Zen Active Sports was sold after just one year. In this episode of Freedom Fast Lane, Ryan Daniel Moran shares the details of the sale in which he and his business partner Sean Coyne exited the business. If you want to know when, why, and how to sell your business, then this is a fantastic podcast for you!
Putting cash in your pocket doesn’t just have to be about making sales and profiting off each one that comes in. You can monetize your business in a completely other way by exiting the business and selling the equity within the business. For Ryan and Sean, they realized that by exiting the company they could reach their financial goals much faster as they were reinvesting into the business.
When Do I Sell My Business?
Selling your business only makes sense when you are out of stage one of a physical stage business. The three stages are 1) Grind 2) Growth 3) Gold. Once you are out of the ‘grind,’ you are in a position to sell. Ryan predicts the buying and selling of Amazon businesses will be the next wave.
In order to get traction to get you out of the grind and make 50-70 sales per day, Ryan recommends following these four steps.
Step 1: Contact everyone you know with an Amazon account, give them your product for free, and have them review your product so you have 25 reviews.
Step 2: Once you have 25 Amazon reviews, turn on pay per click (ppc) because now your product is going to convert.
Step 3: Do a product launch (Facebook, internal list, etc…).
Step 4: Create a regular system for reviews (e-mail follow up sequence, calling customers, etc…).
Zonblast is a tool created by Joe Junfola that syndicates your product and allows you to outsell and out review your competitors. Ryan’s fish oil product was on page two and doing around 40 sales a day on Amazon. After a Zonblast, his product went to bottom of page one and sales increased by 100 per day. The difference was $37, 779 per month extra!
You are a viable candidate to sell your business once you are out of the ‘grind’ and selling at least $10-20K per month. You don’t have to be profitable (paying yourself) in order to sell.
Sometimes selling your business can make your financial goals possible much faster than if you were just building the business from scratch to live off the profits.
Why Would I Want to Sell My Business?
1) The cost it takes to build a business is high and can take $5-10K of inventory at Amazon’s warehouse in order to make sales, plus marketing costs. You could make money by pulling your cash out of the business you are selling because you built a real asset.
2) Market timing is another reason to sell your business as it’s getting harder to bowl your way to the top. What happens if Amazon makes changes as eliminates my category?
3) Reinvestment is the most exciting reason to sell your business.
How Do I Sell My Business?
You need to have sales reports and profit and loss records kept on a program like QuickBooks to give your potential buyer. You’ll also need documented systems to explain who does what, when they do it, and how they do it. Everything that impacts the movement of your business needs to be documented. The person buying your business wants to know how to continue growing that business. Legal documents need to be included, as well such as articles of incorporation. The person who purchases your business will need connection with everyone who is involved, such as suppliers, shipping companies, and anyone else who works for the business. You might also need a plan for growth and competitive analysis.
Who is Buying These Businesses?
- Horizontal Acquirers: When someone in your industry buys you out. This rarely happens, but when it does it’s the maximum payout because your competitor is acquiring more than just your cash flow. They are also acquiring your customers, and this usually only happens when your company is doing at least $1M in profit.
- Brokers: Can get you a healthy payout and 2-3 times multiple of profit. They will take a brokers cut and require you to do your own legal work. This type of deal takes a long time.
- Aggregators: Someone who is in the business of buying businesses and has done the entire process before. Aggregators buy businesses, invest into them, grow them, and keep them. The exit payout is going to be smaller than if you were working with a broker, but there are opportunities to be creative and flexible with the deal. With this type of relationship you could build and sell businesses to the same person over and over.
The Zen Active Sports Deal
Ryan and Sean maintained a small interest in the success of the company. The aggregator was an Amazon business aggregator so could actually build Zen Active Sports to a point to where the small maintain interest is worth more than what they sold the entire company for. The deal had a big cash payment upfront, plus monthly payouts, and Ryan and Sean are held as paid consultants for a few months.
What Ryan Wishes He Had Known
If he could go back and advise himself, the number one thing he wishes he had known was to better manage his inventory. Remember, a single Zonblast bumped him to page one and put an additional $37K per month in his pocket. There were times in Zen Active Sports where they ran out of inventory for 2-4 weeks. It’s not just your profit month to month, it’s the profit times the multiple you get acquired for.
The other thing is that he was building more than just cash flow, but rather an asset to be sold. Ask yourself, “Is this a business I would want to buy?” Ryan also wishes he had kept better records and known there is more than just one way to profit from the business. When you understand you are building an asset, you become a better entrepreneur.
Multiple Options When Building a Business
- Build to hold
- Build to sell
- Build to sell some and hold some
Look at the holes in your business and ask yourself, “What would I be doing differently if I had more cash or I was playing for the very long term?” Also ask, “How would I play the game differently if I was building up an asset that was going to be sold rather than just a source of cash flow?”
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Links to Resources Mentioned
Zen Active Sports
Amazon Product Launch (Ryan’s YouTube Video)
12 months to $1 Million on Amazon (podcast)
Tom Shieh (podcast)