Latest / Exit Algorithms / The 4 Gaps That Cap Your Business Valuation | Muriel Touati, Exit 3D Studio (#110)
Transcript
- Pete Vera, Exit Algorithms: Welcome to Exit Algorithms, the podcast where we decode what it really takes to unlock growth, streamline operations, and prepare your business for a high-value exit. I'm your host, Pete Vera, and today I'm joined by Muriel Tuetti. Muriel has spent the last decade building marketing engines for service businesses, founded and scaled her own digital marketing agency, and now looks at every business through a buyer-side MA lens. Focused on the differences that get a business a higher selling multiple. Now, Muriel is the founder and CEO of Exit 3D Studio, a firm built to help B2B service business founders build revenue that is predictable, scalable, and transferable. So the business is easier easier to grow or sell. Muriel, excited to have you here. Welcome to the podcast. Muriel Touati I Exit 3D Studio: Thank you, Petrie. I'm very excited for this conversation. We have a lot in common. Pete Vera, Exit Algorithms: Yeah, we do as we as we discussed on the on the pre show. yeah, wh why don't you start off, Muriel? Can you share a bit about your background and and career, business journey Muriel Touati I Exit 3D Studio: Bye! Pete Vera, Exit Algorithms: and and yeah, what what led you to exit three D studio? Muriel Touati I Exit 3D Studio: Okay, so I left the corporate world in 2017, about two years after having my son. I was waiting for something else. I started working as a freelance digital marketer and grew from there, from building a little... digital like boutique marketing agency in France and being a consultant and creating the online training and coaching program, the LinkedIn Accelerator, who help French entrepreneur love reach LinkedIn. French because the program is still just in French. And I moved to New York in 2021. And last year, I was thinking, like maybe I was missing some opportunities. I was meeting people I had nothing to offer them, even though they had some interest in my expertise. So I was wondering what to do and I heard I could be buying a business. So I joined a business buying community. I went all in. I learned all about deal sourcing, deal making, deal structuring, deal financing, like everything. And I've been searching for business to buy. I have sent over a hundred, you know, like, I don't know, hundreds of requests. In reply, I got... you know, business broker sending me the NDA. I think I signed more than 100. So I also analyze, you know, I received more than, you know, like 100 SIEM, which are, I call them like the marketing brochure to analyze deal and check if I want to know more, do I want to enter the data room from there? And so I entered dozens of data rooms, submitted, about 10 letters of intent. And I think the first one I didn't know enough is good they did not accept it because it would have been a bad deal. But at some point I got an offer I accepted for a LinkedIn marketing agency that was a really great fit for my expertise. But I had to walk away because I found, you know, even if They were presented really well. They were still having issues in terms of their operation, customer retention, funder dependency. And I decided to walk away because I was valuating the business way more than my offer and what they wanted. So instead of negotiating hard, say, you know what, I just don't want it anymore. It's too risky. Pete Vera, Exit Algorithms: Mm. Muriel Touati I Exit 3D Studio: And so, now, instead I pivoted a bit my business. What is I created a new entity, Exit3D Studio. And now I help service businesses build the acquisition engine that often miss. And this help reduce founder dependency on sales, improve... the revenue predictability and reduce customer concentration and Pete Vera, Exit Algorithms: Mm. Muriel Touati I Exit 3D Studio: plus give more value to their digital assets because those are the risks that we keep finding as prospective buyers on most businesses we are evaluating. Pete, I think you can confirm. Yeah. Pete Vera, Exit Algorithms: Mm-hmm. Right. Yeah. awesome. And and then so that's how that's how it was born, exit three D studio. Muriel Touati I Exit 3D Studio: Yes, exactly. I think from the frustration on not being able to find the right business to buy. Yeah. And I even wrote a book about it, The Valuation Gap. What Bios is that Sellers Miss. I know that it brings sometimes some things that as a... Because I'm also a founder. So I know what I've been doing. advising, like what I'm stating in this book can be a bit, know, bothering sometimes to founders, myself included, because I made most of the mistakes that I am saying. It's genuinely hard to run a business that runs without you that can transfer. It's really hard. And I'm hoping that, you know, with the the book, you can show it here. I'm hoping that it will be helpful to founder who are thinking about exiting their business, but only those who want to unlock more growth. Because if you build a business like that, you can keep it forever, actually. You might not want to sell. Pete Vera, Exit Algorithms: Yeah. Yeah. It's a much more enjoyable business to run when you when it's a transferable asset, right? Muriel Touati I Exit 3D Studio: Yes. Pete Vera, Exit Algorithms: yeah. Let let's talk about that a little more. What are some of those, you know, structural differences or or things about a business that make it command a higher exit multiple? Let's say you compare two businesses, the same EBITDA, why might one get a higher multiple over another? Muriel Touati I Exit 3D Studio: Yeah, it comes back to the four structural issues that I mentioned. I will say if a business is doing like 500,000 in EBITDA and but everything goes through the funders. Everything is referral based. He had 80 % customer concentration. It's project based. We don't know what's coming up next month. can't delegate much even if he has a team but this comment the one time easily, one time that he be down while a business is who will have maybe a general manager like the founder is actually just here for the strategy and the vision someone else is actually managing the business you have recurring revenue you have no customer concentration. That means that no single account is doing more than 20 % or even 10 % of the revenue. This is, you know, like, let's say all is less than five or 5%. So, well, and plus they have a client acquisition engine outside of the founder. we can say that the client are coming for the business and the result the business brings, for the founder. Well, this can command very high multiple, even six or more, depending on the industry. So that's a difference between a 500,000 valuation and a three plus million valuation. Pete Vera, Exit Algorithms: Yeah. How far in advance would do would you say Muriel is a is appropriate for a business owner to to start making some of those changes before before exit? Muriel Touati I Exit 3D Studio: Yeah, yeah. Well, I will say as soon as you know, but at the very minimum should be about four years before because as buyers, when we are evaluating a business, we're not looking just as the last year or the last quarter. We are looking at the past three years in the P &L plus the trading 12 months. So that's about four years. If you do that work for you in advance, you really clean up everything. You will have an upward trend instead of some dip in the middle. And also if your business rely also a lot on ads, for example, you'll be able to reduce that budget as well by having more of an organic. acquisition engine. It won't cost as much as a lot of ad spend. I'm talking sometimes to business owners who are growing, but only through ads. And sometimes they come to me because, the ads are not performing as well. And they are still spending $20,000, $30,000 a month in ads. could be costing less, you know. Pete Vera, Exit Algorithms: Sure. Yeah, let's it you know it can be really difficult for a business owner wanting to diversify their their revenue. what are some maybe some steps they should take to to start doing that or or how should they think about approaching, you know, diversifying their revenue so that they, you know, their business is more attractive to buyers. Muriel Touati I Exit 3D Studio: Yeah, I would say to think about how can you introduce some recurring revenue from your offer. So here you can be creative even if you are project based, but finding a way to keep your customer locked in. I have seen just recently even some makeup company. to be able to retain a customer. The first time I see that is that you can pay a membership of $30 a year and you get 10 % on all the products you're buying. So you will keep buying in that store and all the shipping is free. So yeah, if you like the brand instead of instead of just buying when you want to, when you need something, you buy the membership so they lock you in. since you get a reward. So this is an example, but depending on your industry and your offer, there must be something that can be done to keep the customers and be able to show some sort of recurring revenue. Of course, a model with monthly revenue is even better than yearly or $30. It's not usually significant, but the intention is there. Yeah. Pete Vera, Exit Algorithms: Yeah, definitely. like Amazon Prime. Muriel Touati I Exit 3D Studio: as well. yeah, but they are the best and the subscription, like Pete Vera, Exit Algorithms: Mm. Muriel Touati I Exit 3D Studio: how you get 15%. I, because I use it, like you get 15 % if you have three or four subscriptions coming in the same delivery and, and a, and a discount. And sometimes you forget, you don't even need what you're going to receive, but you receive it because you didn't update your subscription. You know, have you seen that like the product subscription? Yeah. Pete Vera, Exit Algorithms: Yeah. Muriel Touati I Exit 3D Studio: Are you adding more product to get more discounts? Otherwise it's just 5 % discount. If you only have one, let's say. Pete Vera, Exit Algorithms: Right. Yeah. That's really smart. Really good strategies. yeah, and you and you mentioned you talk a lot about o owner dependence as well. what are some some tips there for for reducing that and and you know, building up your team so they can run the business without you? Muriel Touati I Exit 3D Studio: Okay, I can talk mainly on the marketing, digital marketing sales part, where I think mentioned the acquisition engine having some sort of like lead generation channel, maybe even having several that does not depend on the funders. So we can, we cannot say that the funder is responsible for the business growth, it will be the system. this is good. More generally speaking, it will be about delegation and documenting what you're doing yourself and finding either someone to do it for you after that, or just building some systems. automation or that could do it for you as well. This can be done in, I think in all parts of the business at this point with AI and automation. Pete Vera, Exit Algorithms: Yeah. Yeah, really smart. And that's leads into my next topic, AI. I'd love to hear y from your perspective, you know, how how is it affecting the the industries you're in and and also how are you using it personally, professionally? Muriel Touati I Exit 3D Studio: yeah, well, it has been disrupting the digital marketing world really good. know, like I think like every sector has been impacted, but digital marketing a lot. Who is still writing a post or blog post or something. This is all done with AI now. mean, there must be some exception, of course. And well, I've been using it for a lot of things and first like prompting it for questions or creating things and then starting to build food systems that run on its own. And this is the acquisition engine that I have been building, you know, as a done for you system that gets warm leads to a service business founders and also for content creation and a lot of things. It's still good to be reviewing things, not just letting do everything, but it depends. For example, in digital marketing, we do a lot of videos. I don't think that this is good enough. Pete Vera, Exit Algorithms: Mm. Muriel Touati I Exit 3D Studio: I have tried to clone myself. It's just not good enough. I'm not ready to produce AI video of myself, for example. It's still something that you have to do. For example. Pete Vera, Exit Algorithms: Yeah. Yeah. How how do you make your content appear, you know, genuine and real while still leveraging AI? I think I think there's a lot of business owners out there trying to, you know, get into marketing now with AI and it's so obvious the you know, their ads and and everything everything. So yeah, what do you Muriel Touati I Exit 3D Studio: Yeah, Pete Vera, Exit Algorithms: how do you approach that? Muriel Touati I Exit 3D Studio: when you bring your own idea, your own story and have a content strategy, know, initially a content strategy and then when you create anything, just prompt properly and give your own direction and what is it that you want to do and then read it again, make sure it sounds like you. and then you can post it. I think it's good also for image, depending more like graphic image than again like human image. It still look a little strange. Like just yesterday I saw again a person I went on a podcast with, she created a beautiful carousel and she she put me in AI there. I didn't say anything. think she did a great work. But I don't recognize myself on it. So it's still not perfect for image or video. I think the only video that I like, and it was not about myself, it was Sora, like Sora 2. OpenAI just put it. down because it was too costly. It was too good but nobody was paying for it. It was for free and it was just costing them too much money to have this but they were doing beautiful videos. Pete Vera, Exit Algorithms: Yeah. Yeah, interesting. Yeah. How how do you choose which tools or how do you recommend business owners, you know, find the right tools for for their for their business? Muriel Touati I Exit 3D Studio: I don't know if I can answer that question. I will only know for digital marketing. And there are so many at this point, depending what they want to do, if it's auto posting on different platforms, there are a bunch of them. I don't even recommend one in particular. I think many are good. Pete Vera, Exit Algorithms: Yeah. Muriel Touati I Exit 3D Studio: For my Neudon4U system that I use, there are some tools plus my own layer of AI automation agents. Pete Vera, Exit Algorithms: Mm. Muriel Touati I Exit 3D Studio: Yeah. Pete Vera, Exit Algorithms: Yeah. Yeah. I think the probably the biggest thing is just having a s very specific outcome that you want from the tool. You know, not not just trying to pick a tool and then figure out right how to use it. I think a lot of people can go wrong. There's right, you're right. There's so many tools out there now. Muriel Touati I Exit 3D Studio: Yeah, think there are, and plus since we can also create those tools ourselves, I think it's going to be a lot of competition on the price, or maybe if we need a tool, we're just going to build it ourselves. Like sometimes I feel we might just get to that point, but not everybody will be doing it. It still has a cost. It takes time. The one that I have... been building, needed a developer to do it. I'm still not that technical to be building something like that. Pete Vera, Exit Algorithms: Yeah, I know it's exciting. It's changing changing a lot. yeah, Muriel Touati I Exit 3D Studio: Yeah. Pete Vera, Exit Algorithms: Myril, I'd love we could talk a little bit more about your your book. maybe some some of the key takeaways for for business owners listening. Muriel Touati I Exit 3D Studio: Sure, so the book is the Valuation Gap, What Buyers See That Sellers Miss. I will just read what it is. It's a step-by-step guide to evaluating your business the way a buyer would, so you can fix what's capping your growth and build one worth keeping or selling. And in there, are, you know, I think it's 11, 12 chapters, and at the end... there is what we call the BioLens Diagnostic and you have questions and you can score each question with a 0, 1 or 2 and then after you calculate your score at the end of each chapter and you see it gives you some idea of where to start, what to fix first, what to do and you will see that There are some things you're scoring well, you know, don't have anything to do. Some that need a bit more of your attention. And in there, there are a lot of examples of a that didn't go through and why. A deal that was perfect and how does it looks like. And I go more deep into to funder dependency, customer concentration, revenue quality and predictability, digital assets, and much more. Pete Vera, Exit Algorithms: Yeah. Wow. Awesome. Sounds r like a really, really useful, useful book. yeah, and you and you s you say digital assets. I know that's kind of your area of special specialty, right? And focus. How do you how do business owners build digital assets that will, you know, add value to their company? Muriel Touati I Exit 3D Studio: Yeah, there will be, so the fact to have leads coming in consistently from a system online, that's I think the first goal. The second, then after it's what is required to have this. So you could need a website, a strong website with real traffic on it, real way to... convert a visitor into a prospect and then a client. So the way it is built and making sure it has traffic, it is mentioned on AI search, rank on Google, et cetera, have possibly multi-way of generating leads because if sometimes you rely on just one channel and that channel close or you get banned or because it happens you know sometimes they just I've heard some you know people being they could not use a face you know meta ad on Facebook anymore because their their account got closed I personally had a little YouTube channel the one I was using saw to For some reason, they block it. They kick me out of it. I was doing nothing. I was not even trying to sell anything on that channel. I was just having fun. They block me. So things can happen. Sometimes you get warning on LinkedIn. Also, if you do a little too much or something, they warn you. They block you for three days. And they tell you, you continue. We're going to close your account. Yeah, so it's important to be mindful of that and having more way of generating lead and doing business online is important for continuity. Pete Vera, Exit Algorithms: Yeah, a hundred percent. Wow, awesome, Muriel. It's been a incredible conversation. A lot of lot of great takeaways. I one last question for you. And you've touched on this quite a lot already. But if you had to pick just one practical takeaway for a business owner listening, wanting to prepare for a high value exit, what would that be? Muriel Touati I Exit 3D Studio: to get my book, to get the book, to get the full playbook. Or you can also go on my website and fill out the scorecard. This takes just five minutes. It's exit3dstudio.com slash scorecard. It's a few questions to evaluate where you are. you get a score and an email that tells you what it means. Could be a first good step to take because each business has different strengths and weakness and it's good to be able to evaluate it with a tool. This one is free and available. Pete Vera, Exit Algorithms: Awesome. I'll leave that in the show notes. Thank you so much for your time today, Muriel Touati I Exit 3D Studio: Thank you. Pete Vera, Exit Algorithms: Mary. Like love this conversation. It's great talking to you. Muriel Touati I Exit 3D Studio: Great talking to you too, Pete. I'm really glad it resonates with you. Pete Vera, Exit Algorithms: Awesome.