Ep 186: Finding Entrepreneurship Freedom When Setting Up Your Business Exit With Mike Finger

Has it ever crossed your mind that you can actually sell your business for a DREAM Price? 

For that to happen, you should have an exit plan that is worth shooting for!

In this incredible episode, I have invited Mike Finger who will share his expertise that can lead to your dream exit.

Over the last 25 years, Mike Finger has bought, built and sold multiple businesses. Building his first business was a rewarding challenge, but what really captivated him was selling his first business. But that sale almost didn’t happen. Mike was 10 years in with 50 employees when he found out the business he had built was unsellable. It was devastating. But he moved forward and focused on changing a few simple elements in the business. Those changes made that first sale possible, and he says it changed his life. Now Mike works to help other small business owners change their business so they can experience their own life-changing sale when the time comes.

We have discussed Mike’s rude awakening when he tried to sell his first business. What are the three critical things when setting up your business exit? How much time you should give yourself to get your business ready to sell?

We also talked about how to go from survival mode and being up to your eyeballs in work to being in an empowered place as a business owner with options to sell for a large exit or hold on to your business that only takes a few hours per week to run. What is Stress Expense? And what’s the difference between the Mindset of Flipping versus Buying and being in business for the long-term?

Watch now and discover how you can plan your exit for a dream price worth shooting for!

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Episode Highlights

03:54 Getting to know Mike

10:29 Nothing good comes quickly

16:53 The key elements of an attractive business

18:39 The differences between ONLINE and OFFLINE businesses

25:12 Can the results be documented?

31:26 Remember – People won’t buy responsibility!

39:07 The 3 principles that you should know (important!)

40:19 How to set up a DREAM price for your business?

48:32 It’s not always ALL about the money

Courses & Training

Courses & Training

Key Takeaways

➥ For Mike, there’s always a compelling reason not to buy a business. You can always find a risk or threat somewhere. But he doesn’t want a business that’s working perfectly. He want a business that’s broken in a way that he can fix. And that’s how he adds value. 

The two key elements of an attractive business in Mike’s perspective are discretionary earnings and free cash flow, or simply stated, this is the financial benefit of owning the business. 

➥ When setting up your business exit, Mike’s advice: “What we want to do is we want the business to operate effectively so that you can meet your price goal”.

About The Guest

Over the last 25 years, Mike Finger has bought, built and sold multiple businesses. Building his first business was a rewarding challenge, but what really captivated him was selling his first business. But that sale almost didn’t happen. Mike was 10 years in with 50 employees when he found out the business he had built was unsellable. It was devastating. But he moved forward and focused on changing a few simple elements in the business. Those changes made that first sale possible, and he says it changed his life. Now Mike works to help other small business owners change their business so they can experience their own life-changing sale when the time comes.

Connect with MIke Finger

Transcription:

Jaryd Krause (0:00)

If your business doesn't have these three things, you'll never sell it. Hi, I'm Jaryd Krause host of the Buying Online Businesses podcast. And today, I'm speaking with Mike Finger, who has bought, built, and sold multiple businesses over the last 25 years. Now, Mike building his first business was it was a rewarding challenge, but it really captivated him when selling his first business. But the sale almost didn't happen. Mike was 10 years in with 50 employees when he found out the business he had he built was unsellable.

It was devastating. But he moved forward and focus on changing a few simple elements in the business, which those changes made that first sale actually possible. And he says that changed his life. Now Mike works to help other small business owners change their business so they can experience their own life changing sale, when the time comes or change their business in such a great way that they don't want to exit their business. In this podcast episode, Mike and I talk about his rude awakening when he tried to sell his first business, some of the things that he had to actually deal with and some of the things that he did to get his business more sellable and make that exit.

And then we talked about the three critical things, three absolutely important things a business must have in order to sell it. And these are Mike's three things that he explains that he helps people as business owners move forwards to in their business to be able to get a desirable exit, if they choose to, then we talk about how much time you should actually give yourself if you want to get your business ready to sell, which is an important thing. Because if you are at 65, you want to know how much time you should give yourself to make an exit before you retire. Now, sometimes later in life, we don't want to give ourselves that much time, we want to do it in a shorter period of time.

So it's better for you to know now how much time you should have now we talk about how to go from survival mode as a business owner and being up to your eyeballs and work to being in an empowered place as a business owner with freedom, which is actually options to be able to sell your business for a large exit or to hold on to your business that only maybe take a couple hours per week to run. Then Mike and I talk about stress expense. An expense that most people don't know exists because it's invisible, but you're paying anyway, depending on what level you're at in your business and what type of entrepreneur you are.

Then we talk about the mindset of flipping versus buying and being in business for the long term, and the acquisition entrepreneur and how that's an ever evolving thing for us in the online business space. Now, this is such a beautiful chat with Mike Finger, I'm sure you're absolutely going to love it.

But before we dive into this chat that we have, please understand that we're talking about buying online businesses here. Never go away and do this on your own, which is what we talk about in the actual episode. Make sure you go away and get my due diligence framework. It's free, which can help you take the guesswork out of buying an online business. It's what I've used in my clients have used to help us buy multiple businesses. It's saved us a lot of money, and it's made us a lot of money. So get that at buyingonlinebusinesses.com/freeresources. And let's dive into this amazing chat that I had with Mike.

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Mike Hello. Hey, welcome to the BOB podcast.

Mike Finger (3:57)

Great to be here. Thank you for the opportunity.

Jaryd Krause (4:00)

Thank you for coming on. You have a word of wisdom before we started, you said you may not be the best with knowledge of online business space. And I highly doubt that I wanted to talk to you about a little bit about the built the buying of sites and what you've learned through your experience because you bought and you built and you've sold.

Now you help a lot of people exit deals, and there's so many things that go into exiting a deal. You just can't do it straightaway, right? Before we move into the exiting, exiting deals. What sort of businesses have you actually bought? And why did you decide to go with those types of businesses? Was there a particular business model or was there? What drew you to those?

Mike Finger (4:42)

Sure, sure. My first two businesses were businesses that I had started from scratch. And so I got the long term 15 year lifecycle in those initial businesses. So after we'd had a chance to sell and recover, and all of that when I was looking to buy, I was looking for businesses that weren't quite as complicated as the first two that we'd have. So I was looking for a fairly basic service model businesses.

I was shopping, carwash, laundromat, convenience store, really any of those fairly straightforward model businesses, because I knew that I had learned a lot the first time through, I think I bought and subsequently sold those businesses to prove to myself that what I had learned the first time through wasn't a fluke. But really, what drew me to those businesses was the simplicity of the model.

Jaryd Krause (5:43)

Yeah. Okay. And so have you only mainly been buying and helping people exit offline businesses? Have you ever bought an online business, or sold.

Mike Finger (5:55)

I've never bought an online business myself, I've worked with those that have and work that with those who have worked to sell those businesses, it's part of the reason why I gave you the precursor I did about, about knowledge about online businesses, I've made a conscious choices I've as I've grown, and learned to really try to focus on a simple message, because as a lot of this space is driven from a content perspective, by those we call acquisition entrepreneurs, these are people that are essentially in the business of buying and subsequently selling. It's a great business model.

There's a lot to be done in that space. But let's face it, most owners who sell do it once. Most owners who buy do it once. And so the question for me that became key in that space was what are the simple realities that a small business owner who is consumed by running their business can actually do while there working that 80 hour week. So it was to try to find a way through to those to that simple messaging that would translate whether you're doing online or offline or something in between?

Jaryd Krause (7:13)

Yeah, I believe the simple messaging is, is so valuable, because then people can use it at different stages. And in different paths have like different types of journeys, for example, due diligence, right? Due Diligence, I've helped people to buy a lot of online businesses, but also people have used my framework and use some of what I teach in buying offline businesses, because it's got very similar principles, you still need to check similar things.

Sometimes the online space is a few more things you can check in. It's easier for verification, and it can be done a lot quicker rather than offline businesses. But there's still the same principles like you should be proving a business as a bad investment. If you can't, then you must buy type thing.

Mike Finger (7:58)

No, I love the breadth of that, right? Because so often, we get introduced to the topic of buying or selling by someone who's taken a real deep dive in a very specific area. I know a lot of owners who got introduced to selling their business by going to a four hour, seminar on employee stock ownership programs. Well, I'm going to sell my business through an ESOP. Well, you've got five employees, you're not going to sell your business through an ESOP. But that's, that's your introduction to it.

And it's the same in the online space, right? I read the articles, or I hear the presentation about this is the key metric, right? This is what this one metric is what determines whether or not you should buy this business. And it's like, well, maybe that's the key metric for this one, one guy doing a certain kind of roll up. But does that extrapolate out to the to what most of the rest of us should be looking for? So when you talk about due diligence in a wide range of I've looked at this now, let's completely switch gears and look at something else. That's how we get the exposure.

Jaryd Krause (9:04)

Yeah, I think that's a very valuable point that a lot of people in join our community are buying on our business community and looking at deals and they are always asking you what is this a red flag. And the reason I asked when they're looking at buying these businesses is it's a red flag, it's because they want the excuse to be able to run away from the business and go to the next one to do due diligence on that.

And they want they just want validation that it's not a good business through one key metric, when the reality is, it's everything in total. And you'd be silly to walk away from one business because there's one risk that you don't like when everything else could be absolutely perfect. And in essence, you could deal with that risk and that risk could actually be opportunity, right? All risks is just opportunity in disguise.

And you may have just missed out on a really good deal, but you want to excuse to walk away and go find another business or make it an easier path without you having to do extra work, doing due diligence on that business. And it's, it's, this is the beautiful thing about it, people want it to be easy. They want it to not take too much time, and just go away and buy or just go away and easily sell. But the beautiful thing is that it is complex. And it is complicated.

And there's many, many things to consider many metrics to consider, which allows us to the people that want to put in the effort, get the actual ROI from a good sale, and get the actual ROI from a good purchase, which is, I believe, why you and I actually have jobs and businesses because it is so complex. And I think that's so undervalued by so many people, because they want to just do it the quick way. What do you think about that?

Mike Finger (10:52)

It's, I think you're right on this is not a black and white space, this is a shades of gray space, right? I tell buyers that I've that I've worked with in the past, there's always a good reason not to buy a business. I don't care what business you're looking at, you can always find a risk or threat somewhere, oh, why was the performance different six months, there's always a compelling reason not to buy a business. It's that it's that collective that you refer to where I look at this overall.

And I can see, maybe I see things that are broken, but they're broken in ways that I know how to fix Yes, boy, there's an opportunity to bring value, there's an opportunity to expand that business grow that business, I've gotten to the point where when I look at businesses, I don't want a business that's working perfectly, I want a business that's broken in a way that I can fix. And that that's how you add value. That's how you bring in. But for so many going into the space, this is their first time through, right. And that is a terrifying place to be a bit on that transaction from all sides.

And I can remember I worked as a business broker for a year loved part of it hated part of it. But one of the initial training messages was this is a fear based transaction. Yeah, the sellers, afraid the buyers afraid nobody wants to make a mistake. Shades of Gray. That's, that's what this is.

Jaryd Krause (12:28)

And this, the key word that you use here is fear. And when we're in fear, we're not thinking clearly. And this is why I think it's so important to have them doesn't need to be me. And it doesn't need to be up at least somebody that's got experience in the space to not be attached emotionally to the transaction that can provide a level head on whether this is a good, good path to go through in the sale or the purchase of a business.

And that's people just feel like there's too much there's too much I believe, especially in the online space, and content online of like, I'm a self-made entrepreneur, and I did it all myself. And I think that too many younger people are like, I've got to do it myself and I self-made millionaire or billionaire, or whatever it is. And I think that's just ridiculous. Because every single person who's ever read a book, or listen to one podcast, or YouTube video, has actually had help and support. But why did why is the message that so many people are self-made. It's just an ego thing, I believe. And it's really just, it's really destructive to younger entrepreneurs thinking they need to do it themselves, when in essence, the most successful people ever have a team around them.

And I believe we should start building a team. When you when you go through the selling of a business, Mike and the exit, are there multiple people that touch parts of the business or look at it before you go away and make an exit like consultants and people that help you set things up before you go away and can actually have this business that's ready for exit.

Mike Finger (14:12)

Oh, always, I mean, the coaching, I do have small business owners by design I expressed to them I am not a technical expert, right? I I'm not the guy that knows the latest version of this program or that program or how the tax code changed or why in the world would I want to pretend to be good at that when I know the telephone number of several people who are good at right. Let's bring the expertise to the table when we need someone to take the deep dive on those areas of complexity. But again, for the seller, it's about focusing on those simple elements that they can control it what we forget Jaryd is that most businesses that don't sell, don't sell because of something simple, not because of something complex.

Oh, that's most of most of the failed deals, failed deals or just businesses that that never make a sale. It's because of something simple. Almost never because of I checked the wrong box on page 27. Why didn't I have the attorney done? Does that stuff happen? Of course it happens. And it's, it's incredibly painful when you hear the story. But guess what? For every one of those, there's 100 businesses that didn't sell because they didn't have desirable results. Right, right. Owner focusing on that instead of the page 27 detail. Let's, when I work with the client, we've got three key questions. Are your results desirable? Can I buy your duplicate your results? And can you document your results?

If you can answer yes to those three questions. As a small business owner, I don't care if you're in the online space, bricks and mortar, I don't care what kind of business you have. Those three questions should dominate your preparation for sale, because those are the things that kill most deals. And that leads you to success.

Jaryd Krause (16:15)

Amazing, amazing. So let's, let's unpack those three things. The first one is, is yours is your business desirable?

Mike Finger (16:24)

Are your results desirable?

Jaryd Krause (16:26)

Are your results desirable? Meaning that it's on? It's on an incline doesn't need to be hockey stick incline, but it's actually a hockey stick incline might actually not be too desirable? Because can that new owner of the business actually achieved the same results at that at that level? Right? So right, when somebody is looking to sell their business, what are some of the attractive things that it should have.

Mike Finger (16:53)

To two key elements? From my perspective, depending on where you live, the term is sellers, discretionary earnings owner cash flow, free cash flow, quite simply stated, this is the financial benefit of owning the business. The higher that is, the better it is. Right. So sellers, discretionary earnings is measure number one, the second thing that I encourage owners to look at is their job? What does it mean to be the owner of this business? Do you have flexibility? Can you go to the kid’s soccer game? What life does this create for you?

Because what we forget is when I'm the buyer, I'm shopping that life, right? And I am able to make an independent decision. And if this, if this requires me to sit in front of a computer for 18 hours a day, seven days a week, that's it for Yeah, you haven't set it up the way that that brings, it brings it home for me. So I try to stress for owners that when we talk about desirable, it's not a trick, right? It's when I look at your engagement as the owner and the life it creates for you and I go, I got to get me some of that. If that's if that's how it feels looking at your business, then you're well on your way to answering yes to that question.

Jaryd Krause (18:12)

That's awesome. Because what you don't want I've heard from somebody before is what you don't want to do is you don't want to go away. Most people are investing to make an income and have a better lifestyle, not shopping for job through a business. And that's something we don't want to do, right? I've noticed in the online space. And it's done a lot by a lot of different brokers that they will put it takes two hours per month to run this type of business, or three or four, two to five hours, sometimes it's 10 hours. And sometimes they're realistic. And sometimes they're not. A lot of the times they're not. And sometimes they are where the owner of the business may actually have everything systemize within their own headspace and they can get things done really, really quick.

But for a new owner, it might take twice or three times as much time. So I tell people to go away and look at the tasks and ask themselves realistically as a new buyer. How much time would it actually take you as a complete beginner. And then that's the hours of work that would be required to run the business for you. Not for the previous owner because they may have their own process in their own head that can get the work done quicker. Do you find the same is true for offline businesses as well, like where people you need to really be quite strict with like how much time you say it requires to run the business when you're selling it.

Mike Finger (19:36)

Oh, absolutely. And what existing owners sometimes forget, is that if I'm looking at your business as a buyer, I have to assume it's going to take me years to develop the level of conscious competence that you have today running that business. And so if I don't have the same skills that or even if I do, there's still months or years of learning to go through to be able to operate the business as effectively as the existing owner.

And that's why if that owner is miserable, because of the conditions in the business, what chance do I have as a new owner to step in and knowing I'm going to be less efficient and less knowledgeable and have a whole lot of catch up to do in the online space as well. I mean, you see business businesses there, where the, the current owner is an expert in some specific technology, or ad space, or whatever it is. And if I'm not coming to the table with that same level of expertise, even if their projection was 10 hours a month, that's 10 hours a month for the expert, what does it mean for me as the novice.

Jaryd Krause (20:51)

Hugely, hugely, so I'm so glad you touched on that we have a lot of people come to the online space, Mike that want to buy a business. And when they think about an online business, I think I could be generalizing. But most people believe in online business is an E commerce business that just sells physical products online. I think that's what most people believe, is an online business. So they come to me and say, Jaryd, I want to buy an E commerce business. Okay, cool. What sort of skills and knowledge do you have?

And they go away and look at online business that's for sale, they do some due diligence. And I say, Okay, this business, most ecommerce businesses are heavily reliant on digital ads, like paid ads, PPC marketing, and they go away and look at this ecommerce business. And 80% of the sales come from digital marketing, and ask them that's cool. If you buy this business. And this comes this plays into one of the factors that you say is important for the scalability of a business, that rep, you should be able to duplicate the results of the previous owner, if not better. And this is one of the questions I asked them is I said on look, this person's been doing digital marketing for how long? They've got the experience, the knowledge and how to produce these results from the ads, nothing about?

How much do you know about digital marketing? If it's nothing? How confident are you that you can actually replicate the results that the previous owner is doing, if not better? Or do you know somebody like and trust that can produce the results? If not better? And can you afford those people because usually those people that can do that digital marketing costs a couple of 1000s of dollars a month just in Ad Management, on top of the budget for the ads as well. And that's an that's a enough of a question, for a newbie to go, wow, I didn't realize that I didn't, I won't be able to replicate these results, let's change the business model for something that for where they're at in their own level of experience.

Mike Finger (22:50)

I think that's such a critical point. And that that's really interesting, because it raises the question from my perspective, my sense sometimes in the online space is that some of these businesses are getting churned through bought by someone who has a specific skill set, can bring that skill set to that business, Jack, the results of that business over a nine month period or a 12 month period, and then attempt to turn knowing that that upside isn't there anymore. I mean, do you is that something you see frequently.

Jaryd Krause (23:25)

there is a lot of people that are in our space that are flipping websites or buying them growing them in that in that way, and then selling them, what we prefer to look for is and that can be can be a good thing. Because if somebody who's a newbie comes in and said, Cool, they've grown the business in a way that I don't know how I can benefit from those results, and they purchase it and they ride off the coattails of them optimizing the business in that particular department now depends on the business model and depends on who's growing the business and selling it and who's purchasing it, whether it's a good investment or a bad investment.

For some people, it could be a bad investment. But for newbies with the particular business model, they might be choosing, it could be a really good win. For example, if it's a blog, where somebody optimizes the affiliate income, the conversion rates on that, and then also the ad optimization that can stay in place for a long period of time and the new purchaser of the business can really write off the coattails of that for multiple years, and have somebody else come and change some things for you quite cheaply. But if it's, for example, somebody who has done a lot of paid digital paid marketing and built out funnels and PPC campaigns, somebody who's brand new doesn't know how to do that.

They could just buy it and butcher the whole thing if they Yeah, so it can be a positive thing. It can be a negative thing. So now I want to come back to I want to ask you the question on so it was attractiveness is and then you've got can we duplicate the results which we kind of coverages now, the last thing is measuring and I think Is it tracking things or data?

Mike Finger (25:12)

Can you document your results? Yeah. Can you document them? And I will say that is probably have the three questions, the one that's most different in the online space, right? Simply because there's so many resources available where I can, where I can track or the provability of the claims that you're making, right? What did you sell, I can look at the Shopify records and see what you sold what it is.

And, again, my sense is, is that those aren't always fully transparent that there's ways to play with the numbers. But compared to the guy that's got a box, a shoebox under his desk with his receipts for the last two years, that online space offers some opportunity, I don't know that there's as much of the Wink, wink, nudge, here's what my real numbers are in the online space.

Jaryd Krause (26:10)

Yeah, in the online space, it's, it's quite good, because you do have digitally track transactions for sales. And you can ads and for digital marketing campaigns, how much is spent, what's the return of all that sort of stuff. And you can really break all that down. What I do like to see if I was to purchase a business, and I know somebody who has sold their business, recently, they have a really good dashboard with all of their metrics, and it's all accurate and all makes sense.

And that's super attractive for a buyer and the purchase, the purchaser of this business had quite a lot of capital, they've grown the business since. And they purchased the business based mostly based off the SOPs, and the processes that that my friend had built, and the data, the tracking and the documentation of their results. And I think that's highly, highly attractive. But there are some cases, we had cases where I did have a gentleman come on the podcasts, probably like 20 podcasts ago now who did buy an E commerce business, from a particular broker, he bought himself, and he didn't have anybody supporting him.

It's his first online Business Support, but purchase it was a significant purchase in the six figure range. And they were selling ecommerce products on the Shopify platform. And what had been done is some people had he checked the check this their sales records through Shopify in the back end will have been done is some of the sales were sales made by either the seller or somebody that the seller knows to boost up the revenue in the business, but he wasn't able to highlight that when purchasing it and realize after purchasing it that the results weren't typical of what he was purchasing it as, which is a massive shame. So you do need to know financial due diligence and things that we teach. It's a massive shame.

Now, I want to ask you, you had the experience that you built your businesses and congratulations, 15 years in business is awesome. And that is that's no small feat. And I think anybody that's getting into business should be thinking about the long term and you have had to have those experiences of business that you've built. And then you come to, I think it might have been your first time that you realize you wanted to sell a business you want to sell it and you were unable to and then you needed to make some changes. What caused you?

Mike Finger (28:42)

That? Yeah. No, that that's an I apologize for jumping in. But it's just visceral for me, Jaryd, I can still remember that day hanging up the phone. And it was those first two businesses 10 years in, I've got 50 full time employees, I figure it's time for me to make my exit because I'd come to the conclusion my employees were trying to kill me. And I pick up the phone to call the first broker and the second broker and the third broker and I got the same messages on not enough cash flow to owner dependent all of these things that are pretty typical for most small business owners.

But that was my two but a four to the forehead moment where I was like, oh, being in business a long time doesn't mean you've created transferable value, right? Surviving doesn't mean you've created transferable value, the number of employees the revenue, all of these things are meaningless as it relates to what it is that creates a business that you can actually sell to someone that they might find attractive and that's for me where I spent the next five years making those basic Changes And it was that life experience that led me to the simplicity of those three questions. Because you know what, of those three questions at 10 years in? I was okay, on Question three, my financials were pretty clean. But the other two questions I was a hard no. Yeah, were the results desirable? No. Where they could a buyer duplicate my results? No. And why would they want to because they weren't desirable to begin with. So that's what drove me back to that place of Wait a minute.

And you know what, Jaryd, I got lucky. Because I got that moment. In my in my 30s. So many owners don't reach that moment until they're 65 and ready to retire. And then they get that message of I'm sorry, there's nothing here to sell. I have those conversations with owners where it's like, well, I built this thing. This is my retirement plan. I'm sorry, there's nothing here. And I don't want to have those conversations anymore, which is why I do the work that I do. It's one thing to find that out, and be able to make changes or find that out and invest in a retirement fund or do those things, we've got to change that owner, perception that survival is sellable.

Jaryd Krause (31:20)

It's just not enough econ to realize, like, the business owner, is so hungry, like in the survival phase, right? Like, if you're in the survival, survival mode, or like, I need to earn an income, I need to pay bills, I need to live a good lifestyle, what happens is you need you and you need it. But also, you've just creating more and more responsibility that you take on and you put it on your shoulders. And at the end of the day, you want to sell this thing and you realize you built a really good can be a good job, have some flexibility in it.

But also, you haven't really built an asset that can stand alone without you. Nobody wants to buy that job. Nobody wants to buy all of that responsibility. They want that responsibility, outsource to Team systems and processes that anybody can sort of oversee. And we don't realize that until we go out. It's a big wake up call. And I'm stoked that you found that out when you're 30. Because how long? How long can it take businesses to make the turnaround, like five years to get the extra five years that somebody at 65 isn't going to want to endure?

Mike Finger (32:30)

Well, absolutely. And remembering that for most business deals that are financed, the bank's going to look at a three year track record. So even if I start today, and I can flip the switch overnight, I've got a three year track record to build to be able to document that what I want to happen is happening and to what you said, Jaryd, we forget.

I mean, for many owners, they're lucky if it turns out to be an ok job. There's many owners out there that are miserable in the work that they do. It's a lousy job, I asked owners, if your job sucks, why would someone pay you for the opportunity to do it just doesn't make sense. But that's what so many owners believe. They believe that the fact that it's here and survived is enough. And unfortunately, that's why that's such a high percentage don't sell.

Jaryd Krause (33:25)

So how much time should is to say somebody has the idea. We're talking about the typical person that the business is highly reliant on them, and they've got it, but they've basically got a job. They don't have a business. How many? How much time should they give themselves to turn that into an asset? There's and there's an actual business before it's got the subtractive the results can be duplicated. And the metrics are attract. Sure, sure. I know this is a tough one to answer because it's going to be dependent on a speech business. But is there a general.

Mike Finger (33:25)

Right, yeah, right. It interestingly enough, sometimes I think it's a second tier win. But sometimes I think it's a win for the owners to just say, it's never going to happen. And that doesn't necessarily mean that they bail on the business maybe that maybe it's a good lifestyle business for them. But now they know that that exit isn't part of their path. And now I set up the IRA or the 401k are the retirement plan. I have to make different plans for my future, recognizing this reality for those that start to address it.

This is a journey of yours, right? This isn't a journey of days or months because not only do we have to change our perspective about how we run the business, then we have to actually change the business to match that new perspective. Oh, these employees I have aren't going to fit the bill the contract as I have aren't going to fit the bill I've got to. And it's that expansion and growth and then you expand to the next level and the systems you've built at the level before don't work quite so well, and you're doing it again and again. So it's a journey of yours. But even done imperfectly, it can be an incredibly rewarding journey. Because it takes us out of that, that trap that so many of us are in.

Jaryd Krause (35:29)

Have you ever had the experience where somebody comes to you said, Hey, Mike, I want to sell my business, and you help them get sellable over a number of years. And at the end, they go, well, this is a really good asset and doesn't require me much time, maybe I won't sell it.

Mike Finger (35:49)

Absolutely, and it's the reason I don't work on commission, because ultimately, I don't care if they sell their business goal is a happy owner, and either the current one, or the opportunity for the next one to be and the truth of the matter is own ability equal salability. Right, the best business in the world to own is one that's easy to sell. And so that's, I've watched that that relationship of love redevelop between an owner and their business and truthfully watching that is as rewarding, if not more rewarding than watching somebody sell successfully. So it's, it's absolutely part of the journey.

And I love that part. Because what you've bought is the freedom to make the decision right now owners think they have that freedom. And the truth is, is that most do not. Most owners think selling is a choice. I'm going to sell my business now. Most aren't there. They do not own a sellable business. I've seen numbers as high as 80% don't own a sellable business, yet. Most owners think they do. Yeah, that that to me is the cruelest part of this. And because I live that right, I thought I had done everything right. I thought I had done my homework. And then boom, sorry, Mike, we can help you fix these things. Call us back in three years.

Jaryd Krause (37:16)

Yes, stating that he's ready to walk out the door. Three, three extra years when you're at an age, I mean, for you at age 30? Is i mean still annoying? Because you've got three years is a long time. But for somebody that.

Mike Finger (37:30)

Oh, yeah. And I was I was in my mid 30s when that happened. And I was burnt to a crispy piece of toast. Yeah, I was just nothing left in the tank. Yeah, yeah, yeah. And years of, 12 hour days. I was toasted, but again, it was, it was no one's fault. But mine, because guess what, you're the owner?

Jaryd Krause (37:51)

Yeah, we have to take responsibility. And I think we've got to take responsibility, not as just the worker working the business, we need to take ourselves out and look at the business like in the book, the E Myth, you don't, they've got a job, but you should treat it as a business and build the SOPs. And that's a really good book, I guess anybody listening to this podcast is the E Myth is a wakeup call for people that start a business or have a business and tied to that business and don't have options.

What you talked about is the freedom I think before is like a happy business owner is somebody that has freedom. And I think those freedom, like can be summed up between having options, they have the option to sell it whenever they want, because the business is sellable, the option to keep it they have the option to take the money and reinvest in something else have so many options, which allows that freedom. And I think, absolutely, when you're stuck in it in the business, and it's a 12 hour day, you don't feel like you've got freedom or options. And you really don't have them do you because you're tied in. So I want to.

Mike Finger (39:02)

Write in the darkest part of that, from my perspective, Jaryd is that it feeds into how most owners interact with this topic. And they for most owners, their plan is they wait, and then they fail. That's how most owners deal with exit. And, again, for me, that's why the focus was on the question of simplicity, simplicity around it. Even if someone listens to this if an owner listens to this conversation we're having and gets excited. And by the way, I'm 100% behind you on the recommendation of the E Myth by Michael Gerber.

That's an easy recommendation and win for business owner. But even if they get behind that and they start diving into the space, it's so easy to get overwhelmed by the complications by the complexity by the dive into this program or this metric or look at this. This is really important and it might be but nothing compared to the core Question of desirable results, that a buyer can duplicate them that you can document again, that to me is the lifeblood of this stuff.

Jaryd Krause (40:09)

Yeah, those three principle guys note them down. So, so important. Have you ever gotten to the point Mike, where somebody has done all of this work, replace themselves with SOPs and team, the business is no longer reliant on them, and they go cool, I can see how attractive this is now, compared to where it was two or three years ago, where the business was reliant on me. Now the business runs itself, it can get the same results, if not better, without me having to lift as much of a finger as I did previously.

And they have this expectation that because the business is set up so good, now they have an expectation of how much the business will sell for has, have you ever seen that holding people back in terms of they put it up for sale? They've got a price in their head, and they don't actually sell it? Because they've got an expectation on how much they're going to get for the business? Is that a? Is that a thing?

Mike Finger (41:04)

That's really interesting. I don't know that I've seen that. I've seen the flip side of that. And I just had a client who sold his business that had gotten it to that place, right? It was it was very independent. He was there maybe five hours a week. It was the results were great. And he didn't put it up for sale. What often happens with those kinds of businesses is people see that, right. So he's got a knock on his door.

And because of that circumstance, it put him in the place. It's just, it's the dream negotiation place, Jaryd, I don't have to sell my business, and your offer isn't enough. If you'd like to offer me x, then I'd consider it but I'm happy. I'm thrilled to continue owning this business. What an enviable place to be when it comes to selling your business. Right? I mean, because if I'm fine continuing to own this thing, and you're not willing to meet my price, I'll talk to you later. It's I'm trying to think of a direct scenario where I've seen someone get to there, I will say that part of the process is education about the market.

And so hopefully, by that point, they've become aware enough of what the likely market value of their businesses so that they can educate their expectations. But again, as I as I'll tell clients, what we want to do is we want the business to operate effectively, so that you can meet your price goal, doesn't mean you have to list for that price goal, right. And you can list that you can list the thing for more than that and see if there's an opportunity. And if it doesn't sell, that's okay, too. So that's the Win opportunity that that you have if the business is set up that way. Have you seen that scenario you talked about in the online space?

Jaryd Krause (43:06)

Yeah, it's a good question. I think a lot of people when they're flipping deals, especially with content sites, and blogs and stuff, they they're either they're buying the business with the ideology of them, going to sell it and make a profit. On the flip, I believe a lot of people will have an expert. And it's good. Like, I think a lot of people's expectations have recently been met, because of the market conditions. Were just after a pandemic, everybody wants to be online, don't want to have to continue working, I've got a bit of money, how about a buyout on my business, and I work from home, the multiples of the businesses have gone up, and for what people are paying for the businesses.

So it has been a seller's market for the last few years. So I think people's expectations have been met. And I think maybe I don't know what will happen in the future, anything can happen. But there could be a time where people do have this expectation of I'm going to buy this business for however much maybe it's 100k and I'm going to build it up to 200k in this period of time, and then sell it for double what I paid for it. And they might get to that point, but realize that they can't they can't get that for the work they put in. I just think it's I just think math is just working differently.

Yeah, and I think it's something the reason I asked you is because it's a mindset thing I think it's something for people to consider the bought something for 100k and you couldn't sell it at 200 KV sold it at 180k Is that so bad? Like would you just take your take the money off the table, have an 80k profit and reinvest into something else and learn from that experience and make the business more desirable. More replica table or easy, get the results from the new owner can get the same results and may hearing it, tracking things.

Mike Finger (45:01)

Yeah. It's really interesting. What comes to mind to me with what you said is, how different it might be if for the acquisition entrepreneur to just the regular business owner, right? If I'm in the business of flipping businesses, there's a very different metric and method there than if I'm the person who's built this business, and I'm ready to exit at some point in the future. It's, that, to me is a fascinating part of this, because there's so much content that crosses over both those spaces. Yeah, and I'm not sure truth is always the same in those different buckets.

Jaryd Krause (45:39)

Yeah, I agree. It's a different, it's a very different strategy. And I'm more for like, I like acquiring businesses, but not with the intention to flip, because I like to play a longer game. And I know, the longer I play, the better compounding and better returns that I'm going to get versus buying and selling and flipping, you have to take a bit of money, you have to pay fees in terms of how much you give a broker, if you're going to sell through a broker, if not, the fee is going to be your time and trying to sell it yourself being your own broker.

But you've also got the fees of finding a new business again, and again and again and again. And then having to, sometimes you can use the same systems, SOPs and team to buy the same type of business model and grow it and keep buying those types of businesses, which you can use as leverage for a business you're actually purchasing. But also, not every single business is the same. And you will need to spend time, effort and energy and resources tweaking some of those systems. And if you don't even use the same business model, then it just ends up being a lot more work. That's my philosophy. That's my personal philosophy.

I think that there's too much too much effort and energy and time and resources being spent in that flipping space versus if you can play if you if you're not innocent, I think people that are in survival mode, need to make cash and they will be prepared to spend a lot of time, effort, energy and resources to do so for myself in a position. Like I'm in a unique position where a lot of other investors that may be as well that I like I'm not a zillionaire but I don't need to. We don't need to make it work really, really fast. Because I need to get out of the job. And I think that when you get out of that sort of position of survival, you can play a longer game and have less stress around it to pay bills. And I think that's a beautiful place to see.

Mike Finger (47:41)

Yep, no, I would agree. I mean, they're both valid strategies. The last two businesses I bought and subsequently sold in less than three years. And those were both turnaround by design, and with good results, but they were fundamentally different than my first exit intent in plan in in process. I thought it was going to own those first years in those first businesses forever. Yeah. And so that change, so yeah, no, I think that's a great point you made its and I think it's important for owners to recognize that the journey makes a difference where you're starting what you're doing. Sometimes you got to take the advice we hear with a grain of salt.

Jaryd Krause (48:27)

Yes, yeah. I believe I believe in and there's an expense that a lot of people pay that they don't know, they pay, and it's called stress expense, something I sort of like coin a while ago, how much stress are you carrying when you're doing a lot of activity in a short period of time? If trading? Markets, businesses, whatever it is, versus buying and holding in the long term? What's the stress expense you would pay there? And I don't and it's an invisible thing. Right that people don't know that they're paying.

But it's takes a mental toll. And energetically and physically, so I think yeah, I think in those terms, and I like to like my goal isn't just more money, it's have a better lifestyle and sometimes have a better lifestyle that can be minimal stress, sometimes good stress, healthy stresses is valuable and important to help us level up but something that I just I consider when investing and living and I just there is and sometimes we need to go through those diamonds are made under pressure.

Sometimes we need to go through maybe the flipping stage of flipping sites stress and pressure for a lap to allow us to become solid as a business owners. I have a really good mindset before we go. Now I'm going to sit and chill and pay less stress expense. Have you seen that in other people's life cycle journeys as an entrepreneur?

Mike Finger (49:55)

As well? Absolutely. I am just I'm flashing through my head the different conversations I've had with some of my, my coaching clients, especially when we're new in our relationship together, right? Because so often the burden that they're carrying, I described my initial ownership as if 80 pound bag of potatoes that I was carrying. On my back, it was just, it was visceral. It was the stress that was there. And I love the love the term, the stress expense, that it's a very real thing for so many owners and some of its reality.

Some of it is stuff we make up in our head. Some of it is unavoidable, right? I mean, well, yeah, you're a new business owner starting out, man, if you're not a little bit stressed, I am a little worried for you, right, because it's a harried place to be. But yeah, that that development you talk about, you can see it, it's just fascinating to watch as the owner goes from that place of survivability. I tell owners that I'm not a start with the end in mind, guy, I'm not a day one, you should have your plan for exit. Our first goal is sustainability.

Let's get to that place where we're not panicked every day about every decision. And then after sustainability, our goal becomes salability. It's just that that's how we drive ourselves to a place where we can go either way. And that is, that is a wonderful place to be as an owner just, yeah, magical.

Jaryd Krause (51:31)

Yeah, sustainability allows you to, I want to think about stress as like, when you get into the sustainability, phase stresses, stress can be a bad thing, when we're trying to make decisions. For example, if you're rushed, and you try and you're running out the door, and you're like, I can't find my keys that might be in your pocket, and you're making the not the best decisions to look under the couch. And all that sort of stuff, when it's right there in the pocket is something you can't see, because you're stressed, you're freaking out, you don't have time.

And when we try and make decisions, sometimes we crash our car or stub our toe, or whatever it is, we're running around like a headless chalk, for lack of a better term. And because we're stressed, and we don't make the best decisions when we're stressed, but when you're in a sustainable place, then you can have a level head be a lot more grounded, a lot more confident in that that goal of the salability, the exit the goal that you have in mind, and I think it's way more empowering place to come from way more empowering energy to have when you want to, because you got when you when you set a goal, you should have confidence in it, rather than setting a goal based out of survival and stress. You're less likely to hit that because you're stressed about it already.

Mike Finger (52:43)

Yeah. Oh, and I love the visual that you just described there, Jaryd. Because I think of owners I think of myself, I don't think you can always tell that from the outside, right? Because there's times when as an owner, I was up to my eyeballs, but loving every minute, every minute of Yeah, and flow and doing the thing and, and then three months later, I'm up to my eyeballs. And I feel like I'm drowning.

And it's an it's such an important element of that owners journey that you talk about. And some of it comes from external issues. Right, if I'm betting the last dollar I have in my bank account, yeah, that's more stressful than, if you're two or three exits in and you have a little cushion but correct. Good. Good days and bad days. Right? Yeah, definitely don't journey of ownership.

Jaryd Krause (53:35)

Yeah, it's, it's, there's so much I believe mindset is like a huge percentage of it. And if you can have yourself in the right mindset, then you can make better decisions and at times, being up to your eyeballs in, in, in work, but everything's like you're loving it, you're in the chaos lik you can get things done and it's working really, really well. But like the other example, you said, sometimes you dislike you just like where's my snorkel? Like, I can barely breathe underwater here like.

Mike Finger (54:10)

Right, right? Or even worse, when you walk in and your feet get a little wet and you're like, what's going on? I mean, it's just that we could talk for hours about that owner mindset and how we get to that place but and unfortunately, that stress moment is often the trigger where someone says, I got to sell this place. Yes, right now I got to get out of here. And all of those dominoes we talked about earlier start to fall off I'm sorry, you're not ready. Oh, I'm sorry. You can't document your results or I'm sorry.

Being in that place of high stress which I was at the time I got by the skin of my teeth. It my story could have gone legitimately south the complete opposite way because for so many of us as owners when we reached the end of the line there. We can't we don't, we're not able to find that the next couple of years to change it. And I feel very lucky to have had the support and ability to go through that.

And that's part of the reason I do what I do now is I talk about the day, I remember hiding under my desk, because I just didn't want to deal with another employee issue. But there's a way out from under there. And there's a way to do it differently. And I try to bring a lot of sympathy to those owners who are in that place, because a lot of us had been there.

Jaryd Krause (55:33)

Yeah, yeah. I think that's what, why you what you do is so great. So my thank you so much for coming on. People that are listening there. They're going to make an exit one day, where can we send people to check you out? Check out your stuff your link?

Mike Finger (55:49)

Sure, you can. You can find me at exit oasis.com I'm most active on LinkedIn. So you can you can connect with me there as well.

Jaryd Krause (55:59)

Alright, cool. We'll put the links in the show note guys. Mike, thank you so much for coming on everybody that is listening. Thank you for listening. If you are a business owner or a business owner, at some stage, you're more than likely going to make an exit. Please share this podcast episode with another business owner that will make an exit in the future because this is going to be so valuable for them to listen to.

It helps us spread the word selfishly get more viewers and listeners listening to the podcast so it helps us grow and help more people get a higher impact but it's also helping you help your friends and support them.

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Host:

Jaryd Krause is a serial entrepreneur who helps people buy online businesses so they can spend more time doing what they love with who they love. He’s helped people buy and scale sites all the way up to 8 figures – from eCommerce to content websites. He spends his time surfing and traveling, and his biggest goals are around making a real tangible impact on people’s lives. 

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