Thomas Green here with Ethical Marketing Service. On the episode today, we have Tracy Gunn. Tracy, welcome.
Thank you. Well, I’m happy to be here.
Happy to have you. Would you like to take a moment and tell the audience a bit about yourself and what you do?
Sure. You’ll probably learn a lot about me from the episode, but I’m kind of a serial entrepreneur. I just love to create something from nothing and but then Covid and burnout and all of those things happened and so I kind of closed up shop, sold retired semi and then got this passion bug about helping people sell their businesses and prepare for their exit because there was a time where my business was not sellable and it really broke my heart and I don’t want anybody else to go through that. So that’s pretty much it. The reason I I thought I said to you prior to recording that I love I love this topic and the reason is that I think that it’s spoken about so infrequently.
So I speak about loads of different business topics on the podcast. I think I’ve done over 170 episodes now and only one of them has been about this particular topic so that I think even that I think is more than normal because most people just don’t talk about it, they go into business and they don’t necessarily think about their exit correct on that. I think it’s entirely accurate. And most business owners, right? You’re busy starting it, you’re busy building it and you might have a long-term goal in mind about a number you want to hit or I want to have this many, you know, locations or I wanted this many clients but you’re not. Most business owners are not thinking at all about building something that can sell and how to get themselves out of it. And profit from it because most of us start our businesses and think well someday it’ll pay me back, right?
And for most of us that’s when we exit we hope and that’s how we plan to retire. And that is really pretty rare. I mean the statistics for how many businesses actually sell is between 10 and 20% which is not great. I do think that it can change and I do think that for me the sounding alarm was I was taking a class, and we were they were talking about that in the next 5 to 10 years all the baby boomers were going to retire. And that’s about 12 million businesses in the US. I don’t know about the UK but and if those businesses went the way that my business was going to go they would just disappear from the economy. And in our country small businesses employ so much of our population. I mean, I call them the superheroes. They really make our economy work. And if 12 million of them disappeared.
And this is before Covid I learned about this and that Covid has done its own havoc. So yeah, I think it will start to be talked about more, but exactly right. I’m trying to like sound the alarm bell that people can prepare and fix it. It’s not too late. Would you like to share your story regarding how you went to sell your business and couldn’t? Sure. So business has always kind of been my saving grace. had a really hard time period in my life and my family and whereas most people might mope or like feel bad for themselves, I have a tendency to make lemonade and do something. And so I started my first business in that chaos. And then as, as things happened in my life with my family and more things happen, I created more businesses to the point where I had in 2019 I had four businesses running and I was managing them all, which is a long day.
And I didn’t set out to do that to myself. I don’t think anybody does. I think I just thought, oh, I could do this and then I could do this and I’ll rise to the challenge and that’s what we do, right? Like the frog in the boiling water, we just acclimate as we go and my daughter had a baby, and I became a grandma and I was like, I couldn’t leave, I couldn’t be close, I’m missing it and I was like working 16, 17 hour days and I just thought I don’t want to do this anymore, I’m done, I’m done, I’m done, I’m done. had 42 staff between my businesses and I just was done. So I’ll try to cut to the chase. But so basically I called my broker friend local and I was like, I want to sell everything, and so he’s like, all right, let’s take a look right? Which is scary. It’s so scary. I don’t know if anybody out there can relate to that, but like just think about exposing all your vulnerabilities to like some guy who’s judging you and that’s his job.
And so he took a look at it and he was like my biggest one, the one that was making the most money. He said it’s not worth anything and I would, you know, and I was like what do you mean? It’s not like I mean we were probably bringing in 7 800,000 year at that time in sales. So I mean there was value there, we had cash flow. We had customers, we have, you know what do you mean? It’s not worth anything? And he just said it’s not, but he didn’t really give me any direction, he just kind of like set, he just said it and that was it and so I cried a little bit, I’ll be honest, and kind of like took a little while to just process that and still worked right, still kept going like all business owners do. And I was like, well, I could quit, I could liquidate everything, right? Just walk away. Lots of people encouraged me to do that. I could just fix it. I can try to figure out how to fix it, salvage it or I could just keep doing what I’m doing, right? You know, you have three options and I just was like, you know what, I’m pretty smart, the internet’s pretty vast, I’ll try to figure it out.
And so I started to look at, okay, if you remove me from the piece, how do I fix this? Right? How do how can I just get me out of it entirely Because I thought, alright, if I’m not there and it doesn’t fall apart, there’s something that I could transfer, right? And so that’s kind of what I did. I went on this journey. I said I could do anything for three months. So I just set my tone like I’m gonna do this for three months. I’m gonna try everything I can to improve my evaluation. I hired someone to help me with my books and I just, I like. Ike installed an inventory system. I did all these things right to solidify the business that while you’re doing it all, you maybe don’t have the time to even consider or implement. But I just made that I shifted and made that my priority and funnily enough, I mean, my happy ending is that I found a buyer in three months. Like you’re right for one Not all but one, I love the happy ending. There are a couple of things that I thought are worth following up on immediately from regarding the broker and what comments were about the fact that it’s not worth anything from the fact that you have more expertise.
Now, do you disagree with that opinion? I disagree on one level because he really only looked at it through a narrow lens, right? He looked at it profit-and-loss sheet balance sheet. That’s it. He didn’t look at what was there. He didn’t look at systemisation. He didn’t look at any tech. He didn’t look at people, right? That would continue carrying it on. He looked just bare bones. Was your profit. Um, and it was a, it was a relatively new business that has had a couple of years. So the profits weren’t great because you know, you have your startup costs and things and this is pre Covid, mind you, um, but he looked with a very narrow lens, but I will say, um, not to disk brokers in any way, but every state in America is different. So in our state, anybody can sell a business, there’s not like a training or a certification. the reason in our state property real estate brokers are the ones who sell businesses usually.
And the only caveat there is that they have. They have to be the ones to sell if there’s real estate involved, right? Which makes sense. But most of them, this is not their gig, right? This is not what they’re doing all the time. They’re not looking like they’re looking at houses all the time. They could tell you off the top of their head exactly what it’s worth, right? Because, and they can look at all the different ways to value it, but in a business, unless they’re really good at selling businesses, they, and they’re usually they’re not business owners themselves, so they don’t know all the pieces and what goes into it. And so I think he was right. Yes. When he looked at just through his narrow lens, he was right on paper, it didn’t look great. But I do think, and my experience is, and what I share with my customers or my clients is or other business owners is that you’re more than that number because that number is so subjective, right?
So I think he was right to some degree, but I think if he had another, if he had the tools to be able to help me, I think he would have. He’s a nice man, right? We’re still friendly. He still shops at mike Kennedy store. but I think he’s just not equipped to help somebody in that position. It’s just not what he does. And again, that’s something that we’re working with brokers to help do so. And just for clarification, what businesses are you in now? And which one did you sell? So I had a big Irish bar restaurant that I found a buyer for. And we were supposed to sign the week. They closed us down for Covid. So it did not sell. But we had gotten through everything except Covid happened. So I still call it a success. And I’m happy for him, my buyer, because he would have been in a lot of trouble.
If he had given me all his life savings because he dreamed to own a bar and restaurant and he would have got no help from our government. And he would have been sunk. I mean, we were closed for four months after that. So yeah, I mean the happy part is, the hardest part often is just find the buyer right? And having somebody be interested in it. So yeah, so I kept that one longer after I should say kept that one after Covid and we closed that one because we couldn’t operate. And then I shut down another restaurant a year later. And then I have my candy store, one of them not to. And then we have a calm and then I have my business here. Sounds like you’re still quite busy. I can’t help it. It’s the business owner. Way right? But it’s good things. I love it. And regarding the things that you did to change from a business which someone gave you the view that it wasn’t worth anything to when you actually went to sell.
What are the things, the main sort of things that you changed which most other businesses do? Okay. So I mean what I did again I obviously I approached it from my own naivete, right? So I just kind of did the things that moved the dial for me and every business is different, but yet the same, right? So I hired something immediately. I hired someone to help me with my books because the profitability was better than it had looked. It’s just I hadn’t had somebody going and do a deep dive into because I was doing all my books to write. So add accountant to my jobs too. So she went in and cleaned up everything. Like I had things posted in the wrong place and you know you’re just in the motion. You’re not always seeing how everything affects everything else, right? So I paid somebody to help me with that. So that was a huge thing for me. And then I took a little bit of class about valuing like what brings the value right? Most of the valuation will come from your profitability, but there are other factors that get involved when you have your multiple.
So there you are. Right? So I installed an inventory system for my alcohol which I didn’t have before. And I learned somebody was stealing from me a lot, right? So all of a sudden now my profitability, those next three months, went way higher. Why? Because someone wasn’t giving away all my alcohol or stealing from the dill, right? But so that was one of the things I did. I came up with an ordering system and I put my kitchen manager in charge of that. I still oversaw it. And I had a boundaries set up but that she completely on her own was responsible for inventory but also ordering. So that was another thing off my plate. I. So like you really focus on systems right that somebody else can do you remove yourself, you still can be over the business or working on the business but you do not want to be in the business because you don’t go with the business unless you’re planning a big turnout.
Which means you’re going to stay on with the new owner for a while. You do not want any of your roles to be done in the business supervising. Yes, like overseeing. Yes. So you know I hired an accountant, I put an inventory systems. I delegated a lot of my responsibilities. I set up customer loyalty program and had email lists where I could contact. So I could show how I was getting my sales. How I can consistently get my sales and keep it growing? So that was another systemisation I put in place and again, some tech was involved in that and some was delegating to staff. So any kind of thing you can put in place to remove yourself and have consistency. You know, standard operating procedures, having them and using them often are two different things. Right? So any of those things are going to solidify your business and make it way more attractive to a buyer in terms of value.
I suppose just a knowledge question for me because, how a business looks from the financials, I suppose it’s quite difficult to know how much you’re involved in that business. How does, let’s say a buyer know how much you’re doing versus not doing as the owner, the current owner of that business? Usually it’s a conversation I always encourage. I know a lot of people don’t encourage, but I encourage my sellers to talk to the buyer. It is so important because you can usually get all of your wants met if you’re honest and upfront about that. And often the buyer will give you exactly what you’re asking because if you’re flexible and you’re honest and forthcoming, right? I would say yes, that they’re going to look at the valuation, but as they do due diligence and they look what systemisation czar in place.
Asked to see the standard operating procedure, asked to see a chart of the key staff who’s responsible for what that will clearly show you who’s doing what, how much, how much do they cost? Are they doing a good job? Because inevitably you want to buy a business that’s working, that’s profitable. But one that you can also grow, right? Most of us are not looking to buy a business to keep it as it is. We see an opportunity. So if it doesn’t have all the pieces, like eventually my bar had a lot of things that move the dial for me in value. And my, my buyer was a customer who was sitting at the bar regularly. Um, seeing all of the things improved. Seeing more people in the bar seeing better staff, seeing the systemisation is kind of coming through. And so he could see that. And he could see me not being such a frenetic crazy owner who was involved in everything, he could see that right there, would your position be that if the financials are good, then that is what will determine the interest from the via.
But once they have the conversation of how much you’re doing as an owner, that will kill the deal essentially. It could. But the thing is some of those things can easily be fixed. Sometimes the owner is the problem. Sometimes the owner’s in the way of, right, whether they’ve lost interest and I have a customer who is a client. He’s got other businesses. And this other one, which was his first one, he’s kind of just lost the passion. So it’s just on the slow decline, but it’s still a good business, right? So the owner in that and he’s in it a little bit, but he’s kind of neglected it. And so that is, it’s not necessarily a deal kill. I think everything’s different. I think there’s a buyer for every business. You know, there are some people out there that are just scooping up certain kinds of businesses to add on to what they already have. Like we’ll give an example. You know, I still own my brick and mortar my e.com candy store and one of my goals is to buy other candy stores, right? For fulfilment. But also because I think I want their legacy to continue. Um, there’s a little nostalgia there for me, but having 10 candy stores instead of one candy store. Now, my multiple is very different. And all I did was add on to what I already have, right? So there’s a lot of different ways and it really depends on the buyer. You know, if the buyer doesn’t want to be involved at all, that would kill that deal, right? But if the buyer wanted to be the guy sitting at the end of the bar, chatting with everybody, like in my restaurant, ex you know, explanation, for example, that would work for him and that’s exactly what he planned to do. He just wanted to be there, he loved being there, he loved the atmosphere and he wanted to own it. So I think it really depends on the goal of the buyer and I do think there’s a plenty of wiggle room with whether it’s earn out earn ins. There’re all kinds of ways you can frame it if both the buyer and seller are open to being creative, which saves a lot of deals and by earn outs earnings is that coming back to staying on after a business is sold for a certain period of time.
So I had a business recently who – he was a client who came to our virtual event and he didn’t need our services. He had been in business for 52 years, which is like, Wow and he has had a whole bunch of pieces to his business and he just already knew he wanted to validate Which is why he came to the class, but he wanted to carve off parts of it. But he knew because he was so integral in everything over 52 years. I mean, just think of the things he know was about that business. He already knew that he’d haven’t earned out of five years and as to earn in, I mean, so I use that from the perspective that people are earning in as they’re working towards ownership, so that sometimes can shift the financial piece, which is often a struggle for a buyer um, instead of tying up all their money they earn in and they do it over time and they keep the owner on, and it just ensures an easy, handing off of the business, right?
And it really depends on the seller and the buyer, you know, a seller who’s just burnt out and done probably doesn’t want to plan five years to turn out, they just want it now, it’s going to be a different sale. You mentioned you did a class in how to value a business when, when someone says, what’s my business worth? As probably quite a complex question, but if you’re able to give a simple answer, what do you typically say? So the good news is, is we do we have like a really simple worksheet, because it is intimidating, right? And ultimately, your business is worth what somebody’s willing to pay. You know, my house doubled in value this past year only because someone’s willing to pay double. Nothing else really changed, right? We built a treehouse. I shouldn’t say, nothing else changed. That’s what the picture is, but we, you know, my point is that it’s because people are willing to pay that right?
And right now is a great time to sell because there’s a lot of money out there looking for a place to go and land. And interest rates are really low. So when someone comes and says what’s my value? Right. We give a brief overview now. Generally speaking, we’re dealing with small business owners under $5 million dollars a year in sales. And that have staff solo preneurs a whole different animal and you can sell if you’re a solo preneurs but you definitely have to do the work to get yourself out of it and replace yourself. So there’s something that’s gonna it takes a little time but it’s doable. So don’t give up solo preneurs but so what we normally do is we just say we give the brief overview of the buddha versus SDE, right? If you are under I would say $4 million dollars in sales a year and you are involved in the business.
You’re gonna want to go with the SDE. Okay, which is your sellers discretion earnings and then you’re going to take your profit, you’re going to add back in. So make the profit more for any kind of owner perks that we give ourselves as owners. So let’s say you have a Lexus that it’s paying for right the value of that for the year. You can put back into the business or your lease or your cell phone or let’s just say you took a company retreat to Paris or that all can get added back in to your bottom line. So that makes the profitability higher, which is great. We love that. And then if you’re, let’s just say me, I was managing accountant I was inventory. I was you know H. R. I was everything you have to account for removing you and replace yourself. So let’s just say I had, let’s just say I was only doing the books in the business and I wasn’t doing anything else and the books took about five hours a week.
So you have to deduct from your profit what you’d have to pay somebody to replace your role, okay? Not what you’re worth, right? Let’s just say you’re paying yourself 200,000 because you’re worth that. But what you’re doing actually in the business and I don’t mean the owning and the running, I mean the nuts and bolts of the business. You need to replace that so that can continue. So that part goes off of the prophet. And so when you have those numbers, you get kind of this general idea of what it is. Now the other piece of this is your multiple. Let me quick explain. Bada is if it’s professionally managed. So owners not involved at all, you have like a full c suite. Everybody’s jobs taken care of the owner is not actively involved in. You have probably over four million in sales, you’re gonna use a buddha and your multiples are gonna be higher. So when we talk about the multiple again, it’s generally if your SDE is between one and four again, these are all generalities.
And then if you’re doing a beta it could go as high as 10 or 20. It really depends. And we have we have like a little calculator. We created like a cell ability scale or percentage like your score of what you could sell and what your multiple might be. But as an S. T. E. A safe guesstimate is 1 to 1.5 of your total number that you wound up with. I don’t know if that’s confusing. But and then if you’re doing a beta you’re going to go higher and you’re going to find what things have been selling for in your industry because it’s really also industry related buying a newspaper that’s on the decline versus an in an e-commerce store different industries, one’s kind of on the decline, one is definitely on the increase, right? So your multiple is going to be a little bit different. And so I like to have my sellers be reasonable. Because it’s never what they think it’s worth.
It’s always less the first time they do it. I think there’s an old joke or something which is every business owner thinks their business is worth a million a million dollars or a million pounds. Is that where you found that to be true totally and that’s a little bit of again I’d I you know when my broker told me it was worth nothing, that was devastating, I didn’t think it was worth a million, but I thought it was worth something and I thought it was worth selling. But yes, exactly, like I think we just have this I think as the business owners were super optimistic about everything about what we can do and how high we can go and all the things we can, you know, implement and so that’s just carried over into our value. And I think there are things, the great part of this, the silver lining in all this is once they get a valuation, it’s just like it was for me it’s a starting valuation, it’s where you start to get a sense of where you are and then you have choices to make right you whether you want to continue whether you want to improve.
I have a gentleman who is an electrician and we were talking he wants to sell in the next couple of years and he’s still very involved in the business. But one of my thoughts to him, he was trying to talk about like how to maximise and he owns the property. So he’s going to carve out his property. So he still has income. And he was looking at other businesses that are like his, that he could maybe scoop up and bring into the fold so that he could grow over the next two years, right? Because he’s kind of at retirement age, but he and he’s tired, but if he’s going to get the big X that he hopes for, he’s got to do something to like bump it up a little bit, which are great. So there’s a lot of things you can do to increase the multiple, increase the value, increase your profitability. And it’s just deciding how willing you are to spend time and money to do those things. Great answer. I’m looking at some of the questions that I should be asking which checked out on the profile prior and there’s a couple which I guess the one that I want to want to ask you about before I move on is, let’s say someone is who likes the idea of sending their business, but they’re literally, they’re kind of not even at step one.
What do you encourage them to do first? Well, we do our virtual class because I find like you mentioned at the beginning, nobody talks about this. It’s like no man’s land right? And everybody thinks you’re business is different than everybody else’s right because it’s unique to them. And it might have some quirks and things that are different, but in general, most businesses are the same, right? Sales in money out, like, I mean, right, somebody running everything, no matter what it is. And so yeah, I think the first thing to do is to really like to not get frustrated and get overwhelmed. I think it’s a vulnerable place to be. It’s a vulnerable place to be because you’re lost. Nobody really talks about it. You’re in no man’s lands like getting dropped on a deserted island and you’re trying to figure out and you were just in the place where you were running everything and you knew everything and now you don’t know anything about something you own.
So we really try to make it fun and simple and layman’s terms without getting fancy and techie because really it’s personal. and so step one I would say is start to learn understand anyone is welcome to come to our class, but we make it really easy double easy to get in, and we give you worksheets that help you figure that out. But step one, I would say, it sounds scary, but it’s not. Do an exit strategy, think and all that is think about who might be my buyers, what do I want, how long do I want it to take? How much do I really want from my business? Right, what am I willing to settle for? Like one of the simple questions like, okay, are you willing to own your finance? And are you willing to do it over 10 years and all of that? Because being creative like that and being flexible like that. It also helps you tax wise, but it also allows for a lot, a greater spectrum of buyers.
Could be the potential buyer, right? If you want all cash up front right away, that’s going to be a pretty slim basket. We want a big basket to be looking at your business. And the exit strategy is fun. I think. I think the word strategy scares people. So we’ve been trying to change it to plan, and it’s just about dreaming big. Like when you started your business, you dreamed of all the things that could do, all the ways you would do it, where it could go, how it would work. Same thing. You’re just doing that on the opposite end and you’ve already built the business. You’ve done the hard part. This is a little bit of like pie in the sky. Let’s dream big. And then once you have that in place, then you can take to the valuation, a self-valuation or call a broker. They’ll do it for free. And there’re tons of things online that will do it for you just to know where you are, right, and then think about what we do in our class and we encourage people to do is we have a little checklist like, or you can do a buyer’s checklist of what our buyers looking for, but you also can do a seller’s checklist of like how am I going to hand this over?
What would tank it? What is in the way of me handing it over? If I went on vacation for six months, would it fall apart? Why fix those things and figure out what the order of importance is and either delegate hire, train tech, there’re things to do there, right? But I would say first is just decide what is you want. It just takes a little dreaming. You take a half hour. You write some things down. I think when we call it, you know, the exit strategy, it seems very scary and overwhelming and it honestly, I wish that everybody would have this from the beginning. We should have it from the beginning, right? You’re starting here, this is what you’re building, there should be an egg goal, something you’re aiming for how and how you wanted to go, whether you’re gonna, you know, build this business, you’re going to sell it to employees, which is an option, whether you’re going to build something that’s gonna get scooped up by a big conglomerate, whether you’re going to build something and add on other businesses, you buy to make this chain to sell or whether you just want it to be a family legacy.
I mean, there should be an end plan and it changes, right? You have a business plan. It’s a working plan it’s always changing. You should all, it’s not something you do just to go to the bank. It should be something that you’re constantly every year evaluating or every three months or six months or whatever that looks like. Because you know, you know how many of us right, can relate to covid happening and thinking, gosh, now what, how many of us had to pivot in some way. One of my restaurants did five ghost kitchens because we didn’t have the traffic in the store. But I had I wanted them to be able to work. Right? So we changed our model, we changed how we, what kind of food we were putting out. We went from a full-service restaurant to a counter service restaurant. I that changed my waitresses income right? How instead of being dependent on tips, they were getting minimum wage plus tips.
Because a lot of times they were doing doordash. So you know, like everything we have to pivot and we learn as we go and it’s just this next part of pivoting. Okay, well, I want to go here. I want to move to see my grandson. I want to be completely out of the business in two years. I’m willing to finance it as long as you know, I feel solid about it. And I don’t mind staying for three months to help them figure it out. That’s an easy enough thing. Right? And I want 100,000. However, that is right. It’s just having a list and have them be realistic. Because then when you do your valuation, it kind of grounds you a little bit and then the seller’s checklist helps you figure out what are the pieces you should fix and kind of give you a road map to how to get there. Hopefully that wasn’t too long winded, but that’s kind of our process. And that’s what I did for myself, plenty of good stuff in there.
So not long winded at all. I do, you did mention about the think about who you buy It might be, and I mean it’s again probably one of those questions where it’s complex and I’m asking you to simplify it. Sorry about that. That’s okay. If it is the case that someone says, okay, who’s my gap by going to be? How, if they weren’t to know, let’s say for a second, what advice would you give them? I that’s a great question. I would say to really consider. Who do you come into contact with on a regular basis? Right. I would say who are your suppliers, who do you sell to because a lot of businesses are buying in their vertical. So that’s number one. I would say your customers are usually your biggest fans, so you never know.
You kind of can let that get out there. I would say, look at your staff, let’s just say that you wanted to be creative and say, okay, you know, I’m gonna fix this business, I’m gonna get it to the value I want and joe is really good. Like he’s a go-getter. I love having him here, I want him to stay after I’m gone. Maybe I make joe and an offer and I teach him and he’s going to pay me and maybe that’s something joe has mentioned, right? Or maybe your kids that have been working all along all aside you write or alongside you or um, I mean, it could be, I mean, I’m in a number of buying groups. There’s a lot of people out there buying things you wouldn’t think they’d be buying, right? There’s one lady who’s buying auto repair places, she just, I think she has 100 of them. She just keeps buying them, right? She just put it, I mean, people are putting it out there, but what she’s doing is she’s building a change, She’s systematising, she’s bringing all of the process on the HR and all of the expenses to one central place, right?
Like HR and payroll and all that stuff. She’s centralising. She’s standardising, and she’s building herself like a big chain by buying from people that maybe we’re just ready to retire, which is an interesting model, so you just don’t know, you don’t know. And again, because there’s so many, I think as more businesses are for sale and that statistic we talked about, of that 10-20% has got to change, like it’s got to, and so I think the discussions will change. I think the creativity about the deals will change and who you’re looking to buy. And I think more and more businesses will, will start to think with the end in mind. it’s just a shift, right? And sometimes life throws us a curveball and makes a shift really fast, like Covid and then others, you know, come over time, you know, and I think like, we talked about the small businesses, the baby boomers that are going to retire, that’s just the boomers, that’s 12 million in the US, that’s not anybody else, that’s not any, other people who are trying to sell.
So that’s got to change. And I think there’ll be a lot of creativity about how we handle that. And I think people will start to expand their minds about what that what retirement looks like, you know, in the past, it was like, you buy it, you give me all the money. I walk away, we’re done, but that’s not necessarily how it has to go, right or someone buys it because they want to work in it. that’s not necessarily how it’s going, so there’s just so many options and it can be structured so interestingly, and this is why I encourage buyers and sellers to talk because I think you both can get there right? Listen tom if I was gonna buy your business okay. And your number was, let’s just say it was a million because everyone thinks your business is worth a million. And but you are willing to wait And you do a deferred down payment and you’d like work with me for a month and like you would get everything ready. And I have some requirements about like, Okay, I want this, this and this before we close and then you’re willing to do a balloon payment in five years and we’re gonna pay you monthly this and we’re gonna pay you 4%.
But I’m going to give you your full asking price because you’re willing to give me what I want, which is time right, flexibility, creativity. And so I think when the buyer and seller both are willing to be open without being scared because I think fear gets in there right? But what if they tank my business? Well, I mean, if they stop paying you, you get the business back. I mean, so there and you can always write as part of the deal some protection, but nobody buys a business to tank it. Nobody gosh, it’s hard enough to start a business. You know, often people are buying businesses because they’re more guaranteed, you know, 90% of small businesses fail right? If you’ve lasted, let’s say like my friend don 52 years, the likelihood that that business is gonna fail is pretty small, provided that yourself to somebody who’s confident and the seller is pretty smart. They know those types of creative deals that you’re referring to are those options contracts.
I don’t know, I mean I’m not as familiar with options because we’re dealing with smaller companies, but I mean I think options to me and maybe it could be an American versus UK terminology. but options for us is more stock going public or selling off the shares, which is a possibility, right? That’s still an option. You know, I have a client who is selling to their employees. They already know they are, so they’re setting things up and figuring out how to do that, right? And that’s one of the options, right? They’re going to sell to all of them. Do they make one big corporation or do they sell off shares with the corporate? You know, it’s hard to know, and it’s really up to them to figure out how they’d like to do it. And I would definitely say hire a lawyer to help you navigate that and a CPA to kind of look at the tax advantages and disadvantages. Every state is different. Every country is different. I mean, there are ramifications for our choices, right?
Having a corporation in a state that doesn’t have income tax versus having a corporation in, let’s say where I’m from New York where there’re all kinds of taxes, right? Different. So it really, it I mean it takes some due diligence, but as you go through the process new, every time you saw the question, a new one presents itself. But that again, that’s kind of what’s exciting about being a business owner, I think is solving the problem and figuring it out. Well, I think you definitely should. We say act out that particular example because you’re you seem to be always solving problems. Oh yes, I love it. It keeps my brain sharp. I bet it does. What are your goals? Tracy? Let’s see, I have a lot of goals. I want to have more time with my grandchildren, which is exciting. which is what started all this, right? So grandchildren change everything. I think I don’t know that I’ll ever slow down.
I don’t know that I’ll ever not have businesses because I love them. And I love business. I just love the creativeness and it’s like an art. I love it. and I do think my big goal for right now is really kind of like we talked about sounding that alarm for owners. You know, I again, it comes from my own pain, but it’s unnecessary, right? If I had thought about that, or I had even known to think about it, I would have been more prepared, Right? So sounding that alarm, I’ll tell you my favourite part of every day is when I get on a, you know we book a call and we chat about their business and why they want to sell and to see if we’re a good fit or not and I just love hearing from all these business owners what they’ve done, how long they’ve had it, why they did it, why they want to sell because it’s different every time, every time you know one never worked in the business and he has always been a side hustle and he just has a corporate job, they got a big promotion and so he doesn’t want to do it anymore, but other ones started from scratch and built it over 52 years.
I mean, some of it’s just a passion project and they’ve grown, they fell into it, other inherited it. I mean, there’s so many stories and it’s I don’t know, it’s just amazing to me how many stories there and they’re all so different and fascinating. So my big goal is to help a lot of them, I can’t, I probably can’t help all of them because I am you know one person, we try to keep it kind of personal but we’re working on it but yeah I really want to see all these businesses sell because I think business owners have worked really hard and deserve it. And if I could help that happen, mission accomplished. Do you think that one day you will be able to sell your business about selling businesses? Ah, wouldn’t that be funny? Probably you never know or maybe I’ll just here’s this is one of our lines in our, in our course we tell our clients is that well we’ll help you get there right and get it to be sellable but you’ll only sell it if you want to because maybe at that point it’s so easy for you because you’ve removed yourself and all the stress and all the things that made you want to sell.
Maybe you’ll just keep it and profit from it finally. Which is what our goal is always from the start, right? We give to it like our Children, we raise them up and then we hope they’re going to give back to us usually with grandchildren and hopefully taking care of us when we’re old. But right the idea of that and so you know hopefully we helped a lot of people get their businesses ready to sell so that they’re ready when they’re ready if they ever are. But maybe a lot of them just keep it and then pass that on right because they’ve created something that is independent and working smoothly and efficiently. Is there anything that I should have asked you about today? Oh, I think you did a great job. Let me think I don’t think so. I do think you know I don’t think we talked to like, about growth and things like that, but I think that’s all involved with you know, where they are, right?
If they’re willing to take two years to work themselves out of it, they really should have a plan of growing over those two years to show, right that momentum is continuing. And one of the ways you do that with marketing, one of our questions on our sellers checklist is have you made a new offer in the last year? People who are tired and burnt out are not usually thinking about they’re thinking about surviving usually. they’re not always thinking about the next offer to expand and grow. And that’s not bad, but it’s something that they easily could do, and there’s always something new or something that worked before, but that’s kind of like warren, it’s, you know, done it’s time, but that you can refresh and reintroduce, but it just shows this intention and this plan of growth, right? and that involves marketing and sales and things like that, so, but other than that, I think you did an amazing job.
Thank you. I was going to say that I know that your expertise is probably beyond just selling businesses because of the amount of business you do, but it’s nice to get your expertise in an area that’s not being talked about, so if someone does want to learn more, where do they find you? Well, we have a website you can actually watch. A little mini webinar kind of explains the basics of preparing your business for sale. It’s called howtoexityourbusiness.com. We also have a virtual event that we hold once a month and you can come and we do it for like four hours, all different business owners from all different niches, niches, and we talk about those same things, but we answer questions and kind of, it’s amazing what you learn in a group, right? The thing, you know, the beauty salon and the auto repair often have a thing that’s similar that they both were wondering about. So it’s we do that once a month and that kind of exposes us to more people and gives people the opportunity to spend a little more time, get a little more questions answered and then to apply to work with us if they think it’s a good fit and then if we think it’s a good fit.
Tracy Gunn, thank you very much.
Thank you so much.