5 Reasons Why You'll Be More Successful When Your Business Runs Without You (#58)

Steve Wells: [00:00:05] I'm Steve Wells.

Jeffrey Feldberg: [00:00:06] And I'm Jeffrey Feldberg. Welcome to the Sell My Business Podcast.

Steve Wells: [00:00:10] This podcast is brought to you by the Deep Wealth Experience. When it comes to your liquidity event or exit, do you know how to maximize the value of your business? You have one chance to get it right, and you better make it count.  Most business owners believe that business value is determined during the liquidity event.

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Jeffrey Feldberg: [00:01:39] Welcome to episode 58 of the Sell My Business Podcast.

In this episode, we're going to do a deep dive on a topic that is often one of the biggest challenges for most business owners when it comes time for a liquidity event. What's that challenge you ask? Well, that challenge is that the business doesn't run without the business owner.

And so today we're going to talk about five reasons why you'll be more successful when your business runs without you.

So, the first reason of why you want your business to run without you is you'll be able to find and solve new painful problems. I want you to go back to the beginning.

When you first started your business, you were passionate to solve a painful problem. In fact, the problem was so painful that people were only too happy to pay you to take that pain away. Soon, you turn prospects into clients, and over time, those clients became raving fans. And next thing you knew you had a successful business. Congratulations!

It's ironic because oftentimes success can be the pathway to future failure. As crazy as that sounds, hear me out. When you're successful in your business, you become busy. You now start focusing on the day-to-day instead of the big picture. And next thing you know, the sun, the moon, the earth, the stars, the entire universe revolves around you.

Or perhaps you do have a management team, but you're so involved in the business that nothing gets done without you. All the managers, all your supervisors, all your key employees are still checking in with you before they can make a decision. And ultimately what that does it cripples your time.

You're no longer focusing on the newest problems. You're no longer able to create a market disruption because your time is not your own. So, what can you do about this? Well, for starters, if you don't have a management team, now's a time to do that. And I'm not just talking a management team with various supervisors and managers. I'm also talking about a team that would include either a president or a CEO to run the business.

And I know what you may be thinking. Wait a minute. I have to bring in a president or a CEO? That's going to take a lot of time and there may be recruiting fees that are involved. Let alone the amount of money that I'm going to have to pay for a President or CEO. Well, what we find here at Deep Wealth and our nine-step roadmap, whatever the cost is for a President or CEO, it's a rounding error compared to the value that you're going to get for your business day to day, as well as what you're going to do to increase your enterprise value.

So, I want you to think about it for a moment. You now have a successful and competent team in place. They are running the business day in, day out. You're no longer working in the business. You're working on the business. Why is this important?

Well, when you begin the process of working on the business, you're taking a step back from the daily grind, all those issues, which can be painful, they can take up your time. They can have you feeling frustrated. They get you out of your creative zone.

You have successful and competent people who can do this for you and chances are your people will actually do this better than what you're doing. When you have the management team that's taking care of the day-to-day, you get your time back. And I would imagine that you started your business for lifestyle reasons. You started your business so you could take some time off. You could enjoy life. You could have some flexibility in terms of what you're doing. When your business runs without you that's exactly what happens. You get your time back.

So, you get your time back so that you can now find and solve new painful problems. If you're honest about it and you to speak to your clients. In the eyes of your clients, you're only good for what you've done for them today. Yesterday has already passed. The future isn't here. And it's all about today.

But the marketplace doesn't stand still. Yes, you found and solved a painful problem. You're world-class in it. However, your competition is catching up to you. Your competition is doing all kinds of things to take your customers away and put you out of business. Perhaps at one point in time, you were enjoying operating in a blue ocean.

You were the only one there that was doing it. You weren't having to stave off the competition. You didn't have all kinds of price pressures. Now it's likely the case that you're in a red ocean. You have competition, you have price pressures. Business is not fun. So, when you have a management team that runs the business without you, you now get your time back, that you can focus on solving new, painful problems that you're passionate to solve. And if you look around, you can find those problems. But all problems aren't equal. You want to find a problem that number one is painful. Number two has a large addressable marketplace. And number three can be an extension of what you're already doing.

Find that problem with the time that you have solved it and then have your team implement it. And when you do it right, you'll not only increase your revenues, your profits, and your EBITDA. But you can also create a market disruption. You can create a brand-new category, get back into that new blue ocean, and enjoy all of the trappings and the luxury that comes back with that.

So, for point number one, have your business run without you so you can find and solve new problems.

The second point is why you will increase your enterprise value when you take the time to listen to key stakeholders.

 I'm going to share a quick story with you.

In my e-learning business, Embanet, this is the business where I enjoyed a nine-figure exit. One of the reasons that I got to that nine-figure exit was a result of listening to my key stakeholders. I made the phone call to a client. His name is Jon, and I asked Jon the one and only question. And the one and only question is what's keeping you up at night when it comes to your business?

Or said it in another way. What challenges or difficult problems are you currently facing in the business? And Jon shared with me, Jeffrey, I'm so glad that you asked. The problem that I have is I can't find as many new students as I used to. You have this thing called the Internet that's now there, my competition is setting up shop in town, and it's become more difficult for me. Can you help me with that?

So, this was a painful problem. The program was losing students. It was now not on track to have those profits and it was a real issue. Long story short, it took a while, but I figured out a way to solve that problem, and effectively what I was able to do I took Embanet and the first part of Embanet, the first history of Embanet let's call that Embanet One.

I created Embanet Two. And Embanet Two over time, it became a larger than Embanet One. Embanet Two became so large that Embanet One was around in error. And looking back, I can confidently say that it was because of Embanet Two, that's what drove the enterprise value. And that played a key role in realizing a nine-figure exit.

But it's not enough to just ask that one question. What you need to do is you have to ensure that you have the time. Small daily actions over time create huge results.

Oftentimes, we tend to overestimate what we can do in a year and underestimate what we can do on a day-over-day basis. So, when your business runs without you, you now have the time where you can listen to key stakeholders. You can ask the one and only question, what's keeping you up at night?

Or what is your biggest challenge that you're facing today? You can find that painful problem that your passionate to solve. And now here's the key. You can now take that and you can delegate it to the team.  Your stakeholders are also your employees.

And as the saying goes, when the team works, the dream works. So, why not speak to your employees? Ask them, what's working? What's not working? Really listen to them.

And now that you hear that you can delegate that to them. Hey, solve this problem. Let's make things better. So, when you take the time and you listen to your key stakeholders, this is where you increase enterprise value. You'll optimize your business. Things will become better. You'll have happier employees.

And a funny thing happens when you have happier employees. When your employees are happy, they're able to make your customers happy. When your customers are happy, they make your employees happy. And you get this positive feedback loop, which ultimately turns into loyal clients, otherwise known as raving fans, higher revenue, and you also have higher profits. All of which leads to a higher enterprise value. So, point number two, you'll increase your value when you take the time to listen to key stakeholders.

Let's now go on to point number three, on the five reasons why you'll be more successful when your business runs without you.

So, point number three is to have your business run without you to ensure that you're not the smartest person in the room. I suspect that when you first began, you were the smartest person in the room. Probably because you were the only person in the room. But to get ahead, both in business and in life, always ensure that you're not the smartest person in the room. So, let's start with your management team.

Ensure that your management team is smarter and better than you. You don't just want the A-players. You want the A plus plus players who can take things to the extreme in a good way. When you have a smart management team, they're not only able to run the business day to day, they're able to figure out what the problems are, solve them and move things forward without your involvement.

And at the same time, when you have a culture where you have A-Players, not just on your management team, but with your employees. One of the things that you need to focus on is ruthlessly, ruthlessly finding and removing the B and C players in your organization. Why would you want to do this? Well, the B and C players bring everybody down. You know, that. Your employees know that your management team knows that. But the problem is when you leave the B and C players there your employees begin to lose faith in the business, in the management team, and yourself. When you're committed to removing those B and C players. Now you're on a path to increasing your enterprise value because you have smart people in the business. They're seeing what the trends are. They're acting on those trends. They're making your business the place to be for your clients.

So, get rid of those B and C players at all costs. Build that into your culture. Your clients will thank you. Your employees will thank you. The management team will thank you. Make sure that you do that.

And the other reason why you want to have smart people in the business is that you can build a culture around the business itself that doesn't just depend upon you to execute things. You create this vision through your employees, through your management team. And they now execute on that vision.

And the vision is everything. When employees know what the vision is, when employees know what they're working towards, it gives them more job satisfaction. It gives them a purpose and they know what they're working towards. So, point number three, have the business run without you and ensure that you're not the smartest person in the room.

So, now let's go to point number four. Why you must enrich your company culture if you want to dominate and win. Part of a successful company culture is where you have accountability from the top to the bottom.

Let's be honest. When you're at the top when you're running the business. You're probably not as accountable as you'd like to be. And even if you believe that you're accountable and perhaps you are, your managers and your employees may have some reluctance to approach you and take you up on tasks where you're not being accountable, or you're not doing things as you should.

Remove yourself from the picture. Create that culture of accountability throughout the entire organization. Well, how do you do that? How do you create an accountable culture? And by the way, in the Deep Wealth nine-step roadmap. Step number two X-Factors, culture is an X factor. Your future buyer looks for businesses that have a rich culture.

Money can buy lots of things, but money cannot buy culture. You may have well-capitalized competitors. Your competitors with their capital. They can copy you in just about every way. They can use the same technology that you do. They can do all kinds of marketing things that either you're doing or that you're not doing. But what money cannot buy is culture.

Culture is like a unique fingerprint. Every company has its own culture. And I'm sure if you think back to your competitors that were well-capitalized, some of them failed.

They failed because they didn't have the right kind of culture. Your competitors failed because their culture wasn't accountable. So, what can you do to create accountability? You want to identify key metrics. And once you know what those key metrics are. And again, you've turned to your management team who in turn, looks to the employees to help come up with those key metrics.

Those key metrics are known throughout the entire organization. And now your culture works towards driving those key metrics. When done right, you can measure your key metrics on a daily, weekly, monthly, quarterly, and yearly basis. And you can ask the tough questions.

This week, we weren't as good as we were last week or a year ago this past week. Why? Now you can get curious what happened, what changed in the business that we were off?

It goes back to that old saying what gets measured is what gets done. And when you have those key metrics, you can know as an organization to move towards excellence. And the reality is your future buyer is going to want to know what those key metrics are.

In the nine-step roadmap, step number three, Future Buyer. We talk all about tuning into your buyer's favorite radio station. WII.FM.

The what's in it for me radio station. And when your future buyer looks at your business and you have this incredibly unique and rich culture, which is accountable. And you have these key metrics. This now impresses your buyer, your enterprise value is going to increase as a result of that. So, when everyone in the organization knows what those metrics are, they can measure both the business against the metrics. They can measure themselves against the metrics. It is now not personal. It's all about the metrics. It isn't about the people. Why did this division hit it out of the park this month, compared to all the other months? How can we incorporate that on a go-forward basis to ensure that we're doing these key metrics and we're not only doing them, we're really exceeding in them and doing quite well in them.

Then the third point that you want to consider of why you must enrich your company culture if you want to dominate and win, is that the culture is built around the business and not you. It's okay to have an input on the strategy side of a business, but it's not okay as the business owner to actually be operational wise in the business itself.

And your future buyer is looking carefully at this. Why?  Your future buyer will spend millions, possibly hundreds of millions of dollars to buy your business.

Your future buyer doesn't want to believe that your business will still be around when you're no longer there. Your buyer wants to know. So, you telling your buyer well it's okay. when I'm no longer here, the business is going to run without me. Your buyer's not going to believe you. And one of two things will happen when your business doesn't run without you.

Your future buyer will either walk away from the deal. Or will penalize the enterprise value of your business. Neither scenario is a good one. So, let's take that off the table right away. And this is the beautiful thing about preparation and the nine-step roadmap.

 When you go through the nine-step roadmap of preparation. you have mastered two critical elements in preparing for a liquidity event. First, you're finding and removing the skeletons in your closet. Why is that important?

The skeletons in your closet, this gives your future buyer an excuse to lower your enterprise value, or heaven forbid, insist on an earn-out, or increase the escrow amount. So, every time your future buyer finds a skeleton. Oh, look at this we found a skeleton over here. Well, your business just went down $500,000 dollars.

Or we're going to have to increase the escrow by $200,000. Take those excuses away. So, when you show up and you're prepared, you'll not only impress your investment banker and you don't get a second chance to create a first great impression, but you're also showing up with a clean slate. You're taking away the excuses from your future buyer to lower the value of your company.

The second thing that you're doing is you're finding those hidden Rembrandts in the attic and you're putting them out for public display. Now you may be asking what's a hidden Rembrandt?

A hidden Rembrandt is something that you are a world-class in as a business. Most businesses are world-class in at least one area, but it's usually two to three, maybe even five different areas. The challenge is that most business owners don't realize that they have a Rembrandt, and instead, believe that they're doing the same thing as the competition. In reality, you're not. The fact that you're a successful is because you have these Rembrandts. So, when you know what your Rembrandt's are and you take them out of the attic and you put them out for public display.

What you've now done is you're sharing with the world why you're so good. A quick example on this. When Embanet was preparing for its liquidity event, one of our Rembrandts that we identified early on was that we had long-term contracts that were exclusive. Our exclusive contracts were 10 years in length.

Now, I knew a long-term contract was important, but I had no idea how important it was until I really dove in to understand why this was important to my buyer. The longer the contract, the more certainty that my buyer has, that the clients are going to stick around. And guess what, when I shared this with my future clients, they felt terrific knowing that other clients were with us for 10 years in these agreements.

And when I spoke to prospective clients and they found out that Embanet had a 10-year agreement, they were saying, wow, if all these other institutions are working with Embanet and Embanet is good enough for these other institutions with a 10-year agreement, why don't I bring on board Embanet to do the same thing. And it actually helped us grow the business.

So, most importantly, when you remove the skeletons when you put your Rembrandts out for public display and you're having a rich culture that is now doing this day in, day out, you're now showing your future buyer that your business doesn't depend on you. Think of yourself, more like a board of advisor for your business.

You can be brought in and talk about strategy. You can talk about some of the bigger picture things. But you're not the one doing the day in and day out things on the operational side. And in fact, when it comes to your liquidity event and you have your management team and your key employees run the presentation so that you're barely involved.

And that management and those key employees demonstrate how rich your culture is. And they point to those key metrics that you follow on a day in day out basis. Your buyer is not only impressed, but your buyer now knows with certainty that the business runs without you. And when the business runs without you and you have this rich culture that is helping you dominate and win, you can welcome a higher enterprise value.

So, to recap on point number four of why you must enrich your company culture if you want to dominate and win, we've shared that you have accountability from top to bottom. You've identified key metrics that everyone follows. And you have a culture that's built around the business and not you. So, let's round out to the fifth point of why you'll be more successful when your business runs without you.

And that is why you must think like a buyer to drive EBITDA and enterprise value. Now you may be saying, why would I want to think like a buyer? One of the classic mistakes that we see at Deep Wealth is that business owners, particularly during the liquidity event, they think like a seller instead of a buyer. And I'm going to share two statistics with you. And these statistics are horrifying.

The first statistic is that up to 90% of liquidity events fail.

Think about that for a moment. Imagine all of this time and this money and this effort that you put into the liquidity event. You've now lost all of that. And when you go to the root cause of why 90% of liquidity events fail, leading the cause are the business owners. Business owners aren't prepared.

And when you dig a little bit deeper, business owners are not thinking like a buyer they're being selfish and they're thinking like a seller. You want to stop that.

The second statistic, which is even more horrifying than the first one. Is that anywhere from 50% to over 100% of the deal value is left on the deal table. This is a very polite way of saying that your hard-earned money, you have unknowingly given it to your future buyer.

I'll share a quick story with you.

On this podcast, you've heard investment bankers come onto the podcast and share these stories. And one such story was an investment banker shared with us that he had a client out in the market. They were running an auction. And as you know, in our nine-step roadmap at Deep Wealth and the Deep Wealth Experience, we recommend that you have an auction.

The lowest bid for the same business was $11 million. And the highest bid was $70 million. You had a differential of $59 million. So, let me ask you something. As a business owner, if you had an offer of $11 million, would you take that? It's a bit of a rhetorical question because most business owners say yes,

And if you said yes, that's okay. But you're saying yes to leaving $59 million on the table. In your future buyer’s pocket. And this is your hard-earned money. This is what you've earned. This is what you have built over the years. And this is what we do in the Deep Wealth Experience.

Is we protect you from not being in that situation. We have, you do two things. After you complete the nine-steps. You've now created a blueprint to optimize the value of your business. And you also have the certainty that you will capture the maximum value in your liquidity event. So, why must you think like a buyer to drive your EBITDA and enterprise value and how do you do that?

Well, the first thing that you do, and I referenced this in one of the earlier points is when you get your time back, you are finding new markets. These future markets, where you have a blue ocean. Better yet. To create a blue ocean why not create your own category? You know what they say? If it can't be number one in the category, create a brand-new category where you are number one.

So, you're now thinking like a buyer. A buyer doesn't want to have a business where you've maximized and you've extracted all the possible profits. Your buyer is spending a lot of money on your business today to make even more money tomorrow. And when you think like a buyer, you understand that it's a blue ocean, that a buyer wants to have. A buyer wants to walk in and know that you haven't extracted all the value from that blue ocean, because that's what your buyer is going to do.

The second thing that you're going to do when you think like a buyer is you're going to have proven results from your management team. And I'm not talking about results from a month or six months. I'm talking two or three years of proven results.

I'll share a quick story with you. At Embanet we brought in a management team, but we brought in the management team on the later side.

By the time we went to the liquidity event, we only had about a year of in-the-seat experience with the management team. And so we were partially successful.

Every buyer said to me, Jeffrey, you have a terrific management team. Yes, they're talented. And they're smart. But you only have one year of results. If you would have had three to five years of proven results that really would have helped your enterprise value. We're going to have to penalize you on your enterprise value because you don't have the seat time with your management team.

So, when you think like a buyer and you start doing that today. And that's a wonderful thing about preparation. When you do the preparation at a leisurely pace, you're not sacrificing your health, your time, and your money. Because you're doing it in a way that works for you and your team. And when you show up for your liquidity event, you are fully prepared and you have those proven results that you can get things done. You get those things going.

Everyone is a winner. The buyer absolutely loves that because here's the thing. A buyer doesn't want to believe. A buyer wants to know with certainty that what you're saying is true. And the only way that you can show something with certainty is when you have years and years of the data.

And those key metrics that we talked about in point number four, with your rich culture. That's the data that a buyer is looking for. And at the same time when you're thinking like a buyer and you're putting that hat of a buyer on and you're tuning into WII.FM, it makes it easier to both find those skeletons in the closet and remove them. And also taking those hidden Rembrandts in the attic and putting them out for public display.

So, let's do a recap here. Now that we've talked about all five reasons of why you'll be more successful when your business runs without you.

So, the first point was having your business run without you, so you can find and solve new painful problems. This is where you have a management team that runs the business day-to-day. This allows you to work on the business and not in the business. And when you get your time back, you're focusing on solving new, painful problems that will help you create a market disruption.

The second point is why you'll increase your enterprise value when you take the time to listen to key stakeholders. And for point number two, you'll recall, we talked about the one and only question to ask. What's keeping you up at nights? You're not bogged down in the day-to-day. So, you have the time to ask that question. And then at the same time, you can delegate to your management team and your employees, the implementation of that solution. And you also have the time to listen to your employees who are also a key stakeholder but often overlooked.

You can find out what's working for them. You can find out what's not working for them. And ensure that everything gets changed so that they're happy and you can remove the roadblocks for them.

Point number three, have your business run without you to ensure you're not the smartest person in the room. You want to ensure that your management team is smarter than you. You want to be absolutely ruthless in removing B and C players. And with all of the smart people in your business, they can help you create that vision so that they can execute on that.

Point number four, we talked about why you must enrich your company culture. If you want to dominate and win. And a rich company culture has accountability at the core of it. With that accountability, you've identified key metrics that everyone works towards. And the culture that you build around the business is focused on the business itself and not you.

And the fifth point is why you must think like a buyer to drive EBITDA and enterprise value. And here we talked about creating blue oceans. Having proven results from a management team that runs the business. And last, but certainly, not least is finding those skeletons in the closet and removing them as well as finding those hidden Rembrandts in the attic and putting them out for public display.

So, there you go. Those are the five reasons why you'll be more successful when your business runs without you.

And if you liked what you heard and you want to learn more, come visit us. Come to the website, DeepWealth.Com and learn more about the 90-day Deep Wealth Experience. This is where we walk you through the same nine-step roadmap that I created for my nine-figure exit. You have the strategies and the tactics. You're involved with a mastermind group of people who aren't your competitors, but they're business owners who like yourself are both successful and are looking to have a liquidity event.

And then at the same time, you have a success coach. You learn and master each of them nine-steps so that you do two things. Number one, you build a blueprint to optimize the value in your business. And the second thing is that you now have certainty that you'll capture the maximum value in your business.

You're going to be saying no to that $11 million offer that I used in my earlier example. And knowing that there's better offers out there that may be $70 million or even higher for you, you have the certainty because when it comes to your liquidity event, you can't believe you have to absolutely know.

For most business owners, a liquidity event is the single most important, largest financial decision they will make in their lifetime. So, you want to make sure that you're making the right decision and the nine-step roadmap of preparation, that's what you need to protect yourself and to optimize your enterprise value.

So, as always, thank you so much for taking time out of your day to listen to the Sell My Business Podcast. It's your time that you can't replace. You can always make more money. But time you can't. So, thank you for spending time with me. If you enjoy this podcast, please head over to Apple Podcasts and give us a review. I'd love to see a five-star review sharing with the world, the value that you're receiving because let's go on a mission together.

Whereas business owners, we can help each other. We can be a resource for each other. We can protect each other. After all, it's us business owners who are the ones that make the world go around. We're the dreamers. We're the doers. We're the ones that transform impossible into I'm possible.

So, once again thank you so much for your time today and as always please stay healthy and safe.