The Three Exit Levers
Grow what you'll sell by pulling profit, revenue, risk, and systems.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 4
- Confidence
- 83%
Sanchez teaches that most money in buying and building businesses is made on the sale, because small businesses sell for roughly 3-5x profit. So a $100k-profit business bought for ~$300k that you grow to $200k profit can sell for $600k-$800k, fast-tracking years of future revenue. To lift that exit value there are a handful of levers: increase profit, increase revenue, decrease risk, and improve the systems, processes, and people. Because your first deal probably won't be your last, she says you should plan the exit from the moment you buy, treating the first business like a first job you'll grow out of.
Origin
The closing framework of Main Street Millionaire, reflecting Sanchez's own practice of buying, improving, and reselling businesses like her podcast production company.
Core principles
- 01Most of the money in businesses is made on the sale, not the operation
- 02Small businesses sell for roughly 3-5x profit
- 03Raising profit multiplies exit value at the same multiple
- 04Plan the exit from the moment you buy
How to run it
- 1
Increase profit
Raise the bottom-line profit, which at a 3-5x multiple directly multiplies the sale price.
Pro tip Doubling profit roughly doubles exit value at the same multiple.
- 2
Increase revenue
Grow top-line revenue to expand the base the multiple is applied to.
- 3
Decrease risk
Reduce the risk in the business (customer concentration, key-person dependence) so a buyer will pay a higher multiple.
- 4
Improve systems, processes, and people
Strengthen the operating systems, processes, and team so the business runs without you and is worth more at sale.
Pro tip Plan this from day one — your first deal shouldn't be your last.
In the wild
Sanchez models buying a business for $300k that makes $100k profit, growing profit to $200k, and selling it for $600k-$800k at a 3-5x multiple.
→ The owner fast-tracks multiple years of future revenue into a single lump-sum gain on exit.
Sanchez bought 49% of a podcast production company for about $10k, profited roughly $5-10k a month for about a year, then sold it back to the owner when it was no longer big enough for her portfolio.
→ A clean buy-improve-exit cycle on a small boring business.
Common mistakes
Never planning the exit
Treating a first business as forever ignores that most of the money is made on the sale and that you should scale up or out.
Is it for you?
Best for
Owners planning to buy, improve, and sell a business for a multiple gain.
Not ideal for
Owners emotionally committed to holding a distribution business forever.
From the transcript
“most of the money in buying businesses and building businesses is made on the sale”
“the three levers are can I increase the profits can I increase the revenue of the business can I decrease the risk in the business…”
From the episode
Codie Sanchez: How to Make Extraordinary Wealth Buying Boring Businesses
Codie Sanchez