Shaan's Masterclass: How To Sell A Business For Millions

Okay, friends, family, people who like pink pop tarts. Welcome. This is another Master class. My first master class. was on raising money. It was about how to create a killer pitch deck. That's the start of your journey. If you're an entrepreneur, you're trying to go raise money from investors to fund the company. This is now Oh, the end of the company. How do you sell

A company. Ben asked me to do a n a master class. He's like, Hey, can you record a master class today? Your boy's lazy. So I'm repurposing a presentation I gave three, four years ago at Hustle Font. I went on Google Drive, I found an old presentation. I actually didn't even look through it. I'm just gonna do it live here, sort of improv style. But I remember, I remember being on stage And giving this talk about how to sell a company, because I had just sold my first company and I remember at the time being like

I wish there was some more content about this because If you want to learn how to manage people, there's tons of books and you're gonna get practice every day. If you want to learn how to grow revenue or sales. There's tons of books and you get practice every single day. When it comes to selling a company

There's very little content out there that's at that I thought was any good. And you get very few reps. You might sell a company once every four years, ten years. It's it's not a common thing that you do. And so we're not you know, if you don't practice you're not very good at anything. So I learned something some things during the process of selling my companies. And I'm gonna share them with you today.

So let's see what I was thinking four years ago, the only thing I did was I removed the HustleCon banner at the bottom and I put a new logo there because it said HustleCon twenty nineteen. I thought that would Not look so great. So let's jump in and hit the first slide. Yeah. I've sold two companies now, one to a big company. So when we sold it to Twitch, Twitch owned by Amazon. So selling a company in Amazon was one way. And then Milk Road, we sold to

Two private buyers, just like a you know, two dudes. Who were independently wealthy from their previous businesses and it was a it was a totally different transaction. So I'm gonna share some lessons from each. When I made this presentation I had only sold Vivo.

So I added the milk road one just before I went live here. But the rest of the presentation I didn't add any lessons. So let's see if I've learned something the second time. I always start with this when it comes to selling a company. This is a this is a picture of a foot and a dog, and it is the first picture ever posted on Instagram. Kevin Sistram, the founder of Instagram, he posted this. Right when Instagram went live and

No, today it's this like iconic picture of like, you know, this is how it all started. And you know, here's the guy himself, Kevin Sistram looks great, s you know, power pose, got the white sneaks. And if you're Kevin Sistram. Yeah, you got a dozen employees. You make a billion, everybody loves you, right? Because

You've built the hot thing. And everybody comes knocking at your door, right? If you ask Kevin Sistram how do you sell your company, he'd say, Well, you gotta create You know? uh sensational product and then people will just come and offer you a billion dollars, right? Like that would be his experience. My experience was very different. We had built a

good, not great business. We had built a good but early business and we were trying to sell. And so here's what we experienced. So if you're if you're reading this or if you're watching this, You are not Instagram. And I think my talk will be maybe a little bit more applicable to you than than what you might hear from the people that are on the Forbes list'cause they're They were in a totally different position of leverage and bargaining power than most people are when they go to sell their business. This is you.

You've tried. You've pivoted, you've hustled. It's not working. Or it's kinda working. Or it's working, but you're just tired, you're ready to move on. And this is a very common thing entrepreneurs get to. And when you're here, it's okay to think, you know, where where should I go? I've been there. I felt it myself.

And this advice I heard all the time was Great companies are bot. Not sold. That sounds pretty cool. It's a nice little fortune cookie. But remember, you're not Instagram. And so

Great companies are bought, not sold. I think that's true. But Most companies are sold, not bought. That's my my contention, at least, and that was my experience. We sold the companies more so than we just immediately got bought because we were just cr crushing it beyond belief, like you would like you see when you know Whatever. Huge companies get acquired.

Here's a headline from when we got bought. This number is incorrect, which just shows you don't read don't believe everything you read in the media. I don't know where they got that exactly, but Yeah, we we sold we sold for, you know, eight figures, but not like that. And and sales, it's weird when people come up with these numbers too,'cause it's like you get cash up front. Then we got the signing bonus, you get stock. And the stock price changes, you know, it's all c there's all kinds of ways to to sort of like manipulate Sales numbers, but Let me go back here.

When you got started You thought this is gonna work. And this will be big if it works. And I can do this, and I want to do this more than anything else. That's typically the mindset of an entrepreneur. When you start. And the reason I say this is because The first thing when it comes to selling your company is figure out do you even want to sell?

That's why I started here. Do you even want to sell? Because when you're in this state of mind. No way you would sell. Why would you sell? This is gonna work. It's gonna be huge. I could do this and I wanna do this more than anything else. That's how you should feel when you start a company. And then you have to check in and say, All right. Year seven.

And try not to check in on your most frustrated day. But you want to say, do I still believe this is gonna work? Do I still believe this will be big if it works? Do I still believe I can do this? And do I still want to do this more than anything else?

When we sold our first company, we had hit this a you know, all of them kind of were true except for This will be big if it works. I thought we might have a medium sized exit the first time. And that's why I decided, Well, let's sell now versus play this out for four more years and hit a medium sized exit. Yeah, it'll be multiples more than where we're at today, but It still requires four more years and time is so precious.

With Milk Road, it was more uh the last one. I wanna do this more than anything else. It was actually working and I thought it could be big, but My brain was wandering to new ideas, new things and I was loving doing the podcast so much. I just Is this the one thing I wanna wake up and do every day and focus on with laser focus? Yes or no? So These are the questions you gotta ask yourself say are these

More true today, less true today, or at the same as when I started? And that gives you this takes you to this point, right? When should you sell? So if you get a great offer, cool. Consider it. If you don't believe in the business anymore. Well, maybe sell the assets.

Because if you don't believe you're not gonna really take massive action. You don't take massive action, you're not gonna get any results. And then you'll just reinforce your belief, like see I I knew it. I knew it wouldn't work, right? So belief is really, really key. And lastly, the you know common case is you just don't want to run the business anymore. You prefer to exit versus hire an operator and you're just you're ready to move on and do other things. So Three moments where you might sell. Who do you discuss with? I just wanna put this up here for a second. So

Yeah, talk about it with yourself and maybe some mentors, but then yourself and your partners, yourself and your co-founders. It's really a a lot of conversations in your own head, which is why managing your own psychology during a sales process. is the number one most important thing. It's what m helps you be good in negotiation. It's what helps you get people across the line. It's what helps you, you know, stand up and operate every day while you're also trying to sell the company. It's very difficult to do that. So managing your psychology is really important.

And then there's a note about your investors and your team. There is a Finesse you want to do with this. Some people believe. Don't tell anybody. Until the deals are done. Some people say, Well, no, I want to be transparent with my team. For me, I've always been on the be transparent with your team.

But it does have drawbacks. People start to work a little bit differently when they realize, Oh, we're gonna try to sell this thing. What does that mean for me? Should I be looking for a job? Is this what happens if we don't sell? Well, I'd be rich. What's gonna happen? And so I think discussing it with your investors or your team is something to be very careful about. I probably erred too much on the transparency side. I if I would gonna go ba play it back now, I would only discuss with my co founders and I would not talk to the team until the deal is done. And so you wanna create a little like communication table. So your co founders, you want to tell them ASAP, you know. Hey, it's time to score options. I'm gonna do X, you can help me by doing Y.

Investors. You wanna tell them and say, Hey We're gonna explore sale. Here's what I think it would look like. Employees, you might say, Hey, we've been approached we're considering it, blah, blah, blah. Here's the good news, here's what it means for you. I wrote

You know, you can put ASAP, you can say this we're gonna do this when the deal closes, you can say that we're gonna do this when the deal's getting close to closing. You know, you w you wanna decide your timelines. And create your communication table. Okay, now to the fun parts. How do you actually sell the dang thing? So who's who might buy you? You want to break it up into buckets of potential buyers because you're really going to run a sales process. No matter who you are, you become a salesman when it comes time to do this. So I would say there's four potential buyers. There's the unicorn, so

High growth companies that might want to buy you. to accelerate their growth There's dying dinosaur, so you know, incumbents that might need Two Get fresh blood, fresh tech, fresh energy, fresh cash flow, whatever it may be.

There's your adjacent companies, your adjacent alligators. Uh, this is like uh what's that game? Legend of the hidden hidden temple. So yeah, you got the adjacent alligators. They're they're next to you. They might be peers or competitors that you merge with. And the last one is talent farms. This is just go sell it a Google and they just want talent. So they they don't care about your company or your market, but they've

They just want engineers. You have to also know the different roles. Who are you gonna be talking to. So when you get bought The other side is gonna have an exec champion. So who's the one person That really wants this deal to happen. If you can't identify that person

Ain't no deal gonna happen. You should always know who is the person that is pounding the table on that side saying we gotta do this deal. Or hey, come on, let's figure out a solution to that problem. Or do just Let's bridge the gap. Let's come up a little bit, right? You need to know who is the champion on the other side, identify them, and you're gonna nurture that relationship. You gotta know who's the company router. Who's the person in the middle that can get you to the different people that need buy in. Usually in big companies it'll be corp dev, but in smaller companies you might know who else it is. Maybe there's a admin person or assistant. Just who are you gonna be able to reliably get information from and to that's not necessarily the key decision maker.

And then you got your deal doula. So this is using uh uh childbirth metaphor. So if you're trying to birth this baby, you know, a do look who helps you Yeah. Remember to breathe. Think about this. You know, let's move to this position. It's gonna help. Hey, we need to get water here. You know. Your doula is the one helping you through this often, you know.

painful but wonderful, you know, process. And so I like to find my deal dealers. These are one or two people who have done MA before. In my you know, they're they're in my corner. I can trust them that they'll be keep everything confidential and I'm gonna bug the hell out of them. I'm gonna you know, these are people that I was texting and saying, Hey, I'm gonna say this back. You know, is that too desperate? No, no, okay, let me, you know, wordsmithing it like I'm a you know, seventh grade girl trying to figure out. Do they like me? Do they not like me? How do I phrase this in a way that demonstrates strength without pushing too far? Your deal dualist will help with that.

For those who love One of the greatest shows on our on earth. This is the Dennis System. So I'm gonna take you through the Dennis system of how to how to sell your company. So Stage one, the D. Demonstrate value. So why do companies buy companies? There are Financial reasons and then there are strategic reasons. So financial reasons obvious. You're crushing it, you're making tons of money, they want your EBITDA, they want your revenue.

Pretty straightforward if you have it. Many people don't. So who buys companies when there's strategic reasons? Well, here's six strategic reasons. The CEO finds it interesting. That's the first one. That is surprising how far that goes. CEO's got a pet project, CEO has got an itch to scratch. Awesome. If you g if you're so lucky to have that, fantastic.

Number two. There's a new executive or an executive gets a promotion and they need to demonstrate big moves as a signal. So they're they're they're on the way out or they're on the way in and they're looking for for some kind of big move, some big big thing to do as a signal. That's good for you when that happens. Number three. They're trying to catch up to a surging competitor. You know, this is Adobe you know, using Figma to catch up. There are many examples of this along the way.

Synergy. One plus one equals three. This is Uber merging with Didi in China. so that they don't keep competing each other, driving costs up. They say, Hey, why don't we merge into one entity And then we own a monopoly, we can cut cost actually. We can raise prices. So one plus one could equal three in this case. They're afraid of you. This is Facebook buying Instagram.

You know, you do what they do, but better. Instagram was better at sharing photos than Facebook, and okay, you're gonna get a strategic premium when that when that's the case. And the last one is you have unique talent. So you might have computer vision PhDs and they're having trouble finding that talent in mass. And it's actually cheaper to acquire you and get the talent as a bundle that's proven to work together. versus going through a long, slow recruiting process. And so it's important to figure out for every potential buyer what What might be the reasons?

That the that that they will they will buy you. Next step. E. Engage physically. So who do you actually reach out to? What do you say and what's the goal? Yeah, you can reach out to a number of folks, you can reach out to executives, just go meet somebody who's at the company. Corpdev, they're their job is to meet Companies that might be interesting to acquire. investors might make introductions. You know, when we were selling, we went to uh uh I went to an investor who was an investor in Discord and I said, Hey, we got this thing, Discord might want to buy it. And he said, let me email the CEO

CEO gets an email from their biggest investor, they're gonna take it seriously. And then all of a sudden I'm You know, next day I'm in a meeting. with the CEO and I'm pitching why this why one plus one can equal three. There's also advisors. I mean what do you think? You know?

You say, Hey, I wanna discuss a partnership on how we might be able to work together. Intent, right? Like that's discuss a partnership is the best way to to kinda open the door. The more aggressive way, which I've done also is Hey, we got an offer. We're you know, we're considering our next steps. Maybe we're gonna raise money, we or we have an acquisition offer. I would love to talk to you before we just

Go and make a decision. And they say, Oh yeah, yeah, come talk to us first. Don't just don't just Do it without you know we wanna take a peek under the hood. We wanna to know our options before we get in. Your goal here is just to get an in person meeting. And so you know, use these two frames in order to get an in person meeting. Now, what do you do if you don't know them? Well, you gotta reach out. You gotta reach out cold. Ideally, you've been building a relationship over time. This is the smart way to do it is

You meet people in the company, you keep them posted with light updates. They see you, they know you, they see you at an industry event. So that when the time comes you can do this, you're not an absolute stranger approaching them. But I've done it as a stranger too. Usually when I'm a stranger, corp dev is the easiest way to go. Next.

And nurture dependents. I'm covering some of the words here, but You want lust, not love. Lust is gonna get is a high burst, immediate like, oh, I see the it's like greed. It's like oh I want something out of this. Your goal is to tap into emotions. And when I say this, it's about clarity, not trickery. You're not gonna manipulate anybody into buying your company. What you can do Is frame what you're doing in a way that is maximally appealing to them.

Something that taps into their desires, their dreams, their emotions, their Pain points. And you need to Trim the fat of your story so that you

Are the answer. to that problem. I'll give you an example. When we sold Twitch I had met uh in in terms of engage physically, I'd I'd gone I'd gone through Corp Dev.

Corp Dev got me a meeting. With the CEO the next day and I said, All right, well I don't know what to I don't know how to frame what we're doing to the CEO. But I had met a guy on a boat in Australia of all places. who worked at Twitch who's an exec. I said, I gotta hit that guy up. So I hit him up. I said, Hey can I get a beer with you? Today.

Oh yeah, yeah. Sure, let's do it. I said I got a meeting with the C tomorrow. I don't know how to navigate it. You know the guy. Can I just get a beer with you just to to get your download? So I go get a beer with him and I say Yeah, what's he like? What's he inter you know, what what should I expect, blah, blah, blah.

And then I said Tell me, what are the top like three when you're in these exec meetings, you're you know, you're you're at the highest level, right? I'm stroking the ego. You're You're I know you're in the room when they're making the big decisions. So What are the top three priorities? Like what do y'all really care about? Is it profitability? Is it revenue? Is it growth? Where What are the top three priorities? And then he'll say them. I say okay.

I said which one of those is like stuck? Which one of those needs a solution? 'Cause like sometimes you already have a solution in mind, you love that solution, you don't wanna interrupt it. But which one is still We don't really love our plan here or feels the weakest and needs some bolstering. And then he told me, Hey, we have this thing. And actually everybody's pretty bullish on it.

But we don't have the right team and we don't have the tech to do it. And the guy we have, he's not good with tech, so it's gonna be a problem. I said, Oh Say less. So then when I go into the meeting the next day I say We're great at doing this one thing. And I'm a great leader and I know tech. And we have the team that we have the tech already built and I have the team that that can that built it.

And so now I package my story as how I am the solution to their problem. Versus what most people do is they come in as a startup and say Here's what we do, here's why we're great, you know, here's this other feature we have, here's this feature we have, and oh, this guy says this. They're all over the place. And it's like all right, good for you, but that doesn't tell me why I want you. So it's a it's a sales but you got to package yourself as the solution to their problem. Another way to say this, you need to find their pain, offer a cure.

You know, other questions that might be helpful. What initiative has the most juice or momentum or buy in right now? You want to buy in is like the best word with corporations. What what has all what has all the the the exact buy in right now? Oh, they're all bought into this idea. What are the fires that need putting out? Who's on the chopping block? What company are you guys most afraid of? If I only had twenty minutes in front of your CEO, what part of what we're doing do you think he'd be most interested in talking about?

And then you also want to suss out. Who's the decision maker? So hey, right now we're talking to this guy. Is he the decision maker, or who should we be talking to? And oh no, his boss's boss is the guy. Then you wanna talk down. This is a little bit Pro tip. Talk to founders who have been acquired by the same company before. So go to them, say, Hey

You acquired three years ago, four years ago, whatever. What was it like? How did the process go? Were the timelines that they told you real or fake? Was the When they said this is the most we could do, was that real or fake? Did they try to retrade the deal later or not? Wha what was your experience with the CEO? Was he really into it? Was he is he more reserved? What did what did that mean? You're trying to get a bunch of intel and hey, this is founder to founder from somebody who, you know, has done it before, ideally who's

Left the company now. Uh I got a ton of great intel on this. Okay. Here's another. This is just a

Classic move when we did it. You wanna do the work for them. So what a lot of people do is they say Here's uh here's what we do. Then they sit there and they Pray.

I hope they understand it. I hope they get it. I hope they like it. No. True that you take Matters into your own hands. So you basically say Hey, I wrote up a one pager that explains where I think this makes a lot of sense strategically for you guys, because if we're gonna do this.

then I mean I wanna make sure you know, I thought about this from your perspective and what what this would look like once we join. You know, I did some crazy things. So basically w on the technical side, I had our team write a technical one page roll. Here's all the stuff we built, how long it would take for anybody to build it, what's our special sauce so that You they could just see, Man, buying this is gonna save us so much time. Look at all these assets they already have. Who's the talent? Here's my I m I made our team a present like into a presentation of like here's all the talent we have.

What they've done before, make it really easy for them to it's a dating profile. Do I want to swipe right or left on these people? And then I this thing I wrote a letter from the CEO, I said I said I think this deal makes a lot of sense and I wanted to write that out into a memo. I know you guys have this memo writing culture, like Amazon has this thing, like you write six page memos for all your strategies. So I took a stab, I wrote one. You know.

I obviously I don't know some of the internal things, so I you know, I I took Guesses. They're they're in blue. You can see the guesses. But yeah, I wanted to put my logic on paper because I don't want to do this if this doesn't make sense. Right. You're not saying please, please, please buy me. You're saying I'm trying to figure out, does this make sense for both of us? It's a two way street. And so in order to do that

I wrote something to give myself clarity. I thought you'd like to see it. And so I actually wrote for w one of the acquisitions I said This is how I would announce this deal to the to the company, to the team, to your exec team and the rest of the employees. And I just wrote a really persuasive argument of like, we bought this company. Here's why, here's why this was a good idea. Here's how best here awesome this is gonna be. Here's the how this solves one of our problems. I'm so excited about this acquisition. And like in doing so, again, I made it easy. Somebody told me this, one of my deal dual is he goes, You need to turn your company into a giant buy button. Like a like Amazon one click checkout.

So that means Make it easy to understand what you do, make it easy for them to understand your team, your technicals, your your strat how you strategically align. And last thing, get your get all your financials in like very clean, proper you know, data room. So that There's no friction in trying to buy your company.

Last one. Neglect emotionally. The Dennis Reynolds special. So you need to find another partner. You need to go cold. You don't want to be all in hot on one partner. That is not how you get the best deal. So you need to find multiple partners at the same time. You need to be negotiating these in parallel. You don't do one at a time. You start the process, you know, you're starting conversations with ten folks at once, twenty folks at once, you're narrowing it down. You're trying to get multiple offers in the same week. So that you could tell them, Hey we got another offer.

Sometimes you go cold a little bit. Make'em sweat. Not too long, don't push it, but it's not a bad thing. I also wrote leave bread crumbs. I don't know if this made a difference or not, but I would like Check in on my Instagram story. Like I'm in Seattle.

Oh cool. I've never been to the office uh to this cool office before and like they know they're like oh He's at Microsoft. He's at Facebook. He's w where is he? He's he's talking to he's talking to our competitors. So, you know, I I don't know if that show works, but it it amused me at the least. It made me feel like I was doing some Some James Bond shit. Alright. Last one.

Inspire hope. This is where you go back to them and say, Look, we got other options, but we want you. Can you make that happen? Can you get your deal can you get your offer a little stronger here, here, and here. And it's time sensitive. Look, like we have this other offer on the table. They're not gonna sit around and wait. So if you can get us something, we can we would like to work with you. We think you are the best fit.

But obviously uh you know, bird in hand, this is a really good offer and you know, I I don't wanna blow it for my team by by sitting here hoping you guys come around. Yeah, you need to to use the the leverage from one deal to get a a better deal. And then you sell entirely. So you need to do the you need to have your due due diligence stuff ready. You need to make sure that the closing terms are clean. You need to get a good lawyer and a good accountant. Don't and don't burn bridges, because deals fall through and you may need to go back. So make sure you communicate properly, even when you say no to people. And uh do everything with with sort of integrity and grace because many times deals have fallen through. We need to go back. When we sold the milk road, it was somebody we had rejected the last minute.

But we didn't burn the bridge and they didn't burn the bridge, and we came back, you know, later and we said hey Still interested and yeah, they sure were. And there you go. The advice I got here, my deal doula was This is when you need to sprint the hardest. So m m normally An entrepreneur gets a term sheet, it's like they wanna relax, finally.

Look at this, the big number. I'm gonna be rich. This is awesome. And they take a moment to relax. You can't relax here. This is where you sprint the hardest to close. You Cancel everything. Just spend all day following up with lawyers, data room

Your accountant, making sure that all your ducks are in a row, solving any problems along the way. Lastly Celebrate. Make sure you celebrate very often w the whole process is so stressful that the the main feeling is just relief.

I think that's common, but you wanna let that relief subside and then have the joy and the the pr the pride that you did something kind of amazing. Okay, remember. Some some tips here. The great advice I got. Birds fly, fish swim, and deals frawl through. That's what they do. Just remember, deals fall through that is

Complet for them. You can't get emotionally too high, too low. The second Deal momentum is everything. If you have a conversation going, the the speed with which you follow up and you get them the materials and you you move forward is everything. Momentum is everything when it comes to deal making. And last thing One choice?

is no choice. If you only have one person that could buy you, one company that's gonna buy you You have essentially zero people that will buy. You have zero leverage. So you need to have multiple choices. One choice is no choice. All right, that's it. That's the master class. Let me know what you thought about that one. Drop comments on YouTube. So uh that's where I read'em. So go to go to YouTube, My First Million.

Hit the thumbs up if you like this, subscribe to the channel. We're over two hundred thousand subscribers now. That's amazing. If you guys like these, I'll do more of these. They're not easy to do these master classes, right? Like it ain't it ain't easy to to drop these kinds of bombs. But if you guys like it, I will make an effort and I will try to do more of these. Until I'm all out of knowledge and then I'll then I'll stop and just Don't retire.

So Let me know if these are worth doing and uh your compliments fuel me to do more. Alright, I'm out of here. I feel like I can rule the world, I know I can be what I want to I put my all in it like my day's off On the road less travel never looking back

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