Dan Martell - October 18, 2021


How to Sell Your Business

Topics
escalation process red zone
Hosted by
Dan Martell
Mentioned
Spheric Brian
How To Find Early Adopters For Your B2B SaaS Create a Million Dollar Brand with Trent Kitsch @ SAXX Underwear

Episode Stats


Length

12 minutes

Words per minute

200.93

Word count

2,456

Sentence count

134


Summary

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

In this episode, Dan Martell talks about how to deal with the emotional rollercoaster of considering or exiting your business because it can strain on your mind, your team, and your team's productivity. He talks about five areas of thinking that will show up if you re going through an exiting process to hopefully learn from my experience, having gone through it 3 times, to avoid that pain.

Transcript

Transcript generated with Whisper (turbo).
Topics generated with Qwen2.5-3B-Instruct.
Hosts, guests, and mentioned names generated with spaCy (en_core_web_sm), reconciled against Wikidata.
00:00:00.080 It sounds crazy, but I just wanna argue with you
00:00:01.960 that maybe your best thing to do is,
00:00:03.760 if you expect it, that it's gonna be the same,
00:00:06.600 it is so rarely the same.
00:00:21.820 Hey there, I'm Dan Martell,
00:00:22.900 serial entrepreneur, investor, and creator of SaaS Academy.
00:00:24.920 In this episode, I'm gonna share with you
00:00:26.760 how to deal with the emotional,
00:00:28.040 like the crazy emotional rollercoaster
00:00:30.660 of considering or exiting your business
00:00:34.340 because it can literally strain on your mind, your team,
00:00:37.120 like, and I'm gonna teach you how to deal
00:00:38.360 with the team conversation.
00:00:39.600 And be sure to stay over the end
00:00:40.880 where I'm gonna tell you how to get access
00:00:43.020 to an exclusive training called Future Living.
00:00:45.420 And it's really my framework that I use
00:00:48.220 to project into the future where I wanna go and act today
00:00:53.420 because I don't, the identity needs to be existing today
00:00:56.660 for you to achieve an outcome.
00:00:57.920 I call that future living, I'll share with you later
00:01:00.360 because I really want to address kind of five core areas
00:01:04.840 that will show up if you're going through
00:01:06.420 an exiting process to hopefully learn from my experience,
00:01:10.500 gone through it to avoid that pain.
00:01:12.680 Let's get into it.
00:01:13.520 So I remember back in the day when I was in my late 20s,
00:01:17.680 I think it was 27, almost 28,
00:01:19.900 when I first had the opportunity,
00:01:22.360 somebody even showed an interest
00:01:24.220 in potentially buying my company.
00:01:25.420 And it like, what?
00:01:27.000 You think this thing is valuable?
00:01:29.000 You wanna buy it?
00:01:30.300 Really?
00:01:31.140 And it was just like this incredible feeling.
00:01:33.500 I mean, if you've been building a company,
00:01:35.940 I mean, even if it's as little as three years,
00:01:37.560 but most of us five, seven, eight, 10 years,
00:01:40.580 and all of a sudden you have something that shows up
00:01:42.560 and is like, hey, have you ever thought
00:01:43.660 of selling the company?
00:01:44.500 And you're like, no, I haven't.
00:01:45.320 I've been just building what I do.
00:01:47.120 It's a lot of entrepreneurs,
00:01:48.380 we just do what we do and it never occurs to us.
00:01:51.000 And all of a sudden now our minds shift
00:01:52.900 because for most founders,
00:01:55.780 we're always driven to create.
00:01:57.400 We're always looking for the next thing.
00:01:58.720 And as soon as somebody tells us or asks us
00:02:01.660 if we're looking to sell,
00:02:02.500 all of a sudden we're thinking about like, what's next?
00:02:05.260 And it's a dangerous place to get in our mind.
00:02:07.440 It can be a huge distraction.
00:02:09.280 It could be detrimental to our mental state.
00:02:12.340 And you know, having gone through it three times
00:02:14.480 with Spheric, I exited when I was 28.
00:02:16.680 Flowtown I did when I was 31.
00:02:18.720 And then Clarity, I think I was 34 years old.
00:02:23.000 I want to exited that company or yeah, 34.
00:02:26.820 Just the emotional rollercoaster,
00:02:28.760 the phases of the exiting processing,
00:02:31.940 getting advice from my mentors, my investors.
00:02:34.620 And my last two companies I've exited,
00:02:36.340 I was venture backed.
00:02:37.340 I had investors and they had their own motivations.
00:02:41.260 And I'll tell you when money starts getting, you know,
00:02:43.840 to the final levels of opportunity,
00:02:46.520 elbows start getting sharp.
00:02:48.080 And there's a lot of things that both the acquirer
00:02:50.780 might do that's kind of wonky that you need to know about.
00:02:52.880 and also your investors,
00:02:54.200 and just how do you compartmentalize this
00:02:56.420 so that mentally you can deal
00:02:58.780 with the increased emotional support?
00:03:01.220 Because it could be for you, maybe,
00:03:03.220 I know it was for me with Spheric,
00:03:04.880 that was my identity, building that company,
00:03:07.400 being the CEO of that company was who I was.
00:03:09.940 So I wanna share with you five different areas of thinking
00:03:14.120 that's gonna help you deal
00:03:15.200 with that crazy emotional rollercoaster
00:03:17.740 to get you an incredible exit,
00:03:19.980 or what I call the perfect exit.
00:03:21.660 So let's get into it.
00:03:22.760 Number one, keep it private.
00:03:24.640 I will tell you from experience,
00:03:26.080 if you have a team and I know if you're like me,
00:03:28.800 I'm a very, I wear my heart on my sleeves.
00:03:31.920 I share people what I'm doing in real time.
00:03:34.920 I get excited about stuff.
00:03:36.900 But when it comes to exiting a business,
00:03:39.920 even selling 51%, selling a controlling interest
00:03:42.860 in your business, unless the transaction is done
00:03:46.320 or you need certain people involved in that process,
00:03:49.440 obviously your lawyers and your accounts and stuff,
00:03:52.180 maybe your executive leadership team.
00:03:53.820 For the most part, you don't want to inform anybody
00:03:57.020 doesn't need to be informed.
00:03:58.100 Why?
00:03:58.940 Huge distraction.
00:03:59.820 Literally, it could be, I mean,
00:04:02.920 people start counting their money even before,
00:04:05.020 and you'll do the same thing.
00:04:06.220 Maybe they start thinking about what's possible.
00:04:09.680 And if for whatever reason you go down this path
00:04:11.960 and it falls apart, trust me, then what?
00:04:14.660 Then now you gotta explain to them why,
00:04:17.220 oh, they didn't see it as valuable as we thought it was.
00:04:20.560 So we're just gonna keep building.
00:04:22.820 It's just a huge distraction.
00:04:24.160 It's a different mindset of where they should be focusing.
00:04:26.560 And the truth is, is you need to make sure
00:04:29.440 that nothing changes in the business anyways,
00:04:31.700 but just make sure that you try to keep it to yourself
00:04:34.080 and only disclose it to people that need to be aware.
00:04:36.280 So that'll help on the mental strain right off the bat.
00:04:39.040 Number two, escalation ladders.
00:04:40.920 So one of the things about exiting a company
00:04:43.920 that's gonna impact your emotional feeling behind it
00:04:48.860 is if you have enough offers from other people.
00:04:51.480 And if you're at the size where kind of like 30 million plus,
00:04:55.660 you wanna work with an M&A banker on the sell side,
00:04:58.740 you wanna get somebody involved
00:05:00.020 in helping you with the process,
00:05:00.840 totally do that and it's important.
00:05:02.260 But the escalation process is the idea of
00:05:04.140 how do I reach out to a potential buyer, right?
00:05:06.600 My thing is, is I start early.
00:05:08.340 I start literally like when I started a company personally
00:05:11.080 and what I coach my clients on is you should have the list
00:05:14.320 of the 21 companies that should buy your business.
00:05:16.540 And over the next three to five years,
00:05:18.300 your job is to build relationships with those 21 people,
00:05:21.480 not 21 companies, 21 people,
00:05:22.760 because there's seven companies and three people
00:05:24.660 inside of each one of those companies.
00:05:25.880 I'm not gonna get into those three people,
00:05:27.620 but that escalation is really like reaching out,
00:05:31.140 sharing your origin story,
00:05:33.180 getting advice from them on your situation,
00:05:37.160 and really like sharing with them everything you learned,
00:05:39.460 keeping them in the loop.
00:05:40.980 And then if you're in process,
00:05:42.560 informing them that you're in process to exit, right?
00:05:45.380 Or somebody, you know, you had an inbound request,
00:05:47.360 Somebody made you think twice about remaining independent
00:05:50.020 would be some language you could use in an email.
00:05:52.240 And then trying to create a competitive process,
00:05:55.780 but that's the escalation process from reaching out,
00:05:58.860 asking good questions about their origin story,
00:06:00.860 what they've learned, share what you've learned
00:06:02.500 as a thought leader, don't give away your secret sauce,
00:06:05.120 keep them in the loop.
00:06:06.000 Maybe you have some press releases, some product releases,
00:06:08.480 some good news about the business over time.
00:06:10.560 That's why I do it over a period of years.
00:06:13.360 And then when you're in process,
00:06:15.140 you could reach out to them
00:06:16.400 and see if they wanna participate in that conversation.
00:06:18.860 Number three, in process.
00:06:20.660 So in process means that you're looking to exit, okay?
00:06:24.740 So when you're in process,
00:06:25.960 that means you're just trying to generate demand.
00:06:28.000 You have those relationships, you hire a banker,
00:06:30.540 and you're trying to create a competitive process.
00:06:33.380 The key at this stage to reduce the emotional strain, okay?
00:06:38.160 Because it will be, is don't stall out.
00:06:40.540 So many entrepreneurs at that stage,
00:06:43.540 take their eye off of the ball of the business,
00:06:46.340 And what happens is a business that was growing
00:06:48.300 25, 30% a year, all of a sudden stalls out
00:06:51.660 and there's three months or a quarter worth
00:06:53.500 of like 10% growth compounded in that quarter
00:06:56.020 where before you were a lot higher.
00:06:57.800 That is a dangerous place to get to
00:07:00.100 because when you're going through the process,
00:07:02.580 yeah, it's great what you've done before,
00:07:04.200 but what are you doing right now?
00:07:05.540 What's your strategy keep doing that?
00:07:07.000 And if for whatever reason you stall out on that growth,
00:07:10.440 then potential buyers might decide that,
00:07:13.500 or might think that you kind of amplified
00:07:15.980 or pumped up the momentum.
00:07:18.500 So many times I see people like,
00:07:20.740 we're growing at X percent.
00:07:21.920 It's like, yeah, but you're spending more money
00:07:23.480 than you're making from your customer.
00:07:24.580 So you're buying revenue, right?
00:07:26.600 But if you have a profitable business,
00:07:28.260 the key is, is you gotta keep the team.
00:07:29.560 That's why you don't wanna disclose to too many people
00:07:31.400 is you wanna keep the eye on the prize
00:07:34.160 and don't stall out as you're growing
00:07:35.840 and going through that process.
00:07:37.220 And number four, the red zone.
00:07:38.940 The red zone, I call it this,
00:07:40.020 cause this is the part where you've got an LOI,
00:07:42.420 letter of intent sign
00:07:43.660 and you're going through due diligence to close, okay?
00:07:46.460 A few strategies that are gonna help with the mental thing.
00:07:49.420 One, make sure your lawyer and your team
00:07:52.100 is like part of your, like in your corner,
00:07:55.220 they're going to bat for you, they over communicate.
00:07:58.300 You contact them on a daily, well, not daily,
00:08:00.620 but often enough to be in the loop of what's going on.
00:08:03.220 My big thing is no new information, no big launches,
00:08:07.600 no big partnership announcements, no nothing.
00:08:10.160 And coach your team.
00:08:11.320 I've seen so many deals fall apart
00:08:13.060 because when they're in this red zone,
00:08:15.420 they don't coach their team to interview properly.
00:08:18.240 If someone's gonna buy you and your business,
00:08:19.620 they're gonna wanna know who are these people we're buying
00:08:21.400 that comes along with this acquisition.
00:08:23.220 And if somebody says something, this happened to me,
00:08:25.960 I was an investor in a company,
00:08:27.420 and one of the CTO of the company said,
00:08:30.440 I'm looking to go and leave in six months anyway,
00:08:33.000 so this is perfect timing.
00:08:34.120 Well, guess what?
00:08:35.260 If the acquirer deemed that person as a critical person
00:08:38.580 to follow along and to have an earn out
00:08:40.720 and be part of that succession,
00:08:42.960 and they've already communicated they're not sticking around,
00:08:45.460 that literally cut the whole deal down
00:08:48.160 because the valuation was lower
00:08:49.720 than what was gonna be acceptable to the leadership team.
00:08:52.040 So make sure, red zone,
00:08:53.860 sign the LOI and just get the deal done,
00:08:56.440 push it forward and just be diligent.
00:08:59.540 Again, don't stall out, don't get distracted.
00:09:02.500 All those things have to be true,
00:09:04.080 but I just wanna give you this information
00:09:05.740 so you can be aware of it
00:09:06.880 so it doesn't come as a surprise.
00:09:08.980 Number five, vesting in peace.
00:09:11.520 When I sold my company Flowtown,
00:09:15.080 I was really excited about the acquirer.
00:09:17.640 We showed up guns a blazing, team was ready.
00:09:20.900 We moved the offices.
00:09:22.740 We were pumped to integrate our technology in their platform.
00:09:25.640 And it was awesome for about two weeks.
00:09:27.260 And then we realized that we were now just a cog
00:09:29.880 in a bigger machine.
00:09:30.780 And I get it, running big companies myself,
00:09:33.180 I get that there's a process for communicating,
00:09:37.580 quarterly planning and strategic planning.
00:09:39.720 But it really waned on me because for most of my career,
00:09:43.720 I was part of startups and we moved really fast
00:09:46.040 and we made decisions all of a sudden
00:09:47.160 I didn't have the ability.
00:09:48.260 And I called my buddy Brian and I just asked him,
00:09:50.280 I said, man, after he sold his company to Myspace
00:09:53.000 and I said, how did you deal with that?
00:09:54.940 And he said, dude, you just got to vest in peace.
00:09:57.080 I was like, what do you mean?
00:09:57.920 He goes, go on your calendar, block it out,
00:10:00.320 block out your calendar, nobody can book meetings with you
00:10:03.580 and nobody will bug you, just still go into the office.
00:10:06.380 They'll see you there, they'll think you're working.
00:10:08.560 But I mean, it sounds crazy,
00:10:10.460 but I just wanna argue with you
00:10:11.580 that maybe your best thing to do is,
00:10:13.380 if you expect it, that it's gonna be the same,
00:10:16.200 it is so rarely the same.
00:10:18.900 Like, I don't think I've ever met a founder
00:10:21.360 after the acquisition that said
00:10:22.920 that was better than pre getting acquired.
00:10:25.520 So knowing that, try to reduce the amount of waves
00:10:29.960 that you create in the acquiring company,
00:10:31.780 because I was horrible at it.
00:10:32.920 Try to reduce the amount of friction
00:10:35.700 that comes onto you by being invited to stuff
00:10:38.480 that you may not wanna be participating in.
00:10:40.320 Don't put your hand up to run projects
00:10:42.080 if you really don't wanna do it
00:10:43.080 because you're like an eager beaver
00:10:44.140 and you wanna show them that you're capable
00:10:45.800 and you wanna like justify the acquisition costs.
00:10:47.860 Literally, just make sure the integration goes smooth,
00:10:52.340 stay out of the politics, invest in peace.
00:10:55.680 So quick recap, five strategies to help you
00:10:58.540 with the emotional rollercoaster of going through an exit.
00:11:00.620 Number one, keep it private,
00:11:01.940 only disclose it with the people that need to know.
00:11:03.980 Escalation ladder so that you can create enough demand
00:11:06.820 so that it feels like you're going
00:11:08.040 through a competitive process.
00:11:09.500 When you're in process, that's number three,
00:11:11.480 don't stall out.
00:11:12.900 Number four, when you're in the red zone,
00:11:14.580 be sure to not introduce new information
00:11:17.300 and then invest in peace,
00:11:19.100 because it will not be the same.
00:11:21.040 So as I mentioned at the beginning of the episode,
00:11:22.580 I wanna share with you an exclusive,
00:11:24.080 incredibly powerful training called Future Living.
00:11:27.560 I taught this at one of my early workshops.
00:11:30.540 It's a framework that helps people understand
00:11:32.240 where they're at now,
00:11:33.160 where they wanna be in six months
00:11:34.380 and speak that future into existence.
00:11:37.100 It's incredibly powerful.
00:11:38.200 It's how I run my life
00:11:40.160 because I like to live into the future.
00:11:42.200 It helps me communicate my vision,
00:11:44.440 but you can click the link below
00:11:45.440 to get access to that training.
00:11:47.500 It will absolutely help you serve,
00:11:49.080 especially if you're going through an exit,
00:11:50.760 you want to future live that process
00:11:54.060 and how amazing it's gonna be,
00:11:55.340 even though I told you it may not be as great
00:11:56.700 as you think it is, but that's okay.
00:11:58.340 Let's get the deal done.
00:11:59.560 Click the link below to get access to that.
00:12:01.660 If you liked this episode,
00:12:02.540 be sure to subscribe to my channel,
00:12:04.380 smash the like button and share it with somebody
00:12:06.480 that you care about, you think it could serve.
00:12:08.820 And as per usual, I wanna challenge you
00:12:10.440 to live a bigger life and a bigger business.
00:12:12.620 And I'll see you next Monday.