Dan Martell - June 03, 2019


How To Decide When to Sell Your Business


Episode Stats

Length

9 minutes

Words per Minute

197.48851

Word Count

1,861

Sentence Count

93

Hate Speech Sentences

1


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Transcript

Transcript generated with Whisper (turbo).
Hate speech classifications generated with facebook/roberta-hate-speech-dynabench-r4-target .
00:00:00.000 Hey there, Dan Martell here, serial entrepreneur,
00:00:01.880 investor, and creator of SaaS Academy.
00:00:03.760 In this video, I'm going to share five questions
00:00:06.600 that you should be asking yourself
00:00:08.200 if you're considering selling your startup.
00:00:10.920 And be sure to stay at the end where
00:00:12.040 I'm going to share with you how to get access
00:00:14.120 to my five Silicon Valley secrets training
00:00:17.400 to help you understand what I've learned about scaling
00:00:20.000 and growing software businesses from living in Silicon Valley.
00:00:24.240 But let's get into this.
00:00:30.000 So recently, I was in Boston with my SaaS Academy group,
00:00:42.380 and we went and visited Chris at Wistia, the founder of Wistia.
00:00:45.720 And what's really neat about their story
00:00:48.720 is here's a company, if you don't know Wistia,
00:00:50.600 they're a video hosting platform.
00:00:52.600 They also have some sales tools.
00:00:54.800 But here's a company that raised, I think,
00:00:57.600 a million and a half dollars in early seed stage funding
00:01:01.380 that's now well tens of millions of ARR company.
00:01:05.820 And they went through the potential decision and process
00:01:09.660 really of selling their company to only end up at the end
00:01:13.500 deciding to raising a debt round and buying out
00:01:16.620 their early investors, which is very, very rare.
00:01:19.560 I mean, themselves, Buffer, and a few other companies
00:01:22.080 have done that.
00:01:22.620 So I had the opportunity to sit down with Chris
00:01:25.260 and kind of unpack his decision process for my group.
00:01:29.660 And the reason why it was so relevant to not only the group
00:01:34.080 and for myself is because as a coach
00:01:35.760 to some of the highest performing software founders
00:01:38.620 in the world, that conversation of should I sell
00:01:41.740 or should I keep going the path is one that we have almost
00:01:46.100 on a weekly basis.
00:01:47.020 So I want to share with you kind of the five questions
00:01:50.480 that I've had to struggle with myself in regards to,
00:01:54.640 I've exited my last two companies
00:01:57.280 to help some of my clients make the decision of selling
00:02:00.160 or continuing the path.
00:02:01.820 Number one, passion or exhaustion.
00:02:04.400 So the question you got to ask yourself
00:02:06.740 is, are you still in love with the customer or problem
00:02:11.320 that you're solving?
00:02:12.100 Because here's the thing that can't be fixed.
00:02:14.060 I believe the universal superpower of an entrepreneur
00:02:19.360 is their passion for solving the problem.
00:02:22.720 And what typically happens is, potentially,
00:02:24.880 you pivot as you go along.
00:02:26.800 And you're trying to figure out your product roadmap.
00:02:28.640 And you're trying to get traction.
00:02:29.800 And you're trying to grow the business.
00:02:31.480 And you might pivot yourself into a scenario where you wake up
00:02:35.000 and you've lost that passion for the customer or the problem.
00:02:39.040 So if that is a potential, you might
00:02:41.680 want to reconsider continuing the path or exiting.
00:02:45.520 Number two, if crushing, question mark.
00:02:49.120 So the way I think about this is I
00:02:50.620 have entrepreneurs come to me and they're like,
00:02:52.620 I'm thinking I might want to sell the business.
00:02:54.840 And I go, OK, why do you want to sell?
00:02:56.420 And they're like, you know, we've been working really hard
00:02:57.740 at this for like five or seven years.
00:02:59.720 And I think there's this other idea
00:03:01.460 that I'm more passionate about.
00:03:02.680 And my question to them in those scenarios
00:03:04.800 is if you were crushing it, growing 10% month over month
00:03:09.040 like many of my clients, if you were crushing it
00:03:11.400 in your business today, would you stay the course?
00:03:14.400 Would you be excited about building the business?
00:03:16.440 And if the answer is yes, then fix
00:03:19.400 the freaking problem in your business.
00:03:20.700 Because here's what I've learned is most entrepreneurs
00:03:23.480 hit a ceiling of their possibility or their potential.
00:03:27.200 And it doesn't matter if you go start and do something else.
00:03:29.860 You will hit that ceiling again.
00:03:31.760 And the only difference between you
00:03:33.000 and the person that gets further along in their growth
00:03:36.100 is because they did the work to get past that ceiling.
00:03:39.380 So that's my two cents.
00:03:40.840 If you were crushing it in your business,
00:03:42.380 would you keep going?
00:03:43.540 If the answer is yes, then go try
00:03:45.080 to fix the problem that's causing you not to grow
00:03:47.600 or crush it in your business.
00:03:49.140 Because that is the true question
00:03:50.640 that you need to be asking.
00:03:52.080 Number three, build it again.
00:03:54.400 So here's the deal.
00:03:55.140 Yesterday, I was talking to an entrepreneur
00:03:57.300 that is growing like crazy.
00:03:59.460 They were a Y Combinator graduate alumni.
00:04:02.880 And they have an opportunity to exit the business.
00:04:05.180 And they asked me what my thoughts were around this.
00:04:07.740 So here's the way I think about it.
00:04:09.900 If you sold the business tomorrow,
00:04:11.680 and you already know in your heart
00:04:13.200 you would start something the next day or very quickly,
00:04:16.500 just to build the same environment that you're in,
00:04:20.140 meaning that you love the people you work with,
00:04:21.800 you love the environment, you love the problem you're
00:04:23.520 working in, the customer as a solution,
00:04:25.740 then why would you sell it?
00:04:27.100 Because I'll tell you this, the fun part is the journey.
00:04:30.580 But what's not fun, having built and sold multiple companies
00:04:33.200 myself, is the early times trying to figure out
00:04:36.180 product market fit and making the same decisions you've already
00:04:38.860 made several times in the past.
00:04:40.900 So if you're going to build it again,
00:04:42.380 you might as well just shift to whatever's
00:04:44.200 causing you to even think about selling the business
00:04:46.600 and keep the path.
00:04:47.740 And that's why I love Chris's story at Wistia,
00:04:49.640 because they realized, him and his co-founder,
00:04:52.100 if we sold Wistia today, we would literally just
00:04:54.980 start doing what we're kind of doing right now.
00:04:57.680 So all we need to do is just give ourselves permission
00:05:00.860 to do the things that we're not doing in the business
00:05:03.200 that we would if we were to keep us excited and moving forward.
00:05:07.300 Number four, pivot or persevere.
00:05:09.260 This is something I learned from one of my mentors
00:05:11.240 and advisors, Eric Ries, the author of The Lean Startup,
00:05:15.080 where I think that if you want to do this right,
00:05:18.280 about selling or pivoting or not or keeping the path,
00:05:22.120 it's really important to make it a team decision.
00:05:23.860 Put it on a cadence that's frequent enough.
00:05:26.680 So in the early days, it might be every month.
00:05:28.240 Every month, you might have in your team meeting
00:05:30.220 an agenda item that says pivot or persevere.
00:05:31.960 And you just sit down and you say with the team,
00:05:33.920 hey, here's where we're at, here's what we're doing.
00:05:36.060 Should we pivot or should we persevere?
00:05:37.560 And that way, it doesn't seem like you
00:05:40.040 don't know where you want to go.
00:05:41.520 The decision to exit or not can be a huge distraction
00:05:45.100 on a team, can bring a lot of self-doubt
00:05:47.820 amongst the executive leadership team
00:05:49.700 around your commitment to the future and to the problem
00:05:52.860 that you're solving.
00:05:53.820 So I think that it's a potentially good question
00:05:56.940 to plant on a monthly basis in the early days,
00:05:59.060 and maybe on a quarterly basis, or even on an annual basis,
00:06:02.500 part of your yearly planning, to just say to the team, look,
00:06:06.360 do we want to pivot the business a little bit,
00:06:08.060 or do we want to persevere on this path?
00:06:10.460 And then that way, it's not out of left field
00:06:13.420 and catches somebody off guard or makes them question
00:06:15.820 your commitment to the future.
00:06:17.240 It's really just part of the process.
00:06:18.740 So I think that's a really great question
00:06:20.240 to ask yourselves on a specific cadence.
00:06:24.160 Number five, perfect execution.
00:06:27.040 So a few months ago, I was in San Francisco
00:06:30.060 with my SaaS Academy clients talking with Marco
00:06:32.780 at thumbtack.com, the founder and CEO there.
00:06:35.720 And I asked him if he ever considered
00:06:39.100 exiting or selling the business.
00:06:40.740 They're a billion dollar company right now.
00:06:43.120 And I was like, at that stage, why
00:06:45.920 Why do you want to keep building and solving these problems?
00:06:47.880 He had some incredible answers.
00:06:49.760 They were off the record, but here's
00:06:51.040 what I can share from a strategy point of view
00:06:53.080 that I really loved was his question of, well,
00:06:56.360 what is the acquirer really buying?
00:06:59.120 If they want to give you a price,
00:07:00.660 how do you evaluate if that's the right price?
00:07:02.380 And he just said, the way he thinks about it
00:07:04.440 is they're buying years of perfect execution.
00:07:07.900 So if you know that you're on a certain growth curve
00:07:10.700 and somebody buys you today, what's
00:07:13.720 that price and valuation?
00:07:15.260 because you could probably get it if you waited longer.
00:07:17.680 So what they're really buying is the amount of years
00:07:20.260 of a perfect execution.
00:07:21.600 If you actually mapped out your revenue growth
00:07:23.780 and said, perfectly executed, we think we could do this.
00:07:26.360 Now, it's never going to be that way.
00:07:28.160 Let's call it plus or minus 20% directionally,
00:07:31.120 if you're accurate.
00:07:32.180 But really, that's what they're buying, right?
00:07:34.760 So it's like, do you want to spend the next few years
00:07:37.780 doing that?
00:07:38.720 Or if the number, like he said, look,
00:07:40.400 if somebody wants to buy 10 years of perfect execution,
00:07:43.880 then that might be something we're
00:07:45.020 going to entertain.
00:07:45.720 But we're not going to do it for two years of perfect excuse
00:07:48.140 because it's stuff that we know we can do and that we want to do.
00:07:50.580 So I just really love that question
00:07:52.260 to help you get clear on even if you have inbound interest
00:07:55.760 and they give you a number, how do you evaluate if that's even
00:07:58.920 fair based on where you're at today?
00:08:00.800 So quick recap, five questions to help you get clear
00:08:03.720 if you should sell your business.
00:08:05.060 Number one, passion or exhaustion.
00:08:07.900 Number two, if crushing, would you keep doing it?
00:08:11.740 Number three, build it again.
00:08:14.400 Number four, pivot or persevere.
00:08:17.240 And number five, perfect execution.
00:08:20.460 As I mentioned at the beginning of this video,
00:08:22.200 I want to share with you a training
00:08:24.100 that I put together called the Five Secrets of Silicon
00:08:26.400 Valley.
00:08:26.900 So I spent almost six years in the heart of tech
00:08:31.060 and innovation.
00:08:32.260 And I got to meet with some incredible people
00:08:34.960 from the top investors to the top experts
00:08:38.280 like Sean Ellis and Eric Ries and Heaton Shaw
00:08:41.040 and just incredible dudes, Airbnb, Brian and Joe.
00:08:45.900 So what I wanted to do is put together this training.
00:08:48.300 You can click the link below to get access to that.
00:08:50.820 But it's essentially the five secrets of things
00:08:55.020 that I felt that people in Silicon Valley are doing
00:08:57.440 that the rest of the world are not.
00:08:58.940 And it's the way to think about growth.
00:09:00.440 It's the way to think about your business.
00:09:01.840 I want to share that with you.
00:09:03.020 You can click the link below to get access.
00:09:05.400 And if you found this video valuable,
00:09:07.620 I would encourage you to smash the like button,
00:09:09.740 and subscribe to my channel.
00:09:11.080 If there's anybody you think that this video could serve
00:09:13.280 that you care about, feel free to share it with them directly.
00:09:15.660 And as per usual, I want to challenge
00:09:16.940 you to live a bigger life and a bigger business.
00:09:18.740 And I'll see you next Monday.
00:09:20.240 Let's get back a little bit.
00:09:21.200 What?
00:09:21.900 I can't.
00:09:22.400 I have a, there's a light on my butt.