What You Should Know Before You Sell Your Business – Jessica Fialkovich
Thinking of selling your business? Listen to this episode first!
Meet Jessica Fialkovich. Jessica is the Founder and President of Exit Factor, an innovative firm that teaches business owners how to buy and sell businesses for the most profit in the least amount of time. She’s also Business Exit Expert, Best Selling Author, Keynote Speaker, and Small Business Advocate. A first-time entrepreneur at the age of 25, Jessica knows the ins and outs of successfully establishing and selling multiple small businesses in a number of different industries. She has been able to build her business brokerage firm from a two-person team to one of the top firms in the country.
Jessica is particularly passionate about entrepreneurship and educating business owners. Because of this, she is dedicated to supporting the small business community by sharing her experience and expertise.
In this episode of the Think Business With Tyler podcast, we talk about business exit strategies, determining whether your company is sellable, the importance of working with a great broker, and tips for preparing your exit from day one.
If you want to get valuable insight into business exiting, make sure you tune into this episode to hear what Jessica has to say.
💡 Name: Jessica Fialkovich
💡 What she does: She’s the Founder and President of Exit Factor, an innovative firm that teaches entrepreneurs how to buy and sell businesses through courses, programs, and consulting.
💡 Noteworthy: Over the past seven years, Jessica oversaw $250+ million in transactions, worked with over 700 business owners, was involved with 350+ deals, and mentored her team to help over 3,000 business owners with guidance about buying and selling businesses.
💡 Key Quote: “My philosophy is you should be running a business like you can sell it at any time. Like I said, 95% of the reasons people sell are not pre-planning reasons; you can’t pre-plan hitting burnout.”
💡 Where to find Jessica: LinkedIn
Is your business sellable? After working hard for years to grow and build your business from scratch, now you’re probably wondering whether it is sellable. Although there are some factors that affect the value of a business, the bottom line is that any company is sellable.
But the real question is: Are you going to get the amount you want from your business exit? Jessica explains, “One of the bits I like to dispel is that any business is sellable. It just really depends on how much you’re going to get for the business and if you’re going to get it in cash and have to do or have to do like financing. There’s businesses that sell for a few hundred dollars every year, there’s thousands of businesses that sell for a few thousand, and then you get up into the millions, and obviously, there’s less of those. But what makes a business more valuable than others or maximizing the value is there’s there’s three buckets I focus on.”
Great brokers get deals done. A broker is someone who acts as a middleman between a business owner and a potential buyer. They can make all the difference during this emotional and sometimes long process. So it’s essential to find a reliable broker.
Jessica explains what makes a great broker. She says, “Another thing I find that sellers overestimate is the finding the buyer process. Good brokers find you a buyer, right? The great brokers are the ones that can get the deals done. That’s the difference between 50% falling out of a contract and you going through with your business sale. Asking about that experience will give them the creativity to fuel the business getting sold.
Prepare your business for exit from day one. The only secret to success when selling a business is to start preparing for an exit from day one. To create a good exit strategy, you need to have clean financials, demonstrate consistent EBITDA growth, and build effective systems.
Jessica explains, “There’s always many more buyers looking for businesses for sale than there are good businesses to sell. And if you’re one of those good businesses that attract multiple offers, you’re always going to get more money, but you’re also going to get better terms, right? So part of this preparation of getting your business ready for sale before you’re even ready to sell is positioning it so that when it hits the market, you’re going to attract multiple offers in the first week or month. It’s not going to be sitting on the market, and brokers are going to have to go find buyers for you. The buyers are going to come to your business.”
You don’t have to make all the mistakes in life yourself. While it’s true that mistakes make you stronger, you don’t have to make all of them by yourself. Sometimes you can lean on the support of a mentor, friend, or colleague. Jessica says, “One of my good friends about ten years ago told me, ‘You know what, Jess, just you can’t make all the mistakes in life yourself. You have to learn from others.’ And I wish I would have learned that lesson a lot earlier in my career, and I’ve got great mentors around me and things like that now, but just leveraging mentorship, coaching education. No, I don’t we don’t have time in this life to learn all the mistakes and recover from them ourselves.”
“I think I’m in the minority here, but I really don’t believe in this whole pick your niche and stick to your niche early on. I find when you’re in the startup mode, it’s also like survival mode, right? But that’s when you have the most creativity as an entrepreneur and you have the ability to try all these different things and see what works and see what market is going to respond to you and what in the marketplace is going to respond to you. And I think if you’re so narrowly focused in your niche, you’re going to miss out on a lot of opportunities.”
“I think the biggest takeaway is I wish I would have seen the writing on the wall and known that I should have been preparing for an exit the entire time to really maximize that exit for me.”
“As a business owner, when everything’s been wrapped around your role in the business for whether it’s been two years, ten years, 40 years, that the day it goes away, it’s not always a great feeling, even if that’s what you’ve been working for.”
“Everything starts with the financial records. And if they see something they miss, it’s like pulling a string, right? So they start pulling on that string, and something starts to unravel. But that’s where they start their due diligence process. Honestly, if they’re in financial records are in really good shape, there’s not a whole lot of strings to pull.”
“I call them part art and part science. So the part science part is the profit, and we’ve been saying profit, but it’s actually defined by an earnings metric called EBITDA, which is Earnings Before Income Taxes Depreciation, and Amortization. Sometimes we’ll go a step further, and we’ll include the owner’s salary, which is called owner’s discretionary earnings, but that’s the science part.”
“I think there’s good and bad people in every type of career, but there’s some buyers that their whole game and their whole plan is to get a business under contract, wear the owner down and then in due diligence, they’re going to reduce the price to what they really were going to pay for, but they knew they wouldn’t have won the deal with that original offer. So you do have to be careful with that on the seller side.”
“Average due diligence is 30 to 60 days. Some professional buyers will know if they ask for 90 or 120 days, they don’t really need that extra time, but they know it’s going to wear the seller down because, in the back of the seller’s mind, they’re getting emotionally attached to the outcome of the deal. But every day that goes by they’re more emotionally drained, and they can’t imagine going through this again with another buyer.”
‘How do I market my business for sale without everybody knowing that it’s for sale? And should I keep it confidential?’ The answer is you should always keep it confidential.”