Clicks to Cash: Selling Your Digital Business

MICHAEL:
Hi guys, Michael here. Do you want a second opinion on your SEO? Head to theseoshow.co and hit the link in the header. We'll take a look under the hood at your SEO, your competitors and your market and tell you how you can improve. All right, let's get into the show.

INTRO: It's time for The SEO Show, where a couple of nerds talk search engine optimization so you can learn to compete in Google and grow your business online. Now here's your hosts, Michael and Arthur.

MICHAEL: Hello, everyone. It is Michael here. And today we have a bit of a different show, different episode of the SEO show. I have welcomed Lou Viveros on the show. Now, Lou is a business advisor that I connected with at the Chiang Mai SEO conference, and he specializes in helping business owners get their business ready for sale and maximizing the sale price they can achieve and basically coaching them, being their advisor through the process of selling a business. Now, Lou has had a lot of recent experience in helping SEO agencies, tools, software, websites sell. So, I wanted to bring him on to talk about the process. What are buyers looking at when they're buying a business? And as a seller, how can you get your business match fit or healthy, ready for sale? If this is not for you, if you're really into SEO, this is not going to be the episode for you. But if you are a business owner, if you're an entrepreneur and you do have in the back of your mind the dream of selling your business one day, we touch on a lot of interesting points that will, I guess, help you start thinking about it. Because you can't just sell your business tomorrow. It's something you need to prepare for over a year, two years, three years. So Lou explains it a lot better than I can. So let's throw to the chat I had now with Lou Viveros from Market Solutions. Hi Lou, welcome to the SEO show. It's great to have you here, but for people who may not have heard about you, if you could please let us know a bit more about yourself and what you do and we'll get going from there.

LOU: Yeah, no, uh, great to be here. Thank you for having me. Uh, my name is Lou Viveros. I am the founder and owner of, uh, market solutions here in, uh, uh, lovely Silicon Valley in California. Um, market solutions has been around, uh, since 1999. I've been, uh, I'm in business for 40 years now across a lot of different scopes from the one man startup where I was CEO CFO and janitor all at the same time through running a worldwide division for $70 billion Panasonic you know thousands of employees tens of thousands of employees and you know, dozens of countries around the world, so I have seen a lot of it. Recently ended up in the SEO orbit, primarily through my work with Matt Diggity. so mad and i connected a few years back during one of his m&a transactions i happen to know the lawyer that was working the contracts for that and they needed a business advice and some guidance and so mad and i really hit it off and i've been advisor to him ever since and Through that connection, here's a guy who knows very little about SEO, has ended up involved in a lot of SEO projects. You know, done some deals with Surfer, with Authority Builders, obviously with Diggity Marketing. So just kind of have my hands in some of the pies. Mostly as I said, a business advisor, not so much as an SEO expert. At the end of the day, a business is a business and a lot of the same staples apply, whether you're selling television sets or an agency trying to sell links.

MICHAEL: Awesome. Well, that's pretty much where I brought you on the show. You know, you say that you're not an SEO guy. This is an SEO podcast and you do work in this world advising on sales and everyone that either runs an agency or maybe gets a website to a certain level of success has a dream of selling and, you know, making a bit of money off their business. And that's what we want to talk about today. You know, what goes into that? How do you get a good sale? So I wanted to look at this through the lens of digital assets, because you spoke about, you know, diggity and authority builders and those types of businesses you've worked with. Maybe if you could, we'll start at the very start, you know, explain what constitutes maybe a digital asset today and then we'll move into, you know, when you're looking to sell something, how do you even go about it and what are people looking for? So yeah, if you let us know, first off, yeah, what are we looking at with digital assets?

LOU: Well, so the difference between, say, selling real estate, right, which is a hard, I can go look at the property. I can go look at the building. Digital assets are a little more squishy. So one of the core issues is always Was it originally created? Was a derivative product? I spent a lot of time in my career in software, and in particular, in video games. So intellectual property underlies all of these things. And intellectual property ownership and provenance of that ownership is a key component. So if people are Taking something that they find on the web and tweaking it a little and putting it out there as their own work, it's going to be a lot different than someone who has a team of creative artists that are generating fresh content and something that is entirely unique on their own. You know, those are different conversations. Think of it in terms of a creator versus a broker, right? And there's room in the marketplace for all of them, but everyone has to have realistic expectations about where they fit. The other, I mean, just kind of backing up to the very top of the funnel, You know, every here, what's impressed me about SEO is and my time in short time in this world is. the youth, energy, entrepreneurial spirit of everyone involved, right? Everyone's an entrepreneur. Everyone is a business owner of some kind. And I'm a little older than a lot of you guys, so I've spanned the generations from back in the day where You went to work for a big company, you could expect your career to be spent at that company, and then 30 or 40 years later, you retire, you get a gold watch, you get a pension, and you move to Florida. I lived through the generation of The Silicon Valley go-go, the dot-com, the entrepreneurial spirit that really has flushed the entire industry. So it's been really invigorating, energizing to be involved with so much youth, so much energy, so much entrepreneurial spirit. With that mindset comes this idea that one day I'm going to be able to cash this thing out. And every business owner, every entrepreneurs, Big why, you know, why am I doing this? Why am I working seven days a week, 10 hours a day, missing time with my family? The big why is because if I put the work in now, at some point in time, my family's going to benefit. I'm going to have a better life. I'm going to have the opportunity to really enjoy all of that. That is, you know, at the end of the day should be the priority in everyone's life. So that spirit of wanting to build a business that you can sell is obvious. I think what everyone has to be clear is the clarity of purpose underlies all of this. If you have in your mind that you want to Build a business to a certain level, sell it, flip it, move to another business, build it up a little bit, sell it, flip it. That's a completely different approach than I'm going to build something that's going to be long lasting. It's going to be a legacy. It's potentially generational, a business that I can pass on to my kids. different purposes, right? All may end up with the same broker, the same process of trying to sell it, but what is your purpose, right? And that I think is always, I always start every engagement with every client with clarity of purpose. Why are you doing this? Why do you wanna do this? What is your ideal exit? And part of that ideal exit is understanding what's my floor? Right if you live in a part of the world where a million dollars will sustain you and your kids for the rest of your lives not a lot of those places left but you know it's different than living in california where a million dollars will buy you a. 100-meter condominium in the desert. So really understanding what's your floor, what's your clarity of purpose is always my starting point with all engagements. Before we even get into what are my assets, what are my worth, what's my valuation? Their first question, client's first question to me is always, what's this worth? What's my valuation? And I think the honest answer is the old statement, the market determines the price. If there are three buyers all looking for the particular set of assets that you have, those assets are worth a lot more than if there are no buyers who really understand that those assets could be a benefit to them. Right. So market first. Where's the opportunity? And then, you know, everyone wants to jump to the end of the story. What's this worth? What's my value? What can I get? When can I get it? It's all, you know, building block building the pyramid from the ground up before you get to that cap that is the payday for everybody. So long-winded answer that didn't really answer, but that's kind of some background for how I approach this kind of thinking with business owners.

MICHAEL: All right, well, let's look at an example, maybe. Let's say someone owns an agency, or maybe they've got even a website that's making money. They might not have gone into it from the beginning knowing that they were going to sell. In the back of their mind, it'd be nice one day. I assume you don't just sort of flip a switch and sell it overnight. You sort of need to maybe get ready for sale and make it as appealing as possible. How do you go about that? And looking at those types of businesses, like an agency, service business, or a website where it's making money off publishing, is there particular types of businesses that are more attractive than others right now that you're seeing out there? So that's sort of a two-part question there for you.

LOU: Yeah, yeah, no. So let's do the first part of the question first. So the Agency business in general is segmented a lot of different ways. Some people are actually building content and content creators is going to be different than someone who's just out buying and selling links, right? Different sets of businesses. The important point of getting ready is always Corporate fitness, and that's a vague term, and it takes a lot of work and a lot of understanding. There's a lot of people that own businesses that really don't understand what the three-part financial statement means. QuickBooks will spit it out for you. You hit, hey, give me my three statement report. QuickBooks will spit it out for you. But really understanding how those are all connected is important. So even a basic understanding of financial statements, you'd be surprised how many big company CEOs still have a hard time fully understanding everything that's there. But the beauty of the three statement model is you can tell whatever story you want to tell in any two of those statements. You can paint the best picture of any business in two statements. Could be totally false, could be totally made up, but those two statements will tell that story. With three statements, it all becomes clear. The clothes come off, everything's naked. So understanding the three statements is going to be the first phase of any kind of evaluation from a buyer. And I don't want to be overly rudimentary here, but I think it might help that the income statement, known as profit loss, the balance sheet, which tells you the state of your business at any moment in time, snapshot of financial condition, and then the third statement is, the statement of cash flows, where's the actual cash coming and going, right? And all three of those statements tell a different story. So my first advice for anyone is understand your financial statements, understand what goes into those financial statements, understand what the three of them do. And I always liken it to physical fitness. I'm not the fittest guy in the world, but you know, when people go get a gym membership and pay their monthly dues for a gym membership, it's not so much the equipment or the exercises you're gonna do, it's the having a schedule, having a time and day each week that you need to go to see the trainer because you have an appointment that's gonna force you to do the work, right? Going to the gym and doing pull-ups is not fun. Some people think it's fun. A lot of people think it's unnecessary to their health. So, This kind of work that I do is I liken myself to that trainer, right? It isn't fun. It's kind of drudgery to get into these numbers to understand how all these numbers connect to each other. But if you really want to sell a business one day, you've got to at least put in a little bit of effort there. Step one. The other part of it is multiples. So the multiples are measured a lot of different ways. The classic way to think about it is, if you want to consider a vanilla deal, and vanilla is, this cuts across industries, it cuts across business types. If you say, Is valuation on revenue, is valuation on profit, or is valuation on growth opportunity, right? So classic model, one times revenue, 10 times profit, growth opportunity is entirely dependent on what phase of that growth curve you're on. If you are going into a market that is just ready to take off, I mean AI, everyone's getting excited over AI and the people who've been in it are saying, oh, no, I was doing this five years ago. But to the whole world, we're still very low on that curve with a lot of upside opportunity. So if your particular business has somehow got a little bite of an AI component to it, it's going to be a lot more exciting to a potential buyer than something that's already on the end of its growth curve. If you are doing streaming, movie streaming, we've lived it and done it, and everybody's tried every different model of it. We're way farther on that growth curve than we were 10 years ago. One of the popular American entrepreneurs, Mike Cuban, um, built his business with selling a video streaming business like 25 years ago. Right. And, uh, you know, so it's, it's how early on the curve are you, how much of your business can point to growth? Um, and then that's the X factor. So revenue is important. Profit's important. Growth is key. Right. Um, and, You know, I always look at growth before I look at revenue and profit. You can have, there's an old saying that says, you can have sales without profit, okay? You're selling a lot, but you're not making any money. You cannot have profit without sales, right? So if there's no sales, there's going to be no chance of profit. So at least if you're selling, We can figure out the other part about how do I control costs? How do I get better efficiency in my profit to improve profit? If you've got no sales, there's no business, okay? And here, I said, I'm in the Silicon Valley where you get companies that will spend five years burning through R&D money and, you know, tens of billions of dollars with zero dollars of revenue. Different model, because what's the growth opportunity? That's what the venture capital guys are betting on, right? They are, I'm going to go throw money at 10 different startups that are in this industry of five years from now, hoping one of those 10 startups actually makes it there and gets 5% of a $30 billion industry. OK, that's worth throwing money at. In our case, a lot tougher to make that kind of play. So it's really, are you selling? And is your revenue growing? Going back to that revenue, hey, I did a billion dollars of sales this year. But last year, you did $2 billion. The year before that, you did $3 billion. A billion is no longer what it seems, right? I did 10 million of sales. Last year we did 6 million, the year before that we did 3 million, the year before that we did 1 million. I'm going to take that 10 million over that 1 billion every time, right? Maybe.

MICHAEL: What if you're doing sales are going backwards but profits going up? Is that a bad scenario or a good scenario?

LOU: No, I mean, trends are a key measure, right? So if your sales are trending down, but your profits trending up, then it's going to create Questions, maybe some good questions. How does that happen? How can you possibly reduce sales and increase profit? Well, the answer is my margins are up. My efficiency is up. My customer retention is up. I don't have to go get a bunch of new clients and churn them every month just to keep the lights on. I'm charging more per project. You know, so these are answers that are good answers, right? Bad answers are, well, I cut my staffing in half. And now my project lead times have tripled in length. Uh, whereas a year ago I was delivering in a month. Now I'm delivering in three months. Yeah. Okay. Your profits up, but it's kind of artificial, right? Um, because your opportunity is shrinking. Now you can turn projects four times a year instead of 12 times a year. Right. And I'm just using examples here out of the air, but that those are the kinds of things that, that people will, will dive into. Um, questions you want to have you're going to get questions knowing what questions you're going to get and Kind of my role is I play that role of well What about this this this and this because they're going to ask you that and so if you know those answers and know those questions And think about it beforehand when those questions come and you're able to boom boom boom boom You know big big difference then let me look into it. I'll get back to you, right? so I'm wandering around the field here. I apologize. I forget where we started on the question, but you know, hopefully this is just kind of a free flow. Yeah. You know, helpful information.

MICHAEL: So what I'm hearing there, you spoke about, you know, growth being a big factor and like someone's going to come in and look at, are you growing and sort of revenue coming in. If we look at a traditional agency, like a generic digital agency, some of them might have the founder doing sales and it's on referrals and that sort of stuff. In that sort of a case, someone's probably not going to be interested in buying it, right? Because there's not that engine there that they're actually buying. So you need to have either a sales team and marketing and leads coming in, some sort of thing that someone's buying that is going to drive growth into the future to make it appealing, you know, to try and go out and get the best sale price possible.

LOU: Right. Sustainability is the question someone's going to ask. If I cash you out, you step away. is the business sustainable, right? And the one you just described where the owner does 100% of the sales, and if that owner goes away, there's no more sales, you know, go back to point A, no sales, no business, right? So one of the greatest deficits in that entrepreneur mindset is a lot of them are control freaks, right? So you need to be able to delegate without abdicating, right? So you need to build a system where if you get hit by a bus, the business can continue. Very, very hard to do. And again, it's just that nature of entrepreneurs think they can do it best. Entrepreneurs think their business is unique, different from anything else in the world. No one else can do this but me. Those are the strengths, right? The downfall of all of that is Man, what happens if you get hit by a bus and you end up in the hospital for four months? You're going to come back to an empty building with the lights off, right? So having redundancy, having some kind of succession planning, having some thought go into a delegated structure. So, in classic business school organizational theory, span of control is a common concept. Typically, six is one. the edge of span of control. So if you've got six people under you as a manager, and this is where we get corporate hierarchy, right? You have one CEO managing tens of thousands of employees in big companies. The only way you can do that is through a pyramid structure, span of control, where that one has six, those six now have 36, those 36 have 200, right? And that's how you get down to thousands of employees. VP, director, senior manager, manager, however far you want to go down that structure, that's how you get their span of control. So as an entrepreneur, as a business owner, really, really take to heart this idea of I can only manage six things or six people at a time, right? And if you are managing 30 clients, you know, to do 5,000 bucks a project for those 30 clients, I'm doing $150,000 a month of business by managing 30 clients. At some point, that's going to break, right? You are better off having you know, a few key clients that you say, these are my ace in the hole clients. I've got to personally manage these guys, but now I need some help in account management, account supervisors, uh, assistant account managers that can help oversee the day to day stuff. I don't need to be fielding every email, every call, um, every, every inquiry that comes in, um, the sale side of it. Again, if you can build, a sales organization that's not you doing, uh, 15 zoom calls a day to, because those 15 calls turn into three clients and, you know, three clients times five days a week, I need 15 clients just to keep the doors open. You know, you need to be able to build a sales organization that can help you focus your time more on your business. And a lot of guys love the sales interaction. That's the adrenaline junkie in them is fed by, I closed another sale, I closed another sale, right? I convinced someone else to buy from me. That and i know that high and it's a great high right but it's not as high as. I built a diversified organization that can that you know has succession that has survivability that has sustainability over the long term. That's a much greater high than I closed another sale, I closed another sale. You know, I don't know if that answers the question, but just kind of my random thoughts on that.

MICHAEL: Yeah, absolutely does. So let's say you're in a business, you want to sell and you're doing the basics, right? You have a sales team, you have a marketing engine, you have some point of differentiation or something that makes your asset appealing to buy.

LOU: In a growth category, right? Yeah, in a growth category. Check, check, check, check, check on all the things we talked about.

MICHAEL: When someone comes to work with you, how long are they typically spending to get it sale-ready? Because I imagine there's going to be a bit of time spent on making everything look appealing as possible, carving out costs, whatever you need to do to make it sale-ready. What are you looking at?

LOU: depends on the state of the business. Um, you know, if you're selling a house and you're a real estate agent and you walk into the house and it's a decrepit mess, it's going to need a lot of work. And you're going to say, Hey, there's going to be a year of remodel before we can put it on the market. Whereas if you walk into a house, it's pristine. It was freshly painted. It's in good shape is I'm going to take pictures tomorrow and put it on the market next week. Right. So state of the business is going to be key, which is why all that other stuff I was going on about is important, because if you do it as it's needed, when you want to make the move, you're already ready to go, right? Same as the gym membership analogy. If you're going every week for a year, you're going to be in much better shape to run the marathon than trying to get ready for a marathon in a week, right? So state of the business is important. Doing your homework is important. Having your financials in order is important. I'm going to mention a phrase that is vital to anyone that's even having these thoughts, and that's gap. G-A-A-P. Generally accepted accounting principles have been the downfall of more deals than I care to talk about. Very boring stuff, but at the core of GAAP are, and this cuts across Countries, languages, all of it. Gap is universal. If you look at a balance sheet in different countries, in the UK, in the US, in Japan, there's different categories, different phrases, different names for the buckets that are used. And you can work through that. But gap is universal, and at the core of it is revenue recognition, right? So how do I recognize revenue? And this is all boring stuff to people who don't deal in finance, but revenue recognition is the downfall of a lot of businesses. I'm selling $3 million a year, okay? Well, how did you get to that $3 million a year? Well, I sold $240,000 last month. So if I annualize that, that's $3 million. OK, great. Show me that $240,000. Well, that's the cash I received from all of my customers who just bought campaigns. OK, you sold 80 campaigns at $3,000, $240,000. I get it. Have those campaigns been delivered? Well, no. They're all in planning. They've got a manager assigned to them. They're going to be produced. I should be able to get those done in the next three months. Well, OK. That $240,000 is not revenue. That $240,000 is actually a liability on your balance sheet that you have accepted deposits of $240,000, and you now owe $240,000 of work promised that you haven't delivered yet, right? Get out of here, right? So that's where GAP really starts the whole process, is revenue recognition. So making sure that you are in compliance with GAP. If you Google G-A-A-P, you're going to instantly get a nice little list of here's everything you need to know, right? So I encourage anyone who even has an idea that someday they want to sell a business, understand GAP. Even before you get to all the financial statements I was talking about, understand GAAP, and you're going to be a lot of the way there. So assuming, check, check, check. You've got good growth, you've got good trends, good sales, good profit. You're in a category that's growing. Your business is sustainable, even with your exit. All your financial statements are in order. You're in compliance with GAAP. Then basically, the process is going to involve finding a broker that's in the space that you're in. Brokers typically are going to want some money for marketing. They're going to command a commission on the final sale price. That commission can be anywhere between 4% and 7%. Five is sort of a, you know, that vanilla deal is a 5% broker deal. They, if there's going to be a backend to earn out. So let's talk about earn out. I'm gonna sell my business. It's doing $5 million a year. I'm gonna do a $5 million valuation because it's one X revenue. I'm gonna get that $5 million. The buyer could say, sure, I'll give you $5 million, but we're gonna do it as two and a half million today. a million and a half in a year, if the business is still doing X, Y, and Z, another million a year after that, if the business is still doing X, Y, and Z, that's your $5 million, right? So the broker is going to count that as a $5 million sale. They want their 5% on that, which is a quarter million bucks, right? And they're going to need that on the day of closing. So now your money is on that first down payment you're getting, that $2.5 million you're getting up front, you're actually carving out 10% going to the broker from that first payment, because they're taking their 5% on the full valuation. You may never see another penny. If you don't meet your earn out objectives or the KPIs don't hit, your two and a half is what you're going to get less the brokers, less whatever your country's taxes are. Suddenly that $5 million sale is, you know, closer to a million and a half, $2 million. And, you know, that's just a reality of, of the broker world, the transaction world. Um, so you're going to get a broker on board, the broker's marketing program, depending on how good, How do you pick a broker? How good is their book of business, right? So if they have a hundred contacts in the particular industry segment that you are wanting to sell to, they've done 30 transactions in the last year within that segment. They've had multiple, multiple buyers in that segment. That's going to be much better than someone that says, I'm going to give you 10 hours a day for the next three months solid because I want to build my business and my reputation in this category, and I'm going to go beat the bushes and find you a customer. Who is your existing base? Think of it, again, going back to this real estate example, if you've got someone that's in a particular neighborhood that knows every home, every street, every corner, and has sold a lot of houses in that neighborhood, you're better off than someone that's three cities away that maybe doesn't know your neighborhood as well, but is really gung-ho and excited and super, you know, enthused in getting your listing or giving you a lower commission or something like that. Take the tried and true over the, you know, excited and I have a saying. cheaper is usually more expensive. I love that thing. Yeah, so cheaper usually ends up being more expensive. So don't shy away from paying the right things to the right people because it's going to be worth it. So the broker contract itself is going to be 20, 25 pages. And if that broker succeeds and you get to some kind of asset purchase agreement, APA, those are called, or a stock purchase agreement where they're buying, that's a whole conversation. Asset sale versus stock sale, right? If you have a business entity called SEO Show Inc, and you have a bunch of assets in there, the buyer may look at the entity and say, yeah, that corporation has this and that, and you had your personal vehicle on there that you are writing off and all these other things. Yeah, I don't want to deal with the corporate entity. I just want to buy your assets, right? You're going to be selling them assets that are held in that corporation. Those assets go in a box and that box goes over to another corporation versus I want to sell everything, and they want to buy everything. Because in the name, SEO Show, SEO Inc, there's goodwill, there's value in the entity itself. They're going to buy all of your stock in that business. They're going to buy the business. In that business are all the assets. But the assets stay in that business, and they're just buying the whole business. Different deals. But the APA, the SBA, You're looking at hundreds of pages of documents by the time it's all done. It's the purchase agreement itself. The due diligence is going to be months and months of, you know, filling out forms, submitting digital copies of hundreds of documents they're going to ask for. You're going to have closing documents. You're going to have restriction documents. What can and can't you do? I'm buying your business. You have an agency that, you know, creates content for, you know, surfing, I don't know, pick something that you specialize in, right? I, part of my purchase means you as an individual cannot, for the next three years, for the next five years, whatever that timeframe is, have anything to do with surfing. And that doesn't just mean building content for surfing. That means I don't want you at trade shows. I don't want you going to surf events. I don't want you having anything to do with surfing because you are now my competitor. I'm buying your business, but you are now my competitor, right? So that non-compete can sometimes be its own agreement, its own side letter as part of the closing documents. You know, it's three months as fast as you're gonna sell a business. Yeah, probably. Six months to nine months doable if the market is frothy and all your stuff is in order and there's good customers in the market for that thing. Yeah, realistic. A year to a year and a half is probably what you should kind of expect and if you do better, then you come out ahead. Low expectations, high hopes, and between those two is usually where the trains meet.

MICHAEL: And would there be common things that make a deal fall over in that time? You know, are they sort of very precarious and there's things that the sellers are doing to hurt themselves that they should not be doing?

LOU: Yeah. Yeah. Yeah. Lying. Uh, so the, the, there's a very fine line between salesmanship, puffery, promotion, putting the best picture on it and outright lying. Okay? If you're selling a car and the engine right now is running just fine because you just tuned it and had all the fluids changed, but you know those fluids are leaking, and in 1,000 miles, it's going to need another $1,000 of work to keep it running that way. Trying to sell it without disclosing that is going to lead to more problems than it's worth. So if there are issues with the business, say them. You can paint them the best way possible. You can put them in perspective of, and here's how it can be fixed, or and here's what we're doing to correct it, or here are some possible countermeasures that I don't have the time, energy, or money to implement. the classic shit sandwich, right? It's, here's what's good about it. Here's some stuff that maybe can be improved, but if it's improved, here's how great, you know, that whole thing is, right? So good, not so good, great.

MICHAEL: It is kind of a way- And say that straight off the bat kind of thing.

LOU: Yeah. Yeah. I mean, as part of, and honestly, it builds credibility and trust. to be able to openly say, here's what needs work. Here's what's not so great. Here's what I wish I was better. And then what's the out on that is, but you're lucky, Mr. Buyer, because if it was better, I'd be asking double what I'm asking. So there's strength in honesty, there's strength in openness, and going through this process is going to reveal and expose every pimple on the body, right? Hiding it as long as you can is only gonna make it worse, right? There's pimples here, here, and here. I'm openly telling you that. So when you see them, it's, oh yeah, yeah, we knew that, right? We knew that is less likely to blow up a deal than they've been hiding this from us.

MICHAEL: Yeah, explain this to us, yeah.

LOU: Yeah, how come you didn't tell us about this? Because I was hiding it, because I was worried about the deal blowing up. Well, guess what? The deal just blew up, right? Um, I don't know if that makes sense, but that makes total sense. Yeah. Yeah. So honesty is always top of the list.

MICHAEL: Yeah.

LOU: Um, and expectations, sorry. Didn't mean to cut you off. Expectations. Expectations are an important thing in any negotiation in any kind of, uh, openly stating your expectations. And the, the most important word in any negotiation is because. Right. I expect this because A, B, C and D. Right. Yes, it's worth more than what you think it's worth because A, B, C and D. And your because has to be concrete, tangible, real. It can't be because I just love this business, because I poured my blood, sweat and tears into this business. Right. That's not concrete because we've started with five competitors and we're down to one competitor because we've taken everybody's market share. That's a real because, right? The other guy that's my competitor in this space just sold for less than this, but we're growing at, but we're worth more because we're growing at three times the rate they're growing at, right? Because, because, because. So here's what I expect. Because if you can get that as just part of your impulsive, not impulsive, but instinctive without even having to think about it, my business is worth this because. And the other part of negotiation is this classic, well, we're going to haggle, we're going to negotiate. So I really want $6 million. I'm going to say I want $12 million. They're going to say they're willing to pay $2 million. And we'll meet in the middle. You're more likely going to blow that thing up before you even get to a negotiation. So it's better to say, hey, my sense is this is a seven-figure deal. My desire is to be in that high seven-figure range, but I'm open to discussion and coming to a fair compromise on what the market bears. Then the buyer is going to be using all the same stuff, because I think it's only worth mid-seven figures, low-seven figures, because I've talked to 30 companies in your space just this month alone that are all looking to sell, right? Because the market you're in is declining year over year for the past three years, right? Because 80% of your sales come from you as an individual. So all these other things we talked about can be used as a because coming the other way. Because your bookkeeper never graduated even the most basic accounting course in school and your books are a mess. So the because goes both ways. My expectation is You can be vague, but don't be off the charts in terms of, we're not even close. I'm not interested, thanks. Give them something to be interested in. Give them hope of reaching a deal. But kind of lay out just what's the saying, a man's reach should always exceed his grasp, right? You want to set the expectation of the reach and have a clear vision on what your grasp is. What is your floor? What are you willing to accept? And if you go into it with that, with honesty, with a clear sense of your because, then I think you're in better shape than Give me $10 million.

MICHAEL: And figuring out your because or your becauses and your expectations and that sort of stuff. Is that something a broker is going to help you with to their 5%? Or is that like where someone like you comes in? Maybe who else is going to be involved in this process and, you know, on your side and maybe just as a middleman that, you know, just providing a service and what sort of costs are you looking at actually to sell a business when it's all said and done?

LOU: Yeah, absolutely. So, um, lawyers, if you, if, if in your life, you have to pay top dollar for certain services, lawyers and accountants are a good place to do that, right? You can never had a good, have a good enough lawyer or a good enough account. Um, in the case of selling a business, depending on the scale of the business, uh, lawyers fees could set you back. $30,000, $60,000, $70,000. Accountant fees are probably in the tens of thousands of dollars. The broker is not going to be the person that does all of this because work with you. The broker, is churning deals. And the difference between, for example, my role as an advisor is I represent the client. And it's my job to help coach the client, guide the client. I'm the fitness trainer at the gym that helps get the client ready for going into battle. The broker has a primary interest of doing the deal. could be a good deal, could be a bad deal, could be the right partner, could be the wrong partner, could be someone that doesn't know what they're doing but has a big checkbook, they still wanna close the deal, right? So the broker's job is to find potential buyers and then convince both sides that they should do the deal. Good or bad, do the deal, right? Because they don't get their money if there's no deal. The role of an advisor is to help get you ready to paint the best picture possible, to have the best fitness possible, to have the best because package ready for when those conversations happen. And then, you know, in the movie Pinocchio, Jiminy Cricket's always telling him stuff he doesn't want to hear, but he's got to hear it, right? So it may be, you know, this is not a good deal. I mean, not to breach any kind of non-disclosure, but one of my first deals in this industry, my first job was to say, let's get you out of this deal. There was money on the table. There was a buyer lined up. There was a contract struck. My first role is going to get you out of this deal because there's better deals out there, right? And that's hard to say when there's a lot of money sitting on the table and a bag ready for the taking. And it was a lot of work to get out of the deal, and it was expensive to get out of the deal. But at the end of the day, it was the best thing we could have done, because we ended up tripling what they could have gotten. And those are hard ones. But part of my role is the broker's role is always to say, yes, yes, yes, yes, yes, let's do the deal. My role is to sometimes say, you know, Maybe not. And here's what you should think about. And these are reasons not to do this. I want you to get as much money as you can. And I want you to have the best exit you can. But I mean, they're promising you $10 million. But look at the KPIs on the third year earn out. and 8 million of the 10 million is in the third year earner, right? But it's $10 million, $10 million, yeah, but you're gonna see maybe a million less, a million broker fees, you're at zero right now. No, thank you. So the difference between the broker, the advisor, and then beyond the advisory role for transactions, my core bread and butter business is really coaching. So I do business owner coaching, entrepreneurial coaching. All that fitness stuff needs to happen years before you're even ready to sell a business. And so, you know, a monthly check-in, a weekly check-in, just like any coach, any counselor, it's here's how we keep it on the straight and narrow, and here's how we get you from where you are to where you want to be, right? If you think about getting in your car and you're going somewhere, the GPS doesn't say, hey, where are you and how many left turns do you want to make? It says, where do you want to be? So you got to start with, where do you want to be to plug that in? And then there's 100 ways you could get there. What's the most efficient? What's the most time sensitive? What's the least traffic intense? There's a lot of different ways to get there. But, you know, I'm kind of that GPS of how to get from where you are now to where you want to be is really the day to day. And if we can get you to a transaction that works for you, great. Transaction advisory role, very important. But the day-to-day, day-to-day blocking and tackling is really where the end result manifests from the day-to-day work.

MICHAEL: Yeah. Well, I love it. That sort of brings us back to what we spoke about at the start, knowing where you want to be. So I think that's a good way to wrap things up. But for people that might want to connect with you or find out more about you after this show, where can they go to get in touch?

LOU: So you can find me on LinkedIn. There's not a lot of Lou Viveros's, L-O-U, and then last name is V as in Victor, I-V-E-R-O-S. I'm sure it'll be up on screen there somewhere. So LinkedIn is a good way to go. My email, I'm not sure if we can publish it somehow on the thing, but the easiest one to know is lou.viveros at gmail.com. So those two ways are good ways to do it. I would point you to a website, but honestly, after almost 25 years of Market Solutions, I still don't have a website. We've never needed it. So thanks to word of mouth, thanks to reputation, there's always more potential clients in the funnel than we can deal with, but I need to find wood to knock on. So yeah, email and LinkedIn are good ways to do it.

MICHAEL: Well, thanks so much for coming on the show, Lou. It's been great chatting and yeah, have a great day. Great. Appreciate it. Thank you. Bye.

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