The truth is this, building a $10 million company is hard, (0:04) but turning it into a business worth buying, (0:06) that takes margin. (0:08) If your business can't survive without you, (0:10) it's not a business. (0:11) It's a very expensive job.

(0:13) This is The Margin Method, (0:15) where I help ambitious founders build businesses (0:17) with real financial margin, operational efficiency, (0:21) and leadership freedom. (0:22) The foundation for a company that grows sustainably (0:25) and actually builds value. (0:27) I hope you share and enjoy.

(0:28) Let me ask you something. (0:31) If someone came knocking today, ready to buy your business, (0:34) would you be proud of what they find? (0:36) Would they see a company worth $10 million (0:38) or a $10 million mess?

(0:41) Today, we're breaking down exactly what buyers look for (0:44) in a $10 million business. (0:45) Not what brokers tell you, (0:47) not what gets tossed around in social circles, (0:50) what real buyers, private equity firms, (0:52) strategic acquirers, family offices, actually care about.

(0:56) And here's a hint, it's not revenue. (0:57) It's not your fancy office. (0:59) It's not how long you've been in business.

(1:01) They want margin. (1:03) They want systems. (1:04) They want confidence.

(1:05) Let's get into it. (1:07) Revenue gets all the headlines. (1:09) Founders love to say, we're doing $10 million a year.

(1:12) Well, okay, that's cool. (1:13) But where's your free cashflow? (1:15) What's your EBITDA margin? (1:16) Because here's what buyers are thinking. (1:19) I'm not buying a sales number.

(1:21) I'm buying the profit engine behind that number. (1:24) Because here's the deal. (1:25) In other words, let me just say this.

(1:27) When somebody goes to buy your business, (1:29) they want to invest in an asset (1:31) that's going to provide consistent cashflow, (1:34) returns to them. (1:35) Nobody wants to buy a mess. (1:37) Nobody wants to buy a bunch of chaos.

(1:38) They want to buy certainty (1:40) that they're going to make their money back (1:42) and that they're going to earn a return on their investment.

(1:45) I've seen $10 million businesses (1:47) with 5% margins and zero systems. (1:50) And I've seen $7 million businesses (1:53) with 25% margins, tight operations, (1:56) and a clear path to scale.

(1:58) I've seen everything. (1:59) Guess which one sells faster? (2:02) Guess which one gets a premium? (2:04) Buyers don't want to clean up your mess. (2:06) They want to invest in momentum, in margin, (2:09) in a machine that runs without drama.

(2:12) Let's get specific. (2:13) Here's the checklist most buyers are walking in with.

(2:17) Number one, strong EBITDA margins. (2:19) EBITDA, remember, stands for earnings before interest, (2:22) taxes, depreciation, and amortization. (2:25) It's just a nerdy way of saying profit. (2:27) Ideally, they want to see 15% or more.

(2:30) Number two, clean financials. (2:32) Monthly, accurate, and transparent. (2:35) Your financials need to follow GAAP, (2:37) generally accepted accounting principles (2:38) if you're in the US, or IFRS, (2:41) which stands for International Financial Reporting Standards.

(2:44) So they have to be clean. (2:45) They have to tell the true story behind your company. (2:48) If you don't have clean financials, (2:50) you have to get your financials cleaned up. (2:51) Otherwise, it's going to be really difficult (2:53) to sell your business.

(2:55) Number three, systematic KPIs. (2:57) Not just lagging indicators, but also leading ones too.

(3:02) Number four, owner independence. (3:04) If you're still the hub, that's a problem. (3:06) Because here's the deal.

(3:07) When I go into a company to buy them, (3:09) or I'm doing due diligence, (3:11) one of the first things I ask the team is, (3:14) tell me more about the owner. (3:16) How often do they work? (3:18) Who's making all the decisions around here? (3:20) Who's the bottleneck? (3:21) And if the team's like, oh yeah, the owner works so hard. (3:24) She's always here.

(3:26) She's busting her butt. (3:27) Guess what? (3:28) That's a giant red flag because that means (3:30) that there may be key man risk in the business (3:32) because the business may be heavily dependent (3:35) on this type of owner. (3:36) So owner dependence is not good.

(3:38) It's something that needs to be fixed, (3:40) which is fixed by the next thing.

(3:42) Number five, scalable systems. (3:45) Finance, sales, operations, delivery. (3:47) Are there standard operating procedures, (3:49) documented processes, checklists, et cetera, (3:53) so the company can actually scale?

(3:55) Number six, low customer concentration. (3:58) No client should make or break you. (4:01) So when I'm looking at a business, once again, to buy, (4:04) I'll look at the revenue per customer. (4:06) And if any one customer is contributing to 10% or more (4:11) of the revenue of the business, (4:13) that could be a major problem.

(4:14) Number seven, growth runway. (4:17) Buyers want to scale. (4:19) They do not want to babysit.

(4:21) This is where most founders get blindsided (4:23) with this checklist. (4:24) They think, I built a solid company, (4:26) but buyers are asking, (4:28) can I actually grow this without breaking it?

(4:31) So if your books are messy, (4:33) your systems are duct taped together, (4:35) and you're still the quarterback calling every play, (4:39) guess what? You're not ready. (4:40) This is why we talk about margin so much. (4:43) Not just a number, but a mindset. (4:46) Your financial infrastructure is a reflection (4:48) of how seriously you take your business.

(4:51) And here's what should be in place (4:53) before you even think about selling. (4:56) Now, if you're listening to this episode, (4:58) and you're like, I'm not even looking to sell, (4:59) you should always run your business (5:02) as if you are an outside investor, (5:05) or like you're planning on selling it one day, (5:07) even if you don't plan on selling it, (5:09) because a sellable business is a scalable business.

(5:13) So check this out. (5:14) I'm gonna give you a list of things (5:15) you should be thinking about before selling, (5:17) or even before scaling.

(5:19) Number one, a clean rolling forecast. (5:22) That means your profit and loss statement, (5:24) your balance sheet, (5:26) and you should ultimately forecast out cashflow.

(5:29) Number two, a dashboard with a handful of core KPIs, (5:34) things that you review weekly. (5:36) So you should have this dashboard, you look at it, (5:38) it has your KPIs that are related to your strategy, (5:42) that's really important, (5:43) and a target so you know what that you're focusing on (5:47) and what you're driving towards.

(5:48) The next thing is a monthly and quarterly review cadence, (5:52) where you're looking at financials, strategy, and execution.

(5:56) You should also have an org chart (5:58) with clear roles, responsibilities, and succession plans. (6:02) And finally, incentives that are tied to outcomes, (6:05) not just activity.

(6:07) Buyers don't wanna guess how the business runs. (6:09) They wanna see it clearly. (6:11) They want a roadmap.

(6:12) That means predictable performance, (6:14) proactive decision-making, and strategic discipline (6:18) all combined together in a nice, beautiful package (6:20) with a giant bow on it.

(6:22) Now, let's talk about the elephant in the room, (6:25) which is probably you. (6:27) Sorry to hurt your feelings, (6:28) but that's oftentimes the truth (6:30) when I'm talking to business owners.

(6:32) If your business can't survive without you, (6:35) it's not a business. (6:36) It's a very expensive job.

(6:38) And buyers know this, they're not dumb. (6:40) They don't wanna be handcuffed to a founder (6:42) who still closes every deal, (6:45) approves every invoice, and runs every meeting.

(6:48) You gotta move from hero to architect. (6:50) Build the team, build the systems, build the rhythm, (6:52) because that's how you create transferable value.

(6:56) And that's what we're talking about here.

(6:58) I've seen it firsthand. (6:59) We've helped a company go from founder-dependent (7:02) to system-driven in under 12 months. (7:04) We cleaned up their financials, we installed KPIs, (7:07) we trained the leadership team, (7:09) and we flipped the switch on strategic execution.

(7:12) And the result, they didn't just get more offers, (7:15) they got better ones, real multiples. (7:18) And the founder didn't have to stick around, (7:21) because that's oftentimes what happens.

(7:24) A founder goes to sell the business, (7:26) and if there's key man risk, (7:28) or the business depends on this owner, (7:30) they're gonna get the golden handcuffs, (7:31) which means they'll get their money, (7:33) or a portion of their money up front, (7:35) but then they have to stick around for a period of time (7:37) running the business, or serving as a consultant,

(7:41) which would be terrible, like you sold your business, (7:44) you have no authority, you don't have autonomy anymore, (7:46) and you have to stick around (7:48) before you get your next payment, (7:50) or you get all your money back.

(7:51) So you definitely don't wanna end up there, (7:53) and I've seen that happen over and over again.

(7:56) So here's the margin-ready checklist. (7:59) If you wanna build a company that buyers chase, (8:02) not one that they discount, this is what you need.

(8:04) All right, so check this out. (8:05) Number one, 15 to 20% EBITDA margins, that's ideal. (8:10) Auditable, accurate monthly financials.

(8:14) A rolling forecast that's at least 12 to 24 months out. (8:18) A clear dashboard of leading and lagging KPIs. (8:22) Strategic execution cadence, (8:24) where you're doing monthly reviews, (8:26) quarterly resets, et cetera, (8:27) you should have a system in place for that.

(8:30) Owner independence, (8:31) so the business doesn't depend on the owner. (8:34) Scalable systems. (8:35) Team incentives aligned to results.

(8:38) Documented playbooks and SOPs, (8:41) so people know how to run your business, the roadmap. (8:44) And then a clear growth story and reinvestment plan, (8:48) so somebody who's buying the business are like, (8:51) ah, I get it. (8:53) If I put X amount of dollars into the company, (8:55) I'll get my money back one day, (8:56) and it's not all gonna collapse after the deal closes.

(8:59) If you don't have those things in place yet, (9:01) that's totally okay. (9:02) Just don't wait until someone asks for them. (9:05) Build your business like it's already being evaluated, (9:07) because one day it will.

(9:10) The truth is this, (9:11) building a $10 million company is hard, (9:14) but turning it into a business worth buying, (9:16) that takes margin, (9:18) not just financial margin, (9:19) operational margin, (9:21) leadership margin, (9:22) strategic margin, (9:23) and that's what we're here to help you build.

(9:25) If this episode hit home to you, (9:28) it would mean the world to me (9:29) if you forwarded it to someone else (9:31) who's in the trenches with you.

(9:33) And if you're ready to install the systems and create value, (9:36) check out our boost program (9:37) or the three-week challenge that exists at coltivar.com.

(9:41) All right, thanks for listening to The Margin Method. (9:44) I will see you next time. (9:47) Cheers.