so much because it wasn’t making any money. It was taking a bunch of my time. The logistics were a bit of a pain. And I got to the point where frankly I was willing to get rid of it for just about anything. And when we talk about the soft side of a transaction a lot of times people want to talk about the financial side and the metrics and the numbers and the financials; how do you actually juice that multiple, how do you get the value as high as you can? But so much of what we do is on that other side and that is the soft side of the transaction and understanding the arc of an entrepreneur’s ownership of the business and how are you going to feel when you sold that business as well. And look before you turn it off and think this is all soft gooey stuff; this has a real impact on valuations. And I know you talked to David Wood about this, he was a business coach, because he really kind of keyed in on that as well. Joe: Yeah I know it has a tremendous impact. I like to say don’t let the business outgrow you. That’s generally why people sell because they’ve got a certain capacity and the business outgrows them; they get sick of it, they get frustrated, trends change, and they sell which is exactly what not to do. So working with a business coach like David who spends a lot of time with people in the e-commerce world helps you understand what your own personal goals are in business and in life. They’re combined when you’re an entrepreneur. And helps you get through those valleys and over those hurdles as you need to. David is a good friend of Ezra Firestone. I met him at Blue Ribbon Mastermind. Brad and I and Chris were there so I heard him do a fantastic presentation and I just had to connect with him afterwards and have him on the podcast. I think he can and will and has through the podcast I listened to he imparted some great wisdom when it comes to operating a business within your own capacity. Mark: Let’s hear it. Let’s get to it. Joe: Hey folks Joe Valley here from Quiet Light Brokerage and today I’ve got David Wood from Play for Real with us. David is actually a high performance life and business coach. I met him at Ezra Firestone’s Blue Ribbon Mastermind event in; where were we David? St. Petersburg, Florida. David: Yeah. Joe: In January of 2019. I’m sorry 2020. David is a good friend of Ezra’s and he did such an amazing presentation I wanted to have him on the podcast. Welcome to the Quiet Light Podcast David. David: Hey thank you. I’m happy to be here. Joe: Well, I’m glad you’re here. We don’t do fancy introductions so why don’t you go ahead and give the people listening a little bit of background on yourself and what you do. David: Sure. Well I thought I was successful and I was at the age of say 23 because I was working on Park Avenue. I grew up in our country town in Australia. And here I am on Park Avenue consulting with Sony Music for the next song and I thought I pretty much got it made. I was a consulting actuary and for people who don’t know what that is, we deal with financial projections going say 50 to 100 years into the future. Joe: Wow. David: And so my job was risk assessment but then I lucked into doing a personal growth program and I nearly didn’t do it because they were all smiling way too much and they all wore nametags. I’m like this is very cult-y. I don’t know about this but I didn’t let that stop me and they cracked me open. They had me realize that I’d gotten great at systems and logic and results but I didn’t know anything about vulnerability. I knew nothing about deep connection with other people and how to really influence people. Emotional Intelligence was something I hadn’t even heard of. So the first half of my life was about business and results and success in that line of work and then the last half of my life has been about researching the more I still call it hippie woo-woo stuff like the touchy feely stuff. How do I make eye contact with someone? How do I be vulnerable? How do I deeply connect? So the people who come to me don’t just want their business to be better. You can get a lot of business coaches for that. And they don’t just want a part of their life to be better. They want everything to be to be better than it was before. So that’s the short version of; oh I didn’t say to in that course I got to coach somebody. Someone was really stuck about something that was destroying her marriage and I was able to hold space for her and her life changed and I got hooked. I was like this is amazing. I just spot the patterns and see what’s missing and make a suggestion and she ran with it, totally revamped her marriage and her life, and I was like I can do this more than as a hobby? And this is back in ‘97 and it turned out yes you can. People were just starting to consider coaching as a career. So now I’ve been doing it for 20 years and I don’t see any sign of stopping. Joe: You were ahead of the curve then and you’re doing pretty amazing stuff now. You didn’t mention that you wrote a book, that you’re on stage quite often, you’re on 70 podcasts last year, then Loosening Jack Canfield or John Gray did the inside cover of your book or things of that nature. You’re pretty well connected with high level people but you deal with a lot of entrepreneurs as well in your coaching business, is that right? David: Yeah I’d coach entrepreneurs mainly for the last 20 years. Now I’m doing more corporate stuff, some vice presidents and also some prison work and working with prison inmates so I’m expanding but I’m an entrepreneur at heart. So I love working with entrepreneurs who are already doing great things. I don’t work with just startup. You have to have a track record of success and then let’s; how do you go further? Joe: The people listening are probably saying well why are we on the podcast together; why are you here? David: Yes. Joe: And when we list a business for sale oftentimes someone will say; a buyer, well if it’s so great why are they selling? Or we always ask the question why they’re selling. And more and more often what happens, people, is that a business outgrows the individual. And what we want people to do is understand first and foremost who they are, what they’re capable, what their likes are, what their dislikes are, what drives them, what fills the cup and makes them happy. And that’s a lot of what you do in your day to day work, David, is that correct? David: Yeah. Joe: Okay. David: Yeah I get people who have got surface level goals. They come to me like they want to be a better leader. They want to learn how to manage their team or something like that. And that’s fine. Let’s start there. But then I want to know what’s really going to have you be happy. And some people know and they just don’t think it’s possible or they haven’t put time and attention on making it happen. Some people haven’t really asked themselves the question; how could my life be better? And that’s the sum total of my initial sessions with a client; how can your life be better? Sometimes it’s a business goal. If my business increased by 30%, that would do a lot for me financially and my family and then my life would be better. Okay maybe I’ll buy that. But normally there are other things like what if my relationship with my partner was deeper? What if my kids opened up to me and talked to me about their life? What if I had the health that I wanted? So yeah I like digging into those questions like how could it be better? Joe: How can the people listening today sort of figure out what questions to ask themselves? Imagine we’ve got an audience that it’s got a healthy mix of entrepreneurs that someday may sell their business. They’re learning about buying and selling and preparing the business for sale. And then the other half of the audience might be those that are thinking you know what I’m going to buy one of these someday because they’re unhappy in the corporate world or they’ve sold one and they don’t want to take the risk of building another so they’re choosing to buy. But let’s focus first on those people that are struggling with the business that they have; they’ve grown it, they bootstrapped it, it’s growing like crazy, and they’re just trying to keep up. How does one identify what their own comfort level is with the size of the business or the staff or the growth? Because a lot of what we deal with are people that wait too long that things get pretty miserable because it’s grown to the point where it’s beyond their comfort level. They don’t want to manage people. Mark and I had this conversation this morning and he’s like we’re doing an organizational chart here at Quiet Light Brokerage and I’m in a particular place mark and we’re all in different places. The key center of our organization is the advisors; our team of advisers. And I’m straddling a couple of areas, Mark is straddling a couple of areas and we said to each other we have the right as entrepreneurs to do what makes us happy. We want to choose that path. How does one identify what it is that makes them happy? Is there a is there a process that that they would go through in terms of goal setting or asking questions of themselves and I will just stop rambling now answer that question help me out. David: So the question is how can people identify how they can be happy; what are the right questions they can ask themselves? And I love this, on 75 interviews last year no one’s really asked me this question. So what I did is I went straight to my website and I’ll read out some of the questions. I have a life assessment that anyone can take. And if you like we can give it to people at the end of the show. They can go and fill it in but I’ll read out some of the questions. I have people in this assessment rate your life areas out of 10; business career fulfillment, wealth and money, your key relationship, health and peace. I even include relationship with yourself; like how much do you like yourself. So these are a few of the areas, there are a few more which I don’t want to steal all the thunder. I’ll leave some for people to find when they go and fill it in. And I have people rate them out of ten and that helps them look at oh wow this area is really a three; like my health and peace is a three, what’s going on there? Or my relationship with my partner is like a six. Is that really okay with me? Like am I really going to leave the rest of my life at a six? So that’s the first point and then I have people rate coaching areas; how about how are you doing with real goals? I’d like to talk about; and you heard this in my presentation at Ezra’s Blue Ribbon, GPA, goals planning and action. So out of ten how are you doing with setting real goals, having a real plan, and taking real action? A lot of people would like to be more focused. We’re kind of like a monkey on crack when it comes to getting work done. How about your daring, your caring, your decisiveness? So you rate these out of 10 and by the way this form doubles as prep if anyone wants to do a session with me. I use this as an intake because I want to go straight to wow you’re doing great here, here, here, here, and here are three areas that look like they could be doing better. Which of these do you want to focus on? Joe: I think the real goals thing is amazing and critical and so obvious that everybody should be doing it but I don’t think they do. I read decades ago; right David, we both got some gray on the chin that Harvard; I took a little class at Harvard, half the kids wrote down their goals and half didn’t. Those that wrote down their goals were something like ten times as wealthy or successful and happy as those that didn’t. One of the things that we’re trying to do here and having you on is part of that mind shift. I want people to stop asking the question how much is my business worth, how much can I sell my business for, I’m ready to some business how much can I, how much can I? Instead set goals and say in three years I want to sell my business for X and then reverse engineer the pathway to that and understanding, gaining the knowledge on valuations and setting goals to that pathway exit. Are you working with people in terms of that goal section of their life whether it’s personal, with their partner, with their business, with whatever it is that is weak on that scale and helping them with goals or do you just sort of act in a way almost, and what’s the difference between a therapist and a life coach and a business coach in this situation? David: All right we’ve got three areas I want to address here. We’ll see if I can track and remember all of them. The first one… Joe: I won’t remember them all so don’t worry about it. David: The first one is for me I like your process in this many years I want to sell my business for X. I think that’s missing a key step. I would say firstly how do you want to feel in three years? It’s incredible; and you can do this when you’re doing a New Year’s visioning session if you ever do that kind of thing. Like don’t set goals first, set feeling goals. I want to feel this. And then you can set some goals that will help you feel that. I want to feel at peace. I want to feel deeply in love with my partner. I want to feel joy as I walk down the street and look at strangers. Those aren’t some bad goals; actually this came off the top of my head. And then all right to feel like that what would I need to be doing? And I looked at well I love coaching. I’ve wrote this down; it was three or four years ago, I need to be more coaching and training because I’m inspired when that happens and I want to feel inspired. It’s like oh wow I didn’t know that. So it is a goal. So first step, how do I want to feel, secondly what do you need in your life to feel that and there might be a financial component to that. All right I need at minimum this amount of money to support these goals that are going to have me feel good. And you probably found this when you coach your clients, it might be less money than you thought the minimum. They have done some studies that show that first; I don’t know how much it is 50 or 60 grand can really do a lot to provide happiness in the year and after that it drops way off because you need your own food and you want shelter and you want some basic peace. But after that that poor show that extra trip or vacation isn’t going to do that much at all. So that’s the first thing. And then there was a second component. I know I remember the therapy component but what was the other component to your question? Joe: I told you I wouldn’t remember David. Come on, I’m serious. I meant it. David: Oh that’s right. I wanted to say some people come to me ready with goals. They’re like I know what I want I’m just not getting there fast enough. So we might do brainstorming or we might have to strategize a plan and they might just need some accountability to put attention on it. All right every week I’m going to do it. Other people it might take three to six sessions to peel the onion and to just uncover. They may not know yet. Like people would come to me with I want this this and this, six months later we’ve uncovered that; I’m working with an executive right now who finally has seen that he’s really arrogant and he thinks he’s smarter than everybody else which may be true but it’s not serving him. He didn’t come to me with that but it’s a merge and it’s impacting all of his relationships not just at work. Joe: Did he come to that realization and share it with you or did you go you know you think you’re; how do you come about that realization? David: Well, sometimes I might gently point it out and I have that privilege because they’re paying me. So I can say you know I think I have some feedback that might not be easy to hear but it might be very valuable, would you like to hear it? You’re never going to get a no from someone who’s paying you to hear your idea. But he came to me. He said you know what I think I can be a bit of a jerk and we; actually this was really fun. Sometimes you get to have fun in coaching. I said to him there’s a chance. I know this is hippie woo-woo but I think you could really make a big difference for you if you’re willing. It comes from the Himalayas and you’re willing to trust me on this. He said all right. So I took him through this Himalayan chant. It starts with; maybe you’ve heard it, it starts with Owa Tajer Kiam and we did this and we kept on going and he got faster and faster saying it with me until he realized he was saying oh what a jerk I am, oh what a jerk I am, oh what a jerk I am. And when he finally got it he laughed so hard and that’s part of my style is let’s bring some humor to it. Yeah, you can be a jerk, so can I. When I’m frustrated I’ll use my intelligence to belittle the waiter and they may not even know. And then I’ll feel bad about it. But we’re getting off track. So some people have a sense of what they want, other people it’s going to take some time to uncover and I find that really fun and fascinating. And then you said how is coaching different from therapy. It’s very contentious. A therapist will argue about this but once I heard this metaphor a therapist will help a man with a broken leg to walk again and a coach will help that man to run the four minute mile. Joe: Okay. That’s not mental therapy though that’s physical therapy. How do you differ from somebody sitting down and saying I’m unhappy with my life? David: Well the metaphor is more about someone who’s really, really struggling to go from bad to okay versus helping someone to go from okay to good or from good to great. Joe: Okay. And you’re the okay to good or good to great. David: Yeah, that’s my target market. Now there are coaches who might be willing to work with someone who’s really struggling financially. For example if someone’s got a lot of historical stuff trauma and baggage from that; and I’m one of them, I have no judgment about that. That’s not me. I would say a therapist could spend time with you to help you unpack and bring up all those feelings from the past and like that. I’m more interested in what do you want and what are you going to do about it and there is some overlap because sometimes people have limiting beliefs. And I’ve got one vice president who said I think I’ve got some limiting beliefs that are holding me back, can you help me with those? I’m like yeah we can bust those open. But I’m not going to do a lot of how was it when your father treated you this way and whatever; that’s not my style. I’ll refer someone to a therapist if it looks like there’s some old stuff that’s really holding them back. And a disclaimer and a plug for therapists there are some therapists who will work with people who are doing just fine and help them go to great. So it’s a broad brush painting with right now. Joe: But I got to tell you in the future audience you may hear me say how do you want to feel in three years when you sell your business instead of what’s your financial goal. What do you want to exit for? Inaudible[00:21:40.0] a combination of both. Because I’ve got to tell you people are this is their baby they’ve built it up and sometimes they’re sad to sell it. But I’m interviewing people right now for the purposes of writing a book. Yes this is the second time I’ve mentioned this on the podcast and I will not be obnoxious and plug it all the time but it’s fascinating. The idea is when that wire hits your account and you can do it with your phone now and you see all of those zeros in your bank account for the first time, what was that feeling like is the question that I asked. And the feeling was okay, that’s good. Now I’ve got to get to work and helping with the transition of the business and keep going. It wasn’t champagne popping and jubilation and things of that nature. And do you think that’s because; and I heard this literally at three out of the five interviews that I’ve done so far. Do you think that is just because they’re caught up in time focused on the work at hand versus setting a financial and feeling goal when someone exits their business? David: I think the question is why are people so quick to move on to the next thing and they’re not celebrating and enjoying? Joe: Yeah I guess so. Thank you. You do a better job of reframing my questions than I do. Thank you. David: My pleasure. Firstly tell me do you have a working title for your book? Joe: I do. We talked about it. That’s right. David: I think there was one line you said and like oh you got to hold on to that line. I can’t remember what it was. Joe: We did. I’ve settled on; and this is the part where I’m either an idiot or brilliant. I sent out two title options; I already said it to everybody here, one was Incredible Exits which is a series we use here on the podcast for people who have sold their businesses. And the other was Exitpreneur. David: That’s the one I remember, yeah. Joe: That’s the one that stuck. Right. So I think probably 24 out of 25 people said Incredible Exits, go with it, it’s just that. David: Do you remember the book title that I suggested? Joe: Yes Making Exit Sexy Again or something along that lines. David: No, that might be the subtitle but you said to me something like the real money is in the something. Joe: It’s when you exit the business. Yeah the real money is when you exit. And then yes… David: It was nothing like where the real money is. I forgot what it was but I was very excited about it at the time. I really am. Joe: We’re Making Financial Sexy Again that was the subtitle that you suggested. David: Your financials; because you said the real money is in the financials and people might get that and so you can make it sexy. Joe: Or eyes bleed. Well I ended up settling on The Exitpreneurs Playbook with the whole goal of setting a goal and reverse engineering your pathway to that. But we might add some feelings in that goal. David: Yeah. So speaking about reverse engineering I’ll comment on why I think we’re so quick to skip over the celebration but firstly I want to tweak or reframe something you said. I agree with you it would be good to ask them how do you want to feel when you sell the business. So that’s great. I think that would be a good move. And what I’m talking about that I want to clarify it is much broader than that. I’m saying how do you want to feel in your life generally. Joe: Yeah. David: And so just for listeners to make sure that that’s clear; how do you want to feel generally when you wake up, as you go about the day, when you go to bed. How do you want to feel and what kind of activities and things actually have you feel that and then reverse engineer the life of that. And you may find that money would be a component and that’s where Joe can come in and help you maximize what you get for your business to support what you’ve already created in terms of your life goals. Now why I think we’re so quick to skip and I’m one of them once a while this is I say why we are quick to skip the celebration and I got this from Dan Sullivan I think; a Strategic Coach. So we’re looking forward, that’s how we’re oriented. We’re looking forward and we constantly see the gap between where we are and where we want to be. And that’s great that’s the ego’s job because it wants to put food on the table. But when we do that all we’re going to see constantly are gaps. We’re constantly going to see what there is to do and it can be overwhelming and we miss the celebration. If we want to feel good and acknowledge ourselves for how far we’ve come we have to turn around. Metaphorically look backwards and see how far we’ve come and that’s the gain. So he talks about Gain and Gap and I’m always like all right that was good. Now what’s next? And I have to slow down and even say to people we’re celebrating or I’m going to pop some champagne or we’re going to dinner or dinner’s on me because I want to really acknowledge this win in my life that for example my health has been pretty rough for quite a while and I went out three times last week to go and be with people and get limbic connection and that’s a win. So we can slow down and celebrate that and say wow look how great that is instead of looking forward to go there’s still so much to do health wise to heal. So does that answer your question? Joe: It does. Thank you. Have you got any quick tips for those that are too afraid to hire a personal and business and life coach; have you got any quick tips in terms of somebody that’s caught up in that grind every single day just trying to keep the wheels on the bus and not run out of inventory and deal with the coronavirus now and tariffs and so on and so forth? How do they kind of slow down and focus and appreciate what it is that they’ve got so that they can look forward with a clear vision? David: Yeah well I would recommend filling in the life assessment at PlayforReal.life. It’d take you five or 10 minutes and it’s great information to have about your life. And then you can see oh maybe I want to work on the real goals, I’m going to sit down and do an hour session with myself and set some specific measurable targets that will have me feel great. So that’s one thing. I like to talk about truth and daring in particular. Joe: I played that as a kid. David: Yeah well that’s Truth or Dare. Joe: I know, I know. David: I like truth and dare. I don’t know if those are quick tips but I think the more we speak out truth the better life gets the more attractive we get. We might rock the boat a few times and have some teething pains but I think… Joe: So speaking the truth to those around you, to yourself, is a daring thing to do? David: Most of us have grown up learning to hide things. We learn it covertly and subconsciously. We’re like I’m just going to keep all this stuff in here and I’ll show the world what’s safe. And I get that and sometimes that’s appropriate. But nine out of 10 times I think it separates us and a great leadership move and personal growth move is to share the things that are a little edgy. Hey when you said that I felt disappointed or I notice I want us to feel better working together and it feels strange and I don’t know what it is to talk about it. Joe: It’s hard to initiate that. David: Yeah. Joe: How do you initiate that? I remember I was a kid; I was in my 20s and I was volunteering at this theater in Portland, Maine and doing a massive renovation. It was going to end up being a concert venue and I volunteered to work my tail off so that I could become an employee of the company when it finally opened. And I got that opportunity and it really pissed off somebody else and we weren’t done yet. We still had another three or four weeks and that person he could have been bumping into me with his shoulder because he was so upset he would have. It was that kind of you know mental stare and whatnot and finally I just said hey what have I done to upset and offend you? And it was hard for me to figure out what to say but it worked and we became friends afterwards oddly enough. And so I did; I was truthful and confronted him I dared to and it worked out very well but it’s very hard to do. David: Yeah. Joe: How do you bridge that gap and say it? David: Well the biggest obstacle is most people aren’t even aware of those troops that are swimming around in their subconscious. They’re just like that guy’s a dick. Or that I don’t like her or I’m just not going to work with him again. He’s unreliable, right? We don’t even see that I could speak up and possibly change this. So that’s the first thing is become aware of it. And I’m working on an app called it; that will help you do a true thought to try and work out oh what are the truths that I could say if I felt courageous? Secondly once you work it out say it’s like that guy and you’re feeling like things are strained and you want to bring up the conversation, the thing that gets in the way is lack of clarity. You’re not aware yet what your hope or intention is like what’s the good that could come out of it? You haven’t generated that yet. So it’s a bit murky. You’re not totally clear what you’re afraid of. It’s probably something like he might get defensive or it might be really awkward and might make things worse. But that’s not clear in the mind. So I have a free download on the on the website. It’s called A Four Step Tough Conversations Blueprint and the worksheet will help you get clear, it’ll even ask you is there a request you could make; something they could do that would improve the situation? so you get clarity then you’re going to be much more likely to have the conversation because like oh now I know what’s going on. Before I was just this jumble of I just didn’t like what was happening. Then once you got the clarity you can follow the four steps which give you to them in a nutshell. You asked permission, don’t just dump the conversation; can I talk to you about something for a few minutes? You share one hope and one fear. My hope is that we’ll feel more connected after it because I’m feeling like things are a little strange now my hesitation is I might make it worse. But are you willing; can I share the issue? And then three you share the issue and make your request. My request would be just that you let me know what’s going on or if there’s any way I can improve the situation. Joe: You make it sound very easy. David: Well I’ve had a lot of practice doing them and talking about it and the worksheet really does make it a lot easier. I’m not saying you’re not going to feel uncomfortable and I’m not saying there isn’t risk. That’s what makes it a little bit exciting but your chances of it going better are much clearer because you’ll have the steps. You can even take a printout with you and say I wrote down some talking points because I wanted to do a good job at this. And then the step four; super important, is get curious and listen. How is this from your side? What are you experiencing? Do you have a better idea than what I do? And then you shut up and you listen and then you’ll work it out together. Joe: I love it. Can you summarize for us as we’re wrapping up and running out of time how is it David that this is helpful for people in business; the entrepreneurs that are here in the audience? David: Oh my God. It’s helpful for everyone but specifically in business you want your staff to be motivated and empowered. I had my assistant quit out of nowhere. She did only three things that weren’t working for her and she didn’t have the training as most people don’t know how to speak up. She didn’t even consider a conversation was possible. So by you learning these techniques and practicing it you can model it for others so that you can have more communication among your team. You become more attractive as a leader. You’re going to build more loyalty that people want to work with you. They will have a sense that they can trust you. You’ll have more customers because your energy is going to shift. And they’ll be like oh wow; like Ezra, right? I say one of the reasons that people go and pay and be part of Blue Ribbon Mastermind is because of who Ezra is and how he shows up. And he’s learned how to have these conversations and speak truth. So if we had more time I could probably go into 10 more benefits but here’s one final benefit. You will feel better and you will like yourself more if you’re speaking truth. Joe: Yeah that’s a pretty huge benefit, that’s called being happy. So I’m going to go ahead and download it myself. I know you and I are going to chat personally next week and I’m very confident that I will actually become one of your clients and maybe we’ll have you back on and talk about my personal experience and how we went through that process and what it’s made; a difference for me, in my life here at Quiet Light Brokerage. All right. Any last minute thoughts and then of course again the URL at how people reach you if they want to touch base and possibly have a coaching session or just learn more from what you do on the website. David: Yeah. Thank you. So my last thoughts are you’re doing great; wherever you are, whatever you’re doing, life is incredibly complex. I’m going to do a rant sometime on this. Things are designed to break down. That’s how it’s going to work. And you made it this far. You’re doing great. You don’t need anything else. That’s the number one thing. Secondly there’s always room for more; for things to be better. That’s the game I’m playing. How I do better and get the most out of this this life. And so if you want to practice speaking a truth more maybe having a few tough conversations I think that’ll help. Setting goals and really we didn’t talk about laser focused action but those are some things that can help. My invitation, if people want to find out more or get in touch with me PlayforReal.life is my website and there are three cool things you can do at that site all at the same link. One you can download this blueprint if you want to have a blueprint; a roadmap for your tough conversations. Secondly I have my own podcast if you want to listen to me as well as Joe. I’ve got Tough Conversations with David Wood, you can subscribe at the website. And the third thing if something resonated for you on this call and you’ll like I want life to be better. I want business to be better and if you think you might be coachable like you’re open to input see if you qualify for a discovery session. If you qualify I don’t charge for that one because it’s fun and too because it’s how I find the right people to work with long term. We’ll actually dive into your life and business and create a plan. And if you want to implement it on your own, keep me posted. Let me know how it goes and if we both believe that coaching can have a big impact we’ll talk about setting up coaching and that’s all at PlayforReal.life. Joe: All right. Well I’m looking forward to it myself David. Thanks for coming on the show I appreciate it. And I hope you can help a lot of people in the audience just be happier in life and happier and more successful in business. Thank you very much. David: My pleasure Joe. Thank you. Links and Resources: Play For Real David’s Podcast  

What is one of the surest paths to substantial wealth? Grow and sell a business. Today’s episode is all about Joe’s book project, “The Exitpreneurs Playbook.” Joe has over 8000 stories to tell about what it’s like to buy, what it is like to sell, and ways to outsmart the typical entrepreneur process. Mark is interviewing Joe about this upcoming project, his motivations behind creating it, and how getting to the writing process carried its share of challenges. Joe believes that an exitpreneur should have the tools in hand to start, run, and grow their business for better decision making later on. He is not telling anyone to sell, he is offering them the strategies they need in order to be ready if they do. Episode Highlights: Joe’s idea and the process of putting it into book format. Why he wanted to write the book. Reasons exit planning can be challenging for the business owner. The differences between an entrepreneur who is considering a sale versus one who has actually prepared an exit. How businesses often outgrow the founder and smart moves to make before that happens. The importance of reverse engineering to the goal for a better exit strategy. The difference between the entrepreneur and an exitpreneur. How Joe came up with the book title. Transcription: Mark: So Joe I was at an event recently in Salt Lake City and it was in just general kind of a conference meeting room for about 50 people or so and they had a lot of books in this place. And I was intrigued to just kind of look around and see what was there and you’ll never guess what book was up on the shelf. Actually, do you want to guess? Joe: Yeah I want to guess. I’m looking around my office, Tools of Titans by Tim Ferriss? Mark: You know what? It actually was in there. Joe: It was in there. Mark: Not the one I’m referring to. Joe: The ONE Thing by John Keller? Now, wait let’s call out one of our friends; Superfans by Pat Flynn? Mark: You know I don’t know. There were a lot of entrepreneurial focused books so maybe that one was there; I don’t know. Joe: Okay. Buy Then Build by Walker Deibel? Mark: Buy Then Build by Walker Deibel; yeah absolutely, that was on the shelf. In fact, they had multiple copies of it. They were giving that book away. And today; what is it? It’s February 11th so we’re a little bit past a year since Walker launched that book and it spent a year as number one on Amazon Bestseller in this category which is pretty fantastic. I mean obviously, we’re super happy for Walker. He won an award for being the thought leader of the year through a major alliance of mergers and acquisition advisors. Joe: Huge. Mark: That is huge. He’s had professors from Ivy League colleges come up and talk to him about the book. All of this leads me to something beyond just the accolades and that is the information that’s out there in this space about what it’s like to sell, what it’s like to buy. Walker is talking on specifically which is the buy-side and how to use this as an investment vehicle, how to outsmart the Startup Game as he says and reduce some of that risk. But there’s also a whole on the sell-side as well where people don’t really know that their business is sellable or they don’t think about it. But just yesterday I was reading something on the fastest way to build wealth; what is the fastest way to build wealth? And the conclusion that they had is the fastest way to build wealth is through building a business and selling it. This is one of the quickest ways to actually building wealth. And I know you’ve had guests on the podcast here who have talked about this process or you call it your Incredible Exits series. I’m really, really excited that you’re writing a book on this and you’re not calling it Incredible Exits despite everybody else’s opinions that you should but it’s these stories behind the scenes. Joe: Yeah I’m excited to be writing it finally. I sat down with some friends a year ago probably around a fire pit; maybe a year and a half ago because it was summertime. We’re recording this in February of 2020 and I said look I’m making an announcement, I’m writing a book, I’m telling you guys to call me out on it and then I didn’t do anything but I tried. I tried to write it. I tried to outline chapters. I tried to follow up… Mark: Hold on one second. You made this promise right on a fire pit with friends? Joe: Yes. Mark: How much did you consume before you made this promise? Joe: I’m a 2-drink maximum kind of guy, that’s just the way I am. Mark: Okay. Joe: It’s like giving myself an injection of the flu when I have more so it wasn’t much. But I didn’t get it done. It’s a lot of work. So I followed the original book in a box method and didn’t get it done at the scheduled time. I was at Brand Accelerator Live with our friend Scott Voelker last September and one of big Scott’s announcements was that he actually wrote a book. And it is also here on my desk somewhere; where is it Scott? It’s the Take Action Effect. I just turned my head away from the microphone, sorry folks. And I met his scribe; a young lady by the name of Brennan and I connected with her during the event and talked with her and said okay this is it I’m done. I’m hiring a scribe and I’m going to write the book. And I’ve talked to a number of people about it and let me just cover the process and then answer the question as to why the heck I’m doing this because it’s a massive undertaking. The process is instead of actually writing a book myself with written words and a keyboard I get interviewed for I think it was 8 2-hour sessions; so 16 hours in interviews. First, we outlined the chapters and go through the whole process and instead of talking about; I mean writing an article or a chapter on seller’s discretionary earnings and add-backs and the three levels of add-backs and all the different things that we talk about on a regular basis Brennan interviewed me. She transcribes the entire interview through UberConference and Rev.com for those that really want great transcription services. And now we’re in the sort of lull between all of those interviews and me getting my first draft. They’re going to give it to me in thirds. So the first one I will get will probably be I want to say mid to late March and then they’ll drip it out in thirds every week for 3 weeks. They want to overwhelm me in terms of reviewing and editing. I still have a lot of technical stuff to add to it but it’s really kicked the process into high gear. It’s not cheap, let me tell you that. It’s an expensive undertaking but I think given what we do for a living and how many people we’re trying to help I think it’s well worth it. Why am I writing a book? Walker’s been an inspiration, very successful with Buy Then Build and the amount of people that he’s been able to reach and help on the buy-side. We work with sell-side brokers or sell-side clients for the most part and I’ve done the math Mark, does it sound inconceivable that I’ve talked to 8,000 entrepreneurs over the last 8 years? Mark: Not at all. Joe: Yeah and that’s probably a conservative number. I’m not saying I’ve had an in-depth evaluation with 8,000 of them but I have without a doubt talked to 8,000 and that does not count standing in front of a room with 3, 4, 500 people. And the challenge has been we’ve got to reach them one by one and I know that Walker’s book has been as you said best seller. I think it’s probably sold over 10,000 copies at this point. Mark: It’s over 15 at least. Joe: 15,000 copies? Mark: Yeah, I actually talked to Walker about it a while ago. Joe: I think he told me something like 99% of books sells less than a hundred copies that are published. Now Walker, correct me if I’m wrong but it’s pretty impressive. So to get what we share on those valuation calls into somebodies hands before, during, and after they have a valuation call and when they’re in an audience that will give them every possible detail that we’ve developed over the last 8 plus years of doing what we do and sharing that in writing so that they can essentially change their mindset. And that’s the goal of the book, it’s to change their mindset from reaching out to us when they’re sick and tired of running their business or they’ve had a bump where things get tougher and they say Gosh how can I sell this business? A buddy of mine told me I can get X multiple. I’m going to call Mark and say Mark how much can I sell my business for? I want to change people’s mindsets. Instead of saying how much can I sell my business or more often they say how much is my business worth, I want them to say I want to build wealth like you said at the beginning and I want to sell my business for X dollars. I want to do that in 4 years. In order to do that, they need to understand where they are today. And the book is going to help them reverse engineer the path from where they are today to that exit so that they can do a partial valuation, get comfortable with brokers, and drive that path. I had a conversation with Mike Jackness recently and Mike talked about the fact that about what we do sometimes entrepreneurs just don’t want to hear it because the idea of exit planning is so beyond what they’re trying to do when they’re just trying to keep the wheels on the bus, right? They’re running out of inventory, they’ve got competitors coming at them from every angle, they’re trying to do cash flow planning and it’s just so hard that they can’t see out the front window. The objective of the book is to sort of clear that window, have a clear path to an exit that they understand and it’s a much better ride. I’ve been through it myself personally. You did it for me back in 2010. I could see nothing, understood nothing, we had a call, we had several calls and the light bulbs went off and I knew exactly the path to take and I’ll tell you what operating my business became a lot more fun and exciting even though I was sick and tired of it after 5 years. Mark: You know the more I experience the business and grow as an entrepreneur the more I’m learning. With anything dealing with a goal really the best way to achieve these things is what you’ve said, reverse engineer it. Rather than just kind of impulsively decide that I’m going to do something figure out where you want to be and then reverse engineer. But in order to reverse engineer it, you need to understand the mechanisms that are going on to create that value. You’re trying with this book to create a shift in the mindset of entrepreneurs, right? By the way, folks if you haven’t figured this out we don’t have a guest; Joe is the guest. I’m going to interview Joe about the book and maybe we’ll talk a little bit about what it is like to do what Joe and I’ve been doing and everyone else at Quiet Light. Joe: Right, we’re co-guests. We’re co-hosts and co-guests today because I want to grill you too. Mark: Very good. Alright, I want to start out by saying okay let’s talk about your experience. You’ve been doing this for 8 years. You’ve done literally tens of millions of dollars of transactions on your own within Quiet Light Brokerage. Joe: I’m fastly closing in on 100 million. Mark: That’s right you are. You are; absolutely. Joe: Inaudible[0:11:17.8] 12 to 18 months; pretty shocking. That’s amazing. Mark: Absolutely amazing. Talk to me about the mindset that you often see or most naturally see in an entrepreneur that comes to us to sell versus those rare cases of somebody who has planned to sell and what is the difference in the actual process value and stress levels I would say for everyone involved. Joe: Yeah. Look all the success stories that you guys hear about on the Incredible Exits for the most part those are people that had the mindset that they wanted to determine and plan out their exit. They got an education, they figured out what their exit goal was and they called Mark, myself, Jason, Amanda, Chuck, anyone of us and reverse engineer the path to that. They didn’t call and say what’s your fee, okay I want to list. It was this how does this whole thing work and then we worked with them over a 6, 12, or 18 month period sometimes even more. Those are the success stories that you’re hearing about. The people you’re not hearing about never sell their business because they call. They might have a call like this or I was just at eCommerceFuel last week as an event and kudos to Andrew Youderian and all the guests and all the people that are there; brilliant, so many smart folks. But even with that high level of entrepreneurial success and drive I still get e-mails like I’ve gotten this week which is a great chat last week, great presentation. I did a presentation with Mike about the sales of ColorIt. You’ve really inspired me to sort of try this path to an exit. And then I said okay well this is what I need. Yeah, I don’t know I’m so busy with adding SKUs and I’m not really there yet. I’m not ready to sell yet. I’m not ready to think about selling yet. Whereas the yet it should be now regardless of where you are in the business. These people are already doing; the 2 that I’m thinking about where I got the e-mails like the one I don’t know his growth. Well, I could do the math on his growth but the discretionary stands out that he’s close to 600,000 in discretionary earnings and it is 5 to 6 times more than he ever made in his prior day job. And so he’s trying to work towards an exit and retirement. The other was doing nearly 10 million in revenue and had a 25% decline. He’s young, he’s under 30 years old. And neither of these guys are really ready to exit. Of course, they’re not ready to exit but I want them to set a financial goal. I don’t care if it’s 3 to 5 years from now. Set that goal. I need to exit for X in order to exit. And then figure out where they are, get the education, and work towards that. In 5 years if they’re not ready to sell then move the goal post, move it 6 years down the road or 7 years down the road. That is as you said at the beginning the surest way to real financial wealth. But we’re not talking about them yet because they’re pausing, they’re hesitating, they’re not going to do it. Those are the stories that I talk about a little bit in the book. There’s somebody that was my first million-dollar listing back in the day at Quiet Light. I remember it well. I’m not going to name names. We’ll call him Big Mike. That’s not his name but we’ll call him Big Mike. He had no financials; none whatsoever. And I remember sitting over Christmas break taking all of his bank statements and I actually created the profit and loss statement myself. That is a no-no. We do not do that anymore. No. But I did it. I got it all detailed and accurate and listed the business for 1.1 million. I got an offer for 800 from the gentleman that you sold his business once upon a time. It was actually a good offer because the revenue trends were in decline. And Big Mike said to me well why would I accept it all I have to do is XYZ over the next 12 months and I’ll make a quarter of a million dollars and then we can sell the business for 1.2, 1.3 million. And I had a great deal of experience in paid advertising at the time as you know because I just sold my business. This was probably 2012 or early ’13. And so we walked through all the possibilities, what to do and how to do it and off he went. The problem was that Big Mike’s heart was not in it anymore. He had run up all of his personal debt and personal expenses; his overhead was very high. He lived the life of a very, very successful entrepreneur and his business was no longer trending that way so money was getting tight. He didn’t have the ability to pull money from the business and put it into the ad spend that he needed to to reverse it. And so every year for the following 3 years I got any mail from Big Mike that said something along the lines of hey my revenue and profit is at XYZ, can we sell the business for this? And each year it went from that offer from Tony of 800 to the value really was in about 600 the next year. And then the next year he sent me an e-mail it was really based upon what he had given me, about 500. The last time he sent me an e-mail it was about 400. Every single time I replied with based upon what you’ve given me which is just an email with numbers and I’d say your business value was probably X. Please run a profit and loss statement out of Quickbooks or Xero and export it to Excel with a monthly view. Silence, nothing for 12 more months because he didn’t take the necessary steps to do what you have to do in protecting your most valuable asset, in his case his business. And so he’s probably got a job, unfortunately. And that’s the path unfortunately too many people go down or they learn from the mistakes and they hang up their hat on this particular business. They can’t sell it and they move on to another one and hopefully learn from that mistake but it’s a painful one. I just want to see people learn from that and therefore the painful process of writing a book. Mark: You know it’s great to focus on the success stories. We like success stories. I like talking about success stories that make me happy. But for all these success stories that you have shared so far through the podcast that you’ll be sharing through this book we also have the stories like that. And I could probably rattle off a number as well. Maybe I’ll start a new podcast or write a book called Unincredible Exits or Nasty Exits or something like that. It will be real depressing and no one will ever want to read it. But you’re absolutely right in; that example is really good. That example shows what we see so often from entrepreneurs where they’re running; they’re used to the hustle, they’re used to the grind, they’re used to being able to pull themselves up by their bootstraps to be able to correct something but sometimes when a business gets mature especially after you’ve run it for a while doing that can be really, really difficult. I also think it’s; I want to re-emphasize something you said which is the picking number, reverse engineering, and getting to that number doesn’t mean that you have to sell at that point. We’ve been pretty public and I will continue to be public by saying that the best scenario for you is to create a business that you can own for your life, right? Because it’s difficult to start a business; the cash flow that they build is great, the value that is in them as assets is also fantastic. So I’m a big believer in building and holding or buying and holding and growing but that doesn’t mean that exiting shouldn’t be an option. And so when you hit that number, if you’re not ready to sell you can always move the goalposts as you suggested or create a new goal. But something that I know you’ve told me in an email where we were discussing this book is you said one of the goals is to not allow the business to outgrow its founder. And boy this is an issue that comes up time and time again that we see and that is business owners were really good at starting, really good at founding something and even growing it to a certain extent getting to a point where making that next shift is difficult. I always describe that the growth path of a business is a series of climbs and plateaus. You climb to a point and it starts to plateau and then you have to change the business a little bit. Maybe you have to add new people; maybe you have to add a different structure to the business. And once you do then hopefully you start climbing again and then you hit another plateau and then it’s another shift or another restructuring of the company or maybe a new initiative. What point and is there any examples that you’ve seen where somebody has hit that point where business is just about to outgrow them and they were smart enough to be able to not let it do that? Joe: Yeah the climbing the plateaus, by the way, let’s not forget the valleys, right? Yes, my name is Joe Valley but… Mark: Don’t forget the valley. Joe: There are two valleys here, right? It’s a climb, it’s a plateau, and then boom there’s a really nasty valley right there and you’re in it. You got to climb out of it. That’s why I think it’s important to actually do something that you like; something that you enjoy a little bit. It could be something that you’re passionate about because when those tough times come and as an entrepreneur they will unless I’m unique and nobody else has tough times. I don’t think I’m unique. You’re going to have to fight and climb back out of that valley and on the other side there’s a mountain, a peak; not a plateau hopefully. And those are great success stories to tell and very sellable businesses. But the idea of a business outgrowing the founder is not original, right? I mean this is something I’ve seen throughout my own entrepreneurial life where I used to do radio advertising. I owned a radio direct response media buying agency back when there were 800 numbers associated with 60-second spot ads. I could have held that business and grown it but it would have required more and more overhead in terms of people. I don’t like managing a lot of people. I tell you what your job is and how to do it and I expect that you’re going to work hard and do the best you can. If you don’t I’m kind of blunt unfortunately and fortunately in some ways. So if you’re in a situation and I see this a lot where buyers sometimes naively say well if it’s so great why are they selling it? And it is because the business more often than not has outgrown them. They wanted to live the 4-hour workweek. It turned into 30 and that’s okay. And they’ve got 5 VA’s and that’s okay. But in order to take it beyond just a SaaS business that’s doing 2 million in revenue, they need to hire 3 more developers. They don’t want to go through the headache and hassle of that. Or to take it off of Amazon they need to learn SEO offline or email marketing or whatever it might be and that’s not their skill set. Or it’s hiring people and that’s not their skill set. And they learned that one of the greatest ways to earn wealth is to sell a business. Now people that buy Walker’s book have learned that they can; a different breed, a different mentality of an entrepreneur comes in. They’re not the startup entrepreneurs. They come in and they take over where that startup entrepreneur left off. The business has outgrown them and they hand it off to somebody like Matt Howeth who can. He comes from the corporate world. He’s always had lots of travel, lots of staff, and lots of hours. He gets it. He can take it and bring that business in and have a team of employees, a team of VA’s and manage it and take it up to the next level because that’s his passion. That’s what he does. He gets it. The startup is not his passion. It’s not his skill set. So one of the things that I think is critically important and sometimes this only comes with age and mistakes and failures and successes and that is to figure out who the hell you are. What kind of entrepreneur are you? Mark: That brings in mind 2 clients I’ve worked with in the past 14 years now. And one of them; I’ve quoted this story before but he came to me with a business, I’ve never talked to him about sharing his story so I won’t say what he was selling. But he was selling a physical product. He had initially acquired this business for 5 figures, like a mid-5 figure level and immediately grew the business significantly to the point where it was doing 7 figures in top-line revenue, mid-6 figures in discretionary earnings and so when he gave it to me to sell one of my very first questions was why are you selling? You’ve been growing year over year, you’re only adding value to the business, this looks like a fantastic business, you’ve got great rankings, great positioning great pricing; all these things working in your favor and he said well right now I store all of the inventory in an external garage on my property. On Tuesdays and Thursdays, my son and I go out and we fill orders. It’s really nice. It’s like I don’t have any more room for inventory and if I wanted to get another space I’m going to have to hire somebody and then I’m going to have to hire more people to handle the marketing. I just don’t want to do that. I would rather cash out and move on. Meanwhile, another entrepreneur that I’ve dealt with, he was a CPA by trade and loved being on the buy-side and what he really, really enjoyed was taking a business that was somewhat complex, somewhat messy, somewhat inefficient in the way it was run and simplifying it. And I love; I’ve sold a couple of businesses for him, I love taking a look at where his businesses started. Their P&Ls were these super long crazy messes and by the time that he was ready to sell they were consolidated down into less than 30 lines because he simplified these businesses, really focused on this principle of 80:20 and said I’m going to just focus on what really makes sense and I’m going to get rid of all the rest of it. For him the act of cleaning it up was great but he would; unlike with Walker’s book which is a lot of buy, build, and grow, his was I’m going to buy make more efficient and then I’m going to sell. And he did this several times and it was really fun to watch because he knew who he was. That first seller that I had, he knew who he was. He knew he didn’t want to have a staff he had done that and didn’t want to do it again. He loved running the business with his son. The second entrepreneur, he was a buyer, he knew what he liked, he also didn’t want to have a large staff. There are other people out there that do want to build that team. There are people out there that say I want to have 100 million dollar exit so I’m going to buy a bunch of these businesses and build something or I’m going to acquire 15. They’re all different types of entrepreneurs and everyone has different skill sets. Knowing who you are I think that right there is a great bit of advice but going back to what you were saying earlier Joe if you’re so busy and in the weeds constantly and just running and hustling and hustling and hustling and never taking a moment to step back and to think about either the exit or about maybe this topic here of what type of entrepreneur are you, where do you want to see yourself in the next 5 years, what type of business operation do you want to have it’s really hard to know where you’re going and then your business drives you instead of driving your business and your career drives you instead of you driving your career. Joe: Yeah. Walker’s book takes the mystery out of buying a business and the how-to and building it beyond that hence the title Buy Then Build or what he coined as acquisition entrepreneurship. My book The Exitpreneurs Playbook is going to take the mystery out of selling your business and setting those goals on what your exit is and reverse engineering a path to that. Now that I’ve said the title can we make fun of me in terms of predicting I don’t know the future doom and gloom of this title because I did the opposite of what everybody told me to do? Mark: You know what? I like it. I remember doing this when I picked the Quiet Light Brokerage logo. I did 99 designs and I had everyone vote on different types and I hated what everybody chose. So I’m like well it’s my business so I’m going to do my own thing. Joe: And you know it’s a check, check, send something; I don’t know, it must’ve been fall of last year and email out something about the Quiet Light logo and how it has stood the test of time so kudos to you. Yeah so I sent an e-mail out to a couple of dozen past clients that I sold their businesses and they’re going to be part of the book. So part of the book is education and part inspiration; inspiration with them sharing some golden nuggets, wisdom, experience things that they wish they did differently. So I sent it out to them and then another say dozen of influencers that are in the space. People that we know well like Mike Jackness, Greg Mercer, Andrew Youderian, Ezra Firestone, things of that nature; people of that nature. And I think out of roughly 25 people Jason Yellowitz is the only one who said he liked Exitpreneur. Everyone else said Incredible Exits, Joe, it just rings, it rings. And there’s been something about the term Exitpreneur that has stuck with me during the interview process and the more I said it out loud the more Brennan and I, and again she’s my scribe, the more it just felt natural. Because that’s what people are becoming when they sell their business, they’re exitpreneurs. The difference between an entrepreneur and an exitpreneur is an entrepreneur is somebody that runs their own business but an exitpreneur is somebody that runs their own business and they have the knowledge and a plan. And I want to give them that knowledge in order to devise a plan and become one of those people that generate most of their wealth from an exit. So fingers crossed on that. Can I do a shameless plug right now for the Quiet Light Podcast where I think we’re about 25 minutes in and just a little bit of a shameless plug? I have to tell you… Mark: I felt like this whole thing was a shameless plug for your upcoming book. Joe: I know but I don’t even; I haven’t even put up a website yet. There’s no Facebook group. Really what it is, is a plug for education because part; in truth, I’ve said the same thing 8,000 times over and over. Maybe I’m just tired of saying it so I’m… Mark: With that Joe when I was on this trip recently I was in the airport and thinking about Mission, Vision, Values for Quiet Light Brokerage and I don’t have the vision statement out yet but this component of education, if it’s not part of our main vision it’s definitely one of our core values and really something that I’ve built up. I was speaking to somebody just this morning before we recorded this about one of the goals or one of the mission; I’m sorry one of the core values of Quiet Light is to give entrepreneurs the right education and the right set of tools to be able to make good informed decisions. Because when I sold my business I didn’t feel like I had that. I felt like I was misled. I felt like I was put in a position where somebody wanted to get me in an exclusive contract, promised me big bucks, and then when I went to go sell I was completely unprepared. I didn’t know what was happening and so when I started Quiet Light the goal has been from day one not to tell anyone to sell but to give them the tools so that they know what their business is worth today, what it could be worth in the future, what’s driving its value so that you can just make a good decision. That’s your decision. So the education piece and I joke about this being a shameless plug; the reason that I’m excited about this, and I genuinely am excited that you’re writing this book is because that education piece needs to be out there. And I love the idea; more than the idea, love the opportunity that we have to educate entrepreneurs of what’s available to them if they transition from an entrepreneur to exitpreneur, understanding that, the bulk of the wealth that you build in your lifetime for most entrepreneurs will be at that exit. That might be 2 years from now, that might be 20 years from now, either case it’s fine but having that plan to maximize that value and keeping the process smooth is important. Sorry, I totally cut you off of that but I want to emphasize that the education piece is really what I’m super excited about. Joe: Now we were going to do 2 parts of this podcast, a little bit on the book and a little bit about the philosophy behind Quiet Light’s foundation and how you built the company and the entrepreneurial approach. So let’s do a; I think we should do an entire podcast on this business and how it’s built with entrepreneurs helping entrepreneurs just to educate people more about who we are, what we do, and why we do it because I think it’s necessary and you’ve done an incredible job with the model. But in terms of the education, I got a voicemail yesterday and this is the type of thing I want everybody out there that thinks they don’t have time to do it and they’re just keeping the wheels on the bus so to speak, take the time to make time for planning your exit using the educational tools that we provide whether it’s this podcast or articles or Walker’s book on my eventual book or having a conversation because that’s an education tool. Have a conversation with an adviser at Quiet Light. Really do it. But I got a voicemail from somebody who I sold businesses for, very, very well off financially, runs a family office now, bought a business from Walker for around 8 million dollars in 2019. And he heard the podcast on product innovation, product development with Zack at Gembah. And he just left a voicemail yesterday saying hey man I just want to let you know on the way back home from Austin I got a chance to meet with Zack and we’re going to go ahead and do some product innovation, product expansion, adding a number of new SKUs and accessories to the brand. I really appreciate it. I don’t know if enough people tell you that we actually use the tools that you share so thank you. It’s great to hear that. So thank you sir; I’m not going to say your first name, for reaching out and letting us know. For the rest of us this is the shameless plug part and I’ve said this, I said this at Blue Ribbon Mastermind and I said it in eCommerceFuel, Mark you and I have done now I think it was 114; I checked this morning, podcasts. So that’s how many are up on iTunes. We’ve got a total of 31 reviews. They’re all huge close to 5-star reviews. Thank you, everyone, who has given us reviews. I wasn’t aware that we had any at all because we hardly ever plug it. And so I was at Blue Ribbon Mastermind talking to David Wood who will be a guest on the podcast in a few weeks. He’s a personal coach and a good friend of Ezra’s and he said something about he was on 70 podcasts last year and he chose which ones to go on based upon the number of reviews. So I checked ours. We have 31; pleasantly surprised. I checked the EcomCrew, Mike Jackness and he’s got 81. So I stood on stage at Blue Ribbon Mastermind and I said everybody come on now Mike’s not here, I want one more reviews than Mike has. He’s been doing; I think he’s done 3 times as many podcasts as us so we’re doing okay. But please if you enjoy the podcast, if you like the podcast take a minute and go to iTunes or Stitcher or wherever you’re listening and pop in a review. We greatly appreciate it and share the information and wealth with all the others that need it. Mark: Yeah. There’s a video out there and I don’t know if we’re going to be posting it on our YouTube channel but there’s a video out there of you making this plug at Blue Ribbon Mastermind and Ezra is standing there with you and he’s thinking this is what you’re using the stage time for? Like you have the opportunity to talk about what Quiet Light does and all you’re doing is trying to beat Mike Jackness and like absolutely I’m trying to beat Mike Jackness that’s it. Joe: We won’t be sharing that video. That’s not ours to share but I shared it with the team and had a good laugh at myself because of it so no doubt about it. Mike’s a great guy. Ezra is a great guy. We don’t mention people that we don’t like obviously so if we’ve never mentioned you oh boy that’s a long list; oh no, I can’t say that. Let’s just say thanks; final thanks, Mike Nuñez. Thank you, Mike. Mark: Yeah, Mike Nuñez, absolutely. I think that’s a great way to end up this episode here. Let’s do one in the future about the building of Quiet Light Brokerage and I’d also love to get feedback from people that have listened this far through this episode and are listening right now. Are there topics that you’d like to hear us talk about outside of bringing guests in? And we can bring on people within Quiet Light Brokerage, bring in Walker on the podcast again or Chuck or Brad or any of the many entrepreneurs that are working with Quiet Light Brokerage. Anything you want us to talk about specifically when it comes to buying or selling? We’d love to know, we want to produce content that you guys wanted to hear so feel free to hit me up Mark@QuietLightBrokerage or Inquiries@QuietLightBrokerage as well. Joe: Awesome. Thanks, everyone. Links and Resources: Quiet Light Brokerage

One year ago we listed a business that created a massive amount of activity, garnering ten offers, many above asking price. As part of our incredible exit series, today we welcome a seller who has had some time to reflect on all the things he did right in his sale and share what he has been up to since. Paul Anderson started his career as an accountant, taking the safe path and spending ten years in corporate America. An increasing lack of passion led him to start to build his own lifeboat. He avidly studied Amazon FBA and learned by following experts in the e-commerce space. Although his first launch failed he carried on, honing his awareness of product opportunities out there and eventually he hit it big. Today Paul delves into the building of the business, the pillars of his success, and the components of his path to becoming an exitpreneur. Episode Highlights: Paul’s first product’s failure to launch and what he learned. How he sourced the second product and what happened in the last quarter of 2016. Funding subsequent stock and the challenges of inventory planning. How Paul stands on all four pillars of a successfully built business as well as that invisible fifth pillar. The scheduling and nitty gritty of the sale process. How the final buyer was chosen and the deciding factors for Paul. Why the highest bidder does not always win. The toughest challenges of running the business. Why Paul decided to sell. What he has been doing since the sale. Tips for building a successful content website. Transcription: Mark: So almost one year ago to the date of the recording of this episode of the podcast I was on a car ride with Joe; you Joe from where was it? It was from Dallas down to Houston and then Houston back up to Dallas. We were meeting with a good friend of ours that lived in Houston and while we were in that car ride you had launched a new listing that went absolutely berserk. And I’ve referenced this; I think we’ve actually talked about this on the podcast a few times, I’ve referenced this deal because it was one of these outlier deals that seem to check every single box and the result was just a massive amount of requests for phone calls and I believe 10 offers within a very short amount of time. And it’s been a year since that launched and obviously, the deal closed which we’re super happy about but now you finally get to have the seller on the podcast talking about all the things that he did right. Joe: Yeah it’s a great time because it’s a year out so he gets to look back. And over the years of doing this podcast the people listening have heard us talk about the four pillars; risk, growth, transferability, and documentation and someone might go yeah ok whatever, the reality is that they matter. Paul Anderson sold his business; 10 offers, he checked off every one of these pillars and the six little subtitles under each pillar and then the fifth one which I know Mark there’s no fifth pillar, but the fifth one is the man or person or entrepreneur behind the business. Paul being a former CPA turned entrepreneur who outsourced his bookkeeping to a bookkeeper is just a super likable guy, stay at home dad, buttoned up in so many different ways. The end result is I had to clear his schedule; he basically had three conference calls with highly qualified buyers for five days in a row. He was exhausted from it because each one was… Joe: So you had 15 conference calls then. Paul: 15 conference calls. Joe: And I remember again we were in the car going back up to Dallas and you were on the phone pretty much constantly telling people okay let me see if I can arrange a time for you. So there was a lot more requests for conference calls on this deal. Paul: A lot more requests and we say we had 10 offers but finally a few people dropped out because they just didn’t want to compete because they knew what it is going to be. And the funny thing is people get concerned about that and we always say right up front look don’t get caught up in the hype of multiple offers, don’t go beyond your comfort level, offer-wise. We want you to make an offer that works for you and hopefully will work for the seller as well because we want it to go all the way from letter of intent through to due diligence and that’s exactly what we wound up with. And oddly enough Paul did not choose as we always say they don’t necessarily choose the highest price. He didn’t do that. He picked the offer that was best for him and I think it was somewhere $150,000 lower than the highest price. So we talked about a little bit of that process, what makes a good seller, a good buyer, and then we talked about what he’s doing today which is really interesting as well so hopefully, everybody will enjoy this podcast. Joe: Absolutely. Paul: Let’s go to it. Joe: Hey folks. Joe Valley here from the Quiet Light Podcast and today I have an Incredible Exits client on the phone with me. It’s Paul Anderson. We sold Paul’s business I think; when was it, Paul? Paul: March of last year, so a little under a year ago. Joe: Spring of 2019; so a little under a year ago. So we’re going to talk about Paul’s exit. We’re going to talk about what Paul went through when he built the business, sold the business after he sold the business, and what he’s doing now so we’re going to get the full picture. Paul welcome to the Quiet Light Podcast. Paul: Thanks Joe, good to be here. Good to talk to you. Joe: So for the folks listening why don’t you give a little bit of background on your professional pedigree and your entrepreneurial journey? Paul: Yeah, sure. So I actually studied accounting and followed that path. I was kind of one of those people that never really knew what I wanted to do. Like some people I think they’re just like hey I want to be a TV news reporter or a journalist, I never really had that strong thing tapped me on the shoulder that said this is what you should do so I took a pretty safe practical path. I went into accounting and got my CPA. I spent about 10 years working in corporate America doing accounting and finance jobs and didn’t really ever feel like that passion and eventually it started to kind of wear me down. I got to the point where I had to think of something else to do and try to build my own little lifeboat to escape from that because something inside me just didn’t feel right anymore doing that. So that’s kind of what led into starting a business. So that’s in 2016. Somewhere; I don’t even remember where I started to hear about Amazon FBA and I kind of consumed everything I could about it like podcasts, there’s this guy Manny Coats inaudible[00:06:09.6] Helium10, he had a great podcast back then, Amazing Seller; there’s all sorts of good stuff online about the model and that’s kind of how it started and I started really small. We can get into it from there but that was kind of the first step, learning about it and seeing like oh I think I could do this. Joe: So you learned about it from podcasts; you didn’t pay for a course or anything like that, you were absorbing free information from experts in the space. Paul: I never bought a single course it was all podcasts, Facebook groups, Reddit forums, and I was just… Joe: I love it. Paul: Yeah I can tell you about the first launch which was a total fail but that was like my training course like the very first launch because I learned. Joe: Failure is a great lesson. How much money did you pull together to launch the business and were you working at that point in the CPA business? Paul: Yeah I was still working. It was 2016, I put $5,000 in to do; most of it was an inventory buy so I was on Alibaba like at night trying to find my suppliers talking with China and I put in probably about 5,000 bucks to start on my first product. Joe: Okay. And you just mentioned Helium10; did you use Helium10 to help you find that first product? Paul: Yes. So it’s funny like almost all the products I launched I’ve kind of like encountered in the real world somewhere and the product that turned out to be my big business was I kind of got onto it from a discussion with my parents. We’re just having a casual discussion like you would have many times a day and they mentioned this particular thing and I would always in my iPhone put down; anything that seemed interesting I would just like log it in there and then I come back to it. So I had a list of 20 to 30 things going and I went back and started doing some research. I actually was using Jungle Scout back then and I switched over to Helium10 for everything now. Joe: Oh they’re both great products; both of them. Manny and Greg have both been on the podcast; great guys. Paul: Yeah, for sure. So I kind of punched it in there and said like oh this looks like; the numbers look good and that’s kind of how it started but it really was that conversation being like; I think if there’s a lesson there it’s being aware, we have so many kinds of filters and blinders on like if you really put yourself in the headspace of looking for opportunities you’d be surprised how many little things you read online or you hear about through friends like this is really popular; there’s just all sorts of those little things that pop up that could turn out to be big businesses. Joe: So pay attention to your surroundings; the stuff that you use every day, emerging products in categories and niches and try to pay attention to and think is there an opportunity? Did you use any tools to see if a lot of people were selling in that particular category and that particular product? Paul: I mean Jungle Scout helps with that but mainly you can just go on and kind of assess like if page one everyone’s got a thousand reviews and they’re really well-known brands or something that’s probably going to be a tough place to break into. Joe: Tough barrier; okay. So tell us about your first test, it was an epic fail? Paul: Yeah, so I was really pumped and thought like here it is, this is going to be like my ticket out of full-time work and it’s going to be amazing and it was actually an accessory. Have you ever heard of pour-over coffee? Joe: Yeah. Paul: So that was kind of just bubbling up, seeming like oh this is really a trending product… Joe: Too much work; I never bought it because… Paul: Too much work, yeah, but there’s a lot of people that are really into the craft obviously a coffee one and having some artisan experience. So I sourced these little wooden coffee stands that’s basically used to make pour-over coffee. And it was kind of a cool thing but it turns out products made out of wood can crack and can break and have issues and I was not an expert at sourcing at that point in time so the long story short a lot of the products ended up cracking and breaking. And then once you start getting all these one-star reviews and returns; like my garage was full all around with carts of returned inventory and there wasn’t that much demand I think. At the start, I was thinking oh you really got a niche down into this little tiny space and own that and there just wasn’t quite enough demand in that space either. So I kind of learned to be a little smarter on sourcing and just to look for ways that things can go wrong inaudible[00:10:31.6] thing that’s just so niche that like even if you execute and everything is great like you’re going to be selling a couple of units a day. Joe: So how much money did you test and lose on that first product launch? Paul: So that was about 5,000 bucks in and I didn’t take to bad a bee but I think I lost about a thousand dollars on it which isn’t bad. Joe: Oh that’s not bad. Paul: Yeah. Joe: Not enough to make you go away and say okay this didn’t work I’m done; I’m going to go back to the corporate world. You got a taste for it and you said okay I just picked the wrong product. Paul: Exactly. And I mean I was still in the corporate world and like 5,000 bucks it’s not like a lot of money at the time so it wasn’t like I was; I’m like yeah whatever it doesn’t matter. At that point, the stakes felt real and high. Joe: Yeah. Paul: Because it definitely was like I can see the power here on Amazon it’s just like finding the right thing to really get this thing spinning. Joe: Okay. So you learned a lesson; you only lost 20% of your money but you get an excellent education from it better than any course you could have ever purchased. You went out there tried it, failed, learned, and didn’t lose so much that you couldn’t do it again. So you came up with another product niche and decided to go at it again? Paul: Exactly yes. So then I was actually going over to; are you familiar with the Canton Fair which is the big supplier…? Joe: Yeah. Paul: So I had a trip booked to go over there and kind of in-between going there… Joe: Just out of curiosity did you book it with a group or was it just you? Paul: Just me and my wife went over. Joe: Oh okay, because I was just talking to Athena from China Magic and they have a group of folks that go on a regular basis for those that are terrified to go alone. So you and your wife chose to book a flight to China and go to the Canton Fair alone. Paul: I loved it. It was really, really full out and I’m eager to go over there. Joe: Okay. Paul: I actually ended up finding my supplier on Alibaba before I went so I can’t really say that the trip necessarily paid off in terms of like… Joe: Did you connect with him in person when you got to the Canton Fair? Paul: No because it was still too early and he was pretty far away from the Canton Fair. I think it helped me really see kind of like the culture of China and doing business with China and I think just a little savvier about how things work. So it was a great education for that and just like a lot of fun to check it out; I mean the place is just massive, like multiple football fields. Anything you want to ever source it would be out there so it was a super interesting spot. But anyway back to your second question so yes I stumbled upon this other product and started kind of the wheels turning in 2016 to source it. I got it on I think in the fall of 2016 and I remember that Q4 for Amazon or e-commerce is like the prime time and I remember just refreshing that seller app that Black Friday, Cyber Monday, like all through up until Christmas and it was just mind-blowing the sales that were coming in off this new product. Joe: What was it like your first day that you got a sale, how many sales did you have all together; do you remember? Paul: Oh I mean it started slow. The first thing was probably just two or three units. I mean it’s really; it was in such a momentum game like when you have no momentum it’s hard to keep momentum and then once you get this momentum going and the wheels start spinning it can blow your mind like the amount of sales that… Joe: And that actually blew our mind within the first month or in that first quarter like what did you wind up with on the biggest day within a couple of months of launching it in the Q4 of ‘16? Paul: I don’t want to say maybe like $8,000 of sales there. Joe: Oh, wow. Paul: Something big like and then when you look at the profits from that it’s like wow I made more money like on this one day than; and I had a pretty decent corporate job, I’m like this is crazy like the potential. So the hooks kind of got in me right there and then ’16 was kind of just getting off the ground and then the next year is when the ball really started to roll. Joe: When you started to get revenue in the fourth quarter of 2016 and sales started to come in you had euphoria with the fact that you were getting that kind of revenue and making more money in one day than you made perhaps in a month in the corporate world but did you also have the fear of oh my God I’m going to run out of inventory? Paul: I did. Joe: Okay. Paul: Yeah, inventory is like not something glamorous to talk about and you don’t really hear about it that much in podcasts or anything else but it’s like running a physical products company doing an Amazon business like the inventory planning is so difficult because your sales can change on a dime. inaudible[00:15:20.7] your supplier 30 days early to make something and another 30 days to put them on a ship to get it over here. So you’ve got these difficult variables to manage that can leave you stocked out or even a little bit too much stuck so that’s always a tough thing to manage. Joe: Awesome. I don’t think I’ve ever met an Amazon seller or an e-commerce business person that’s been growing rapidly that’s not run out of inventory at one point or another. All right, so you started with $5,000, did a test, failed, how long between the first failed test and the second product that took off; how many months was it? Paul: That was about three months I think. Joe: Okay, and all the time you kept your day job which is fantastic. So you’ve got some revenue, you’ve got some money in the account that’s transferred to your business account, at what point did you order more inventory with and did you just use that money or did you sit down and talk as a family and say okay this is a winner we need to take a home equity line of credit; how did you fund the rest of the inventory purchases? Paul: It was all really funded with profits. Joe: It was? Okay. Paul: Yeah, it was. Joe: And you didn’t have to take any money out for living expenses because you had your day job so that’s perfect. Paul: Yeah. If I wouldn’t have my day job it would have made it much more difficult but luckily I had some steady income coming in on the day job and then I was able to just take the profits and reinvest them back in and just go from there. Joe: Fast forwarding you had an amazing 2017, an amazing 2018; strong year over year growth, like huge year over year growth. For those listening, Paul’s business was listed again spring of 2019 and it’s those perfect situation folks where we talk about the four pillars of a sellable business and that invisible fifth one which is the person behind the business and that’s Paul. We have a 30-month-old Amazon business with an incredible brand that’s growing rapidly year over year. The financials we’re set up impeccably. Paul is a CPA but he did something incredible which was what? You outsourced the books to an e-commerce bookkeeper; brilliant by the way. So those of you that are out there saying oh I can do this I’m not going to pay a few hundred bucks to a bookkeeper we’ve got a CPA here that chose to outsource to an e-commerce bookkeeper because he can do better things than bookkeeping with his time like grow a multi-million dollar Amazon brand which is exactly what you did. Your business checks so many boxes. It was SBA eligible. You were the owner behind the business. You built trust. People believed in you. During the recorded video interview, you’re the first person; and I keep asking people to do it now, you’re the first person that ever sat in front of the camera, reached down picked up the product and demonstrated the product. You showed the new packaging that you had just done. It was beautiful and the end result was an overwhelming request to buy the business, conference calls where you had to clear your schedule for a week. I said Paul cancel everything, right? We had to clear it and we ended up with I think three calls with qualified buyers every day for five days. We wound up with 10 total offers. I think we were at; the top one was something like $150,000 over asking price. Paul: Yeah, I think that’s right. Yeah. Joe: Yeah, and we say this all the time that it’s not always the offer that comes in with the highest number, it’s the right fit more than anything else. We had; of the 10 offers, I think we had maybe six that were SBA and four that were cash. You ended up choosing a cash buyer and not just because it was a cash buyer but also the person behind the business. We did video interviews between the buyer and seller. How much did that matter and how much of a difference did that make for you? Paul: The interviews mattered a ton. I mean that was the deciding factor because when I went into the process I just thought like well it’s pretty simple, right? You take the highest number and the highest bidder wins but as you get into it and talk to different people it’s like a huge diverse set of backgrounds that people are coming through Quiet Light looking to buy, right? Joe: Right. Paul: And some people I felt like wow I could just hand this to them and they could run with it immediately and do like as good or better a job with this than I ever could. And others are like hey I really like this person and their heart is in the right place but I feel like the transition might take a little bit longer and then what if somewhere they dropped the ball and things get sideways like I don’t want that somehow to come back to me. I don’t know if that’s a rational way to think about it but if there was a lot of comfort like feeling this guy or these guys I feel like really got it, they get it, they know what to do, they will hit the ground running from day one so to me that mattered a whole lot. Joe: Yeah. And I think given the fact that we’re in this remote world where your buyers and sellers are all over the world literally sometimes doing a video conference call for that initial call breaks the ice. You’re not reading the client interview anymore, you’re not just talking to somebody on the phone; you can see the whites of their eyes and anybody that wants to see Paul we’re recording this both on Zoom with video and audio and it will be up on the YouTube page as well. He does not look like a buttoned-up CPA today and I was making fun of him when we first got on the call. You’ve always looked like that but today you know what you’re a successful exitpreneur. You got the sweatshirt on, a little stubble, working from home; I love it. All right so I want to you ask a couple of things just for the audience purposes. Number one back to running the business what was the toughest challenge in running the business? Let’s start with that. Go ahead. Paul: Yeah. I’d say even at the start this isn’t even a tactical thing but the hardest thing was just getting the momentum going. Starting an Amazon business is not like hey I’m trying to create an electric car and beat Elon Musk but even me like I had a lot of doubts at the start like is this is going to work, am I going to lose all my money? All of these doubts kind of creep into your head so I remember really kind of struggling to pull the trigger in a way thinking like I just don’t know is this supposed to be my pathway? So I think that was really hard to overcome and you just kind of keep going one foot in front of the other and once you get a little momentum it just like brings all this energy and life into you that you just feel so energized to just keep improving and add products and make your products better and make the packaging better. Getting that first momentum can feel elusive and challenging so I think that was like a big thing at the start. Joe: And you failed and then you stuck with it and then you succeeded. Paul: Yeah. And I was kind of at an inflection point like should I keep going or is this just not meant to be and then you know. Joe: This may be a dumb question but are you glad you kept going? Paul: I’m very glad. It changed my life that I kept going. I mean I’d still be sitting at a desk in corporate America right now I hadn’t kept going and like we’ve got a three-year-old son at home like the physical time we will spend with him and then mentally my head is so much like the stress is away from me. So I was always stressed working in corporate America so it’s been the biggest blessing ever to go out and do this. It’s changed my whole family’s life. Joe: Okay. So let me ask the question that all buyers ask, why did you sell the business? Paul: Yeah, it was a tough decision to sell because I was having so much fun running it. And I think the honest answer is the value of the business became such that it really could provide a lot of security for our family. And it felt like if I was 23 and single and didn’t have kids I’ll like alright instead of going for this I might have just keep on going and try to sell it for three times this or five times this or just keep going. But knowing Amazon can be volatile and like I had all my eggs in that basket so it just felt like the responsible thing is to take some chips off the table and let go of the business but it was really hard. Joe: The responsible thing; I like that, the responsible thing. Your CPA background is coming out now. That’s good. Paul: Yeah. Joe: All right so what was the toughest part about going through the sales process and selling the business; what was the hardest part there? Paul: Picking a buyer was really tough. Joe: It’s a good problem. That’s a good problem to have. Paul: I mean just even knowing how to approach it and you really helped a ton Joe in that process. When it’s your first time through and you already have kind of these emotions like you built this thing and now it’s worth something that people want it, it’s a weird feeling and like how to value it and how to find the right fit and thinking about SBA versus cash; there’s just a lot of things that are spinning through your head at that time so I think just getting a clear head and trying to identify what the right fit was the toughest part. Joe: Okay. I think you again exception rather than really had 10 offers, I think maybe one or two might have come in slightly under asking price but the vast majority was above. I think 2019 the average offers that we had on any single listening was two and a half so you are five times that amount which is pretty exceptional. That goes to the brand that you built. It goes to the way that you set the business up with its own entity. You didn’t come and go books. You’re a CPA but you hired a professional bookkeeper. You instilled so much confidence in buyers. They clearly came out of the woodworks to buy your business. All right, the toughest part was choosing the buyer; that’s amazing. It’s not what I would’ve guessed you would have said. Sometimes it’s due diligence but with you, it was choosing a buyer. All right so now there’s life after the sale, you were in the corporate world working 40, 50 hours a week or sometimes more in tax season and then you’re an entrepreneur working from home spending time with your son now what are you doing? You’ve sold the business nine months ago, what are you doing with your time? Paul: Yeah so it’s been nice to have a little; in life usually you’re just like chasing after the next thing and I’ve had just the time to step back and think really what I want to do and what I want my life to look like so it’s been like a real luxury. So I’m going into; I’m building a website, it’s called WealthFam.com. Joe: Fam like family? Okay. Paul: Yup like family. It’s brand new but basically it sort of like combines my background and what I like to do. So it’s all about building wealth; becoming financially independent, starting and running online businesses. Basically, it’s how to be smarter with your money and use the money to help kind of enable the life that you want to live whether it’s being with your kids or going on trips or whatever else. So it’s a content site which is a super interesting thing. I thought a lot about going back and doing another Amazon business but I just didn’t feel the same spark for like starting it and it takes a lot of energy and mental fortitude to take something from A to Z and you’ve got to really want it kind of every step of the way. So this just kind of really energized me and there’s been some great stories like Ramon’s story; you featured Ramon. It like blew my mind the… Joe: His content site, yeah. Paul: And that happened in the content space so that was really exciting to me. And on top of that I just like doing this stuff so it feels like the right sort of fit. Joe: So what kind of subjects are you going to cover on Wealth Fam? Paul: So it’s broken down a couple of categories like making money, saving money, investing money, financial independence, and then some stuff like how money intersects with having a kid and being married or buying a house. So I’m trying to make it like a modern personal finance site that people in their teens, 20s, 30s, can find well like at least from my experience like education society; like our schools and in general, there’s not a lot of like real training about… Joe: There’s none of it. There’s none of it, yeah. Paul: And there’s even a lesson mode like starting an online business and like the potential kind of betting on yourself. Joe: It seems like a great idea because you’re taking your educational experience along with your entrepreneurial experience and marrying them together with a content site which is great. I love content sites. We work with SaaS, content, and FBA and content is just fantastic. Scott Voelker is really, really focused on helping people go beyond FBA and build content sites and some of them have great success and its driving more traffic back to FBA and getting their business products sold. For those that aren’t familiar with content site monetization, how do you plan to monetize the site? Paul: So there’s a couple of traditional ways that people will do it. So, first of all, you have to have traffic. I mean if I have traffic inaudible[00:28:43.3] selling eyeballs like it’s tough to; getting traffic is really hard and you’re playing like this SEO game and it takes a long time to rank in Google. Then there’s a couple of primary ways, the first is affiliate links like you could be selling a course or selling something on Amazon or selling; the Amazon FBA thing is a really interesting thing for Amazon sellers to marry their inaudible[00:29:04.9] business with content. I love that idea. I think that’s really smart. There’s brand sponsorships, other partnerships; but it’s like advertising and affiliate income are kind of the two main plays for monetizing. Joe: I got you, okay. All right how’s life at home; what do you do with your time? I mean you’ve you don’t have a job. You’re starting a content site which might take a little bit of your time. You’ve got a baby. Paul: It takes a lot of time. Joe: It takes a lot; the startup phase is always the hardest, isn’t it? Paul: Inaudible[00:29:38.4] the thing I underestimated about content is that like writing is really hard. Joe: Yeah. Paul: I think oh I can write something about Amazon, that’s easy, I know this. It takes a lot of time to really do a good job at clarifying your thoughts but overall I’m just trying to optimize my life for happiness and contentment and I get that right now being with my son and my wife. So I spend a lot of time with my family. We do a lot of cool stuff together. And I’m really liking; I do some Amazon consulting because I’m still at the Amazon blog and I like to be involved in it so I’m doing some of that for some local companies which I love doing.   Joe: Good. Paul: And then this content thing really is exciting and fun and I’m going to see where it can go and… Joe: So you didn’t make enough on the sale of your business to never work again but enough to give you a pretty long runway and you’re enjoying your expertise in the Amazon space and doing some consulting while you’re building up another content or a content business? Paul: Yeah that’s a fair way to… Joe: Does that sum it up? Paul: Yeah and I’d like to go up those kind of shift too, right? I’m not sure how in-tune you are with the financial independence world, all the people that want to retire early and be financially… Joe: Oh yeah, fire. Paul: So like if your burn rate or you can live on 40 grand a year once you stacked up a million bucks, in theory, you can quote-unquote retire. Joe: Sure. Paul: But as you think about education and college and healthcare and all these other things that number maybe gets a little bit… Joe: It gets blown out of the water. I have an 18-year-old and we’re 14 days away from knowing what he’s getting into which is schools and I’m rooting for the in-state schools; I’m not going to lie to you, I’m rooting for the in-state. Paul: Hey, I went to an in-state school and… Joe: Look at how it turned out; pretty damn good. Paul: Yeah. Joe: All right cool. Well, listen Paul I always tell the story about you and your brand and the fact that that fifth pillar makes a huge difference. It’s the person behind the business that builds a great business with the next owner in mind. You kind of did that, I don’t know if you did it intentionally or not but you said I’m going to build a great business. I want to put it all in a package that’s going to help the new owner of the business do amazing things with it. And Matt the new owner of the business as you know is doing amazing things with it. And it pays off when you think about others exactly what you did that paid off for you, it paid off for your family, and now hopefully through Wealth Fam, it’s going to pay off for a lot of other visitors to your website as well so people can start young and start smart and get on the right path financially. So listen man thanks for your time. I appreciate the business that you’ve built because it allows me to tell a story of how the person behind the business makes a tremendous difference so thank you and I appreciate you coming on the podcast today. Paul: You got it. Anytime. Thanks a lot, Joe. Links and Resources: Paul’s Website Jungle Scout Helium 10

Acquisition expert Mike Nunez shares tips for successful business buying, including criteria evaluation, advertising account checks, and hunting for opportunities. He emphasizes the importance of keeping criteria lists, finding affiliates for content sites, and identifying synergies in a search. Mike also discusses lessons learned from previous acquisitions and recommends productivity tools for Google Ads, prioritization, email writing, affiliate management, and SEO.

Experienced online marketer Mike Nunez shares his 9 super secret tips to being a great buyer, emphasizing the importance of building relationships with sellers. The podcast explores non-combative questioning, the significance of being a good buyer, and the value of preparation during a call with a seller.

We often discuss is the importance of the person behind the business. When leaders learn the value of their business and set goals for success they are positioning themselves to profit, whether they plan to stay in or sell. Today we are discussing standard operating procedures for leaders that run different types of ecommerce businesses. Our guest realized from day zero of being in business that creating SOPs helps business owners stay in the game longer with a focus on working on the business rather than in it. Trent Dyrsmid is the founder of BrightIdeas.co and host of the BrightIdeas podcast, where he has interviewed numerous CEOs, marketers, and entrepreneurs and has gotten them to share the processes they use to achieve results. Trent is also the owner of an Amazon ecommerce business and creator of a SAAS tool called Flowster, an app that helps business owners track, manage, and delegate business processes. Episode Highlights: How Trent got his start and how Bright Ideas got an INC 5000 254th fastest growing business ranking. The Amazon reseller model and how Trent makes it work via SOP. Trent’s mantra of “document and delegate” and when he realized this was the key to success. Feedback loops he employs to optimize the procedures. Hiring challenges and how he’s affronted them. How Trent’s app Flowster was born and how it works. Ways to introduce new elements in the existing SOP for any workflow. Flexibility in the SOP templates. Implementing SOP with a team not accustomed to this type of work culture. Advantages of SOPs for sellers and buyers Transcription: Joe: So Mark one of the things we always talk about is how important the person behind the business is when they do eventually sell. And the fact that when they learn to value their business it actually becomes much more fun to operate and run because they’ve got some goals set out in the future. And one of the things that helps them are SOPs and above that, we had Norm for our own podcast, it was quickly shot up to the top 10 podcasts that we’ve done. And I understand you’ve got back to that and had Trent, and I’m going to get his name wrong, Trent Dyrsmid, is that how you pronounce it? Mark: Dyrsmid; yeah. Joe: On the podcast and he’s got some great SOP stuff both for people that run SaaS, content, Amazon businesses, all sorts of different aspects. What was the general call about? Mark: Yeah. I saw the Norm for our episode and that was one of the ones that we did early on that really took off because Norm was running an eight-figure business largely on the backs of SOPs and virtual assistants; VAs which is really cool to see somebody be able to do that. Well, Trent Dyrsmid is very similar in that regard. His company was ranked on Forbes 5000 as the 254th fastest-growing company in the US. Joe: Wow. Mark: Amazon based business, reselling other people’s products and just exploded and I asked him and I said when did you start to realize that you need to put SOPs in place? Day 0; it’s like I don’t have any special talents other than being the big idea guy and picking the direction but as far as executing those things that’s on my team to do and my job is to give them the processes to be able to do that and to give them the tools to be able to execute on these ideas and this general direction. A really, really disciplined entrepreneur in this regard. He’s not just an Amazon seller either he’s got his own podcast. I was actually a guest on his podcast BrightIdeas.co. He’s got a SaaS company Flowster.app which is an SOP software. I’ve played around with Flowster, a pretty cool SaaS product here where you can develop and roll out to your team a complete operating procedure for pretty much anything. So you can create this nice collaboration but what really sets it apart is there’s this entire marketplace what he found was happening among both when he started his company and also once he started coaching some other people is they’re asking how do you do this part of your business? What’s the process that you use here? And instead of writing it down in word and all that sort of thing and trying to transport over he said well there should actually be a marketplace where people can collaborate and sell their best processes to each other or give them away for free. Most of the stuff in this marketplace is free so it’s kind of cool on that. But what we focused on Joe is not a pitch for a Flowster; I think there’s a lot of ways, you and I talked about just put a video together as just kind of a minimum type of SOP. We talked a lot about how do you write an SOP that is specific enough to really tell people how to do things, will be adopted by your team. How do you make it adopted by your team, and how do you create it general enough so that it can absorb differences when people are seeing maybe exceptions to what the standard process would be. Why is this so important in the process of building a company and can you actually scale a business to eight figures like he did very quickly without them and the answer is no. Joe: Yeah, and that’s why so many people sell because they take it as far as they can and then they have to bring on staff and get into areas they’re not as comfortable with and I think these SOPs will help those folks hold on longer and get a higher value. I think SOPs will help buyers as well when they buy a business and take it over and if there’s no SOPs in place they can do that and instill more confidence in the next buyer and grow that business to the next level. So let’s get to it. Mark: Trent, thank you so much for coming on the Quiet Light Podcast. I’m super excited to have you on. I recently appeared on your podcast. Somebody actually reached out to me recently about that episode as well so that’s always an encouraging sign when people contact you after appearing on some of these podcasts. But I’m excited to have you on today because you’ve got so much experience in the world of online business and you cover a lot of materials. We’re going to be looking at just one area that you covered pretty heavily and that would be SOPs; procedures and operating procedures to implement things. But you cover a ton of territory and a lot of the bases of what you do is based on your success with your company. And congratulations on Inc 5000 ranking that you had recently. Why don’t we start; just give us a little bit of background on yourself and also where your company was ranked recently in Inc 5000? Trent: Sure. So the company was ranked number 254 which was a very pleasant surprise. And as you might guess it’s a wonderful bit of social proof to kind of reinforce what my whole brand message is about which is systematizing your business so that you can delegate a lot of the work that you really shouldn’t be doing to other people on your team. And the net result of that, of course, is an accelerating growth rate. So how did all this start for me? I’ve been an entrepreneur for two years now. When I started my first company back in ‘01 I really had no idea what I was doing. I knew how to sell but that was it. And I figured everything else out over an eight-year period. And it was pretty painful but thankfully I was able to get a seven-figure exit out of that business. And that put me on a track to have a bit of time and bandwidth and so forth to figure out this online business thing and I’ve been making my living online now for about nine years and roughly just over three years ago I switched from being a service business; I’d been running a digital agency for a number of years because my podcast built an audience and people would reach out and can you help me with this and can you help me with that and we were making a decent living doing that. But the last couple of years have been just a stratospheric kind of change up the hockey stick and it started with this e-commerce business. So we started a business three years ago where we would partner with US manufacturers to sell their products on Amazon ideally as one of their exclusive sellers. So in doing so, we were able to avoid all of the risk of launching our own brands and the time that it takes to do that and I like low risk. I love Warren Buffet’s number one rule Don’t lose the money and rule number two is see rule number one. And so the reseller model is a very, very low-risk model because you’re buying proven products. But the problem with the reseller model is there’s lots of sellers on each product and so oftentimes the margin can go away. So instead of making money you just end up kind of getting your money back which is pointless, so by forming these relationships with the brands directly and getting them to kick off all the other sellers or having a very small list of approved sellers that actually can be a very profitable model. The challenge is finding these suppliers require a great deal of grunt work; massive, like you, can’t automate it all. There’s just a bunch of labor because you need to send hundreds of emails a week to hundreds of suppliers. And what made me a little bit for lack of a better word famous in this particular industry was just how quickly we were able to scale the business. We went from doing 0 to over $100,000 a month in five months. We did at one point one million in the first year and we grew at 20% per quarter for eight consecutive quarters which was a huge contributing factor obviously to being 5000 at Ford. And how did I do all that? Well, that’s the secret sauce. And essentially what I did was I realized I can’t be the one doing all this labor. So when I launched the business rather than sitting down to do I sit down to document. And as soon as I’d created documents for all these; like I would do it one time or maybe two times and I would make my operating procedure while I was doing the thing and we would delegate the thing and never ever do it again. And that was a huge, huge advantage over everyone else in the space who was really kind of trying to do it all themselves. Mark: Yeah and I know we’ve got an episode a while ago with Norm Farrar. I don’t know if you know Norm but the entire episode was how he grew an e-commerce business to over 10 million dollars on the strength of doing exactly what you’re talking about; hiring the VA’s and putting in strong SOPs in place so that the procedures are what you’re working on rather than trying to master every little aspect of your business yourself and run the day-to-day. And I think procedures; in my world, in my opinion, I think a lot of entrepreneurs see procedures as important but they don’t necessarily put the time into the procedures with a business so I want to delve into that a little bit. When you’re growing this business when was the moment where you switched over and thought I should really be putting my time into writing awesome procedures for people to follow? Trent: Day 0 because I’m not a first time CEO, I had started to drink the Kool-Aid back in my very first business that I started in ’01, somewhere in maybe ’03 or ’04 or it could have been ’05, somewhere in that period of time I read E-Myth by Michael Gerber and my life as an entrepreneur was transformed at that moment. And I said to my co-founder at the time; I said I want a written procedure for absolutely everything our engineering team does. And then I handled writing procedures for what I was doing on the sales and marketing side and that business was twice ranked as a Profit 100 fastest growing company in Canada. And so I got a decent exit out of it for a relatively small business. And so for me having documented procedures was just kind of normal. So when I started my business on Amazon I never thought well I’m just going to go and do this and get really proficient at it and then maybe I’ll make a training video or maybe I’ll have a training session for somebody else. I don’t think that’s an efficient way to eliminate and delegate it all for a whole bunch of different reasons and so procedures were written literally from Day 1. Mark: So tell me how you go about writing your procedures and starting this and my first question is if you’re not proficient in it how do you write it? Trent: So thankfully I did have a bit of a mentor in really a bit of a mentor; not really a bit of a mentor, I had a mentor in that business. I’d interviewed a guy by the name of named Dan Matters on my show and that’s how I discovered this whole wholesale model and he has a training course which is a really high-quality course for me. So I had access to his material and I also had access to Dan because he’d been a guest on the show. And so I foundationally understood what I needed to do. And so as I mentioned before I would just start doing what his training told me to do and then I would document it as I was doing it. Mark: So when you’re developing a procedure for a new task I mean you obviously we’re staying off somebody else’s work to some extent; I mean you were taking some inspiration but if you come across something that you haven’t dealt with before especially like in the Amazon world I’m sure there are elements there that you needed to come up with, what sort of feedback loops do you employ or do you employ feedback loops to be able to maximize and optimize some procedures? Trent: Yeah absolutely we do. So a perfect example of that is I recently for my software company, a content marketing SEO is a huge focus as a part of our growth. And I’ve never been an SEO expert and so I wasn’t really a keyword research expert and I had never used this tool called Ahrefs before; Ahrefs is a wonderful tool. And they provide training videos. So I would watch these videos but rather than just kind of sit and consume it and take sort of random notes over the period of the video I kept hitting the pause button, pause button, pause button and I would take screenshots of what they were explaining in the video. And at the same time in my Flowster software which is where I create all my standard operating procedures, I’m literally typing out the instructions that they’re giving me and then I’m taking screenshots from the videos. Because my goal is this I want to; I don’t about you but I can’t watch a ten-minute training video and remember all the details, it’s just too much. Not only that I only want to do it once or maybe twice and then I want to delegate it. So what am I going to do; ask somebody else to watch the training video and they have the same problem as me and what if they interpret the video differently than me? Because the training videos they kind of give you guidelines and I have to choose of those guidelines well how exactly do we want to do it? So by the time; a 10-minute training video would probably take me an hour and a half to turn that, to repurpose that content into my standard operating procedure which is a checklist essentially, it’s a step by step by step do this, here’s how you do this and do this, here’s how you do that, do this, here’s how you do that. And by the time I was done now I had a way that I never had to watch the training video again. Anyone that I was going to delegate that task to never has to watch the training video because the procedure is broken out so clearly in the document. And so that’s how you can create a standard operating procedure for something you’ve literally never done before. Mark: Right. So you would start with somebody else’s training video. Break that up into basically an outline and a step by step process in order to do that. When you’re delegating procedures how do you identify who you’re delegating something to? For example, I’ve talked to entrepreneurs who want to delegate a task but it just doesn’t seem to fit the current team member and hiring somebody new for that doesn’t really make sense. What have you done in the past when you’ve run into these smaller jobs and tasks that should be delegated but maybe they don’t have a great home? Trent: It’s an interesting question and I don’t know that I’ve really run into that scenario because I live my life every single day thinking about what can I eliminate from my workflow and in order to eliminate it I need to document it and delegate it so I don’t really think; I don’t see anything in my business aside from; so as a CEO I see my job as working on the business. I’m the one who’s supposed to go get the Big Ideas. I’m supposed to come up with the big vision. I’m supposed to build the team and help them to define and execute on a strategy. So that’s the high-value activity and the minute I get sucked down into working in the business that high-value activity suffers. So I’m a delegating theme. So you said well what happens if I can’t find somebody? I’ll find somebody. I’ll hire another virtual assistant or I’ll hire an employee or I’ll give it to an existing employee; like for most of the day to day, repetitive processes that are part of working in the business somebody else can do it. Like I’m not the genius of the universe that oh I’m the only guy that can do this; I don’t really see it that way. Now, are there occasionally tasks that are somewhat non-repetitive, like they only happen every once in a while and they require judgment that comes from experience in addition to following a process? Well, I’m less likely to delegate those to somebody else because the return on investment of doing so is going to be slim. But for those highly repetitive tasks that are every day or every week if you spend that; in my case, I spend an hour and a half making a video for how to use and do keyword research on Ahrefs, well guess what? How many times is that going to get done for every single blog post that my software company publishes which is three a week? Just think of how much time I saved myself. Mark: Yeah. Oh absolutely. I mean that makes a lot of sense. That makes complete sense. You mentioned earlier; I want to go back a little bit to what you mentioned with Flowster and also how you got started. You leveraged knowledge of your mentor and some of the procedures that he put together to be able to scale up pretty quickly. And this is kind of the idea behind Flowster and I know this is a full disclosure, this is your business, this is something that you’re growing right now a really cool software that really focuses on workflow especially in the e-commerce realm. Can you tell us a little bit about Flowster and how you can use Flowster to be able to leverage other people’s experience? Trent: Sure. So the thing about like when I very first started out to create my procedures they were in a Google Doc because I didn’t know any better. I thought well that would be a great place for them. They’re easy to update and I can share them and so forth. And then over time we realized that that wasn’t terribly efficient and so we moved our content into a competitor software application. And then as a result of speaking at an event I ended up becoming someone that sells SOPs. I was speaking to one of Dan’s events and there was hundreds of people in the audience and I’m talking about SOPs and they all say hey I love it, I don’t want to make them though can I buy yours? So we started selling ours and that’s why Flowster got created. And the functionality of the software is really; because really you have two pieces when it comes to workflow process management. You have your content which is the set of instructions. Think of it like the recipe book. You want to bake a chocolate cake it’s on page 68, flip to page 68, bake the cake. But what happens when you have multiple cake bakers baking cakes and they all have different due dates and they all work in different places so you have some issues about workflow management. And so what the software does is it allows you to say; so we have in our vernacular we have what we call an SOP template and then we have a [inaudible 00:19:02.3]. So the SOP template is like the master copy of how to do the thing. So we’ll call it in my world one of the things I produce a lot of these podcast episodes; like this SOP template for podcast episodes well in the week that I recorded episodes, I might record 4 or 6ix episodes. So now that’s 4 or 6 workflows each workflow being for one episode. Well if I have; and I have various people on my team who are involved in the post-production process of taking those raw recordings like you and I are doing right now and then turning it into an episode and then getting it on social media and running ads for it and do all of the things that we’ve got to do. So that’s all defined in the workflow and then various portions of that workflow get assigned out to various people on my team with differing due dates. So the software provides you the ability to do all of that delegation and give deadlines and so forth and everybody gets notifications in their inbox or they can just look at the calendar and see what to do. Because the more people that you have on your team and the more concurrent workflows that you have going like how do you manage all that? How do I know Mark if I’ve delegated something to you and I’ve told you I need it done by Thursday; if I just sent you an email saying hey reference the Google Doc, see the instructions, make sure it’s done by Thursday if you don’t finish it by Thursday I’m not going to remember that by any stretch of the imagination. So I need us closing the loop system. So that is one of the primary pieces of value that the software does. But aside from that I actually have one thing that I like even better and I call it the magic button but it’s really the edit button. So remember I mentioned how my job’s to go and get the big ideas etcetera, etcetera? So I’m not a mastermind weekend this past weekend in San Diego and I’m getting a lot of big ideas and some of those ideas I realized I need to implement those in my workflow because they’re really great ideas. I don’t want to forget them. Without the software and without the standard operating procedures I would be faced with the challenge of having to change the hardest thing in the world and that’s people’s habits. I’d have to sit down. I’d have to explain to them and have meetings and tell people that this is the way they need to do it now and then hope and pray that they actually make that happen which as you well know the human habit is really hard to change; that would be difficult. Thankfully in the software so I learned that I wanted to create; I’ll give you a specific example, for my podcast I want to now create a little 1-minute ad and I want to retarget my audience on Facebook to say hey I just recorded this episode with Mark and it was really awesome because of this, this, this, this, and this. So I fire up my SOP template for producing a podcast, I hit the edit button, I go and I make those changes, I hit save, the software says would you like to update all the active workflows based upon this change? I say yes. Well, guess what? That new idea is now going to get implemented in every single workflow that is active at that point in time. So with essentially no effort on my part this new idea or the strategy of this process has literally been pushed out to everybody in my organization just like that. And for me, it’s the best part of the software because you’re able to have your team collectively get more efficient, smarter, and more effective over time. Those ideas that you pick up don’t get lost. They don’t just stay in the notebook they actually become reality. Mark: When implementing a new idea like that do you find it ever causes confusion among your team? Or let’s say that they’ve been doing the blog production workflow for the past two years and they know the steps that they may not even need to consult the software because they’ve done it. They know that I do keyword research and then I do this and then I do step 3 and step 4 and so maybe they’re doing this independent of the software. Have you ever run into a situation where your team trips up on something like that? Trent: They’re going to have questions. So it’s a part of our culture and it’s a part of our DNA. People know that the workflows are always changing and they’re always being updated and it’s just like in our company no one would go and try and drink a glass of water without a cup of water. You’d just be weird. The same thing with our workflows; everybody understands that everything happens by logging into the software first. Looking at the workflow, following the workflow, you’re not supposed to do anything by memory. Now does that mean that you’re not going to get questions? No, you’re absolutely going to get questions. And all questions means that you didn’t provide clear enough instructions. So when I get questions I then think okay well how can I update my workflow or my SOP template and in turn the workflows so that that particular question doesn’t get asked again. And if you’ve written great procedures and you’ve provided enough detail you really won’t get very many questions. I like to think of it like the mom tests or all of our moms are not particularly tech-savvy when I’m writing workflow I think to myself is there sufficient detail not only in the what to do but how to do each of those what’s that my mom go through this and probably get it all right without asking me any questions. Mark: You answered my next question a little bit here but maybe we can expand in that a little bit. In the world of programming there is this idea of coupling, right? You can be either loosely coupled or tightly coupled. And what it basically means is a program can either be loosely coupled; it’s very broad and allows for a lot of different possibilities and tight coupling is very specific as to how you do things. And there’s benefits and drawbacks to both. You want to be somewhere in the middle in the world of programming probably my old days when I used to write code here. But I love these kinds of; writing and SOP I would imagine that there’s something similar there, right? If you’re too specific and they run across an exception they’re going to wonder what should happen here because the SOP is specific. If it’s too broad then you end up getting people doing things all sorts of different ways. Do you have any tips to find that sweet spot in the middle of where you can be nicely of both sides there? Trent: So the SOPs themselves are pretty tightly coupled. However now we go back to the whole hiring aspect. Ideally, I’m looking to hire people especially in the more senior roles who have a higher level of expertise in a given topic than I do. And the loose coupling as I say to them look you now own these SOP templates in your department. It is your job to improve them over time so that the people who report to you when they are doing these workflows that they’re able to follow them and you’re able to improve them over time and that has worked very well for us. And it also, of course, frees me up from having to be the guy that writes every single SOP. Because there’s lots of stuff like for example in my e-commerce business that my wife runs on a day to day basis, there’s lots of stuff I’ve never done but we have SOPs for it all because somebody else wrote them. Mark: Yeah well on that one of the things; so I’ve played around with Flowster app and one of the things I love about it is the marketplace that you have. The ability for people to contribute in SOPs that have worked well and for somebody else to come in and say you know what I really need right now what I could really use well right now but let’s go use an example, how to use Ahrefs for keyword research. This is one of the SOPs with new marketplace. So if you’ve never done this before and don’t want to sit there and write your own procedure or you don’t know where to start you can use this marketplace. In your past, growing the businesses that you’ve grown; I mean you’ve grown e-commerce businesses, Amazon businesses, SaaS businesses, a podcast, I mean you’ve got a really wide range of online experience here, how much have you been able to draw on other people’s materials? What role has that played would you say in the growth of some of these properties? Trent: Oh massive. Honestly, my secret of being a podcaster is yes it is nice to have an audience and as I’m sure you’re already well aware it’s the world’s best networking tool and it also allows me to get free advice from really smart people in other areas. So yesterday was a perfect example. Yesterday I interviewed a woman by the name of Erin Corn. Erin worked for Facebook. She worked for Instagram and she worked for Amazon. So do you think she’s got some skills? Absolutely she does. And particularly in the area of online advertising which is one of my big focuses for 2020. So at the end of that interview, I’m saying to Erin, hey Erin I think we should collaborate. And I think you should develop a whole bunch of SOPs around advertising on Facebook and Instagram; something I am not an expert in. We’ll figure out how we can monetize that knowledge to your benefit and to my benefit going forward. So the whole idea of the marketplace is when people come to Flowster nobody wants to build an SOP from scratch. It’s just a lot of work. And I was willing to suffer through it but not too many other people are. So the marketplace allows to come in to buy; so there’s free ones you can download and then you can edit them to your heart’s content. If you’re a creator like me you can put your own in the marketplace and you can sell them to other people. And I’ve generated millions of dollars in the last two years in sales of SOPs for Amazon sellers. So there is a huge market for pre-made standard operating procedures and that’s the big reason why we created the marketplace. I thought to myself there’s all these other experts, there’s all these other companies who would benefit from having SOPs that they could either give away or sell to their audience like a software company. We’ve formed partnerships with software companies for example. We’ve got one happening with a major player in the Amazon space by the name of Viral Launch because I said to them; I said look if you’re only providing training videos to your new users you’re putting a pretty significant burden on them because much like me with Ahrefs I had to watch the videos over and over again and I got to take notes and it just sucks. It’s not an efficient way to learn highly detailed processes. So we’re now collaborating with them to create standard operating procedures for how to get the most out of their software. And they’re going to tell their 200,000 email subscribers about those. So how does that benefit us? Well it benefits their users, it benefits them as a company, and it benefits me as a platform. And so if anyone is listening to this who runs or owns a software company or you’re an expert in a particular niche I definitely invite you to reach out and talk to me about some type of collaboration because that’s a huge part of our growth strategy going forward. And for everyone who comes to Flowster the more and more content that’s there; think of it a few years down the road like the Amazon of SOPs. No matter what business that you’re in you can come there and you could SOPs that they might not be perfect but they’re 80% good enough and you can hit the edit button and tweak the areas that aren’t exactly the way you want and you’re off to the races and it’s so much better than creating it from scratch. Mark: Yeah I mean especially if you’ve never written it before and don’t know. We talked about the idea of this loose and tight coupling; how do you find that sweet spot, well, follow somebody else’s lead like somebody who’s written one that’s really successful. And I think for the audience listening here I know a lot of you guys have SOPs in place, why not share some of these and also use it as a revenue-generating aspect to your business especially if it’s something that’s tried and true. Of course, unless you think the SOP is something where you want to keep it proprietary but there’s a lot of common SOPs that would be really good to share. Trent: There really is and if someone’s running an agency as an example let’s say your minimum retainer is $5,000 a month and you’re on a classic line or like well we can’t really afford that. Well if you don’t have a down-sell they’re gone; you generated zero. But if you say well you can’t really afford that I’ll tell you what we have a collection of SOPs and you can buy those for 2,500 bucks or we’ll pick a number out of the air. At least you’re giving the opportunity for A. to capture some revenue that’s going to be 100% gross margin because it’s kind of like selling software, build it once sell it a thousand times and B. more than likely as that buyer or that customer starts using your stuff you’re at least giving them the opportunity to come back to the trough later on and say well actually now we’re ready to put you on retainer because these are great but I don’t actually want to do all this work and I want to hire people to do this work and you’re opening a door that wasn’t necessarily previously open to you. Mark: Right. Just a couple more questions for you. And this one here I think would apply to a lot of the people that are listening. You said that you were SOP heavy from Day 0; I’m sorry not Day 1, Day 0. How do you implement in your experience and maybe you haven’t had to do this; maybe this can be difficult to answer but how would you implement SOPs with a team that is not used to following SOPs especially when you have a step by step software and you want them to live in that SOP on a day to day basis? Trent: So yes that will be more of a challenge because there is a cultural shift and I think the way to do that; there’s a couple of ways, first and most when the SOPs, so you got to get the SOPs created. So as the boss I mean maybe you could create them all yourself but that wouldn’t necessarily be the most efficient. But you might start off with creating SOPs for your direct reports and you’re just saying hey look this is how it’s done. I’m going to start assigning you these things; this weekly recurring thing or whatever and you’re ingraining your direct reports into using and becoming dependent upon the software. And then you tell them alright so now for your subordinates who have to do this, this, and this over the next 30 days you have to develop 8 SOPs or 10 SOPs and if you don’t you’re just not going to fit in the company and you’re going to get fired. That would be the way I would do it because I’m a pretty direct leader. If I have my culture and you’re not in my culture then you’re not on my team. Other folks are probably going to take maybe a softer approach to it and I don’t know that I’m the best; I know then I am not the best expert on leading cultural change because I didn’t do this with 50 people on staff already and then saying okay guys we’re going to start drinking this SOP Kool-Aid. Mark: Yeah I just like to wrap up here and then ask you one final question but you mentioned early on that a big influence for you was Michael Gerber’s book E-myth and I read that book and I can; everything you’re talking about stems from what he wrote in that book and so it makes complete sense. So if you want to delve deeper into why SOPs and really I think sort of a philosophical look at how you build and scale a business and the hiring models that you would follow there, that would be a good foundation for anyone that’s really going into this world. I think the product itself is fantastic. We preach a lot at Quiet Light Brokerage when talking about building value in an online business. One of the key pillars that we talk about is transferability. What’s really important with transferability? Well having procedures written out. And for a lot of people it’s intimidating so we just say just do a video recording if nothing else; just kind of a minimum [inaudible 00:34:21.6] product but how much greater would it be if you actually had everything written down in steps with timelines, with due dates and you could apply it to a team and literally just plug and play. A fantastic product and something that would really increase the value of a business just based on the fact that that you have all these procedures written and a buyer doesn’t have to come in and try and figure out processes on their own. They already exist. If somebody wants to check out Flowster what recommendations or do you have anything for them to check out first? Trent: I do. I put together a page just for your audience. They can get to it at BrightIdeas.co/quietlight and on that page, I will put a promotional code and along with a couple of links. So there’s one of our products that we sell in the marketplace, we sell it for $299 and it’s what I call it the blogger content production pack. So any company that is producing blog content or video content or podcast content would highly value this collection of SOPs because there’s my SOP for podcast production, there’s my SOP for video production, there’s my SOP for text blog post-production, for webinars and for email and obviously, the email is specific to one particular application. So if you don’t use that same application you would obviously have to make some edits and so forth. But if you go to BrightIdeas.co/quietlight all that good free stuff which we normally sell for 300 bucks we’ll be there for you. Mark: Yeah and just disclosure I actually have that workflow because I was checking out Flowster. It is so detailed. Like the SOP that you have here is great. It really does; when you’re talking about being a little bit more towards the tightly coupled sort of SOPs, it is. I mean there’s just on the weekly broadcast email I’m seeing 29 steps here labeled out which is fantastic. I mean that that level of detail makes sure that nothing is getting dropped. Trent, thank you so much for coming on. It’s definitely a pleasure to have you on the podcast here and thank you for the offer. That’s really really generous for our clients. I appreciate you offering that over to them. So we’ll link to that in the show notes everybody so that you can take a look at it. I’d highly recommend you check out the app, it’s really cool. And if you haven’t implemented SOPs now’s the time to do it. If you don’t know whether or not you want to, read E-myth by Michael Gerber first and then you can build up from there and start implementing some SOPs. Trent: Yeah and I think mentioning the E-myth you asked me how would I transform the culture? I would hand E-myth to everybody on my management team and I would say you got two weeks to read this thing and we’re going to sit down on our future. I think that because that way you’re using that third party reference. You’re not saying hey I’m the expert. I’m saying this has been proven to work in every industry on planet Earth. This book has been a bestseller for years etcetera, etcetera. Mark: Absolutely. Okay Trent, thanks for coming on. Trent: Thanks very much for having me, Mark. Links and Resources: Bright Ideas Flowster QL Listener Offer The E Myth by Michael Gerber  

There is always a recession coming, we just don’t know when. The US is in one of the longest expansion periods ever known but many predict a recession in the next twelve to twenty-four months. Business owners can make money in a growing economy and they can make also money in an economy that is pulling back. Today we are talking to Jonathan Slain, founder of Recession.com – a company he started in 2008 when he lost his fitness-based business. He saw an opening and borrowed the money to launch his successful recession-proof consulting business. In his new book, Rock the Recession, Jonathan and his co-author highlight ways savvy entrepreneurs can bounce back from internal recession and make plans to be buyers when opportunity knocks. Episode Highlights: Jonathan’s recommendations for owners of online businesses to start assessing themselves as recession ready. How to benchmark a small online business with smaller revenues. Importance of board of advisors and mentors and how to find them. The cost and time involved in choosing advisors and mentors. Other actionable advice for someone running an online business to prepare for economic downturn. The importance of having access to capital and credit now rather than waiting for the pull back. Why Jonathan wrote his book. Internal recessions and how to avoid or rectify them. How to research whether what you’re selling will survive or thrive. Advice for the business hunter in pre-recession times. Some final tips in Jonathan’s own words. Hint; plan now. Transcription: Mark: Joe there’s a recession coming. Joe: Is it? I’m not sure I thought it was here 18 months ago or was coming 18 months ago and now it’s going to be fall of 2020. What’s the story? How do you know this? Mark: Well there’s always a recession coming, right? Joe: Oh, yeah. Mark: I mean we know we just don’t know when but if you look at; I would encourage people listening; when you’re in your car don’t pick up your phone but when you get back to your office or get back to in front of a computer do a search for a graph of recession gaps and you’ll get to see from 1900 until present when the recessionary periods were and when the non-recessionary periods were. And we are in a period of time right now, one of the longest expansion periods in our economy and so it’s not really soot saying or you know looking in a crystal ball to see that there’s a recession coming. We know it’s going to happen, we don’t know how bad, we don’t know when exactly but we do know it is. And I had an investment professor in college who would say all the time bears get rich, bulls get rich, pigs get slaughtered and I always thought well bears get rich too but you need to actually plan for; I screwed that up, it’s bulls and bears and pigs but whatever you need to plan for this… Joe: I’m just trying to think through what you just said so thank you I thought I was not keeping up with you. Mark: Well you know what I failed that class so maybe that’s why I don’t know the right answer. But bulls get rich, bears get rich, pigs get slaughtered. And the point was you can make money in a growing economy, you can make money in a declining economy don’t get greedy; that’s the lesson but there is an in lesson in there, you can make money in a down economy but how many of those listening right now are just looking at their last year being like that was awesome without any idea of what they’re going to do when; not if but when the economy pulls back or they haven’t pull backed within their own company. And I know you talked to somebody who specializes in this; he owns recession.com for goodness sake. Joe: I know what a great URL, Recession.com, it’s Jonathan Slain and he’s been through this. He started his own company in 2008 and just had to fight through meeting payroll and all these different things and learned so much in terms of being ready for the next recession and preparing for the next recession. And he’s expanded beyond the actual economic recessions that we’re talking about and focuses a little bit in helping companies with internal recessions so that if they had a client that had a subscription or SaaS business but only had 10 major clients and they lost two or three within a month or two that’s an internal recession. If you’ve got a hero SKU that you’re selling and 70% of your revenue is from that hero SKU you are setting yourself up for an internal financial recession with your business if competition comes in and hurts that. So he has a readiness assessment test; a recession readiness assessment test on his website and it goes through and compares how you are prepared compared to others and helps people take advantage of upcoming recessions and avoid the major pitfalls in being one of those pigs that get slaughtered. Mark: Well let’s get right to it because I think this is an important topic for anyone. Anyone out there that has an online business, don’t get too fat on your current earnings. Understand that businesses go through cycles, economies go through cycles, let’s all survive this next cycle and thrive in the next cycle and it sounds like that’s what we’re going to learn here. Joe: Hey folks Joe here from Quiet Light Brokerage and today I’ve got Jonathan Slain with us. Jonathan is the author of Rock the Recession and is an expert in preparing for an economic downturn either in a worldwide situation or a nationwide situation or possibly in your own business. Jonathan welcome to the podcast. Jonathan: Let’s rock. Good to be here. Joe: Can you expand on that background a little bit? We don’t do any fancy introductions here. Can you tell the audience who you are what you’re all about and where you come from? Jonathan: Yeah, so I come to you today from my home in Cleveland, Ohio but I really started my career; I have to disclose that I’m a recovering investment banker. And so that’s where I started. From there I went on to own my own business which was five gyms all located in Cleveland. I think you mentioned earlier that I borrowed some money from my mother in law in the Great Recession so we can talk about that. And since then now I am full time doing consulting for large companies looking to grow revenue in or profit and that is what brought me to writing the book. And then when we were talking before we started the show getting me on Fox News lately. So we can talk about any or all of that but that’s my story. Joe: Well congratulations on stepping up to the Quiet Light Brokerage podcast from Fox, it’s a big show you’re on now. Jonathan: Understood. Joe: Are you nervous? Jonathan: A little bit. Joe: We’ve got some pretty impressive people in the audience believe it or not; they’re both buyers and sellers of online businesses, entrepreneurs that are building businesses that they’re solopreneurs in some case sometimes they have remote VAs working for them sometimes they have staff. But what would your recommendations be for those that are; first we’ll talk about the owners of online businesses and how they prepare for a potential economic recession. Jonathan: Yes. So the first thing that I would do is to assess where you are. So as a business owner it’s really to benchmark how you’re doing compared to where everybody else is in the market. So if you don’t know where you stand then you can’t figure out what you should do first to start to get better and improve. When it comes to benchmarking that was where my business partner and the co-author of the book; that’s where we started. And so we put up a free tool. It’s on our website so if the audience wants to go to recession.com they can go there. It’s 20 questions. It only takes about 5 to 10 minutes Joe and you’ll get a score from 0 to 100. If you’re a zero then it’s likely that you’re going to go bankrupt in the next recession, if you’re a hundred then you’re licking your chops; can’t wait to pounce when we hit the next downturn. So that’s where I’d start. Joe: How do you benchmark in an industry like the online business with a lot of smaller businesses doing less than 10 million in revenue when none of the information is public? Jonathan: Yeah. So what I can tell you is that from all of the responses we’ve received to the recession readiness assessment, the average score right now is a 37. So I think for people looking to benchmark themselves with other private companies 37 is where we’re seeing the mark. If you’re above that score that relative to we’ve got a thousand plus responses you’re probably doing better than the average and below that can be nervous. So I think that’s one piece but it brings up a good point and I think part of what I was listening to on some of your other episodes is that private businesses, small businesses need to have their own board of advisors. And so that’s one of the questions actually on our assessment is do you have a board of advisors? And I’m not talking about your lawyer, I’m not talking about your accountant, I’m talking about people that have a proven track record of making money in business preferably in a similar business to what you’re doing to your online business and that will just give you straight feedback. Again I know that some people bristle when I say don’t have your accountant or lawyer on the team. My issue is that your paid professionals may not want to tell you what you need to hear all the time for fear of losing your business. Joe: And I think that’s a great idea. I call them mentors or board advisers whatever it might be. The question is I saw something on the hustle the other day, we focus on or I watched that and I know Sam and that was a question that someone came up with so like look I’m trying to find a local mentor or board of advisors; how do you find them? A lot of people gave a lot of different responses but what would your advice be in terms of trying to find the right type of mentor or board of advisor and is there a cost associated with it? Jonathan: So I always have a list. I call it the list. I keep it with me at all times. It’s the 10 people I’d love to have on my board of advisors; the people I’d love to have as a mentor or a coach. And the issue is that most of them are not going to work with me right now. These are all folks that are super busy; they’re overcommitted, and so they’re on my list because once a quarter I bug them. I send them an email, I text them, I give them a phone call, I just drip on them and I try to wear them down until they finally get to the point where they’re like fine I’ll coach you; I’ll mentor you. And that’s literally I think how I’ve gotten a lot of my mentors because the people that I’m chasing don’t have discretionary time. And so I don’t think it’s as simple as we listen to the podcast and we decide I’m going to do this thing and you just all of a sudden have a board. It’s going to be a process that takes some time. In terms of the cost associated with it, I do think it depends on who you’re working with. But I would think an honorarium of 500 to $1,000 per board member per quarter is fair. And I’ll tell you that they shouldn’t need the money. If the reason they’re doing this is turning a little bit extra money I don’t think you have the right person on your board. I think that in most cases they should be donating whatever you are giving them to their favorite nonprofit. And I think they should want you to pay them the 500 just to keep you honest and actually listening to their counsel and to keep them honest so that they feel like they have some skin in the game that they need to do some research; they need to read your financials before they get to the meeting. Joe: And how much time a quarter do you take up with someone like that? Jonathan: Yes. So my thought would be a four-hour meeting once a quarter and that they should do anywhere between two and four hours of prep of reading whatever packet that you send to them before the meeting. Joe: Okay, not too bad. What actionable advice can you give people that are running online businesses now in addition to the board members what could someone do now thinking okay, if there is an economic recession I want to do everything I can to prepare over the next 6 to 12 months. What can they do now? Jonathan: Yes. So the second step in the whole process would be to tune yourself and your business up. And by tune up I mean you’re going to be doing things like looking at your line of credit. So do you have the right line of credit to be able to grow in a recession? Joe: Why do they need a line of credit? Jonathan: So by that, I simply mean capital access to cash if we get into a downturn and you see an awesome opportunity to buy assets to buy inventory for cheap, to be able to afford talent that you couldn’t get access to during the recession or maybe they find a bolt-on opportunity for their business to purchase another business then you’re going to need access to capital in order to make all those things happen. Joe: And what forms of credit would you advise someone seek? Jonathan: Yes. So I think that the best would probably be a line of credit that isn’t secured by personal assets. If you can’t get that done then look at a home equity line of credit and if you can’t get that done then look at credit cards. The thing is to have access to capital; you don’t have to use it. But here’s the deal like right now when the economy is good this is the best possible time to go to your bank and ask for credits. When we’re in a recession, when we’re in a downturn the banks are not going to loan you money. They’re going to laugh at you if you come and you try to borrow from them. I mean one of my favorite sayings is that you can go to a bank; it’s like asking for an umbrella except when it’s raining. So banks operate in the same way. They want to extend credit now because all the banks are competing for your business. When we’re in a recession, when we’re in a downturn they’re going to start to contract their portfolios. They’re going to start to mitigate risk. They’re not going to want to open up new lines of credit especially for online businesses; especially for newer online businesses that they see as riskier and not asset-backed. Joe: I’m going to back that up, folks. I sold my business as you all know in November of 2010. I bought a house in June of 2010. I paid mostly cash for it. I sold my business in November and then got busy got delayed and didn’t apply for that home equity line of credit until sometime in May the following year. Well, guess what? I had filed my tax returns. I didn’t have employment. I had a ridiculous amount of equity in my home and I got declined for a home equity line of credit because of timing. It was ridiculous. It was 2011 at that point as well. So the economy was just coming back and I had a ridiculous amount of credit but because I didn’t have a quote-unquote job or income at the time I got turned out for hillock. And I had been given previous advice exactly like this and this is from my mentor; a business person, a business advisor, always have some sort of line of credit available to you. Jonathan is right. Make sure if you can it’s not tied to personal assets but the reality in this solopreneur world that we live in for the most part that’s really hard to do. If you can’t get that non-secured get secured and get it backed up as a credit line with your investment advisors or on your home equity line of credit or any other way that you can. What about credit cards and revolving credit cards; do you advise people to mess around with that at all or is that something that they should avoid? Jonathan: Well I would as a last resort. Again for me, you don’t have to use them. But I’m a business owner too; I’m an entrepreneur I always want to have a backup in case things don’t go as planned and so part of this is that I want everyone to look forward to the next recession. I know that’s weird but that was the idea behind why we wrote the book. I mean the traditional plan for a recession is fire people and cut overhead and just survive and that book’s already been written many times over. The idea here was what if we studied people that leverage recessions and use them as a way to hack the system to escape the usual need to hustle and grind to be able to grow your business and then sell it for a dream outcome. And so I’m always thinking of how can we use credit in downtimes to be able to buy assets to buy businesses from other people that weren’t smart enough to listen to our podcast; from everybody that didn’t prepare. And at the same time if all the stuff we’re talking about isn’t working; Joe, if people are listening and they’re like look my business isn’t growing and I’m in a recession myself then you need access to that capital just to survive. I mean at the end of the day we all need to protect the beehive as entrepreneurs because if the business doesn’t survive then none of the rest of this matters. Joe: And that’s almost moving into the second type of recession and that’s just an internal business recession when someone has key employees that leave or hero SKUs where competition comes in. How do you help people in that regard or what actionable steps can you recommend to them that they take to avoid a situation like that or rectify it if it happens? Jonathan: Perfect. I mean I know a lot of people don’t always agree with my predictions. I do think that we’re going to have some sort of a downturn in the US economy towards the end of 2020. I don’t think it’ll be a full-blown recession but I do think as we get closer to the election that consumers and businesses will hold up in terms of spending and that will slow our economy down. But if you’re rolling your eyes right now, if you’re saying I don’t agree with this guy I don’t think the next recession still 2021 or 2022 and you’re about to tune us out then just wait one sec. The idea here is that you brought up non-economic recessions so if your biggest customer leaves that would usually put most businesses into a recession. It could apply to a hero SKU in our case. If you have a competitor come in and attack your hero SKU; same difference, you’re in a recession. If your best one or two employees leave and they go start a competing business, you are in a recession. The other one that has recently come up is what about government and regulatory changes? I mean I know the audience understands that vaping is a huge new business and everybody wants to get into marijuana, get into vaping well in New England they recently passed a law putting a moratorium on vaping while they studied the after-effects of it after there were several deaths. All of a sudden all those online businesses that were selling vaping cartridges were vaporized. And that happened overnight. It happened very quickly. So I want everybody listening to have a plan for how they can leverage those opportunities. Joe: Well the tariffs I guess could be considered a recession for some businesses. I’ve got a client who’s tariffs are 42.6% on top of his cost of goods sold; a pretty big impact. Jonathan: They sell online? Joe: No, they don’t. Jonathan: Okay. Well so it’s thinking through if you’re in one of those businesses what can you do? So the question then becomes you want to start to think about how you can diversify. And I know that the more practical tips for this are that I like to use online research. There’s a site called Ibis World and it’s a paid site. Joe: Is that I-B-I-S? Jonathan: I-B-I-S. Ibis World. You would have to make an investment but they provide industry reports on where they believe the future of different industries are going. So if you’re selling line online they’ve got a report for that. If you’re selling widgets online they’ve got a report for that. And the idea there is that you want to think about industries that will do better in the downturn and industries that will do worse. So in the book, we write about some of our favorite; some of the ones that got pummeled in the last recession, in the Great Recession and the ones that did well. The ones that got pummeled think like jewelry stores not good in a recession. If you’re selling high-end jewelry online or in a store; not good, same thing with things like travel and tourism, discretionary goods. That’s why I was selling personal training services in the Great Recession; not good. We all know that insurance and finance got hit especially hard in the Great Recession. Not good. So the ones that did well would be things like consumer staples; so if you’re selling consumer staples like toothpaste, people are still going to need to brush their teeth in a downturn. If you start to get more exotic with your thinking; think about like veterinary clinics and veterinary supplies, people still spend money and take care of their pets in a downturn. And people don’t care; if their dog is sick they’ll put it on a credit card, if their dog likes Eukanuba and that’s one of the most expensive brands, people will not change their dog food brand if we’re in a recession. So if you’re an online seller of those high-end pet products; I actually like that market. I think it will continue moving forward. My point just to answer your question though is that if you slow down, if you do some of the deep work of thinking instead of just being busy then I think all the answers are actually out there for how I will position myself, how I would start to diversify if I am in that hero SKU situation. Joe: In other words I had a neighbor tell me once; I was asking him, he was a bit of a mentor as well, he said Joe, you know exactly what to do. You just need somebody else to tell you to reinforce it. Same thing here folks; you’ve heard Mark and I say it and almost every guest that’s ever been on the podcast, focus on the business. It’s not about driving top-line revenue only, focus on the nuts and bolts of the bottom line part of the business and that’s going to bring value; improve transferability, the documentation, the growth trends, the data behind the business and that’s going to bring you more value in the short run and in the long run if you eventually do sell your business. And that leads Jonathan to talking about the other half of the audience; the people that are buying online businesses, those people that tune in week after week as they’re on the hunt for that next business that they want to buy and they listen to us. What advice can you give to someone if they’re out there hunting for a business in terms of looking for that business with a potential forthcoming recession? Jonathan: Yeah. So I want to start with the story and that’s that Paul Belair who I wrote the book with; right before the Great Recession started Paul bought a business. He invested a million dollars with his management team to purchase the business and they grew it during the Great Recession. It was an HVAC business, so a business that helped out with heating, ventilation, and air conditioning; not a sexy business. And they sold it 63 months later. They sold it for over 70 million. Joe: He bought it for a million and sold it for over 70. Jonathan: So the purchase price was higher than a million but they put in a million in cash. Joe: I got you. Jonathan: And then they had some debt to fund the rest of it. Joe: Fair enough. That still sounds like a hell of a return on investment. Jonathan: Yeah well it’s 70X on your cash plus; I can’t tell you the exact number. He’s under an NDA but in any case, it’s even over 70 million. So that’s why Paul writes the book with me but in terms of being on podcasts, you would prefer to be off playing pick-up ball in Florida. Joe: So hopefully he’s using Amazing Aces. We’ve got a client that bought that business and it’s a great brand. Jonathan: Really? Joe: Yeah. Joe: Jonathan: I love it. Well, it’s Amazing Aces? Joe: Absolutely. Jonathan: All right I’m making; you know what? I’m still Christmas shopping for him. Joe: There you go. Jonathan: So I tell you that story because part of the way that they did that huge one million to 70 million dollar exit is that they picked a business and then they moved it such that it would have a tailwind in a downturn. And so if you’re a buyer right now it’s thinking about what kinds of businesses would get an economic tailwind if we were in a downturn and then like my mom says you’ve got to put yourself in the middle of the street if you want to get run over. So Paul… Joe: Very bad parenting; I don’t know what the deal is with your mom but I got to say that’s not very good advice. Alright. Jonathan: Paul put himself in the middle of the street because what he did was when he bought that HVAC business they moved it from doing mostly construction; so by construction I just mean when you buy a new HVAC system and they install it on the roof of your building that’s a construction project. Joe: Yeah. Jonathan: Those units cost 5 to 20,000; that’s a big project, a big investment. They moved it to doing service. So how could they take the equipment that was existing for a business owner and repair it because in a downturn; in a recession, people would rather repair their equipment than replace it. And so Paul saw that trend coming with his management team and totally changed the business to really capitalize on that. And that’s how they were able to grow it into this recurring revenue business which again is another big thing I’d be looking out for your buyers. Joe: Yeah. Jonathan: Yeah. How do we get into a business that has recurring revenue? How can we be selling the razor cartridges instead of that one-time transaction? Joe: So find a business in a niche that’s not going to be impacted by a downturn whether it’s a critical service business or something like the pet space where people will spend money on their pets no matter what and adding some sort of recurring revenue aspect to it. Beyond that any thoughts in terms of their own personal financials and how to prepare for it in terms of buying; is it the same thing lining up as much line of credit and purchasing power as possible? Jonathan: Yeah well actually my favorite tip there is on the personal guarantee side. So I know right now with the economy booming; I mean consumer confidence is at record highs, unemployment is at record lows, the economy is still booming so banks are still willing to do more than they will at any other point in our economic cycle. I love the idea of capping, reducing, or eliminating personal guarantees especially for your buyers. So what does that look like to go to the bank and ask them to do the deal but to do it without a personal guarantee or to put a cap on that personal guarantee? Right now I think bankers are willing to have that conversation. You don’t have to give up a blanket personal guarantee on all of your stuff. So this isn’t possible generally with an SBA loan so don’t worry about writing to me about that because I get it. But if you can do a conventional loan product can you get it so that you can cap those personal guarantees or reduce them? And it may mean that you have to shop banks, maybe you have to go to four or five banks, maybe you have to talk to your local credit union to make that possible. I just think it’s worth having that conversation so that if we get into a downturn; if your business does go sideways that you’ve mitigated some of the risks that you would otherwise have. And it’s free to ask. Joe: And on that aspect folks we’ve had Shakil Prasla on the podcast and Shakil has bought half a dozen businesses and he’s done it mostly with non-SBA money and building up credit with banks and probably is avoiding that personal guarantee as well. So Google Shakil Prasla and Quiet Light Podcast and you’ll find that episode. In fact, I think if you Google Shakil he’s got a new course on how to purchase an online business as well so check that out. Jonathan before we go any last-minute thoughts or advice for anybody listening in terms of rocking the recession that may be coming in like 2020 in your words? Jonathan: Yes. The main thing is to put together the recession plan in the cool rational light of day as opposed to the emotional heat of the night. I want the audience to be thinking about putting together a plan now and then putting it under glass and then if you do have a recession in your business or you see on Fox or CNN that they’re announcing that the economy’s in a recession you can go over the glass break the glass take out your plan and start to execute it. The issue most of the time is that we don’t have a plan and so when we get into a recession whether it’s personal or affecting the entire country you’re huddled in the fetal position in the corner of your office like I was when the Great Recession hit. I didn’t have a plan. I had people knocking on my office door asking me what was going to happen with the business. And I just spent months trying to figure out what the plan was while all my competitors were executing and taking the best opportunities off the shelf. Well if you’re still graciously listening to us that’s what I really want for you is to be one of the people that can actually be looking forward to the recession and that can just move into execution mode when the next recession is announced. Joe: That’s great advice. Thank you, Jonathan. How do the audience find out about more about what you do online and helping them rocking the recession? How can they find you? Jonathan: Sure. Recession.com is the website and yes we really do own recession.com. All my contact information is on there. They can get me at Jonathan@Recession.com or all the infos are on the site if they want to go do that. Recession Readiness Assessment. They’ll see all my contact info right at the site. Joe: Excellent. Thanks for your time today Jonathan. I appreciate it. Jonathan: Alright. Rock on. Links and Resources: Recession.com Free Assessment Tool Rock the Recession Ibis World