#21 - How To Value, Sell and Buy Online Businesses

first thing you gotta do is get the numbers right sellers discretionary earn net income trailing twelve months often lost add backs but to accrual listening the business getting under and the having it fall completely apart in due diligence because the numbers are wrong it's heartbreaking it's debilitating it's emotionally crushing but it's reality people listening they know the value of their car their house their condo their retirement account but they probably have no real accurate idea what the value of their most valuable asset is which is their business so we're seeing larger more mature businesses where the entrepreneurs are smarter they're more educated and the size of the businesses are much larger you know in two thousand thirteen when i closed twenty three transactions myself it was about two hundred and twenty five thousand dollars on average in two thousand eighteen my average size was about two million dollars five million is nine a enough ten million million money million dollars hundred million dollars half a billion hundred and fifteen million dollars one or two people in a bedroom actually put threats to these like giant multi dollar companies because you have creativity and you have nothing to lose add another zero to that price buddy add two more zero for first every week we sit down with self made millions theirs and asked them how did you do it i didn't start a podcast i started my own personal business school and the teachers are the successful entrepreneurs behind the biggest brands businesses that you find today i wanted to know the real stories where all the details like how did you get your first hundred customers what did it feel like shit i ask them how did you spend your money now that you're rich and what would you do if you're starting over from scratch again today if you're like me and you wanna own your own business instead of living a nine to five job this is the podcast for you the hustle presents my first million here we are i got joe valley with me here on the podcast i he's partner at quiet light brokerage which if you listen to the episode i think two with ra ramon van mere who had an amazing story where he created a blog about soap opera even though he's never seen a soap opera in his life but he made one of the most popular soap opera blogs in the world and when he needed to sell it he went to quiet he actually tried several different methods to sell the business when he finally was able to sell it for nine million bucks it was through quite light brokerage and that was the first time i had never heard of it and since then i've been hound your site to see what are the other opportunities what are the other great businesses that are up for sale because you know if you're somebody who is looking for a business to buy and rather than start these are businesses that are already running have been running for years they have income they have profits and they're not you know marked up like a crazy tech company with like fifty times you know revenue or something like that very reasonably priced so i love quite light i wanted to get one of the main people behind quite light on the podcast just to talk about this and so we have joe here today joe welcome how are you feeling i'm doing fantastic sean thanks for having me on gonna jump right in to say something yeah please the beautiful thing about ramon who i count as a friend now is that he didn't just sell a nine million dollar business he actually sold a two hundred thousand dollar business first right and learn from that and built another and the next one that he sold through twilight it was four hundred thousand dollars right and then hit the model load and jumped up to to nine million so i don't want anyone to think oh my gosh that's amazing on there get to that people start where they start and they just keep going forward and fighting and ramping and succeeding people like ramon it's an incredible success story if anybody hasn't listened to that episode go back and listen to it he's got quite a story and even better his new venture which he originally bought i believe off quite light and has ramped up i think he's gonna be a hundred million dollar business and you know in the time i've been messing around doing a podcast you know between episode two and and wherever we're at now fifteen or so this guy built another massive business that he bought sort of renovated off of quiet light so i just talked to him today and i tried to give him credit for that i'm like man that's incredible what you're done i said it's all you you're done some incredible stuff because he's so humble he's no actually it's it's really my team yeah and i'm like okay ron ramon you hired the team you guided the team you inspired the team you treat the dream well it's really you so and it's incredible story for sure yeah yeah exactly okay so before we talk about how much we love ramon for an hour because i will do that let's hear about you your story you know give me a sense of your entrepreneurial background so give me the two minute version of who you are how you kinda jumped into the entrepreneurial world what that's been like for you and i been hustling since i could walk to be honest with you but we'll jump to the adult version of when i was grown up and launched my first venture married back in nineteen ninety seven and i was working for a company in portland maine i was the thirty fourth employee and it was amazing i love going to work every day i get there early at daylight i couldn't imagine being anywhere else until i couldn't stand it anymore right it it got so big so corporate so people just trying to climb the ladder that there was a time when i couldn't imagine working anywhere else and then all of a sudden within two and a half years i couldn't imagine working there anymore so i jumped ship and launched a media buying business back in nineteen ninety seven we used to buy radio air airtime for direct response clients which really are now all internet based clients said to myself if i could just make fifty thousand dollars a year working from home i'd be thrilled they're just incredible and i had one client in nineteen ninety eight my taxable income was just north of a half a million dollars so i ten times my goal at that time and it took off and grew from there it wasn't long before somebody knocked on my door and said hey look i've got a call center i hear you're good at buying media do you wanna partner on something and we did and i launched my first product on radio took it to radio and then did a television in commercial with it let it run its course did the next one let it run its course and then took that one one hundred percent online in two thousand and five and that particular one we did one hundred percent online from o five to two thousand and ten when i exited the business so if you could imagine we took it through the absolute best of the economy and the absolute worst of the economy and it came up the other side of it emotionally toast exhausted not loving this amazing online recurring revenue e commerce supplement business that i had that was providing a very healthy living for myself and my family for less than twenty hours a week and i just absolutely had to get rid of it it's horrible story people like they're rolling their eyes go want the hell wrong with this guy but if they're entrepreneurs they know that you just get bored it's time to move on you've gotta do something else and so at the time it just occurred to me and i never knew it before that i had something i could actually sell and so i started looking online and calling online business brokers people that specialized in selling online businesses which mine was and i talked to three different brokerage companies two i felt like all they were trying to do is to get their hooks through the telephone nine into me for a commission they just wanted me to sign an engagement letter and the third was mark dow at quiet my brokerage and he's now my business partner and he looked at my profit and loss statement gave me some good advice and basically said joe look you we're coming off the tail end of the economy your numbers are just coming back if you wait six months you're probably gonna put another hundred thousand dollars in your pocket and give some time to get organized and prepare and i thought who hell is this guy he's essentially telling me go away it's in your best interest joe to hang on another six months and i'll be here when you're ready there was no one else that i wanted to do business with at that time and so i did i waited i implemented the things that he suggested and i tightened up my ship so to speak and made my business better for the next person that was gonna run it and more valuable for me to sell it as well he handed off to jason yellow who's still a broker a quiet light still a member of the team leader of the team really we listed the business end of october had it under lo and sold around thanksgiving i it was a thirty day due diligence process so somewhere around that period we got nearly full asking price and then i had to figure out what i was gonna do with my life i had just bought a house that was built in nineteen eighty nine sean some of these people listening weren't even born then and the guy that built it put shrubs around the yard and there were eighty nine of them because i counted because they were like giant tree stump and for a couple of months i grew up in maine by the way so i had a sharp axe and i live in north carolina now but i was a total redneck out there swinging an axe for about thirty days getting rid of all those stops it was you know physical therapy for me after being just mentally challenged for so long i just i loved doing it because it allowed my mind to just wander in terms of what i wanted to do next and i kinda came to the conclusion that i wanted to buy something and i wanted to do what jason and market here at quiet like brokerage which was help others grow and exit their businesses so i did both i actually i bought a content site and had forty two amazing days and then the floor fell out from beneath it it was the penguin update so it got crushed all the keywords that were on page one when i got crushed because the guy that built it cheated like crazy and it was a very valuable lesson than lost about quarter of a million dollars but that lesson has helped me in what i do now was a partner here at quiet light i joined quiet in march april two thousand twelve worked my tail off closed twenty three transactions in the first full calendar year and then for several years thereafter after really closed more than fifty percent of total transactions for quiet light mark and i sat down we agreed that we needed to partner and we set a goal to do that and a path to do that about three years ago and a big part of the goal was to minimize my role as the person closing so many transactions so we've grown from a team of three to a team of ten and we brought on two brokers plus one more over the last three three and a half years and this calendar year of two thousand and nineteen now will be the first year where i haven't closed nearly fifty percent of total transactions we're doing so much this year and some of the other team members that are incredible entrepreneurs i'll probably be ten fifteen percent of total close transactions and the entrepreneurs that we have man they should be on your show because they've all made their first million and more brad rolled up thirty content sites and sold did private equity jason's been a super affiliate all sorts of incredible success stories with the entire group walker got a best bestselling book by then build at your audience should buy and read because it's all about buying online businesses and building a portfolio just like our friend ramon is doing but it's been a great journey i think we've grown five times over since mark and i decided to be partners and we've had a a great success and we see a great us in the future let me ask you you know i'm on quite light right now and i'm looking at what's for sale which i do probably once a week right now and i see that somebody's got a real estate coaching business you know asking price eight million revenue five million income two point two million wow you see some things that just sold so like this is a hockey training game a patented did hockey training game that's asking six point nine million but then you have other more affordable businesses that if i scroll down you know a seventeen year old online candy business that's asking three hundred fifty k and does one point one million in revenue per year and so there's all these different businesses let me ask you in a given year how many businesses get sold through your guys site two thousand eighteen we did about fifty total transactions how do they find you guys how do how does the person who owns the seventeen year old candy business how do they know how do they find out i should list with quite light or are you reaching out or is it coming inbound what is the primary way that people find you it through content that we've developed over the years it's through our own podcast it's through attending events it's through helping people like ramon who then you know share his story and people find us that way we don't do any outreach and you know sort of show up and knock on people's doors or email and say hey man you got a great business i've got a buyer for you we find that's a bit unethical and under handed it and not honest so we don't go with that approach we're here to help first it's very rare that we will talk to someone and enlist their business for sale in two weeks later so it's usually a longer process and it's the smartest thing that an entrepreneur can do is plan their exit because there's a million different little things that they should do to make it more valuable and prepare for the exit they first they need to know what the current value is is so that they can understand how to set proper goals unfortunately you know you and i both an people listening they know the value of their car their house their condo their retirement account but they probably have no real accurate idea what the value of their most valuable asset is which is their business and that's a shame because there's so much misinformation out there it's not easy that's part of the challenge is that is it calculating the value is not an easy thing to do and how does that work you guys go in and calculate the value of the business or make a recommendation or the entrepreneur throws out their number and you kinda give some guidance see an asking price on the site how did that number come to be it's really more of our valuation process the hardest part right now i'll tell you is is calculating what's called sellers discretionary earnings i don't wanna get too technical but that's the primary term when people talk about oh i get a multiple of two i get a multiple three or four or five it's a multiple of sellers discretionary earnings and it should always be a multiple of the trailing twelve months sellers discretionary earnings now what the hell is sellers discretionary earnings it's net income you run a profit and loss statement the bottom line number is net income bottom row right net income well you pay yourself a salary you do some personal development you travel but you write it off through the business you might even write off a car but you have an internet based business so you've got some personal benefits there that's what would call them as owner benefits those are called add back so sellers discretionary earnings equals net income plus add backs so you figure out the hardest part is figuring out what sellers discretionary earnings is or s and believe it or not sean the hardest part is actually getting entrepreneurs to use good accounting software but that's what i was gonna say the hard part there's zero the hard part is that people don't have their shit organized i know because even the best entrepreneurs often don't have their stuff together or they have weird things where two businesses are tied together and they need to actually split them and things like that yeah and the more people i can reach to talk about that and get it through their heads that it's the most important thing they should be doing is making sure their financials are in good shape because someday day they will wake up and go man i hate this or something in life will change where they want to exit and the best thing they can do is have good clean financials and be prepared to exit right because when you are not prepared i just had a a client come to me where he was looking at another brokerage firm him and it came to me and i felt kinda pressured so i i signed that engagement letter with him and then dug deep deep deep into the financials you doing ten million dollars a year in revenue turns out that all the top line revenue numbers are not accurate it's the first thing we gotta to do is fix that second thing we figure out is that it's all on a cash basis so if a business is growing physical products business is growing like crazy and they're using cash accounting the net income is gonna be severely depressed right so if you're taking all of the excess cash from the business and buying more inventory and that inventory is in your profit loss as an expense you got an extra two or three or four hundred thousand dollars in inventory on hand it's gonna depress your net income by that two or three or four hundred thousand dollars it has to be flipped to accrual and it should be done by a qualified e commerce a bookkeeper that out there i'll be happy to refer anybody to any one of them it's important you should be doing it we initially this gentleman initially thought his business was doing one point three million in discretionary earnings well after digging deep into it the reality is with all the proper adjustments the way it should be he was doing about eight hundred thousand dollars in discretionary earnings so he's gone from a value of in the six to seven million dollar range right down to three and a half to four it's heartbreaking it's debilitating it's emotionally crushing but it's reality right and i'd rather be brutally honest with somebody and get them on the path to achieving their goals and their financial success than dilute them and over price of business take them through that emotional jungle that they'll go through in listening the business getting under and the having it fall completely apart in due diligence because all the numbers are wrong first thing you gotta do is get the numbers right right that's the thing i like to about this because the thing that for me when i was at buying i was like well like trust is a big piece right i'm buying an online business you're not buying you know it's just not like you go you see the house okay you you walked through the house you you know what you're getting here these are online businesses it's easy for people to inflate traffic or you know like you're saying like not have accurate numbers things like that what i liked was that you guys went really deep like the first one i click to find out more information i got this like amazing packet of here's interviews with the that we're like very all the questions i would have we're already asked there's the financial financials there's a video there's all the so i like that it seems like you guys are going for trust and quality right you're like you don't have a whole bunch of different businesses on the side there's only a handful but they are of a certain level of quality and the trust is that hey you know what i see is what i'm gonna get that's my impression of it i haven't to try anything yet absolutely right trust is is not you know one of the most important things it is the most important thing remember i lost a quarter of a million dollars by buying something from somebody that shouldn't have bought it from i got pressured into it which is crazy because i'm a mature professional a successful entrepreneur but i still got pressured into buying the damn thing but it happens we're all human trust is so so so critical i don't want anyone else to lose yeah a quarter of a million dollars like i in in forty two days and was that the case from day one or was this something that evolved over time like when they started this thing in two thousand seven or so did the site like it does today or was it different because i think a lot of people are gonna do this with their business right with any business you gotta decide what are the one and two most important things i have to nail that i wanna be best in class with and i wanna be different than the competition right like there's no such thing as being better you need to be different and then you to decide okay if i'm different in what way am i gonna be different is it gonna be i have the most selection i have the lowest prices i have the most trust you know you could trust me the most because i do this verification process whatever it is yeah and so you decide on that everybody needs to decide so i'm curious how did you guys decide was that a day one decision or sometimes these things come in a year later or three years later what what whatnot i think most often it comes from the character of the person that's starting the business and in this case you know mark founded it in two thousand seven i joined the team in two thousand and twelve en and i are now business partners but the character of mark da is you know i would say uni impeach if you will it's an interesting time to be say uni impeach it's october two thousand nineteen for those that are listening three years from now is trump still president good question okay we won't go there the goal really with mark was like most entrepreneurs that start their business the right place at the right time and made a good impression and and and somebody said hey you just went through the process of selling your business do you think you could help me sell mine and that started quite like brokerage and sort of evolved over time mark was just helping helping through talking to entrepreneurs giving them good advice helping buyers this is the one sort of unique difference that his approach was from others is that his goal is education right you go to the website you look at the content and over the years it's been a lot of content on how to buy an online business how to buy an online business with a rob's rollover program we're an sba loan things of that nature and so it's instill that confidence and trust in the people who are really most important at the end of the day in these transactions who's the buyer the person who's gonna stroke a check for a quarter of a million or a million or two and nine you have to have that trust with them and i think most people in this industry don't do that they miss the mark they're just trying to sell and get somebody to sign an engagement letter but you gotta build trust with the people gonna stroke the checks and that's the buyer at the end of the day great and so one thing that ramon told me that i didn't realize early on was he said the person he sold his soap opera blog site to they raised some of the money to buy it because i was wondering you know this guy just walking around nine million bucks in cash to spend on a online business and the idea was no he you know he looked at the business thought it was interesting raised part of the money from just is say hey let's buy this business and grow yeah and then took a loan for the rest and so you know when i look at these prices and i see oh wow this is you know six point one million dollars should i buy this business you know for somebody who's listening they might be like well i don't have obviously six point one million dollars that's part of the reason i like this podcast is because i'm trying to you know make my first million bucks and so i don't have this type of money tell me about the financing i'm just curious two tactical things one is what percentage of the buyers do use financing either sba or other and then what is the most common way of financing it so people can sort of wrap their head around the possibilities of how do you buy something that don't quite have the cash for yeah the most common way of buying an online business is through an sba loan small business administration there are little to no other resources out there in terms of lending institutions that means that two things have to happen first and foremost the seller of the business itself has to be a pre qualified to meet the standards of the sba which means there need to be a couple of years of tax returns it means that the financials can't be c ming among five other brands but you're only selling one the tax returns don't have to match up to the profit loss statements banking institutions lenders do add back schedules just like we do but in order to make your business more sell to a broader audience which brings more buyers more offers more competitive closer to asking price if not over and a better deal structure get down to those financials and getting your tax returns filed properly and not c ming link different brands under one llc sba pre qualified number one the buyers have to then also be sba pre qualified do you have the pe to run a business on your own do you have enough money to bring to the table the lenders really what do they wanna do they wanna get their money back they're protecting their investment so they wanna make sure their business is solid and they wanna make sure that the buyer is solid even with that it's a great opportunity for the buyers because with an sba loan you can borrow up to five million personally and that's how we were able to sell ramon business we had multiple offers on ramon business and they were not all sba but we had three buyers bidding competitively i don't know if you told you the full story but it was pretty aggressive and we went well over the original asking price and letter of intent that we had i think one of them was sba and you were not one of the other two were raising money from outside sources so there are outside sources but it's investor money is really what it is you've got to have friends and family and contacts with people with money that are willing to invest in you this particular person that does this that didn't win the bid is he's harvard mba he's raised money before he's very good at what he does he understands treating investors well and giving them a good return on investment so they trust them so let's walk through an example the business is for sale for let's say eight million dollars so you're saying sba can loan up to five million you've gotta come up with the rest through either your own money or investors money and walk through the math of okay you know sba requires you to put this much down the income needs to be here are there good rules of thumb you can put out there for people who have never walked through one of these before yes so these are rules of thumb which means that you know they're in pencil and it changes depending upon them who the lender is who the buyer is and what the business is all out anything sub one million dollars you could probably buy with ten percent down so you're coming to the table with a hundred thousand and you're buying a million dollar business so they're loan you ninety percent of the money the sba is they're probably gonna give you working capital money as well to buy the inventory and and and have some leeway in terms of waiting till the the money's roll in when you get above a million depending upon the size it's gonna change and shift a little bit that percentage that you need to put down is going to grow and then on top of that they're probably gonna say you know what we want the seller of the business to have some skin in the game as well so you mister buyer this is a two million dollar business we want you to come to the table with ten percent and we want the seller to also take a ten percent seller note right so you gotta come up with two hundred thousand for a two million dollar business but in this case we want the seller to have a note as well so the lender is only risking eighty percent instead of a hundred percent and it will grow and change and shift like that as the business gets larger and to be frank and honest with you we're seeing that there's been a bit of a frenzy with sba loans and lenders lending out you know ninety percent on transactions it's going to change things are probably going to tighten up and i think it's smart for both buyers and sellers if they want the sba lending option to be there it's gonna grow to fifteen or twenty percent down on a million dollar deal because it's safer for the lender and that means the lender gonna keep lending money over the long run which is ultimately really everybody's goal right yeah is and when the lender looks at the business and they say okay cool you're putting ten percent down on let's say a million dollar business what are the other sort of qualifications or expectations around income history of the business what are the other sort of benchmarks to think about in terms of you can borrow this much because there's this much income or there's this much revenue coming in yeah and for those that are good at doing the math and calculating things it's a ten year note for the most part as sometimes there's a five year balloon payments where they'll refinance the note or something like that and do what's left but generally it's a ten year note at five or six percent so ninety percent mh at five or six percent over ten years and then they work to okay well how much cash flow is the business generating how much do you mister buyer need to live off of and how much cushion do we need to have there so they're looking for a debt to income ratio what the number is changes all the time and i don't wanna throw any numbers out there because it changes so much but the bottom line is they need you the buyer to have enough cash flow to live off of and we don't know everybody's car payment mortgage payment expenses so it's all about your overhead and how much cash flow the business kicks off after servicing the note right so service that note do you have enough to live off of through the ups and downs of the business and they're doing debt to income ratios there their favorite buyers they're favorite buyers of all time i've sold lots and lots of these the lenders will tell me depending upon lender but they'll be like and i love this guy his wife she's making four hundred thousand dollars a year and she can support the entire household those are the favorite when you've got second income in the family that is sticking around and keeps their day job and can support the family the buyer the husband and the wife whatever it might be is much more likely to get qualified for that being alone but they're really looking for a mature professional that can operate the business successfully they're placing a big bet on that individual and they wanna make sure that they win with that bet right it's a lot less like real estate where they kind of don't even look at the operator for the most part unless you have a a sort of sketchy history they're just looking at the what are the rents what's the past twelve months look like you know when you buy a building it's very much just off of the cash flow and they don't sort of assess your abilities but it sounds like with all my businesses that pe matters you gotta have some life and some business experience i had a a deal of a couple of years ago probably three years ago now is it's two million dollars beautiful business growing like crazy and we were under lo through an sba loan and the buyers were two harvard mba students and the mom or dad of one lend them the money for the down payment and they got turned down in underwriting because they didn't have any real business experience in the real world they would harvard mba someday they would they're very good pe agree but no real life experience so the banking institutions would rather bet on a high school dropout that has built and sold their own business or built and runs their own business than two kids that went to harvard that have no real business experience as would i and how long does the process take you say let's say you apply for sba alone how long does it sort of end to end typically is it sixty days thirty days and hundred twenty days to be able to say yes we qualify you for making an offer on this pre quality vacation lender that you get from a lender takes twenty four hours to think on how busy they are you gonna say hey wanna buy a business i wanna do with an sba loan what do you they're gonna send your for form and you fill it out they send it back he said yeah okay let's have a conversation you're qualified i i think you're qualified to buy a business based upon your experience and your assets and your cash you can buy something for up to one point five million dollars that's where we're comfortable lending you that money in terms of the value of the business now you've got some direction you know okay i'm gonna focus on buying a business and i can buy something up to one point five million so why bother they're looking at something for six million just a waste of your time assuming that you're gonna be a entrepreneur where you're gonna just do an sba loan purchase once you find the business though and you go under letter of intent right so a listing comes up you look at it you look at in details you talked about and you have a conversation with a buyer and you feel comfortable making an offer and the offer is what you should be closing at ultimately once you get through due diligence successfully letter of intent letter of intent is that non binding that letter that says i'm buying the business at this much and we're gonna close on this state right and the terms are built into it then you go through due diligence and then you close with an sba loan it's gonna take sixty to seventy five days to close and by closing i mean money changes hands in the assets of the business change hands from the letter intent to closing sixty to seventy five days right we've done it in as little as thirty but it's the exception not the rule right but cashed in only thirty to forty five days sba at that point the the deal is sort of it's yours to close and the they they're not shopping it beyond you at that point right it's an exclusive right letter of intent no one else can make an offer or look at it unless you decide to walk away gotcha and so what are some interesting trends you've seen right so one of the cool things about either being you know an investor is you see a bunch of businesses or in your case you're you know broker who's seeing different entrepreneurs we're building things you're seeing what the buyer appetite is how are things shifted what are some trends that are interesting that you've noticed over the last few years well the first trend is the size of the businesses that are available we're all growing up in this e commerce world this internet world we don't sell all e commerce and e commerce would be defined as a physical products business we do just there's lots of saas and content affiliate stuff out there as well ramon was a content site we're all growing up we're maturing we're losing our hair we're getting gray we've been doing this for a while and the people coming into the space are coming into a more mature space so this this niche this this business niche is maturing so we're seeing larger more mature businesses where the entrepreneurs are smarter they're more educated and the size of the businesses or much larger you know in two thousand thirteen when i closed twenty three transactions myself it was about two hundred and twenty five thousand dollars on average in two thousand eighteen my average size was about two million dollars right so that things are changing in that ten x bigger ten x bigger but at the same time there's plenty of small stuff too small stuff being you know sub half million or so the other thing that we're seeing is the multiples honestly they've grown there was a time that you know back to the multiples of multiple of discretionary or anything it was a time that i would list things at two point seven four so it would round down online because buyers just wouldn't accept anything above that right now we're seeing businesses of the same caliber and size that are easily pushing up into the three to three to half time range but there's definitely stages smaller businesses will be in a certain multiple range depending upon age and history and def but there's more bigger businesses that are getting larger and therefore the multiple is higher as well because they're less risk there might be multiple channels of revenue which means it's less risk less risk means a higher multiple so we're seeing buyers be educated on that one hundred percent or ninety percent plus amazon fba businesses buyers are becoming much more comfortable with i wrote ten step to selling an amazon business in two thousand fifteen and it was like i was pioneering something everybody's like no it says right there in the terms of of the seller account that you cannot transfer control of a an amazon business it said generally in bracket and i had done it and i had gotten permission from amazon legal to do it in certain circumstances in most circumstances and from a seller central and the rest so you could do it buyers are getting much more comfortable with that to the point where people are buying up amazon businesses and building a portfolio of them back to the size and how size matters if you've got something that's you know doing a million dollars in revenue it's worth an awful lot less than something that's doing a hundred million in revenue and not just in terms of discretionary earnings but the multiple the multiple changes dramatically when you've got a much bigger business and less risk and that's what price equity guys are doing and family fund people and search fund and people that are just smart and building portfolios they're buying up low value sub one million two million dollar one hundred percent amazon businesses when i say one hundred is ninety percent there's always some trickle over to their website and then they're putting a portfolio of these together and they're buying them at two to four times discretionary earnings but when you pull them all together you don't have a business doing two hundred thousand in discretionary earnings anymore you've got a bigger business doing two million dollars in discretionary earnings and that the three time multiple might immediately jump to six times multiple or depending upon how def defense it really is maybe even more so they're buying them up low and just by pulling them together they're becoming much much more valuable i have yet though to hear of one be connected with one that has gone that approach and been successful in selling it to a much larger private equity firm that's the goal that's the plan that's the theory and i think it's one hundred percent legitimate it's just that i don't think any of them have matured to the point where they've bought enough with a sell them off to a larger private equity firm right and let's say you know when i look through the businesses that are on quite light i love the variety it's like you read one and you're like i didn't even realize this niche initially even existed let alone thought of the business that might serve it if you were to highlight your favorite child this year and a business that either sold or is for sale either way your favorite business i was on here where you're like you you know you're even tempted to buy it because you're like that is a this is a fantastic business or a fantastic price or what's your favorite give us a okay example of one it's gonna be crystal clear that you said this year yep so therefore i ramon is out we sold his business last year last year i have to say ramon so i had a listing this year it was a beautiful brand well branded majority amazon ninety percent plus growing i think you know which they should rapidly at that age but you know two hundred percent year over year but again at that young they should be growing the owner of the business i wanna call him a former cpa not a retired cpa because he was about thirty years old and left the corporate world as a cpa to become an entrepreneur and run a business online and built it from scratch while his wife who was a school teacher stayed employed and not only that he was the state home dad to his two year old running this business but the beautiful thing and this goes back to financials and instill confidence he's a cpa but he outsourced his bookkeeping to an e commerce bookkeeping firm love that guy right and i knew buyers would love them too and he had a beautiful brand beautiful videos on all of it i just loved it and i remember i sit him look this has everything it checks absolutely all the boxes sba eligible growing like crazy beautiful brand easy to transfer all of the four pillars that we talk about i'm like look i think we needed to go out at least a three and a half multiple it was a smaller business too it was doing i don't know four hundred thousand three hundred and fifty thousand in discretionary earnings so it wasn't really big yet so the multiples is a little bit longer like we need to go out at three and a half and again that's three and a half times discretionary earnings for the trailing twelve months inventory is treated separately at this size so inventory is just purchased separately so it'd be three and a half whatever the multiple was plus inventory at closing and he's like oh i don't know i don't know joe i'm i'm a little stressed out would it be okay if we went out at three point three instead which is absolutely again just the opposite of west most entrepreneurs to be they'd be like oh i don't know can you can't through five six right so mike look i know we're we're pushing the multiple a little bit based upon histories but you check every box but okay we'll go out to three point three because you have certain motive and that's important for everybody to understand that listening everybody sells for a different reason it's not always about getting maximum value for the business you wanna get as much as you can in a good deal structure to a great buy so that you can just transition and move on if that's your goal we've got one closing it's under lo now that the goal is to stick around it's a twenty million dollar valuation and thank you for five million the guy wants to stick around and help grow it to a hundred million and he's found the right private equity firm different goal altogether but this particular seller his goal was to sell it find a great buyer and move on and that's what we so we were not three point three the response was exactly what i thought it was going to be and i had to shut down his calendar and take it over to schedule three calls a day for five days in a row and didn't wanna do any more than three because these calls can take at least an hour sometimes longer and that's part of our process again trust and instill comp accidents build a great package have them look at it numbers are there all that client interviews there and then the videos there as well but we we want the buyer and seller to be on a call too so that you can ask same questions and look at each other hopefully if we do a video conference call in the whites of each other's eyes because again you're gonna be all over the world who knows where the buyer and seller they're gonna be so we wound up with about fifteen calls i just had to shut it down we had ten offers the highest one was at about three point six five times and so we just had to shut it down ten offers on the business paul the seller of the business did not pick the one that was the highest value he picked the one that he liked the most which is really important another lesson for buyers simplest thing if you wanna be a good buyer don't be an asshole if you wanna get the deal done over an sba buyer it's not necessarily about making the best offer in terms of dollars it's asking great and making the the seller of the business feel like they did an amazing job and you know i'm gonna take over your baby and i'm gonna do an amazing job with it you're gonna be proud of what we can do with it and if you have staff perfect i'd love to keep those people in place is that okay and it's exactly what call wanted it's act exactly what he heard from multiple buyers but he chose one that ended up at about a three and a half multiple all cash transitioned the business in thirty days and the buyers very very happy with the business is one of the best investments he's made these bought three or four from us now like it so i love this episode because i feel like it's very tactical and as somebody who tried to build things from scratch yeah definitely doable definitely very hard it is intriguing to me the prospects of piggyback off of somebody who's taking it as far as they can go and either they're too tired or they've sort of reached the limit of where they think they can grow to with their skill set or they're just ready for the next adventure taking something that has some momentum that has some revenue that has existing customers that has existing either manufacturers or contents supply whatever it is i love this idea i i'm surprised more entrepreneurs don't do this i think they're definitely a at least where i am at in silicon valley there's a bias towards diy you know you gotta you gotta start from scratch to the whole hero's journey from day zero and i think there's a whole set of people that are out there that are business people and they can take a business see it for what it is analyze it make an offer and grow that business and and i hope that you know more people do this and if you've done that send me your story i wanna hear it you know if if it's a great story put it on the podcast but i love meeting people who are in this space doing this thing it is to me it's like the modern day real estate and and so joe i appreciate you coming on where should people get more of this you said you have your podcast shout that out shout out you know the the website your twitter handle however else people should get more info awesome quiet like brokerage dot com quiet like brokerage dot com that's the first place if you're a buyer you can drop your name right there in in the notify me on the first page and we'll let you know anytime a new listing launches if you're a an entrepreneur that wants to fix your books and get it straight and become ramon and sell for two hundred and four hundred and nine million please let us help fill out the valuation form and let us get started there or if you just wanna shoot an email off it's inquiries at quiet light brokerage dot com love it alright joe thank you so much has been great my pleasure man thanks for having me on