Dan Martell - How to Sell Your Business

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.

Dan Martell - October 18, 2021

How to Sell Your Business

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