Resources for Buying and Selling Online Businesses

Hollywood Executive Turned Entrepreneur (and EXITpreneur) Part 2

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Dan SmithDan Smith is the Founder and former CEO of an e-commerce brand that sells iPhone wallet cases. In 2022, Dan sold his self-financed company for 100 times the invested capital. Dan is a former Hollywood executive, turned entrepreneur, turned EXITpreneur who spends his time consulting for major brands such as Fred Segal, Wired, Macworld, Beams (Japan), and AT&T.

Here’s a glimpse of what you’ll learn:

  • [2:56] When did Dan Smith know it was time to sell his business?
  • [4:54] The first step you should take when selling your business
  • [9:32] Out of 20 broker offers, why did Dan trust Chuck Mullins to negotiate the purchase of his business?
  • [11:16] The four assets that made Dan’s e-commerce brand desirable to buyers
  • [14:25] Dan explains why he felt confident selling his business to the current owners
  • [16:44] Joe Valley explains the value in considering Small Business Administration-eligible buyers
  • [18:45] Dan talks about the transition period after selling his company
  • [22:23] How Dan is spending his time as an EXITpreneur

In this episode…

Dan Smith spent over 10 years as a Hollywood executive before converting an idea into a thriving e-commerce brand. How did he do it?

For eight years, Dan grew and nurtured his multimillion-dollar company, even gaining customers like Tom Hanks and members of Coldplay. But as the adage goes, “all good things must come to an end,” and Dan was ready to sell. After consulting with his wife and accountant brother, Dan knew he needed the expertise of a business advisor. Enter Quiet Light’s own Chuck Mullins, who brokered a deal that Dan couldn’t say no to.

In this episode of Quiet Light Podcast, Joe Valley sits down with entrepreneur-turned-EXITpreneur Dan Smith in part two of a two-part discussion about the process of selling a profitable company. Dan explains what led him to sell, the steps taken prior to selling, and the post-sell transition. Finally, Dan talks about his latest venture and how he’s helping other entrepreneurs grow their businesses as a consultant.

Resources Mentioned in this episode

Sponsor for this episode

This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.

There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. By providing trustworthy advice, effective strategies, and honest valuations, your Quiet Light advisor isn’t your every-day broker—they’re your partner and friend through every phase of the exit planning process.

If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.

Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on their website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!

What are you waiting for? Quiet Light is offering the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.

Episode Transcript

Intro  0:07

Hi folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.

Joe Valley  0:32

Hey folks, Joe Valley here, welcome to another episode of the Quiet Light Podcast. Thank you for joining me once again. This is part two of talking with Dan Smith, a former Hollywood producer turned entrepreneur turned EXITpreneur. The first part last week, we talked more about Dan’s journey as the producer to entrepreneur building a business. In this episode, we’re talking more about his experience in why he decided to sell the business what process he went through, presale, what it was like to work with an advisor at Quiet Light. In this case, specifically, Chuck Mullins, who he you know, praises him greatly. He had interesting number here, Dan had talked to 20 brokers before he talked to Chuck and made the decision to go with Chuck, he wound up with eight offers for his business, it sold for over asking price. And he attributes 90% of that to Chuck. You’ll hear in Dan’s voice. And if you watch the video, you’ll go to get to the point of trusting him and understand that it wasn’t just the business, it was to trust in Him as well in some of the unique aspects of the business that he put together, as he built it over the last eight years. So we go through that aspect of it. And then again, we talked about what he’s doing now, he’s actually doing some consulting. So if you stick around to the end or look at the show notes, we’re giving away, giving his contact information out and the website as well, where you can reach him directly and get some help with some alternative CMO marketing type of stuff. So here we go. Part two of Hollywood Producer Turned Entrepreneur Turned EXITpreneur, Dan Smith, here we go.

All that’s fascinating on the bootstrap and building the business and, and growing it by making every dollar count, you know, and reaching out and talking to the customers yourselves. This is something that I don’t think we do enough of in fact, I need to redesign my website, I need to start calling customers and say, I know what’s bad, what would you do differently? What were you hoping for? What am I not providing for you both on the Quiet Light side and on the EXITpreneur side. But let’s jump now though, to the exitpreneur aspect of your life. At some point you decided it’s time to sell this business. Talk to me about your mindset there and, and how that how that came about?

Dan Smith  2:56

Well, my wife was my consultant, we’ve been talking about it for about three or four years. And I said to her, I said, when I decide to do this, I have to invest a year in it. Like I did not I’ve never sold the business before, but I kind of knew it would take a year and a year of focus. And so we had gotten to the point around 2019, where there were choices that I’ve made, we every time that we would do our strategic plan at the beginning of the year, there would be a body that we would want to add, we really need somebody to do X, okay. And every time we saw that, we said we’re not hiring that person, we’re gonna invest in technology, we’re gonna figure out process or technology to maybe not do exactly what that person would do, but sort of achieve growth without raising our overhead. And what I found in the end was we ended up automating processes. So at the point that we were really I started to really get serious about selling it at I think was the beginning of was 2021. I could take the time off from running day to day because our processes were really good. And my brother, who was a he’d done a bunch of liquidity events, he’s a CFO accounting guy. And he had taken a handful of businesses through liquidity events. He before I ever talked to Chuck, my brother, I handed in my accounting, and he in the kindly way that a brother would do beat the hell out of me for about two months. So that once someone like Chuck got a hold of the business, the accounting was really buttoned up. And I can’t tell you because that’s another great piece of advice. Before you begin selling your business way before get your accounting straight because eventually Really, there’s going to be somebody doing due diligence on your business, okay? And he’s going to look at all that accounting that that you’re going to allow them to have. And they’re going to try to pick apart your accounting, and it’s brutal. Except if you know your accounting is buttoned up. So when you’re asked questions, and you can answer them, and you know, you’re telling the truth, and you know that the numbers reflect what you’re saying, then what can be a brutal experience becomes, you know, just kind of just one more element in selling your business.

Joe Valley  5:35

Yeah, I’ll second third, fourth, fifth that I’ve looked at thousands of p&l, Stan, over the years, it’s been a decade since I’ve been part of Quiet Light. And those businesses, and those business owners that don’t have accrual accounting, or their p&l is or an Excel or it’s just a mess, with the details in QuickBooks, or Xero. Just all piled in and not categorized. Well. They eventually give up on the idea of selling or they’re so emotionally burnt out that they sell for so much less than what they could have. So I love your foresight in terms of honey, I’m gonna I’m gonna do this, but I’m going to prepare for it for a year and then having the luxury of having your brother be a CFO and rip your p&l to shreds.

Dan Smith  6:25

Yeah,

that’s the other thing is sort of like I’ve got an athlete, what are the assets that are available to me? Oh, I have a brother, who I mean, I don’t know what it would cost to hire somebody to help you prep your business. And there’s no way I could get anybody was good, as good as my brother for whatever I would be willing to spend. Yeah. So it’s really it’s sort of like, Oh, I got this asset. Now, this is an interesting idea. So I would say the advice is, I was using QuickBooks. So I was decent. But man, you’re absolutely right. Like that coding. You know, I was basically using QuickBooks only to give to my accountant so we can have a p&l for tax returns. That was the only reason because I was just basically I will cashflow spreadsheet. I knew what my cash flow was. I didn’t need QuickBooks to do that. Yeah. So but if my, if I done a better job of coding, it would have been easier.

Joe Valley  7:21

Yeah, there’s

lots of e-commerce bookkeepers, these days, they can do that work for you, then eventually, folks will have a referral partners. On the Quiet Light page, we can see the half a dozen that we recommend if you need one, now just go to EXITpreneur.io to the partner page. In many cases, Dan, for those people that came to me with a horrible p&l or Excel spreadsheets, I would recommend that they work with e-commerce bookkeeper. And the bookkeeper would take their books, clean them up for 24 to 36 months in arrears for a flat fee. And usually it’s one to $200 a month going back, that expense is an add back. So it doesn’t hurt your overall net income or discretionary earnings. It hurt, you know, it, you pay for it. But at the same time, you make so much more money, because the numbers are in great shape, and it instills confidence in your buyers. If your buyers don’t trust the numbers, what are they going to do, Dan, you’re gonna negotiate the hell

I think also the thing is, you have like when you work with a firm like Quiet Light, and you have a really good broker, you want to give them as much power and ammunition so that they can they can negotiate, you know, a good deal,

And put the right price on the business to begin with. So let’s talk about that. You had clean p&l. Did you know anything about add backs or how to calculate discretionary?

Dan Smith  8:47

Well, my brother taught me about that. So that so that was that was a lot of the accounting was just to get all that, you know,

Joe Valley  8:53

he didn’t do any of that in QuickBooks, or he just educated you on it. And Chuck did a separate ad back schedule?

Dan Smith  8:59

No, by the time Chuck had it, we Well, Chuck did some work on the back schedule, but it was it was it was 90% of the way there I believe. So my brother hasn’t done this. So we kind of knew what what what could go in there look good.

Joe Valley  9:13

Okay. And so when Chuck did the valuation, he gave you a value range. Were you initially happy with that value range disappointed with the value range? You thought it was right on par? Are you excited about it? How do you feel about the range

Dan Smith  9:25

I talked to 20 brokers before I talked to Chuck?

Joe Valley  9:29

Okay. So you had a pretty good idea what was wrong with the prior 20?

Dan Smith  9:32

Chuck? Chuck, Chuck was Chuck had a a very solid view. Let’s just say I think Chuck had a very solid view on valuation. Chuck is not afraid. Okay.

Joe Valley  9:44

So he went a little higher than some of the others. And I would say

Dan Smith  9:47

Yeah, I say he landed he. What I saw was other brokers. Were more conservative. They were covering their assets. Excuse me for your podcast, but I think Chuck, Chuck or maybe Quiet Light has a little bit more like doesn’t waste there. I what I felt was Chuck doesn’t waste time. pussyfooting around?

Joe Valley  10:09

Well, the reality is that I have the feeling sometimes like, Well, the reality is that we don’t get paid unless the business sells. And so we’re not going to overvalue the business, Stan. So Chuck’s valuation was probably right on par, even though you thought it might have been higher than what the other brokers said, at the end of the day. He’s listing it to get it sold for you. He’s not afraid to take a little bit of a leap of faith, especially, especially if he believes in you. And your numbers are so well.

Yeah, well, I think this is the key. We make a video. I think I made a damn good video. So I’m a Hollywood guy. I mean, maybe we’ll see it with his podcasts. But he showed me some of the other entrepreneurs and I was like, I can make a better video than that. Let’s go. So I think

this is this was the video when the business was listed for sale for the buyers to see.

Dan Smith  11:08

Yeah, I huge. Yeah, I think I think back to like, my brother helped me with the accounting that just made it easier. I think it sort of gave Chuck the tools to do the job that he you know, or Quiet Light to do the job that you do well, you know, and then the product also, we had a product that has a patent that had really good margins, had great publicity. You know, we had Tom Hanks had used the product that guy’s from Coldplay, there was a lot going on there that made the product the the, the business more valuable than a generic Amazon,

Joe Valley  11:54

No question, no question, especially especially the defensibility of it, right, you’re in a very competitive niche to begin with. But you’ve got a patent on it. And that helps the defensibility instills confidence in the buyers, and therefore you’re going to get offers, where you know, in this particular niche may be more challenging if you didn’t have this defensibility and you didn’t present yourself the way that you did. So let’s talk about the pricing of the business the launch of it. Did you get below at or above asking price when the deal was finally done? It was above it was above asking price. So you felt with the 20 other brokers you talked to them you got a lot of knowledge and experience from them. You didn’t like them Chuck came in and he was not he was willing to take a risk and whatnot. Yet he’s still got above asking price might have been that video that you put together because instilling confidence in the bone we had,

Dan Smith  12:48

we had 10 people who saw who do the final pitch and eight of them did.

Joe Valley  12:54

Okay. So you did 10 it the way this works folks that haven’t done this before listed with Quiet Light before is that anybody’s that people that signed the nondisclosure agreement can see the full marketing package, then they get to decide if they want to have a conference call talk to Dan directly. So you had 10 people that you did conference calls with you and the buyer and Chuck. Eight of those 10 came in and made offers?

Dan Smith  13:20

Correct.

Joe Valley  13:21

Okay.

Dan Smith  13:22

Well, I think they were all I think seven of them were full price offers.

Joe Valley  13:25

Seven were full price offers.

Dan Smith  13:27

So I think it was it was it was over. It was about a year ago. But it was it was there weren’t a lot of kicking the tires offers.

Joe Valley  13:35

Yeah. And so a year ago, so roughly last summer, summer of 2021, a very hot market, the market hasn’t changed tremendously. Folks, we’re still getting, you know, about three offers. For every business, on average, an average of three in Dan’s case, it was a, I think in 2021, we had something like 3.7 offers for every listing. So this is good. Your business is above average, because of the way you built it because who you are, because of the work your brother did because of this patent. And the way you and Chuck presented it together of those eight offers that you’ve got. What was it about the last one that you chose to work with? That made it stand out? Was it simply the numbers or was it a combination of other things?

Dan Smith  14:25

Now we’d like the buyers, the buyers, we, we they seem to have hustle or moxie. We just liked them a lot, you know, and it turned out that you know, after the sale or through the process of the sale I learned to like that more I think that they’re great guys. And boy does that make it you know, nice when, you know sort of you’re going through all the details of handing over a business to find that the buyers are good people and that you know Yeah, I, we, I think everybody treated each other with, you know, great respect. And so that, that that was really the main choice that I thought they were solved.

Joe Valley  15:11

The price that these guys gave you the offer the number of was it equal to others? Or was there’s also the highest?

Dan Smith  15:21

It was the highest, but it wasn’t by that much.

Joe Valley  15:24

Not enough to sway you to know, I

Dan Smith  15:26

really doubt it was like, you know, I think the key is my feeling is like I wanted, I wanted people who could be successful at this not because of any proprietary needs for the business to be successful, but like, you know, it would be I would want them to, you know, karma you want them to be successful. Yep. And so I felt like they had the best chance of being successful.

Joe Valley  15:49

Yep. Now if I recall, this also was because of the age of the business because you’ve been running it, let’s say like a mature professional or an adult that you were able to make it SBA eligible as well. Is that correct? Correct. Correct. All right. How many of the eight offers and I know you’re digging deep into the recesses of inactive time, 12 months ago? How many of those eight offers were SBA offers? versus more, I think most more SBA offers, right. So this is another thing, folks for you to consider as you’re building your business. You know, if it’s three years old, and you’ve got three years worth of clean tax returns, right, you can’t commingle with three other businesses. And then I mean, you can separate it out, but it’s going to be a real pain in the ass. And I’m saying ask now, Dan, because you did. I swear on the podcast occasionally, as well. That’s okay. Being SBA eligible, opens you up to a whole slew of different buyers. It doesn’t eliminate the cash buyers. What it does is it more often than not makes the cash buyers make better offers. Right. And I’ve been in situations where I’ve had an SBA offer and a cash offer. And because the seller liked that person that made the SBA offer, even in that case, back in the day, when you had to have a 10% seller note on SBA offers, they still chose the SBA buyer, because they liked them. They trusted them, they thought they do a better job with the business. And they knew like you said, you have to work with them through due diligence, which is kind of, you know, pretty intrusive, invasive process, right. Yeah, absolutely. Did, did any challenges come up in due diligence for you? Or was it was a pretty smooth sailing, because of the work you did with your brother in advance? You know, I

Dan Smith  17:40

think there were some challenges. I don’t want to go into the details. But I will say this, I think Chuck and Quiet Light did a really good job of, of not being fazed by the challenges and also having really good resources to tap into, you know, whether it was especially, you know, sort of working through the SBA and, and knowing knowing the people. Yeah, so that, you know, I think that was invaluable.

Did the buyer use? Was it e-commerce lending? Or do you know, it was sound familiar?

I don’t remember. Okay.

Joe Valley  18:18

I’d say probably 50% of the SBA deals that we do is with a guy named Stephen Speer buyers use him. And folks, he’s with eCommerce Lending, so you can go to ecommercelending.com. Talk to me about the transition period. Dan, you’ve been running the business for eight years, you got a couple of new people coming in buying the business? How long did you need to stick around contractually, to help them with the training and transition period?

Dan Smith  18:45

I think there is a six month contract that’s a certain amount of time for the first month, and a certain amount of time for the next and then you know, sort of, you know, sort of small amount of consulting. So I think now we’re, we’re in a few months in, I would say there was probably, you know, a lot of engagement for public first six weeks. And then there was, you know, then it’s been just very informal support, you know, reasonable support, like, oh, wait a second, this part of the website how to where’s the login for that? You know, or, or this vendor is charging me this much. Can you give me an old invoices? I can see. You know, what the old invoices were that kind of thing.

Joe Valley  19:33

Yeah. Yeah. That makes sense.

Did you track the time that you spent with them? Was it up to a certain amount of time during that?

Dan Smith  19:44

Yeah, there was something. I think there was boilerplate that’s in the contract. Yeah. I didn’t know I didn’t. I didn’t you just helped. I mean, I figured I figured was be full time for a month and it was probably something like that.

Joe Valley  19:58

Do you think the the time Timing of the sale of the business benefit either one of you do you know if the numbers are still strong if it’s still growing 30% year over year,

Dan Smith  20:07

I’m not tracking the revenue. I think it probably took the the buyers probably, you know, let’s say six, eight weeks to really get the marketing in a year. And so I think they’re, you know, sort of on a good trajectory. I think the buyers had, you know, a number of things that they, they they wanted to do with product and sort of growing Amazon and some different things that they thought were. So like, you know, they’re not running the business exactly the same way I did. They’re bringing their own, you know, unique.

Joe Valley  20:43

Buyers are smarter than sellers, they come in and they’re smarter, they’re going to do things differently. That’s a shame. It’s not always right, though, but it is.

Dan Smith  20:51

It’s, I’ve got I’ve got plenty to keep me busy. I’m very excited to. I’m very excited. I thought that thought it was a good time, in the business in the in the arc of the business for somebody else to bring some new moxie, energy, creativity to the game. And so I was very, very excited. I think it all worked out in that way that I had hoped. And I’m very encouraged by the work that the buyers are doing.

Joe Valley  21:20

Excellent, excellent. Well, let’s talk about what you’re doing now. Because at the beginning of this, you know, before we hit record, we talked a little bit about some consulting that you landed into, because of your experience in Hollywood and your experience being an entrepreneur and growing this business, what is it that you’re doing now, and now that you’ve exited the business? Well, so the when you’re

Dan Smith  21:41

a Hollywood producer, or Hollywood executive, you really are a marketing executive, even if you’re, if you’re a content guy making shows, there’s never enough marketing dollars to promote your show. So you really do have to

at least have some creativity in the way you shape your product, and your the messaging around your product to be efficient, too, as we talked a bit about, you know, having a really good conversion rate. And so when I launched called CMO, I basically took the marketing content methodology that I had a Playboy and used it writ small. So we had sort of an internal agency within

our company, and the new company, and so on when I after I sold the business, after about five or six weeks, I started reaching out to friends and saying, forget my colleagues and meet LinkedIn network, it said, Hey, I sold my business. And, you know, I had a lot of people who were, we’ve been tracking, you know, we were engaged in tracking what we were doing and had been fans of the product. And and the way we did our marketing. And so I hadn’t really planned this, but people just started saying, Hey, can you help me with my launch a Shopify store for me, or I have a friend who’s got a consulting business in Japan, he’s like, let’s take this marketing thing that you do and apply to our clients in Japan. And that’s working well. And, and then I just landed today, a client that’s in the in the media space, doing some sort of content work for them. So essentially, the things I’ve been doing both at my company, but also priors, and as a Hollywood executive, instead of taking another job working in a studio, I’m just, you know, applying those skills. Sort of these, you know, I was, let’s call them clever, not clever, but like marketing skills that do that, hopefully, allow companies to do a better job of connecting with their customers without spending so much on ads. If that conversion rate ROI thing, yep.

Joe Valley  24:03

And the URL is alt-cmo.com. Is that right? Correct. ALT as in alternative. Almost sounds like you’re a bit of a fractional CFO. But with some specific stuff, which is trying to boost conversion rates without spending a whole lot on one.

Dan Smith  24:18

I think also like every, every place I worked had a CMO. And they’re, they’re wonderful people. You know, they’re they have if you look at a job listing for a CMO, the number of bullet points in that job listing is, it’s incalculable. And so I always felt like when I was working in Hollywood, that I would never get enough attention for my particular show. Not because the CMOs were didn’t like me, it’s just there’s there’s just too many, too many kids trying to eat from, you know, a fixed table. And so, I just have a different way of looking at marketing, which is focused more on One of the things I can do with my product and my messaging to make whatever my marketing spend is more efficient. And I don’t think the CMOs are busy people, they can’t necessarily everyday think about how can I make my marketing spend more efficient, because their job is to achieve growth, growth growth, right? So that so it’s not all, it’s not so much fractional, it’s like, let’s, if you’re, if you’re tired of spending too much money on ads, or you think you’re spending too much money on ads, then you know, maybe there’s some things you can do that are less expensive, that maybe help you be more efficient in your, in your marketing and your storytelling. And also, one last week, and I tell you so so I’ll tell you, one piece of advice for you. So I look at marketing, not as you know, a lot of people think is what is my What am I going to tell about my product to a customer? So they’re gonna like think of my product, we like it. You know what I said that this idea that you ask people tell me about yourself? And oh, that’s interesting. Tell me more. It’s sort of like my wife, her love languages, did I wipe the counter? So I learned very clearly, I don’t need to buy flowers every day, I keep the kitchen clean by when I’ve learned her love language. So it’s the same thing with this idea of well, how did you grow your conversion rate, we we we learn the language of our customers. And we speak the words that they use. And it’s a way of showing love. And so what I think about marketing and conversion rate, if anybody ever wants to hire me is you just need to get customers to fall in love with you. Just enough, pull out their credit card and get that then people will buy and then we will do it without so much spending on ads. So by ideas that wow, that traffic that you have already are getting so valuable. Already got people to your website. If you can be loving and sensitive to people. And true we deliver a great product, then you can convert well, and you can be way more profitable.

Joe Valley  27:12

Sounds great. Sounds fantastic. How how do people reach you Dan, if they want to talk to you about…?

Dan Smith  27:17

I have a visual aid. Let’s see if I can get it to show up on camera correctly. What can I turn it? Turn it this way? There we go. You got it? No, there we go [email protected]

Joe Valley  27:28

[email protected] Check it out. Guys. Reach out to him if you need some help. Dan, love your story. From Hollywood executive to EXITpreneur, and now helping folks in this online world. Thanks so much for sharing your time with me today. Appreciate it.

Dan Smith  27:46

All right. Well, thank you so much. It was it was great fun.

Outro  27:50

Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast, subject or guest, email us at [email protected] Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.

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