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Selling 60% Profit Margin Businesses
Chris Wozniak is a Business Advisor with Quiet Light and the Founder of The George Ryan Group, LLC. He began his career as the Founder, Business Broker, and Mergers and Acquisitions Intermediary of Lesdon & Associates Business Brokers LLC.
Through his work representing hundreds of sellers and being a member of the International Business Brokers Association, Chris has earned accreditations of Merger & Acquisition Master Intermediary and Certified Business Intermediary. He also earned the Board Certified Broker designation as a member of the Texas Associations of Business Brokers, the Broker Dealer license issued by the Texas State Securities Board, and the Real Estate Broker license issued by the Texas Real Estate Commission.
Here’s a glimpse of what you’ll learn:
- [04:09] Chris Wozniak explains working with agencies that serve specific niches
- [08:26] What key ingredients are needed to grow your brand?
- [12:36] How can you attract more buyers through the presentation of your brand?
- [17:13] Tips for a more profitable exit
- [22:23] Chris defines a barrier entry from a buyer and seller’s perspective
- [27:52] Chris talks about training and transition periods for buyers
- [33:07] Why underserved markets can be a profitable business
In this episode…
When you’re in a specific niche for content agencies, is there a demand to buy your brand? How can you achieve a more profitable exit?
While there are many factors in the exit process, Chris Wozniak recommends you have at least two things: clean financials and tax returns that closely resemble your P&L. When it comes to selling your brand, you don’t want to let anything get in the way. Listen to this episode to hear Chris’ first-hand account of selling a medical writing agency — and why the underserved niche can be extremely valuable.
In this episode of the Quiet Light Podcast, Joe Valley sits down with Chris Wozniak, Business Advisor at Quiet Light, to talk about selling third-party agencies. Chris discusses how to attract more buyers to your brand for a greater exit, the in’s and out’s of a barrier entry, and building a profitable business with an exit strategy. Stay tuned!
Resources mentioned in this episode:
- Chris Wozniak on LinkedIn
- Chris Wozniak
- Chris Wozniak’s email: [email protected]
- Partners at Quiet Light
- Quiet Light
- Quiet Light on YouTube
- Joe Valley
- Mark Daoust
- Quiet Light Podcast email: [email protected]
- The EXITpreneur’s Playbook: How to Sell Your Online Business for Top Dollar by Reverse Engineering Your Pathway to Success by Joe Valley
- My Amazon Guy
Sponsor for this episode
This episode 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. They provide trustworthy advice, effective strategies, and honest valuations. So, your Quiet Light advisors aren’t your everyday brokers — 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 its 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 offers 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.
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 back to another episode of the Quiet Light Podcast. Today, we have Chris Wozniak or was at quietlight.com. Co hosting with me, I want to say, right, he’s our guest. But he took over quite a bit here, because we’re talking about the multiples that he’s getting for selling. I don’t want to use the word agency, you’ll hear that we don’t want to use the word agency throughout, but third party platforms, service companies that people would consider agencies, the key point is that they’re not your typical typical digital marketing agency. Right? We’re talking about content writing firms, medical firms, reputation firms. And he sleeves off a bunch at the end that he’s talking to as well and getting valuations for typically people think that agencies are hard to sell and the multiples are low. And if you have an agency where you are the name and face of it, and you eat what you kill, and there’s no recurring revenue to it, then the answer is yes, it’s probably going to be a little harder to sell, you might need to stick around a little bit. But from a buying perspective, the type of companies that Woz selling are really low risk, their strong growth is recurring revenue, too. And it’s highly, highly transferable. All the four pillars that we talked about, that make these businesses worth a lot, and the margins are awesome. So if you’re a business owner, where you provide services to other business owners, yes, and agency of sorts, this is when you absolutely need to listen to it. If you’re a buyer out there listening to this, because you’re learning about this online world and you’re thinking I need to buy a physical product e-commerce business, this might open your eyes to considering an agency of sorts, that the margins are strong if the people are in place as a recurring revenue. It’s it’s a really, really attractive model. So here we go. Chris Wozniak, talking about his experience selling these types of companies at pretty strong multiples. Here we go. Chris Wozniak, welcome back again to the Quiet Light Podcast here. What, three, four times on now? This will be your third time. We just figured that out. Yeah,
Chris Wozniak 2:40
forgot. Yeah, this is the third time but thanks for having me.
Joe Valley 2:44
You told me, You told me you’d been on before Am I done? And I was must have been webinars. Now I don’t I don’t remember when I looked it up. And there it is, which is an indication that I got too much going on in my head or not enough brain cells left, which do you think it is?
Chris Wozniak 2:58
Maybe a little bit of both. I’ve actually done a couple of webinars, I think two but I was with you. I couldn’t quite remember what I’ve done.
Joe Valley 3:05
So I know you were a little confused as well. You believed me when I said it. So yeah, it took me a minute. Yeah, maybe it’s our collective brain cells or what we do for a living because so much stuff going on. Anyway, for those folks that have not heard Chris on the podcast twice before, he’s got a wealth of experience. He’s one of our top advisors here on the team. You’ve been in the m&a world since 2001 Or two,
Chris Wozniak 3:30
how long? Yeah. 2003? Yep. So going on 19, almost 20 years. That’s representing sellers. Yeah.
Joe Valley 3:37
Amazing amount of experience. And you’ve been with a Quiet Light team for going on three years
Chris Wozniak 3:43
now. So right? That’s right. Yep.
Joe Valley 3:47
And this is going to air but this is airing in February. So if we look back January was a hell of a month for you, right?
Chris Wozniak 3:55
Yeah. Yeah. I think. So. I had a couple of deals that, you know, obviously was hoping would close in late December. But I think just with holidays, and attorneys being involved in people out of the office, they kind of are pushing towards January. But yeah, it’s January should be an awesome, awesome month. Yeah.
Joe Valley 4:14
And that’s that’s the way things go. Right. We get ahead. As a company we had so much slated to close in December, we would have had a year where we topped 2021, which is a record year and m&a history. But a bunch of that stuff got bumped over to January. So at a glance, you’ve always got to look at the trailing 12 like we do for all the businesses that we look at as well. So that’s right, yeah, yeah. Now we’re going to touch specifically on your work with agencies, which is something you know, we don’t do a whole lot of, interestingly enough, the call that caused me to be late to our recording the podcast was somebody that was you know, saying how difficult the agencies are to sell and that often there’s, you know, a better one out, which is through limited partnerships with, you know, the senior senior people on the team. In your situation, you’ve had some success in seven selling several agencies at what seemed like pretty healthy multiples so far. Yeah. Talk to us about what you’ve worked on so far. And the three years that you’ve been with regard to agencies?
Chris Wozniak 5:22
Yeah, absolutely. I think that that is a pretty common narrative, I would say, with agencies. And, you know, from I can only speak from my experience, but I think it would, the first thing to, to kind of mentioned is, especially if hopefully, we have agency owners that will eventually listen to this podcast. But I think it’s important to note right off the bat that agencies are, in my opinion, very sellable. And that’s from my own experience having sold them. I think when we think of agencies, we often think of just the typical kind of digital marketing agencies that are sort of the outsourced marketing arms of online businesses. But there’s, there’s all kinds of agencies that exist that serve specific niches.
Joe Valley 6:12
Yeah, that’s exactly what I think of when I say agencies and, you know, Steven, Steven, Pope at my Amazon guy who was, you know, a sponsor of the podcast, if folks if you didn’t hear us, tooting, Stephens horn, is MyAmazonGuy.com helps Amazon sellers really level up their knowledge, but it’s exactly what I think of Chris is an agency that is an ad agency, essentially helping people market their products, when usually, the expert is at the helm, and when they leave the expertise goes away as well. And that’s often what buyers are fearing. That’s right. So, how do you overcome that? Go ahead?
Chris Wozniak 6:54
Well, sorry, I was gonna say, I think that’s a legit fear. It’s a very real one. You know, I, you know, the agencies I’ve sold in the last year or so, they weren’t really digital marketing agencies, which is what I found interesting, because you realize that there’s these kind of niche within niche type agencies that they provide a very specific service to a very specific need in the marketplace. And so like, the first one I’ve sold, in the last year, year and a half was a content writing agency. That’s an agency I represented, we were able to get an SBA pre approved, we sold the company to an SBA buyer, but that’s what they did, they had a team of writers that they were an outsourced agency that companies would hire to write their content for them. So, you know, very specific niche.
Joe Valley 7:46
Remember that I think I talked to the owner of that company at one point. So as a buyer, what I would look at in that situation is, you know, am I going to come in and operate the business and, and the team is going to stay in place? That’s kind of the secret sauce to being able to sell an agency, I would think that end, you know, recurring revenue is also a wonderful thing. What is your key? What are the key things that you see that are necessary in order to successfully sell an agency to an outside? Well?
Chris Wozniak 8:14
Yeah, I mean, I think, one, I always go back to the basics, which is kind of quiet lights, foundations, foundational aspects of valuation, which would be kind of the four pillars, you know, whether your agency or any other online business, I mean, it helps to have growth, which is, you know, has a huge impact on the valuation, obviously, the size of the business, the scale, you know, the larger it is the less perceived risk, you know, documentation, regardless of if you’re an agency or not, you need to have clean financials, SOPs. And if possible, I always stress this, I can’t stress this enough, try to have tax returns that resemble your p&l, because we do want to try to get SP pre qualified, but
Joe Valley 8:54
the more men this world, I don’t understand you have how you would have tax returns that don’t resemble your p&l. It’s I know, it’s calling flying by the seat of your pants not using QuickBooks or Xero, or whatever it might be.
Chris Wozniak 9:06
Yeah, spreadsheet. Okay. Yeah, minimizing your taxable income, but you’re you’re doing that in lieu of potentially a much higher sales price down the road. And it just, there’s no comparison on the return. You know, but, yeah, and then transferability, which is maybe one of the lesser of the foundational aspects, but, you know, pretty self explanatory, how transferable is the business? But to get to your question, I think transferability may be more have more weight and importance with agencies than it may be a typical online business, because like you mentioned, you know, what, how much involvement does the owner have in the business? Are they are they the, the first person face that the new customer sees when they’re onboarding? Is the owner, the salesperson? Are they the brand? I mean, I’ve I’ve actually talked with agencies where the name of the agency is the owner’s name. And the URL is their name. And on the front page of the website is their face. So those are a little bit different discussions when I talk to sellers like that, and they’re usually very open to this. But my suggestion, obviously, is, we can probably sell your business, but it’s going to take a pretty big hit towards evaluation, in my opinion, versus if you have the time to remove yourself slowly from the day to day operation, remove yourself from the website, potentially rebrand or rename the website. So yeah, those are, those are very real things when dealing with agencies and like with this content writing agency, the the seller, it was a husband and wife, but the wife was really the face of it. She did a lot of YouTube videos, a lot of Facebook Lives, that sort of thing. So we’re actually able to work through that the buyers, the husband and wife also felt like they could kind of take the reins on that. But again, she did have a very, very trained team, really good writers that had a pretty good history with the company. So I think that that made the buyers much more comfortable.
Joe Valley 11:06
What about the recurring revenue aspect in that business? Were there clients that had that agency? on retainer, where they’d write a certain amount of articles every month for them? And it was just recurring revenue? Or was it each kill sort of thing?
Chris Wozniak 11:21
Yeah, no, it’s and that’s a good, also a good question. When it comes to valuation. It’s like, Are you a company, an agency that has monthly or quarterly or maybe annual customers? And many of them do this one did as well? Do you do a lot of stuff ala carte, which would be maybe more customized, that can be a little bit more difficult? Because it’s like, what is that customization? And is that is that trainable and transferable? So yeah, but with the three agencies that I’ve sold recently, they they had a ton of repeat customers on a monthly basis, with some variation to quarterly and annual that was a much smaller percentage of the total revenue.
Joe Valley 12:02
What are the term can we come up with besides agency? Because as you said, it’s, we all think of a certain thing in there’s a stigma associated with it that make it less appealing to buyers or less sellable? And, of course, I’m just playing around, but I mean, it is it’s really, I mean, it’s a, you know, when you think about the content writing service, it’s a service, it’s an agency as a service, is it? Is there any any other term that you would apply to it other than the simple agency model? Probably no.
Chris Wozniak 12:34
No, that’s a great question, though. Because it’s it is it is about the presentation, right? I mean, maybe maybe it’s, maybe it’s, it would be more attractive to see content writing third party provider, or content writing third party service, or service provider.
Joe Valley 12:50
I’m asking this because I’m thinking about the title of this podcast already. So folks, if you’re listening to this podcast, it’s because Chris, and I worked out a good title for the podcast to draw you in and listen to this, as opposed to think it was just a digital marketing agency that we were talking about how to sell.
Chris Wozniak 13:04
So yeah, yeah, that’s a tricky one.
Joe Valley 13:07
It is, it is. So talk to me about the buyers. Well, first of all, what kind of what kind of multiple? Did you come out of the gate? With how close to that did you end up selling the business for? And what kind of pushback did you get from buyers in the fact that it was in fact a service agency?
Chris Wozniak 13:25
So on the content writing, third party service provider, we, we came up with, I think we did a 3.2, I took some notes, a 3.2. Multiple. And we basically sold for asking price. And I would say, when it comes to buyers, with, with agencies or third party providers, what I’ve noticed is, and this has been true for all three launches, that we don’t get necessarily the the volume of clicks on the package. But for sure, I would say I get much more buyer intent. So in other words, the buyers that do inquire, they are they understand what they’re inquiring about, and they’re very interested in it. And typically, they have some type of aspect to their background that lends itself to what they’re looking at. which blows me away every time because when I launch something in my head anyway, I’m like, It’s not that it’s a bad visit. So don’t take this wrong, but I’m like, who’s gonna buy this, you know, like, who the buyer be? Because it’s, it’s so nippy, and maybe a niche within a niche. And it’s a quote unquote, agency. And I’ve been blown away because, you know, often like I had a medical writing agency provider, and their, their writers and their medical, so just keep on layering that and I’m like, boy, this is going to be interesting, you know, when we launched this, and I bet you we had 10 12 like hot and heavy, you want to have buyer seller call buyers sets a
Joe Valley 15:04
lot having tended to a buyer seller calls right away?
Chris Wozniak 15:06
Yeah, it’s great. I mean as the week, that’s, that’s double what I would hope is a good launch, you know, and they all had either backgrounds in writing, managing writers, maybe a medical background to some degree and a couple of like both, which I mean, you can predict that, you know, as,
Joe Valley 15:28
as we talked about this, I can’t help but think about, you know, like my own entrepreneurial experience and whether or not I’d want to buy an e-commerce business where somebody’s built up a brand that sells, you know, on Shopify, and Amazon, and how I’m gonna have to innovate and compete and launch new products and learn learn, maybe, maybe it’s because I’m, I’m at the end of my learning curve here, Chris, but I hear Yeah, that doesn’t sound as appealing as this really niche business that has a customer base with some recurring revenue and transferable staff that has less competition. You know, I’m not competing against, you know, 13, you know, sellers in China that are just stealing my images and trying to, you know, reduce the price on Amazon and sell with produce. It’s, it’s, yeah, it’s almost like these are, these are more established real successful businesses that have those four pillars really strong. You know, we’re growth, transferability and documentation and they should sell at higher multiples. And it sounds like, it sounds like the few that you’ve sold, or trading at a pretty strong multiple you said 3.2 for the content, righteous third party platform business. Yeah. And then the medical writing business as well. That was a strong what was that? What kind of multiple are we talking about there?
Chris Wozniak 16:56
We were at a roughly a 4.2, multiple on $800,000 and trailing 12 month Ste. So very, very strong. I mean, I think their gross revenue was like 1.3 or 1.4 million. So that’s another thing. These agents are just so profitable. Yeah, the margins are just crazy. And we got that one, SBA pre qualified as well. So it was one that went under contract at 3.4 million. And we had multiple offers at that. So it was really the sellers kind of deciding who they wanted to go with. Okay,
Joe Valley 17:28
so both of these were SBA eligible, I want to talk about I want to talk about the benefits of running an agency or buying an agency in terms of cash flow, but also just want to focus in on the SBA eligible aspect first, do you think both of these sold quickly with multiple offers because of the SBA aspect?
Chris Wozniak 17:48
Yes, I do. Okay, so
Joe Valley 17:51
quickly cover for the business owners that are out there, the agency owners that are out there, what do you have to do to run the business right to become SBA eligible? Yeah, I
Chris Wozniak 18:03
think, if I was to tell you quickly, like the maybe the two most important things is have have clean financials, meaning your p&l is whether it be QuickBooks or whatever other third party financial software you’re using, excuse me, and then I would say, you have to have tax returns that closely resemble your p&l is and by what I mean closely resemble is you can have, you know, minimize your taxable income if it’s by way of your salary and things that are recognized by underwriters with the lenders, but you don’t want to run a bunch of things that are personal through the tax return. Because at the end of the day, there’s a bunch of items that that underwriters and lenders will disallow when it comes to their calculation of the available income and how that translates to their debt coverage ratios. Because that’s what it boils down to is they have a specific coverage, multiplier. And if you don’t hit that on the tax returns, even if your p&l show you clearly do they default to the tax returns. So there’s, there’s really no getting around it. And then with your financials, you want to be on an accrual basis, you know, recognizing expenses, when the sale has occurred, not when you’ve, you know, not when you’ve had a lump sum purchase of something or any anything like that, because cash basis will typically reduce your income. So you want to be on an accrual basis if possible.
Joe Valley 19:22
Yeah, and there’s a ton of bookkeepers out there folks that do that we’ve got a resource partner page up now quietlight.com/partners. That’s got six or seven bookkeepers that our team has worked with, over the years that just keep presenting really clean, healthy profit loss statements that allow us to sell their clients businesses for higher value. So check that out. quietlight.com/partners. Okay, so if you’re running an agency of any sort, get your financials in order so they fairly closely match your tax returns and keep in mind that an add back schedule is still part of the valuation and the SBA lenders Do the same thing with the schedules. The next part, though, that I wanted to chat about was, I forgot already, Chris. Well, thanks.
Chris Wozniak 20:11
You had a good one that was gonna segue into something I wanted to talk about, which is kind of, you know how attractive these businesses really are?
Joe Valley 20:18
Yes, thank you. You’re the host. Now, we’re going to handle the case you don’t make me the host. Yeah, so So typically, in a in an e-commerce business, we’re looking at anywhere between 10 and 20%. profit on the bottom line, and then you get to the content businesses, and you’re really excited because you’re doing a million in revenue and 850,000 in profit. Here in this situation, you’re at 50, or 60%. profit, which is huge. It’s a beautiful thing. And and, and you would think that the multiples would be even higher because of it. Obviously, they’re pretty strong, what you sold, pretty strong multiples. But you’ve got much, much more margin for error, as you’re running these agencies, because of the profit margin, if you screw up in a year and you you overspend on something, whether it’s people or travel or whatever it might be, it’s it’s not the end of the world because your margins are so much higher. Is that what you’re seeing as well?
Chris Wozniak 21:15
That’s what I’ve seen. Yeah, it’s a huge cushion. I just sold a reputation management and branding agency as well. And I think I’m doing my math, right, their net margin was like, above 60%. That’s, that’s the bottom line compared to their revenue at about 60%. So
Joe Valley 21:32
three agencies of reputation management company, a medical writing company, and was the first one content writing content writing for any kind of business. Is that right? Yep. Yeah, yeah. I wonder why the writer aspect of it, I get the reputation management, right, how, you know, somebody’s going to a bad mentioned on page one, they can suppress that and get at page 10, I guess, by overwhelmingly positive things that the right. But why do you think the agency in the in the writing niche is so prevalent? Or is it just that this is? What happened to be what you you, you sold, and another one fell in line?
Chris Wozniak 22:11
I think they I think it was just they fell in line. But you know, I think between the content writing and the medical writing, this also goes back to something you were saying, it’s like, from a buyer’s perspective, you know, you always you always hear the the term barrier to entry. And, you know, sometimes those barriers are stronger than others, I would say. But like it with this medical writing company, you had about 100 writers. And I would say, I think it was like 15 to 20 of them were kind of their main writers that were always working. And of those, many of them were physicians that had either left their practices or had smaller practices, maybe only open a couple days a week, and then they were kind of augmenting their salary with with this medical writing, because, honestly, there a lot of them are making, you know, 100 to 150,000. Doing this, and they get to do it in the comfort of their home. Or we’re talking about physicians writing, not not content, they’re writing labels on medications. Medical inserts that you maybe you’ve seen some of those, they can be pages, these pages.
Joe Valley 23:16
I can’t do that. Yeah, me too. Yeah. So supplements online before? Does that qualify me?
Chris Wozniak 23:21
Yeah, you just google how to do medical writing, I think you’ll figure it out. But, you know, the real tiny writing on, you know, would probably would be a chapter in a book really, once you blew it up. But that’s the kind of I mean, I think, to me, that’s a barrier to entry to have huge, put this team together of highly educated, trained physicians that can, that what they’re writing is actually extremely important, because it can mean life or death with the people reading it. The end user.
Joe Valley 23:51
Maybe I shouldn’t do
Chris Wozniak 23:52
that, then. Yeah, you shouldn’t
Joe Valley 23:55
stick with what I’m doing here. Yeah. Yeah. The guest podcast. Yeah. Yeah.
Chris Wozniak 24:01
I guess the podcast, not the host anymore. But yeah, so that I mean, I think in the reputation management agency, same thing, we went out at a 4.75 Multiple on roughly 1.61 point 7 million and trailing 12 month Ste. And I think over the course of we relaunched it two months in because their business had kind of grown so we took it down and kind of updated the numbers but from the relaunch, which I would consider the launch, I think we had six or seven offers on it. The individual it was SBA pre qualified in just because by the way, we’re SBA pre qualified doesn’t mean as a seller you need to we have to sell to an SBA buyer. What it does mean is it will put I think upward pressure on on the value because it puts all the buyers on notice that there’s more opportunity for them to get into the mix. Yeah, gig
Joe Valley 24:51
gets the cash buyers off the fence. They don’t have strong opposition because they know when it’s SBA prequalify there’s gonna be other buyers that come in at it. The 10% down and 10 year financing. So that’s right, you jump in quicker of the of the seven or eight offers that you got for the reputation management company did. Did you have any cash buyers? Or were they all SBA bars?
Chris Wozniak 25:11
We did. We had a, I think a couple of cash buyers, but one was a really, really strong cash buyer from Chicago. And you paid 4.5, multiple all cash.
Joe Valley 25:23
You sold it all cash. Okay. Yeah, I know that because there was a referral fee on that as well.
Chris Wozniak 25:28
Yes. Right. Yep. That was one. Yeah, I’m
Joe Valley 25:30
gonna keep plugging things here. Look, I plugged the partner page folks probably quietlight.com/partners, and then [email protected] The person that referred, this seller to us just got a 10% referral fee, to the tune of what would pay for two years of education at a state school. Yes, least NC State Go ahead, look up the tuition is basically 50,000 bucks. That’s right, for an email introduction. And this is someone that the person that referred these folks over to us, I sold their business, what feels like a decade ago, and I know it wasn’t, but it was an affiliate platform. Business, Chris, I don’t know if you know the story, but they had to go out and have an investment banker sell their affiliate platform for eight plus figures. And it didn’t really work. And then they, you know, they came back down to earth and, and connected with me. And I knew absolutely nothing about affiliate marketing. I remember when I first joined quietly after selling my own business and chatting with Mark about he’s like, Well, what, what what models do you know nothing about I was like, Yeah, affiliate marketing, I know nothing. So three years later, I’m selling an affiliate marketing platform of all things. But we got through it, we did it. And it was one of the toughest buyers have ever dealt with ever. And then the same folks, this is the life of an entrepreneur, the same folks went out and launched another company in the pet niche, basically an agency recurring revenue, and Chuck ended up selling it for just under $5 million to businesses, and then they’re referring clients over to us as well, of this size and caliber, where it’s just literally an email introduction. And then we do our thing, and it takes a while obviously, turns out that you know, they’re gonna get a very healthy check, higher than most people make in a year. Yeah, just by sending an email. So if you’ve got friends or colleagues out there, folks that we don’t already have a relationship that want to get a valuation adventure, sell their business, send an email, Intro to referrals at quiet like a calm, you can put my name, Mark’s name Chris’s name, and the salutation doesn’t matter. We’ll reach out to a section. Deanna that will reach out to you because she runs the referral program now. Okay, that’s my plug on the referral program. Now back to the show, folks. Chris, what are we talking about here?
Chris Wozniak 27:52
We’re talking about third party service providers, often referred to as agencies,
Joe Valley 27:57
third party service providers, that’s what we’re going to talk about that’s, that’s something like that will be in the in the in the in the title. So this last one, you got all cash it was SBA eligible, but it got the cash buyer off the fence, a four and a half multiple, all cash a pretty big number, what kind of what kind of training and transition period is required by the sellers in this situation? Do they stick around for a long time to help this person take over the business with a deep in the day to day operations of it.
Chris Wozniak 28:29
You know, it varies obviously, between businesses, but this one was unique, because it was two owners, there was the founder who owned 100%. And then he brought in a partner about I think two or three years ago for 50% ownership. And the partner the new partner, the 50% owner was kind of the became the and he was brought on for this the day to day person managing his team, they had a physical office kind of near the west coast. But he was also very integral with with sales and bringing new customers in. So it a little bit different because the buyer recognize the importance of the 15% owner and wanted required, but wanted him to retain or give him ownership in the new code purchasing. So I believe he, I believe took some chips off the table, maybe half of what what his 15% was and then reinvested the other half into a percentage of the new company and then got all kinds of perks a really strong salary, some some bonuses that would that would initiate really quickly, you know, insurance, monthly car payment, and then an opportunity to be awarded additional ownership interest if certain thresholds were met over the next one, two to three years.
Joe Valley 29:49
And then a second bite of the apple sundae if you decide to sell it again. It’s much, much larger company. This person is obviously good at what they’re doing. Because you know when I initially first talk To the 85%, owner of the company wasn’t that big. So they’ve grown pretty consistently. So that’s another thing for you, agency owners out there, or buyers that are thinking about buying a business like this is having a really good operator in the business that maybe will earn equity over time and can transition with the sale. And that will again, install even more confidence in buyers to take a chance at buying that company with a strong multiple as well. Yeah, tough to do you got to get to a certain size in order to do that. That’s the challenge for smaller companies, you know, given up 15% It did, did the 85%. Owner just give up 15%? Or did he have him buy it? Or how did that work out? You haven’t had any recollection on that? I do.
Chris Wozniak 30:47
Yeah. Of the 7.25. He essentially the main owner and founder got 85% of that cash boom, done?
Joe Valley 30:56
I mean, when the original owner gave the 15% to the new partner, was it? Was there a buy in? Or was it just you’re going to earn this 15% Over the next 24 months or something?
Chris Wozniak 31:07
Yeah, more of a sweat equity? Yeah, but of course, no. Yeah. No buy in? Yeah.
Joe Valley 31:11
Yeah, that not that. Yeah. Again, you gotta be a certain size to do that. I know, the original owner wasn’t wasn’t working full time in the business even when I don’t think. Yeah,
Chris Wozniak 31:19
yeah, the original owner. I mean, he created a awesome business. And then I think, I think he made the right move with with the partner he brought in. Both awesome guys actually think we’re gonna be doing a podcast with them. In a few weeks, actually, I think so
Joe Valley 31:34
indeed, we are in excellent. Chris, the selling of third party service companies called agencies, I’m still working on the title here. It’s, it’s a great, it’s a great subject, simply because there’s not been that many of them over the years that we’ve done here at quietly. But there are really talented people out there building businesses like this, especially when they come from, you know, a non entrepreneurial background, right. So these medical writer, content writer, I bet they were just writers in their field at one point and started this as a side hustle and built a business up. So I think as you know, the entrepreneurial world in the online space continues to grow, we’re gonna see more and more of these. And it just helps people that are taking the risk to build these companies to have an exit path and helps us understand as a company, the value that buyers are willing to pay for these. So keep an eye on this. Yeah,
Chris Wozniak 32:37
that’s cool. I have had in the last quarter, I was looking at it a couple days ago, I think I’ve had eight to 10 valuation calls with other agencies. And I’ve got some, I’ve got some lead sources, where I’m kind of getting those more and more now, as people are kind of realizing that, Hey, maybe I can actually sell mine. And what’s interesting is, it’s not, it’s not the typical digital marketing agencies, as we kind of talked about, it’s continues to be these, you know, I’ve got to like a resume writing, provider, brand development, I’ve got a real estate kind of, for lack of a better term, a real estate kind of content. Agency, that’s not the best way to describe it, but it’s very demographic specific. So that kind of opens up the world of potential buyers, on those kinds of things, maybe synergistic strategic, but, you know, at the end of the day, it never ceases to amaze me how people can find an underserved market and provide a service that’s extremely profitable business and run it and, and grow it. And that’s what I’m seeing with a lot of these agencies, they’re, you know, even in this strange economic time, they’re doing really well. They’re making a lot of money. They’re increasing, they’re profitable. They’re, I mean, I mean, just a repeat business being 50 to 70 to 80%. recurring revenue is it does it goes back to what you said, like these are these are really attractive businesses, we just need to kind of change the, the narrative or the perspective on them, because they do sell. I mean, I know from personal experience that they do sell, and they’re selling for multiples, often very competitive with some of the more sought after SaaS and content site businesses. And that’s been interesting to me to realize that,
Joe Valley 34:28
yeah, it almost sounds as if you could write all the right pieces in place that it’ll be less risk than content site where you might sometimes be at the whim of Google. Folks was his email is [email protected] You can reach out to him directly. If you want to chat about an agency third party platform selling services that you might have an interest in getting evaluation on, you can always fill out the form at quietlight.com Click evaluation forum. You can specify quickly put in there that you want to chat with Woz as well. Or, or again, hit him up with an email [email protected] Woz? You’re awesome, man. Thanks for Thanks for hosting this Quiet Light Podcast. Appreciate it.
Chris Wozniak 35:10
Okay, Joe, thank you for having me. It was awesome to talk to you.
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.