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EPISODE FOUR [THEME THREE]
Episode #312: with Chris Yates
Hosted by Ryan Tansom
In this last episode of the series, “Demystifying Business Valuations,” we have Chris Yates, the owner of Rhodium Weekend, a community of online entrepreneurs, on the show to share the story of how he sold his business, Centurica. Chris received two offers from different buyers that were wildly different. In this episode, we hammer home the concept of intrinsic financial value vs. strategic transaction value by unpacking the differences in Chris’s offers.
In the first half of this episode, Chris goes in-depth with the first offer he got from a strategic buyer–an Amazon aggregator–that wanted to do an “acquihire” (essentially wanting to purchase the company for the people and processes). Chris describes how the purpose of the deal drove the deal structure and terms and how it eventually blew the deal up.
In the second half, Chris walks us through how he doubled down and focused on the intrinsic financial value of the company by getting a bank to pre-approve an SBA loan (ultimately determining the intrinsic financial value of the company based on the risk of the cash flow).
Getting clear on the intrinsic financial valuation helped Chris during the second negotiation for a few reasons. First, he knew what his valuation was regardless of the specific buyer. Second, Chris was able to clearly negotiate the terms and deal structure efficiently because he knew what the company’s intrinsic value was worth. In addition, there are limitations to “creative” deal structures when an SBA is used.
Being approached by a buyer can cause a rush of emotions for you as the business owner. However, in this series, we have consistently discussed how getting clarity on the intrinsic financial value is crucial so you can weigh all your options against what you know the company is worth.
What you’ll learn:
– How to structure an LOI so a buyer can’t steal your clients, processes, and systems.
– Why Chris decided to exit even though he was getting fed opportunity from old and existing clients.
– What was driving the acquihire buyer to want Centurica so badly.
– How Chris got into the mind of the acquihire buyer to really understand why they wanted his company.
– Why understanding what he wanted and why helped Chris negotiate with a buyer that initially had an unappealing offer.
– How Chris realized that ALL of the decision makers need to be sitting at the deal table.
– The uncertainties Chris had in the first deal and why he wished he had set the terms instead of reacting to each offer (and pulled away at the beginning knowing it wouldn’t work).
– Chris’s thought process after the first deal fell apart and how it benefited him for the next deal.
– Why the buyer taking out an SBA loan was so attractive to Chris in his second negotiation.
– How Chris handled the aggregator–who was also a competitor–wanting to get inside his client list and agreements.
– Chris’s takeaways for other business owners that will be going through an exit in the near future.
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// USE YOUR FINANCIALS TO CLARIFY YOUR PATH TO A MORE VALUABLE BUSINESS
Take the Intentional Growth Financial Assessment:
https://arkona.io/intentional-growth-financial-assessment
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The post #312: Demystifying Business Valuations by Comparing Two Offers with Chris Yates appeared first on HumanitasConnects.
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