Without Leverage, Your Entrepreneurial Race Will Be Over Before It Even Begins
How Smart Entrepreneurs Rely on Leverage, Even When Selling Their Businesses
Imagine you’re getting in place for the race of your life.
It’s a high-stakes sprint you’ve trained for relentlessly. You take to your lane, crouch into place on the starting line, and become completely still.
You focus your mind and the entirety of your being on a singular mission — launching full speed towards the finish line.
You’ve done everything in your power to make this right, but there’s just one problem.
Your only competitor’s starting line is 50 meters ahead of yours. They’ve also got perfectly placed starting blocks to launch from and the best racing spikes in the industry.
As the gun goes off and the race begins, it’s no surprise that your competitor crushes you with their lead in a matter of seconds. As they glide over the finish line, it dawns on you: the race was practically over before it began.
No doubt, your competitor had an unfair advantage, but still an advantage nonetheless. An inequity like this would surely be called out in the track and field world, but, in the business world, this happens all the time and would never be considered unfair.
In business, it would be considered leverage, using a resource or what you have to its maximum potential. Any smart entrepreneur would advise you to use leverage in every situation you can.
Entrepreneurs are unique in the sense that they can create systems of leverage that catapult them to heights of success far faster than other routes. Leverage is equivalent to a 50-meter head start.
Let’s explore all the different leverage tactics available to entrepreneurs and how to get the most powerful leverage when selling your business.
Examples of Entrepreneurs Using Leverage
Online entrepreneurs are constantly using systems of leverage in their journeys, often without thinking about how it puts them leagues ahead of the competition.
Here are some common examples of leverage:
- An affiliate SEO hires a content agency to produce hundreds of articles for them rather than writing the articles themselves.
- An Amazon FBA entrepreneur hires out a 3PL warehouse to save storage costs with Amazon rather than building their own warehouse.
- An e-commerce brand applies a suite of online tools from Google analytics to Facebook ad pixel to correctly identify the demographics of their highest paying customers rather than doing laborious customer surveys themselves.
All of these are leverage that an entrepreneur might use. They may seem like commonplace strategies, but these small shifts are what help entrepreneurs get ahead of the competition and address general inefficiencies. It’s an ever-improving process to make business operations the best they can be.
Leverage isn’t just available to entrepreneurs running their businesses. Some systems of leverage with the most impact exist for entrepreneurs leaving their businesses. It’s how they decide to sell that makes all the difference.
Introducing the Broker: The Fulcrum of Leverage
A business broker is akin to hiring a content agency; you’re simply hiring them to do something that they should be far better equipped to do than you are.
To go back to the track analogy, a broker is like lacing up the best racing shoes to start a race well ahead of the pack. Their knowledge of buying and selling — an event entrepreneurs only encounter once or twice in their lifetime — means you’re equipped with the best possible tools and team to support your deal. So few really know how to buy and sell and do it well, making a broker a crucial member of your wealth-building team if selling or buying businesses are at all part of your wealth-building plan.
We don’t want this to seem like a grand claim. Here’s how a broker’s leverage helps in the entrepreneurial race.
Buyer Network
One of the strongest advantages of a broker is the buyer database they’ve built. At Empire Flippers, for example, we have a buyer database that has shown investable proof of funds valued over one billion dollars at the time of this writing.
Putting your business up for sale in front of an investor pool with a billion dollars to spend is an unparalleled advantage compared to those who try to sell on their own.
Trust
A broker’s buyer network trusts that broker, hence why they use them. Buying a business can be as emotional as it is mathematical; thus trust is paramount.
One important way Empire Flippers creates trust is by having a dedicated vetting process to ensure businesses on the marketplace are profitable and closely examined — a process which no other brokers implement.
Reputable brokers get buyers ready to close deals because trust is already in place. The sense of trust they instill in the buyer base makes it easier to sell your business.
Negotiations
Remember, most entrepreneurs encounter a deal only a handful of times. Brokers, on the other hand, sell businesses every day of the week.
They’re deeply entrenched in the deal-making experience, meaning they can help you negotiate the best possible price for your business.
Keep in mind that most brokers have a fiduciary responsibility to you as a seller (it is you that pays the broker ultimately), and thus it is in a broker’s best interest to get you the best possible deal.
Ease of Transfer
Migrating a business from one owner to the next can be either an incredibly simple process or an overly complicated one depending on the online business.
Whether it is simple or complex, migrating a business is the most crucial component of the transaction. A failed migration means everything else up to this point was for nothing.
Entrepreneurs who’ve sold larger businesses can attest to the difficulties migrations can present. In bigger deals, say a $2 million Amazon FBA business, there will also likely be negotiations still to be had in this process, complicating an already difficult part of the deal.
A broker’s sales team and migration team can help you navigate these challenges, and a good broker will handle this for you at no extra cost.
Earn Out Management
As businesses get bigger, it is more likely you will have some sort of earn out paid over time. If you’ve sold a $700,000 SaaS business, you may have gotten $600k upfront with $100k paid out over a few months. Earn outs help buyers manage cash flow and risk and help the deal close in a timely manner.
Earn outs can be scary for sellers because they have to trust that the buyer will actually pay the earn out.
A good broker will again manage this earn out on your behalf. In fact, they won’t get their full payment until you’ve gotten your full payment. It helps that they have the legal structure in place to enforce the earn out and they are just as invested in ensuring that it is paid in full.
The Most Successful Entrepreneurs Use Leverage: Why Wouldn’t You?
All the reasons above are just some advantages you get when leveraging a broker.
The entrepreneurs you look up to the most will have all created or used some sort of system of leverage.
It makes sense to use a similar strategy when selling your business. Using a broker lets you tap into a huge system of leverage pre-built to do what you need so that you can focus on other aspects, such as growing more businesses or offline investments.
If you want to learn what your online business could sell for, check out our valuation tool. Or if you’re ready to start leveraging a broker now for a profitable exit, you can sell your business here.
