"Businesses fail because they lack a proven and powerful business model." - Jeffrey Feldberg
Jeffrey Feldberg is the co-founder of Deep Wealth. The M&A journey for Jeffrey began when he said "no" to a 7-figure and "yes" to mastering the art and science o...
"Businesses fail because they lack a proven and powerful business model." - Jeffrey Feldberg
Jeffrey Feldberg is the co-founder of Deep Wealth. The M&A journey for Jeffrey began when he said "no" to a 7-figure and "yes" to mastering the art and science of a liquidity event. Two years later, Jeffrey said "yes" to a 9-figure offer. During the process, Jeffrey increased his company value by 10X.
How did Jeffrey increase his company value 10X and go to a 9-figure liquidity event?
Jeffrey created a 9-step roadmap on how to prepare for a liquidity event.
The Deep Wealth Experience has you learn the 9-steps of preparation in 90-days. At the end of the 90-day,s you create a blueprint to help you optimize your business value. You also have the certainty of capturing the maximum value for your liquidity event.
This podcast is brought to you by Deep Wealth.
When it comes to your liquidity event, you have one chance to get it right, and you better make it count. Enterprise value is created from preparation and not the event itself.
Learn how the Deep Wealth Experience helps you maximize enterprise value. Master the same strategies our founders used to increase their company value by 10X.
Access the same 9-step road map of preparation that paves the way for success. Enjoy the certainty that you'll capture the maximum value on your liquidity event.
Click here to book your free exploratory call.
Enjoy the interview!
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This podcast is brought to you by the Deep Wealth Experience. In the world of mergers and acquisitions, 90% of deals fail. Of the successful deals, business owners leave millions of dollars on the deal table.
Who are we and how do we know? We're the 9-figure exit guys. We said "no" to a 7-figure offer. Two years later, we said "yes" to a 9-figure offer. In the process, we increased the value of our company by 10X.
During our liquidity event journey, we created a 9-step road map of preparation. It's the quality and depth of your preparation that increases your business value.
After our 9-figure liquidity event, we committed ourselves to help business owners dominate and win. The Deep Wealth Experience has you create a blueprint to optimize the value of your buisness.
Our solution is resilient, relentless, and gets results. Enjoy the certainty that you'll capture the maximum value on your liquidity event.
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Your liquidity event is the most important financial transaction of your life. You have one chance to get it right, and you better make it count.
But unfortunately, up to 90% of liquidity events fail. Think about all that time, money and effort wasted. Of the "successful" liquidity events, most business owners leave 50% to over 100% of their deal value in the buyer's pocket and don't even know it.
Our founders said "no" to a 7-figure offer and "yes" to a 9-figure offer less than two years later.
Don't become a statistic and make the fatal mistake of believing that the skills that built your business are the same ones for your liquidity event.
After all, how can you master something you've never done before?
Are you leaving millions on the table?
Learn how the 90-day Deep Wealth Experience and our 9-step roadmap helps you capture the maximum value for your liquidity event.
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Enjoy the interview!
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.
Unfortunately, most business owners are wrong. Your enterprise value is a direct result of the depth and quality of your preparation. Who are we and, how do we know? We're the 9-figure exit guys. We said "no" to a 7-figure offer. Two years later, we said "yes" to a 9-figure offer.
Despite having the same people, the same company, the same services, we increased our business value 10 times.
How did we do this? We spent millions of dollars and years of time to uncover strategies that level the playing field. The end result is the 12-week Deep Wealth Experience.
We've created a proprietary solution that is relentless, resilient, and gets results. Learn how to master the art and science of a liquidity event. We've leveraged the same strategies that took us from 7-figures to 9-figures.
The Deep Wealth Experience levels the playing field so you can dominate and win.
Book your free call today to find out if you have what it takes for the Deep Wealth Experience.
Visit www.deepwealth.com/success to book your free call.
Jeffrey Feldberg: [00:01:39] Welcome to episode 53 of the Sell My Business Podcast. Well for this podcast, we're once again, going to do a deep dive on a topic that should be near and dear to every business owner's heart. And that is strategies that will not only increase your EBITDA and your profits, but will also increase your enterprise value.
Now what's interesting about success is that success leaves clues. And when you look around in the marketplace today, what you'll find is that private equity is the talk of the town. Successful private equity firms are hitting it out of the park in terms of their performance, as well as their profits, their EBITDA, you name it, they're really doing everything right.
So, for this podcast, let's do a deep dive on the five best private equity strategies that you really need to know. And before we start with those strategies, I know that some of you are thinking, well, wait a minute, I don't have that sophistication of a private equity firm. How can this apply to me? Stop that thinking. You have a successful business. You are a builder, you are a creator.
You have a lot to talk about. And the wonderful thing about strategies is that you can take them, make them your own, internalize them, and between yourself and your team, you can look to get things going. What do you do if you want to be successful? Well, you find someone who's really successful and you do everything that they're doing.
And if you don't want to fail, what do you do? Well, you'll find someone who's failed and do the exact opposite. So, without a mind, let's talk about the five best private equity strategies that you really need to know.
For strategy, number one, it's a proven and powerful business model that unlocks both EBITDA and enterprise value.
Now I know what you may be thinking. Jeffrey, look, I have a terrific business model. There's nothing wrong with it. It's been with me for years. What's there to talk about. It's the same old, same old. Well, not really. In fact, in the Deep Wealth Experience in our nine-step roadmap, step number two, it's all about X-Factors that insanely increased your enterprise value.
And one of those X-Factors is the business model. I wrote an article a while back, it's called your business model sucks and what you can do about it. And all teasing and joking aside. Sadly, this is the truth for most business owners. Most business owners do not have a strong business model. So, what do you need to do to have a powerful business model that unlocks both EBITDA and enterprise value?
Well, there are three key things that you want to look to in your business model. I'll name, what those three things are, and then I'll talk about each of them. So, the three things are for a powerful business model is number one, recurring revenue. Number two long-term contracts. And then number three, the holy grail of them all, revenue sharing.
So, why are all three of those important? What do those mean and how should he be doing this? A powerful foundation for a business model is recurring revenue. So, how do we define recurring revenue? Well, recurring revenue is revenue that you can count on that's coming in in a specific period of time. And if you think about this, you're probably already doing this.
If you subscribe to a music service, you're being charged on a monthly basis. You know, and the music service company knows that on a certain day of each month, you're paying them to use their service. Well, what's so good about recurring revenue? Recurring revenue means that you now have the predictability of what your cash flow is going to be like.
And with that predictability, you can do all kinds of things around financial forecast and building things out for your business. Let's compare recurring revenue to the traditional business model. You don't know when your customer is going to be coming back. Or is your customer even coming back? This is the thing you don't know.
Perhaps they'll come back this month. Maybe they'll come back next month, but maybe they won't. Maybe it'll be six months. There's no commitment on either side. And while that's happening, it's a great opportunity for your competition to swoop in and steal your customer. With recurring revenue, both parties now know exactly what's happening.
What's going to be paid. And when it's happening. And for your clients, I always like to tune into WII.FM, your client's favorite radio station. The What's In It For Me radio station. A recurring revenue model is a big service to them as well. Because your client now knows what's going to be spent in a given year or quarter or month. And your client, like you, can also begin to do all kinds of financial forecasts.
So, there are no surprises. It's a soft commitment between the client and your business and your business to your client. And it's the beginning of a powerful business model. But let's not stop at recurring revenue. Let's take it to the next level. So, it's great that you have recurring revenue, but now what you need to do is to have long-term contracts.
What's the benefit of a long-term contract? Well, it's obvious. Both you and the client are locked in for a set period of time. And in fact, if you can transform your long-term contracts into exclusive contracts, that's even better. Now your client can not go to any other company for the product or service that you're providing.
So, again, why are long-term contracts important? Well with recurring revenue, you now have a basis of what your cash flow is going to be. You know that month over month, but with a long-term contract, you can now know that year over year. So, let's combine the two now. You have the predictability of the recurring revenue.
You have the predictability of the long-term contracts. When you're looking to grow your company and expand, you have a sense of what your revenues are going to be years in advance. What an advantage that is on the planning side, relative to where you're likely right now. Are your customers coming back this month?
Are they going to come back next year or the year after? You don't know this takes that off the table. But then the holy grail, the third part of a proven and powerful business model is revenue sharing. And this is where you're providing such a high-value proposition to your client that your client agrees to have you share the revenue.
And when you do revenue sharing, there's a subtle, but incredibly important change that happens. In the mind of your client, you are no longer a vendor or a supplier. Personally, I've never liked the word vendor. I think it doesn't do any service in regards to the kind of value that we offer our clients.
When you revenue share, you now become a trusted partner. It's not that you're going to own a percentage of your client's business, but you are going to have a percentage of the revenue. So, the question becomes, why would a client look to do revenue sharing with you? And it's a terrific question.
On paper, revenue sharing sounds wonderful. In reality, to implement revenue sharing, that's a whole other story. And it goes back to the heart of being what a business owner is really all about. As business owners, we find and solve the very painful problems that people are only too happy to pay us to solve and take their pain away. So, let me share a quick story.
When I started my e-learning company Embanet, we kept the students in the seats. We did this through our technical support. We did this through our course conversion and a number of support services. But when I was looking around for the next painful problem, and there's a whole story behind the story about this, but what emerged was that my customers, which are universities were having problems, filling the seats. In other words, they couldn't find the students to enroll in the programs. They're having marketing issues. So, I pivoted I created Embanet two. And what this new division did was it worked with universities to not only keep the seats filled, but to fill the seats in the first place.
And the value proposition that I went back to the universities was, let me do everything for you. I will do all the marketing, all the course conversion, the hosting, the technical support. I'm not going to charge you a dime. I'm going to absorb all of those costs. So, the very first student that enrolls in the program, the university is already profitable.
They've had no expenses. I've picked up the tab for everything. So, to the university, this was an incredibly important value proposition. Think about it. Let's tune intoWII.FM from the university's perspective. My clients had zero risk. They weren't spending a dime. That was coming all out of my company bank account and not theirs.
So, for them, they had more to lose by not working with me then working with me. And in that example, it made a lot of sense for them to do revenue sharing. And because I was solving such a painful problem, I went back to point number two, long-term contracts. And I ensured that I had an exclusive contract for 10 years.
Again, most universities in their wildest dreams would never think of having a 10-year exclusive contract. In fact, when Embanet first came up with this idea, everybody thought we lost it, that we were crazy. Why would a University do it? Well, the answer is the university would do it because they had a painful problem that they did not know how to solve and Embanet solved that problem.
And then I circled back to the first point of a business model of recurring revenue. Every time a student took another course, well, that's recurring revenue. And there's revenue sharing between Embanet and the University. And I have to tell you that this change in the business model, it put Embanet one out of business.
Embanet two became larger than Embanet one. And looking back, I can safely share with you that Embanet one was a rounding error, both in revenue and profits relative to Embanet two. And if you're going to be put out of business, isn't it better that you're putting yourself out of business, so you can then get into a bigger and better business? And that's exactly what happens when you have this proven and powerful business model.
Now, private equity firms, they love this kind of business model. A private equity firm or your future buyer. For that matter, whether it's a strategic, a family office, a hybrid, all of the above, it doesn't really make a difference when your future buyer sees that you have recurring revenue, you have long-term contracts that are better yet, exclusive. And that you have revenue sharing. They love that because they now have predictability. They now have assurances that the customers are going to stick around for quite some time. And as a result of that, your enterprise value catapults to the next level. So, strategy number one is to implement a proven and powerful business model that unlocks both EBITDA and enterprise value.
Let's talk about strategy number two. Successful private equity firms have a strategy where they're going to look to have businesses that they're going to invest in that have tremendous growth potential. So, private equity strategies include having tremendous growth potential. So, what does this really mean practically speaking?
Well, number one, you want to be operating in a blue ocean. A while back a wonderful book was published called the Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. And you may have heard this said in different ways. If you can't be number one in a particular category, create a new category where you are number one.
So, a blue ocean strategy this is where you are the only one that's operating within that space. And let me go back to the Embanet example. Universities had many choices when it came to providers or dare, I use the word vendors that they could use to host their courses.
But there wasn't anybody that was doing all the filling of the seats and keeping the seats filled all in one solution, all with one company until Embanet came along. So, Embanet created its own blue ocean or its own category. There were no other competitors. And as a result of this we were solving such a painful problem that we could essentially call the shots in terms of what the business model looks like, how we're going to operate, and what's going to be done.
So, take this back into your own business. Most businesses are operating in what's called a red ocean. It's blood field from all the competition fighting it out with each other with lower prices, lower margins. All that competition and pressure is not good for business. It's great for the client, but it's not good for business.
And in reality, a red ocean, isn't great for the client either. Because when you think about it, when your margins are being compressed, you're no longer reinvesting in the business. You're not doing innovation that you should be doing. You're not bringing to the client new solutions that are going to make their lives easier, have them more profitable.
So, when you find a blue ocean, everyone wins. And before we leave the blue ocean concept, just in case you're wondering in the nine-step roadmap that we have a Deep Wealth, yes, a blue ocean is what we consider an X-Factor to insanely increase the enterprise value of your business. So, think about this for a moment.
Successful private equity firms that are finding these unique businesses to invest in. It's little wonder that they're successful. They are checking the boxes on all of the needed and relevant things that are going to make them successful and the company successful. There's two other points to private equity strategies, which include having tremendous growth potential.
And the second one, we call it different things. At Deep Wealth, we call this a hidden Rembrandt in the attic. This is something that you're world-class in, but you don't know that you're world-class in it. And so, for point number two, it's looking at and asking the question, what are you world-class in?
What are you doing that your competition isn't? What are you doing better than anybody else? And if you're doing it right, you're solving a painful problem. When you're world-class your competition it's very difficult for them to come in and copy you. Money can buy lots of things. Your competition can use money.
They can use their capital to copy the technology that you're doing. They can even copy the products and services that you're doing, but they cannot copy if you're world-class. Being world-class it goes back to business culture. That's a whole podcast in and of itself, but when you have the right culture, you have the right attitude and everyone's on the same page.
Your company becomes world-class in solving a painful problem. So, look around at what your world-class and you may not realize it when you find that hidden Rembrandt. Take that hidden Rembrandt and now put it out for public display. This is where you're telling your customers why you're, world-class. You're telling the marketplace, why you're world-class. Before you know it, your prospective customers will become customers when you talk about the world-class solution that you have to a very painful problem.
And then the third point, and this is one that's often overlooked by most business owners. It's simple, but don't confuse simple with simplicity. Are you in a growing marketplace? You can have a proven and powerful business model.
You can be in a blue ocean. You can even be world-class. But if the marketplace that you're in is limited or it's had its best days behind it, and it's simply not growing. Then openly, you're wasting your time. Ensuring that you're in a growing marketplace is absolutely essential for you to reap the rewards of doing all the things right in the strategies that we're talking about.
And that's a wrap on strategy number two, private equity strategies include having tremendous growth potential.
So, what's the third strategy that successful private equity firms use? Well, I'm glad you asked that question. At the heart of private equity strategies is a talented and proven management team.
And in the Deep Wealth Experience, we consider a talented and proven management team that is an X-Factor. Step number two. And let me ask you a question. It's a very simple question. Does your business run without you? In fact, it's so simple. I'll ask the question again. Does your business run without you?
For most business owners, the answer is no, it doesn't. Whether you have a business of five people or 500 people. We can all point to examples where the business owner or the founder is such a control freak, regardless of the size of the business, that the business does not run without him or her. And this is a classic mistake if you're thinking about having some kind of liquidity event.
So, point number one of the strategies is the business must absolutely run without you by having a talented and proven management team. And what's important about the management team. And this is a second point of the strategy is that the right management team will drive accountability.
Everyone's under the microscope. Nothing is hidden. Everything is up for grabs. Everyone is on the same page and working towards the same goal. And it's that accountability to doing the right things, having a terrific and rich culture. Making sure that you're having the right kind of business model. That you're in that blue ocean.
That's where accountability really starts. And for accountability, it can't just come from one person vis-a-vis you, the business owner. Accountability has to be throughout the entire organization. And the third point to this and private equity firms and your future buyer will absolutely look for this when it comes time to either invest in your business or buy your business. In addition to the CEO or president, who's running the company, do you have strong internal candidates as successors for the CEO? Your future buyer when evaluating your company is asking three things in his or her mind.
The first thing is, does this business run without you? Because your future buyer knows that once the deal is done and you've cashed that check, regardless of what you say, your mindset is going to be different. And the fact of the matter is that your future buyer may not even want you in the business. So, having a management team, having a CEO to run that company day in day out to ensure that your future buyer's investment is going to have a high return on investment is absolutely essential.
But at the same time, your future buyer is also going to be asking, well, what happens for whatever reason, if the CEO or president is no longer there? What kind of management team is in place? Is there a successor for somebody to run the company? And hopefully, there is because when you have that, you provide hope, you provide assurance, and you increase the enterprise value.
And so, when you do all those three things when you have a business that runs without you from a strong management team when you have a management team that drives accountability, and when you have strong internal candidates as successors for the CEO, your future buyer can check all the boxes of why it's a good reason to buy your company.
Now there's a fourth reason of why you want the business to run without you. When the business runs without you, you get back your time, you get your lifestyle back. After all, you likely started your business to have a very specific lifestyle that's meaningful to you. With your extra time, you can go back to doing what you do best. And that's finding new painful problems to solve that you're absolutely passionate about solving.
And when you do that, this is where you create market disruptions. You create a whole new blue ocean. You're doing all the right things to ensure that your business lives another day. And while you're at it, your revenues thrive. Your profits are going through the roof. And yes, your EBITDA and enterprise value are also significantly increasing.
So, having a talented and proven management team does so many things for you, including ensuring that your business has a bright and profitable future ahead of it. As we like to say at Deep Wealth, keep your business forever. It's thriving and profitable. Why not? Have a liquidity event tomorrow? They're both terrific choices.
And the point is you do have a choice. Either one is a great one. It's whatever makes sense for you. So, that wraps up strategy number three, at the heart of private equity strategies is a talented and proven management team.
Let's go-to strategy number four. And strategy number four is, is why a culture of accountability is a key ingredient for increasing enterprise value.
Now you may be saying, wait a minute, Jeffrey, you already talk about accountability in the proven management team. Well, yes, I did, but that was what the management team. Accountability and culture really go hand in hand. And it's such an essential ingredient ultimately for your business success. When you have a culture of accountability, three important things happen.
Number one, accountability is embedded in your company culture to eliminate arrogance. And yes, arrogance, no matter how successful of a business you have, can ruin your business. It can take you down. We can all look at former titans of business. These titans of business, they ruled the marketplace, they called the shots.
They were incredibly innovative. They were successful. They were powerful. But that success led to arrogance. And that arrogance caused those companies to take their eye off the ball. And they're no longer here. You know who they are. I know who they are. And it's such a tragedy when that happens. So, a culture of accountability eliminates arrogance.
The second thing that a culture of accountability does, it ensures that your entire company regularly reviews performance and makes adjustments. You know, it goes back to the old saying what gets measured is what gets done. And go back to your personal life for just a moment. On December 31st, how many people around you are making all these new year's resolutions?
And that's it, it stops. The next time they look at that resolution is a year later on the next December 31st. Absolutely nothing happens. I hope by the way that you're not one of those people because if you are, you know that again, what gets measured is what gets done. So, when you have regular performance reviews, you now have the ability to make adjustments.
We're talking perhaps one to three times a year. And this was where everyone from the CEO, all the way through to the receptionist. It's a performance review of what's going on. And because you have that culture of accountability, being able to point out blind spots, being able to point out weaknesses, it's not taking personally. In fact, it's expected.
And so when everyone reviews the performance on a regular basis and makes adjustments, your culture becomes better. Your offering becomes better, and you have a stronger company. So, when you have a culture of accountability, everyone expects a regular review and also expects to make performance adjustments on that review.
The third thing that a culture of accountability offers, it's an opportunity to survey your employees once or twice a year for their job satisfaction. Now there's a big difference between a performance review and an employee job satisfaction review. Here, we're turning the tables. In the performance review, we're talking with the employees about what's working and what's not working. When you do an employee survey. This is where the employees get to openly talk about what's working and not working in their particular job. We all know that the happier somebody is the better the performance is going to be.
So, why wouldn't we do this? Well, if we don't have a culture of accountability, the employees don't trust the leaders, the leaders don't trust the employees, and a vicious circle happens. But when you have accountability where everything is up for grabs. Everyone trusts each other. Now the employees have trust and faith that they can speak openly about what's working.
What's not working. And here you have a golden opportunity to hear it straight from the trenches of what's not working and what you can do to change it. Happy employees lead to happy customers, happy customers lead to happy employees, and you have a wonderful positive feedback loop. So, that's strategy number four that successful private equity firms follow of why a culture of accountability is a key ingredient for increasing enterprise value. And by the way, when we're talking about private equity firms, the culture of accountability is not only in the businesses that they're investing in. But it's also in their own culture of accountability. Successful private equity firms run a well-tuned operation.
They themselves hold themselves incredibly accountable for everything. And that actually ties in nicely to strategy number five. What strategy number five, you ask? Well, again, I'm glad you asked that. Strategy number five is why private equity strategies leverage a foundation of strong financial systems.
Now you may be saying, well, yes, of course, a private equity firm is all about financials. It makes sense that they're going to have a strong financial system, but as a business owner, I'm really not that strong in the financial systems. I don't really need to. I meet with my accountants once a year. We go through the year and reports and that's good enough.
Well, if that's the belief that you have, that's not really good enough. And the truth is when it comes time for your liquidity event, and this is step number three, number four, and number five in our nine-step roadmap, your future buyer and the due diligence process is going to be looking closely at financially how you're performing.
So, wouldn't it make sense that at the start you have strong financial systems that you can measure on your regular basis? So, let's talk about what makes a strong financial system. It sounds great, but practically speaking, what does that mean? Well, there's three things that make a strong financial system.
Number one, a strong financial system is something that measures specific key targets or key indicators that are known by all employees. So, again, from your frontline employees, all the way up to the CEO and yourself, everyone knows exactly what's being measured. Why? Well, what gets measured is what gets done.
People like to be on a team that's winning. And people like to have common goals. When everyone knows what those financial measures are, it makes it easy to rally the troops. You can measure this on a weekly, monthly, quarterly, and yearly basis. Everyone is in the know of not only what needs to happen, but why it needs to happen. And think about this for a second.
Let's leave the business world and let's go to the sports world for just a moment. We all probably know people who are really into sports. And they can tell you every single statistic about all the players and the teams and what's going on. Perhaps you're even one of them. When you have known statistics, it becomes very easy to have lively discussions about those statistics.
We see this in sports fans who will have these very passionate discussions on which team is the best or which player is the best or how this team is doing this time, this year compared to last year. Whatever it may be because there's a foundation of not financial measures, but in this case, performance measures.
Of how that sports team or how that sports player is doing. Well, it's the same thing. If we now take that back to the business world. Why not have lively conversations with everyone who's on the team about how the business is doing. Again, going back to strategy, number four, when you have a culture of accountability.
Where everything's in the open. It's not personal. Oh, look at this this week we didn't do as well as we did this time last year. Why? What's going on? Or this week we really hit it out of the park. We did two times better than we did this time last year. What happened? How can we replicate this? How can we do more of that?
So, when everyone knows the financial measures in the entire company, it makes for a much more successful company. Now the second part of a strong financial system is when your employees have the power to improve their own business performance. It goes back to what gets measured is what gets done. When your employees know what those financial measures are. When they're in that culture of accountability, where they're accountable for their own performance.
And then they have that autonomy, which is a key thing. They have that autonomy to make that change. It's like compound interest. It's a magical effect. The results of it are like nothing else. When everyone is making real time adjustments across the board, you have a business that cannot be stopped.
Your revenues will thrive. You'll get new customers. Your existing customers will absolutely love you. There'll be not customers they'll be raving fans. Your EBITDA increases and your enterprise value goes off the charts. This is everything that your future buyer wants to see. And it's part of your culture now where employees have that autonomy.
They know what to measure. They know that they can make those changes. That's where the magic happens in real time, day in, day out. And then the last part, the third part of a strong financial system. This is where you have opportunities for your employees to own shares in the company, or have a direct stake in the ultimate success or failure of the company.
It's at this point in the conversation that many business owners will say, hey, stop the presses I was with you up until now. But really having my employees own the company? That's just not going to happen. Or I can't do that. Well, listen, there's no right or wrong when it comes to your business, it's your business and you choose what you can do.
And when it comes to employee ownership, there's different flavors of that. Two flavors that come to mind is one that I mentioned where employees actually are business owners in the company. A certain percentage of the business is allocated for employee ownership. The second flavor is what's known as phantom shares.
At Embanet we did Phantom shares with our employees. So, Phantom shares are where you own shares, but it's not direct ownership in the company. You can't sell those shares. You can't trade those shares. When an employee leaves the company, they lose those phantom shares. But as long as they're in the company and they have those phantom shares, they now participate in the wellbeing of the company.
So, to Embanet, what we would do is at the end of each year, we would openly talk about the financial performance of the company. And bonuses would be given out. The more phantom shares that an employee owned, the larger, the bonus. And it created the same kind of effect of having ownership in the business.
And there's other variations of this it's really whatever works for you personally. But the important thing is that your employees feel that they have a stake in the company, that they have some ownership in the company, because when you own something, you have the impetus to not only take care of it, protected and ensure that the company grows and prospers.
So, when you circle back now to what makes a strong financial system, we spoke about firstly having open financial measures so that everybody in the business knows exactly those key metrics. We spoke about how employees have the power to improve their own business performance, based on those metrics.
And they have the autonomy to make those changes. And then we talked about some kind of ownership in the business. Whether it's direct ownership in the business, whether it's phantom shares in the business, or some other variation of that. Those all combined to make a strong financial system. And again, when you look back to private equity firms, which now today, as I record this podcast are some of the most successful businesses on the planet.
They all have incredibly strong financial systems. And if it's working for them, why can't we have that work for us as business owners? Remember success leaves clues. And when we see what's working for other business owners, regardless of whether it's a private equity firm or not, let's take that, make it our own, and put that into our own business.
So, let's do a quick recap here. In this episode, we did a deep dive on the five best private equity strategies that you really need to know. Strategy number one is having a proven and powerful business model that unlocks both EBITDA and enterprise value. And in that business model, we spoke about recurring revenue, long-term contracts, better yet long-term contracts with exclusivity, and revenue sharing.
Strategy number two is private equity strategies which include having tremendous growth potential. Now for growth potential, we spoke about operating in a blue ocean. Ensuring that you're world-class. Solving a painful problem. As well as ensuring that the marketplace that you're in is thriving and growing.
Strategy number three at the heart of private equity strategies is a talented and proven management team. Once again, we spoke about a powerful X-Factor that the business runs without you, that you have a talented and proven management team, and that the management team drives accountability. And that even within that management team, you have successors for your current CEO or president.
Strategy number four is all about why a culture of accountability is a key ingredient for increasing your enterprise value. And in the culture of accountability, we spoke about how this eliminates arrogance so that you can live another day. That culture of accountability ensures that everything is under the microscope to be discussed in a manner that's not personal.
It's all about the business. And the second thing that we spoke about was why having regular company reviews, regular performance reviews for the employees. And making adjustments in real-time is essential. And rounding that out was why it's so important to have regular employee surveys once or twice a year for their job satisfaction.
What's working. Do more of that. What's not working. Do less of that and change that. And then the fifth strategy that private equity firms use of why private equity strategies that leverage a foundation of strong financial systems. And in this fifth strategy, we spoke about how it's so important that the entire company, that every employee knows what your key financial metrics are. That you have an open book.
We also spoke about why employees must have the autonomy to improve and increase their own business performance. And we rounded things out of having opportunities for your employees to own the business. Whether that's direct ownership, whether that's phantom shares, or some other variation of that. You know, what's interesting about all these strategies that successful private equities firms use.
These same strategies are the foundation of what we talk about at Deep Wealth with our nine-step roadmap. And you may recall when I was running Embanet, I had that proverbial knock at the door from a very sophisticated, smart and experienced buyer who gave me a seven-figure offer. I said no to that offer, much to the surprise of everyone around me, and spent the next two years to develop what we now call the nine-step road map. And two years later, I said yes, to a nine-figure offer. To this day it never ceases to amaze me how the nine steps of preparation made all the difference in going from a seven figure offer to a nine-figure offer. And this is what gets me out of bed every day. This is now my mission in life to help pay it forward to other business owners, to ensure that they don't become a statistic.
Here's two statistics, speaking of statistics for you. Depending on who you speak to up to 90% of liquidity events fail. And of those few successful liquidity events, anywhere from 50% to over 100% of the deal value is left in the pocket of the future buyer. This is your hard-earned money that we're talking about.
And so now what we do at Deep Wealth with our nine-step roadmap is we have a 90-day system, a proven system that helps you master the nine steps of preparation. And when you come out of that Deep Wealth Experience on the 91st day, You've created a blueprint of how to optimize value in your business.
And you also have the certainty that you'll capture the maximum value in your liquidity event. Why not become part of the Deep Wealth community and join us in the Deep Wealth Experience? You have access to the same strategies, the same playbook that I used at Embanet. You're part of a powerful mastermind group and you have a success coach to walk you through step by step by step, every step of the way where the only silly question is the one that never gets asked.
Your liquidity event is likely the most important and largest business transaction that you'll ever do in your life. Why not put the odds, not only in your favor, but tilt the playing field in your favor for your liquidity event, to make sure that you capture that maximum value?
Coming over to the DeepWealth.Com website. There, you can see what we're all about. You can also take the opportunity to have a free consultative call, to learn where you're at and how we can help you achieve your goals. It would be our pleasure and honor to have that conversation with you. So, as we wrap up this podcast, as we wrap up episode number 53, I have one request for you.
If you found value. If you liked what you heard, please go to Apple podcasts and leave a review. The more reviews we have, the more we can increase the community at Deep Wealth. Get the word out to other business owners that you don't have to be a statistic. You can learn these valuable strategies and insights that we talk about here on the Sell My Business Podcast so that you can tilt the playing field to your advantage.
So, with that said, we'll close out this podcast and I want to thank you. Thank you so much for part of your time today, to listen to this podcast. You know, your currency is not money. You can always make more money. Your currency is time. And the fact that you spent time with me today on the podcast, I'm grateful for that day.
A heartfelt thank you. And on that note, I'm going to wish you all the very best and please stay healthy and safe. Thank you.