The EntreMD Podcast

Building and Exiting Your Business: The Art of Seeing Your Business as a Product

December 07, 2023 Dr. Una Episode 384
The EntreMD Podcast
Building and Exiting Your Business: The Art of Seeing Your Business as a Product
Show Notes Transcript Chapter Markers

What if your business was not just a service, but a product? A product that has been meticulously designed and honed to increase its valuation and set the stage for a substantial monetization event. Join us as we unravel the importance of building a business with the end in mind, be it passing it on to the next generation or selling it for a significant figure. We share personal insights and experiences on the potential wealth creation possible with a solid exit strategy and the pitfalls of not having one.

Imagine seeing your business as a brand that dominates its respective industry, a brand that is armed with assets such as a YouTube channel, podcast, or an email list. This episode explores the concept of treating your business as a product, and the roads towards increasing your business's valuation with strategic endorsements, awards, and content. We also delve into building a business with the intention of selling it - the importance of a clear exit strategy, the need for a team that ensures the business thrives, even in the absence of the owner. Tune in as we help you rethink your business strategy and guide you towards long-term success.

When you are ready to work with us, here are three ways.

1. EntreMD Business School Accelerator - If you are looking to make a 180 turnaround in your business in 90 days, this is the program for you.
2. EntreMD Business School Grow - This is our year-long program with a track record of producing physician entrepreneurs who are building 6, 7 and 7+ figure businesses. They do this while building their dream lives!
3. EntreMD Business School Scale - This is our high-level mastermind for physicians who have crossed the seven figure milestone and want to build their businesses to be well oiled machines that can run without them.

To get on a call with my team to determine your next best step, go here www.entremd.com/call

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Speaker 1:

Hi docs, welcome to the EntremD podcast, where it's all about helping amazing physicians just like you embrace entrepreneurship so you can have the freedom to live life and practice medicine on your terms. I'm your host, dr Ibnah. Well, hello, hello, friend, welcome back to another episode of the EntremD podcast, and today we're going to be talking about something that is really one of my favorite things, and that is setting up your business to exit. Okay, and there are a number of reasons why this is one of my favorite things. When I look in Facebook groups, a lot of times people say well, there is this doctor who's retiring, who wants to sell his practice, and he's asking for I'm making up the number of $500,000. And the number of people who come out and like private practices are not worth anything. Just go set up shop right next to him or her and things like that. And so there is this thing of private practices. Our business is not being worth anything, and there are reasons why that could be true, but it's also a pointer that maybe it's time for us to think about it differently Now. I was fortunate enough to be exposed to this concept really early in my practice. This must have been the first two to four years and I met this lady who is a pediatrician, had her own practice for decades. She was near in retirement, she wanted to sell it and be done and she was only asking for $40,000. I went to think about it only $40,000. And she could not find anybody to buy it. Her broker came to my practice and said, hey, she's selling this practice, it's $40,000, said all the good things about it and so I went with my husband to go see the practice. But she was the only doctor there. They were still on paper charts. They did not own the real estate. They didn't have a long lease either. They were coming up on a renewal. She did not have systems in place. She owned her job. She owned her job and so, even though that would have been a steal I mean $40,000 for a practice but I had to decline, like I didn't take her up on the offer and she went on to shut down the practice. She wasn't able to sell it. And I wanted to think about something you've worked really hard on for decades and at the end of the day, yes, of course it paid you while you were working in it, but then to walk away with nothing, it really got me thinking and I had already started thinking differently about my practice. But that really got me thinking. Like you want to think about the end from the beginning, right? And then I went on. At an event I met this lady who is a banker for individuals who are ultra high net worth and ultra high net worth, by their definition, was people who had a net worth greater than $25 million and she started talking about how most of the people came to their money, to their ultra-high net worth, and she said for most of our clients, it was through a monetization event, so they sold a business, so they sold a business and because of that they hit this ultra-high net worth. And so I'm thinking well, other people are selling businesses and getting to ultra-high net worth and we are creating businesses that cannot be sold for anything not even $40,000. But people are crossing $25 million in net worth because they sold a business. You see the discrepancy. And so for me, I was like, wow, we really need to start thinking about our businesses differently and really need to start building them as businesses that we plan to exit from. And the truth of the matter is we are going to exit one way or another. If you think about it, nobody's going to be alive 150 years from now. You know what I mean. So if your business is going to go on, if it's going to continue, it's because of things you put in place now. But you are going to leave your business, Even if you don't put a plan in place. When you're done with your time on Earth and you leave, you would have exited the business. So we're going to exit one way or another. And so if we're going to take the time to think about our retirement when we're young, if we're going to take the time like as soon as our kids are born, we start putting college funds together and all of those things, if we're going to do that, then we also want to think that way about our businesses, like we want to think about the end from the beginning. You might be like Dr Una I just hit two million in revenue this year and things are good and I cannot even conceptualize that and I'm trying to figure out my team at work, all these things, and this is the deal. Okay, we want to set the foundation for that now. If we set the foundation for that now, then we have options later. It's too hard for us to just go at it and not make any plans to have a return on investment, and I'm going to unpack some of this. I'm going to unpack some of this. So, if you're building a business well, you're listening to me, so you're building a successful business but as you build the business, if you're going to go through the work of doing that, then I just want you to think, like you have the option of building something that's a well oiled machine that you can pass on to your family, and that is your way of maybe even creating a monetization event for them. That's your way of transferring wealth from you to the next generation. Or you may decide I just want to sell it and create your own monetization event. Or you shut it down, but guess what? It's still going to cost you money to shut it down, but it's just so heartbreaking for us to have to do that. So let's talk about these foundations, and I just you know this is really like a broad way of looking at it, but I want to talk about five things you want to start putting in in placing your business from this moment, okay, and I'm going to have it already from this moment, okay. And the overarching thought is you want to start treating your business as a product, not a service. Okay, so there is the service. So let me bring this all the way home, make it a practical example. There is a service in my private practice. We have the service aspect of it, so we take care of patients, we do all of those things, but there is the product, which is the pediatric practice. That is a product. Now, my job is to see that as a product, to see it as a business asset, to build in the foundations, to work on the valuation of that. In that product is the service that we offer. Okay, entremd, entremd, the Entremd Business School it is a service. What do we do? We help doctors build profitable seven, seven as multiple, seven-figure businesses so they have the freedom to live life from practice medicine on their terms. That is the service. But there is also the product. The business school is a product and I need to work on the valuation of that product. Right, so think about it. I deliver a service, but the business is a product. Okay, so in the service angle, I take care of my clients, I take care of my patients, I do all of that. But in the product, I work on making that more valuable. I make sure that it's created as an asset, so it is an asset that I can keep and pass on if I want. I can sell it if I want. So we want to make that distinction. And even if your business is a product-based business, you have the product that provides a service or an outcome for your clients, but there's also the business that is a product. So we want to start looking at our businesses as products, as assets, because that's what they are. Okay, all right. So your job there is the job of providing a service, but there is a job that belongs to you, the owner, the CEO, the founder, and that is the job of working on the valuation of that product. Okay, you're going to say what do I need to do to put this business asset, this product, in a position where it can sell at the best possible rate? If I were going to sell it, I might say I'm not thinking of selling. I started working on this process from the second year in my private practice. We've been in practice for 14 years Until this moment. I am not looking at selling, but this is the deal. I heard Dr Ron Kedosimo say this. She said a business worth selling is a business worth keeping. Okay. So at the end of the day, this process only makes your overall business so much better anyway. So you have absolutely nothing to lose. And when you're ready to sell, it is too late. To get ready to sell. It is a multi-year process to put all of these things in place. So when you're ready to sell, it's too late. So the time to prepare is now. The time to start working on this is now, okay. So let me give you five things you want to think about. Okay, when you think of how do I increase the valuation of my product, of my business? Okay, what are the things? Number one is building a dominant brand and brand assets. Okay, so we want to pay attention to the brand. In the Entremde Business School, I talk about this a lot. In fact, in EBS Scale, which is a tier for doctors doing a million in revenue and more, we talk a lot about building your eight-figure brand. Okay now. So, first of all, your brand goes with you wherever you go. But the company brand is what will sell the product for years and years and years or as a service for years and years after you're gone is what gets market share. It's what makes you the desired one to buy, and all of those things Like you want to have that. And the more pieces you have in place that can lead to the continuous success of the business, the more you can get for the business. So, for example, let's say you have your private practice and you have a YouTube channel and the YouTube channel has a really good following. In fact, it has such a good following that you have ads running on it and you have revenue coming from that. And on the YouTube channel you talk about the practice and people should go make an appointment and all of those things. Those are all evergreen, like they're the gift that will keep giving and giving and giving and giving. So they factor it into the valuation. I've seen I've had friends who did exits. I had a friend who did an exit and she had a podcast and the podcast had 200 episodes of her promoting the business. Now she kept the podcast. She didn't even add it to the sale, but because they had this evergreen marketing and it was a well, you had a lot of subscribers and people were listening and all of that it affected the valuation of her business. And so having a YouTube channel, podcast, blog, long form content that is strategic content, meaning it's promoting the business, and all of that stuff. That is something that will help the valuation. You cannot create 200 episodes when you're ready to sell. You create all of that now, like you start now. So that's one. Another one you can look at is an email list. So you've been building this email list. You have an email list of 100,000 subscribers. Okay, 30,000 subscribers, that is huge because that means you have all of these people. I mean, they're there. It's not like social media. You have them. So that affects the valuation. Think about endorsements, awards, all of this. This is all for positioning, but put together, the bigger the brand, the more dominant the brand of the business, the better for you. Okay, and again, it's not something you're going to build when you start, when you're ready to sell. It's something you're going to start building now. This is why, again in the O&MD Business School, I start pushing, start speaking, start doing videos, launch the YouTube channel, launch the podcast, start building this body of work. Right, because the ROI you're going to get an ROI now, because it will lead to increase patients, clients, all of those things, but you're going to get an ROI down the line when it's time to exit. And the funny thing is this right, you can exit different parts of your business. You can choose to keep the YouTube channel and sell the practice or sell the coaching company or whichever, right, and it doesn't mean. But you have all these different things that you've built. If all you do is walk in see patients, make sure there's money in the bank account and then leave, it's not going to cut it, okay. So that's number one. Number two is profits. You want to make sure that your business is profitable. Now are there businesses that don't make money that get sold? Yes, right, but chances are it's not your business, right? Okay, so it's more like tech businesses and things like that. Generally speaking, okay so you have a practice, you have a coaching company, you have all of these things. You're even at the point where you're bringing in seven figures, multiple seven figures, but maybe you haven't paid attention to the size of the team you're building and the profitability of the team and all of those things. So, for each new system process, you add in team member, you add in your profits, keep getting smaller and smaller and smaller, right, so it's time to pay attention to that. It's time to demonstrate. We have healthy profits to demonstrate. We have profits growing year to year and all of those things. Right. When you're ready, it's too late. So the profits is good. Right, because you have the profits, but it's also good because when you want to create a monetization event, you're ready to do that. Okay, number three documented processes. Okay, it is not unusual for someone to start a business, even if you've gotten into seven figures, and your processes and your systems are really all in your head, jumbled up so much so that you cannot even explain them. You're like I just know how to do this, and that's not true. There is a method you followed. There is a method to the madness and you want to start documenting. You want to start creating SOPs. In my practice, we call it IV in a box. We want to have everything documented and you have this one, like it's just a picture, but you know like you have this box where everything is in it, but you want to start documenting that. What is our procedure for hire? What is our procedure for evaluating our staff? What is our procedure for getting people door-to-door, in and out of the door? What is our procedure for this? What is our procedure for that you want to create that. What is our procedure for training our team? What is our procedure in Buddhas mà Itís kдét? What is our procedure for helping people get wins? What is our procedure for helping people when they're falling off? What is our procedure for it? All of those things, how do we run our calls? How do we run our success groups? How do we manage and administer our Facebook group? All of those things need to be documented. One of the problems with the practice where the lady was trying to sell it for as little as $40,000, she had nothing documented, and who's gonna sit down to figure out how to get everything going right? Okay, so that's number three. Number four team, team, team, team. You wanna have a stable team. You wanna have it documented not documented, but you have the people who are getting the things done, which means for you now what you wanna start practicing is getting things done through people, not just assigning tasks, but assigning outcomes. This is the person who's in charge of making sure our schedules are full, so the doctor's schedules are optimized and we stay profitable. This is a person in charge of sales for this coaching company and because of them, we make sure we're getting new leads. We're getting new leads every day. We're getting consult calls. We're having offers made every single day. This person is the marketing strategist and they're the people who ensure that our brand, we're getting in front of new audiences. Our email list is growing every day. And all of that. You wanna have people driving results and you also want to have evidence that the business runs without you. Okay, so earlier in my career I did a lot Like I started weaning my practice off me, if you will, where I'd work four days a week, then three days a week, then two days a week, then one day a week, then I'll take a month off, then I'll take two months off, then I'll take and this is all me walking away to see how well will the system run without me. Now, if somebody wanted to acquire my practice and remember I said I'm not selling my practice but if someone were to acquire it, I have been away from my practice for as long as 24 months and we grew in profitability without me, and so there's no question of will the practice survive if I'm not there, because there is evidence that it did really well when I was not there. Okay, so you wanna have the team. So you wanna start building that? Oh, I don't like working with people, I do it all by myself. You're gonna shut down your business, right? You're not gonna be able to sell it, you're not gonna be able to hand it off. You don't even know how profitable it truly is, because maybe you're doing the roles of five people and you're paying yourself one salary, so you don't actually even know if you'll be profitable if you're not there, right? And so I'm not saying exit your business. No, that's not what I'm saying. But what I am saying is you need to build a team. If you take us a one month sabbatical, a two month sabbatical, that'll be just fine and test and see how is this working. Now remember, if you're at a stage where you have bigger fish to fry, right, you need to work the profits. You need to build a team. So maybe you have a team that's full of people who can do tasks, but you don't have teams of people who are leaders. The first thing you're gonna do is not take a sabbatical. You're gonna put the things in place and then take the sabbatical to see how the team and the processes and the systems and the profits and all of that worked without you. So we're gonna build this in steps. Remember, I said this is a multi-year process. This is not something you're gonna listen to this podcast episode and say what I'm implementing. Yesterday You're gonna look at it and then you're gonna start building these blocks, one at a time. Okay, when you are earlier in business, I compare your business to a kayak right, like it's a. You can flip it any way you want. You can change directions at the drop of a hat. You can do all of that. The bigger your business gets, the more it's like a cruise ship. Okay, now, cruise ship. You don't just flip it and it turns. This is a process to get it to turn around. Okay. So when this process is a cruise ship process, it's not a kayak process at all. So you're gonna need to flip it around. It's gonna take a moment to do it, but when you do it it'll be amazing. Okay. But if you don't start today, then you'll never get done. Okay then, number five the last thing I'll talk about here is really your strategic like ads, and what I mean by that is there are things you add to your business because you know you want to sell it and so you wanna work on the valuation okay. So, for instance, when you have businesses especially well, not especially online businesses but when you have businesses that have a high monthly recurring revenue, the valuation is so much higher, okay, so they use multiples of EBITDA. Well, let's just say they use multiples of profits. Okay. So let's simplify it. We say we use multiples of profit and for if they're just going based on annual revenue and this is different per industry, so I'm just giving an example they may say that the valuation is two times your annual profit, but if you have a nice monthly current revenue, that valuation goes from two times profit to 10 times profit. Maybe you're running a business and for you and for the ease of things, you have everybody paying in full. So, let's say it's a coaching company you have everybody paying in full. Now, if you're getting ready to exit let's say you want to exit over the next three years then what you begin to do is say, hey, this is now how we want people to pay. So, for instance, you have $100,000 coming in every month in monthly recurring revenue. 10x, that is 10 million. But if you have the same amount of money that's coming in, that comes to 1.2 million a year. What would have come in a monthly recurring revenue, and it's times two, it's 2.4 million. So the question becomes is 7.6 million? Is that difference enough to make you do something different? And so a lot of people what they'll do is they'll add that in, they'll add in something either change the payment structure or they add in something that gives monthly recurring revenue. So if it's like a direct primary care practice, we're looking at monthly memberships and things like that. And are you going to do that in the beginning? Maybe not, because the annual membership is going to create more stability, and I just want to make sure I say this so nobody says, oh, let me just go for the monthly. The monthly has its issues as well. So that's why I call this strategic ads. As you get closer to wanting to exit, some other people will add a software like just adding a software dramatically changes the valuation of your business, because what you're talking about is something that does not necessarily require more team, doesn't require more overhead, is very scalable and all of those kind of things. So, for instance, in the on-term do world, I can decide that I want to add an app where people go in they get content they can't get on the podcast. They get some things that are for accountability maybe we gamify some things and all of that and people are just subscribing. They could do ask a coach, all those kind of things and people are subscribing. I mean by the hundreds and the thousands and the tens of thousands right Now. That alone, adding that, massively increases the valuation of the company, okay. So I just wanted to put this out here so we can start thinking in those terms because, truthfully, the right time to start thinking about this is from the beginning. It doesn't mean you implement all of them, but as you build you'll be able to take the right building blocks and put them in the right places. Okay. So for you listening, I want to challenge you. You may never sell your business. I have never seriously considered selling any of my businesses. I have never talked to a broker, I've never done any of those things. But I have always built with the thought process that I need to build this in a way that if I wanted to sell, I have the option okay. If I wanted to pass it on to somebody who's not even doing what I do, I need to know that I have created the option okay, and because I am doing that the businesses are healthier, they're more sustainable, they don't have a lot of fluff, because I know exactly where I'm going and what I'm trying to build. Okay, so I want you to take this, I want you to think on this. This is probably one to listen to a second time and kind of workshop it, where you're examining your business and auditing as you do that, pick up a few next steps that you can take action on. And if this episode really resonated with you, one of the things I want you to do for me, which I would really appreciate it is I want you to take this and give this episode to every physician entrepreneur in your life and say, hey, I want you to take a listen to this. You'll thank me, but you really thank me a decade from now. Okay, thank you for listening. Be sure to share this. You share it on social media, tag us, hashtag ontrendy, and I'll see you on the next episode of the Ontrendy podcast. If you enjoy listening to the Ontrendy podcast, you have to check out the Ontrendy business school. It's the number one business school for physicians who want to build six, seven and multiple seven figure businesses. You get the coaching, the accountability and the community you need to do the work so you can thrive. To find out if this is your best. Next step, book a call with my team ontrendycom forward slash call. That's ontrendycom forward slash call. I count. Wait to celebrate all the wins we can create together. Really appreciate it.

Building and Exiting Your Medical Practice
Treating Your Business as a Product
Building a Profitable and Sustainable Business