Bonus #29

Ellen Yin18min

Ellen Yin

00:05

Hey friends, it's your host Ellen Yin welcome back to another bonus episode of cubicle the CEO, the podcast where we ask successful entrepreneurs the business questions you can't google in this week's guest case study that aired on Monday episode 204 with Teri Yu. Behind the buyout: the numbers and negotiation of Vibely's acquisition by Kajabi. Teri shared her experience selling the company she founded Vibely to software giant Kajabi. And what that was like from the perspective of a business owner, building a traditional venture backed company. So a company who receives funding raises money, and then has the goal of scaling to hundreds of millions or even billions of dollars and then going public or having an IPO unless, of course you sell to a larger company.

Ellen Yin

00:55

So in Teri's case, that's what she did, she sold Vibely to Kajabi. And it got rebranded as Kajabi communities. And Teri shared a really interesting insight in her interview, which again, I'll link below in the show notes if you haven't listened in yet. And that was the three factors that influence the valuation of your business or how attractive it is to potential buyers. And those three things were traction team and product. Now what's really interesting is, like I said, Teri built a traditional venture backed business. But she said, if you're building a lifestyle business, which is the type of business that you and I most likely are building, when I say lifestyle business, the way that I would define it is a business that typically is self funded. So you are bootstrapping the cost. Or maybe you borrowed money through a loan to start your business. And you are scaling your business to meet your own lifestyle or financial goals and to be able to support the team members who joined you on the journey. But you're not necessarily building a company with the goal of going public as the end outcome.

Ellen Yin

02:02

So keeping that in mind, assuming that most of us who are listening to the show our lifestyle businesses, an interesting insight that Terry brought up was that if you are a lifestyle business, out of those three factors, traction team and product, traction is actually going to be the most influential factor in the valuation of your business. And she defined traction as growth, right growth in terms of users and customers growth in terms of revenue, growth and audience. So anything around showing momentum or a positive upward trajectory in growth and capturing more of that market share. So with that in mind, I thought it would be interesting to dive a little deeper into this concept of traction and how we, as lifestyle business owners can improve the strength of our traction through two key things. One, of course, being revenue growth, and the other being audience growth.

Ellen Yin

03:01

So on the revenue growth side, I wanted to share an interesting tidbit that I gleaned from another friend of mine, Christina sclera, who actually did sell a lifestyle type of business. Christina is a very successful digital entrepreneur, she sold the contract shop recently. And one of the things that she shared with me over lunch a few months back when I was up in Washington visiting her is that if she could do things a little bit differently with the sale of her company, she would have focused more intensely on showing a big uptick in revenue in the months leading up to the sale of her business, because that would have, in her opinion, made her business more attractive and have sold at a higher price.

Ellen Yin

03:49

Now, granted, she had a very successful exit, and sold her company for a very sizable amount of money. But you know, if you were looking at optimizing, right, the process, that is one thing she thinks could have increased the sale price even more is if in again, the let's say 12 months leading up to when the business went to market for sale, as well as like during the actual negotiation process. If during that time window, the revenue had continued in an upward climb, it would have just driven the sale price up. So I think the takeaway we can have there is if you are ever planning to sell your business, maybe projecting out further in advance and saying, Okay, if I have the intention of selling my business, like is it going to be in the next year or so? And if so, what can I do to aggressively reinvest in my business at this moment in time to show that hyper growth over the next few months the next year to really put my business in a position where it's extra attractive to potential buyers and it's going to really drive that sales price up.

Ellen Yin

04:58

So that was like an interesting tip that I gleaned from my conversation with Christina and I want to make sure that you all know of her brilliance. And if you are interested in this idea of selling your business, and you want to hear it from the perspective of someone who is a lifestyle business owner, rather than a traditional venture backed company like Terry's case study showcased, then check out Christina's YouTube series, because she actually did a really interesting YouTube series, walking everybody through the process of selling the contract shop. So again, I'll put that in the show notes. So anything I mentioned, as always, any links I mentioned, will be below in the show notes. So you can go scroll and click on those and check them out.

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