Secrets to a Successful Business Exit with David Fairley

Intro (00:09):
Welcome to Innovations and Breakthroughs with your host Rich Goldstein, talking about the evolutionary, the revolutionary, the inspiration and perspiration, and those aha moments that change everything. And now here’s your host, Rich Goldstein.

Rich (00:33):
Rich Goldstein here, host of the Innovations and Breakthroughs podcast, where I feature top leaders in the path they took to create change. Past guests include Ryan Deis, Joe Polish, and Jason Flatland. This episode is brought to you by my company, Goldstein Patent Law, where we help you to protect your ideas and products. We’ve advised and obtained patents for thousands of companies over the past 29 years. So if you’re a company that has software or product or design you want protected, go to goldstein patent law.com where there are amazing free resources for learning about the patent process. And you can schedule a call with my team@speaktolarry.com to explore. It’s a match to work together. You could also check out the book I wrote for the American Bar Association that explains, in plain English how patents work. It’s called the a b a Consumer Guide to Obtaining a Patent I have with me here today, David Fairley. David is the founder and president of Website Properties, an online business brokerage that sold over $650 million in, in sales in businesses. And prior to that, David also established a, a hammock import business that eventually became hammocks.com and later sold to a billion dollar company. Uh, and that was just the first of 20 online business, um, businesses that he would create and sell. And so with that experience and that background, I’m really happy to welcome here today, David Fairley. Welcome David.

David (01:52):
Thanks, Rich. Great to be here.

Rich (01:55):
Absolutely. So, yeah, let’s, let’s talk about how you got started as an entrepreneur, um, and, uh, and, and what those first experiences were like.

David (02:04):
Oh, well, I guess, how far do you want to go back? <laugh>? I think I’ve been an entrepreneur my whole life. Uh, just grew up, you know, I grew up on the prairies and so, uh, we had, uh, winters with, uh, four feet of snow, so there was lots of, uh, snow plowing and driveway cleaning. And then of course, summer I spent a lot of time cutting lawns and doing gardening and weeding and stuff like that. That was my initial foray. Started at home, and then I, I kind of ventured out, but I think, uh, I’ve been an entrepreneur my whole life. Um, as regarding, you know, where it led me to, at this point, um, in the nineties, I had been importing hammocks. I had traveled, done some traveling, and came across the, um, the Mayan hammocks when I was overseas, actually in Australia.

David (02:47):
And, and when I came back, I ended up going down and, uh, started importing those. And so I, I did that in the early nineties, and then when the internet came along, I really jumped on quickly. I saw the opportunity to, to, uh, avoid going to trade shows and malls and, and re you know, repeating the same thing again and again at, at concerts and, and festivals and fairs. And so, uh, the internet was really sort of the, just a wonderful opportunity to just take off. And so that’s how I got online. That was around 90, 19 96. So it was pretty early, relatively early, the wild West. I also got into a bunch of domains early, um, eventually getting hammock.com and, uh, yeah, just, uh, it just took off. I was lucky. Good timing. Of course. Mm-hmm. <affirmative>. Um, but

Rich (03:35):
I love those early e-comm stories, so I’d love to hear about that. About starting an e-comm business back in the nineties.

David (03:42):
Yeah, I was, uh,

Rich (03:43):
Look, the Gary V of Hammocks

David (03:45):
<laugh>, well, I mean, I’m like, so like, it’s interesting, even after being online for 30 years, I’m still technically not very savvy. So I, uh, I, I had to lean on a couple friends that were somewhat, uh, knowledgeable and they ended up building my first, uh, my first website and getting me on, on Yahoo and some of the other search engines. But I think things really took off. Uh, at one point when I did acquire the, the name hammocks.com, it was like two and a half years in, but um, it just really was such a branding opportunity. It’s it’s IP as well. So I trademarked that and I immediately got picked up in, um, in a few magazines. And one of the big, big breakthrough was I got picked up in Men’s Health Magazine and, you know, 31 best places to have Sex. And the opened up the magazine in the middle, and it was a centerfold of a pretty girl and in a hammock and with, uh, hammocks.com and the 800 number. And it just like, that really proved the value of, of the, uh, of acquiring that name. I think I’m, I think I did a hundred thousand dollars in in February, which is an off month for hammocks, uh, back at that time. So, um, yeah, it was just a, it was a wild ride. Let’s just, uh, to say the least.

Rich (04:56):
Yeah, a absolutely. Um, and, uh, um, and, um, so then you exited that business and you went on to create a bunch of other businesses. Like what, what, what do you feel like were, were the ones that really taught you something that was, is valuable to, to what you’re doing now, working with other businesses on their exits?

David (05:15):
Well, the first one really exiting from hammocks.com. I mean, I, I literally went out to find a broker that could handle a deal. And at the time, no one really had a clue of the fundamentals of, of online businesses. And so I ended up, uh, hiring a couple people. They didn’t work out. I paid ’em money up front, and that went nowhere. So I decided to represent myself. And so that was the first lesson that was in the end, it was a tough lesson. I got out done by a company that had better resources and lawyers. And, um, you know, that was, uh, I, I think, you know, the lesson of that was just, you know, to, to have good advice and people around you. ’cause you only know what you know. And so there’s lots of pitfalls out there. And, you know, long story short, I felt like I didn’t get what I should have for the deal on the front end or the back end.

David (06:02):
Um, but it, what it did do is it inspired me to just go out and start, I started picking up a lot of latent sites. It was right around the time that Google came out and AdSense, I had the AdSense Pro program rolled out, and I was really quickly to jump on that. So I started buying latent content sites back in the day when, you know, these things were sitting around for five years or sometimes longer, and they just had great content. So I started buying those and monetizing those with AdSense and affiliate clicks, uh, ClickBank stuff. And so then, you know, from there, I just started buying and holding and selling every year. You know, I hold six months to 18 months and flip those and sell those. And, um, that, that went on for a few years. And, you know, I just got a lot of experience selling, and then other colleagues and friends started asking me to do it.

David (06:44):
And that, that kind of turned into, into, uh, website properties formally started around 2005. And since then, we’ve, as you mentioned, we’ve done over, you know, 650 deals or 500, 500 to 600 deals and 650 million in mm-hmm. <affirmative> gross sales. So, uh, that first deal was probably the most, I think I got a lot outta that. And just, just the, the thing that, the main thing that I, I got out of it was that’s the drive to help other entrepreneurs that were sincere, hardworking, and built something not have, you know, have the exit type of exit that I had that you, you know, you feel like you had some regret with it. It was basically that was, I think, the driver for the why of why, you know, get out of bed and help people is just to, I want them to, to avoid the pitfalls and, and optimize their exit that they deserve for all the hard work, you know? So that’s how it led me here to this point.

Rich (07:37):
Got it. Um, and, and so I guess that’s kind of something that you, you see as a, as a trend is that people often, um, go through a transaction that they’re initially excited about and then at some later point they think, well, maybe I could have done better if I adjust blank. And it sounds like you’re, um, you’re a big proponent of, of having people with experience to be there with you on that journey.

David (08:00):
I think so. You know, the, the main thing is just to have a sounding board of someone that’s got years and years of, um, experience doing what you’re gonna do. And you, you may do once or twice in your life. And it, a lot of times it’s a huge life changing experience, especially if you’re selling a, a significant sized business that’s seven or eight figures. Uh, even six figures is a lot of money, uh, to, to most people. So, you know, it’s something you have to take seriously and you, you want to provide guidance that helps people, you know, set set themselves up for success and not regret, um, timing is everything. And we, you know, the thing that we often do with people is just make sure that they’re in the right frame of mind. ’cause you can’t really be, you have to be clear that you’re done and that you don’t have the energy to go back.

David (08:43):
Sometimes, you know, you shouldn’t second guess your, uh, I think your gut feeling. Most people that come to the conclusion that they wanna sell, I found over the years that, that if they go forward with that, that in that, that instinct, they usually do the best. And if they question that and they, they second guess their instinctual, sort of knowingness, um, it, it often they, they try and time it and they end up on the other side of the, the bell curve and it’s, you know, it’s trying to fire, sell a deal. So mm-hmm. <affirmative>, um, yeah, a lot of it’s just timing and knowing, you know, being clear with yourself. I think it’s not like you, uh, I think most of entrepreneurs, um, are confident once they’ve built a business that’s worth something, that they can do it again quicker and fe better. And, and, you know, just like me, I have a, I had to always reign in my ideas. It was always too many to pursue at one time. So, uh, you know, that, that, I think that’s a common thing that I see with other entrepreneurs.

Rich (09:37):
Mm-hmm. <affirmative>. Yeah, absolutely. And so it, it sounds that, um, that part of it is a, a lot of, um, uh, a lot of entrepreneurs aren’t really clear that they’re ready to exit. Um, and so it’s a, a matter of like a, you know, like assessing whether they’ve got a plan for what they’re doing next, or like, or even confidence that, that they’re going to, you know, they’re gonna do it again, that they’re going to, to have Yeah. Take another one of their ideas and turn it into something. Or, I

David (10:06):
Think it’s important for people to have an, you know, an exit strategy already in mind before you start a business. Like, I’m gonna, I’m gonna put in five year, three to five years and, or whatever it is. Um, uh, and then I’m gonna, I’m gonna sell it and move on to something else. There’s also other personalities that all they do is build and they, you know, they create a portfolio that’s a whole other different type of mindset. ’cause you have to be pretty good at operations and be organized and stuff like that. But I think, I think that, um, you have to be, I think if you start with, I’m gonna exit my, you know, end goal is to exit and have a nice capital gains and a, uh, and, and something as a nest egg, then you have to, you know, then you prepare better at the beginning. You actually create a better foundation and you protect your ip. You, um, you make sure that your books are good. You make sure that you’re, you know, you don’t have one customer that’s takes up more than 20% of your revenue. All those things that build value and, and you have good people that work for you or that can facilitate, um, anyone, any new owner, like it’s turnkey, they’re contracted out. Those things in place, those type of relationships are super important as well.

Rich (11:11):
Yeah. Like the, um, I guess the things that make the business transferable Yeah. In terms of IP and the, um, um, having, um, customers, um, a customer list that isn’t necessarily concentrated on a couple of key customers or customers that are there because the owner is there, but won’t necessarily stick around after that or Yeah. Having, having that in place.

David (11:37):
Yeah. I think it’s also, it’s more like idea of like making yourself, uh, obsolete with the business. Like, you’re not important. You’ve built everything so that it can run with or without you, and that’s really the ideal position to be in. But, you know, you know, I think when you go out on your own to build a business, uh, to begin with, you’re, you know, I don’t think people get excited about that, but then they become slave to the business. And I think really what you want to create is you want to create a business to give you more freedom. Um, and so you gotta find something that’s going to allow you to do that and protect your, you know, protect that along the way so that it, it’s easier to sell.

Rich (12:12):
Yep. Absolutely. And, um, so like, you know, what are some of the, the, um, um, this, the ingredients to success or a successful exit? Like what are some of the things that, um, that entrepreneurs should have in mind, um, as they, as they think of putting their, their, um, well, getting their business ready to be on the market and ready to exit?

David (12:35):
Sure. Well, as I said, and number one is just go to organize books. ’cause I think in any successful transaction, you have to be transparent. And it’s hard to be transparent if you’re, you know, not your, you don’t have clear, uh, reconciliations with your, your financials and your tax returns and your bank statements and stuff like that. So that’s number one. Number two, I think it’s, you’ve gotta be, you have to have a business that has some sort of mode around it. It’s got some, you know, some barriers to entry. It’s not, you know, it’s not terribly generic that you’re fighting everyone else, you know, on Amazon, every Chinese manufacturer in their country. It’s you, it’s, I, you know, I think it’s important, um, to do that. And, and you may have product that is in a competitive niche, but it’s about how well have you done the branding?

David (13:16):
How well have you protected your, do you have any, um, you know, do you have your name trademark? Do you have, um, patent, is it patentable or do you have technology that’s really unique, you know, software, um, things that, how automated is the business? I mean, it’s just those, those are the things that are really, people are looking for. Branding’s huge. Um, you know, also the consistency of the, of the revenues, uh, and the margins. Now, you know, no one wants to, like, everyone’s looking to buy a business that’s gonna give them cashflow, the cashflow that coming from the corporate world, that’s gonna replace what they’re making in the corporate world without all the stress. Um, so I think you have to, um, just, it’s about to prepare your business. You wanna make sure that you are, um, mitigating your expenses, unnecessary expenses, and just trying to run a, you know, really run a, a well-oiled machine, um, that you can pass on. And it’s not geographically limited. That’s the other thing. Um, uh, why I’m focused on online businesses and why I’ve been on, focused on online businesses primarily is just ’cause it’s, you know, there’s buyers and sellers, uh, around the world. We’ve got clients in every country, you know, most continents in every country.

Rich (14:25):
No one wants to move to your town and run your factory. Like they, yeah.

David (14:30):
Yeah. So I think that’s, and that’s a huge component of like, what’s makes these things so attractive is that they’re, they’re 24 7 typically, you know, sales 24 7, you don’t have to have a lot of employees. You can ro work remotely so you can, you know, either stay, stay on your 10 acre property like I do, or live on a beach and surf and, and do, you know, like be a, a traveling nomad, digital nomad, like a lot of them are. Uh, it just gives you a lot of, I think, versatility. But again, it’s just, well, you know, a well run business that has got some moats around it. Um, good product mix, um, you know, diversification of channels, you know, some, there, there’s a lot of people that wanna buy Amazon businesses because they have other, it’s easy to consolidate and aggregate that way, but, you know, that’s only one channel. Amazon’s enormous. But, you know, you, you want to go, you want to have, um, uh, a way of owning your customers and diversifying into maybe, you know, starting with the Shopify site that you can, you can, you can, um, advertise on social media, not just on Amazon. And, and you can, maybe you have

Rich (15:34):
Your customer list <laugh>. Yeah. Have your actually know customer, your customer list. Yeah.

David (15:38):
Yeah. And they’re, that’s the one, that’s the one sort of thing about Amazon businesses that we’re, we’re the sort of the hidden flaws that you don’t know on your customer. At the end of the day, Amazon does, and they own your, they have all your data and they know, you know, what products are doing well, what categories are doing well. So you have to just, I think just be mindful, uh, about that. Anyway, I kind of, we kind of went all over the place with that <laugh> <laugh>. That’s one. That’s

Rich (16:02):
True. I mean, yeah. Uh, I, and I think that that’s good insight there in terms of channels and, and uh, um, and kind of opening with a channel where you really have the, the best or most direct access to your customers, like through Shopify site.

David (16:17):
Yeah, I, it’s just, it’s just the fact, like you can have everything. You can have both, you can have, like, there’s a lot of people that start with a Shopify site and then they set up on Amazon, and, but with Amazon you’ve gotta be really be careful. ’cause you’ve gotta, if you’ve got products and you’ve got a brand and you’ve done it well, and you trademark it, then you can get it gated and what’s called a gated listing on Amazon. So that protects you from other people knocking your product off and using your images and all that stuff. And so, and patents go even further now what we, we’ve, uh, spoken, uh, with another patent attorney that’s worked for a couple of our clients and they are, have become very aggressive on Amazon and being, they’re able, Amazon will actually freeze the money, uh, from a, um, a seller that’s abusing their, you know, the product things and actually give that money to, um, to the seller or to the, you know, the attorney. So I think there’s some interesting things there that are, are protecting, uh, it’s just better in my mind to do what whatever you can to protect your, you know, your business as far as far as you can with, you know, whether it’s, if you’ve got unique products and stuff like that. So, um, but yeah, it’s, um, definitely, you know, important to diversify. Like anything, it’s just good strategy. So you don’t have all your eggs in one basket. That’s common sense business practices.

Rich (17:30):
Well, what’s lead time that you typically look for before someone is, is looking to exit, to start the conversation about getting things together? Like is it, uh, if, if someone wants to exit, let’s say a year from now, is that the right time to approach you and talk to you about it? Or if someone wants to exit two and a half years from now, is that too early to begin the conversation about, about setting up for exit?

David (17:57):
I don’t think it’s ever too early to have the conversation. I mean, we’re typically, people come to us when they’re thinking about listing like in the next three to six months or right now. Um, certainly there’s a lot of people that will ask us, uh, they’re in the early stages of either setting up or thinking about an exit, so they might be two or three years out. Um, you know, we’re happy to provide guidance and just this kind of information that we’re ha conversing o over right now is super valuable. It’s like just, it’s just like building a, a skyscraper. If you don’t have a strong foundation that thing’s gonna blow over. Like you, you just have to think about it. You’re building something you want to have, uh, longevity with. You want to have it solid so you take these steps. Um, but we’re happy to have conversations with, with people that are, you know, a year out or even, you know, a couple years out is fine.

David (18:45):
Um, you know, they, and they could already be at a s cycle where they’re doing, you know, seven figures a year and they’re just, they’ve got an aspiration to get to, you know, have an exit at some number and what do they need to get there? So any of those, we, we’ll talk to people that will come back to us three or five years later, um, and sell. So we’re, it’s, this is a business of, of relationships and building, you know, a network based on the sincere desire to help and to, um, provide some sort of value. So that’s sort of our purpose driven model. So we’re happy to have those conversations and help other entrepreneurs, uh, because I think that’s, that’s genuine, um, authentic kind of, uh, business drive that you, I would want someone else that’s gonna, I’m gonna go to, to get mentored. I want them to think the same way. So we try to apply the same type of philosophy with people that are approaching us for, for assistance or guidance or, you know, ultimately to broker their business, which is a life changing event typically. So we take it really seriously. Yeah,

Rich (19:47):
So, so in in essence, it’s never too early to begin those conversations and it pays to really start, um, having conversations with pe people that are experienced having gone through this process before and that could help you to, um, to set up your business in the right way for exit and yeah, I praise that good exit strategy is just good business strategy.

David (20:12):
Yeah, absolutely. And you know, look, the thing is, most people that are looking at your, they’re gonna look at your last, your most current three years revenue. So, you know, you’ve got, you, you wanna make sure that those data points are looking strong, the fundamentals are, are based in the financials. And so if you’ve got a business that’s doing very well, so, you know, for the lot since 20 20, 21, 22 and it’s trailing 12 is doing well, like, that’s a trend that people are gonna get excited about. They’re gonna see, okay, I’m gonna get my money. I’m gonna get a 30% or a 40% return on investment. Um, if everything, you know, holds the same and these, these, you know, you have to do your due diligence on a business. But that’s kind of what people are looking at. So, and yeah, it’s just

Rich (20:53):
Cool. Well, awesome. And, and so if, if people wanna learn more about you or get in touch with you, David, how they go about doing So,

David (21:00):
Uh, they can go to website properties.com. That’s our, uh, we have lots of content there. Our listings, they can see what, how we present and, uh, they can learn about the process there. They can reach out to me on LinkedIn or at dfairley@websiteproperties.com as well. But happy to, to, uh, you know, provide any guidance we can to, um, anyone that’s, you know, in the process or close to, to the point of, uh, when they want to, uh, start understanding their valuation of their business and, you know, maybe the time to exit is coming up closer than they think <laugh>, you know? Yeah. Sometimes you get, sometimes you get your business appraised. It’s like, oh God, I want to <laugh> the time is now. So, uh, but yeah, we’re happy to have those conversations, so.

Rich (21:41):
Awesome. Well, David, thank you so much for taking the time to, to do this interview. Really appreciate it.

David (21:47):
Hey, my pleasure, Rich. Thank you for having me on. It’s a pleasure.

Outro (21:56):
Thanks for listening to Innovations and Breakthroughs with your host Rich Goldstein. Be sure to click subscribe, check us out on the web at innovationsandbreakthroughs.com and we’ll see you next time.