4.8 • 793 Ratings
🗓️ 7 September 2017
⏱️ 13 minutes
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These days when you hear about a company selling for billions of dollars it's easy to fall prey to the myth that every internet-based company has that possibility. But that's not the truth. Most product-based companies or e-commerce companies only sell for two to three times their annual revenue. But there are things you can do to tweak your company structure and brand so that you can get more for your company when and if you're ready to sell it. On this episode, Ryan discusses 3 small tweaks that any business owner can make to his business to get a higher evaluation for their company.
At the Freedom Fast Lane event in 2015, Gary Vaynerchuk famously said, it is a shame for anyone to fail to pivot their business at the right time and remain stuck in it to their own unhappiness. What he saying is that those of us who are building a business need to resist the temptation to hang on to what is safe instead of making changes that will make our business more profitable and therefore more attractive to a potential buyer. If you think you might sell your business some day in the future you want to make sure you're building in things that will get you the highest price possible on that day. Find out some simple things you can do that will make a huge difference, on this episode.
Many of the listeners of Freedom Fast Lane sell products on Amazon. It's a great marketplace for anyone to start their own business and has proven to be a very successful sales channel even for well-established brands. But Amazon can only take you so far. The fact that you don't have direct contact with every single one of your customers makes it difficult for a prospective buyer of your business to feel secure about your income figures. That makes them less optimistic about the value of your company. How do you fix that problem? You need to do everything you can to connect with your own audience in a personal way and have the ability to control the communication that goes out to that audience. That little tweak alone will sometimes double the price you're able to get for your company. Discover more tweaks like this on this episode.
One of the reasons that extremely successful companies ARE successful is it they are able to tell a story about themselves that draws in people who think or feel the same way. It's called a brand story and it is one of the things you can do to position your company in such a way that should the day come you want to sell it, the value of your company in the buyer's eyes will be greater. This episode includes three simple tweaks that if done right, can make your business more profitable when it comes time to sell. Don't miss this one.
Put yourselves in the shoes of a prospective buyer who is looking for a company to purchase. What sort of things would need to be in place in order for you to feel comfortable that after you purchase the company it would continue to thrive along the lines that it has in the past? Thinking about your own business from that perspective can help you put in place systems and procedures that will be very appealing to a prospective buyer someday. Those are the things that enable them to feel comfortable that the company could be run without them and still be very profitable. Ryan shares a number of great tips about getting a higher evaluation for your company when it comes time to sell, on this episode.
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0:00.0 | You're listening to Freedom Fastlane presented by Capitalism.com. |
0:08.0 | This is the show about building businesses and investing the profits so that you can live life on your terms. |
0:16.0 | And now your host, the future owner of the Cleveland Indians, Ryan Daniel Moran. |
0:23.3 | My name is Ryan Daniel Moran. |
0:25.2 | My website is freedomfastling.com. |
0:28.1 | I work with entrepreneurs and help them scale their business, teach them how to invest, |
0:32.6 | and we help them think a lot bigger. |
0:35.0 | About a year ago, I sold one of my businesses. It was a physical products |
0:39.9 | business actually in the yoga space, and it took actually all of its sales on Amazon.com. |
0:46.4 | It was an interesting situation because we didn't plan on selling. We wanted to sell someday, |
0:51.5 | but we had a compelling offer come to us, and we ultimately |
0:56.7 | accepted that offer. I want to squash, however, some misconceptions that come up right away |
1:02.9 | when we talk about selling a business, because internet companies, not the tech companies, |
1:08.8 | not the sexy Instagram stuff that you hear about, your |
1:12.6 | sells for billions of dollars. Most internet companies are really cash flow businesses, |
1:16.9 | and they're valued on cash flow, and they're valued on track record. So the longer track record |
1:22.2 | and the more cash flow you're spitting off, the higher the valuation is going to be. |
1:26.6 | So a physical products business that's a one-trick pony on Amazon, the higher the valuation is going to be. So a physical products business |
1:28.2 | that's a one-trick pony on Amazon, the valuations tend to be fairly low. You can expect |
1:34.4 | between a two and three times EBITDA or two to three times your yearly profit to sell |
1:41.6 | your business. And that's really not a life-changing amount of money unless you're |
1:47.8 | doing a few things differently that will help you boost that valuation. Before I go into those |
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