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Mark Daoust - Quiet Light Brokerage, The Business (And Art) Of Selling Business

icon-calendar 2021-01-18 | icon-microphone 1h 7m 19s Listening Time | icon-user Debutify CORP

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Mark Daoust of Quiet Light brokerage opened up my eyes to a whole other realm in the e-commerce world. The business of buying and selling businesses. Thankfully for us, Mark knows full well the trials of our pursuit. And for that reason, his business is geared for our needs, regardless of what you have in mind. Keep sell, acquire more leverage what you'll learn today will come in handy. No doubt about it. 

Mark Daoust is the Founder and CEO of Quiet Light, an entrepreneur-led group of advisors who help people buy, grow, and sell their online business for six, seven, or eight figures. He is also the co-host of the Quiet Light Podcast, and a contributor to Forbes, Entrepreneur, and Inc.



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Mark Daoust: [00:00:00] Do we do free valuations for people? Do we, do we like to do that? Absolutely. Because it's our way of giving back to the entrepreneurial community. It's also our way of educating the entrepreneurial community that your business is valuable and it has a certain amount of value and you should, you should do what you can to maximize that value over time.

It's just good business.

Joseph: [00:00:21] You're listening to Ecomonics, a Debutify podcast. Your resource for one of a kind insights into the world of e-commerce and business in the modern age. This is Joseph. I'll be presenting a wealth of industry knowledge from interviews, with successful business people and our own state-of-the-art research. Your time is valuable, so let's go.

Mark Daoust of Quiet Light brokerage opened up my eyes to a whole other realm in the e-commerce world. The business of buying and selling businesses. Thankfully for us, Mark knows full well the trials of our pursuit. And for that reason, his business is geared for our needs, regardless of what you have in mind.

Keep sell, acquire more leverage what you'll learn today will come in handy. No doubt about it. 

Mark Daoust, it's good to have you here. Welcome to Ecomonics. How's it going today? 

Mark Daoust: [00:01:16] It's going great. Thanks for having me on. 

Joseph: [00:01:18] And thanks for being here. I should give credit words. Do you are the second of two referrals from a previous guest Steven Pope.

So, yeah. Uh, for that, I'm very grateful. And again, just want to let the audience know, uh, we're all about that referral. So feel free to, if anybody think well for refer yourself, if you haven't considered yourself yet, feel free to come on the show and feel free to tell your friends about it. We're all about growing the show and trying to really get the biggest perspective that we can on the e-commerce world.

And we're going to all corners of it. And we're exploring a unique coroner today, uh, which, uh, Mark is the expert on it. So first question to get us going as always is to tell us who you are and what you do. 

Mark Daoust: [00:02:01] Sure. Absolutely. So my name is Mark . I'm the founder of quiet light brokerage. We are a business advisory firm for internet based businesses and business owners who are looking to exit or be acquired.

Um, we've been doing this for 14 years. I started as an entrepreneur in the online world and sold my own business, which opened my eyes to the space at the time. This was again, 14 years ago, actually. 15 years ago that I sold my own business. So for the past 14 years, we've been helping business owners prepare plan and execute an exit, um, ideally in a way that benefits them the, in their specific goals.

Right. Uh, rather than trying to push somebody towards the exit doors. Try to help them really identify what those goals are. So we have a tilt towards e-commerce. Um, that's a little unintentional. We do have a really good SAS team as well, and, and content team, uh, that, that, uh, can do that. But I'd say right around 65, 70% of what we do is in the e-commerce realm.

So we have a lot of familiarity with this space. 

Joseph: [00:03:03] And now you said that you had sold your business 15 years ago. Was that also in the e-commerce world or was it. 

Mark Daoust: [00:03:10] Yeah, no, my, my, uh, it was content my, uh, experience in the e-commerce world. I bought, um, five, six years ago. Now I acquired a group of e-commerce businesses, really just to, to get us because we were doing a lot of e-commerce, uh, here at quiet light.

And, uh, I bought it and learned pretty quickly that, um, I'm really good at helping people sell their e-commerce businesses, but I have zero desire to run them myself. Um, it just isn't for me that the logistics aspect of it, wasn't really fun that that kind of broke me. I'm I'm not, uh, I'm not a logistics guy.

Um, so, um, Service oriented. That's who I am much more so than, uh, some of the other key skillsets that I think play well to an e-commerce business owner.

Joseph: [00:03:52] I would have bet to you, you have like an inclination for networking, because a lot of what you're doing is you're connecting. Two different parties together, an interested buyer and an interested seller.

And then a lot of these connections are coming through your brokerage. So you're getting an opportunity to meet different parties throughout. 

Mark Daoust: [00:04:07] Absolutely. So it's, it's networking, it's, uh, doing deal analysis or business analysis is a big part of it. And then also I think, uh, just, just, uh, being able to connect people.

Uh, not just making an introduction, but being able to set the parameters for a productive conversation between two people. And I think that's one of the key elements that we have done it quite like that that works. Right. Why, why do buyers prefer to buy from us and how does that benefit our clients, our sellers at the end of the day, it's because we've been able to normalize these conversations in a way that they're really productive.

And benefit our clients. I don't want to get too into the weeds on this here, but, um, uh, having this idea again, this kind of service oriented approach towards, um, what we do, that's, that's where my strengths lie. I think, as an entrepreneur, you know, uh, it's important to understand where your strengths lie.

I love the idea of e-commerce for awhile until I did it and then realized. My goodness. I was selling these big fire rated, uh, safes, uh, and locking cabinets. And people were having them delivered to their homes. We had to count the number of stairs that they were being delivered to. And I was just thinking, this is, this is not me.

I am not the sort of logistics, uh, guy. I, I can do it. I just don't enjoy it. It was, it was a chore and it was a year of running that business where I was like, I'm done. It's just not worth it for me. 

Joseph: [00:05:26] Okay. Well, we're going to, next question. I have chamber is to get into how the business model works from the perspective of Island.

Uh, I'm gonna put myself in the position of, uh, of a buyer, maybe in a position of a seller. But before I do that, I want to know about the, the safe, uh, store a little bit. So. How exactly did you guys come to decide to, uh, deliver safes? Cause those are pretty heavy.

Mark Daoust: [00:05:49] I didn't. So it was somebody, it was a woman who came into me to sell her business.

It was frankly too small for, um, for our firm, but I was interested in them because it was a small price, was a good opportunity for me to, to try my hand at e-commerce and what I really liked about it, it, it had a lot of legacy authority, uh, in the SERPs and this is. You know what five, six years ago where that was definitely a lot, uh, much more important, um, still important today.

But, but back then, that was kind of the creme de LA creme. And I looked at this and thought, boy, there is, there's some raw clay here that I can shape and mold, uh, into something really incredible. So that's how I got into that. And yes, you're right there. They're big. They're heavy. Um, I'll tell you the first moment I knew I was completely out of my depth.

I changed to a free shipping model, um, because, and, and I figured all the, all the math I did, everything I needed to do. And then I got my first order. And it was somebody in Alaska. And I realized that I had all my modelling from the lower 48. So I had to call the guy and I said, Hey, I I'm sorry. And he just laughed.

She said, I thought it was too good to be true. I'm like, yeah, it is. I can't ship you a safe trip to Alaska for free shipping. And the cost was ridiculous. So, uh, yeah, you're right. It, it was a pain. 

Joseph: [00:07:03] Yeah. Um, I, I have to admit, I have a bit of a, not a bit I'm, I'm, I'm quite a nerd and I, I have my own, like, Uh, cartoonish mine.

So I was expecting you to get a customer and be like, yeah, I tried to use this to, to catch a road Reiner. And, uh, it just, it just didn't drop quickly enough. So. 

Mark Daoust: [00:07:21] Yeah. I mean, it literally, it was the sort of thing where, um, we had to inform our customers, you know, check the safes when they arrive at, if there's any damage, let us know right away.

So they had to check all around because these are big things. Right. And they, they, they move around, they knock around and they can get a chip in the paint. Um, and again, you have to ask, you know, do you have a lifting dock? If it's commercial. Uh, place, if it's a, if it's a private residence, uh, do you want this brought into your office?

If so, how many stairs do you have? Because we charged by, you know, they've set of stairs, you know, do you want this door side? And it was really, really difficult. Um, I also learned, uh, that I have a special. Uh, hatred for Magento, um, as just a platform. Um, and I'm sure this is just me trying to wrestle that at, into shape, but, uh, it was, it was a good experience though, on the balance.

Again, I ran the business for about a year. I didn't lose money on it, but I did end up selling the business a year after, because the amount of money I was making on it was not worth the work I was putting into it. Uh, but the education I got in this space was, was phenomenal. Um, and it was a really good step in my journey as an entrepreneur to again, discover where are my strengths?

What do I enjoy? What do I not enjoy as well? So good experience overall. 

Joseph: [00:08:37] Okay. I only have one more question for it and then I promise we'll move on. But were you ever contacted by someone who. Had their safe, broken into. 

Mark Daoust: [00:08:45] No, thanks. 

Joseph: [00:08:46] Okay. Okay. So, so they worked and that was that's. That's good. Great.

Mark Daoust: [00:08:51] Uh, the stakes were great, but again, it was, I'll tell you, I know we want to move on, but another moment that I knew I might be in trouble. One of my main vendors, and one of my best vendors, frankly, was a guy in New Jersey who would hand write his invoices to me. I would receive these handwritten invoices in the mail, you know, so it was just, it was a lot of ma you know, you think e-commerce what I love about the idea of e-commerce is you can automate so many things.

This industry was not automated. Um, there are elements that were, but there were elements that were definitely old school, uh, and. That part of it was kind of fun because again, this guy in New Jersey was, he was a great advisor for me, really kind of helped me understand the space a bit better. Uh, but, uh, in terms of scaling up and being able to, to kind of build on top of that, it was, it, it was a task, uh, for sure.

Joseph: [00:09:40] Yeah, I appreciate it. As old school approach. It makes me wonder if like, if he goes a retail shopping, he has his own personal credit card machine back in the olden days when they would swipe it back and forth. 

Mark Daoust: [00:09:50] I bet he did. Actually. I bet he had one of those ones that, you know, it's like back and forth and like print it out the, the credit card number. Um, I'd be willing to do it. 

Joseph: [00:09:57] Can I offer you a drink? Uh, no, I prefer to drink from my own flask. Anyways, let's get back to the, uh, to, to your, to your business. It's um, That's why we're all here. So I set up the question for you prior, uh, but just to refresh your memory, I want to frame this as how this, you know, how this works.

Exactly. So I'm looking at a business I'm interested in buying it. Question B I'm looking at, uh, selling, interested in selling a business. That is how does this break down? 

Mark Daoust: [00:10:23] Well, uh, from the buyer side, again, we have a lot of buyers out there right now, looking for e-commerce businesses. Um, to just give you an idea of the numbers.

Uh, we released a business a brand last week. Um, I believe it's slightly over a million dollars for the asking price. Within the first 24 hours, we had over 300 people inquire on that business. We had a little over a dozen conference calls lined up and we'd received multiple offers on that business. Now that's a little bit of an outlier from what we would see on average, but it gives a sense for the buying power that's out there right now.

And the number of buyers that are out there. So why is that? Um, well, I think buyers are increasingly seen the e-commerce space as viable and less risky than it's historically been it. It's a nice return on investment relative to where you're going to see other, uh, returns on investment. Um, Plus with the virus with lockdowns, everything else, the role of e-commerce has only benefited, um, with some few exceptions.

Um, whereas, um, I was at a, uh, an event a while ago with Chad, a bunch of, uh, M and a advisors from all different walks of life. And they were talking about the need to normalize for the COVID slump. And in our business, we're having a normalize for the, what we were calling the COVID bump. Right. We're just seeing businesses have this massive uptick, um, in the e-commerce world.

Um, from a seller standpoint, um, you know, somebody who's potentially signed. I think the takeaway I would start with your audience with you would be that, that, uh, most people who are running e-commerce businesses don't really have a concept for what the value of their business might be. Right. The fact that their business is valuable at all. I think a lot of entrepreneurs online entrepreneurs, we look at our businesses and we see them as money in money out. And that's the value that we see forgetting that the business itself has. Uh, asset value and what I would like to compare it to would be a dividend paying stock.

Right? So if you, uh, play the stock market at all, or invest in inequities, you might buy an equity for $30, a share $50 a share a hundred dollars a share because it pays in good amount of interest or dividends rather on that stock. But we don't think of that just in terms of the dividend payouts. We also think about it in terms of the asset value of the, of the equity.

Well, the same thing holds true with your business. Your business has asset value. What that is is, is up for question and investigation. Um, and once you start to understand that, once you start to understand that, that the business itself has asset value, you can start to maximize that value. Now, this is important on a few levels.

One, if you ever want to sell what you may not want to, but let's say that you do want to sell someday or what happens most of the time with our clients is they wake up one morning. And they realized that selling is their best option. They had never planned to do that. They had never planned to sell, but life has a way of changing our desires, our goals, and, um, what makes sense today.So if you've paid attention to the asset value of business, you now have a business that you can sell and it takes some money off the table. Uh, second of all, having a business that is valuable and, uh, has, um, asset value. It's part of your overall net worth picture.

And in addition to that, having a business that is valuable is often a really good business to run as well, uh, for a lot of variety of reasons. So I've just downloaded quite a bit there. I don't know where you want to take the conversation from here. I want to make sure this is useful for your audience, but, um, from the buy-side and sell side, you know, people are waking up to the idea that these businesses are valuable in and of themselves and more than just money in money out machines.

Joseph: [00:13:57] Yeah. We can take this conversation in a, in a couple of different directions. And one thing to keep in mind with our listeners is that, you know, we do these episodes for an hour, uh, but the amount of information that is out there in regards to this. Far exceeds an hour. So it's always important for listeners to use their discretion and decided this is something that they want to continue looking into.

I recommend they do. Um, and I make that recommendation, which basically everybody that we talked to and I mean it each time. So. That's just, that's just one important distinction. Um, so yeah, one thing that actually came up, um, and this is not when chambered, but something I was wondering about as you're describing, I guess what the, the personal experience, uh, people are having they're, they're waking up.

There's obviously there's an emotional side to this too. And I want to frame this in a way that doesn't, I don't want to make, I just don't want anybody to sound like they're being the bad guy in this, because. You would think that if someone was in a position where they want to sell something and they're almost like they're exhausted by it, or they are, they're emotionally drained by it, that might be used as leverage against them.

So what do people need to keep in mind to kind of be clearheaded about it and make sure that they are making the correct decision when they want to part with their business? 

Mark Daoust: [00:15:08] Oh, that's a great question. And you're absolutely 100% correct. The emotional side of it plays a big role into it, right? People often sell because they are emotionally done with a business and they realize that they've taken it as far as they want to take it.

That might be the most common reason why people sell. And it's something that's kind of difficult for. Those on the outside to understand, because you think you have this great business and we know how hard it is to start a good business. Why would you ever sell it? Being emotionally done isn't as important, um, is what drives a lot of people to, to sell?

Uh, I mean, so how do you not have that work against you at the end of the day, I think is kind of where your question is going. How do you make sure that that leverage isn't a working against you? And it goes back to what I was saying before. If you understand the asset that your business is valuable from an asset standpoint and you work to make it.

Valuable the market will help prop that value up the example I gave of a business, that we are a brand that we launched for sale a few weeks ago with 300 inquiries. And just a short amount of time is an example of that. With multiple offers, we were approaching 10 different offers on that business buyers don't have the luxury.

Of knocking down that price because there's other buyers waiting, right? You do get sort of an auction effect that starts to take place there, right. At least leverage on the sell side. And that's, that's important to have conversely, if somebody is emotionally done with their business, And they either haven't prepared or they wait too long.

What can happen is the, would that business start to suffer? Financial, start to go down the revenues, start to go down the gross profit margins, start to go down. Uh, they expose themselves to risk. The business becomes less efficient, whatever the case may be. There's all sorts of things that can start to creep in.

Once that burnout is starts to creep in and now you don't get 10 offers, right? You don't get, you might get 300 people inquiring. But they won't necessarily be as interested in buying that business now, quite like what we do quite a bit of is when we look at a business or somebody who comes to us and says, Hey, I'm thinking about selling, we'll take a look at the business and try and prepare them, say, here's what we think the market's going to do.

Here's what we think the value is. More importantly, here's, what's really great about your business from an exit standpoint, what buyers are going to love. And here's what buyers are going to be like. Hmm. I don't know about that part of it. Right. That gives the client or the entrepreneur, the business owner, the opportunity to say, I think I want to fix these things.

I think I want to fix these things that maybe buyers are not going to like so that I have more pricing leverage, but the caveat there. The asterix is it takes time. And so if you're burnt out, if you're done and you come to us and we say, Hey, you know, buyers are going to love these aspects. Buyers are going to trip over these things, and it's going to take 10 months for you to work on this.

You might have that question of, do I have 10 months, 10 months left in me to actually work on this? Do I, do I have that energy? And then you have to make that decision. 

Joseph: [00:18:02] There's two questions that I have that I want to raise, uh, based on what you're describing here. And the first one is. About being proactive.

Let's just say, I, you know, I have a business and I, and I, and I don't actually want to sell it, but I kind of want to antiques road show it, or I would want to bring it to your attention. And just to get a sense of, is this something that you would be willing to, to do for people to give them an idea of.

How they can get their business, maybe prepped for selling down the line or just out of curiosity, or do people have to have like a certain commitment level before you are going to, cause this is your, this is your business, right? You do need to keep the lights on. So how do you, how do you deal with that situation?

Mark Daoust: [00:18:40] No, we, we love to give people a check-in value of their business and. Um, I I've been very public, um, in interviews I've given in the past and I'll say it right now, people ask me sometimes when's the best time to sell my business. My answer is never, ideally you own your business for the rest of your life.

I'm not going to push you to sell your business. It's yours. I know how hard it is to run these things. I know how hard it is to get traction. Um, but at the same time, I also know how important it is to, to know the value of a business. I'll, I'll ask you this, Joseph, do you know, you don't have to tell me the amount.

Do you know how much is in your checking account right now? 

Joseph: [00:19:14] Yeah, I can, I can ballpark it for the record. I do transfer most of my money into my, into my savings. 

Mark Daoust: [00:19:20] Okay. Again, I don't need to know the specifics. I just, just want to go through this exercise because we a values of our different assets. You know, how much is in your savings.

Yes. Now, you know about that. If you have other assets, like a car or a house, you know about what's, what's in that if you have investments, you know, basically what the value is there. Do you know how much your business is worth? And when, when we go through this exercise with most entrepreneurs, You know, they know how much their, their 401k or their retirement account is worth.

They know how much their home is worth. They know how much their cars roughly worth, they know how much they have in their checking and savings account. But one of the most valuable assets they own their business. They don't know. So just know this is a long answer to a short question. I apologize for that.

Do we, we do free evaluations for people. Do we, do we like to do that? Absolutely. Because it's our way of giving back the entrepreneurial community. It's also our way of educating the entrepreneurial community that your business is valuable and it has a certain amount of value and you should, you should do what you can to maximize that value over time.

It's just. Good business. 

Joseph: [00:20:21] Okay. And then the second question that I wanted to raise too, is if you are able to specify any of the strengths and weaknesses that you have identified, and the assumption that I'm making is our listener base is highly focused on the e-commerce and store sector. So I would want you to answer that question for SAS, but, um, I have, have you noticed any common trends and what are some winning traits and what are some riskier traits will I should say. 

Mark Daoust: [00:20:48] Yeah. So we have a very basic framework that we use for pretty much every business. And, um, I'll, I'll run through the framework, uh, quickly with an bent towards e-commerce. Right? So, uh, we call them the four pillars of value, right? So the four pillars of value, our risk growth.

Transferability and documentation. Um, and we run through these quickly. So let's talk about an e-commerce business. Um, what elements of risk do you have with your e-commerce business? Well, one common one that we look at would be single points of failure or vendor risk. Right? Are you too reliant on one vendor?

Um, Uh, or, um, are you not protected from competition, um, with, with what you have already to reliant on products that that might be, uh, um, not safe carded from, uh, from competition. Other elements that we commonly see in this risk category would be key man risk. The entrepreneur is doing all the work and they are the person that really makes the engine run.

Um, so that's one element that, that we look at does gross profit margins play into that as well. If you have, you know, really thin gross profit margins, that's an element of risk as well. Uh, so again, on the risk side, um, single points of failure, too much dependency on one vendor, um, too, too much dependency on unprotected products of some sort key man risk gross profit margins.

That's just off the top of my head. Uh, growth, uh, would be the second pillar. And by the way, risk, obviously the higher, the risk, the lower, the price of your business, right? So we have to discount the business for risk growth is going to be a positive influence on the value of your business. If we can point to a lot of growth and we look towards historical growth first, and it was a business and a growth pattern, but also other patterns within the business.

So sometimes we can see businesses where, Hey, every time I add a new product line or a new variation or these certain things, my revenue grows by this much. Right? So we have a pretty clear, uh, product development cycle. We know how to build this week. We can grow the business this way. We also look at other untapped opportunities such as maybe you're on Shopify only, and you haven't added to Amazon.

Is that a possibility? And can we add there or vice versa as well? Um, and, and other channels. The third pillar transferability. Um, we kind of go back to that risk of key man risk, um, or other dependencies or maybe vendors that won't transfer to a no new owner. But the basic concept here is can a new owner come in and run your business?

Yes or no, if they can't or if there's a really steep learning curve or it's really difficult to do, that's going to have a negative pressure on the price of your business. And then finally the documentation. And we can talk about this one all day. I won't, because I don't want to bore your audience to death.

But just having proper finances in place, having a good bookkeeper or CFO, I'm a big advocate of CFOs for larger businesses. Um, making sure that you have your SOP is documented, uh, with their business and having, making sure that, that, uh, just the different elements of the business are on paper somewhere, or you have recording of, of key metrics.

So these four pillars are, are, are, uh, kind of the basic indicators that we see the most. Common problems we see in e-commerce we have to go to documentation. People are just not keeping their books well or right. Um, in the correct way. Um, and I know you talked to Tyler Jeffcoat, he's a great resource on this regret guy.

He'll get your books in order. Um, for sure. Um, and the other elements that we see would be, uh, not protecting the product lines or being in areas where competition can easily undercut your, your main revenue source, which is the products that you have. 

Joseph: [00:24:12] Yeah, I just had this, um, mental, uh, fantasy in my head of all of these different, um, uh, businesses such as yours and such as Tyler's.

And I almost had this vision of like a, of like a digital main street where somebody can take their, their, their portfolio, their, their business, and go to all of these different, uh, organizations. To have different needs beds to have their accounting and meant to have their evaluations met. And I'm just gonna stop there.

Cause that's just me picturing something very, um, uh, nebulous in my head. 

Mark Daoust: [00:24:39] Well, I, I it's, it's, it's a good thought and I'm sorry to interrupt, but it's a good thought because I think I come from the online entrepreneurial world. Right? The first business I started, I coated in my, my, my bedroom. You know, and I, I, you know, I launched it and next thing you know, it was making money.

So I get this idea that we can bootstraps, uh, and, and really pull ourselves up by our bootstraps and get these pretty impressive things started. But there's an entire world of support services out there for businesses that are really, really useful. And so if your audience takes one thing away from this, this call or this, this podcast episode, it would be to awaken up to some of these services out there.

And to understand that they do add value, you know, outsource, CFOs, I like Tyler's are really good. Having a good attorney who can protect some of your intellectual property is really, really important as well. Um, so these outside services, this main street take a walk down. It it's worth taking a walk down.

Joseph: [00:25:34] So of what you brought up out of those pillars. And interestingly, I did, I didn't want to say that. What other questions chambered was asked about the four pillars, but we managed to just transition into it organically. So I'm just patting myself on the back for that one. Um, but the key man, that one, uh, stuck out to me because that's an issue that I can see myself having.

I don't have, uh, an e-commerce store yet. Um, but with all these people that I talk to, it is hard to resist that temptation. So with the key man, In specific, if you have like particular stories of this happening, I would like to know is how, uh, something like this as resolved, like how someone is able to transfer there.

They're their knowledge and a skillset to one other person, do they delegate it? So they have one person who's doing the job and then they split it into maybe five or six people who can do the job. Uh, so this one is just something that I would love to know more about if there's anything else you can share on that subject.

Mark Daoust: [00:26:27] Yeah, absolutely. So I think it starts with understanding whether or not your skill sets are really unique to you. Right. That kind of starts there. And let's assume that they're not because for the most part business owners, aren't, we, we like to think that we're the best at what we do. Um, but oftentimes we're just kind of hidden par. Right? Uh, so, um, if, if you're replaceable, then it becomes a matter of identifying what you do in the business. And that's as easy as journaling and putting down, what am I doing on a day to day basis? What am I answering customer service emails that can be done? Am I doing logistics and ordering inventory that can be done by somebody else, so on and so forth.

So that's where it starts is is if you're replaceable, then document what you do. And then a business can be sold, uh, pretty easily with that. Where we run into problems is when an owner has a particular skill or something that is above and beyond. Um, just a replaceable part. Relationships would play a big role in this.

Um, I talked to a e-commerce, uh, business owner who, uh, was selling hats. I won't get into the specific type of hats that he had, but he was selling hats and. Everything about the way he set up his business was relationship based. His vendor was a guy that he had known since like high school, you know, and, and was getting a sweetheart deal with him.

And, you know, uh, he had, uh, family members running different parts of his business and he also had just a particular eye for, for what he was doing. That'd becomes a little bit more difficult to replace. Uh, another, another example would be, um, This was years ago. Now, six years ago, seven years ago, the company that was sign old software.

So outdated software. It sounds a little bit odd, but they would find old seats of kind of legacy software. And there were, they were, uh, really good at finding and sourcing these old unused seats. I won't get into the details of business problem because I don't remember specifically, I'd have to go back and research it.

But they had this particular skill set and finding these pieces or these old seats. And that was something that wasn't as easy to replace. And so that that's where we run into problems. Right. Um, so, so what do you do in that case? Um, the, the best situation is if you can bring somebody in. And start to train them in what you're doing to be able to show that it can be done by other people, um, is, is really the advice that, that we give to somebody or conversely, you can go into an exit with the understanding that you will stay on board for a period of time, um, to be able to train that owner in sort of your, your, your skillsets and apprentice them into that or somebody that they, they decided to bring on board.

Those are really the only options. Key man risks can be a real problem. Um, w with, uh, businesses, if you have a particular skillset that doesn't transfer very well. 

Joseph: [00:29:07] Yeah. And so you had a question about this, but I just want her to make a point about it too. It's just because of this person, his business is hinging on a lot of his personal relationships that he's built over the years.

That's a lot of. I can see them taking a lot of issue with him or even, even if they don't have a problem with it, you can understand how that might affect his, uh, his friendship with these people or the connection that has with his family. So, yeah, that's, that's something to look out for. 

Mark Daoust: [00:29:33] Yeah, no, I mean, what happens if the buyer that comes in doesn't get along with them.

Right. You know, and, and then you have to ask yourself, are there backups, you know, when we talk about this risk factor, a lot of it is, do you just have backups? I had a situation where I was selling a business that sold, um, Uh, mobile cribs for like nurseries, right? And it was a week about a week before the close, maybe, maybe four or five days before the close, we were at the point where we were transitioning vendors while by 80% of the products were being sold from one vendor and very rare that this happens, but they reached out to the vendor that, that they want to transition in.

That vendor said. Yeah, I was actually going to send you an email. Uh, we are discontinuing your program with you. You have to remove our artwork within 48 hours. It's we're like, Oh my goodness. This business is destroyed because you know, it's such a large percentage of the sales were coming from this one vendor.

So what do we do well that, that business owner had done the right things. He had a backup relationship in place. And so within 48 hours, he had switched over to the backup vendor. Now it wasn't his vendor of choice, but he was able to transition to a, this other vendor. We delay the deal by three weeks to be able to see what the numbers look like and the number sustained really, really well.

And so we were able to get that deal done that saved the deal, his foresight, to have a backup vendor, uh, made the different stuff. Um, I guess when I found a bit of a tangent there, but, uh, this idea of mitigating your risk with backups is one of the key mechanisms that, uh, uh, we, we preach. 

Joseph: [00:31:00] Oh yeah. And, and, and I wouldn't, uh, I wouldn't worry about tangents or anything like that.

For me, this is all just new information for me and I'm hanging on to every word. So if I, if I'm enjoying it, I, I. Uh, expect the same in my audience. Um, I do want to shift gears because I wanted to ask about the term due diligence and its relation to business. My guess is over the course of the last half hour, we've managed to dip in and out of it, but I want to give it like a specific, uh, moment here within our episode is because it's given a lot of respect just from the sense that I get from having done prep and having a research.

You're looking at your website. There's a, there was a lot of credence to the due diligence. So what is it in relation to your business and you know, how, how do you put us into practice? 

Mark Daoust: [00:31:46] Sure. I mean, due diligence is just making sure that you're checking everything that you should be checking. Right? So for, uh, for buyers, um, due diligence comes in two phases, um, there's discovery due diligence, and then there's verification due diligence.

Uh, discovery due diligence is just learning what you need to learn, to make a good acquisition or make a good decision. And on the sell side, um, this is w when you, when you talk about the dynamics of a deal, this is areas where things can break down a little bit. Because as sellers, as business owners, we listen to the buyers that are looking at acquiring our business.

And we often wonder, like, why are they asking all these questions? Oh my goodness. How much do you really need to know? Are you thinking about you're going to compete against me because I'm telling you everything from the buyer's standpoint, they're saying. Hey, I'm ready to stroke a check for six figures, seven figures, eight figures.

I'm going to know everything about your business. Before I do that, to make sure I don't lose my investment. And so due diligence comes first in this, this discovery phase and for a buyer they're trying to learn and absorb everything about your business, that you've built up over years of running and you've absorbed through.

Living that business, um, this, this institutional knowledge or this experiential knowledge that you gain running your business, a buyer's going to try and absorb as much as they can, and hopefully get some insights maybe that you don't have in your business as well. To ascertain, is this a good investment or not?

So that's the first stage of due diligence. The second stage would be verifying that everything is correct because like it or not a, not everybody is honest with, with what the represent. Sometimes we kind of tilt facts in our favor, but more often than not, where you run into verification issues are just honest mistakes on the part of a business owners.

They think. That they've represented something fairly, but the numbers were wrong or they think that their books are in order, but they actually forgot about this, that, or the other thing. And so a buyer is going to look at your books. They'll take you at your word when they make an offer, but before they write that check, they're going to verify every last bit of the process or every last detail that they've seen and verify that you haven't.

Left anything out, you know, that that's a big part of this, as well as making sure that that, uh, in their discovery, they didn't miss something or you haven't been hiding something. Um, this can set up a tension in the process. Uh it's it's one of the deal dynamics that, that we work at hard, uh, and having an intermediary like ourselves.

Um, I often argue where we earn most of our money is. In helping bridge this gap and this, this disconnect between the buyer and the seller, the buyer saying, I need to know, and the seller is saying, why do you need to know all this? Right. And, and how can you bridge that gap? And that, that gap is this big kind of a morphous blob of due diligence.

But when you break it down, it goes into these two simple categories of discovering and then verified. 

Joseph: [00:34:28] And I imagine too, that all it takes is a, is a story or two, just to remind people why this is important to you, re relate to them. Look, we, you know, let me give you an example of how, by the way, I don't want to, uh, uh, have to get one of those examples out of you, but I can just imagine that you have a lot of evidence to back up the importance of doing this for, for the buyers and the sellers.

Mark Daoust: [00:34:50] Uh, absolutely. I mean, um, first of all, from the, from the sell side, the first thing that I recommend to my clients, where I try and advise my clients, when they're going through this process and they're getting exhausted and make no mistake, it is exhausting and the tensions do run high. Towards the end of a lot of deals, because, because you don't want, you know, again, you constantly see the goalpost shift in, or at least that's, that's the perception, right?

I've already answered a hundred questions. Why do I need to answer another 50? Right. And you've already asked for this information and you're asking for it again, like what, what is going on? Um, so I often try and explain to my, my sellers, a thorough due diligence is good for you because what you don't want is you don't want that buyer.

Three months down the road to have something negative happen with the business and say, Hey, you hid this from me or you didn't give me enough time or you push back. When I asked for this information. I think there's something more nefarious here you get in that situation. Now it's messy now. It's really, really messy.

That's much worse than going through kind of a painful, upfront due diligence. Um, and on the buy-side, I mean, look, I can point to a lot of examples of people who didn't do their due diligence properly, uh, who didn't go through and check things out. Uh, we, we have had situations of dishonesty all the way down to literally forged statements, um, you know, bank statements, literally forged, uh, PayPal statements. We've uncovered some of these, um, uh, Amanda, one of the, the members of my team, she was working on a deal. I was going to be about four, four and a half million dollars. We were a week away from closing and she called me and she said, all right, there's something about this.

That doesn't seem right. And I, we talked a little about a little bit. She said, I'm going to just check into a few of these things. And she went in to verify some of the PayPal transactions that were being shown. And we found out that the PayPal transactions were, were invalid. You know, how you get that little confirmation number?

She called PayPal and said, can I, I don't need to know everything about this transaction. I just want to know, is this a valid transaction? And they came back and said, no, this is not a valid transaction on our, on our network. This, this never happened. And so we knew right then and there, these statements were, were, uh, were manufactured.

They were not actually a real, that's an extreme example. Um, you know, w we can look at other examples of, of deals where. Maybe things weren't really discovered properly. Um, and it, it was, it was honest mistakes. Um, but you know, these things have consequences for everybody. Um, and we don't want to see a buyer lose money.

We definitely don't want to see deals go bad after the fact. And so, um, that due diligence process is important for everybody. 

Joseph: [00:37:21] Uh, one of the, uh, the questions that I had a little bit later, uh, a little bit further down the list was actually because I remember. I was listening to some of your content while I was getting ready for this episode.

And the story that you're telling was in relation to how you guys have this process in place, where you take a lot of time and you look through everything and you ask a lot of questions because you figure, if you're asking a business, a hundred questions, Um, after the a hundred questions, you have a pretty good sense of their legitimacy versus if you just take people at their word, 

Mark Daoust: [00:37:54] I mean, that's a big part of it. Yeah. So our process at quiet light, our clients I'd always tell them, right. You know, when they say, okay, let's go forward. I always tell them, I say, okay, there's going to be two points where you hate me. Uh, first is about to come up and then second would be in due diligence. All right. So I'm just going to warn you up front and then you're going to not like me in the upfront portion, why they, they don't like us as, and I say that tongue in cheek, we send over a written interview and this is custom written for every single client.

It's not like a standard interview. And that written interview average is a hundred to 120 questions sometimes as little as 80, but usually a hundred, 120 questions that you have to provide written responses for. And it's a pain. I mean, I feel for our clients, there's a point to it. There's a purpose. And one of them is on my side.

I'm vetting that client. I want to see, you know, does this all line up? Is there something fishy here? And once in a while, we do get something where somebody just gives us one sentence answers and we have to dig deeper and, and. Second of all, I want to see how are they going to interact with buyers? Are they forthright with their information?

That's another element of it, but, uh, on the selling side and creating value for our clients, we also want to answer a buyer's questions before they have a chance to, to answer them. And there was a dynamic in these, these, um, uh, transactions in which. Buyers will come up with questions and they are both opportunistic.

They're seeking opportunity, but they're also risk averse. And so questions that go unanswered, they will in their heads answer in the most pessimistic way possible until they're told otherwise we want to get ahead of that process. I don't want my buyer to have a negative answer to something that is really inconsequential. So I will seek out with my clients. I'll seek out the ugly, I'll seek out the bad, and I'm going to ask that directly of them. You know, what's going on here? Why did your sales dip here? It looks like your gross profit margins are declining, or you had these AMA Amazon account suspensions.

You go into the detail of this and find out. You know, Mr. Seller, Mr. Klein, Mr. Entrepreneur, you've been running this business for three years with these, these kinds of gross parts of these thinky parts of your business. Why are you comfortable running it this way? And what happens most of the time is these, these clients come back and say, Oh, I'm comfortable with it because of ABC and D Oh, that's very reasonable.

Now, from the buyer's standpoint, they'd take a look at this information. They understand why these risks are allowed to be out there. Maybe these risks are not as scary. As they might think the, the, the scariest thing in a transaction is the unknown. Uh, right. And we want to answer that question. We want to answer that unknown.

So yes, we, we put our clients part of our process. Is that upfront work that we do at quiet light to really be thorough, um, and prepare our clients for a whole host of reasons, not the least of which is, is our ability to ascertain if this is a good and legit deal, but there's, there's a whole host of reasons for that.

Joseph: [00:40:44] Well, that's a, sorry, just one second. I'm I'm giving my brain a second to process all of that. Cause that was a lot of fascinating insight into it. And one thing that I, I have to wonder about too, is the, is the syntax in. See, if you notice something that looks fishy. How exactly is the best way to approach that when you're talking, uh, to the seller, because, you know, I don't know if he would ever want to jump to a conclusion because of, Hey, look, this looks like a, this looks like an issue.

So how do you find that delicate balance between respecting them, but also pointing out that something doesn't look on the level. 

Mark Daoust: [00:41:19] I mean, it starts with asking questions. Um, I don't want this with a client a few years ago where. Um, you know, I send out the client interview and then they didn't want to answer the client interview.

They sent over their own document. That's okay. Thank you. This is really helpful. Um, uh, you know, I do need this client interview put together, our buyers expect this and it's, it's a standard format. Uh, let me see if I can help you out a little bit with it. And, and, uh, you know, I filled in some, some answers for them saying, please read these over, tell me if they're correct.

And then they. They shorten them up. They made them very vague, said, okay, we need to dig deeper. And then, so a lot of that, that process, you know, between, if something isn't lining up on our side, obviously I'm not going to jump to the conclusion and say, you're a fraud, you're a criminal. You're trying to rip somebody off.

Of course, I won't go there. I will ask more questions. And then when they aren't, when I'm not getting the answers I want, I will try to educate and explain, Hey, you know, we, we need to go deeper and here's why we need to go deeper on this. If you don't. Then people are going to wonder, you know, what's going on.

These buyers have a reasonable expectation to have a, you know, the straight answers to these questions. So it goes to education. And after a certain point, you know, natural selection happens. If somebody doesn't want to give up that information, that's fine. Uh, and, and look, this is, this is our general stance.

It's their business. If they are not comfortable giving the information that we're asking them to give. Okay. I can totally respect that, but I also know how this field works. I know what impact that's going to have on the saleability of your business. And so, um, I will just tell you very honestly, here's what the impact is going to be from a buyer standpoint.

Um, and if you're not okay with that, that that's cool too. Um, so what happens eventually is either people give us the right information that we need, uh, and the right depth of information and, and everything checks out, or it doesn't. And if they're just too shifty on, uh, on the questions, they'll go away.

Um, so for fraudsters, we have been fortunate in the, uh, quite a while to not have anyone who has been fraudulent. I can't say that we have a a hundred percent success rate, especially at the beginning of our company. Um, as we're learning a lot of this, but it doesn't happen. It's too much work. It's too much work for a fraudster to use are they use quiet light? 

Joseph: [00:43:30] Yeah. You know, I, I will say that's the one thing I admire about the position that you're in is because you have you're at, there was, if there was a more appropriate word than leverage, I would say that, but I'm just gonna have to go with leverage, but you have your, yeah. You have your leverage.

You have your, your history, you have a backlog of, uh, of success. I can see why there's never going to be any hesitation on your side to do your due diligence. Not just to protect you, you know, the, the buyer then not to protect the seller, but protect the whole website as a whole. So as far as the motivation goes, there's there w there was, there was no reason, uh, there, there can't be any, anything holding you back.

So, yeah, I just wanted to say that's one thing I admire about how the business model really protects you and, uh, justifies your motivation to, uh, to move forward with it. 

Mark Daoust: [00:44:13] Yeah. I mean, we've, we've built a lot of, uh, we we've built this business on reputation. Um, everyone that works as a broker at quiet light we're, we're all entrepreneurs, you know, the vast majority of us have bought, sold and started our own business.

That, that plays into a big part of it. Right. Because, um, I don't work as much on the front lines anymore as, uh, as my team. But they've been there. You know, they, they bought their businesses before they understand why that buyer's asking those questions. And they've also been on the sell side and they know how frustrating it can be.

And so there's a lot of empathy. I'm going both ways there. Um, but also a hesitancy to take on anything. Anything at all that we think is not going to pan out because, Hey, we don't want it to ruin the reputation that we have. B again, everyone's entrepreneurs. And one thing you can say about entrepreneurs is we tend to be fairly efficient.

With our time. We're not going to waste our time with something that's not going to pan out in the marketplace. So if a client, if a seller is not going to be forthright with answers and not give enough detail again, I can totally respect that, but I will also be very honest with them and just let them know, Hey, this is not going to work.

I'm not trying to tell you to do something you don't want to do, but, uh, I'm just gonna tell you how the market reacts to it. So fortunately, you know, I'll be honest, so it's not common. It's not a super, a major issue that we have. Most people come into this, knowing that they have, you know, that they're ready to sell.

They've been prepared well, Uh, to sell and, um, most the vast majority do a great job with that interview as painful as it is.

Joseph: [00:45:44] So we're getting towards like the final act of, uh, uh, of this discussion. Um, this is, this is, I guess, more of a personal curiosity of mine, but I do like the name quiet light, uh, cause it's not a term that I. I don't know. I don't think of it very often, except for those, uh, fluorescent lights, which I don't really see any more lights tend to not be known for the noise they make.

So is there a story to the origin of the term quiet light? 

Mark Daoust: [00:46:07] Uh, there, there is a story. I mean, I, it works on multiple levels. Um, it's, it's, uh, how I see, well, first of all, I'll start with this religious significance, uh, to it. So that's, uh, I was actually in church when I heard that the, the, the phrase first, uh, stated, and, um, I love the phrase.

I think it, it signifies quite a bit of where I like our position to be. Right. My background before I started quiet light was, um, going through the sales process myself and having the sense of here's this advisor who has not gone through the pains. He did not stay up late with me as I was. Building this business, he didn't go through the difficult decisions I've made to, to that that got this business where it is.

And here I am entrusting him with a big part of, uh, you know, one of the big chapters of this, uh, the life of this business. Um, quiet light. One of the th the elements behind it is that we're advisors. We're not here to tell anybody what to do with our business. Uh, we're, we're, we're simply advisors. We're going to try and shine a light on the process and bring some clarity to this process for entrepreneurs, but the decision is ultimately yours. And, um, one of our core values, one of the key things that we want to recognize all the time is that when somebody entrusts the sale of their business, to us, that is something we should be honored about, uh, honored by. And then it's something that we should have the utmost respect for the tendency.

And the criticism that I have of my industry is the commodification of people's businesses. Trying to treat them really as inventory, as opposed to somebody's effort of labor and love. In many cases, we can't lose that sense. I think, as an industry and as a company, for sure, we can't it because it's not just sorry to cut you off, but it's not just transactional.

Joseph: [00:47:55] It's also, it's, there's a vision there's emotion. There is a cause that a lot of, uh, just from my research, you know, a lot of these businesses, they start because people. Had a desire to solve a problem. 

Mark Daoust: [00:48:06] Absolutely. Absolutely. And look, there's a couple of models in our industry and I won't talk about their efficacy because I think that are viable.

Um, but one of the models is to, to, to, to kind of make the process of selling a business, kind of like an assembly line, right. We go through the valuation phase and then we go through the prep phase and then you have your person that's going to talk to buyers, yada, yada, yada. And the idea is to scale up and do as much volume as possible.

Fair enough. I, I'm not going to, again, talk about the efficacy. I think there are, there's an effectiveness there to it. I highly prefer having somebody who is a skilled entrepreneur. And it has been through this process before. I want them to walk through with our clients, that process both emotionally, but also as a clear advisor during that process.

So yes, the, the, the name has significance. Um, it, it, it's indicative of, uh, how we see ourselves in the process and really the role that we want to play. Uh, and also the positioning where. You know, I will give my clients advice. Sometimes it's hard advice. Sometimes it's advice. That's going to encourage them to go a certain direction, but I will never disrespect the fact that it is their business.

And even if you come to me and say, Hey, look, I want to sell my business. And if I get an offer for $750,000, it's a done deal. And then I get you an offer for 800,000 and you come back to me and say, you know, I've decided I don't want to take it. Am I going to be disappointed? Yes. But am I going to be mad at you?

No. It's your business. You've earned that right to say no. So I think that's an important distinction to have. 

Joseph: [00:49:34] Hmm. You know, I don't want to say what movie it was a specific, but I remember my parents had rented this film and I'm sitting watching it and I'm 13 years old. So I'm at like peak cynicism. And I, I, I think this movie really want to be a movie or just a movie just want to win an Oscar.

And sometimes I get that vibe from certain movies. And to relate that to this, is that, have you ever. Encounter it a business where. It was just made to be sold. 

Mark Daoust: [00:50:01] No, absolutely. I mean, we've seen this with, with flippers from time to time, actually that example I gave of the business where the vendor, uh, backed out the week before, uh, that was a situation where, uh, you had a buyer who um, they had done this a number of times where they bought a business and he had cleaned up the business. So if we look at those four pillars, he heightened, uh, and, and, uh, maximize the transferability of the business and the documentation of the business. And then he also mitigated a lot of the risk elements to it.

He didn't pay as much attention to the growth, although he sustained the growth, but by optimizing those three variables, those three pillars, he did a great job of maximizing the value. That business was built to sell and what he really enjoyed doing. What, what was his passion as an entrepreneur was cleaning businesses up and streamlining them.

So that was his passion. But he cleaned it up to it. He never intended to run that business for 15, 20 years. He didn't really care about, um, changing stations for nurseries. It was more of, uh, more of a, that the act of clean business up. So we do see that and there can be some really good businesses that are not, not every business is a passionate business, not every business should be.

I mean, um, you think about some of the really boring niches that are out there and there are some really boring niches. Um, sometimes people's passion is business and that's cool 

Joseph: [00:51:18] too. 

Hmm. Yeah. I, I see that too, in some of the fields that people pursue, like it, when, when people get into say it, something that I can ever get into, but they just have that knack for it.

And I have nothing but admiration and respect for that. 

Mark Daoust: [00:51:32] Yeah. Same here. I mean, I couldn't do it myself again. There, there are a lot of people out there though that. They just enjoy the act of business and they're, they're fairly product agnostic. Um, and that's fine. I, I love it. I love watching these people.

I had a client, I had a client a few years ago. Who was selling sticks. And I mean, he was at a massive rate. Um, and he was a logistics genius. Logistics is something that I can't stand. I mean, I would, there were so many things I'd rather do that than logistics, but he told me he had to move from a 7,000 square foot warehouse to a 20,000 square foot warehouse one during this growth cycle.

And he told me, he said, Oh, That was one of my favorite moments as an entrepreneur. And I'm like really moving to 6,000 foot ware foot warehouse to a 20th. That was fun. That sounds to me are no, never, but that was, that was his passion. He loved doing it. He loved getting in the spreadsheet. He loved figuring those, those puzzles out. More power to them. 

Joseph: [00:52:29] Yeah. I'll say one of the things that I, that I absolutely love to, um, uh, when I do editing is when I'm going back to the audio and I'm almost truly seeing it like a game in my head, or I can. Notice people's verbal patterns and find ways to reduce them so that, uh, they send a little bit on the outside.

Not a lot of people have the patience for that, but I do. And, and yeah, I, I just, I feel that same way. I just enjoyed the heck out of that. Now one of my, one of my spiritual beliefs is that, you know, we're born for the time we're meant to be in. And so for, for somebody to have that passion for going from a 7,000 square foot, where else to what was 20,000 is where else for glowsticks yeah, him and the 16 hundreds.

I don't know, but him in this time makes it makes perfect sense. 

Mark Daoust: [00:53:13] Absolutely. 

Joseph: [00:53:13] Um, I gotta get, I gotta get a question in for our, for our drop shipping peeps. Um, and I think by, by now we've provided enough info that we can kind of gleam what the answer is, but let's just make sure that we. Let's just be sure that we focus on it for a moment.

Um, can you lay out a roadmap for a dropship based operation to become sellable and someone who's like getting their stuff from Alibaba and they found the winning products and maybe those pictures are going to sell it just yet, but a year, two years go down the line and it's yeah. 

Mark Daoust: [00:53:41] Yeah. So the number one problem, and again, look, the process of preparing a business for sale is often about solving the major problems that you have.

So I don't want to sit here and rag on drop shipping as a bad business model. It's not, um, we released a drop shipping business for sale. Uh, three or four weeks ago and went on her offer within a few days. So drop shipping businesses can certainly be sellable. The one thing you need to guard against though is, um, the, the lack of defensibility of many drop shipping businesses.

If you're ordering products, for example, from Alibaba, um, where you eventually want to be with the drop shipping businesses, having product lines where you either have exclusivity, or there's definitely limits on who can sell that product, uh, or what you have is somewhat unique. So I I'll use the, um, the example of the safes that, that I was selling, um, that was drop shipping because who in their right mind would ever inventory safes, you know, big, old gun safes and stuff like that, or big old file cabinets, nobody.

Right. It's just, it doesn't make sense. So where was the advantage that I could have? The advantage that I could have was in negotiating better rates? It was in my product selection. It was in, uh, the ability to find the products on the website that I had, um, finding these other ways to distinguish yourselves from competition.

So that it's not just a race to the bottom price-wise and that's the problem that you have with, with drop shipping is it's often a race to the bottom with price. You might find a good vein of products that you can make a profit on. But once that gets discovered by other people they're going to come in and they're going to sell the same products and they're going to sell it for a little bit cheaper, and then you're going to sell a little bit cheaper and then you're going to run into map pricing, and then you're going to have those stupid little things saying, click here to see the price, you know, it's that your, your, your body by map, if your competitive edge is just the race to the bottom.

It's going to be difficult to sell buyers, know what happens next. So it was all about the defensibility of what you built, um, and, and trying to set that up, uh, so that somebody looking to make an investment and pay a multiple of your year's worth of earnings can look at that and say, I can make business money on this business for the next three, four, five, 10 years, because they've done a great job, uh, specializing in xYZ furniture. Businesses are classic examples. So, uh, I've seen furniture, businesses that specialize in just modern furniture. And so that's kind of their appeal. We have a really nice, unique selection of furniture. We've gone out. We're finding, uh, products that are kind of exclusive to us are very hard to find.

So that that's where you want to find your protection. 

Joseph: [00:56:15] Yeah. And also too, um, one of the recurring themes throughout talking to a lot of drop shippers is that. Drop shipping tens to and feel, feel free to, uh, right on and prove me wrong podcasts at  dot com, but it tends to be, um, them mining the raw resource.

And then once they've gotten that they branch out and they find different uses for it. And if they want to evolve their business, they tend to move towards a white labeling or they even move towards a self manufacturing having their own distribution. So, uh, so, so that's key to the, to the roadmap as well.

Is that for your own sake? You know, you do want to put your business into a more stable position first because drop shipping does tend to be like, I like a gold rush. Like you say, it's. Yeah, you can get a winning product, but then other people are going to head in, they got their pickup pickaxes and their DNT and they're ready to go as well.

Mark Daoust: [00:57:04] Yeah, I think we're, we're drop shipping can be really, really valuable. It's it's it's the, the low cost of entry to find what the market wants. Uh, but then from there, um, I do think. I didn't want to go here because I don't want to discourage dropshipping necessarily, but I do think one of the best paths that you can take is when you find that vein of products, that niche, that, that plays really well find out why it plays really well and then maybe move to private labeling, but then even involve a little bit beyond that to say, um, can we're private labeling?

We know the customers really like X, Y, and Z about our business, but they have problem with a and B. So let's, let's iterate on this and let's create something that nobody else has. And, and now you're in a position where you have a very unique product. That's super defensible. That's kind of the creme de LA creme of, of what we're looking for in e-commerce what buyers are looking for.

Um, again, you can, you can sell things that, that, um, in a drop shipping model and still have a very defensible business furniture is a great example of that, right? You're not going to necessarily create your own furniture lines. Um, so it's, it's not always possible with every, with every vertical, but if you're selling smaller products and you're using it as that.

That market discovery option, uh, iterating is a great option. It's, it's a really good way to, to build out a business that is highly sellable. 

Joseph: [00:58:14] And I thank you for your discretion as well. Cause you said you want to go here, but as a motif on the show is that we've talked to some people who. Are pretty, pretty darn artist.

Artists are pretty darn honest about this. And so it's more important that we get to it to get to that. Cause we don't want there to be any illusions about what goes on in the business. So, so for that, I just want to, uh, give you my thanks. Um, also again, cause you brought up the safe, that just opened up my, my cartoon, mine again, just the idea of like, uh, Of a, of a robber breaking into a warehouse and seeing it's a warehouse full of safes.

Mark Daoust: [00:58:49] You have no idea how glad I am to be done with that business. 

Joseph: [00:58:53] I'll try to ballpark it. And that's as a, as, as far as I can go. Um, okay. So, so this one, initially my first draft of this question was a lot more tongue in cheek than it is now, but I'm trying to exercise restraining, which is if I could just use Afterpay to buy a business and increments and that's ridiculous, but, um, is it actually possible to make a, a agreement to, uh, pay, uh, to purchase down over time? Or does it have to be an upfront transaction?

Mark Daoust: [00:59:18] It's a good question. So seller financing is, is, um, uh, what you're getting at here, Willow seller finance, the purchase of their own business. Um, maybe a small portion typically.

No, because why would you, uh, again, looking at this in terms of you have a business, that's an asset. It's worth money and that that asset generates money for you. So you can continue to own that business asset, which is valuable. That's generating money for you on an kind of infinite basis. You don't know when that's going to end, or you can take seller financing, which is now you pay me money.

On a monthly basis and that's going to end someday and I lose the value of the asset of the business. It doesn't make a lot of sense to do that. Um, however, from a buy-side, what you can do and what a lot of buyers are doing is they're using SBA loans, um, to finance a purchase. And that effectively does the same thing or other private loans as well.

Right. So if you were to get an SBA loan, you need to put down 10 to 20% of the purchase price. And then the rest is financed over 10 years at a pretty friendly interest rate. That's a great way to do it. Um, again, sometimes you do see some seller financing, but it's usually maybe 20% of the deal. Um, and remember the whole market leverage that I talked about at the beginning of the episode, that's a real thing as well.

I mean, if you come in and say, Hey, I love your business. And you're wanting to sell for 500,000 all pay you 700,000, but I'll be on painted over the next 10 years. Well, that, that a seller is going to look at it and they're going to see another offer that says, you know, here's, here's $500,000 cash tomorrow.

Joseph: [01:00:49] Right, right. So yeah, it's, it's, it's an auntie, like you have to meet the antiques. That makes that make sense. Yeah. Yeah. And then this is another, um, entry question. Is there an equivalent to this one on a smaller scale? Like do people ever. I saw businesses that are valued at like one K two K. So if somebody wants to get into more like an entry-level business buying and selling, uh 


Mark Daoust: [01:01:11] Flippa um, you know, you have to Wade through some of the stuff that's not necessarily high quality there, but a flip is a good place to go for smaller sites.

The one thing I would just advise though, is that the dynamics of, uh, by any business say sub $100,000 in value and above a hundred thousand dollars. Pretty different. Uh, just when you're buying something that's small. It's, uh, I'm not sure if we could say it's a full on business at that point. It's really just a concept, uh, that might have some promise.

Um, and, um, when you're buying larger, uh, if you're looking to just get your feet wet and experiment, this is what I did with the safe business. That was 25, 30,000 I think is what I paid for that, you know, it's a great opportunity, but you're buying an education. Uh, and, and maybe something that can grow into something bigger, uh, but a lot of our buyers that are doing seven and eight figure deals now, and they started out doing small deals, uh, just, just to get their feet wet and, and, uh, discover and learn.

So it's, it's a great way to get into it. 

Joseph: [01:02:01] Yeah. I, I have some, uh, uh, some entrepreneurial friends of mine are going to be really pleased to hear that, but it is important to note that it's, it's the educator, it's more, it's more the education. Um, and one of my philosophies is I, I do think it's good. To be small before you be big, because you can learn a lot more in the small.

And so any mistake that happens when you get big will be amplified, we're getting pretty well. I almost have to, to wrap this up. Um, so I'm just going to ask you one more question and then we'll do, and then we'll get our parting words of wisdom and we'll let you go. Uh, so let's just say I'm I was looking at the website.

And so let's just say I wanted the, the low carbon Quito, uh, uh, fulfillment by Amazon supplement business with a 23% recurring revenue. Now, I suppose this is a case by case basis, but can I go in and rebrand it or are there any stipulations to the legacy of the operation that I have to respect 

Mark Daoust: [01:02:53] Once you buy the business it's yours to do with, as you want.

Right. So if you buy that business and you want to rebrand have at it, um, on occasion, you will have a seller who has certain requests, but it'd be very hard for them to, um, to, to, to have anything contractually most of the time where you would see, uh, trying to think of an example where you might see. A request that would, uh, bind you after the fact maybe with staff or employees or, uh, you know, uh, anyone that they're taking care of.

So they make sure that you take care of them for at least six months or a year, or what have you, for the most part, once you're done, uh, you know, once you close on the business, you can do what you want with that business. It's, it's yours. 

Joseph: [01:03:29] Okay, fair enough. Although, even as I was saying that out loud, that's when I realized that it might not be in the best interest to do that because of brand recognition.

If you just go in and suddenly they change it.

Mark Daoust: [01:03:41] I mean, usually, so if you're a, if you're on the buy side, typically what you want to do is keep things exactly as they are. At least for the first few months. Right. Um, because you need to learn that business, even though you've gone through an extensive due diligence process, you've discovered things, you've asked a ton of questions.

You're still going to learn by doing and learning by doing is the most effective thing. Um, give yourself at least three months of, of learning and understanding that business and the nuances that you didn't pick up on. And then the questions that maybe you should've asked that you didn't ask, and you'd be surprised that they're out there, even though you think you've asked everything under the sun, that you're going to find something after that you should have asked about.

Joseph: [01:04:16] Excellent. Yeah. So that, that definitely got that curiosity, uh, satiated, and then some we're we're good to go. This has been an excellent talk I've I've learned a lot today and I really want to thank you for your time. Um, so the last thing to do, give you the floor once more is if you have any parting words of wisdom, anything you just want to impart, uh, on, uh, on our audience now that you haven't already given us plenty already, but.

Just in case, and then let us know how to reach out to you and, uh, take it from there. 

Mark Daoust: [01:04:43] Wisdom would be just start to learn about this space. Um, you don't need to ever have in your mind that I'm ever going to sell my business, that that doesn't have to be part of the equation. That's not the impetus that I think you should have to say, how much is my business worth.

It's good to know in and of its own. Right. A business that has good to sell is typically a business as could own. And so by just going through this process, you're going to learn a lot about what you can do to improve your business. Um, if you have a business that is established and generating revenue and you want to get that valuation, it's a super insightful experience I would highly recommend doing.

So if you're towards the beginning or if you don't like to talk to people because you know, it's a waste of time or, you know, I feel about things. Um, I put together a course on this called how to sell a business for six, seven or eight figures. Um, you can find that at courses that quiet light, brokerage.com it's free.

I don't charge for it, but I go over all the dynamics of the four pillars of value, but also the other elements of the financial side, why that's important and how to, to get that in order. So I would say, learn. Learn about the, uh, this, uh, field. Um, we have a podcast, the quietly podcast. We go over a lot of this stuff as well.

Uh, so that might be another element to get in touch with me. If people have any questions, Mark, M a R K at quiet light, brokerage.com. Happy to talk to anyone who has any questions about anything mentioned in this podcast or outside of it. Um, but other than that, uh, you know, just, just thank you for having me on.

It's been a lot of fun. 

Thank you 

Joseph: [01:06:02] for being here. I, I, I agree completely. All right, everybody. Uh, that has been another episode of Ecomonics. We'll check in with you soon. Take care. 

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