WealthTalk - money, wealth and personal finance.

Will You Walk Away Wealthy From Your Business?

Episode Summary

In today's episode we are joined by Dave Pearce who shares with us his knowledge which will help business owners. Make sure to tune in if you want to learn what steps you should be taking to make your business more valuable, in the event you want to sell.

Episode Notes

Most people that sell a business are first time sellers, and most people that buy are first time buyers. Very few people do lots of homework and research, especially those that are selling. There's also very often a massive disconnect between what's in a business owners head as to what they think the value of their business might be, to what a buyer will pay.

Dave Pearce is somebody who knows how to help business owners prepare to get better value when they decide they want to sell. In today’s episode you’ll learn what steps you should be thinking about to make your business more valuable in the event you wish to sell.

Featured Guest: Dave Pearce

Resources Mentioned In This Episode:

>> 6 Step Business Sales Process [Free Download]

>> Transworld Business Advisors

>> Episode 36: Women in Business Feat. Charlotte Pearce [Daughter of Dave Pearce]


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Episode Transcription

Unknown Speaker  0:01   The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.

Unknown Speaker  0:19  
Welcome to Episode 44 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders. And I'm joined very closely by my site today. Mr. Kevin Wayland founder.

Unknown Speaker  0:30  
I think this is the first Cruise is a double first today, I think, Well, yeah. It's not your degree qualification, is it? We have a double first double first is the first time we've done a joint interview. Yes, that's because we have a very special guest right every day. And second is this is the first time we've ever had on our podcast, the second part of the dad daughter combo. How about that? So what was the episode when Charlotte Pierce was on?

Unknown Speaker  0:56  
That was wealth talk 36 and that was women in business. Charlotte, who is the founder of ink Pat was one of our guests on the episode.

Unknown Speaker  1:04  
Yeah. And she did a great job and she is your dairy powerful, very, very enthusiastic lady going great guns. And I understand she's recently announced that she's planning to be married soon. So well congratulations to Charlotte and a proud dad to boot in date. Before we introduce today's guest, Kevin, what are we talking about today? Well, we're still in the business pillar. Chris. Right. So we're still focused on this idea of a business as an asset, but because of all the moving parts, people don't always understand that in the end, you know, with the business is always an exit plan. Now, people choose how to enter their business. You know, lots of reasons why people enter businesses, they don't like their boss. They want to do something on their own. You know, you can list all the reasons people get into business, but you know, the sad fact is Chris 95% of people in business don't have an exit plan. Yet they should have because if you think about it logically, everybody exits their business, everybody, like everybody exits a job, you know, it just has to happen. So if you know you're going to exit because you're either going to be ill, you're going to die, or you pass it on to your family, whether they can cope with it or not, or you pass it on to your employees, whether they can cope with it or not. Most people really leave it too late. They're ill prepared, don't have a well structured plan as a result, they don't capture the true value, in some respects is like having a property which you just let dilapidated bit you don't really get full value. What we have from Dave is somebody who knows how to help business owners prepare to get better value because he works in a business environment, which helps people do that and sell their business. So he has a real structure to how they do things. So Dave PS has been both a friend of colleague and client for many, many years is somebody I've got enormous amount of time for. So I wanted to be on this anyway, just because I like Dave so much. But also because I think with business, there might just be one or two questions that I could ask that would be helpful to get the most out of Dave's knowledge.

Unknown Speaker  3:17  
I reckon so. So why don't we bring Dave into the conversation, Dave, welcome to wealth talk.

Unknown Speaker  3:22  
Well, thank you very much, Chris. And thank you, Kevin. And thank you for those very kind

Unknown Speaker  3:26  
words. So Dave, would you like to just introduce yourself in the context of the conversation that we're about to have today, please?

Unknown Speaker  3:32  
Absolutely. I'll just roll the clock back a little bit and just say yes, a very proud father of Charlotte to you mentioned earlier and very excited about her upcoming wedding at some point not not sure what, what you better be. But yeah, obviously excited by that and immensely proud of her business achievements and a success to date. I'd like to say to that you bought the old block, but I think she's probably coaching me more than coaching her these days. But that's, that's that. And just in terms of myself, I spent a long time in the corporate world and then decided and actually quite closely linked to my first contact with Kevin actually left the corporate world and got into business for myself many years ago now. And we've known Kevin since then the involved in various different businesses a lot in the franchising sector, and some outside of the franchising sector. And the business that we're talking about today probably is business. I'm involved in both as a non executive director and an active broker effectively, and that's a business brokerage business called Transworld business advisors, which is based in central London.

Unknown Speaker  4:43  
Okay, and and picking up on some of the statistics that Kevin just shared. Dave, what's your perception of the industry when it comes to selling a business and how many people actually do manage to successfully exit?

Unknown Speaker  4:54  
Yeah, and I think that's a great question and something that we've been quite vocal about it world and exactly what Kevin said, most people, anytime they think about selling their businesses, when they want to sell their business literally when they want to put it on the market, or they have to sell it for whatever reason. People just aren't generally I'm talking obviously, very generally now there are exceptions to every rule. But generally people haven't given any thought. And they expect someone just to pop along and give them either a big suitcase full of money or in a deposit into their bank account for the value of businesses in their head. And 99% of the time, that's not what happens. And I think it's fair to say that most people who sell the business and most people that buy a business in interviews as well, it's the first time they've done it. So to wantons purposes. Most people that sell our first time sellers and most people that buy our first time buyers, and very few people do lots of homework and research either way around especially the best of the sellers. They just think that while context on Or I'll put my business on business for stale daltons or any of the, any of the aggregator sites and, and some will come along and they'll just, they'll just buy it from me. That's the sort of that's the norm. There are exceptions to that. People that have worked with, say, business coaches, or people who have gone through more development on how to get their business ready for sale, but they are in the minority, but there are people that do that, but the majority, the majority,

Unknown Speaker  6:25  
so don't given that, you know, most people are, I suppose, you know, they fall in love with their businesses, don't they? They almost say, Well, my baby, you know, my business is my child. It's like a child is like raising a child. And like, nobody likes to have an ugly child, I guess. But what's the point here, as far as business is concerned, is there's usually a huge difference in valuation or perception. Because of that fact that you've raised this business, you've seen all the hard times, you've seen the difficulty, and then there's a perception that the business somehow needs to recover. reflect the value you've put into it, rather than what's the value to the acquirer who needs something completely different and actually could care less about how hard you worked over the last 10 1520 years, what they want is some sort of certainty and predictability of income stream in exchange for the money. Why do you see the difference? What normally plays out is that that difference in terms of the valuation the buyer has and the valuation the seller has?

Unknown Speaker  7:27  
Yeah, I think to be honest, Kenny, you hit the nail on the head there and it very much is like you just said it. It's it's like the I think it was sent to me quite recently by someone who sold their business that it's like seeing your first child go off to university you know, it's going to happen at some point, but when it when it happens, it's a real shock, and almost even just getting ready for it. And like you said, there's a there's a massive disconnect between what's in the business owners head as to what they think the value value of the business might be awesome to pay for it to what buyer will pay. And quite often people forget that they may have had a business for 510 1520 years or whatever. And our businesses probably serve them quite well with it. So if it's the businesses still going after that time, and they've probably taken quite a decent income and revenue out of the business book for those years and years, they were probably very hard. And so people working 40 5060 7080 hours a week or whatever on their business, and what they think is that that should be reflected in in the asking price. But it actually means nothing. And I know it sounds quite harsh. But if you spent 8080 hours a week in your business the last five years, Mo you probably should restructure that was one thing, but no buyers going to pay for the fact that you've worked so hard in your business because they want to buy like you said the ongoing revenue stream or the the assets that are in the business, they're not going to by the time you spend in it. Now all the time you spent building it unless they can see some residual value in that also recurring income or some some assets. They can actually put a put a fence around say, Well, look, we can we know it's worth it's because of this calculation or because we've worked these numbers out, they they're not going to pay for all the hard work and effort, unfortunately. But that's that's how people view their business like like you say that the baby that's grown up and they love it they trace cherish it is probably been their life in lots of lots of times, especially for owner and the sort of managed businesses, they would only run businesses where the owners does a bit of everything. They tend to be more skewed in terms of what they think the value of the business is. And what they miss there is the fact that as soon as someone buys the business after you replace that person, because if the owner is the only person that's really doing anything or always controlling the majority, what happens to the business, and there's no leverage going on, and there's no no management structure. Quite often those businesses have quite a low value, which is very different than what the the owner of the value thinks is the case.

Unknown Speaker  9:58  
Yes. Very interesting. Isn't it? You know, you can almost see a number of threads here that are worth airing. So, you know, let's just touch on them. So the first thing, I think you're saying, Dave is, actually when you've got a business that has served you well over a long period of time, you it's been a lifestyle, you know, it's paid for the mortgage is got the kids through private school or whatever, or it's paid for university fees, but it served you and then at some point, gotta serve somebody else. So you know, it's almost like you had a lifestyle, hopefully, you've done well. But now for whatever reason, you want to move on? And what are the kind of reasons why why people want to move on rather than just continuing the lifestyle and just saying, well, it served me well. Why don't I just keep the business and and therefore, essentially buy it themselves and not sell it to anybody at all? Why don't they do that?

Unknown Speaker  10:51  
Yeah, well, actually, some, some do. And those tend to be the businesses where the owners have done a very, very good job in management itself. In the South Africa business and they've they've leveraged business very well, they've got a team in place, they've got a management structure. And they can sit back either as a non exec or a director that doesn't need to be hands on and they can pick and choose, it comes back to some of the some of the philosophies that you teach and preach Kevin about, about about leverage in business is no exception. So there are a few that do that. The majority, they sort of get to the end of the road, they either get to the point where they're dumb enough years that they just need out, they're done. They're just sort of done with it. Some people obviously sell because the business isn't doing as well. The business might need to refresh, it might need a fresh pair of eyes, it might need fresh thinking coming into it. Or there could be a changing circumstance quite often. That's the situation as well, where maybe the owner wants to go and live in a different part of the country, maybe a different country. Maybe there's been some kind of family challenge that they've encountered and that's another reason why business might be might be solving I said variety, but the best way Just the ones that we come across, tend to be, they've either got to the end of the road and that's what we've done with the business. And they want to reap the rewards of a few years worth of not working and taking the value out of the business and capitalising on their assets. And some people have actually done it on purpose. That makes sense. They've specifically built a business over a period of time to actually realise the asset, they've actually done it with that in mind that that's the minority rather than the majority, the majority, they started thinking about it literally when they want to sell it, and then have to then probably read retrack of it and, and change a few things, but there are there are exceptional people, more experienced business buyers, I would say they buy businesses, I restructure them, they, they they sort of take some costs down, they make the value better and they'll resell it on a bit like

Unknown Speaker  12:50  
you know, they can do with property, they'll flip the business, but that those people are doing it with with absolute intent and purpose to do this. And again, they're probably in the minority as To the traditional business owner that just says I want to I want to retire, I want to pack up and go and spend a few months or a few years and in the sunshine somewhere on the beach. Also, I can see there's lots of reasons including, you know, we can ever guarantee your health and relationships sometimes break up. I've seen people do that. That causes a challenge with a business, but lots of reasons. But I can see that despite those reasons, there's almost always whatever the reason is a fundamental mismatch between the value they think the business is worth and the value, if they're looking to sell either a portion or all of that business to an acquirer, then, which I understand why they would do because only an acquirer is going to pay potentially, anyway, a premium price, if they can get what they want. You're not going to get a premium from your kids and you're definitely not going to get a premium from your staff because nobody's going to buy it from you. So if the idea of selling can give you a premium The mismatch seems to me to be a fundamental tool, or fundamental tool that's needed to help people kind of get to a place where they're planning the value or they know the value. So if you think about a piece of property, Dave, you mentioned properties and asset. If you want to know the value of your property, it's pretty easy to go get it. Yeah, you know, if you want to know the value of your pension, you just look it up online, you know, you can see your stock market, you can see what it is today. And you can look it up online. How the hell do you get a valuation of a business that somebody put their time energy and effort in and built it, you know, through the trials and trips like a, like a child growing up? How the hell do you put a valuation on the business? I mean, what is that formula and, and where do they get the idea from what they think it's worth? And then be what happens when they suddenly have to wrestle with the fact that there is some kind of formula to it and how does that work?

Unknown Speaker  14:53  
Yeah, I mean, that's, that's a great question. We could probably spend the rest of today going through all the different intricacies of that. I mean, I'll try and sort of summarise the fine if I can. I think there's a lot of factors that come into play with, with this, it really depends on the type of business the, the area that that business is in, how it's been built, what type of revenue it has. It's got recurring revenue, for example, as opposed to having to keep making the product sales on a daily weekly basis. There's been the structure, the business management team, there are there are lots and lots and lots of actors, you know, how good it's been set up, how well it's documented. All these things play that play play to the counter here. I mean, fundamentally, there are I mean, there are professionals out there we are not a professional valuation company as as as Transworld we, we help people to understand what the business could be worth on the open market. But we don't do professional valuations. You can engage with specialist accountants that will do proper valuation on your business that tends to be a much bigger business this I would suggest, because it's a fairly costly exercise, and you need to have a very, very good handle on all your records, your accounts need to be well in order, everything needs to be well documented and accounted for specialises in that will will be able to give you a very sort of precise valuation based around the balance sheet and the p&l is of the business going back over a number of years. And that will give you a starting point. We tend to obviously work with businesses of varying sizes, everything from you, your local shop takeaway restaurants up to very very large, multi million turnover, engineering businesses, and and so on so forth. And we as a business and this is this is sort of industry information when we went to work on sort of three different calculation methods that we talked to business owners bounce, and this is quite an engine conversation that we have with business owners because They're not normally sort of ready for it because they've got this figure in their hand. And that's that's the starting point. You talk to most business owners and say, Hey, Mr. Smith, you've been running this business for 20 years. And these are numbers this will you take out the business and blah, blah, blah? What would you take me for what you would check out for it? And most people have got a figure in their head, God knows where it comes from, they've got to figure and then what we say is okay, how did you come to that figure? And they have all kinds of weird and wonderful ways to justify it. And then we say, Okay, well, let's put some science behind your, your sort of thought process. And we talked to them about three different valuation methods and crudely. For smaller businesses, we can work on what's called a percentage of gross sales. So what this is, basically you take the gross revenue for a business and you apply a percentage of that to it. And then you effectively apply that apply that percentage to the revenue to come up with suggested pick at tends to work better with the sort of you saw the businesses Here your local shops and takeaways that that sort of thing. And again, we use, there's a there's a book called Big Black Book, it's a bit like the valuation book that surveyors use, you probably were but can they it's like a reference guide that you can go to, and then read it, you choose the sector of the business, you put a load of different parameters in there. And it gives you some suggested multipliers based upon the different valuation methods. So there is some sort of science in this. So the percentage of gross sales is one of the ones we use. The second one we use, it is probably the most common one that we use for the size of businesses that we tend to get involved in. And that's called an S D, which is sellers discretionary earnings. It's a bit of a mouthful, but what that basically does, it takes effectively the the p&l of the business or the balance sheet for business. And we work through those numbers and what we then do we work out what's called some ad backs. So for example, if the owner of the business is taking a salary or dividends or pension or whether it's things out of the business that won't be there. When that owner fails, we we do what's called out, actually, we add those back into the calculations. And then we've come up with the discretionary earnings bigger within times up by multiple. And that multiple, again depends on the sector, it depends on the type of revenue depends on how good the records are, all sorts of factors come into that. So for most businesses, again, this is very, very much rule of thumb. But if you've got a solid discretionary earnings figure of less than 75 K, we tend to use one to one and a half times multiple for that, between 75 to hundred goes to between one, one and 2.52 to 500, K, three, two to 3.5 502,000,002 to four, and over a million, you tend to move to the slightly different calculations, which is a

Unknown Speaker  19:53  
method of calculation that's a slightly more laborious and sort of harder calculation. For most businesses, because they don't tend to have the detail the figure so much bigger businesses, we call it a bit darker collection, which is basically earnings before interest, tax depreciation and amortisation. And that's, that's, that's effectively the what the bit that the stem school and then we use we use a multiple based upon upon that, again depending on the sector depending on if it's got recurring revenue or if it hasn't, and those are two of the most common ones. And then the third one we use it was called an asset method. So basically, you define the assets of the business, plus a percentage for stock and you will get an apply a percentage to that. We tend not to use that one quite as much as they're more specialised businesses that use that one. There's normally some pretty gross sales or an SD calculation, those are the ones that the most most common, but just to find just the final point on that one is when you go through these numbers, because obviously as we all know, people that run companies, especially limited companies, you maximise the The session with from attacker to view and you know, you will utilise the opportunity for putting stuff with the business, which is all legitimate, but obviously reduces your profits. So you don't have to look at that and say, well, you almost like can't have it both ways. If you utilise the business well and you're taking good tax advice, you might find that the valuation of your business is a little bit less or quite a lot less than you might think it is based upon these numbers. And quite often when we do this normal calculation, and compare that to the expectations of the owner, this is where you can get quite a big difference. I mean, quite significant. And that's always a difficult conversation, as I'm sure you can

Unknown Speaker  21:38  
imagine. So what are they, you know? So let's, let's just take stock here because some of that stuff was quite complicated, right? But if we were to try and put you know, and put a number on something like a not not a non typical number. So you know, I'll make it up. So you're not I'm not putting words in your mouth. But let's say if I I assumed for the sake of an argument, you know, on EBIT da, you kind of profit multiples, so it's a reasonable sized business. They don't have big assets. So we're not talking about that. And definitely, you know, they've had good income from their business, but there's some value in the business continuing. It's not just them drawing it out in a safe was three times you the IBA. So they put a profit of half a million quid. And we talked about three times that is how different is that from their expectation? Say, because some of the multiples you're talking about their multiple of SDE, you know, 7.75 to what you thought one times Yeah, that's going to be a

Unknown Speaker  22:42  
shocker. Yeah. And that's absolutely right, Kevin. It's quite a shock to most business owners. When you go in and say, well, actually your your USP or your Eb de, whichever one we do it is is x let's use a finger let's let's call it let's call it 100 K and based upon the The sector and the way the business is structured. So cable hundred K, the multiple that we're looking at here is, you know is one 1.5. That means it's worth 100 or 150 k on the moment quite often that that that seller is probably got a figure of 300 to 400 K and quite often, right? It's very much that that discrepancy is always is always a big discrepancy. Very rarely do you get. Yeah, I totally agree with that.

Unknown Speaker  23:29  
But does that lead to the possibility that the potential seller get so cheesed off with that difference that they go so that I'll just carry on running?

Unknown Speaker  23:40  
Yeah, sometimes they do. Or the other option that we talked about is is is to the seller, say, look, there are ways that you can make your business more valuable. You've got to allow time for those factors to play out so that they can go a potential buyer and that's the challenge. We have is 22 not smart. So if those figures to come through because a bias by another look at one year's worth of results, they will and it will be, in fact, what happened last year, but they're looking for trends as well. But look at the trends over the last three years. So if all of a sudden, you do something different, that's okay. But if you've been doing those things for last two or three years getting your business ready, it makes a massive difference in what you're going to get for the business. Huge difference.

Unknown Speaker  24:26  
So Dave, you know, we talk a lot in wealth builders about asset income, and often people will call that recurring income. What do you seeing is the difference in the valuation of a company when the businesses focus has been very, very strong on providing a recurring income model. So the acquirer knows the predictability of the income, because the income is predictable. You don't need the owner to be there, which is always a big problem in selling a business if it's depending on the owner been there. What do you what are you seeing from Fundamentally out there in the real world A or people actually focusing on recurring income at all, and be if those who are do they get a higher multiple in all calculations? And if so what magnitude?

Unknown Speaker  25:11  
Yeah, great question really Kevin and the answers yes, they do get a much better multiple if they can prove recurring revenue that is not dependent on the owner being around you tend to find less people sell those businesses in all other state because obviously if they're that way, trying especially if they've been through any of your programmes, why not just keep taking the recurring revenue for him tonight and really and possibly in past that recurring if you wanted someone else in the in the family, but the ones who sell the ones that do sell then you would probably get it if it was a non recurring revenue and it's based upon just making sales all the time it depends whether their sales are contractual or non contractual, let's say to say the sales of a business and non contractual your keep on finding customers then we can all the rest of it, as opposed to recurring revenue. You probably Looking at, if it was a it was a one times multiple or two times multiple for the where you find the customers all the time, you're probably looking at double the multiple if you can prove recurring revenue,

Unknown Speaker  26:12  
right? So let's let's say that again, right? Let's just say that again, in a different way. I'm going to say in a well build away and just tell me if I didn't put these words in your mouth. You said them, if I know what I'm doing, and I think about creating a business with recurring income, I can keep it and carry on banking, the recurring income, or if I choose to sell it, either all of it or part of it. from somebody who does this day to day, the value of my company can be double the value of a company that doesn't do that.

Unknown Speaker  26:51  

Unknown Speaker  26:53  
Absolutely spot on.

Unknown Speaker  26:54  
Right. Right. So from the listeners point of view, the lesson here for me is yes, you must prepare and think very carefully about your exit, knowing your exits always going to come. But if you can, why not spend some time thinking about what proportion of your business can generate recurring income? And even if it's zero, just like all students start with zero income recurring in their wealth plan, Chris, what if we could encourage business owners to go from 1% to 5% to 10% to 15%. And stop building that recurring income, so that no matter which formula whichever exit route they choose, knowing an exit route is always going to come? They've got potentially double or more in some cases, if you do it really well. The value of a company compared to somebody didn't do that. I mean, that's an outstanding issue, isn't it? Don't you think? It's an absolutely spectacularly big realisation? What do you think Chris?

Unknown Speaker  27:57  
Yeah, absolutely. And for someone listening Nowadays who is a business owner? Perhaps, you know, they're overwhelmed. They're short of time. What would be if almost you were to do a quick self audit with them some of the first steps they could start thinking about to make their business more sellable.

Unknown Speaker  28:13  
Okay, great point, Chris. And the first step in that would be, and again, we see this quite often is when we talk to potential business owners, they will furnish me with your information on your business, they have very little or nothing in terms of documented information about the business, even the finance, the financial, sometimes the finances are just not in order. They don't have very good records, they have a very basic return that they have to do for HMRC and the accountants all the rest of it, but the better the records, the more accurate they are, then that's a that's a great start. So if you aren't keeping very precise, accurate records on your business now, then start definitely engaged with someone who can help you whether it's accountants tax advisor is this like everything given as we talked about a lot of athletes having you having your power team around you and the business owner is no different you need you need the right advisors to help you get your business in shape, whether that's a coach or an accountant, tax advisor, whoever and work with these people because they will help you to get your business in better shape but definitely records definitely documentation. It then there's things about your your staff, your customers, your systems, all these things need to be documented. They need to be somewhere they need to be accessible, and they need to be easily pass on you know, easy, easy to pass on to a third party might divide by the business is getting Yeah, getting your house in order, I suppose is the is the is there, Chris?

Unknown Speaker  29:43  
And, Chris, if we listened back to the episode from Richard Perry talked about the value build metrics, the key things you could focus on tapes touching on those automatic listening you know getting your finances in order having a robust plan. The percentage of the, what percentage of the income is coming from recurring or not the dependence or otherwise on the business owner. So just maybe even listening back to that and kind of add in looking at those points and gradually getting themselves ready for business. Because it's often said, I think that, you know, business owners don't own their business, their business owns them, you know, because they get caught up in all of this day to day stuff, that they don't take care of these things because it's paying for their lifestyle. It was paying for your lifestyle, you got money in your bank account, you're happy, you but soon as you start to think about, you know, I've had the lifestyle from it, it's now now now time to pass this, this business on either because you want it to go to a higher level or you want to protect the employees, or you just don't have the time for that or if you're someone who's very creative and actually what you enjoy doing is getting your business going, getting it to a certain point in moving on. There's always a need to think about the exit. So begin with The end in mind, every time you enter, write down what you think the exit is going to be. And ideally, talk to a coach because the coach will help you bridge the gap between what where you enter and where you exit and hold you accountable. So you never lose track and get caught up. And I'm rambling a bit, but I think this is Dave is really helping us get a living evidence of all of these principles that we've been sharing on business and practice.

Unknown Speaker  31:24  
Yeah, I think it's been fascinating chatting to you today, Dave, because it really has encapsulated all of the lessons from the previous few weeks, where we've been talking to different guests about the different parts of the business that all make up that whole, which is what we're talking about today. And we know that overwhelm is is a big challenge for people and thinking about all of these things that they know they need to do. But the day to day business just obviously controls them. And so it really is about just kind of having a bigger picture, isn't it and just kind of breaking it down into the bigger chunks and what's most important and just focus on those big rocks.

Unknown Speaker  32:00  
You know, absolutely, I think, I think working with good advisors, whether it's in your personal life or your business life, it helps you to set realistic expectations as well. And that's the other challenge we have here is is not just expectation on value its expectation on the whole process. Again, I'm sure we were running out of time very quickly because you could spend a lot more time on this but the expectation of a business owner in terms of how long is it going to take the sum of business? That's a great question it's not only how much am I going to get from business how am I going to get it? What are the tax implications? For me there's there's a whole there's a there's a there's a whole nother podcast we can do around this around Okay, so while that's

Unknown Speaker  32:43  
Yeah, that's probably a good idea day for like, you know, I can we could talk at length about earn out and the difference between the cash up front and you announce and what you do for the announced but, and I think maybe on another day, we should just do that. And so in the context of helping people get ready Just to think about exits, they view it. And your, you know, colleagues at Transworld, you know, you know how to do this. You having these conversations with people? How could anybody who's got a business who's listening to this who might be interested in getting better prepared, getting ready, you know, then they're going to know a little bit more about their expectations need to be sort of, you know, suppose realigned with how you can help them. And then on another podcast, we can talk about maybe how to help them wants to get to that point, and they still got time, but if they haven't, and they're really looking to sell now, do you have any collateral any marketing, any documents that would be useful to give people as an introduction to you and your company, Dave, because I see the value in what you do.

Unknown Speaker  33:45  
Yeah, absolutely. Kevin. Yes, yes, we have and if anyone wants to get in touch and you can email me at dps at teen world uk.com happily said announce some collateral we've got with Got a number of different pieces of collateral dependent on what it is you're you're looking at we ever got an overview document, which is probably the one I would suggest that just talks about what it's like to go through the process of selling your business is broken down into different stages, happily send that out or send you a copy, Kevin, and you can send it out to

Unknown Speaker  34:16  
any of the Yeah, I think the best thing to do, Chris, tell him what to do.

Unknown Speaker  34:20  
Ya know, if you have that document, Dave, then I think to make it easily accessible for our listeners, if we could put that into the show notes with a link and host that on our podcast page, if that's okay with you, Dave for everybody.

Unknown Speaker  34:33  
Yeah, absolutely. Yeah, no problem at all. We're, you know, we're happy to help. We know it's a it's a it's a difficult process. And business owners do get to that stage thinking, Okay, it's time to think about it. And then the other question is, well, how do I go about it and who do I talk to and where do I look? Most people talk to their accountant, which is fine. They won't sell your business for you. They might help you to talk about what it looks like but they won't, they won't normally help you to start it. So you need to go somewhere. And that is Are you doing so? Are you guys through? So party but hopefully that could be us.

Unknown Speaker  35:06  
So why don't we make a note Chris to do another podcast with Dave, specifically on the subject of some, so I'm ready. Where do I go to take it to the next stage to get the best value for being ready doesn't give you the best value what will give you the best value is working with experts who know what they're doing. And then help you prepare that position that have competition in the in the whole process so that you know you and also define the right type of acquire because you need to be in the mind of an acquirer in order to understand what they're looking for. So you're positioning in the best way. So an expert like Dave and his company, you know, a much better position than an accountant or even thinking of doing yourself an earn if you had heard what he said if your business can be worth double, by, you know, positioning it right and then they can make it worth a bit more by helping you market Well, so so you get three times more when you send your business for a million otherwise, and you get 3 million, it's worth having these experts on. And this is where I keep bringing back that message that you must invest, to accumulate things, you must invest time in relationships and with people who know more, to help you get a better result, rather than save the money, and then just get a rubbish return on the life's work, which I think would be a tragic waste. So Dave, would you be up for coming on a podcast again, to talk more specifically about that? And we'll get to that soon? Absolutely. You know,

Unknown Speaker  36:34  
you know, I would, I'm passionate about people working on their wealth. If they're if they are in business, then great. If they're not, they should be thinking about how to get into business, because we all know it's one of the pillars that that everyone should be looking at if they haven't already. So absolutely, and we that we haven't touched on, we ended on buying a business. There's plenty of people out there, we'll talk about that. We could talk about how you finance a business, how you structure it, and and Very close to you or Kevin is, so what do you do when you sold your business? Because if you don't Well, you're scot free your revenue and it says 3 million pound business or whatever. What are you gonna do with it? Well, exactly Dave and that's that's another podcast so now he's not just angling right to be double first with his daughter. He's wants to be the first person was four consecutive podcasts in a row.

Unknown Speaker  37:24  
Dave you know your mind your brain wants to share and give great value and thanks for acknowledging that thing back as well. You know, it is a sad fact that if people do sell their business, even if they're ill prepared, but they do take a check, and they have no experience and understanding different wealth building assets and they get a check that no hope of really deploying that money to get a great outcome. So the lifestyle the business was giving them by being there, when they sell it, that lifestyle invariably deteriorate significantly because you stick a million quid in the bank. What are you going to get in return? Not a lot. You just took a million quid in the stock market, you've got an uncertain life and maybe 4% on your money, you know, so 40 grand for a million months, probably not going to keep you in the life that you've been used to in your business. So lots of great points raise. Dave, going to thank you for your time today. And we look forward to seeing you on a podcast sometime soon.

Unknown Speaker  38:23  
Thanks again for coming on. Thanks, Christian.

Unknown Speaker  38:26  
Thanks, Dave. Okay, so that was fascinating conversation with Dave there. What I picked up on especially Kevin is just the complexity around selling a business that you can start quite simple just by getting your processes in place. And even if you're in business now, you can begin with that and certainly start from the beginning by just documenting what you're doing.

Unknown Speaker  38:48  
Yeah, I mean, if we do the same with wealth building, don't we, you know, we ask people to take care of a foundational element of the core things they should do like debits, you know, like things that they should be doing. To get their act in order get their roof protected. Well, you could just do the same thing with business, you know, make sure you set the business up, right, you've got the right sort of easy accounts thing, you don't just accumulated a shoe box full of stuff. You know, you begin with that end in mind knowing that the more accurate the more complete the data, the easier that problem is going to go away. You begin from the zero is so easy, isn't it? So and then as you, you just do the business and then you just document the processes. So when you've got things and you're doing them, build the process, think about recurring income, that's a process. Think about what your exit plan is, if you're ready for that, what's the outcome you're looking for? Because the thing that business owners I find don't ever think about is what's the purpose of the business in the context of overall wealth. So you know, Dave said he asked the questions, remember, those are kind of cheeky question at the beginning. So you know, what, what do you think you'd like to check out for your business and I think you should know that. Because if you know you built your wealth outside of your business, and let's say you've got a target of 10 grand a month, say, and you build five grand a month outside of the business, and then you need the other five grand a month, then you can work out what you need to sell your business school. So you actually got to figure that says, This is what I need to sell my business for, given I know what to do with the money. How do I make my business worth

Unknown Speaker  40:29  
so I can sell it? It's thinking about the problem inside out. And almost everybody does it the exact opposite the way they should they leave their wealth planning too late, they leave their business planning too late. They leave their exits, everybody exits. So stop focusing on the entrances and start thinking about the exits is the key lesson I picked up from that.

Unknown Speaker  40:51  
Yeah, and a benefit I found as well in terms of documenting the processes in your business is that actually you can do that very easily just by the recording, you know? invoice and then having someone transcribe that, you know, for a very, you know, low cost kind of outsourcing fee, or you just record your screen of the processes you're doing. And actually, you can realise that some of the things you're doing each week, somebody else could do those for you. Yeah. And that frees up time in your business to focus on some of the more impulsive

Unknown Speaker  41:17  
Bokan like a man who's got a wealth dynamic. And the opposite me nothing would be further from my mind to do that. So another key

Unknown Speaker  41:24  
point, I think, from today was the point we've been speaking about for several weeks here is about recurring income in your business.

Unknown Speaker  41:31  
Yeah. Look, I mean, I love business, but I only look for recurring income businesses and I seek them out. I build businesses that do that. And I will talk to Dave, I'd love to be looking at business owners who've got business that could potentially create brilliant recurring income but they just didn't think about it that way. So I think there will be a podcast on buying businesses and specifically looking I think there's two key issues okay. That's this is what I think which will Give the best value. And you've heard about doubling of the value. And I think if you do it well with recurring income, it could be triple or quadruple the value of a business. And that's a massive return on leverage if you can do that. So the two things to me are a must, with any business owner, one, build recurring income to don't have the business depending on you. And actually they work together. Because the bigger the recurring, the less they need you. So because if I'm an acquirer of your business, and you do everything, and it depends on you, you're going to be stuck in an urn out anyway. Because you know what, I really wanted you to be gone, I'm taking it over and for whatever reason I acquire it. And if the recurring income is there, and the systems and processes are there, that business can be worth a lot, because then all I'm now doing is taking that business on and taking it to the next level. Because the person who brought it up the person who raised it is now saying is tough. For me to wave you off, say goodbye, bank a nice check a move on to a new lifestyle. And that in the end is what businesses therefore, is to give you a life not to take the very life you've got away from me, which is what happens to most businesses. I'm off my soapbox now.

Unknown Speaker  43:16  
And I'm off to Florida. So I'm gonna see you soon, Chris. Well, I'm going to step into the hot seat then for next week's episode, we're actually going to take a step into our next pillar, which is the pillar of intellectual property. And I know we're not finished with business completely yet. No, no, but we've got a very special guests coming next week. So whilst you're away playing golf, the unities everybody or you're going to drop a little hint? Well, it's a very well known disruptive entrepreneur. Oh, I think I know who you're talking to. Many people in the property scene in the UK will definitely

Unknown Speaker  43:49  
recognise and he's got a lot to share as the, you know, he is disruptive which means in many respects, like everything disruptive, you're going to like it or you're going to load it. It's like Mama, isn't it? Something People like it, some people load it. But I think you know, the content. And of course, I've heard it Chris is bloody good. And I think everyone's in for a treat. So definitely Tune in next week. I've already heard it so I can tune out for a week and I'll look forward to seeing you on the next podcast, Chris, to learn everyone. So yeah.

Unknown Speaker  44:20  
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Transcribed by https://otter.ai