May 23, 2025 • 23 mins
Too many buyers think they're purchasing a business — but what they're really buying is a full-time job.
In this episode of Built to Buy, Sam Penny breaks down how to spot owner-independent businesses — the ones that don’t rely on the founder to survive and scale. Whether you’re buying your first business or your fifth, this episode will sharpen how you assess, value, and filter opportunities.
🎯 What You’ll Learn:
- Why owner-dependence is the #1 acquisition risk
- How to identify businesses that run without the seller
- Key systems, processes, and red flags to look for
- The "walk-away" risk test and how to use it
- Why operational independence increases valuation and reduces stress
📍 Chapters:
🎤 Transcript:
Click here to view the episode transcript.
📺 Watch the Video:
Click here to watch a video of this episode.
👤 About Sam Penny:
Sam is a business builder, adventurer, and Coach for the Brave. He helps founders and buyers create freedom through bold business moves. Learn more at https://sampenny.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Sam Penny (00:04):
Welcome to Built to Sell, Built to Buy, the podcast
for business owners, operators,and bold thinkers ready to take
the next big step. I'm SamPenny, business builder,
adventurer, and coach for thebrave. Each week, we dive into
real stories, sharp strategy,and battle tested insights to
help you grow, sell, or buybusiness the smart way. So let's
(00:26):
get to work. Welcome everybodyto Built to Buy.
Today's session and this webinarseries Built to Buy has been
created for people wanting tobuy a business to own
businesses, but particularlythose who wanting to invest in
businesses. Today's topic is howto spot an independent owner.
(00:48):
Today's session is gonna beabout thirty minutes, and then
we'll dive into a live q and a.So make sure you jot your
questions down along the way.Now, also, you can pop your
comments into the chat and asklives if they if it's something
that's relevant to what we'retalking about right there and
then, I will make that questionlive.
(01:10):
Now let's dive in because we'vegot quite a bit to get through.
Oh, and okay. So here we go.Built to buy, how to spot an
owner independent business.Yeah.
So welcome. My name is SamPenny. I am the coach for the
brave, and today, we're gonnaunpack one of the most
overlooked risks when buying abusiness, and it's owner
(01:32):
dependent. So if you're lookingto acquire a business that can
run and grow without you orwithout the seller, you're in
the right place. You're in safehands, as they say.
A bit about me first. I'm SamPenny. I've run companies for
about twenty five years. And inthat time, I've bought and sold
companies. I've grown severalfrom scratch.
(01:54):
I've operated in quite a numberof different industries, medical
devices, beauty, fooddistribution, ecommerce of
distributed products rightaround the world. One of my
products, particularly a medicaldevice company, was in a third
of all pharmacies here inAustralia. That product then
went on to be a worldwidesuccess. I've done a lot of
(02:18):
media as you can see here inthis first Sky News Financial
Review, The Australian, you nameit, I've been there, podcast,
love a bit of media tard aboutme. Also, I was lucky enough to
be invited to present a TEDxtalk, and my TEDx was on why
everyone should buy from aregional business across the
(02:39):
planet and the benefit that thathas to regional communities.
And last but not least, I amalso an English Channel swimmer
and the first person to haveattempted to swim the English
Channel in winter. I know. It'sdumb, stupid. On top of this, I
was once a civil engineer. Ihold an MBA in marketing,
(03:01):
finance, and entrepreneurshipand also did a masters of
entrepreneurship at MIT Bostonin The US.
So alright. Built to Buy, how tospot an owner independent
business. Now we're cooking ongas. Alright. So why does this
matter?
Well, here's the brutal truth.Too many buyers, they think
(03:23):
they're buying a business, butthey're really just buying a
job. So if the seller is stillin the engine and they walk away
post deal, you're left with ashell, basically. So today,
we're gonna speak about how tospot those red flags before they
cost you. Having bought and soldseveral companies myself, I've
experienced this firsthand ofbuying businesses where the
(03:46):
owner walks away and all of asudden, some of the business
goes with them.
It's just it's ridiculous. SoI've learned by my mistakes, but
also learned a lot and which iswhy I wanna share these with you
today. So what we're going to gothrough today and what to expect
so, firstly, what does an ownerindependent business look like?
(04:08):
And then what are the red flags?So what are the red flags to
look for?
But, also, what are the greenlights during your due
diligence? And, also, how to digdeeper than the p and l? And
quite often, as we know, sort ofwe look at a business. First
thing we do is look at theprofitability. We look at the p
and l, but there's so much moreto a business than that's beyond
(04:30):
the financials, beyond thebalance sheet, the cash flow,
and the p and l.
We've got all the things likethe systems. Is it owner
dependent? You know, will a lotof the goodwill go as soon as
that business owner leaves? Andthen I'll open it up to your
live questions, so make sure youjot them down along the way. And
(04:50):
if you've got any questions, popthem into the chat, and and
we'll get to them.
So the real problem, if theowner leaves the business and it
falls apart, that really wasn'ta business. It was a hustle. Now
if you're not just buyingnumbers, you're buying a system.
And if the system is called thefounder, that's the problem. And
(05:11):
that's really what we're tryingto avoid through this webinar
today.
How can we look for those redflags to ensure that we're not
buying a hustle, we're notbuying a job, and we've got
something that's going tocontinue on when you buy that
company, but also in the futurewhen you may decide to sell it?
So these are the early warningsigns. If you see the owner in
(05:33):
every sales call, key clientswill only deal with the the
owner. There's no standardoperating procedures. There's no
documented processes.
And the staff are task doers,and they're not decision makers.
And, also, there's no middlemanagement really start to make
some red flags of whether thatbusiness is a business owner
(05:57):
dependent one, and that's whatwe're trying to avoid. So here
are some of the red flags towatch for. When you start having
conversations with the seller,you wanna listen for these
signs. If they insist on beingin all the meetings or if they
say, only I know how to do it,Only I know how to if the team
(06:18):
can't answer basic operationalquestions, these are signs of a
single point of failure, and wereally wanna ensure that we're
buying that business that canrun independent of the owner.
Can that business owner go on aone week, two week, four week
holiday, and the businessdoesn't fall apart, doesn't fall
(06:40):
into chaos? And what does goodlook like? So what are the
traits of an owner independentbusiness? So let's fit flip this
script here. So here's whatyou're looking for.
You're looking for standardoperating procedures that
actually exist. And I'm nottalking about the ones that are
filed away in a in a folder, youknow, like, everybody's business
(07:01):
plan gets filed away. Theycreate it or they get they pay
someone to create their businessplan or their SOP get filed
away. No. I'm talking about theones that the staff, the team
actually run by.
They manage everything by. Theymake decisions by that. So
managers who can run day to dayis what we're looking for
(07:23):
without the micromanagement ofthe owner, of the leader, and
clients who engage with thebusiness, not the founder. So
when they call up, they're notasking for the owner. They're
happy to speak with the staffbecause they know that they're
gonna get the right answer fromfrom the staff, and they don't
(07:43):
have the need to speak to theowner.
And ideal ideally, the owner issemi absent, already in the
business, and it just humswithout them. So the owner may
be doing, let's say, businessbuilding. They might be going
out to get new clients, butthat's not the day to day
(08:03):
operations. So, for example, ifwe're looking at a mechanic's
garage, is the owner under thecar? Or do cars get serviced
without them being there?
Do cars get booked in withoutthem being there? And so these
are three simple questions thatyou can ask when you wanna deep
dive into the due diligenceprocess. So and we wanna go
(08:27):
deeper than the p and l. So whoruns things when you're away?
Really simple question, but youcan quite often get from their
response.
If there's not one person who'srunning it, then it's kind of a
red flag. And what are the topfive documented processes? So
and I ran a a parallel webinarseries to this called Built to
(08:49):
Sell, which is for businessowners wanting to remove
themselves from the day to day.And in that, we talk about what
are the tasks as the businessowner cause you most of the
stress? What fills your day today?
And then with those tasks, howcan we document them? How can we
then delegate them and trainthem to one of the staff, but
(09:10):
also then being able to reviewthe performance of those? So
what I've been working with withbusiness owners is to
effectively build a feedbackloop so that these tasks can
happen without the owner beingthere, but also so the staff can
start to make decisions. So whatdecisions does your team make
without you? And they reallyneed to feel empowered and
(09:36):
trusted, but also have theprocedures, the standard
operating procedures in placefor them to make decisions
whilst the owner is away.
And the kicker, you know, thekicker question, what happens if
you take four weeks off? Andthis is a big thing. You know?
And you'll often find that abusiness owner will say, gee.
You know what?
I haven't had a holiday for forbecause I can't leave the
(10:00):
business, or I took a week offlast year. You know, even asking
them, when was your lastholiday? Where did you go? You
know, they think that you'reasking a personal question and
getting to understand them, butwhat you're actually doing is
understanding what theirprocesses are that they've built
into their company. So who runsa business when you're away?
What are the top five processes,and are they documented? What
(10:23):
does your team do without you,and what happens if you take
four weeks off? And one of thereasons why we're trying to
understand these, if we look atthis scenario so we've got two
businesses with the same profit,and they're different because
one's owner dependent and one isnot. And it's such a massive
valuation impact. So let's justsay we got two businesses with,
(10:47):
say, half a million in profit.
Right? One is completely ownerdependent, while the other one
runs with a management team andsystems. So the owner dependent
company might only sell for twotimes the profit. So it's
selling for $1,000,000. But theother one that isn't owner
dependent, that has systems inplace, that has standard
(11:11):
operating procedures in place,who has a team that feels
empowered, stood, and can makedecisions without the
involvement of the owner, Thevaluation of that company jumps
75%.
So rather than being worth onlya million dollars, we're now
looking at something that'sworth, gee, three and a half
times $5,500. Why does my mathnot work right now? So
(11:35):
$1,750,000. That's a massiveincrease in the valuation. Once
again, we're not buying a job.
That's not what we want to do asa business owner. We want a
business that we can scale. Wewant a business where as soon as
the previous owner walks out,the thing doesn't fall apart. We
don't lose half of our clients.I'll give you an example.
(11:56):
I used to own a chain of hairsalons. I had seven hair salons,
and I recall two salons that Ibought, which did have all the
systems in place, but the ownerwas also working in them. And as
soon as the owner left, abouthalf the clients left. And
(12:17):
little did I know that thoseclients had gone because the
owner had set up another salon.Now if we had built if the
company was not about the ownerbut about the staff, about the
loyalty to the brand, thosekinds of things, we would have
retained a lot of those staff.
So here's the buyer advantage.You want a business that scales,
(12:38):
not stalls. Owner independentbusinesses, they're easier to
finance, they're easier to grow,and they're less likely to
implode during transition. So ifyou want an asset that works for
you, not one that needs you,this is the profile that you're
buying. And we asked thosequestions before, you know, to
(13:00):
really start to understand whatare the red flags that we should
be looking for because you'reinvesting your good money into
buying a business.
You wanna ensure that you getreturn on your business, not
walking into something that'sgonna detonate as soon as the
owner the previous owner leaves.And it's it's quite a it's you
know, this is an importantthing. Owner independent
(13:22):
businesses grow faster, retainclients, and are easier to
finance. And so here's the finallitmus test. I call it the walk
away risk test.
So could the seller walk awayfor thirty days and have things
keep running? If the answer isno, then they're not selling a
business. They're selling you ajob with their name crossed out.
(13:45):
Could the owner leave for thirtydays without chaos? Have they
got systems in place?
Have they got a team that'sempowered to make decisions
without the owner being there?Do the staff have freedom and
trust from the owner, or do theyget micromanaged? Will they will
(14:06):
the owner walk away and thingsstart to catch on fire? We want
operational independence fromthe founder. We want real
systems and an empowered team.
And we want a culture ofaccountability, not reliance. So
let's go through each of theseone by one and explain that a
(14:26):
little bit further. Theoperational independence from
the founder, has the task thatthe owner used to to do, have
they been documented? Has arelevant person been trained?
Does the owner have trust inthat person to perform the duty?
And is there a review structureto ensure that the tasks are
(14:46):
being performed adequately andto the level that the owner
wants. We need to have realsystems and an empowered team.
So we need to have standardoperating procedures, just
procedures where each of thestaff know exactly how to
perform their duties, how tomake decisions without having to
(15:08):
ask the owner. And when we startto get this empowered team, the
team also starts to makestrategic decisions as well. And
this is a very important partwhen you've got a culture and a
team that's starting to makestrategic decisions.
Then when you have your monthlymeetings with your team where
you get to ensure that you'vestill got your finger on the
(15:31):
pulse and they know that youexist, they come to you with all
these great ideas to build thebusiness, to grow the business,
and that's the golden egg rightthere. An empowered team that
really thrives in makingdecisions, strategic decisions,
and making the right decisionsand learning from their feedback
(15:53):
loop. We want that culture ofaccountability and not reliance.
We want people to stand up. Andif they made a mistake, just go,
yep.
You know what? I put my hand up.I stuffed up. I own that. But,
also, at the same time, a teamthat can think strategically,
can think about how can I makemy role better?
(16:13):
How can I service the customerbetter? How can I bring more
sales in? How can I improve theefficiency of our admin? How can
I market this company better?How can I convert more people in
the sales call?
How can I increase the lifetimevalue of a customer or get more
recurring revenue every singlemonth? And when you've got a
(16:35):
team that's thinking like this,they're thinking strategically,
they're thinking very empoweredin an empowered way, then we're
starting to have a business thatis throwing up so many green
flags, green lights for you togo. This is one worth
investigating deeper becauseyour return on investment is
(16:56):
really going to work for you. SoI know I ran through that very
fast. There's quite a few thingsin there.
I'd love pop it in the chat.What's one question you're gonna
add to your next due diligencemeeting? Also, a recording of
this is gonna be made availableafter the show across all the
social medias. I have alsocreated a document for business
(17:19):
buyers, which is the wholeframework of what we've been
talking about in a lot moredepth, a lot more detail in how
to spot the owner independentbusinesses because we don't want
this. We don't want you walkinginto a business and having to
then be present in all meetings.
Because you don't have thehistory with the clients,
(17:39):
because you don't have historywith the business, but
everyone's all of a suddenlooking to you for direction,
things are really going to fallover. You don't want that high
staff turnover. Staff can'tspeak about the numbers, and
there's no clear roles. Nobodyreally knows what they're doing.
They're just getting told whatto do.
That's exactly not what we wantto do. Also, I help buyers get
(18:03):
clarity. So if you wanna if youwant help navigating your
acquisition, valuing the rightbusiness, asking the right
questions, or avoiding theexpensive mistakes, you can book
me for a thirty minute strategycall. It's to help buyers get it
right. It's no hard sell.
It's just clarity. Look. I'vebuilt companies. I've sold
(18:24):
companies. Made so many mistakesbuying companies, but this is
really what it's all about.
I wanna help business ownersfind businesses that are really
worth buying, not buying you ajob, not buying you the stress.
Yeah. You've worked hard to saveup that money or invested that
money that you're now going toinvest in another company. You
(18:46):
need to make the rightdecisions. You need to make the
right decisions to ensure thatyou're making your money work
for you.
This is an investment decision.You don't wanna walk into that
company that's going to implodestraight away. You wanna walk
into a company that, basically,the owner of the owner of the
company changes, and that's allthat anybody anybody knows. The
(19:08):
day to day operations work.Everything just works.
The numbers still happen.There's feedback loops. There's
KPIs being achieved. Staff areempowered. Staff are making
decisions.
This is just crucial. Now I'llalso pop into onto the screen
right now. There's a link. Ifyou wanna click that link, you
can book in straight away thatthirty minute discovery call. By
(19:29):
all means, I love speaking withbusiness owners.
It brings me a lot of joy.Owning a business should bring
you freedom. It shouldn't bringyou stress. And I say it so many
times with a lot of businessowners that I work with, the
amount of stress that it bringsthem. Being an entrepreneur is a
twenty four seven job, and Ithink it's actually one of the
hardest jobs in the world.
(19:50):
But when you've got the machinerunning, the cogs start turning,
everything starts workingcorrectly exactly how we want
it, then we're in a positionwhere we do have the freedoms.
We can go on holiday. We'restarting to have a business that
works for us, you know, bothemotionally, financially. We get
to spend more time with ourfamily. We get to spend more
(20:12):
time doing the pursuits that wewant.
Swimming the English Channel.All those kinds of things. It
really is an important thing.Now as I said, this is part of
this is part of the Built toSell webinar series. This runs
every single fortnight, and it'sall about empowering business
buyers and investors to makebetter decisions.
(20:35):
Now my next session, it's on theJune 5 at 12:30 Australian
eastern time. And the nextsession is what the systems tell
you about the business. So beingable to look at all the systems
that are within that company andreally help you during that due
diligence. So I hope to see youat that. Now, also, at 11:00 on
the same days, I run a similarwebinar for the business owners.
(21:01):
And for that side, it'sbasically the other side of the
script, how to ensure thatyou've got the systems in place
so that the business can runwithout you, so that the
business can run smoother. Soit's very interesting. You're
more than welcome to join me inthose sessions in the 11:00
sessions because it lets you seewhat the business owners are
(21:22):
looking at, and, also, they getinvited to these ones as well so
that they get to see what a buya buyer is looking for. And it
just ensures that we've gotbusinesses that are worth more,
probably better. We get a muchgreater return on investment.
You can make faster decisions,better decisions, and we're
going to be in a position wherethings work so much better. I
(21:44):
hope that really helps. I reallyenjoy providing these sessions.
Like I said, book the thirtyminute discovery call. Link is
on the screen there.
Show notes are going to go out.Also, the document that I've
created to help business ownersreally identify what are the
flags of an owner operatorbusiness. It's effectively a due
(22:06):
diligence checklist that you canimplement straight away. And
there's so many companies outthere for sale at the moment,
and we're gonna see so manyopportunities that are rising
over the next five, ten years asthe baby boomers start to look
to offload their companies. Thesmart operators are gonna have
all these things in place, butthe smart buyers are going to
(22:26):
know how to identify the rightbusinesses.
So I hope that helps. Don'tforget, book in for a thirty
minute discovery call. We cansee where you're at, what kind
of things are you looking at,what frameworks do you need in
place. Do you need my assistancefor anything? I'm always here to
help.
I love doing this. I hope youhave a great time. See you at
the next session.
Welcome to Built to Sell, Built to Buy, the podcast
for business owners, operators,and bold thinkers ready to take
the next big step. I'm SamPenny, business builder,
adventurer, and coach for thebrave. Each week, we dive into
real stories, sharp strategy,and battle tested insights to
help you grow, sell, or buybusiness the smart way. So let's
(00:26):
get to work. Welcome everybodyto Built to Buy.
Today's session and this webinarseries Built to Buy has been
created for people wanting tobuy a business to own
businesses, but particularlythose who wanting to invest in
businesses. Today's topic is howto spot an independent owner.
(00:48):
Today's session is gonna beabout thirty minutes, and then
we'll dive into a live q and a.So make sure you jot your
questions down along the way.Now, also, you can pop your
comments into the chat and asklives if they if it's something
that's relevant to what we'retalking about right there and
then, I will make that questionlive.
(01:10):
Now let's dive in because we'vegot quite a bit to get through.
Oh, and okay. So here we go.Built to buy, how to spot an
owner independent business.Yeah.
So welcome. My name is SamPenny. I am the coach for the
brave, and today, we're gonnaunpack one of the most
overlooked risks when buying abusiness, and it's owner
(01:32):
dependent. So if you're lookingto acquire a business that can
run and grow without you orwithout the seller, you're in
the right place. You're in safehands, as they say.
A bit about me first. I'm SamPenny. I've run companies for
about twenty five years. And inthat time, I've bought and sold
companies. I've grown severalfrom scratch.
(01:54):
I've operated in quite a numberof different industries, medical
devices, beauty, fooddistribution, ecommerce of
distributed products rightaround the world. One of my
products, particularly a medicaldevice company, was in a third
of all pharmacies here inAustralia. That product then
went on to be a worldwidesuccess. I've done a lot of
(02:18):
media as you can see here inthis first Sky News Financial
Review, The Australian, you nameit, I've been there, podcast,
love a bit of media tard aboutme. Also, I was lucky enough to
be invited to present a TEDxtalk, and my TEDx was on why
everyone should buy from aregional business across the
(02:39):
planet and the benefit that thathas to regional communities.
And last but not least, I amalso an English Channel swimmer
and the first person to haveattempted to swim the English
Channel in winter. I know. It'sdumb, stupid. On top of this, I
was once a civil engineer. Ihold an MBA in marketing,
(03:01):
finance, and entrepreneurshipand also did a masters of
entrepreneurship at MIT Bostonin The US.
So alright. Built to Buy, how tospot an owner independent
business. Now we're cooking ongas. Alright. So why does this
matter?
Well, here's the brutal truth.Too many buyers, they think
(03:23):
they're buying a business, butthey're really just buying a
job. So if the seller is stillin the engine and they walk away
post deal, you're left with ashell, basically. So today,
we're gonna speak about how tospot those red flags before they
cost you. Having bought and soldseveral companies myself, I've
experienced this firsthand ofbuying businesses where the
(03:46):
owner walks away and all of asudden, some of the business
goes with them.
It's just it's ridiculous. SoI've learned by my mistakes, but
also learned a lot and which iswhy I wanna share these with you
today. So what we're going to gothrough today and what to expect
so, firstly, what does an ownerindependent business look like?
(04:08):
And then what are the red flags?So what are the red flags to
look for?
But, also, what are the greenlights during your due
diligence? And, also, how to digdeeper than the p and l? And
quite often, as we know, sort ofwe look at a business. First
thing we do is look at theprofitability. We look at the p
and l, but there's so much moreto a business than that's beyond
(04:30):
the financials, beyond thebalance sheet, the cash flow,
and the p and l.
We've got all the things likethe systems. Is it owner
dependent? You know, will a lotof the goodwill go as soon as
that business owner leaves? Andthen I'll open it up to your
live questions, so make sure youjot them down along the way. And
(04:50):
if you've got any questions, popthem into the chat, and and
we'll get to them.
So the real problem, if theowner leaves the business and it
falls apart, that really wasn'ta business. It was a hustle. Now
if you're not just buyingnumbers, you're buying a system.
And if the system is called thefounder, that's the problem. And
(05:11):
that's really what we're tryingto avoid through this webinar
today.
How can we look for those redflags to ensure that we're not
buying a hustle, we're notbuying a job, and we've got
something that's going tocontinue on when you buy that
company, but also in the futurewhen you may decide to sell it?
So these are the early warningsigns. If you see the owner in
(05:33):
every sales call, key clientswill only deal with the the
owner. There's no standardoperating procedures. There's no
documented processes.
And the staff are task doers,and they're not decision makers.
And, also, there's no middlemanagement really start to make
some red flags of whether thatbusiness is a business owner
(05:57):
dependent one, and that's whatwe're trying to avoid. So here
are some of the red flags towatch for. When you start having
conversations with the seller,you wanna listen for these
signs. If they insist on beingin all the meetings or if they
say, only I know how to do it,Only I know how to if the team
(06:18):
can't answer basic operationalquestions, these are signs of a
single point of failure, and wereally wanna ensure that we're
buying that business that canrun independent of the owner.
Can that business owner go on aone week, two week, four week
holiday, and the businessdoesn't fall apart, doesn't fall
(06:40):
into chaos? And what does goodlook like? So what are the
traits of an owner independentbusiness? So let's fit flip this
script here. So here's whatyou're looking for.
You're looking for standardoperating procedures that
actually exist. And I'm nottalking about the ones that are
filed away in a in a folder, youknow, like, everybody's business
(07:01):
plan gets filed away. Theycreate it or they get they pay
someone to create their businessplan or their SOP get filed
away. No. I'm talking about theones that the staff, the team
actually run by.
They manage everything by. Theymake decisions by that. So
managers who can run day to dayis what we're looking for
(07:23):
without the micromanagement ofthe owner, of the leader, and
clients who engage with thebusiness, not the founder. So
when they call up, they're notasking for the owner. They're
happy to speak with the staffbecause they know that they're
gonna get the right answer fromfrom the staff, and they don't
(07:43):
have the need to speak to theowner.
And ideal ideally, the owner issemi absent, already in the
business, and it just humswithout them. So the owner may
be doing, let's say, businessbuilding. They might be going
out to get new clients, butthat's not the day to day
(08:03):
operations. So, for example, ifwe're looking at a mechanic's
garage, is the owner under thecar? Or do cars get serviced
without them being there?
Do cars get booked in withoutthem being there? And so these
are three simple questions thatyou can ask when you wanna deep
dive into the due diligenceprocess. So and we wanna go
(08:27):
deeper than the p and l. So whoruns things when you're away?
Really simple question, but youcan quite often get from their
response.
If there's not one person who'srunning it, then it's kind of a
red flag. And what are the topfive documented processes? So
and I ran a a parallel webinarseries to this called Built to
(08:49):
Sell, which is for businessowners wanting to remove
themselves from the day to day.And in that, we talk about what
are the tasks as the businessowner cause you most of the
stress? What fills your day today?
And then with those tasks, howcan we document them? How can we
then delegate them and trainthem to one of the staff, but
(09:10):
also then being able to reviewthe performance of those? So
what I've been working with withbusiness owners is to
effectively build a feedbackloop so that these tasks can
happen without the owner beingthere, but also so the staff can
start to make decisions. So whatdecisions does your team make
without you? And they reallyneed to feel empowered and
(09:36):
trusted, but also have theprocedures, the standard
operating procedures in placefor them to make decisions
whilst the owner is away.
And the kicker, you know, thekicker question, what happens if
you take four weeks off? Andthis is a big thing. You know?
And you'll often find that abusiness owner will say, gee.
You know what?
I haven't had a holiday for forbecause I can't leave the
(10:00):
business, or I took a week offlast year. You know, even asking
them, when was your lastholiday? Where did you go? You
know, they think that you'reasking a personal question and
getting to understand them, butwhat you're actually doing is
understanding what theirprocesses are that they've built
into their company. So who runsa business when you're away?
What are the top five processes,and are they documented? What
(10:23):
does your team do without you,and what happens if you take
four weeks off? And one of thereasons why we're trying to
understand these, if we look atthis scenario so we've got two
businesses with the same profit,and they're different because
one's owner dependent and one isnot. And it's such a massive
valuation impact. So let's justsay we got two businesses with,
(10:47):
say, half a million in profit.
Right? One is completely ownerdependent, while the other one
runs with a management team andsystems. So the owner dependent
company might only sell for twotimes the profit. So it's
selling for $1,000,000. But theother one that isn't owner
dependent, that has systems inplace, that has standard
(11:11):
operating procedures in place,who has a team that feels
empowered, stood, and can makedecisions without the
involvement of the owner, Thevaluation of that company jumps
75%.
So rather than being worth onlya million dollars, we're now
looking at something that'sworth, gee, three and a half
times $5,500. Why does my mathnot work right now? So
(11:35):
$1,750,000. That's a massiveincrease in the valuation. Once
again, we're not buying a job.
That's not what we want to do asa business owner. We want a
business that we can scale. Wewant a business where as soon as
the previous owner walks out,the thing doesn't fall apart. We
don't lose half of our clients.I'll give you an example.
(11:56):
I used to own a chain of hairsalons. I had seven hair salons,
and I recall two salons that Ibought, which did have all the
systems in place, but the ownerwas also working in them. And as
soon as the owner left, abouthalf the clients left. And
(12:17):
little did I know that thoseclients had gone because the
owner had set up another salon.Now if we had built if the
company was not about the ownerbut about the staff, about the
loyalty to the brand, thosekinds of things, we would have
retained a lot of those staff.
So here's the buyer advantage.You want a business that scales,
(12:38):
not stalls. Owner independentbusinesses, they're easier to
finance, they're easier to grow,and they're less likely to
implode during transition. So ifyou want an asset that works for
you, not one that needs you,this is the profile that you're
buying. And we asked thosequestions before, you know, to
(13:00):
really start to understand whatare the red flags that we should
be looking for because you'reinvesting your good money into
buying a business.
You wanna ensure that you getreturn on your business, not
walking into something that'sgonna detonate as soon as the
owner the previous owner leaves.And it's it's quite a it's you
know, this is an importantthing. Owner independent
(13:22):
businesses grow faster, retainclients, and are easier to
finance. And so here's the finallitmus test. I call it the walk
away risk test.
So could the seller walk awayfor thirty days and have things
keep running? If the answer isno, then they're not selling a
business. They're selling you ajob with their name crossed out.
(13:45):
Could the owner leave for thirtydays without chaos? Have they
got systems in place?
Have they got a team that'sempowered to make decisions
without the owner being there?Do the staff have freedom and
trust from the owner, or do theyget micromanaged? Will they will
(14:06):
the owner walk away and thingsstart to catch on fire? We want
operational independence fromthe founder. We want real
systems and an empowered team.
And we want a culture ofaccountability, not reliance. So
let's go through each of theseone by one and explain that a
(14:26):
little bit further. Theoperational independence from
the founder, has the task thatthe owner used to to do, have
they been documented? Has arelevant person been trained?
Does the owner have trust inthat person to perform the duty?
And is there a review structureto ensure that the tasks are
(14:46):
being performed adequately andto the level that the owner
wants. We need to have realsystems and an empowered team.
So we need to have standardoperating procedures, just
procedures where each of thestaff know exactly how to
perform their duties, how tomake decisions without having to
(15:08):
ask the owner. And when we startto get this empowered team, the
team also starts to makestrategic decisions as well. And
this is a very important partwhen you've got a culture and a
team that's starting to makestrategic decisions.
Then when you have your monthlymeetings with your team where
you get to ensure that you'vestill got your finger on the
(15:31):
pulse and they know that youexist, they come to you with all
these great ideas to build thebusiness, to grow the business,
and that's the golden egg rightthere. An empowered team that
really thrives in makingdecisions, strategic decisions,
and making the right decisionsand learning from their feedback
(15:53):
loop. We want that culture ofaccountability and not reliance.
We want people to stand up. Andif they made a mistake, just go,
yep.
You know what? I put my hand up.I stuffed up. I own that. But,
also, at the same time, a teamthat can think strategically,
can think about how can I makemy role better?
(16:13):
How can I service the customerbetter? How can I bring more
sales in? How can I improve theefficiency of our admin? How can
I market this company better?How can I convert more people in
the sales call?
How can I increase the lifetimevalue of a customer or get more
recurring revenue every singlemonth? And when you've got a
(16:35):
team that's thinking like this,they're thinking strategically,
they're thinking very empoweredin an empowered way, then we're
starting to have a business thatis throwing up so many green
flags, green lights for you togo. This is one worth
investigating deeper becauseyour return on investment is
(16:56):
really going to work for you. SoI know I ran through that very
fast. There's quite a few thingsin there.
I'd love pop it in the chat.What's one question you're gonna
add to your next due diligencemeeting? Also, a recording of
this is gonna be made availableafter the show across all the
social medias. I have alsocreated a document for business
(17:19):
buyers, which is the wholeframework of what we've been
talking about in a lot moredepth, a lot more detail in how
to spot the owner independentbusinesses because we don't want
this. We don't want you walkinginto a business and having to
then be present in all meetings.
Because you don't have thehistory with the clients,
(17:39):
because you don't have historywith the business, but
everyone's all of a suddenlooking to you for direction,
things are really going to fallover. You don't want that high
staff turnover. Staff can'tspeak about the numbers, and
there's no clear roles. Nobodyreally knows what they're doing.
They're just getting told whatto do.
That's exactly not what we wantto do. Also, I help buyers get
(18:03):
clarity. So if you wanna if youwant help navigating your
acquisition, valuing the rightbusiness, asking the right
questions, or avoiding theexpensive mistakes, you can book
me for a thirty minute strategycall. It's to help buyers get it
right. It's no hard sell.
It's just clarity. Look. I'vebuilt companies. I've sold
(18:24):
companies. Made so many mistakesbuying companies, but this is
really what it's all about.
I wanna help business ownersfind businesses that are really
worth buying, not buying you ajob, not buying you the stress.
Yeah. You've worked hard to saveup that money or invested that
money that you're now going toinvest in another company. You
(18:46):
need to make the rightdecisions. You need to make the
right decisions to ensure thatyou're making your money work
for you.
This is an investment decision.You don't wanna walk into that
company that's going to implodestraight away. You wanna walk
into a company that, basically,the owner of the owner of the
company changes, and that's allthat anybody anybody knows. The
(19:08):
day to day operations work.Everything just works.
The numbers still happen.There's feedback loops. There's
KPIs being achieved. Staff areempowered. Staff are making
decisions.
This is just crucial. Now I'llalso pop into onto the screen
right now. There's a link. Ifyou wanna click that link, you
can book in straight away thatthirty minute discovery call. By
(19:29):
all means, I love speaking withbusiness owners.
It brings me a lot of joy.Owning a business should bring
you freedom. It shouldn't bringyou stress. And I say it so many
times with a lot of businessowners that I work with, the
amount of stress that it bringsthem. Being an entrepreneur is a
twenty four seven job, and Ithink it's actually one of the
hardest jobs in the world.
(19:50):
But when you've got the machinerunning, the cogs start turning,
everything starts workingcorrectly exactly how we want
it, then we're in a positionwhere we do have the freedoms.
We can go on holiday. We'restarting to have a business that
works for us, you know, bothemotionally, financially. We get
to spend more time with ourfamily. We get to spend more
(20:12):
time doing the pursuits that wewant.
Swimming the English Channel.All those kinds of things. It
really is an important thing.Now as I said, this is part of
this is part of the Built toSell webinar series. This runs
every single fortnight, and it'sall about empowering business
buyers and investors to makebetter decisions.
(20:35):
Now my next session, it's on theJune 5 at 12:30 Australian
eastern time. And the nextsession is what the systems tell
you about the business. So beingable to look at all the systems
that are within that company andreally help you during that due
diligence. So I hope to see youat that. Now, also, at 11:00 on
the same days, I run a similarwebinar for the business owners.
(21:01):
And for that side, it'sbasically the other side of the
script, how to ensure thatyou've got the systems in place
so that the business can runwithout you, so that the
business can run smoother. Soit's very interesting. You're
more than welcome to join me inthose sessions in the 11:00
sessions because it lets you seewhat the business owners are
(21:22):
looking at, and, also, they getinvited to these ones as well so
that they get to see what a buya buyer is looking for. And it
just ensures that we've gotbusinesses that are worth more,
probably better. We get a muchgreater return on investment.
You can make faster decisions,better decisions, and we're
going to be in a position wherethings work so much better. I
(21:44):
hope that really helps. I reallyenjoy providing these sessions.
Like I said, book the thirtyminute discovery call. Link is
on the screen there.
Show notes are going to go out.Also, the document that I've
created to help business ownersreally identify what are the
flags of an owner operatorbusiness. It's effectively a due
(22:06):
diligence checklist that you canimplement straight away. And
there's so many companies outthere for sale at the moment,
and we're gonna see so manyopportunities that are rising
over the next five, ten years asthe baby boomers start to look
to offload their companies. Thesmart operators are gonna have
all these things in place, butthe smart buyers are going to
(22:26):
know how to identify the rightbusinesses.
So I hope that helps. Don'tforget, book in for a thirty
minute discovery call. We cansee where you're at, what kind
of things are you looking at,what frameworks do you need in
place. Do you need my assistancefor anything? I'm always here to
help.
I love doing this. I hope youhave a great time. See you at
the next session.
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