The Wise Exit

Exitwise (00:01.58)
As a business owner, selling your company is one of the most important professional and financial decisions you'll ever make. When is the right time to sell my business? What is my business worth? Should I hire professionals to help sell my business? And how much does it all cost? These are questions I hear every day. My name is Todd Sullivan. I'm a five time founder and the CEO of Exitwise. I've created four exits on my own and I've coached

hundreds of business owners and executives along the way. We created this podcast to simplify the process of selling your business, to open the M &A black box, to track down the inside information that I wish I had each and every time I sold my own companies. We want to give you an MBA in M &A. Today my guest is Nathan Hirsch, a serial entrepreneur who uses fully remote workforces to build his companies. One of Nathan's companies, FreeUp,

was an outsourced labor platform for e -commerce companies and grew to 12 million sales with 30 employees all in the Philippines. Nathan sold the business in a life -changing exit and shares encouraging insights on how using remote workforces creates an incredibly valuable way to maximize the sale of a business because of the systems and controls that need to be in place for a remote workforce to be effective. So welcome to the Wise Exit podcast and this week's episode.

Exitwise (01:24.582)
Nathan, thank you so much for being here. I'm fired up to get a chance to chat with you, an entrepreneur from a very, very early age. It sounds like you've had jobs very early on, and then when you got to college, you realize that you don't want a job, right? So you became this entrepreneur. Love to hear that story. But what's really exciting is after building companies and solving your own problems, you built a company to help other entrepreneurs solve their problems and had an amazing exit. I think the thing that we'll dive into, that I'm hoping to dive into,

is your use of virtual workforces and remote people and how that affects M &A transactions because more and more businesses are being built this way and we're seeing more and more transactions. So I think you're like the perfect candidate to talk about this and share that experience. I was so excited to have you on in this time slot that Mark Cuban actually had this slot and I bumped him. So thank you for being here.

Oh man, I don't know if you should have done that, but thanks so much for having me, Todd. Appreciate it. You know, I love it when our guests really just give their backgrounds and share kind of who they are, how they started, that the lead up until the exit of the company, Free Up, would be great. Yeah, so growing up, my parents were both teachers. So I grew up with a mentality that you go to school, you get into a good college, you work for 30 years, you retire, and that's your life. And there's nothing wrong with that. I mean, my parents are both ret...

hired now, they live in Colorado with me, they're traveling the world and living their best life. But from a young age, they always made me work hard for anything I wanted, whether it was a toy I wanted, I had to use my allowance or rape my neighbor's yard, I wanted video games or a car, whatever it was, I had to pay for it myself. So I had jobs at a really young age, I think I started working at 12, 13, 14 and

I started to pick up skills. I was a head umpire from my town. So I learned a lot about managing people and how unreliable they can be. And then I got a job at Aaron's Sales and Lease, which is kind of like a rent -a -center. So I learned sales and eventually Firestone, which is a tire company. But I learned a lot about sales and customer service. They have really good customer service. But...

Exitwise (03:33.582)
through all these jobs, I really learned that I hated working for other people. I hated having a time to go into work and having to follow the rules and not really using my own creativity. And I felt like I got a glimpse into what life was like after college, right? And...

It just wasn't for me. So when I got to college, I started hustling. I knew I wanted to be an entrepreneur, but I wasn't sure what. And I started competing with my school bookstore, offering better prices on textbooks at the end of every semester, created a referral program. And before I knew it, I had lines out the door of people trying to sell me their books to the point where I got a cease and desist letter from my college telling me to knock it off and stop competing with them. I love that story. I love that story.

stymying entrepreneurship the way the free market should actually work and you get a cease and desist. That's awesome. Yeah. And I was majoring in entrepreneurship, so it was very frustrating for me. But yeah, that was my first glimpse into being an entrepreneur. And as you know, it's very addicting. So I have this Amazon account and I couldn't sell textbooks anymore. And I started experimenting through trial and error. And I had to be one of the first thousand dropshippers. I didn't even know what dropshipping was. That word didn't exist. But

I said, hey, I don't have money to buy inventory. I don't have places to put inventory. What if I build relationships with all these people that make products and this is 2009 so that they don't know what e -commerce is? And I said, hey, I'll sell these products for you. You keep my credit card on file. I'll handle the customer service and let's build a relationship. And I just started doing outreach to all these different companies. Started off with retailers, went around the retailers and worked directly with the manufacturers.

And before I knew it, I'm running this multimillion dollar Amazon business out of my college dorm room. And our sweet spot was baby products. If you can imagine me as a 20 year old single college kid with a lot more hair selling baby products. And it's funny, I just had a kid, he's five months old and all the baby products I'm buying now is the exact same thing I was selling back in the day. So it kind of comes full circle. So we're growing this Amazon business. We're having more success than any college kids should. Great time.

Exitwise (05:44.622)
Amazon was bursting onto the scenes, but we were struggling to hire college kids, super unreliable. They were smoking weed on the job, drinking on the job. I was banging on their dorms to get them to wake up and actually show up for their shift. And I was 20, 21, hiring adults was very intimidating. I didn't think a 35 year old was going to want to work for me. So.

A buddy of mine introduced me to virtual assistants and I hired my first VA in the Philippines, Chiki Anne. And this ended up being an amazing hire. I got to learn a lot about the Philippines and build a relationship with her. And as we're building this VA army to run our Amazon business, Amazon starts to become harder. There's more competition. They're changing the rules. What worked before didn't work now. And instead of growing this business and at the beginning, we thought we were going to take down Amazon and

slowly realizing that it's not that easy. But we have all these VA's, we have all these freelancers that know e -commerce. E -commerce is very new, there's no e -commerce agencies back then or e -commerce service providers. So we start offering these VA's and freelancers.

to all these new Amazon sellers that are bursting onto the scene. So we create a competitor to Upwork and Fiverr focused on e -commerce, although by year three, four, we were into marketing and other stuff as well, but pre -vetting. We would match people up with freelancers already on the platform. It was hard to get on the platform. It was easy to get kicked off the platform if you didn't give our customers a great experience.

And this was a very scalable business. Not only was it reoccurring revenue and we're building clients every week, but we're not an agency. We're not managing people. There's no project management. We're not doing the fulfillment. We built a great customer service team. But yeah, we built this business to doing $12 million a year by year four, completely run by VAs, no office, no U .S. employees. We had thousands of freelancers and VAs on the platform.

Exitwise (07:36.75)
platform, but our internal team was 30 full -time VAs in the Philippines doing everything from bookkeeping, to customer service, to sales calls. So then the AESA came next, which we could talk about, but that's kind of the journey that led me to Freya. Oh, Nathan, that's freaking awesome. That is awesome. So when you say 12 million of revenue, is this a kind of recurring revenue? These clients are on contracts?

No, so that's a good question. So the way that we set this up is it was free to sign up. There's no minimums. You can stop, start any time you want. So we were billing about a thousand clients a week and let's say 600 of them plus are reoccurring and then maybe you've got another thousand that you're billing 400 of them each week and they're starting projects, stopping projects, coming back and forth, whatever. Yeah, yeah. More like agency.

Yeah, that's fantastic, right? So you figure out how to create businesses on Amazon. You're using the remote workforce. And now you understand that remote workforce can be really trained up by you, and then other clients can use it. That is fantastic. OK, so you build up that business, what you say, four or five years, the product offering evolves a bit. When did you get your first nibble of somebody saying, we would like to buy this business?

Yeah, so this was early 2019 pre -COVID. One of our clients, the Hoth actually reached out to us and their message was pretty simple. They use FreeUp. They like FreeUp. They buy businesses. They don't start them and they love the freelance space and they want to get into it. And they're known for the Hoth, but really they're a conglomerate of different businesses. And all those businesses use VAs and freelancers in some capacity. And the ones that don't, they want to use VAs and freelancers more. So they looked at the

hey, we can acquire a cashflow positive business that it's growing, but also we can use it to support all our other businesses and bring costs down, hire the best of the best for our own stuff. Instead of going to Upwork, going to Fiverr and paying those fees, they were going to own the marketplace and source talent for their other businesses from the platform. So, David Martin and Mark Hargrove reached out to us and we had that initial conversation. Okay. That's fantastic. So,

Exitwise (09:47.31)
They're seeing a growing business, right, which is really interesting, but sorry, were they a customer? They're using FreeUp to make themselves better. And so they want to continue to use it, right? So they can model the value of what you have in their own business and then also the value of the revenue and the growth that you have. Were you growing pretty significantly at the time? Yeah. So in the four years, we grew from a million dollars in the first year to five to nine to 12. So we were growing. We kind of stopped doubling each year. So that's kind of -

point where you're like, okay, you don't want to plateau before you sell it, but we're still growing, you know?

Exitwise (10:34.222)
and the value of the business declines when you've hit that plateau. People really want to buy you on that hockey stick. But it sounds like you had enough of a growth rate, you're profitable, there's a lot of runway, a lot of gas left in that tank. So you probably got a great exit. So can you tell me, right, it really is a customer, right? So you got to know them over time, they got to really understand the product that you were really offering. Can you talk to me about that M &A process?

Did they make the first offer to you? Did you go and get help to assess that offer? How did it work? Yeah, so we had an initial phone call with them and they asked a lot of questions and it kind of goes back to the best decision we ever made was hiring a bookkeeper from day one of when we started FreeUp with our Amazon business. We were young, we didn't know what we were doing. We were dumping stuff on our CPA and trying to do it ourselves.

with free up, we said, hey, let's never do that again. Hire a bookkeeper from day one. And when they asked us questions on that initial call, we knew our numbers inside and out because we had clean books every single month. We had finance meetings every single month. And they were just impressed by the knowledge inside of our books. And down the line, when they actually opened the books, it matched everything we told them on the initial call, which built a lot of trust. So they're asking us a lot of questions where we're kind of.

talking high ballpark numbers and they end up making us a good offer. And obviously my partner and I were discussing it. We take a little bit of time to do that. And I mean from the pro side, business incredibly profitable, no debt, cash flow positive. We're building clients before we pay the freelancer. So there's never a point where we owe money.

And we didn't need to sell it. We could have kept running it, which is a great position to be in. And we liked our team. We liked the clients. On the flip side of it, the way we look at it is, yes, it's a life changing offer, but also the economy was at an all time high. This is 2019 before COVID. So things are looking pretty good. We had gotten this to 12 million. That's the biggest business we had ever built. Would we have been able to get it to 24 million? I don't know. Things would have had to change. Maybe we would have had to hire.

Exitwise (12:39.424)
U .S. people or just increase our overhead in some way. And we didn't want to end up in a position where sure, we got it to 18 million, but we're really making the same or less money than we were making at 12 million. And we didn't want to lose that remote flexibility that we had. In we really liked the people that we were talking to, and even though we had to do more due diligence on them. So there was a lot of stuff just going through our heads and it was a tough decision.

But from there, we ended up accepting the letter of intent and then the due diligence began and that was long. That was six months, probably the longest, most stressful six months of my life. And they're sending us 20 questions. It felt like every single day. They told us that we were the fastest people to respond because we had everything ready to go. We had SOPs on how billing works, how customer service works. We had all our financials in order. We had any single possible report that they could ask for, whether it's

percentage of your biggest client, whether it's the reoccurring customers which we were talking about. We had all this data ready to go and we were firing back questions. We want to know everything about them. Businesses they bought, success, failures, their net worth, how they treat people, what their plans were for free up and we were only going to sell this business if we felt like they were going to treat our clients and treat our people well. They impressed us through the due diligence. We can talk about more if you want. But once we kind of got through that,

Then the lawyers got involved and that's when things really slowed down because for us, it's the biggest moment of our life. For them, it's another Tuesday. They go on vacation, their lawyers take time, our lawyers take time. It's no one's fault. Everyone's trying to protect their client, but that just took forever. Natan, thank you for sharing all that. I want to jump back just a bit because I think the theme and the education that I think we want to give here is the idea that you can build these businesses with remote workforces, with virtual assistants, virtual whatever.

you had a virtual bookkeeper from the very beginning and we are always trying to teach get your books in order whether you are thinking about selling or not it helps you make great business decisions right that is the right discipline to have with your business but when it comes time to sell or somebody comes knocking on the door you said the word trust which is exactly it when you can share financial information that is accurate right that you're making decisions on this data.

Exitwise (14:57.742)
And when they get to see it later in due diligence or when they formulate their letter of intent based on the numbers that you've given them, those numbers are accurate. And I love that that was your first kind of virtual hire. And so I want to get to is that businesses can be built this way. And I want to talk about in that due diligence period, the buyer, were there any concerns that your workforce was essentially remote?

And I also love you. I just want to touch on two other things. The return on investment ROI is really what you were looking at. You get to 12 million and you say, yeah, could we get to 24? You notice that the market's pretty high. Is this the right time for you guys to de -risk, take money off the table or do you kind of stick it out for another couple of years and try to double revenue? Well, we know what happened in the next couple of years, right? So you guys obviously made really, really

ideal decisions to sell at that time, it sounds like. Any regrets around the timing of the sale? Like once it was done, did you hit the 24 million once the new owner stepped in? Yeah. So they didn't hit 24 million. They have told us that it's probably the best purchase they ever made and that's coming from them. And that's because they were able to supplement it. They were able to keep it profitable and grow it, but also just supplement their other businesses. Like I said, we went into this thing that

we were going to have no regrets. If we were going to make this decision, we can't be looking back the rest of our life and trying to hindsight 2020. I mean, we're making the best decision possible based on the information that we had. And there was another factor too that I forgot to mention. I mean, again, timing is everything. When we started, we were one of the first Amazon sellers.

when we started FreeUp, we were one of the first e -commerce service providers. By year four, that was no longer the case. There were lots of agencies, lots of other platforms popping up, and all that was just becoming a lot more dense. So we definitely just looked at it like, hey, this is the best decision for us based on the information that we had and no looking back. And we have no regrets. I mean, COVID hit four months later, which it was just a situation. And we kind of got to skip the entire stress that a lot of entrepreneurs

Exitwise (17:05.358)
Renewers went through during that time because the exit was done and free up was still doing well because it was remote hiring platform. And yeah, it allowed us to start other businesses. We ended up starting out for school, which teaches people how to hire remote VAs. We ended up starting accounts balance and econ balance, our two monthly bookkeeping services because we knew how important that was. Trio SEO or SEO service that you guys are clients of because we know SEO is a big part of the sale too. The Hoth is an SEO company. So the fact that.

free up had a really good domain rating, what really helped us with the sale. So it allowed us to spin up other businesses and really diversify our portfolio where for four years it was just free up 24 seven. If this fails, we fail.

Exitwise (17:55.918)
And a lot of entrepreneurs don't have that quite in their head. But this is a journey, right? We're going to do this multiple times as entrepreneurs. And you got the time. Not only do you get the cash, life -changing money, but now you've got time and opportunity to go do the next things. And you've hit company after company. Yeah, we're a client of Trio SEO, right? We love that. And you've got the e -comm balance. And you have several others, right, where you're employing this model of virtual workforce, which is fantastic.

You mentioned one other thing I want to touch on before kind of get to the main question, which was the reverse due diligence, which is so important, right? You pick a buyer, you obviously had a relationship, you're sharing information, but you're getting information back to know, right? That the structure of this deal is going to make sense. These guys are going to know what to do with the business. It's not going to fail on the other side. Can you maybe mention one or two things that you realized in doing that on the buyer that helped make the decision to sell to them?

Yeah, and this was the best advice that we ever got. We were networking with different entrepreneurs who had gone through exits and some good, some bad. And there was really two pieces of advice we got. The first one was don't stick around very long after the sale because you'll just be miserable. And there are people that agree with that and disagree with that. But we were out of there in 90 days. I think our contract said 90 days, but it was really like 40 days. And both sides, they've been through this before. So they kind of know the drill and they wanted to get the information from us, keep us around if they have a question here or there, but to let us go on to do different things.

and then to vet the buyers like you said. And we wanted to sell it to good people. I mean, if we're in B2B, we're going to start other businesses in the future. The last thing we want to do is to sell it to someone who's going to treat everyone badly and ruin our reputation. That's going to make it extremely hard for us to start a bookkeeping business and take on clients down the line. We also really care about our team. We took half a million dollars from the sale and gave it to our internal team in the Philippines and made sure they were taken care of it. And that was a

big part that we want to know if they were going to be cool with because the downside of that is those people could take the money and run, right? And they'd be out of an internal team. We knew these people, so we knew that they weren't going to do that, but they didn't. They were kind of taking blind faith in us. So there were certain things like that that we wanted to care about. And during this due diligence, we learned that they had one employer the year in Tampa, which is where they're located for the past three years. That was

Exitwise (20:17.614)
pretty good sign. They had a high net worth. They had other businesses that they had bought for $100 ,000 and grown it to $25 million. So they had the track record. Their values were very much the same. People that if you get into an argument or you disagree on something four years later, two years later, whatever it is, you're not pulling up the contract and saying, hey, in section two, part A, this is what it says. You're talking out like adults and finding a reasonable solution. And that's how my business partner and I do business too. So.

Those are the kind of people we wanted to work with. We didn't want something where we were fighting for years to come or fighting or ending up in a lawsuit down the line or anything like that. And we also wanted a situation where if FreeUp did fail because businesses fail, that's what happened as an entrepreneur, that the buyers weren't going to get screwed over. Sure, it wouldn't have been great for them. That's not what they want when they buy a business. But FreeUp is a drop of their portfolio and they diversify businesses for a reason. So all those were pretty big factors.

You give so much on every question I ask. It's so much value. Let me touch on that time period. I like that you had that advice and I want what I want founders to know is, right, there is a period of time that called a transition. And you have to transition the business to the new owners. If those owners or buyers are really sophisticated, they've done this before, they know what that process looks like. And it's fairly formulaic. And so you might

get this kind of 40 day transition that you're talking about. We just had a 30 day transition on December 29th. We sold it a business 300 % above market. The guy just absolutely killed it. All remote workforce in the Philippines.

and we negotiated because the buyers, they were really sophisticated. They bought businesses before. They'd actually bought the competitor. Now, when you're going to sell to a first -time buyer, that transition period could be longer. If you have earn outs, you might have to earn those dollars over periods of time.

Exitwise (22:17.55)
But I think the biggest learning is that, yes, you can do short -term, but you got to be really upfront with what you want. And you were getting that advice and you kind of stuck to it. So that's great. And I love that you knew their track record. You understood their values. Your customers are going to be treated really, really well. Lastly, it's the employees, right? So you knew the employees were going to get taken care of. You did something financially for them, which I just love. But I think that leads into the topic.

of the employees that are remote, right? Your virtual workforce is being transitioned. Can you talk to me a little or talk to all of us about that, how that plays out in M &A? Does the buyer have to meet all these people? Did you go to the Philippines and make these introductions and talk about this transition and make sure that that it was all going to work? Because we've been through that and we've had a really positive experience and I just want, you know, people to understand what that process might look like.

Yeah, so we've been to the Philippines once by business partner Connor and I that was your two of free up and we got to meet our team and we threw a conference for any freelancers and VAs that wanted to show up and get food and it was a blast and we got to build a lot of relationships there and that was definitely the hardest part of selling the business. People like Chicky Ann who had been with me from the Amazon days and I'm still friends with her. I'm the godfather of one of her kids. That was tough to not be able to work with her anymore. So, I mean, that was very emotional. We, this is interesting. We

had a rule that they could not meet our team prior to the sale because we kind of we had the mentality that the sale might not go through and we had to pretend like it wasn't going to go through and continue to grow the business and do everything that we were doing as if they could back out at any time because realistically they could we could have gotten a month.

and they say, hey, we don't want to do this deal anymore. And we didn't want to have a crummy business to go back to because we had neglected it for five months. So we said they couldn't meet our team. I told you, we gave our team a lot of money. I think that right there told them that we really like our team and respect our team. We probably wouldn't do that. But we also got to show them the work. Like they were clients. They interacted with our customer service reps from the client side. They interacted with the billing team. They hopped on sales calls with our.

Exitwise (24:29.006)
team in the Philippines. So through a workaround, they slowly met a lot of the important people on our team, but not directly. And once we flew down to Tampa and signed the agreement and met them in person, then we did a Zoom and announced it to our team and told them how much money they were getting. And although they appreciated the money, it was still very emotional and sad. And it's one of those things that I told Mark and David this, that you're going to have to tell them they're not losing their jobs 100 times. Because the second that a business becomes acquired,

That's the first thing in everyone's mind, like, hey, they're going to lay me off. They're going to replace me, whatever it is. So almost all of them still have their jobs now. Some of them decided to move on to other things, which is fine. But that was kind of a transition and just kind of talking with them. And you do build it in where any money that you give them over time, this was kind of smart on their part. You don't want to just give them all the money upfront. You got to make it so they have to stay over a certain period of time. So if they do decide to leave, you have a buffer and you can transition and all of that.

You know, it doesn't sound very different than having a workforce that is local. There is that privacy concern that you have, right? You're building a business, you're selling it, you don't want key people to find out.

that you're selling the business and they may not have a job afterwards, right? Just it causes too much questioning, right, around the security of your job. So it's right to keep it private. You do that whether it's virtual workforce or, you know, in person. So that part isn't really different. And certainly you don't have them meet the team other than maybe the CFO who's helping you through it. Maybe there's a factory manager or, you know, a COO that you're introducing.

if you're not going along with a sale. I'm trying to look for main differences because I think when I entered this conversation, I thought there's got to be a difference from a buyer's perspective on how do you do diligence? What are the risks with a remote workforce? We've had one transaction where it was all remote. We've had others where it's about 50 -50. And we haven't really seen any problems with it. The buyers really understand what they're buying. These

Exitwise (26:33.516)
businesses run. And as long as you create loyalty around that workforce, which it sounds like you were able to do through multiple methods, it really doesn't change the due diligence process. Would you agree or the other things that something that you saw that might be a little different?

No, I completely agree. So I mean, if you're kind of looking at pros and cons, some people will say a con is like, hey, they're the Philippines, they could take your client's information or run or something like that. I would argue that someone in the US could do that too. At our school, we teach what we call our barf method, which is kind of a funny acronym, but it's getting them to buy in showing appreciation.

building relationships and creating a family within your business. And when you do those four things, you're getting people that really care about the company that want to be there. And you could do this whether they're in the US or in the Philippines or wherever they are. So that's what we believe in. That's where we tried to pass over to them. And they kind of took that in RAM. And I think from the buyer side, and I guess I can't speak for the buyers, but this is what I would look for. If you're taking on a business that's got 20 employees, there's a lot that goes with that. There's

taxes, there's registering in different states, there's benefits and insurance and all the other things that go with that, whether it's office space, whatever it is. And with the remote workforce, you have complete flexibility. You can add in US full -time employees. That's what the HOTH did. They essentially replaced Connor and I with three full -time US people to work with the VAs in the Philippines, but it gives you that flexibility. So I don't know, unless someone was just terrified of working with someone outside of the US, I don't know why that would be a negative.

You know what? I know I understand the economics and the flexibility, but I think, you know, I've heard you speak before around processes and the different types of outsourced labor from followers all the way down to I think you're calling them experts. And so with the followers, right, you are creating real processes ahead of time. And that those processes are engines that buyers are buying. So if they understand the processes and they know they can train people into them, yeah, people.

Exitwise (28:36.75)
More people can come, people can leave, right? You can fill the holes. Can you, I know we're diverging a little bit from the topic, but I think it's really interesting the three buckets that you put kind of outsourced labor into and can you talk a little bit maybe about that, how you train them and how you manage them? Yeah, so this goes for anyone no matter where you're hiring them from. And what's really important is that before you hire someone, you need to know.

Do you need a follower? Do you need a doer or do you need an expert? Those are the three layers. And if you're hiring for the wrong level, you're going to run into a lot of issues. So followers are what I consider virtual assistants. They can have years of experience. Someone might have 10 years of customer service experience. But the way you do customer service is going to be different than the way I do customer service. So you have to have a system and a process.

for them to follow. You're not just going to hire a follower and say, hey, go find me profitable products on Amazon. That's not going to work out. You need to have a real process for them to follow to go through product list to find that product or to do your customer service or whatever it is. Then you got the doers, the graphic designers, the writers, video editors, web developers. You're not teaching someone how to be a graphic designer and they're not consulting with you either. They're doing the same thing eight hours a day.

The beauty of the doers is you can build a Rolodex of these doers that you can bring from company to company. I don't have a separate video editor for each company I own now. I have two video editors that I use for all my companies and then if they get busy with projects for other clients, I can just use the other one. And maybe if you have a video editing agency, you're hiring full -time video editors, but usually that's not the case and you're hiring these doers more project -based.

And then you got the experts, the high level consultants, agencies, people who come in with their own processes, their own strategy, they can consult with you, they can project manage. And where people go wrong is they try to hire people for the wrong thing. They try to hire a follower without a process, or they try to hire an expert and teach them how they want it done. Or they try to hire a doer and say, hey, I need you to consult with me on this project when really they're just there to do your writing. So.

Exitwise (30:42.286)
Make sure you know what you're hiring and what levels and that's a lot of what we teach in outsource school too. So those three buckets, did you have all of those, those three outsourced buckets when you went to sell the business? Yeah. So the 30 person team was mostly followers. Now these were very advanced followers, people we had trained throughout the years, people that become team leaders and

running our customer service, running our billing. The exception to that would be bookkeeper, right? We hired an expert bookkeeper. We're not bookkeepers, so I can't teach someone how to do bookkeeping. And there's other examples too. We had a YouTube expert who was running our YouTube channel. Again, not something that I can teach them or not. So there were exceptions, but for a lot of like the core tasks of the business, like customer service or matching up freelancers to clients or recruitment, those were followers with experience that we taught them our process.

I think that probably the thing to hit on is that the followers really are an engine, right? There's so much process and systems. You're plugging people in. They are doing their job. They're following the process. And that becomes very transferable. I think that's probably where...

the realization, the light where the light goes on for me and probably a really good lesson for people is that that works very well in M &A to have great systems and followers executing on tasks, because it's a very transferable to the new to the new buyers. Let me jump back a second, Nathan, because I really forgot to ask, did you have any M &A expert?

on your team when you went to sell, somebody helping with valuation or the negotiation, marketing materials, did they bring in other buyers for you to compare, legal, tax, any of that? Or did you do it really on your own?

Exitwise (32:22.286)
Yeah, so we did have a broker in there that kind of helped us run through it because at the time, like we had never gone through it before. So he was there to kind of help guide us. He didn't really put together marketing materials or anything. And then I have my own lawyer, my own CPA who we could have done it without. I mean, we really relied on them for every question that was a lot of questions because we had no idea what was going on and what to expect. So.

They helped to write the agreement and protect us and make sure that we were good from a tax side, if we sold it and try to maximize the tax quota as much as possible. But we didn't have people like you, which maybe we should have had, hopefully for the next one. No, I think it's great. Like you got the deal done. I think that you understanding ROI was really important. You got it to a point. It was very successful. The timing was right.

and you were open to having that conversation. Typically, what we like to do is present valuation to make sure that that inbound offer really is the right value for the market, right? Or is it above market? But value, that purchase price is not everything. You have to understand what do these dollars do for you, right? You might get a check and it might be, the business could have been overvalued, but it was not the right amount of money for you to go off and do the next thing.

And if that's the case, then maybe you should keep building your business. So you guys got to look at an offer, kind of internalize it, know what you're going to do next. And if it makes sense for you, you know, you go do the deal. So you don't always need a full M &A team. I think what they're best for is not only telling you what is market, this is a good deal or bad deal, but they can bring competition, they can introduce competition very quickly. And so you might have had two or three offers.

consider and value might go up a little bit structure changes. You might not have got this 40 day transition. They might have said, Hey, you guys are the wizards here. We need you for the next three years and we're going to pay you really well. And you might have said, no, that's, that's not for us. We want to go off and do our next thing. So there's, there's, yeah.

Exitwise (34:19.438)
that you said, I mean, you mentioned the earn out before and we saw this a lot in the past few years in the e -commerce space where all these aggregators bought up all these e -commerce businesses and they bought them for high valuations, five million, 10 million, six million, whatever it is. But when you look at the deals, it was mostly earn out. And these aggregators had no idea how to run these businesses. So a lot of these sellers got really screwed over because they're getting a small amount of money upfront. And the earn out is dependent on these aggregators growing the business. And they never saw any of that money. And...

For us, we said, hey, there was an earn out portion just because that's pretty standard. But we said, hey, we're treating the earn out as a bonus. We're only taking this deal if we're happy with the upfront money. Now we're fortunate enough that we got every penny of the earn out and it worked out really well, but we didn't know that going in. So you have to have that mentality and you can get a good deal. But once you dive into the details, it might not be the right deal for you. And especially if you're not selling to the right people, you could do a good job.

I don't want to go too deep into it because it's another podcast episode, but the Thrasios and the Cellar Xs of the world raised tons of money, went and structured all of these acquisitions. And when it didn't work out, who pays the price, right? It's the business owner that started that business is heavily reliant on earn out and then they don't work out. And we're really started this company to not let that...

happen, right? To protect, to do the right structures, to give the right guidance. So I appreciate you saying that. And you had some earn out, right? A lot of times there, that is the case. And if you view it as a bonus, great, right? The money that you receive on signing day really is what you should consider. And the other component is if it's enough, you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So you can get a bonus. So

and you believe that the business is going to grow, you have the opportunity to reinvest. They have what's called rolled equity, where you'd roll some of that purchase price back in as if you're an investor. So there are a lot of different options to consider. That's why we really like giving the best M &A expert guidance that every founder deserves. Nathan, this has been just a quick overview of the business.

Exitwise (36:16.974)
Awesome, right? I started out with One Direction trying to like pick your brain around remote workforces and M &A, but you've given so much of like how to build businesses, the right time to sell. There's so much really good stuff here. Is there anything else that you would want to leave with us and our listeners? For me, business is all about just making it as simple as possible. And anyone that follows me on social media knows that I preach that it's good hiring,

good financials, good marketing plan, and everything else is a bonus. But the entrepreneurs that focus on those simple things that get overlooked by others are the people that succeed. I love that because the more simple the business is, the more kind of structured it is, the more easily it's transferred to the next owner, which means you get more competition, more people want to buy that business, price goes up, failure rate goes down. It all speaks to very successful M &A transactions as well.

Nathan, this has been awesome. Really appreciate your time. Thank you so much for being here. Yeah, thanks for having me. It's been fun.

Exitwise (37:26.382)
Well, listeners, that's all the M &A wisdom we have for you today on The Wise Exit. But the conversation doesn't stop here. Head over to our website at exitwise .com and sign up for our weekly newsletter to stay informed on upcoming Exit Wise events, newsworthy headlines, and M &A advice to support your journey towards exit. And remember, The Wise Exit podcast is intended for entertainment purposes only. We appreciate you listening and we'll be back soon.