The Unofficial Shopify Podcast

Selling Your Online Business

Episode Summary

From someone who's been there

Episode Notes

Elaine is an advisor at Quiet Light where she helps online-based businesses exit. She has a background in e-commerce and a track record of success in online business. She started her first profitable eCommerce business on Etsy in 2009 and has built 3 more businesses since, including a content site, an online subscription service, and a multi-million dollar fitness eCommerce brand that she exited through Quiet Light before joining their team as an advisor.

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Episode Transcription

The Unofficial Shopify Podcast

Kurt Elster: Today on The Unofficial Shopify Podcast, I want to talk to you about selling your business. Do you have a business for sale? Have you considered selling your business? Have you seen friends get these big payouts and then go out and buy Lambos and it’s very exciting and you’re jealous? Certainly, we all have that dream. We all flirt. At the very least, I think we all flirt with the idea of selling our business, of getting that big, exciting payout. And of course, that has its own issues of like, “Well, now what do I do?”

But beyond that, you’re curious about it. I know you are. You want the big payday, right? And so, today on The Unofficial Shopify Podcast, we are joined by a guest who has been there, done that, and now works to help others sell their businesses. We met in Miami Beach at Ezra Firestone’s Blue Ribbon Mastermind and she is a wealth of knowledge and experience, and so we are joined today by Elaine Eason, an advisor at Quiet Light, where she helps online-based businesses exit.

By the way, exit, that’s not because there’s a fire. That’s code. That’s business buzzword code for sell. I’m your host, Kurt Elster.

Ezra Firestone Sound Board Clip: Tech Nasty!

Kurt Elster: And this is The Unofficial Shopify Podcast. Elaine, welcome. Thank you for joining us.

Elaine Eason: Thank you so much for that intro, Kurt. Happy to be here.

Kurt Elster: My pleasure. You know, that one… It almost got away from me, but it’s only because I’m excited and I have COVID. That’s right. This is the first COVID-positive episode of The Unofficial Shopify Podcast.

Elaine Eason: Yikes. Yeah.

Sound Board: Eww!

Kurt Elster: At the moment, I’m asymptomatic and I credit the variety of boosters and vaccines, et cetera, that I’ve got, so hooray. I’m safely at home. Anyway, I just thought I’d throw that out there. It was top of mind. Elaine, how you doing?

Elaine Eason: I’m good. I’m good. How are you, Kurt? I mean, aside from having COVID, how are you feeling?

Kurt Elster: You know, I feel totally fine. A not great 48 hours and now I’m good, so let’s hope it stays that way. Fingers crossed. So, tell me what you do currently.

Elaine Eason: Yeah, so right now I am an advisor with Quiet Light, so I help sellers exit their business. If you’re ready to sell or if you’re just thinking about it and wanting to plan ahead of time, I’ll meet with the sellers and kind of guide them through that process and give them an idea of what to expect.

Kurt Elster: What is Quiet Light, exactly?

Elaine Eason: So, Quiet Light is an online business brokerage, and we sell all different types of online businesses. Anything from a SaaS business, a content site, an eCommerce site. We’ve been in the space for 15 years and represent the sell side through these transactions, so if you have an online business and you want to exit, you want to do something else, you meet with us, and we can walk you through that process and get your business sold.

Kurt Elster: And why do we call it exit? Doesn’t that seem like an odd term?

Elaine Eason: I think that’s just kind of like a sexy buzzword. You’re like, “Oh, I exited my business.” More than anything, really it’s a sale just like selling real estate or any other asset.

Kurt Elster: I think that’s why it seems odd to me. It’s like I didn’t exit my house. If I said I exited my house, you’d be like, “Where’d you go?”

Elaine Eason: I feel like it’s from startup culture, but I really don’t know.

Kurt Elster: It’s one of those things that’s always quietly bounced around the back of my head. So, how did you come to do this? How did you end up at Quiet Light?

Elaine Eason: Yeah, so I am an entrepreneur, eCommerce owner, former eCommerce business owner at this point myself, and I got connected with Quiet Light after selling my eCommerce business through them. I ran a health and fitness online eCommerce store primarily through Shopify for five years, and I sold it with Quiet Light a year ago and joined their team shortly after that.

Kurt Elster: And what did you sell? Wasn’t it like aerial stuff?

Elaine Eason: Yes, yes, so aerial yoga, circus arts equipment, yoga equipment. That was our niche.

Kurt Elster: It’s pretty cool. If people aren’t familiar with it, aerial is like the ropes… How would you describe it?

Elaine Eason: Yeah, it’s like-

Kurt Elster: I looked at it. It was super cool.

Elaine Eason: It’s fun and it’s a great workout and it actually can be easier than you think. So, it looks really intimidating, I know. If you’ve been to Cirque du Soleil and you’ve seen the aerial silks artists that hang from the fabric from the ceiling, that is really what it’s all derived from is this art of aerial silks, but our business really started as an aerial yoga company, so it’s taking that fabric and applying it to yoga. So, it’s used as a prop that you can lay in, meditate in, use as a stretching apparatus, and it makes it really accessible just for everyday folks. Anyone from kids to seniors can do it.

Kurt Elster: It’s super cool. And so, you had an eCommerce business in this space, multimillion dollar business, and you were able to sell it through Quiet Light?

Elaine Eason: Yeah. Yeah, so I started that business because I wanted to be a digital nomad and live the digital nomad life. That was my inspiration for kind of behind it. Aside from my own personal love of it, it was like, “How do I…” It was a goal of mine also to be able to travel and do what I wanted with my time, to have financial freedom, but I didn’t know when I started that business that selling it was even an option. I was just building it for the sake of building a business and building income for myself. And then I found out at a conference that there’s this whole world of exiting your business, that it’s worth money, and I can get a lump payout and be done. That was really, really eye opening for me.

I didn’t sell then. I wasn’t at a point where financially it made sense at that point. But that was in the back of my mind and as the business grew it got to a point that I wasn’t the right person to manage that. I didn’t have ambitions to manage a big team. That wasn’t my strong set. It wasn’t my skill to have a giant company and I just didn’t want that responsibility. The point came where I knew that it was like I don’t want to do this anymore, this has become too much for me, and I chose Quiet Light to sell it.

Kurt Elster: And so, you had learned in the past… You knew this was an option, that there were services available, there were people out there willing to help you sell a business and willing to buy a business if it was the right fit, and then so later, the time came where you just… You knew it was the right time. You sold the business. And then I think there’s this issue after you sell a business where you go, “Well, now what? What do I do?” And so, you ended up working for the people who bought it?

Elaine Eason: Not the people who bought it but for Quiet Light.

Kurt Elster: For the broker.

Elaine Eason: Yes, the brokerage, so that was kind of a twist of events. That wasn’t on my agenda when I went out to sell it. I was just ready to be done. I was like, “This is enough money where it makes sense for me to exit, and I can be done, and I’ll figure it out later.” That was my mindset, was I was burnt out. You know, COVID was rough anyone in eCommerce knows. It was wonderful and terrible at the same time for a business and very stressful, and that’s really what killed me, killed my motivation to keep going. And you know, any seller that’s been in that point, when you know, you know when it’s time to sell. If you don’t know that, if it doesn’t feel like the right time, it’s not. You’re not there yet. But at some point it will be the right time and… Yeah, I couldn’t keep going.

So, I chose Quiet Light because I met with them, and I loved how really hands-on they were, and they really dug into the details of the business. Not just the numbers, but like what are we doing? What specific aspects of the business would be hard to sell? What are gonna turn buyers away? What can I improve? And they helped me make that roadmap, because when I first talked to them I wasn’t in the position where it was ready. It took me about six months to get there. But they really guided me through the process, and I was really impressed with them that when I went through the process, it just so happened that they were hiring at the time and they were like, “Hey, Elaine, you’ve been so wonderful to work with.” I’m like, “Okay. I don’t know that I…” I hadn’t been thinking about this as even an option, but it seemed like a really, really cool opportunity and I’ve been loving it because it’s just… It’s so wonderful to be able to help other sellers, to learn about what people are doing, and just… No matter whatever someone’s business is, everyone has their own unique experience and it’s so cool to hear people’s stories and how they’ve gotten to that point.

Kurt Elster: Oh, absolutely. As someone who has made a living of talking to people about exactly that topic, I absolutely agree with you. It does make sense to have you available as a resource at this brokerage having been through this experience. I mean, who better an advocate than someone who has lived it themselves? When you sold your business and you went through this process, what was the thing that surprised you about it?

Elaine Eason: I was warned going into this that, but it still was something I had to overcome, is that it really is very emotionally draining, the process of selling. You know, you put so much of your time and effort into building this business and it’s like I’m really proud of this business, and going through this process, meeting with buyers, it’s a lot. You’re getting questioned about everything. Nothing is guaranteed. There’s always twists and turns. Now on the advisor side I see that. Every single deal, there’s some kind of twist or turn. It’s like you really… It’s a mental roller coaster.

Kurt Elster: It seems that way. But at the same time, it seems achievable, because I’ve heard similar things from people who have all successfully sold and gotten paid. But were also like, “Man, that was harder than I thought.”

Elaine Eason: Yeah. Yeah. I think the mindset you have to have going into it is you have to realize this is gonna be crazy. It’s like don’t count your chickens before they hatch. And also, that almost anything is over… You can get over it. You know, you’re gonna encounter hurdles but will get over it. You have to kind of go in with that optimistic mindset knowing it’ll be issues and knowing that there will be solutions.

Kurt Elster: Yeah, certainly if you set your… I think if you set your expectations at this is going to be hard, but it should be. I mean, the potential here is like big payout for this thing you’ve built, but you’ve invested your soul, your time, and your resources, and your mental energy into this business. None of what you’re saying should be a surprise to people who are building a business, right? So, we started… I think that brings us into the process. What does this process look like? I’ve put my shingle out and now years later I go, I get a for sale sign at Home Depot, and I hang that on the shingle, and now I’m good?

Elaine Eason: Yeah.

Kurt Elster: What’s the process here?

Elaine Eason: If only it was that easy, Kurt. Yeah. I mean, so you can try and sell it on your own or you can list with a brokerage. You certainly can go on your own, reach out to aggregators, and see if you can get a good offer. That makes sense for you and people exit like that, they’re happy, and they have good experiences, but you can also go that route and have a really bad experience. You know, if you’re talking to an aggregator, they know that you haven’t been through this process before. You don’t know what you’re doing. The chance that they’re gonna try and screw you, or take advantage of you, or not give you the best offer that you might otherwise get is higher than if you are working with a brokerage, working with a team of people that have been through this before.

So, if you go with a brokerage, you’re more likely gonna get a lot more eyes on the business, so that’s why I chose to work with Quiet Light as opposed to trying to sell it myself, because I’m definitely like a DIY-style entrepreneur in everything up to this point, but I recognized that look, this is a big transaction for my life, and I don’t want something to go totally haywire, and I definitely wanted that team of support to help me through it.

So, if you’re listing with a brokerage, say you’d come and contact me. We’d have a conversation just about your business and I’d give you approximate valuation, and walk you through those steps, so it’s about a 90-day process on average to sell with us, and it takes a few weeks to put together a marketing package together. Then we list it on the market, list it on our website, send it out to our email list, and then we handle buyer calls. Maybe on average a listing has six to eight buyer calls and gets three to four offers.

So, our goal as a brokerage is to get you as much competition as we can, as many offers as we can, to drive the maximum value, because the more people we have interested, the more likely we can get you the best terms and a buyer that you want to work with and you’re excited to work with and is the right fit that you see what you built going onto and being taken over by. That’s really important for a lot of sellers.

Kurt Elster: So, arbitrarily, 90 days for average sale, that seems quick to me. But I’m basing that on nothing. It just feels quick to me. Is that quick?

Elaine Eason: Yeah. I mean, this is quicker than a lot of other brokerages will tell you. That’s something that you’re gonna want to do your homework on if you’re considering different options is how long of a contract are they putting you under, because sometimes, unfortunately, some brokerages will quote you a really high price and tell you they can sell it for X amount, and then they get you under a really long contract and that doesn’t turn out to be true, and now they have you locked into an exclusive contract or some kind of payment structure that you would have to pay to get out of that, and you’re stuck running your business when you really wanted to sell it and get out. Until that ends or until they bring you an actually realistic offer which is a lot lower than what they told you up front, and just puts you in a bad position.

Kurt Elster: Oh, geez.

Elaine Eason: Yeah.

Kurt Elster: Well, and so the fear, if I sell it myself, the fear is I don’t necessarily know what I’m doing and I’m probably going… People who have bought businesses I imagine are… You’re gonna run into people who are fairly sophisticated and have done this before, and if I’ve never bought or sold a business before, my risk is they take advantage of my inexperience. At the same time, it sounds like if I get the wrong brokerage they overpromise and then underdeliver. So, like a similar thing can happen.

Elaine Eason: It really can. It really can. And the devil is in the details in these offers. You know, sometimes we’ll get a ton of offers and all of them will be around X price, and we just have this one offer that’s way higher, and it’s like what’s the chance that you would have found that going out on your own? It’s like we send it out to tens of thousands of buyers, it’s like it’s unlikely, so there is a very good chance that we will get you higher offers, but yeah, you do have to be careful who you work with because not all brokers have the same kind of buyer pool. Not all of them will give you the same time and attention. And not all of them will be up front and honest with you, unfortunately.

Kurt Elster: All right, so the closest thing I can relate to is buying or selling a house. That’s a large purchase and often you work with a broker, and there’s a… That’s I think a fair parallel.

Elaine Eason: Yeah.

Kurt Elster: And for the most part, we’re looking at price, but then there are also contingencies on the sale. In the case of selling a business is it always simply like we give you a cash offer, you get that cash, take it or leave it? Or are there more ways to structure these deals, more complexities than I’m aware of?

Elaine Eason: There can be a lot of complexity and that’s where it can be actually challenging sometimes to compare, because a lot of deals will have… Probably the most common types of deal terms will be something like a stability payment, which is a payment contingent on a business maintaining a certain revenue or income over a certain amount of time, and then you’d get paid this amount. You can also have different types of earn out structures, where you get paid, and these can also have many different types of terms. A percent of sales, a percent of the growth in your profit over amount of time, almost any which way you can structure it, you can structure an earn out based off of whatever the buyer perceives to be risk to be able to mitigate that on their side. But it can get really complex and hard to evaluate like what’s the likelihood that you’re gonna get paid this or that.

And that’s another reason it’s kind of helpful to work with a brokerage, is that you don’t… You have no idea if you’re selling to an aggregator or even sometimes individual buyers that are these smaller kind of roll-up companies that manage portfolios of brands, you have no idea what their track record is, how they’ve been to work with in the past. Have they decided to change the price on the eleventh hour before closing on you? Some of them really don’t have great reputations and working with them on a regular basis we track that and we kind of keep tabs of we like working with these groups, these people have been a little difficult in the past, et cetera, and can help kind of avoid those bad players out there, too.

Kurt Elster: Of the variety of deal structures for an eCommerce business, which do you think is the most common?

Elaine Eason: Yeah, it’s hard to say. I mean, what’s the most common? It depends. So, the most common right now in the last couple years has been cash for the most of it, and maybe if it’s an Amazon business that the Amazon aggregators are interested, maybe you’re getting like 80 cash up front, 20% in some kind of earn out structure. That’s been the most common, but we’ve also had just a lot of all cash deals. Seller financing has not been very popular in the last couple years. It’s been such a strong sellers’ market.

We’re seeing more and more of that in the last few months, but really it’s still fairly uncommon that we see much seller financing. It’s a lot of cash that’s been in the market, and so as the economy is shifting, things are a little bit uncertain right now.

Kurt Elster: I like the premise of an all cash deal. Who doesn’t? But in a recession… I know we’re not supposed to say that word. Walk me through seller financing, because I think if you end up in a recession, seller financing deals become more common, and I really only recently became aware of this. So, walk me through this idea of a seller-financed sale.

Elaine Eason: Yeah, so it can also be really variable, but in that… It’s much more common in the brick-and-mortar business world, so if you’re selling a gas station, or a hair salon, that’s way more common. In the eCom world, it hasn’t been as common, but it certainly does happen. So, you as a seller, you might hold a note on some portion of the business, and what we see most commonly is relatively small, so maybe like 15, 20% max, but it’s not… If there’s some case where it’s necessary it could be more. It could be up to like 40%, which would be really high, not very common, but it’s a possibility.

And you would get paid over time. So, it might be a five-year note. We usually try as a brokerage, it’s like I don’t want sellers to hold a long note, so try and keep it under five years. You know, just two to three years is really ideal. If you go beyond that, your risk as a seller is really high, and typically you agree on an interest rate. It’s typically pretty similar to the market rate and you may have different terms in there. The ability to pay it off at a certain year as agreed upon between you and the buyer.

Kurt Elster: So, I sell my business, but this is similar to a car loan. I’m going to hold… I’m financing the sale of my own business. So, instead of a lump sum payout, I’m maintaining partial ownership of the business and then they’re paying me back over time plus interest.

Elaine Eason: Yeah. Yeah. And some things that people will do to kind of protect yourself as a seller in those cases is you can get a personal guarantee on that loan, especially if you’re also… If there’s an SBA loan involved, they will help you with that process. And you can also hold something back, like maybe you’re holding the domain names back in escrow until that loan is fully paid off. There’s different things you can do to kind of mitigate your risk as a seller, but definitely limiting the term of that note would be the number one place I would start negotiating that.

Kurt Elster: Yeah, if it’s an eCommerce business where nothing is physical, necessarily, it does make it harder, because like what is the collateral there? I like a domain name idea. Of deal structures, are there any where you say you just avoid this? Don’t even consider this type of structure or contingency.

Elaine Eason: Yeah. I mean, that self-financing of a really big portion of the deal is probably what I would avoid. Seller financing more than 40% of your deal, I probably wouldn’t touch that. I really-

Kurt Elster: It’s just too much risk that you don’t see the rest of the payment?

Elaine Eason: Yeah. Yeah. Yeah, we-

Kurt Elster: And you’ve given up the business?

Elaine Eason: Yeah. Yeah. It’s like at a certain point it’s like, “Okay, well it just depends on your situation and why you’re selling.” But a lot of times it’s like sometimes it’s worth it for you to hold it yourself and just hire more help and make less money if you can do that than to sell it for really unfavorable terms, but it really depends on your situation and why you need to sell. In some cases, it’s like you need to sell and you’ll take what you can get, but if you can avoid it, I would.

Kurt Elster: Any other types of deals we should consider?

Elaine Eason: Let’s talk a little bit about SBA. I think that’s an important piece is the SBA financing, because it’s also a little bit trickier with the interest rates rising. It’s a little bit… You know, because the buyer is getting a loan that’s SBA backed, but it’s still a huge plus if you’re selling your business if it can get SBA qualified, because that 5Xes your buyer pool. There’s so many people that want to use leverage to buy the business, and we don’t like seller financing generally, so SBA is much better than seller financing, because you’re not involved. If you have an SBA transaction, you as a seller, you get paid at closing. You get paid your cash at closing. Unless you have a small amount of seller note built into that deal, you’re done at that point and you’re not having to wait on those payments in most situations.

Kurt Elster: And SBA, Small Business Administration, this is a U.S.-centric thing, correct?

Elaine Eason: Yes, so you have to have a U.S.-based company and it has to be typically three years old, and you have to have two years of tax returns that match your P&L to what you’re selling the business for.

Kurt Elster: And so, who is getting qualified by the SBA here? Is this something I should do in advance as preparation for a sale?

Elaine Eason: I think it’s just important to be aware of it if you know that you might possibly qualify. So, if you might possibly qualify being that you’re a U.S.-based business, it’s important that you don’t… you’re not too aggressive on your taxes, because I’ve had clients that otherwise would qualify but they wrote off too much on their taxes that they would have to amend their tax returns and pay a bunch of tax to be able to qualify for multiple years, and that’s just not realistic. No one’s gonna do that.

So, it’s important to understand what those requirements are, so I’d do a little bit of research on that and just have in the back of your mind and knowing that it’s gonna be your two years. You need to have decent growth trends in that time. But it’s not something you really can do anything about. It’s kind of like you qualify or you don’t and we as a brokerage will connect you with banks that we work with that do a lot of eCommerce SBA lending, because that’s another piece is that most banks will do SBA lending, but most banks don’t work with eCom regularly and don’t know the right questions to ask to give you a really fair valuation of that.

Kurt Elster: And valuation. That is the big keyword here and the thing people I’m sure are dying for us to get to. How do you value an eCom business?

Elaine Eason: Yeah. Yeah, for sure. It’s gonna be based off of your numbers first, so what is your trailing 12 months net income, and what other monetary benefits do you have? You add that together and that gets you your seller’s discretionary earnings, so that’s gonna be your net income, plus your salary, health insurance, writing off your car expenses, your personal meals, anything that entrepreneurs tend to write off that’s a discretionary expense or like a one-time expense, like let’s say you filed some patents. Those expenses get added back because the new owner is not realistically going to have to pay those fees again. That gives you your seller’s discretionary earnings.

And then we apply a multiple of that based off of factors we know that buyers are looking for or that turn buyers away. And we call those the four pillars of value, so those are your risk factors, the growth trends in the business, how transferable everything is that you’re doing, and then how well documented it is. The last pillar is documentation there.

So, it’s based off of your trailing 12 months, SDE, and then we assign that multiple and that can be really, really variable. We’ve seen a really wide range, especially in the last few months with the turbulent economy.

Kurt Elster: And so, what is that range typically?

Elaine Eason: Yeah. For a primarily Shopify-based business, you’re looking at probably two-and-a-half to 4X. If your seller’s discretionary earnings is maybe like 600K or under for the year, the trailing 12 months.

Kurt Elster: Okay. And how… Run me through again how we’re calculating trailing 12 months seller discretionary earnings?

Elaine Eason: So, it’s your last 12 months of profit and add back any of your discretionary or one-time expenses in that timeframe, like your salary, health insurance, car payments. Whatever is like a personal benefit to you that’s not gonna transfer to the new owner.

Kurt Elster: Okay, so some things that normally we’re deducting as business expenses but really are beneficial to the owner.

Elaine Eason: Yes.

Kurt Elster: So, it’s really it’s like deductible income, in a way.

Elaine Eason: Yes. Yes.

Kurt Elster: Okay. And then we’re gonna take that amount for the last trailing 12 months, so not year to date, not previous year, just the previous 12 months from whatever today’s date is, and then 2.5 to 4X. And then the range on that 2.5 to 4X we’re gonna determine based on how attractive this business is otherwise, subjectively? Risk factors, potential, and ease of transferability? So, like is this a turnkey thing or do we have a single keyman in existence here?

Elaine Eason: Yeah. And those things are huge. Those are the four pillars of value. The risk, growth, transferability and documentation. That’s actually a really, really big portion. If you want to go back to like buying a house analogy, it’s like is your foundation totally crap and this building’s gonna collapse in six months? Yeah, you’re making money now, but maybe there’s something like you have a key contract that is gonna expire in three months and then that’s 80% of your sales. It’s like there’s all of these little nuances that can add a ton of value or detract a ton of value as well. And that’s something if we meet together I’ll walk you through those pillars and exactly what falls into that.

So, it’s like okay, your risk factors, yeah, do you have any key customers? Do you have a dependency on a certain manufacturer? Is it just a really young business or is there a really old business that adds a lot of value? We walk through each one of those columns and I’ll kind of tell you, “Hey, these are your strengths. This is where buyers are gonna ask you questions. There are things that might be concerning.” And then out of that it’s like where do you need to focus on if you’re not ready to sell yet to maximize your value six months, a year, three years down the line? That way you have an idea what you need to do, and sometimes making those tweaks, like diversifying, say you have this one contract that you’re selling all of your products to. Getting more contracts in there, it's like getting more customers, diversifying that can add a ton of value when it comes to your exit.

Kurt Elster: As a broker, what’s the number one red flag you see where it just… it always jumps out at you and you go, “This is a big detractor that people miss.”

Elaine Eason: The number one thing I see when I’m talking to sellers is the financials, and that I think is the biggest danger of… I think people are losing out on a ton of value if they’re selling without using a brokerage, is that their financials are not in order. Because it’s probably 75% of sellers I talk to need some work on their financials. And it's very easy to just not focus on that. You’re focused on running your business. It’s understandable. But it’s something that you want to get fixed sooner than later and your books need to be on an accrual basis, accounting for your COGS correctly. That is the biggest piece that we work to correct and get updated because it makes a huge difference in your profitability, and it can go either way.

If you’ve bought all of your inventory two years ago and you’re just now, now this has gone viral and you’re selling a ton of it now, but you’re not actually accounting for any of that COGS in your trailing 12 months, your actual profitability is lower. And vice versa, if you’ve been buying a ton of inventory and your inventory has been delayed, and all this has been expensed on your books, your profitability is probably higher because you’re writing off all this inventory that you paid for and if you’re getting paid a multiple, you’re getting an offer for a multiple off of that SDE with all of this inventory that you have on your books, you’re gonna get paid way less than what it might otherwise be worth.

Kurt Elster: So, can we consider… If I’ve got all this inventory that I know I’m very probably going to be able to sell, we can count that in our profit?

Elaine Eason: So, the inventory needs to be taken out and put on an accrual basis, so I recommend hiring an eCommerce bookkeeper for that. You can use like A2X or Sellerboard if you’re looking for a software, but really hiring a bookkeeper, especially if you need to do some kind of historical cleanup is going to be the easiest way and the best way to keep it clean moving forward, because it will show you how’s your business actually doing. If you have your inventory, you have this $100,000 inventory payment in the month of May, it’s like that’s gonna look like you lost money in May, but you didn’t really lose money. That needs to be pulled out, put on your balance sheet, and adjusted so that whatever that true amount of inventory that you sold is being accounted for the COGS there, and then you’re gonna have probably a green month in May if you take that giant expense off your books.

Kurt Elster: When is the right time to sell? For the seller, it’s about mindset, like you knew during the pandemic you were not the right person to continue to scale the business. You were feeling burned out and so you knew for you that was the right time to sell. When is the right time to sell a business? Seasonally, mentally, I don’t know.

Elaine Eason: Yeah. Yeah. There’s definitely a few factors to think about. So, your personal goals and motivations I think comes first. It’s like I think that when you know, you know. It’s definitely time to start making a plan or get on it. Life happens. Sometimes there’s situations where you have to sell, and you’ll just know.

But otherwise, if you have the luxury of being able to plan ahead and really maximize that, you’re gonna want to think about the timing and not just seasonality, but also the lifecycle of your business timing, as well. You want to sell while your business is growing, not while it’s already kind of stagnated or declining, because that becomes a lot harder to sell. So, while your business is growing, that’s the time where if you’re a buyer looking at it, you’re like, “Wow, this thing is growing at X% rate. If I can just keep this stable or even if it declines a little bit, I’m still gonna be making my money back at X date or sooner.” Whereas when your business is declining they’re running those same calculations and they’re like, “Wow, this is kind of scary. Am I gonna be able to turn this around?”

Because there’s already the risk that you have as a buyer buying a business, thinking that you’re gonna be able to take this over and run it, and then you have the added risk of not only do I need to take it over and fill the seller’s shoes, I have to do better than the seller to turn it around to make my money back. Otherwise, this thing is gonna decline and it’s gonna take longer and longer and longer for me to see my return unless I make some big changes.

Kurt Elster: Now, it would seem to me… Some people see, they’re like, “Well, this business isn’t scaling anymore. I don’t know how to scale it. I’m bored. Time to sell.”

Elaine Eason: Yeah.

Kurt Elster: And that’s a much less attractive proposition.

Elaine Eason: Yeah.

Kurt Elster: But certainly I would imagine as long as… If I’m willing to take some haircut on the price, I can still sell the business.

Elaine Eason: Yeah. Yep.

Kurt Elster: Okay, but it’s just that you know it’s not ideal particularly here.

Elaine Eason: Yeah. Yeah. We see a lot of that. A lot of that. It’s a super common thing. It’s understandable. You’re burnt out because maybe you’re trying everything you can, or you’re just over it and you don’t want to try anything else, and so you’re like, “Let me sell this thing.” And that’s harder to sell. It is. So, your multiple is gonna be lower and even still it’s hard, and I’d say even if you’re coming from that position, I’d still be trying throughout this process to at least keep your sales steady or increase them if you can. When you decide to list a business, it’s not the time to kind of turn your attention on it. You have to keep going with running the business, with trying to grow it to a reasonable extent, because if your business is just slipping like crazy, if your sales are slipping like crazy through the sales process, it’s… You might get an offer. You might accept an offer. But the buyer could get cold feet if it looks like things are just going to zero real quick.

Kurt Elster: One of the things we’re familiar with, so I’ve bought and sold a lot of used cars, and you end up… You quickly discover people will do the goofiest things to cover up problems and make that car look better than it is, like got rust in your frame? Fill it with foam and spray paint it black. A quick glance, you probably won’t notice. And then, of course, the foam falls out and you’ve discovered you have a nightmare. This is window dressing. Certainly, in selling a business, window dressing exists. You have to be able to see right through that.

Elaine Eason: Yeah. Our philosophy at Quiet Light is to get ugly early. So, if there’s something that’s bad about your business or that’s gonna be a deterrent, you want to disclose that up front because if that comes out later, the buyer is gonna be thinking, “What else are they hiding? What else are they keeping from me?” So, you need to be really front and forthcoming with that, because if they see that right away, they’ll be like, “Oh yeah, that’s not great,” but they’re more likely to overlook it.

Kurt Elster: Yeah, so being up front with the issues like, “Hey, want you to know what’s going on here, these are the negatives,” just right away would immediately make one seem more trustworthy and put everyone at ease. What’s the most common window dressing that occurs here?

Elaine Eason: I think that the way to think about it for going back to the house analogy is when you sell a house, you want to do some degree of window dressing. You’re gonna go fix the landscaping. You’re gonna go patch the holes in the walls, et cetera. But you don’t want to do that as a seller for your business because a buyer is gonna see that as opportunity. It’s not the same as selling a house in that they’re going to see that as a room, something that’s really easy for them to fix, and they’re gonna be impressed. They’re like, “Oh my gosh. Elaine, you did X amount of sales with this crappy website, or you’re still using this app? This is crap. Nobody uses that anymore.” They’re gonna see opportunities in things that you might think are kind of pitfalls or something that you’re not doing well.

Kurt Elster: Continuing with our house sale analogy, certainly I have to pay my real estate broker for their efforts. What does a business broker typically cost me?

Elaine Eason: Yeah. We work on a sliding scale and it’s a success fee only, so we only get paid if we sell your business, so there’s no retainer, there’s no obligation to sell if we don’t get you good offers, so we try to make it relatively risk-free for the seller and also, that also keeps our interests aligned that we get paid a percent of what we sell it for, so we are motivated to sell it for maximum value, as well.

So, our fee structure is 15% on sale value from zero to $500,000 and it drops beyond that, so essentially you pay 10% if it’s a $1 million valuation and it drops to 9, 8, 7 at increments above that, so it really depends on how much it is that you’re selling for.

Kurt Elster: Elaine, do you ever miss your business?

Elaine Eason: I miss my team. That’s the only thing I really miss is I had some really, really amazing people that I was able to work with and you’re friends with your team at a certain point. That is really the only piece that I miss, because the day-to-day grind, I don’t miss that, and I feel like I still get… I’m still kind of in it in being able to talk to sellers and I still get a piece of it, but just from a little bit of a different perspective as an advisor.

Kurt Elster: Are you glad you sold?

Elaine Eason: So glad. No regrets.

Kurt Elster: Good. If I’m interested in selling my business, where can I go to learn more?

Elaine Eason: Yeah. Visit If you’re just kind of testing the waters, I definitely recommend checking out our learning tab on there. We have a lot of articles. We have a podcast. Different resources that explain in more detail different business structures and things that you might encounter. And you can also request a free evaluation on the website as well, or you can email me elaine at, and happy to have a conversation too.

Kurt Elster: That is fabulous. Elaine, thank you so much. This has been great. I have always… I’ve talked to business brokers in the past. This is the first time where I really feel like, okay, this… I have a much clearer picture of it. Things are really starting to click here, so I appreciate your approach and I think it’s helpful that you had been through the experience yourself and now provide this service to people in the same position you were in. And so, I don’t know, it makes it seem that much more accessible and real, so thank you so much. I appreciate it.

Elaine Eason: Thank you, Kurt. Glad to be here.

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