If you’ve built a successful business, deciding when to sell it can be gut-wrenching. You’re making good money. You don’t need to sell and your business acts like a giant, tax-efficient slush fund to pay for just about anything you want to buy. Nobody likes living off their capital, so why on earth would you sell the goose that laid the golden egg?
Last week Darden, the owner of The Olive Garden restaurant chain, announced it was acquiring Ruth’s Chris, the legendary steak house, for $715 million, implying a valuation of around one times last year’s annual revenue or about ten times their adjusted EBITDA for 2022.
Before putting your company on the market, creating a list of potential buyers for your company is paramount. Rather than courting generic investors, I’ve learned that founders that sell for the highest multiples understand the key players in their industry that are paying a premium for businesses like theirs.
Watch a climbing stage of the Tour de France bike race and you’ll see the world’s best cyclists performing a cat-and-mouse game as they ascend a mountain pass on an 8-10% grade. One climber will pull away from the relative safety of the pack, exposing them to the wind, only to be caught by the peloton a few seconds later.
The word “optionality” comes up a lot these days, and you may wonder what exactly it means. In the context of business building, optionality is creating a company where you have lots of different avenues for reaching your goal(s).
Having optionality is the opposite of putting all of your eggs in one basket and is a common vein that runs through all of the value drivers we measure over at The Value Builder System™.
Survey a group of founders about the personality traits that made them successful, and they will be quick to use words like determination, sacrifice, and hard work. Others will show more humility and chalk their success up to personality traits like curiosity. Still, others will credit dumb luck.
However, I believe there is another personality trait that many of the most successful founders have in common…
Try this thought experiment: Divide your employees into two groups. The first group is made up of your rule followers. These are the employees who will do what you say, follow your processes, and generally behave the way you ask them to.
The second group is your scoundrels. These are the creative spirits who are difficult to tame—the superstar salesperson who refuses to follow your sales process or the designer who insists on doing it their way.
Turning a service business into a product or software company can be tempting. While a typical consulting company may trade at a modest multiple of EBITDA, a fast-growing software company with sticky subscribers could sell at a double-digit multiple of revenue.
The difference is hard to ignore.
Basketball coach Don Meyer is famous for something he calls “The Foxhole Test.” He encourages players to imagine themselves in a life-or-death battle and asks them to pick the teammates they would want in the trenches with them. The test is designed to break down the inevitable cliques and friendships that evolve on a team and identify the true leaders that players trust with their lives.
Foxhole leaders are often known for getting in the trenches with their teams. They typically lead by example and never delegate a task they are unwilling to do themselves. As a result, Foxhole Leadership produces disciples willing to do just about anything for their leader.
In the real estate business, agents refer to a home that has been renovated recently as “turnkey.” A buyer can turn the key on the front door and start enjoying the home immediately. Equally, a turnkey house is one that can be rented out without much fuss, making it a valuable asset to the real estate investor.
What’s your number?
You know the one.
It’s the amount of money you would have to be offered to sell your business. It can be tempting to imagine selling for an outlandish sum, but is that amount necessary for you to consider your exit a win?
Streaming services like ESPN+, Disney Plus, and Netflix have risen to prominence in part because cable providers have been holding their customers hostage for decades.
If you wanted to get ESPN in the old days, you had to subscribe to a cable package of six hundred useless channels with nothing but bad sitcoms and crappy reruns.
If you’ve built a successful business, deciding when to sell it can be gut-wrenching. You’re making good money. You don’t need to sell and your business acts like a giant, tax-efficient slush fund to pay for just about anything you want to buy. Nobody likes living off their capital, so why on earth would you sell the goose that laid the golden egg?
Last week Darden, the owner of The Olive Garden restaurant chain, announced it was acquiring Ruth’s Chris, the legendary steak house, for $715 million, implying a valuation of around one times last year’s annual revenue or about ten times their adjusted EBITDA for 2022.
Before putting your company on the market, creating a list of potential buyers for your company is paramount. Rather than courting generic investors, I’ve learned that founders that sell for the highest multiples understand the key players in their industry that are paying a premium for businesses like theirs.
Watch a climbing stage of the Tour de France bike race and you’ll see the world’s best cyclists performing a cat-and-mouse game as they ascend a mountain pass on an 8-10% grade. One climber will pull away from the relative safety of the pack, exposing them to the wind, only to be caught by the peloton a few seconds later.
The word “optionality” comes up a lot these days, and you may wonder what exactly it means. In the context of business building, optionality is creating a company where you have lots of different avenues for reaching your goal(s).
Having optionality is the opposite of putting all of your eggs in one basket and is a common vein that runs through all of the value drivers we measure over at The Value Builder System™.
Survey a group of founders about the personality traits that made them successful, and they will be quick to use words like determination, sacrifice, and hard work. Others will show more humility and chalk their success up to personality traits like curiosity. Still, others will credit dumb luck.
However, I believe there is another personality trait that many of the most successful founders have in common…
Try this thought experiment: Divide your employees into two groups. The first group is made up of your rule followers. These are the employees who will do what you say, follow your processes, and generally behave the way you ask them to.
The second group is your scoundrels. These are the creative spirits who are difficult to tame—the superstar salesperson who refuses to follow your sales process or the designer who insists on doing it their way.
Turning a service business into a product or software company can be tempting. While a typical consulting company may trade at a modest multiple of EBITDA, a fast-growing software company with sticky subscribers could sell at a double-digit multiple of revenue.
The difference is hard to ignore.
Basketball coach Don Meyer is famous for something he calls “The Foxhole Test.” He encourages players to imagine themselves in a life-or-death battle and asks them to pick the teammates they would want in the trenches with them. The test is designed to break down the inevitable cliques and friendships that evolve on a team and identify the true leaders that players trust with their lives.
Foxhole leaders are often known for getting in the trenches with their teams. They typically lead by example and never delegate a task they are unwilling to do themselves. As a result, Foxhole Leadership produces disciples willing to do just about anything for their leader.
In the real estate business, agents refer to a home that has been renovated recently as “turnkey.” A buyer can turn the key on the front door and start enjoying the home immediately. Equally, a turnkey house is one that can be rented out without much fuss, making it a valuable asset to the real estate investor.
What’s your number?
You know the one.
It’s the amount of money you would have to be offered to sell your business. It can be tempting to imagine selling for an outlandish sum, but is that amount necessary for you to consider your exit a win?
Streaming services like ESPN+, Disney Plus, and Netflix have risen to prominence in part because cable providers have been holding their customers hostage for decades.
If you wanted to get ESPN in the old days, you had to subscribe to a cable package of six hundred useless channels with nothing but bad sitcoms and crappy reruns.
