65 | From Pipe Dream to Pay Day: Avoiding the Biggest Mistakes in Selling Your Home Service Business: Justin Deese

Welcome to another episode of Freedom Blueprint podcast. I'm your host Justin Deese and I just want to say thank you for coming and hanging out with me a little bit today. And as always, we have a pretty cool topic and I'm excited to talk about this topic. And I have a free gift for you if you hang around and wait till the end. So I'm going to tell you how to get get this really cool free gift. So first off, happy Monday.

And if you're not listening to this on Monday, if you go into the, to the podcast and you subscribe, then that means you'll be alerted on Mondays when these episodes go live and, you can be first on the list to know what's going on. So, so anyways, even if it's not Monday, whatever day of the week you were listening, I do appreciate you being here and thank you for your time. So I want to make sure as always that the information that we are sharing is valuable and something to help you. So.

Here's what we're talking about today. I recently wrote an e-book. And for most of you that know, I have written a book in the past. My wife and I wrote a book called When Your Business Partner Was Your Spouse.

wrote a book called When Your Business Partner is Your Spouse. And that's a full, full, full-fledged book. And this one was just an ebook. It's about 29 pages. And this kind of started from, I don't know if any of ever seen Jerry Maguire in the middle of the night, he starts kind of writing his little manifesto or whatever he calls it. This is kind of what it was, was this ebook. So the title of the ebook is from Pipe Dream to Pay Day.

This all started because obviously I've sold several businesses over the past and recently we sold to a private equity group and obviously that just stems a lot of questions, right? There's a lot of questions in our space right now from the home service space on what does that even look like and how do I get ready? And there's just a lot of questions. So I don't know. I kind of started thinking, well, what if I wrote a book and then I looked at it I was like, well, a book would be a really big project.

What if I wrote an ebook and that's kind of how, how this came about. So, so really the book is about how to avoid the six most common mistakes when selling your home service business. And I, and I wrote specifically HVAC and plumbing business. but really this is, this applies to whatever your home service business is. And honestly, it applies even for any business that you're selling, even if it's not a, even if it's not a home service business, I think all these things are.

are really valuable no matter what, what you're trying to sell. So I don't know. It was kind of a passion project for me that I thought, you know, with all these questions, maybe I can help somebody in the journey because really there's out of these steps that we talk about, if, if you skip one or you don't do one, mean, it can be the difference of a lot of money. And so our, mission here at the podcast is to help you grow your business. And at the end of the day,

Everybody exits their business. Everybody. It's either on your terms or not on your terms. And on your terms is typically either selling it or maybe passing it down to generations. And obviously not your terms is, let's say you're no longer able to run and manage your business anymore because of health concerns or even worse. So these are things that no matter what you're wanting to do with your business right now, these are things to just get prepared.

for the future. So some of the things that we talk about in the ebook and again I'm going to tell you how to get a copy of this at the end but one of the big things is understanding the selling process. There's a lot of there's a lot that goes into selling a business. There's a lot of steps to it. There is a lot of things that are important to do from a preparation standpoint. I know a lot of times

as people are getting ready for the process, it's a very emotional process. It's a very personal journey. And you're thinking, OK, well, what do I do? What do I do? Where do I start? And really being prepared is probably the biggest thing you can do. And we're going to go specifically into what does that even mean?

And some of the mistakes that people make when selling a business too is their lack of preparation of the business. If there's some certain things you've got to do in order to prepare your business for selling. mean, think about it from a house, right? From a house, if you're going to sell a house, what are some things you do? Well, you're going to clean up. You might paint that wall that you've been meaning to paint. If the roof needs to be done, maybe you're going to look at what the

what that looks like, right? So there is a lot of similarities between a house and a business. Obviously, a business is probably going to be way more personal than a house would be. But from a preparation standpoint, I think it is so valuable to just take a minute and look at what is it? What is it you got going on? What is it that are some issues that you may have going on that you need to fix? What are some things that might be?

flags for buyers, like for instance, like I talk about the roof, the roof analogy, maybe you need to fix the roof. You don't want to hide that and start having the sellers come look at your house, right? They're going to go, your roof needs to be replaced. So you're better off to kind of say, Hey, listen, I'm selling my house and really the roof needs to be replaced. It's probably dated and aged. So the point I'm getting to here is with selling your business, if there are those things that you know, need to be done,

but you're not going to do them, just make sure that you point them out, that you're not trying to hide them or deceit people. think that's a really, it's one of the fastest ways to kill a deal is to not be transparent and 100 % forthcoming with what's going on. it is a good one. Another mistake that people make is they'll overestimate the value of their business. Now, again, I said this earlier, selling a business is a very personal.

It's personal, right? It's you've put this blood, sweat and tears and money and hours and all the things into it, which is great. But the truth is, and this is probably not going to be the easiest thing to hear. None of that matters when it comes to an evaluation of your business, right? And when you're evaluating your business, it's really going to come down. There's a lot of factors, but the, but the big one is going to be the profitability of the business, especially when you're talking to home service businesses. Now,

If you were in the IT space or the SaaS space, like you're making technology, you know, those guys will sell based on a percentage of overall revenue and the home service space. just really not how it works. It's going to, it's going to have to do with profitability. Yes. Things like systemization. Yes. Things like how many memberships you have, which really tie into,

reoccurring revenue. That's always a very attractive things for buyers if you have a reoccurring revenue. So there's a lot of those things that come down to a factor. But for instance, if your business is not making any money or it's very, very, it's a small amount of profitability that your business is making at the end of the year, you just need to check whatever your expectations are. Right. And you can Google it. I don't even want to say what a multiplier is right now because

somebody may be listening to this five, 10 years in the future and it will change. But over the course of time, I mean, we've seen multipliers from, you know, mid double digits to double digits to single digits and, there's everything in between. And there's a, there's a lot of things that, can affect that as well. A size of your business, you know, if you're at a certain size, as far as being a very, very large business, then your multiplier.

Typically is going to be higher than what it is and it all comes down to the market. I mean it all comes down to market and so anyway, so just you want to be very careful about overestimating what the evaluation of your business is. Now there's a couple ways to do it. You can also

There's a couple ways you can do it. You can actually, I mean, you could do what's called a quality of earnings. That is a really big, big project that you can do in order to get a better base of what the evaluation will be. Another thing is you can send me an email and I'll be happy to kind of give you a very, very high level based on the current time of what you could expect from your business. And I'll put my email address and contact information in the show notes, but it's pretty easy. It's just Justin at

JustinDees.com. that's one thing to avoid is just overestimating the valuation of your business. And then managing realistic expectations of what it looks like when a sell happens. Now, just like I used the house analogy earlier, when you sell a house, if the new buyer comes in and they want to paint a wall a different color that you don't like, I hate to tell you, but it is theirs. They own it. They can paint that damn thing whatever color they want.

But I do think that this is why it's important when you're looking to sell to be thinking about how you're going to sell. Right? We'll get into that in just a few minutes. But how are you going to sell? What is your exit going to look like? Another thing is going to be your type of transactions. And there's more than one way to skin this cat. So there's the traditional sell. Sometimes people are going to be retiring. So if they're retiring, they may just want to sell it and

sail off in the sunset. Good for them. And I hope that if that's your plan, you have done what you need to do and based your business to where when you sell it, you're able to do that. And that's fantastic. Sometimes a traditional cell can be selling it and not retiring and doing something else. Nothing wrong with that. That's good too. Also, you've got selling and staying involved. Now we'll tell you a lot of these private equity groups right now. That is what they're looking for. They're looking for, well,

I don't want to let me take that back. I don't want to say a lot of people. I know that for lead partners, the group that I'm a part of, we want the owners to stay on and run the business. And we, we want that really because culture is, is very important to us and we want the culture to stay. want the team members to stay. We want everybody to keep plugging along and doing great. We, we joke, we say we don't buy fixer uppers. We, want to buy businesses that, that are

really in a good place and that we can help them get to that next level. anyway, so selling and staying involved is one of the ways to do it. And then also in enrolling equity into a transaction is a pretty big thing to do with private equity groups. And basically what that means is that if you're selling for X amount of dollars, you take a percentage of your proceeds and you roll them into equity into the bigger organization or group.

Again, if you're retiring, that may not be something that you want to do. Full disclosure, that was part of what Gist and I, when we sold Paradise, that's what we wanted to do because we do believe wholeheartedly in what the mission is in Leap. And we do think that's going to continue to grow and be an amazing company moving forward. So there you go. There's a couple different types of transactions. And then also in here, I put some different success stories.

So here here's why this was important to me. If you give it a Google I'm sure you can find or less the Google go to a Facebook group. I'm sure you can find a hundred actually hundreds of stories about people that have had not a good experience when selling their business, especially to private equity groups. I wanted to share the stories and the reason I shared them with my fellow

owners from Leap is they all have good stories. They've all had a really good experience and Leap's willing to share that with anybody. So if you want to actually talk to the owners, they'll certainly give you their phone numbers, their cell phone numbers and their email and let you talk to them. Just because I think at the end of the day, we've got to make sure that we have a win-win between what the owner, what the seller and the buyer and it's just got to be a good fit. And that's okay if it's not a good fit.

but transparency is something that's very important to leap.

So one of the other things you'll notice too in the success stories is if you're going through it, there's some lessons that you can kind of pick up from and really because at the end of the day, you want the best possible outcome for your business. It's typically your largest asset. I know a lot of times people talk about homes being your largest asset, but if you're a business owner, your business should weigh more, be a higher evaluation of what your home is.

It is truly can be a life changing transaction and you do want to be serious about it and you don't want to kind of haphazardly come into selling your business without doing some homework and some things I talk about in the ebook. So so listen again some final takeaways or really go through this book. It doesn't take long. I think it's 29 pages. There's lots of pictures so it's not 29 pages of hundreds of words.

But there is some good resources in here and this was just kind of over my couple of decades now of buying and selling businesses some just very simple things that I have learned over the time that I thought would be valuable to share with you. So in order to get a copy of the book, here's how you get it. You go to Justin Deese and that's J-U-S-T-I-N-D-E-E-S-E dot com forward slash ebook.

And when you do that, it'll give you a form. You fill it out and boom, you will get the ebook sent right over to you. If you fill out that form and you don't see the ebook in your email immediately, check your spam. A lot of stuff goes into spam. So just check that and see if it if it is in there. And listen, when you go through this ebook, if you have any questions, have any comments, concerns, anything you want to ask me, feel free to reach out to me. My email is pretty simple. It's Justin at.

JustinDees.com and you can send me an email and I will get back to you and answer the question to the best of my ability. So that pretty much wraps up the quick overview of the ebook. I know there's a lot of stuff that left out but partly because I want you to read the ebook. I took a lot of effort to write this thing and I had full disclosure. I did not do the graphic design of the book and it looks really cool. I'm super grateful to have a amazing marketing team.

that I have access to now. So they made it look pretty. I just used, I just put the words into place. So, so yeah, so download a copy of it. If you got any questions, shoot me an email. And again, whether you're looking to sell your business or not, this is just really a guide in order to make sure that you are thinking about what the process needs to be in the long term. Cause the last thing you want to do is have to sell your business. And you want to talk about getting burned and not, getting the valuation of what you should.

So this is just really a plan, you know, kind of goes back to the E-Myth. If you've ever read the E-Myth through Michael Gerber, a great book, it's, you know, he's talking about building your business to sell it or to be a franchise model. So in order to do that, these things that we talk about in the E-Book are things that you just from a day-to-day basis need to know and understand. So good. Well, I appreci