Honest Marketing

AJ Silber: How to Scale and Sell Your Business

• Honest Podcasts • Episode 57

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When it comes to scaling up and selling businesses, few know the ropes quite as well as our guest today, AJ Silber. With a wealth of experience under his belt, AJ's going to guide us through his journey of transforming his agency, the Guerrilla Agency, into a hot ticket for acquisition.

From the importance of being strategically persistent with SEO efforts, to diving into building topical relevance and authority in your niche, you'll learn the key factors that led to his agency becoming a lucrative asset.

He also reveals the nuts and bolts of selling his business, from business valuation to term sheet negotiations and the importance of strategic exit clauses.

If you've ever pondered the future of your business and how to take it to the next level or even prepare it for sale, this episode is a goldmine of wisdom. 

Tune in now to harness the full potential of your business venture!

Specifically, this episode highlights the following themes:

  • Effective SEO strategies and their role in scaling a business.
  • The process and considerations in selling a business.
  • How to transition post-acquisition and shape future entrepreneurial journeys.

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And if you have a guest in mind who you think would be a great fit for this show, drop me a line at hello@honestpodcasts.com. 

AJ Silber [00:00:00]:
One of the big things in SEO is that you really want to build up. It's called topical relevance and authority. The general idea is that Google wants to see that you're an expert because they're really heavily focused, at least now. And even it was starting to be more even, like relevant then. But it's called EEAT, so it's experience, expertise, authority and trust. So it's baked into Google's algorithm. And when I say topical relevance and authority, what I really mean is like, covering every single possible avenue and topic like there is in your niche.

Travis Albritton [00:00:34]:
Welcome back to the Honest Marketing podcast, where you learn proven strategies to grow your business without selling your soul. I'm your host, Travis Albritton, and today you are in for a real treat. My guest is AJ Silber. He started, grew, and sold his SEO agency, the Gorilla Agency, a Minneapolis based SEO agency working with small businesses. And so we talk about his early days, how he got started in the agency world, how he got his initial set of clients, how he scaled beyond his initial network. And then at the end of the episode, we talk all about selling your company, which I know for a lot of you, listening is something that you're thinking about or have thought about as a potential outcome for growing your business or investing in your business. And so I asked him all about his process, the things that he learned, some things to be thinking about and thoughtful about for yourself as far as positioning your business. To have a high evaluation all the way to what? To make sure you put in the term sheet so that way you don't get stuck holding the bag after the fact.

Travis Albritton [00:01:33]:
So definitely a wide ranging interview, but I think you're going to find a.

AJ Silber [00:01:35]:
Lot of value out of it.

Travis Albritton [00:01:36]:
Make sure you stick around to the very end of the episode where I'll give you my number one takeaway from my conversation with AJ. But here it is. Let's dive in. AJ, welcome to the Honest Marketing podcast.

AJ Silber [00:01:47]:
Thanks for having me, man. I'm really excited today, to be honest with you. I mean, I know we spent the last even ten minutes kind of connecting and talking, and I can tell this is going to be a fun one.

Travis Albritton [00:01:56]:
Yeah, for sure. If nothing else, we will have a pleasant experience between the two of us, and I expect everyone listening will as well. So before we jump into kind of the things I want to pick your brain on, I would love for you to just set some context on your background, specifically with the guerrilla agency that you led and grew and eventually exited, and then also tell everybody listening what you're up to right now?

AJ Silber [00:02:20]:
Yeah. No. So I'll kind of give you the medium version of it, I guess I would say, because I can go pretty in depth for the last kind of five, six years, but kind of call it, like, circa 2017. I started doing some marketing consulting, had absolutely no idea what I was doing. There's a lot of small businesses that also don't have any idea what they're doing. So the little knowledge of the articles that I read on the Internet were more than they knew. Right. Which is all you really need to start kind of selling your expertise.

AJ Silber [00:02:53]:
So I ended up going to a. There was a brewery right down the street from my house in northeast Minneapolis. It was called six one two brew. So I walked in the door. I, at the time, was working kind of partially as a marketing consultant and partially as kind of call it the CEO, the single CEO of a software company. So there was two of us. It was my kind of co founder, and I. And so I was pitching that to him.

AJ Silber [00:03:18]:
And I also was doing, again, a little marketing consulting at the time, or attempting to do some marketing consulting. And so he asked me, he was like, hey, yeah, the software is really cool and all, but we need somebody to run our social media account. And I was like, that's something that I definitely know how to do. So I go home. I wrote up this very long proposal on exactly what I was going to be doing. It was like 85 pages fast forward to at the height of the gorilla agency. Our proposals were, like, three. So I'm just starting out.

AJ Silber [00:03:49]:
I write this long proposal up to them. I send it out, and I specifically remember, and I'll never forget it, it was like $1,400 a month. And I was like, there's no way that he's going to be willing to pay $1,400 a month. I pulled that number out of thin air, and he signed the paperwork, and he said yes. And I started the next day, and I was like, oh, my God, this is something that I could make money doing. This is insane. And then call it fast forward, like, six months. I ended up having, I think, eight clients.

AJ Silber [00:04:20]:
I got really lucky. I had a large network of individuals. I went to the University of St. Thomas, which kind of had a very tight knit alumni network. So at the time, it was a lot of like, hey, I'm AJ. I also went to the University of, and, you know, just doors get opened. So I was very fortunate there and grateful for that. So, again, I built up a lot of clientele in terms of doing kind of social and SEO and SEM.

AJ Silber [00:04:48]:
And at the time, again, as a marketing consultant, the door is really wide open. Right? You can do SEO, you can do social. I used to tell people that I would paint their back porch if they paid me enough money for it. No model. Yes, right, exactly. No porches were painted, by the way. But then I started really digging into SEO. And the difference between SEO and social, at least from an agency model standpoint, was like social media.

AJ Silber [00:05:20]:
Like, hey, I'm promising likes, I'm promising followers, I'm promising engagement. I'm maybe promising that some people are going to come to the event that you're going to have on Saturday. That said, the difference again is like night and day from that SEO, which is like lead generation, right? Like, I'm getting actual leads in the door for your business, and I'm looking for kind of that bottom of funnel engagement. So I started really seeing success there and it was a much easier sell. Right? Like, again, going up to these businesses and saying like, hey, I do social media versus SEO again was like, yeah, I'll pay more money for that. I'll pay more money for leads. And that's really what we're looking for. So I then decided like, hey, I'm dropping kind of this software gig.

AJ Silber [00:06:01]:
I'm really going to focus heavily on specifically niching into kind of SEO SEM. And we always did web design just because it was kind of a necessity. We had to, like, if somebody came to the door, small business typically didn't do web design or have a web design or two. So we started doing that and then we rebranded as the guerrilla agency. And then over the course of four years, we scaled that to kind of a multimillion dollar agency, which was awesome. At the height of it, we had 16 employees, which is pretty rad. And we kind of had this team, this cool office over in northeast. And then I was approached by a larger agency out of Kansas City to actually acquire that.

AJ Silber [00:06:44]:
So I ended up selling it in 2022, which is pretty sweet. Learned a lot from that process, to say the least. And then over the course of the last year, I had to kind of transition the business out. So a part of that kind of m A was like, hey, let's again transfer the business out. And I had a year kind of contract of doing that year and a half, and now I'm working on a new project called Small Business Bonfire. And kind of the general gist of Small Business Bonfire is it initially started out. I acquired that website two years ago. I've been kind of running it as kind of my own asset of SEO.

AJ Silber [00:07:20]:
Again, it was more of display advertising, kind of affiliate marketing, and now I'm kind of building that out to have kind of a suite of services, really, that I'm offer. We have a newsletter, which is great. It's called the Bonfire field Guide. So I'm really kind of speaking directly to kind of the Internet side of your business or Internet based businesses on how to start, grow and scale and the kind of lessons that I learned throughout the last four or five years. And then I currently am offering some coaching stuff, and then I'm actually building out some kind of beginner courses. Again, I think I've really been fortunate enough to work with a lot of small businesses, and that's kind of driven a lot of my passion throughout the last five, six years. When you see going and working for, working with a Cargill, a target, a best buy, things of that nature, and I can add a half a percent of value or half a percent of top line revenue, I mean, that's cool, right? And you get the big name brand, but when you can double, triple somebody's gross revenue as a small business owner and change lives, it's huge, and you create really great relationships that way. So that's kind of some stuff.

AJ Silber [00:08:30]:
I'm actually going from working with more of these, again, small businesses, call it a million, 2 million plus in revenue, to, hey, I'm making ten grand a month. How can I go from ten grand to 30? So that's even been an interesting thing over the last year or so, too. Anyway, I hope that kind of encompasses the whole thing.

Travis Albritton [00:08:52]:
Yeah, no, it's a good framework because we're going to dig into each of those different chapters. I have specific questions I want to ask you on each, but before we go into that, I just want to tag in on the end. What's really driving you at this point in your career? Like, you've had a successful exit. You're in a place where you can basically choose the path that you want to pursue moving forward. Why go into basically education? Why go into more of a service mindset of, okay, I'm going to take the things that I've learned from helping the big guys, and now I'm going to work with business owners really at the beginning of their process, their journey, when they don't even know how to spell a CEO. Like, I'm going to meet them there and help them get to where they want to go. What internally is driving that? Because what I see a lot is agency owners that have a certain amount of success, and they basically just parlay that into the next level and the next level, and they're always trying to level up as far as the size of their clients or the cachet of the brand that they're working with. Where do you feel like you are in building your personal brand and what you're wanting to lean into in the next couple of years?

AJ Silber [00:09:55]:
Yeah, thanks for asking that question. Actually, it's very interesting because, again, I think a lot of agents C's run that way, too, that I can specifically speak to is like, when they start out, it's like, hey, I'm working with that $10,000 a month entrepreneur or $10,000 a month business, and how do I get to the million dollar mark and then how do I level up from there and work with the targets, the best buys of the world? And I think that is, again, from a coaching perspective, I could go into and have went into businesses and helped kind of coach specifically their marketing team or things of that nature. So that's something that I'm capable of doing. I think that it just sets me on fire talking to a lot of these younger entrepreneurs. Right? Like some go getters, when you get on the phone with these cats and you're like, hey, listen, you can do this, you can do that. They actually implement the stuff and they start growing and they have a business and they're able to quit their day job or they're able to scale their company further. I mean, I think that stuff, again, really, again, I guess, sets me on fire from the inside. And I learned that kind of early on because, again, a lot of times when we were at the agency, we did have a lot of smaller clients kind of initially, and those ones were always the most fun to work on.

AJ Silber [00:11:05]:
Right. They didn't have an established business process. They didn't have a business model that they could really scale effectively. And I think that was the stuff where it was like, hey, I can have more influence there as opposed to like, hey, I'm just your guy who gets you leads, your leads guy. You know what I mean?

Travis Albritton [00:11:20]:
Yes.

AJ Silber [00:11:21]:
So in terms of, that's sort of what's currently driving a lot of my passion, just, again, working with a lot of these younger, smaller businesses, younger entrepreneurs, smaller businesses. That said, I think one of the things that we already started talking about before the call was like, I'm kind of in process of, my goal is to really kind of build my personal brand up, and I think that opens a lot of doors into other businesses. That I can either get involved with in terms of, from an advisory role or kind of a mentorship role. And then also I've got several ideas that are kind of in different spaces right now, just in terms of starting different businesses. So I think in terms of, again, Small Business Bonfire, it's like, how can I help these folks in the kind of the interim? And then where can my kind of investing, entrepreneurship kind of life take me, if that makes sense, while I'm enjoying? Totally.

Travis Albritton [00:12:20]:
Totally. Yeah, you're in Tulum right now. Definitely a sunnier destination than most of the US when we're recording this in know where. It's like sleet and frozen rain and snow everywhere, and we got some palm trees in the background. And it's definitely nice to be able to live the digital nomad life. I know. Yeah. So let's go back towards the beginning of your story where you were just getting started with your agency.

Travis Albritton [00:12:47]:
You'd kind of stumbled into an agency model, which I find is more common than not for me, that's what happened to me. I was, like, working professionally in podcast production, and then a company tried to poach me to work for them, and I was like, well, I'll do it as a contract on the side, but I'm busy, so I'll hire people to work under me and do the work. And I'm like, oh, this is actually nice. What a wonderful world. Oh, I didn't discover something new. This is the agency model. It's service as a service instead of software as a service. Once you got past your initial network, where I see a lot of agency owners specifically get stuck, is they talk to people they know, the people down the street, the people in their local kind of business owner networking group, and they tap that out, that inventory is gone.

Travis Albritton [00:13:33]:
Now you need to reach new people outside of your immediate network if you want to continue to grow and also just replace the inevitable churn of people not needing your services anymore. So what did you do in those early days to kind of step beyond your initial network? And what were the sales and the marketing strategies that you used to be able to lead to the scale that you ultimately saw with your guerrilla agency?

AJ Silber [00:13:56]:
Yeah. To be 100% honest with you, it's sort of doing exactly what you're doing right now. Right. Like you're running a podcasting agency. You also run a podcast, you know what I mean? So we did the exact same thing at the gorill agency. I knew early on that my network was going to run out. You know what I mean? I mean, referrals are kind of the lifeblood of every agency or every service based business when they first start out. And those do end up drying up, or if they don't dry up necessarily, you can overtake in terms of leads that you're getting from referrals by five, tenfold, by, again, investing in your own marketing.

AJ Silber [00:14:30]:
So that's something that we did very early on. I think I haven't looked it up in the last six or eight months, but I'm pretty confident that we're still ranked number one for Minneapolis SEO. In Minneapolis, I'm pretty confident. And so we did, again, just that. So we invested heavily into our own SEO efforts. And from a service based business, SEO works well for 70% of all businesses out there. There is very specific businesses, and a lot of times those are in the SaaS space, especially if you're inventing something that's brand new, that doesn't have a lot of search volume. Those are really hard to kind of rank for because you're again, kind of creating a blue ocean.

AJ Silber [00:15:13]:
But from a service based business standpoint, or even like a product based business standpoint, SEO works super well. So that was one of the things that we knew early on, or I knew early on was like, I got to invest in my marketing, like, today, especially SEO, because it takes so long. And one of the ways that we were able to kind of curb that was by kind of investing into, again, like SEM. So we would do SEO SEM. That started to kind of trickle in leads up until the point when we were now ranking on the first page and that eventually, just inside baseball, we backed off investing into SEM. A lot of people can scale that up. Like, hey, we're going to spend $1,000 a month. And then two, three, 4510, 2050.

AJ Silber [00:15:54]:
We actually backed off of that because our SEO efforts were driving so many very quality leads to us that we really didn't see kind of a, we saw diminishing returns from investing further into SEM, if that makes sense. One of the reasons that we did that or one of the reasons that we kind of kept going in adwords, generally speaking, is called search real estate. I'm getting in the weeds here, but that was another thing that, again, is kind of a part of our industry is like, how many times can I show up on the first page? I want to show up in adwords. I want to show up in the map pack, and then I also want to show up organically. So that was really what we did, is invest heavily into our own kind of services in terms of marketing.

Travis Albritton [00:16:33]:
Right. And for anyone who isn't familiar with SEM, that would basically be like the paid version of SEO. So SEO is you're optimizing organic content. SEM is placing Adword bids to get in front of searches.

AJ Silber [00:16:46]:
Yeah, it includes display and retargeting. But in reality, it's funny, I should start just using the word adwords and SEO, but I always just say SEM. I've always said SEM, but yeah, really, what I'm talking about is more like adwords. Yes, adwords showing up in the paid placements and then organically is SEO.

Travis Albritton [00:17:05]:
Yeah, well, and it's not like SEO agencies don't know how to do SEO. So it's one thing to say, oh, we leaned into SEO to gain clients, but every other SEO agency worth their salt is also doing those same things. So how did you execute your SEO strategy? In a very competitive keyword string where it's like, I need digital marketing help for my small business. That's almost like trying to be the number one organic result for credit card or like new credit card or personal injury law firm. They're very competitive niches. So how did you execute your SEO strategy to be able to have that number one organic placement? Like, what were the elements, the things that you did on a content side, on a website? Kind of like break all that down for me.

AJ Silber [00:17:56]:
Yeah, for sure. So at the time. Gosh, this is such a deep topic. Again, I don't want to go too far in the weeds. At the time, there was a really heavy emphasis on link building. How much do you want me to be explaining some of these terms that I'm talking about? Do you want me to go, sorry, I don't know if this is like an edit clip.

Travis Albritton [00:18:21]:
Yeah. So I would contextualize it for somebody who is familiar with SEO. They know about digital marketing backlinks, they may have heard the word, but domain authority kind of illuminate those things. And pal, when you're editing this, you can edit out this little aside. So kind of like illuminate a little bit on what you're talking about just to have some context for anybody who's like, I recognize that word, but I'm not sure it's ever been defined for me. Kind of like we did for SEM.

AJ Silber [00:18:52]:
Yeah, for sure.

Travis Albritton [00:18:53]:
So they're educated, but they're not necessarily leading the digital marketing efforts for their companies.

AJ Silber [00:18:58]:
Love that. Maybe what I'll do is I'll start with, I actually am going to start with more content and then I'll flow into link building.

Travis Albritton [00:19:07]:
Perfect.

AJ Silber [00:19:07]:
Top gun from the top. Yeah. So when we first started, I would say my advice to anyone who's kind of getting into the digital marketing game is start early and often. And that was one of the things that we did very well. And I kind of knew going into this is like, hey, if I'm going to sell SEO services. And again, it's a very specific thing because it's like, hey, I got to show that I'm drinking my own koolaid, if you were. So in that situation, what we did is that I started out writing content. So one of the big things in SEO is that this is applicable to all businesses, is that you really want to build up.

AJ Silber [00:19:49]:
It's called topical relevance and authority. So the general idea is that, let's say I always use the kind of example of like, let's say I'm selling apples, right? So if I'm an apple farmer, I own an apple orchard, what I would want to do is I'd want to start again talking about all of the apples. So like Granny Smith apples, honey crisp apples, et cetera, et cetera, right? I'm talking about the characteristics of all the apples. Like what are they? Kind of that educational content. Because the general idea is that Google wants to see that you're an expert because they're really heavily focused. At least even, it was starting to be more even relevant then. But it's called eeat. So it's experience, expertise, authority and trust.

AJ Silber [00:20:31]:
So it's baked into Google's algorithm. So again, the general idea is that you want to build up that topical relevance and authority. So if you look at website a and website b, it's you and one of your competitors with website a, let's say website a has 20 pages of content, right? And it's all of their service pages and they got two blog posts. Website B has 500 pages of content, they've got all their service pages, and all these blog, you know, these blog posts that cover every single individual topic and subtopic on apples, right? Apple trees, apple orchards, et cetera, et cetera. What eventually happens is that Google sees you as kind of an experienced expert in that space because you've built up again that topical relevance and authority. And when I say topical relevance and authority and building up that, what I really mean is covering every single possible avenue and topic like there is in your niche. And so the ways that we did that were, you go mean a lot of know. Again, we're an SEO agency, so we use software.

AJ Silber [00:21:33]:
So we use like hrefs, but you can also do like a Google search or use a free tool. But the general idea is that you want to just build up, it's called a topical keyword map. So the idea is that you just want to write down every single possible topic. And so I would start again using my example. I would start with, like, honey crisp apples, and I would write that at the top of my spreadsheet. And then I would write down every single thing that I could possibly talk about in terms of honey crisp apples. Then I would move on and then write about the next type of apple. I'm really like, is it like me or am I blanking on all the types of apples right now? So now I'm talking about Granny Smith or pink ladies, right? Yeah, exactly.

AJ Silber [00:22:12]:
So then I'm talking about the pink lady, and then I'm talking about the granny Smith and I'm just going down those rungs and then, so one of the things that I can't stress enough, and again, this is where I'm kind of delving into the weeds a little bit. Strategy session is there is such thing as getting too far away from the topic. So, for example, let's say I'm selling apples, right? I'm talking about apples. That's great. That's like on the nose. I can talk about apple trees because they produce apples. That makes total sense. I can talk about an apple orchard because that's in apple trees.

AJ Silber [00:22:41]:
Apple pie. Little bit too off, right? I'm not going to talk necessarily about apple pie because then that becomes like a recipe thing and it just doesn't make a ton of sense. So there is such thing as getting too far away from the topic. But essentially those first three that I mentioned, you have to cover that topical relevance. So one of the things that I can't stress enough in terms of SEO is that nowadays, again, back then it was more like I had to actually sit down and write the content. Now it's like more AI generated content. And we can talk about this later. This could be kind of a sidebar, but I would not have AI generally just be spitting out content and be posting like 500 pieces of content a day.

AJ Silber [00:23:22]:
That just doesn't work. Google is going to see right through that. I would be very strategic about my briefs that I'm laying out for content and then writing that. I digress. So one of the things that we did early on is that we just wrote a ton of content. So we wrote a ton of content on the website. There's still a ton of content on the website. You have to refresh that content constantly on the website.

AJ Silber [00:23:38]:
So that was one of the things that we did and then at the time, and it still is important, is link building things. So acquiring links from other websites to your website is huge. And the way that you can look at those is like votes of confidence in the content that you have on your site. So the general idea is one way to build links and it is kind of a little bit of a, I wouldn't say outdated way. It's more of a numbers game because you have to reach out to a ton of websites, but you reach out to a website, you say, hey, I'll offer you a piece of content in the form of a guest blog post, and then there's a link in that piece of content that goes back to my website and then that is kind of one link built, if that makes sense. So over the course of time, we built like thousands of links that way in several other ways. And so we built up that authority and that know, to be honest with you, and I have no idea what Phil, who ended up buying the agency, has done in the last six or eight months for the gorilla, but that really sort of, to be honest with you, solidified us. We're so far and above in terms of website authority, authoritativeness, E-A-T we're so far and above the next competitor that it's going to be really hard to, even after stopping doing SEO or whatever the case is, we're going to continue to ride out that first position.

AJ Silber [00:24:57]:
Not forever, but it's going to be really hard to overtake us. So those are kind of the two things that I say. And then in terms of growing your business, one of the things that you have to really focus on is building out service based pages. So having the service pages on your website, making sure that those are really heavily targeted and perfectly optimized. And so again, using my apple example, like if you're know, again, Pink lady apples, I was going to blank on the apples again. So if you're selling pink ladies, you've got a service page dedicated to Pink lady apples. And like Pink lady apples for sale, Pink lady apples online, whatever the case is, that's an entire service page dedicated to it. And then all of that content that you wrote, like the Pink lady content does link internally to kind of that service page.

AJ Silber [00:25:44]:
And that really is all you do in terms of SEO in order to rank. There's a lot of technical SEO stuff that you can look into, but that's the blocking and tackling of it. And then it's just doing that consistently over time, every single day, putting the effort every single day, waking up, like writing a blog post, things of that nature. And eventually it does pay off. I will say this, though, that the reason that I talked about Adwords is because starting out, I always say, if you're not getting any leads, start out doing Adwords. Get leads in the door, right. To fuel your business while you're building up your organic kind of avenue. But I hope that answers your question.

AJ Silber [00:26:22]:
I feel like I did get a little in the weeds there.

Travis Albritton [00:26:25]:
That's all right. It's good to, because it's one thing to talk about SEO in the abstract, it's another to have a tangible example that someone listening can follow along to and think, okay, how would that apply to my business? What's my version of Granny Smith apples? Right. And really see the application of these principles that we're talking about. And I love kind of where you ended because I feel like for most business owners, SEO is the ultimate test of delayed gratification. You know, it's important, but you're planting seeds and trees that are for next year's harvest. So it could be hard to prioritize it because it's like, well, I need cash now. It's like the JG Wentworth jingle, right? But 100% if you want cash a year from now, this is what you got to do today.

AJ Silber [00:27:14]:
Yeah. And I think it's interesting because after working with at this .1 hundred plus small businesses, we had tons of clients over the course of five years that started working with us. I always like to set expectations, like, hey, listen, this is going to be five grand a month, and you're going to have to invest that for six months before you start to see results. And it's going to be a year plus until you get kind of maximum results. And no matter how many times I said that, it, made sure I said it, wrote it in the contract, big bold letters at the top, you know what I mean? This is going to take a while. It's like three months in. It's like, where are my leads? And exactly what you said. I mean, the kind of like leads in terms of SEO look like this.

AJ Silber [00:27:55]:
It's flat, flat, flat, flat up and to the right. And typically it's like when you get on the first page, it's like that's when you start getting leads. So it is very much delayed.

Travis Albritton [00:28:05]:
Sure. Now, you obviously were incredibly successful at executing that strategy because then you were able to break out of your initial network, you started getting other clients. Was it mainly a regional SEO play, like, we want to dominate Minneapolis, or was it more of a nationwide focus for you guys?

AJ Silber [00:28:23]:
I would say 70% of our clients were in Minneapolis, and 30% were kind of spread across the country in no particular area. So, yeah, it was very much like a local kind of play. Local, regional. That said, we ranked so well in Minneapolis, and it's very interesting, and I don't know if this is still true today, but if you looked up the search volume for Minneapolis SEO, it's like 10,000 searches a month. If you look up the search volume for Chicago SEO, it's like 7000. It's, like, very interesting. Like, Minneapolis just happens to be. And I think because we have so many of the kind of big headquarters in our backyard, like Target, Cargill, et cetera, et cetera, I'm not sure if that's why, but that was always kind of my inference.

AJ Silber [00:29:05]:
But, yeah, so it was very much like a regional play in terms of where the location of our clients were, and we were really targeting kind of that like five, to call it, $25 million business. We had a couple of businesses that were, like, north of 500 million, and that, again, was like, it was a drop in the bucket in their marketing spend. So they would always be looking for, like, hey, we have a new marketing director coming in, and we want to get another agency because they worked with somebody. Our bread and butter, really. We had clients that I had in 2017 that when I exited the business, I think there was ten of them out of the 50 that we had that I had started working with in the first year. And those are always back to our previous discussion, the most fun to work with. But I think that, for the most part, answers your question.

Travis Albritton [00:29:52]:
It does. Yeah. It's always helpful to know the context for somebody's business and the footprint and what they've built. When you start to talk about selling your business, which is an outcome that a lot of business owners have, right. That they have a passion for something now, but they know it's not going to be the thing they're doing for 50 years. Like, they're not building a multigenerational family business. It's a season in their life where they really want to execute or sprint or take advantage of some blue ocean, knowing that there's a potential exit on the back end. So now that everyone kind of has an understanding of what you built and how you grew it and kind of what it looks like, the framework for it.

Travis Albritton [00:30:30]:
I would love to talk a little bit about your story of basically selling your company. So I would love to hear more about why they approached you. What were the things that you had built or created that were valuable to them, why they would want to buy you versus somebody else who was serving a similar area, in a similar niche. And then what was kind of your internal dialogue yourself among the team about, is this the right time to sell? What's our valuation? What would our company be worth to somebody? What would be the terms of that sale? Because those are all variables that you have to consider. It's not like you see this press release. So and so sells a company for $100 million. It's like, oh, well, they got a check for 500 grand. There's all these things that don't make the top line press release.

Travis Albritton [00:31:13]:
So I would just love to hear kind of like that story and kind of all the things that went into that.

AJ Silber [00:31:18]:
Yeah. And I guess the story really kind of starts around the time that I would say that I hired my fifth employee. It was, call it like fifth or 6th employee. I knew very early on that the only way, and to be honest with you, I built the agency to sell it. I mean, that was the goal, right? I didn't want to. And kind of, to your point, I knew that I wasn't going to do this forever. I love working with small businesses. I love working with the clients that we worked with.

AJ Silber [00:31:47]:
I love doing marketing because it's very data backed. That said, I just knew that I wasn't going to want to do this forever. I would consider myself more like leader business owner, kind of that side of the table as opposed to digital marketer. I was and am good at digital marketing, but I always kind of had the mindset of, like, I can hire people that are better at this than I am to kind of grow the organization. So really what happened is that I, over time, had worked myself out of the day to day operations. Have you ever read the book the Emyth? Oh, yeah, absolutely.

Travis Albritton [00:32:23]:
Such a great book. Required reading for every entrepreneur, 100%.

AJ Silber [00:32:27]:
Every time that somebody's talked to me about entrepreneurship, I'm like, read the Emyth and then come back to me. Emith is a great book. And that was sort of my, like, I mean, I was the tactician, right? And then I always knew that I had to kind of grow up to know the entrepreneur. So that was the biggest thing that made our business attractive to somebody that was selling it. And one of the biggest pieces of advice that I give to somebody that again is hiring their first, second or third employee. How can you again grow and scale this thing without you being a part of the day to day operations? Another way to put it is how can you work on the business as opposed to in the business? So that was kind of my big mindset shift at that time. It was like, hey, I've got to really work on again, I'm going to take less money home because I'm now no longer operating part of the business, at least at the time I would. So I kind of made the jump at that point to say, like, okay, I'm going to become the role of CEO, call it president, whatever you want to say, and I'm going to kind of become more of that visionary like, hey, here's where we're going, here's how we're going to get there, here's our services, here's who we're hiring, here's how to motivate these people, et cetera, et cetera.

AJ Silber [00:33:34]:
So by the time that I had sold the business, I was no longer really working in the day to day operations, which is really the only way that you're going to be able to sell a business. You can't get up. I mean, even if you had a hundred million, well, maybe if you had 100 million dollar company, right? But if you had a million dollars in EBITDA and you were doing like three key pieces in the business, nobody's going to want to come in and buy it because they're going to have to replace you, which you've essentially made yourself the face of the business and you're really hard to replace. I was not very replaceable at that time. I was like motivating the team and ordering pizza. I'm like half kidding because I can order a mean pizza. But no, that was kind of like what really kick started this whole thing is now I'm working again more on the business, not in the business. And over time I was again trying to become more of the face of the business.

AJ Silber [00:34:25]:
So I would say that's my biggest piece of advice to anybody that's looking to grow and sell their business is like they're going to have to become again that CEO role as opposed to the operator role. That said, outside of that, one of the things that I had been thinking about is that at the time of sale, and this is something that I didn't really even know, is that businesses obviously in the m a kind of even runs in cycles, right? And it follows really kind of the economy. So when the economy kind of boomed up post Covid, it was just a very perfect time to sell. Valuations were high with businesses. I started kind of digging into what our business is worth, and I remember getting the number and being like, damn, okay, that's pretty solid, right? Getting the valuation was pretty cool. And so I was like, man, if that's the case, if that's kind of what the offer is on the table, I'm willing to walk away from the business, not because the offer was so high, but more because it was like, okay, this is going to be, again at kind of like where I'm at in my journey, like life changing cash. And on top of that, it was more like, hey, I can now focus my effort and energies on something else in the entrepreneurial space, because, again, I get bored with stuff. To be 100% honest with you, I get bored with the places that I'm living, hence why I'm traveling in Tulum.

AJ Silber [00:35:51]:
Right. I get bored very quickly. So after four or five years of doing it, it was like, okay, what's the next thing? What's the next chapter in my life? Because I've always seen it, and this isn't the case for everybody because there are, again, entrepreneurs that, as you said, build legacy businesses, that they hand down their kids. I'm more like, how can I build a business to the point where it's running itself in five years and then sell it again? And how many of these can I possibly do? Or how many of these can I hand off to a new CEO, or whatever the case is to kind of more work on the board of directors and then start another thing. So I've always been that entrepreneurial scrappy, get it from zero to two to 5 million and then hand it off to somebody else. So that's kind of like where my passions sort of lie. And again, what I want to do with this next thing. But those are sort of like some of my thought process going into this.

AJ Silber [00:36:41]:
I don't know if that sparked any additional questions or I didn't answer some of your questions. I kind of, like, went on a little bit of a rant there.

Travis Albritton [00:36:47]:
Sure. Well, a couple of questions. Was your business valued at an EBITDA multiple? Is that how the valuation came through?

AJ Silber [00:36:56]:
Yes.

Travis Albritton [00:37:00]:
Really?

AJ Silber [00:37:00]:
Like the two most common ways that businesses are valued, at least in our space, in the agency space, was ours was an EBITDA multiple specifically because I wasn't really part of the day to day operations. Sometimes it's like owners discretionary earnings, which is another way to value a business. And really that's like EBITDA. But then add back how much you're paying the owners, especially if they're very much a part of the business. So that's typically used when it's like, call it like, and it's used all the way up and down kind of the scale, but typically that's used with a two to three person business where the founders are very much an integral part of the business. Right. And then maybe they're just selling off a certain amount of shares or whatever the case is. But ours was EBITDA multiple.

AJ Silber [00:37:41]:
Yeah.

Travis Albritton [00:37:41]:
Okay. And then what was the term sheet like when you were negotiating your exit? Because it's rare to just basically get a check or a direct deposit, and then it's like I turn in my one week notice. Here's your company. What was that like, that exit process for you? Just so anyone listening actually has an understanding of what is typically involved when you're selling a company to an investor or to another company, and the handoff process so that you can fully integrate the business in with them so that way they can start to see the returns that they're looking for for why they bought the business in the first place. Did you have any performance metrics built into timelines and things like that? As far as your own compensation, what did your term sheet look like and what were the things that you wanted to make sure were included in there to really make it as good as possible for you?

AJ Silber [00:38:31]:
I love that you asked that question. I have not gotten asked that question on a podcast. There's a couple of things that are included in all term sheet. I'm going to talk about my specific situation. Plus, if you're going to sell a business, like some things that you should look out for. And I think the biggest couple of terms that are in a term sheet are typically, the non compete clause is huge. So what does the non compete section of the contract look like? How long are you going to be able to not compete with the business in what region? So our interim sheet had a pretty hefty non compete because I didn't really care because I don't want to run another SEO agency. That said, typically what you're looking at is like you might have a global non compete.

AJ Silber [00:39:18]:
Sometimes they put that in there. It's like globally, you can't compete at all for two years or a year or whatever the case is, and then for another additional two years, you can't compete in these regions or indefinitely, you can't compete in these regions. And that's very like every single contract that you ever read is made up by people that are no smarter than the two of us. Right. So you can put whatever you want in there. It just depends on somebody who's going to agree with it. But typically what you'll see is, again, it'll be like a geographic location non compete and then the length of time non compete. So that's going to be in there for sure.

AJ Silber [00:39:50]:
And so ours was, again, pretty standard, maybe a little bit more than standard, but again, I didn't really care because that's not something that I'm really wanting to get back into business doing. So that was in there for sure. Another thing is there's traditionally kind of three payout, I guess three payout strategies, I guess you could call them, or most traditional payout strategies. I'm not going to talk about the exchange of stock in another company, but that is a strategy. But I guess you can call it that. That's one. So let's say there's four, but you.

Travis Albritton [00:40:26]:
Could get discover just sold to capital one.

AJ Silber [00:40:33]:
Okay.

Travis Albritton [00:40:34]:
Which is pretty rare, though. It's pretty rare, yeah.

AJ Silber [00:40:37]:
And the reason that I leave that one out, because the audience isn't probably selling to discover. Traditionally, people aren't selling to discover, and those multiples are insane. Right? Like when you get into selling to a public company, I mean, it's 20 times EBITDA. Because they're looking at it as like, okay, well, we're selling for 20 times earnings right? Now. If we buy that company, and then they're going to sell for 20 times. So then it's a whole different beast.

Travis Albritton [00:41:02]:
Right? Because then it's also, what's the stock lift? What's the stock?

AJ Silber [00:41:06]:
Exactly.

Travis Albritton [00:41:07]:
It's like when Amazon bought Whole Foods for free, because the stock of Amazon rose and the increased market cap was more than what they paid for Whole Foods, there's some funny math that goes on.

AJ Silber [00:41:19]:
So if we're excluding a stock sale, which I would never, ever recommend for a business, and here's why, is because I've seen too many businesses get screwed over by doing that. For example, if you wanted to buy my business and you said, I'm going to buy it for 100% stock or 30% stock in my company or in your entity, you're a private business. Like, okay, you don't take an owner's drop for ten years, I don't get paid. And on top of that, I don't get paid until you sell your company, if you never sell it, and then it turns down, like, okay, then I'm out my cash. But anyway, sorry, I digress. So there's traditionally, in these term sheets, there's traditionally, like, three ways, so cash is one of them. Like, how much cash am I going to make? And then there's something called an earn out. So if I'm going to now work for the next company, what are some metrics that I have to follow in order to get paid? And typically, that's like a tiered approach.

AJ Silber [00:42:13]:
So it's like every six months, we'll check metrics and figure out if I'm going to release this much cash to you. And then the final way is a seller's financing. So I essentially am providing, like, a note or a loan to the person that's buying the business. And so ours didn't have an earn out. And to be honest with you, I think that that's totally fine to say, but ours didn't have earned out. It was cash and sellers financing, which for me, that was a big deal. I would say that we came to a very great agreement where I think that we both. It was a 50 50 kind of split in the negotiation.

AJ Silber [00:42:48]:
Like, he got stuff, I got stuff. I'm super happy with it. One of the things that I went into, and I think he did, too, is it was like, hey, we don't want to. And again, I don't know if this is the case for future deals, but it was like, hey, we're not going to do an earn out. I don't want to do an earn out, because typically those metrics are really hard to hit or the economy comes into play. So it might look great on paper. Like, oh, we've been growing at one and a half percent, or whatever the case is, a month, or we've been growing at 10% a year, whatever the case is. And those are the metrics that we have to sustain.

AJ Silber [00:43:24]:
Then Covid hits right, and then all of a sudden, your business turns down, and now I'm not getting paid out. So that was a big thing for me, is not really having an earnout in the term sheet. And he was 100% fine with that. So I think that answers kind of the full question, but typically, it's those three things.

Travis Albritton [00:43:42]:
Yeah, well, I appreciate you speaking candidly, because there's a lot of luster, there's a lot of rose colored glasses around acquisitions and selling your company. And so it's also helpful to be able to count the cost ahead of time and know kind of what to expect. And I've heard, obviously, arguments for each of these cases, not necessarily much the stock case, but with cash out, the idea is like you've capitalized on the business as it is currently constructed. It's like you're at a certain size, a certain scale, certain evaluation, and then blending or being acquired into another company. There is a lot of variables that are outside of your control, and so you can't guarantee that it will continue to perform in the clip that it has been. And so you're kind of hedging towards your own capabilities and what you've built so far instead of betting on yourself to be able to continue to perform or perform better, partnering with somebody else.

AJ Silber [00:44:39]:
Yeah.

Travis Albritton [00:44:40]:
The other cost account as an entrepreneur is if there's some kind of earn out clause or like a time based performance period where you get 25 or 30% of the sale up front, and then the rest of it is in payments over several months or years, that means that you're now an employee again, which for a lot of entrepreneurs, feels like indentured servitude. It's like I can't escape. I have the golden handcuffs. I have to work here. I have to work as an employee for a certain period of time to earn my payout. And I know more than one entrepreneur that sold their company with an earn out clause and ended up leaving early and leaving money on the table just because they could not personally do it anymore, they couldn't show up to work anymore. It just wasn't in their dna.

AJ Silber [00:45:23]:
Yeah. So I'll actually speak. That was my third thing. Right. First thing again is like, hey, what is the non compete clause going to be? How are you going to get paid? And then how long do you have to work at the company for? And those are kind of the three big parts of this really lengthy contract, I would say. I think there might be one more, but I'm kind of blanking on it. But, yeah, that was a big thing for me, too, is like, how long am I actually have to work for the company? Because I knew going in, and I had read again, I'd never sold a company before, but I had read enough, I've done enough research and talked to people who had sold their companies to understand. When you sell your company, and let's say you sell 100% of your company and you don't own stock or equity, even if you do own a smidge of equity in that new company, you're an employee.

AJ Silber [00:46:02]:
That's what you are. And so I was really fortunate, generally speaking, because Phil was incredible. I mean, he was so easy to work with. He's the nicest guy in the entire world. I can't say how lucky I am because I've heard horror stories of, like, new owners. An asshole. Sorry, that was my one. That was my one.

AJ Silber [00:46:27]:
Start over. I've heard horror stories about, the new owner's a jerk, right. And I think I was very fortunate in that regard, because, again, I can't say enough about Phil. He's a stand up guy. I would say he has become a friend of mine that I would call on to bounce ideas off of. I think he's, again, a very great guy, and I was lucky in that regard. But make no mistake, you're going to be an employee, and it depends on how long you're going to work there in that kind of golden handcuff thing. So going in, that is something that you can definitely negotiate.

AJ Silber [00:47:00]:
And that was one of my tenets, too, where I was like, hey, again, the earn out thing, I'm not super excited for how long I have to work at the business. I wasn't super excited for. So I went in. I think I would say that one of the things that I've always been good at, naturally, and got better over time with practice, with sales and negotiation. And I think one of my big things is kind of like, one of the things that I always revert back to is always be the buyer. You know what I mean? And so I went kind of to the table with like, hey, here's some of my. Not non negotiables, but here's some of the things that I'm looking for in terms of a sale. And that started really early on.

AJ Silber [00:47:46]:
So the process really kind of just, again, a little sidebar is that it took six months to sell the business. So it took quite a while. And so from soup to nut, start to finish, it was like we started kind of the due diligence phase. And then, well, we first had a couple of conversations, then we go into due diligence. Then it was financing. And so in terms of that first initial couple of meetings, we were talking about the business at a very high level, and then what are we looking to get out of it or get forward or what are kind of some of these high level terms? And so I went in, in every relationship that I try to go into, I try to set expectations. So I was able to go in early and be like, hey, this is kind of the expectations that I'm really setting before you get too far down the line. Because in reality, if you can get in that again, first couple of conversations and be like, hey, this is kind of like, not some of my non negotiables, but this is really what I'm looking for.

AJ Silber [00:48:43]:
And he's like, yeah, no sweat. That's kind of what I was thinking, too. It's like, okay, now we can have this conversation further. I talked to several people who were like, several other people who were like, hey, you're going to have to work here for, like, three to five years. And, oh, by the way, we'll give you 5% of the company and stock wise, and you'll get this in cash, and otherwise the rest of it's going to be an earn out. And it was just a bunch of crappy offers. I had a couple of really great all cash offers, too. So there was a bunch of stuff on the table for me to kind of consider.

AJ Silber [00:49:15]:
But, yeah, again, I think setting an expectation was huge going into this whole thing.

Travis Albritton [00:49:20]:
Yeah, it's like the first date version of when you're intentional about finding a life partner. It's like, do you want to have kids? Let's get that out early, because if there's no agreement there, there's no reason for a second date. Right. And so you kind of have that conversation up front. Yeah, for sure.

AJ Silber [00:49:33]:
Yeah, that's exactly right. That's exactly right.

Travis Albritton [00:49:35]:
So we've covered a lot of ground here. Really appreciate all the things that you shared. Where can people go to learn more about what you're doing right now and connect with you online? Where's the best place for people to connect with you?

AJ Silber [00:49:46]:
Yeah, I would say right now, LinkedIn is probably the best place to connect with me. So it's just AJ silver search out on LinkedIn, and I think I'll send you the link for that if you want to put that in the show notes. Otherwise, Small Business Bonfire is my new website, kind of my new venture. So you can kind of reach out to me there if you want to chitchat. And otherwise, I think the best place to, I guess, learn from me would be the Bonfire field guide newsletter. So just getting a part of that again, that's on my LinkedIn profile, that's on the website. And again, I put out a weekly tip. Tactic or strategy? Kind of for small business owners to grow.

Travis Albritton [00:50:24]:
Perfect. We'll link all that in the show notes for your convenience. AJ, thank you so much for being here, and thanks for sharing all your expertise with us.

AJ Silber [00:50:31]:
Yeah, love it, man. Thanks for having me.

Travis Albritton [00:50:33]:
So I would say that my number one takeaway from my conversation with AJ is make sure that if you have an eye towards selling your company at some point, some kind of exit, some kind of season beyond the one that you're in. Make sure that you take the time to remove yourself from the daily operations of the business. That if it's a lifestyle business, you want to do it forever, then it doesn't matter if you're integrated into everything that you're doing. It doesn't matter if you're the salesperson and the marketing director and the product developer and the person answering customer support emails, because that works just fine. But if at some point in the future you do want to do something else, you want to sell your business to someone else, then you need to remove yourself from the business. Otherwise, you working in the business is going to be a hindrance to selling it instead of an asset that you're offering to make somebody want to buy it. So just something to keep in mind. Definitely make sure to check out all the links in the show notes to AJ's LinkedIn profile, his website, his newsletter.

Travis Albritton [00:51:32]:
Connect with him over there. Let him know that you heard him on the podcast and he would love to serve you and continue to help you in whatever you're doing with your business and as far as growing it and getting more leads. Thank you for listening to another episode of the Honest marketing podcast. Until next one, stay honest.