While everyone's busy starting tech companies and investing in tech stocks at 40x multiples, boomers are struggling to sell their boring companies for 4x in the US and 7x in Europe. Buying those admittedly buys you a job. But those can be fun! At least it was super fun for me to turnaround a 60 people stone masonry company, which should probably be another post. Anyway, if this path interests you, ping me and I'm happy to share more and clean up some notes. In the meantime, here's some questions credits to Helen Guo, who also has a cool youtube channel on the topic. # **Seller Background** What’s your background? **Does it take a special background to operate the business?** When did you start the business? **The longer the time the business has been around, the more value** Why did you start the business? Why are you selling? **Is it a legitimate reason (i.e. retirement) or do you no longer believe in the future of the business?** # **Customer** What's your customer demographic? **Higher-value customers like businesses and enterprises are worth more** What problem do you solve for them? **The more dire the need, the more your business is worth** What % of customers are B2C vs B2B? **B2B worth more** # **Product/Service** Why do people work with you/buy your products/services? Where does the demand stem from? What is the business model? How much of your revenue is recurring/one-time? **Recurring income worth more** What is the average price of your products/services? **Higher ticket is worth more** What is the breakdown of sales across the various products/services? What is the breakdown of sales across the various types of customers? What % of sales does your top customer represent? **High customer concentration is red flag** What % of sales do your top 3 customers represent? **High customer concentration is red flag** What do payment terms look like? **The less AR, the better. Prepayment is even better.** # **Competition** Who do you view as your competitors? How are you different from your competitors? **Having a unique advantage/moat is valuable** How does your pricing compare with competitors? # **Team** What is your current role in the business? **The less, the better** What does the team look like? Roles and responsibilities? Compensation? **Having management and someone who can be promoted to a CEO/GM makes business worth more** What family members work in the business? **Having multiple family members makes business worth less** Are they remote/in person? Is the team staying on? **Having team members makes business worth more** How difficult is it to hire team members? **If staffing is a concern, business is worth less** What is your hiring process? Who would be required to replace you/departing team members? I**f it's too niche of a role to replace, business is worth less** How much more new business can the current team handle? How many new team members would need to be hired to grow the business to x size? **Being able to grow without having to expand into a new facility or add on a lot of expenses makes business worth more** # **Sales/Marketing** What have been the main drivers of growth for the business? **Unique organic relationships, contracts, and organic growth that can't be easily replicated is worth a lot** What is the sales process? Who runs the sales process? **If not run by the owner, the business is worth more** How long is the sales cycle? What forms of sales and marketing are you running? What have you tried? What works/doesn’t work? **If there is low hanging fruit (i.e. business has never run paid ads), the business is worth more** Who is the key decision maker you are trying to reach? Is there any seasonality in the business? **This can make the business worth less** # **Retention** Is there a contract with customers? What does that look like? Is it exclusive? **Long-term recurring contracts with long term clients is worth the most** How long do customers stay with you on average? What % renew? What % don’t renew? Why do they leave? **Low churn and high LTV is very valuable** What is the average lifetime value of a customer? In other words, how much has your average customer spent with you? **The higher the better** # **Opportunities** What are the key growth opportunities? If you were not selling the business, what marketing opportunities would you focus on? What could you do better in terms of operational efficiency? # **Expenses** What are the key expenses in the business? Can you walk through any add-backs listed in the P&L under SDE? **Addbacks can be suspicious to buyers** # **Finance** What kind of working capital is required to run the business? How much $ do you keep in the bank at all times? **Having more free cash flow and less cash tied up in AR or inventory makes business more valuable** What does the cash conversion cycle of the business look like? **Shorter the better** What is the age and status of any inventory (cars, computers, etc.)? Does the business come with any real estate? Leases? What accounting system do you use? **Having clean books makes business easier to sell** # **Risks** Are there any upcoming changes in regulations or laws that could impact the business? What kind of insurance do you need for the business? # **Tech/IP** Is there any tech? Who manages the tech? Who built the tech out? How much has been invested in the tech? How much does it cost to maintain the tech? Does your business own any IP? **This can make the business a lot more valuable if it's not easily replicable** # **Transition** What would a realistic transition to a new buyer look like? **If you are open to staying on for 1 year or more, your business is more sale-able** Are you looking for a full buyout or are you interested in staying on in some capacity? **If you are open to rolling equity, that signals faith in the business and makes the business more valuable** Are you open to offering seller financing? How much? For how long? At what interest rate? **If you are open to offering seller financing, you will get more interest from buyers**