Episode 51 – Ben Davis – The Gents Place – Part 1

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In this two-part episode, Andy and Doug are joined by Ben Davis. Ben tells us the story of the origin of the Gents Place and why he had to wire $50,000 to a contractor to even get the business up and going, expanding into new territories, the decision to Franchise, and a bunch more. Thanks for joining us, Ben!

If you would like to learn more about The Gents Place, go to https://thegentsplace.com/ for their customer-facing website, or if you want to be the next Franchisee, learn more at https://www.tgpfranchising.com/

Are you considering selling your business? Are you considering entering the world of entrepreneurship? If so, please get in touch for a FREE consultation. The best way to learn about us is at our website, which includes connecting with Doug, Andy, or the rest of the Apex Team.

Using Real Estate to Boost the Value of Your Business

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Using Real Estate to Boost the Value of Your BusinessWe have often spoken about the importance of keeping any real estate connected to your business in another entity so that you have more options when you’re looking at an exit. In this article we’re going to take a closer look at the interactions between those entities.

It’s Hard to Buy Early On

When businesses are young, there’s not a lot of free cash to spend on acquiring the real estate associated with the business. Also, sometimes the first location is a “good enough” location as opposed to an ideal one, and that young business may very well outgrow that original space. In the early years, many business owners are reasonably just concerned with making the rent, not in being a landlord too. 

If You Can, Buy

Once a business has matured and there’s capital and a willing seller, a business owner should almost always consider buying the real estate associated with his/her primary business.

The simplest advantage is the changing of a liability — rent you are paying to a landlord — into income into another business entity you own. You’ve taken money that was going out the door to someone else and redirected it into a door that you are benefitting from. 

More importantly, when it comes time to sell, you have two businesses to sell, creating more options for how a transaction can happen.

That said, things continue to shift in the new world of work post-pandemic, and businesses are continuing to evaluate how much office space makes sense for their operations. This is yet another thing to consider.

Charge Appropriate Rent

Now, if you are your own landlord, there’s a fair amount of flexibility that you now have. But you must wield that flexibility wisely.

Scenario 1: Undercharge

A business owner may want to, for whatever reason, take more money out of his primary business, so he/she fixes a rent that covers the mortgage for the real estate business, but is below market rates for his primary business. This creates a number of problems:

  1. A future valuation of the business will have to take into account the true market rent
  2. The real estate business is not benefitting as much as it could
  3. A buyer will wonder what other irregularities are under the hood

Undercharging your business rent when you are the landlord may be a good short-term solution for various personal reasons, but it’s clearly a poor long-term solution.

Scenario 2: Charge Aggressively

Part of owning the real estate business is creating another vehicle with its own tax advantages. As such, you may want to “stress” your primary business a bit in order to reach some goals in your real estate business. 

This doesn’t have to be anything extravagant. It could be something like 10% above market prices. Or it could be as high as 25-30% above market prices. You can choose an amount that makes sense for your own goals.

But, to make sure that you have the best price for your primary business, you will want to ramp that price down to market rates 12-24 months before selling it. This will maximize seller discretionary earnings (SDE) and the valuation of your business. 

Many of our brokers have real estate licenses precisely because we often have to deal with transactions that have real estate attached. Give us a call to see how we can help you prepare for a future transaction.

Episode 50 – Third Party Influencers

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On this Apex Business Advisors Podcast episode, Andy and Doug discuss Third-Party Influencers. These parties are not directly associated with the Buyer or Seller, but they certainly are part of the transaction. They talk about Lenders, Landlords, Franchisors, Distributors, and others who all have a say in whether the deal gets done or not.

Are you considering selling your business? Are you considering entering the world of entrepreneurship? If so, please get in touch for a FREE consultation. The best way to learn about us is at our website, which includes connecting with Doug, Andy, or the rest of the Apex Team.

Book Club #30: $100M Offers: How To Make Offers So Good People Feel Stupid Saying No, by Alex Hormozi

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Book Club #30: $100M Offers: How To Make Offers So Good People Feel Stupid Saying No, by Alex HormoziAlex Hormozi begins his short book $100M Offers with a story from Jeff Bezos. In it, Bezos discusses the similarities between baseball and business, particularly the idea that you’re not going to hit a home run (or even a base hit) every time you step up to bat. But there’s a key difference. On your best at-bat in baseball you can only bring in 4 runs. But on a “grand slam” in business, you can bring in the equivalent of 1000 runs. “Big winners pay for so many experiments,” says Bezos.

Hormozi’s book is entirely oriented towards getting you that 1,000 runs for your business using what he calls “Grand Slam Offers,” offers so good that, “people feel stupid saying no” to them.

While a great deal of the book is dedicated to surgical explanations of how to craft a fantastic offer (and that’s very useful) there are some key ideas that Hormozi puts forward that give proper context for how these offers should be positioned.

Never Offer the “More for Less” Value Proposition

Hormozi notes that many players enter the marketplace and charge approximately what the competition charges, but with an extra or two in order to create the “more for less” value proposition. But this is a fool’s errand.

Not only does this indicate the simple path any future competitor of yours can take, but it’s ultimately a race to the bottom. Go the other way, Hormozi notes: charge more for more. By serving niches and serving them well, you can begin to dictate your prices instead of the market dictating your price to you.

9% Growth Should Be Standard

While most people know that the stock market grows roughly 9-10% a year, they don’t normally apply that metric to their businesses. Hormozi does. If you’re not keeping up with the growth in the market, you’re falling behind. While not everyone may like this metric, it’s certainly a hard one to disagree with.

Use Objections to Create Features

Hormozi now is in many different industries, but he started out helping gyms bring in more revenue. Hence many of his examples or templates in the book use fitness/nutrition starting points.

One of the examples he gives is the idea of getting people to eat healthier instead of going for liposuction. He then offers a whole list of objections that people might give to eating healthier. Hormozi then reframes those objections as reasons to buy.

For example, if someone says that eating healthy is “too expensive” a headline for a blog or a heading on a sales page might read:  

“How Eating Healthy Can Save You Money”

Another objection might be that it takes too much time to cook healthier food. Again, the reframe looks like:

“5 Healthy Meals You Can Make in Under 30 Minutes”

Hormozi notes that there are many different reasons that customers buy, but if even one objection they have is unaddressed, that can lead them to walk away. By anticipating every single objection they might have and reframing them as features, you build momentum towards a transaction. Since you’re not stopping/starting with objections and answers to objections, customers are free to proceed on the customer journey unimpeded towards a sale.

Hormozi’s entire book is oriented towards helping you:

  • Get more customers
  • Increase their average purchasing value
  • Increase the frequency of their purchases

If you’re looking for different ways to reframe and/or upgrade the offers you currently have, this is an excellent resource.

Episode 49 – New Year, New Me!

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On today’s episode, Andy and Doug share some tactics a buyer, perhaps as part of their New Year Resolution, can use to make their evaluation and buying process as smooth as possible.

Are you considering selling your business? Are you considering entering the world of entrepreneurship? If so, please get in touch for a FREE consultation. The best way to learn about us is at our website, which includes connecting with Doug, Andy, or the rest of the Apex Team.

Use Loom to Help You Save Time

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Use Loom to Help You Save TimeThere are times when we read an email and think, “I could explain this in just a few minutes instead of replying back with a long email.” Or you know that vocal tone and body language will help a message land properly, but can’t do that in an email. There are video messaging apps that can help. One of them is Loom.

What’s Loom?

Loom is a video messaging tool that helps you get messages out through instantly shareable videos. 

You can record your camera, microphone, and desktop simultaneously. Your recordings are then stored in the cloud with trackable views.

You can use web or app-based versions of the software to do the recordings and basic video editing tools are available to you if you want to trim a video for its best look and feel.

Why Use Video Messaging?

There are lots of use cases for video messaging, and the more you use it, the more possible uses you’ll discover in your own organization. Here are some ways you can use Loom and other similar apps:

  • Video SOP — one of the reasons that SOPs don’t get written is because people are intimidated/discouraged by writing down a lot of text. But for whatever reason, people are less intimidated by having a video conversation. You can use Loom to create explanatory SOP videos what can help onboard new employees and provide a respository of knowledge in any position.
  • Email reply — as noted above, it’s acceptable to reply to an email with a video message. In fact, customers will often be impressed that you recorded something for them, even though it may have taken you less time to do so than to write an email. Somehow recorded video conveys more “work.”
  • Troubleshooting — when particular problems occur frequently enough that everyone in your office knows how to answer them for clients, it might be worthwhile to record a one-time video explaining how to solve the problem. Now your team will gain back future time by sending them this video (and others like it).

Interaction

One of the ways text messaging has evolved over time is allowing for reactions to individual messages. We can “thumbs up” a particular message without replying, allowing the party on the other end to see our thoughts without our having to write them. 

Loom also features this feedback feature on its videos. Users can react with emojis at any time during the video, and/or send direct email feedback on specific timestamps.

Those who like to speed up their videos can take comfort in the fact that Loom allows you to speed up (or slow down) the video to a speed of your choosing (within reason…10X isn’t available!).

Videos can also be password protected and Loom offers integrations with other tools like Slack to make access even easier.

Prefer phone calls to emailing? We’re here for you! Give us a call today to talk about how we can help you with a business transaction.

Episode 48 – Anatomy of a Deal with Stephen Heiner Part 2

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In this two-part episode, we are joined by Stephen Heiner to share his experience as a seller working with Apex. Last week we talked about the pre-listing process, valuation, and marketing of the business. Today, we’ll discuss what happened after a buyer was attached, the offer process, due diligence, closing the deal, and what happened post-sale.

Are you considering selling your business? Are you considering entering the world of entrepreneurship? If so, please get in touch for a FREE consultation. The best way to learn about us is at our website, which includes connecting with Doug, Andy, or the rest of the Apex Team.

Case Study #70: Read the Fine Print

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Case Study #70: Read the Fine PrintJason Bagley sold his South-African-based cold email lead generation company, Firing Squad, to an American marketing agency but lived to regret the deal when he realized that the contract he signed didn’t give him what he expected.

Cold Emails

Most people don’t like writing cold emails. They know that it can work, but the stress and pain involved in writing them is enough to discourage them from pursuing it.

That’s where Jason and his team came in. Originally oriented as a web design firm, Firing Squad simply didn’t have enough recurring revenue and to dig them out of this hole Jason looked at his top recurring client and saw that it was an email newsletter business. He decided to pursue emails a bit more narrowly and almost in prophecy, wrote a number of cold emails to offer businesses help with a cold email service.

“How do we know this is going to work?” Many of the business owners unironically asked Jason when they had their appointment.

“You’re sitting here based on a cold email, right?”

Fair enough.

Secret Sauce

Jason was the top writer of these cold emails, but he knew that he had to pass on his knowledge to team members in order to scale. He did this through Looms or live video chats in which he would explain why something needed to be changed. An example he shared of a change he would frequently push was closing with a question.

Emails might end with “Let’s have a chat.”

“That’s not a question leading to action,” opines Jason. Go for a close, like “Can we chat?”

Little tweaks like these led to better success rates for his emails.

Apart from writing, Firing Squad’s secret sauce included how many emails to send and who should be targeted.

Challenges and Scaling

While Jason and his team were experiencing success, they still felt like they were on the same revenue treadmill that they were on when solely working on web design.

In the best cases, they created so much new business that the companies that hired them turned off the service because they couldn’t handle any more new leads.

In the worst cases, they only were able to get a few leads for the clients, making it not worth the client’s money or the team’s time.

Jason thought expanding into the US market might help him find a balance between these two types of clients and started having conversations with US-based businesses around referral partnerships. One of those conversations took a turn towards acquisition.

Jason knew that given how much he was still involved in writing the emails, he didn’t really have a business to sell as much as he could offer himself as a kind of acquisition. 

Looking for Upside

So Jason offered Firing Squad lock, stock, and barrel, in exchange for some base pay and some equity in the acquirer. After some negotiations, they agreed, but one of the deal points included significant price increases for the South-African-based clients. By significant, that meant tripling the prices.

Jason played the “we got acquired and the acquirer has forced us to do this” and after some grousing, a lot of the existing clients came along — which also offered an unexpected insight into how underpriced those services had been.

Jason was fine with working for the acquirer as long as he knew that at some point when he chose to leave he would be able to cash out what he had helped grow. Except that’s not the deal he signed.

Read the Fine Print

Jason had wanted actual equity, not shadow equity that evaporated when he left the company. The problem is that he got the latter and his lawyer hadn’t told him that he hadn’t received the former because he never clearly explained what he wanted to his lawyer.

Worse, the agreement was subject to US laws and Jason didn’t want to fly to the US to fight a court case. He chalked up the mistake to inexperience — avoidable inexperience — and went on to found another company.

Lessons

Three key takeaways here:

  1. Clearly communicate with your lawyer. He/she is paid to review paperwork, but can only offer you good advice if you are crystal clear on the outcome you want.
  2. End prospecting emails with a clear question with a bias towards action, rather than a lukewarm suggestion.
  3. Recurring revenue is king. 

Need someone to help you read the fine print? We know good lawyers who can help. Give us a call.