Alex Hormozi: I sold 8 businesses by age 32 [here’s how]

The video is about Alex Hormozi sharing his experience and knowledge on how to sell a business, including the prerequisites, finding a bank or broker, marketing the business, and closing the deal.

This video by Alex Hormozi was published on May 11, 2022.
Video length: 42:16.

In this video, Alex Hormozi talks about his experience of selling eight businesses by the age of 32 and shares his insights on how to sell a business.

He discusses the prerequisites that must be in place for a business to have enterprise value, the importance of finding a bank or broker, and the three phases of the selling process: preparation, marketing, and closing the deal. Hormozi also shares his experience of selling to different types of buyers, including financial buyers, strategic buyers, friends, competitors, customers, and partners.

He aims to help others understand the process of selling a business and avoid the common pitfalls.

• Most businesses need to meet certain prerequisites to be valuable and attract institutional investors.
• Customer concentration and lack of unique selling proposition can be deal killers.
• Finding a bank or broker with industry experience is important for the selling process.
• Marketing the business involves creating a package that highlights its unique selling points and reaching out to potential buyers.
• Closing the deal involves negotiating terms, due diligence, and transferring ownership.
• Requirements for selling a business include a diversified customer base, realistic valuation, and growth potential.
• Prerequisites for selling a business include consistent growth, a strong team, and avoiding deal killers.
• Networking and sending a teaser can help find a banker or broker.
• Preparing a detailed information memorandum and targeting potential buyers are important for marketing the business.
• Being patient, flexible, and emotionally prepared are important for closing the deal.

I sold 8 businesses by age 32 [here’s how] - YouTube

Prerequisites

• Most businesses are not valuable and do not have enterprise value.
• Prerequisites are deal killers that make a deal not happen.
• Businesses need to be of a certain size to make sense for institutional investors.
• Customer concentration is a problem if there are too few customers that equate to the business.
• Businesses need to have a unique selling proposition and a competitive advantage.

Finding a Bank or Broker

• It is important to find a bank or broker to represent you in the selling process.
• Brokers can help you find potential buyers and negotiate the deal.
• Brokers can also help you prepare the necessary documents and financial statements.
• Brokers can be expensive, but they can also help you get a higher price for your business.
• It is important to find a broker who has experience in your industry and understands your business.

Marketing the Business

• Marketing the business involves creating a marketing package that includes financial statements, customer data, and other relevant information.
• The marketing package should highlight the unique selling proposition and competitive advantage of the business.
• Marketing the business involves reaching out to potential buyers and generating interest in the business.
• Marketing the business can be done through online platforms, industry events, and personal networks.
• It is important to maintain confidentiality during the marketing process to avoid disrupting the business.

I sold 8 businesses by age 32 [here’s how] - YouTube

Closing the Deal

• Closing the deal involves negotiating the terms of the sale and finalizing the transaction.
• It is important to have a lawyer and accountant involved in the process to ensure that the deal is structured properly and all legal and tax implications are considered.
• The due diligence process involves verifying the financial statements and other information provided by the seller.
• The purchase agreement should include all the terms of the sale, including the purchase price, payment terms, and any contingencies.
• The closing process involves transferring ownership of the business and ensuring that all legal and financial obligations are met.

Requirements for Selling a Business

• A diversified customer base is important to reduce risk.
• A defined sales process is necessary to acquire customers.
• Targeting enough potential buyers is crucial to find the right deal.
• Timing is important, as waiting too long can make a business unsellable.
• Realistic valuation is necessary, as businesses are often sold for less than expected.
• Growth potential is important to attract buyers.
• Key man risk should be minimized to make the business more valuable.

Prerequisites for Selling a Business

• Have a clear understanding of your financials and be able to show consistent growth over time.
• Have a diversified customer base to reduce risk.
• Have a strong team in place that can continue to run the business without you.
• Have a clear reason for selling the business.
• Avoid deal killers such as legal issues, poor financials, and single channel dependence.

Finding a Banker or Broker

• Network for introductions to bankers who are relevant to your size and space.
• Send them a one-page teaser to get them interested in your business.
• Sell them on why your business is a good deal during a phone call.
• Meet with 4-6 bankers to negotiate their fee structure and ask about their network and recent deals.
• Watch out for upfront fees and negotiate them if possible.

Marketing the Business

• Prepare a detailed information memorandum that includes financials, customer data, and growth projections.
• Highlight the unique selling points of your business and what sets it apart from competitors.
• Be transparent about any potential risks or challenges.
• Target potential buyers who are a good fit for your business and have the financial means to make the purchase.
• Use a variety of marketing channels, including online listings and direct outreach to potential buyers.

Closing the Deal

• Be prepared to negotiate the terms of the deal, including price, payment structure, and any contingencies.
• Work with your lawyer and accountant to ensure all legal and financial aspects of the deal are in order.
• Be patient and flexible throughout the process, as it can take several months to close a deal.
• Stay focused on running the business during the sale process to ensure it continues to grow and remain attractive to buyers.
• Be prepared for the emotional impact of selling your business and have a plan for what you will do next.

Prerequisites for Selling a Business

• Have audited financials ready.
• Create a SIM (Selling Memorandum) which includes financials, competitive analysis, growth trajectory, and marketplace analysis.
• Decide on a number you would accept for the sale of your business and write it down.

Finding a Banker or Broker

• Look for a banker or broker who specializes in your industry.
• Ask for referrals from other business owners who have sold their businesses.
• Interview multiple bankers or brokers to find the right fit.
• Understand the fees and commission structure before signing a contract.
• Negotiate the breakup fee and minimums in the contract.

Negotiating the Deal

• Understand the targets and ratchets in the contract.
• Be aware of the minimums and how the banker or broker will get paid.
• Write down a number you would accept for the sale of your business and stick to it.
• Be willing to walk away from the table if the deal is not in your best interest.
• Give the banker or broker the selling story and salient points about your business.

The Selling Process

• Have audited financials and a SIM ready.
• Banker or broker will pound the pavement and talk to hundreds of buyers.
• Be prepared for an emotional process as you are selling a part of yourself.
• Remember that the banker or broker is trying to sell both sides and may not have your best interest in mind.
• Be willing to walk away from the table if the deal is not in your best interest.

Understanding the Sales Process

• Send out teasers to potential buyers, with a certain percentage signing NDAs.
• Contact 500 buyers and ask questions about their potential requirements.
• From 98 NDAs, you'll usually get around 14-15 potential buyers.
• From there, you'll do management presentations and get 2-4 LOIs.
• Negotiate with potential buyers and get one deal.
• Sign the LOI and go through the diligence process before closing.

Watch the video on YouTube:
I sold 8 businesses by age 32 [here’s how] - YouTube