Exit Readiness

What if the very thing that sets you apart is the key to everything you're striving for? Welcome to Uncommon Edge, the podcast for those who are done with the ordinary and ready to own what makes them different. I'm DJ Newman, and if you're here, it's because you know you're built for more. You're uncommon by design, ready to break boundaries and build a life of purpose, success and impact. Each week, we'll dive into hard hitting strategies, raw stories from the trenches, and the tools that will sharpen your edge. From game changing lessons to deep diving interviews, this is your space to rise up, build, and make your mark. Whether you're growing a business, dreaming of starting one, or looking to level up in life, you'll leave each episode with insights and inspiration to make it happen. You weren't designed to blend in. You were designed to stand out. So if you're ready to defy the norm and bring out your best, let's dive in. Get to work. Your journey to owning your Uncommon Edge starts now. When buyers looked at the company I ran, they made one thing very clear. They wanted me to come with it. Now, I'd grown that company's net profit over 620%. So I took that as the compliment that it was. But it also put a question in my mind that I have been asking business owners ever since. Because there's a difference between a buyer wanting to buy your business and you versus a buyer really only wanting you. One of those means that you built an asset. The other means you built a job with your name on it. Today, I'm handing you the exact scorecard we use with clients to find out which one you've got. So grab something to write on because you're keeping score today. Welcome to the Uncommon Edge. I'm DJ Newman. So let me catch you up on what happened during the year I was gone because I promised you that story in the last episode. I spent over 30 years in that world. I ran that company. I grew it significantly. And that growth put me in a position to retire my parents. And that also put me in a position to do fun things. Paying off house and putting people in better positions than they were. And that's not a small sentence. And I want you to understand that I don't say it lightly. And somewhere in the middle of all of the stuff that happened, I'd been dabbling in something else on the side, helping other business owners fix their businesses. It started out, you know, as a thing for myself, getting into personal, professional, you know, mentoring and all that type of stuff. But I had attended a mastermind group that didn't have any, like, follow up sequencing. And we assembled a group of nine people that got together and started holding each other accountable. And that grew into a larger community, about 130 or so. And I ran that for free for like five years. And it was, it was fun because it helped me hold myself accountable in growing Speed Clean. And it also helped me keep myself accountable to my own personal professional development as well. And, and you know, when you show up to teach something, you show up differently than if you're just there to consume it. You're not passively taking things in. You're actively trying to pull out all the nuggets so that you can bring the most value to the table. And when all that happened, helping the businesses out, it turns out that the thing that I actually loved doing the most was getting these results for other companies as well. So I made the call to go in full time with Uncommon Ventures, and that became my whole focus. And when we decided to exit and get all that going, that's when that started to launch full time. And I'm so excited about it. That's the part everybody asks about. Here's the part no one asks about. And it's worth 10 times more to you than my story ever will. Go back to what I said at the top. The buyers wanted me to come along with the deal. And look, that's how a lot of these deals work. I get it. And when an operator is a big reason that the numbers look the way that they do, the buyer wants continuity. They're protecting what they're paying for. It's a compliment and I'll take it. But here's the question that it planted my head, and I've been asking owners some variation of it all along, ever since. How much of the value is in the business versus how much of it is in the person running it. And here's what I found sitting across from owner after owner after owner. It's almost always way more of them than they think. Most owners are convinced they've built an asset. What a lot of them have is actually built is a very good job that they happen to own. So that's what we're doing for the next little bit of time here. While I'm with you, I'm going to walk you through the seven things a buyer actually looks at. The same seven we score inside our Uncommon Ventures platform. And when we run an exit readiness evaluation on a real business, it'll actually pop Out a score, you're gonna go ahead and find out how much of that score works for you and what your company value is. When you come to the table, not the valuation, but your exit readiness score, you find out how much your company's value walks out the door when you do. And before you check out on me, because you have no intention of ever selling anything, hear this. This is not an exit conversation. Sellable and livable are the same thing. I'm gonna say that again. Sellable and livable are the same thing. A business that can survive without you is a business that lets you take a vacation. It lets you get sick, it lets you go to your kid's game, have a life, have the number you're about to give yourself isn't a sales score, it's a freedom score. If you really think about it, selling is just the test that reveals what was already true that you might not be aware of. And that's the biggest thing that I want you to understand as we go through this. You know, you started the business because you were a great technician or you were a great physician, or you were a great. Whatever the thing that it is that you sold, maybe like you sell products or whatever. Whatever it was that you did, you were awesome at it. That's a completely different set of skills than actually running a business and documenting the systems and doing the things and building the roles and the scorecards and the expectations of your team and the deliverability of your services or products or whatever it is. That's a totally different skill set. Now, you might be wondering, how do we score? So this is how this works. There are seven categories. Each one you're giving yourself a one, a two, or a three. One means it's a problem. Two means it's okay, but needs work. Three means it's genuinely strong, 21 points possible in the entire score. And I want you to be honest with it, because the only person you can fool here is yourself. And you already know the answer anyway. So you got your pen ready? Let's go. If you're driving, you can do this as a mental note, or you can save this episode for later, come back to it when you have time, or if you're really excited, pull over, you know, and let's just do this together. So category one of the seven categories, Profitability, not revenue. Remember, revenues for vanity profits for sanity. Cash is king, so. Or I should say cash flow is king on the profitability, why buyers look at real, profitable net profit. Again, this is why I talked about in the Pulling the first lever that we're going to be talking about later. It's so important that you know your numbers and have your numbers right, because if you don't have your net profit situated and figure that out, you don't truly know what that net is. You will have a really, really thin line to work with. That's where EBITDA's evaluated from and all that type of stuff. So what is the true profitability of your business? Is it healthy? Is it 1%? Is it 10%? Is 20, 30%? What is it? And is it a true number with true numbers baked in? Is your salary baked into that business expenditure or are you leaving your salary out to make your profit look better? Trust me, Equity's going to figure that out if you don't have that baked in. Category 2 revenue trend. Which direction and for how long? A buyer isn't buying last year, they're buying the next year. So flat is a yellow flag, declining is a red one. And a spiky ride tells them that the business runs on luck or one person's hustle. The score will anchor it. So when they're looking at this, a lot of times when private equity groups or a seller comes in, they want your last three or five years of numbers to see what the trend is looking like. So go ahead and look back at your trend and see what that's looking like and give it the score. 1, 2 or 3. Category 3 customer concentration. What percentage of your revenue comes from your single biggest customer? This is the one that kills deals. And you might not even realize it if one client is a huge share of the whole thing. You don't own a business. You own a relationship. And that relationship, if that walks, that could mean messing with your whole business. If losing your biggest client would be catastrophic, then that can end up really hurting your exit score. The rule is no single customer should be more than 20% of your entire revenue stream. So take a good look at that. Category 4 owner dependence. This is a big one. There's actually 15 seats in the company that has to be filled either by design or by default. And a lot of times you're owning more of these seats than you know about. If you want to learn more about what those 15 seats are, you can reach out to us@ UncommonVentures.net you can call us at 586-400-1333. We'll be more than happy to walk you through this. But owner dependence, I want you to be brutally honest on this one because this category is inflatable for everyone. Two measurements first. How many hours per week are you personally putting in work in the business? Not necessarily on the business, but in the business. Are you out in the truck? Are you in the day to day? If you could not walk away for two weeks and the business doesn't grow, you're probably too dependent in the business. And how many roles of those 15 that I told you about are your, are you filling? Like, are you the one that is making things happen? Are you the one making the decisions, running the, the systems, building the systems and, and running it? What does that actually look like? The goal is to be zero seats with your name in it. And that's what turns a job into an asset. And that's one of the things that we track very heavily at Uncommon Ventures. So score it honestly. And wherever you land, that's just information. Every owner starts higher than zero. I promise you. When you're founding a company, you own all 15. I promise you that. And then the goal is to get it to zero. Category five is recurring revenue. What percentage of your revenue shows up whether or not you sell anything the next month? This is based on your service plans or, or monthly recurring revenue. What percentage of your revenue is that? The higher that is, the better your score should be. This could be contracts, maintenance plans, service agreements, memberships. Customers and buyers will pay an absolute premium for predictable income. This is probably one of the more valuable things that you can have then. Category six, financial hygiene. You know this one was coming. Do you have a real bookkeeper or are you doing it yourself at midnight? Are you just handing over a box of receipts? Or do you have a CPA who actually advises you on how to actually set up your files and your books, your chart of accounts and your categorization, your tax strategy, planning, all that stuff. Nobody buys a business they can't verify. And you can't run one that you can't read. So this is a super critical, important one. And then lastly, category seven systems and documentation. If your best person quit on Friday, how much of that like that they actually know walks out with them? Or is it documented so you can put somebody else in place and then be able to run the play? Written processes, checklists, trainings, who does what? Not a binder, nobody opens. The real question is whether the business runs on documentation or does it run on memory. If it runs on memory, it runs on people and people will leave. The team you have right now is not the team you're going to end with. I promise you that. Even if people been with you a long time. Opportunities change, life's change, events. Life events can happen that can change everything. So systems and documentation is probably one of the biggest insurance strategies you can have in your business. All right, add it all up now. Each one of those seven, you should have given yourself a one, a two or three. One meaning hey, I need some seriously help. Two means it's running okay, or three means hey, I got my stuff together, add it up. Out of 217 to 11, here's the honest read. You own a job, might be a great job, might be a well paying job, but the business is you. Nobody is buying that. And more importantly, you can't step away from it. That's not judgment, that's just where most owners live. And it's flexible. And the cool thing is it's changeable. If you scored 12 to 16, you own a business that still needs you. There's real value there and people might buy it. Real dependency on you is at the same time, this is the zone where 12 months of actual intentional work can change everything. 17 and up. You own an asset, that thing is value whether you're standing in the building or not. And, and that's what actually buys you options. Sell it, keep it, hand it to somebody, you can exit, you can exit without selling. You can do all kinds of different things or you can step back and let it all just run. Options are the entire point and that's the whole point of freedom when you're looking at this entire exit. And I've learned a lot, both exiting my company that I ran and helping other businesses exit their companies as well. It's been a real eye opening adventure. So this is the challenge for this week. Take your lowest scoring category of those seven. Write down one action, just one that moves a single point, not a plan. One action. Do it before Sunday, whatever number you got. Remember, it's just really measuring what you have. It's stepping on the scale and saying, hey, I need to fix this or I'm good. It's not measuring whether you could sell, it's measuring whether you are free. Next week I'm going to get into the very thing I do with every owner I sit with. It's the one place I go before marketing, before hiring, before anything else. And I usually find enough money already sitting inside of it so that the business can pay itself. Come ready to take notes because next week it's going to pay you, I promise. So when those buyers said they wanted me to come along with the company, I understood that they were really saying they were protecting the one thing that made it work. And that's a compliment to any operator. But it's worth knowing exactly how much of your business value is sitting in one chair. Because the goal isn't just to be great at running your business. The goal is to build something great enough that it runs when you're not in the room. Go find your lowest score and work on it. This week, Everything is@ UncommonEdgePodcast.com if you want to work with me directly, you can go to uncommonventures.net or give us a call 586-41333. I'm DJ Newman. Stand out and stay sharp. You've been listening to the Uncommon Edge with DJ Newman, where average goes to die and your next level begins. If you're ready to go deeper with real strategies to build a stronger business and a stronger life, head over to uncommonventures.net new episodes every week. Now get out there and do something uncommon.