The Golden Triangle for Buying and Selling Businesses
Buying and selling businesses, even online businesses, can be a difficult and frustrating process. There is so much that has to happen just from a technical standpoint, and when you throw in all the psychology of negotiating with a buyer or a seller to get the best possible deal, things can get very messy.
This is why it is important to keep what we like to call the Golden Triangle in mind when it comes to buying and selling businesses.
The Golden Triangle is such an important thing that we use it literally every day at Empire Flippers. It is hard coded into all of our processes, including marketing, sales, and even the technical migrations of businesses after a sale.
The Golden Triangle is a three-part method to speed up and manage the buying and selling process, but it is also a set of principles that can be applied to any business. These principles can be boiled down to three concepts which influence every portion of the buying and selling process. With every person who comes into our marketing funnel and becomes an active lead for our marketplace, we determine if they are:
When each side is in perfect alignment, the process of buying and selling businesses becomes a lot faster, smoother, and more enjoyable for every party involved.
Every contact who becomes a lead for a potential sale falls somewhere on the Golden Triangle. Some might be more coachable than they are trackable, but in order for a successful deal to happen, the person involved needs to have enough Golden Triangle characteristics for us to do business with them.
There are ways, which we will go into in just a second, to set up your marketing and sales to make sure you’re dealing with Golden Triangle people most of the time.
If you’re looking to increase the reliability of businesses you already have, take these lessons and apply them to your current marketing and sales process. If, on the other hand, you are looking to become a business-buying mogul like several of our buyers, then this process is also going to be hugely helpful to you.
What Makes a Qualified Lead?
At Empire Flippers, the first part of establishing the Golden Triangle is making sure our leads are qualified for our marketing pitch. We don’t want to spend money and precious time on leads that are not going to pan out for us. This means we need to have a way to weed out the tirekickers — the people that will never buy anything from us but will gladly allow us to spend our advertising dollars trying to get them onboard.
Tirekickers, as we all know, can waste a significant amount of time. Dealing with them can mean leaving a ton of money on the table simply because you don’t realize who you’re dealing with.
Every business should have a system to qualify buyers. For an Amazon affiliate site, it is quite easy; anyone clicking on your Amazon links becomes a qualified buyer.
For more complex businesses like Empire Flippers, we came up with our deposit system as a way to eliminate 99% of the tirekickers who just want to waste both our time and our sellers’ time. Likewise, we have a listing fee, which eliminates sellers who are not serious about unloading their business. The listing fee is so small that it shouldn’t bother anyone looking to legitimately sell their business, and the deposit system is 100% refundable so there is no worry that the buyer is going to lose out on all that money.
The deposit system also acts as a mini-qualifier by guaranteeing that the prospective buyer actually has the finances to buy a business. Unlike a Letter of Intent (LOI), there is no possibility of banking screenshots being photoshopped to meet whatever standards the LOI is meant to qualify the buyer for. Ultimately, our system helps to protect the seller’s niche even more, by weeding out unqualified buyers.
The qualifying aspect of the Golden Triangle is best applied at the top of the marketing funnel rather than deep into the sales process.
The earlier you can apply this filter in your marketing, the easier and faster your process is going to be. The last thing you want is to start qualifying people right at the end of a sales cycle. By that point a person should be completely qualified and just need some more information before they make their actual decision.
What Is a Trackable Lead?
The qualifying process should occur at the top of the funnel. The next side of the triangle to focus on after qualifying, is tracking.
At its most basic level, a trackable lead simply means you are tracking every step that the lead takes along your sales cycle. That means you know whether they opted in through a Facebook ad, content marketing, or some other channel, and you can clearly see the actions they are taking throughout your sales funnel, such as which emails they are opening and which links they are clicking. With proper tracking, you can even measure pieces of content for when someone buys from you while they are within that funnel.
When it comes to optimizing this portion of the Golden Triangle, there is a quote by the author Robert S. Sharma, author of The Greatness Guide: Powerful Secrets to Getting World Class, that is extremely relevant: “What gets measured, improves.”
If you don’t ever measure what your opt-in rate is, you’ll never know what it is. If you do measure it and find out it is only 2%, and you make one tweak and suddenly it goes to 4%, you have now just improved your business drastically with this one tweak. Measuring is the gateway to greatness.
Most people stop tracking after the initial opt in, though, which is a big mistake. We track our leads continuously. We track people who opt in to our lists from various sources, and we also track when people create an account with us. We track their interests, and we also see where they are clicking within our emails.
Obviously, we are using HubSpot for the heavy lifting when it comes to tracking, and such an expensive piece of software isn’t always needed for the majority of online businesses.
Yet, if you are growing a bigger, more authority-styled business, I would recommend finding solutions that allow you to track beyond just the opt-in rates you are getting.
There are ways you can split test email campaigns with AWeber, for instance, which is a cheap alternative to HubSpot as far as email marketing goes. With it, you can send out the same email with two different headlines and track clicks inside the email, which allows you to split test the wording of the link, or the entire body copy of the email.
In addition to marketing tracking, we also do sales tracking. Our marketing and sales coordinator, Mike Swigunski, recently put together what we call our Deal Flow. This is a pipeline that starts when a lead from our email list puts down a deposit on a marketplace site. From there, we move that contact through the Deal Flow sales pipeline.
This allows us to see when deals are lost, or when deals go extremely well. Over time, we can take this information and turn it into actionable data that will improve our process even more through fine tuning and tweaking.
Of course, once a lead is in the actual sales portion of the process (the most time-consuming process for us, as our marketing is set up to be very much on autopilot, minus the content writing we do), we get into the third portion of the Golden Triangle — coachability.
What Is a Coachable Lead?
This is the most important part of the Golden Triangle, and if you set up systems to help qualify and track your leads, you will hopefully be able to find which leads will tend to be coachable and warrant the valuable time they take up.
Time is the one resource we do not have more of, so it’s important to put as many systems in place as you can, to either determine which leads are coachable, or to see if you can train your leads to become coachable by the time they take some kind of sales action with you.
There are a couple questions you can ask to verify just how coachable a lead is:
- Are they listening to what you say? You can ask them if they understand what you are telling them to see if they are truly listening to you. They might be listening to you, but what you’re saying just might not make sense yet for them. Make sure your messaging is as clear as possible.
- Are they trainable? If you teach them how to do something that is important to your sales process and they don’t do it, it’s going to be a big problem, especially later on. If someone learns why we have a deposit system, but they refuse to do it and demand we change our systems for them specifically, this is probably going be a pretty problematic lead for us down the road, meaning they will likely not be worth our effort.
If someone resists giving out important information to prospective buyers, such as their analytics data, this is going to be a pretty hard sell. When a seller does this, he is basically telling us that a buyer has to act on faith in the seller’s words alone. Or, if the seller refuses to fix small flaws on their websites — such as a duplicate content warning — this is also a warning sign.
What happens when that seller does convince a buyer to spend potentially hundreds of thousands of dollars on a website?
Because the person was so uncoachable from the start, everyone is in a situation that could turn nightmarish very quickly. A ton of the buyer’s time, and of Empire Flippers’ time will likely be wasted, and the situation may even potentially damage our reputation from bad reviews posted about the experience.
So even though in such a case it is the seller being nasty, Empire Flippers could take a hit from it.
That is why the Golden Triangle is so important and why we implement all three sides of it throughout our entire business process to mitigate these issues as much as possible.
The coachable side in particular is incredibly important. Bottomline: an uncoachable prospect can hurt your business reputation, be a total nightmare for customer service, and waste a significant amount of your profit-producing time.
Therefore, if you make sure all portions of the Golden Triangle are in place and get comfortable with rejecting potential customers that don’t exhibit enough of the Golden Triangle characteristics, you are going to be able to work with much more positive people who will ultimately lead you to more profits.
The Golden Triangle Is Important for Every Business Model
The Golden Triangle is important to every online business model. Some sales companies need less systems in place to ensure the Golden Triangle is met and active in each lead and customer. These typically include businesses that use AdSense and Amazon affiliate models.
However, other businesses need multiple systems in place to make sure people meet all the requirements of the Golden Triangle. Businesses which use models such as Software as a Service (SaaS) and productized services are examples that need more detailed implementation of Golden Triangle requirements due to a more complex customer acquisition process, as well as the added challenge of retaining customers month after month.
Regardless of what kind of systems are needed for your particular business, it is true that every lead is going to exhibit a propensity to favour certain sides of the triangle more than others. Some might be far more trackable than qualified, or more qualified than trackable. You might also get someone that you have tracked through the entire process who is very qualified but then turns out to be very uncoachable.
Using the proper systems from marketing to sales, that are best for your particular business, can improve where your leads land on the Golden Triangle.
It’s important to be prepping sellers and leads throughout the entire process by managing their expectations and foregrounding the necessity of being transparent and flexible. By doing this, you are teaching them what to do and how to react, giving them a sense of your process and helping them find the best way through that process.
Master these principles in your own business, and you will likely find that you can get much more done than before. This is especially true if you are in the business of buying and selling business properties.
The better you get at the Golden Triangle, the smoother your business life is going to become.
Hey Greg… a good read. Creating and selling niche sites in a medium term goal for me, but I’m always reluctant to actual start and keep pushing this goal back. The reason is just as you describe… the negotiation and the fear of being scammed. You do an excellent job explaining the psychological aspects and how you to overcome them. Definitely worth serious consideration and the service you guys provide. Makes me more comfortable with the process and having some fun in achieving my goal of selling sites. Thanks for sharing!
The fear of being scammed is one that every seller should take into account. It’s the wild, wild west out there in a lot of circumstances. That is one reason a trusted broker is a strong ally when it comes to selling the site, because they have processes in place that help alleviate and mitigate a lot of that kind of risk.
Plus, they often do the lion share of negotiations for you in many cases to broker the best deal.
I’m glad the article was helpful for you. Selling sites can turn into quite the lucrative career (as well buying sites and growing them, since it takes so much of the initial guesswork out that building a site from scratch entails).
Looking forward to see what you make Todd!
Would love to hear more about Deal Flow, particularly the pipeline that starts upstream when a buyer is looking to sell.
We’re going be working on more content related to deal flow.
Do you mean you would like to see what is happening when someone buys a website and then later on sells that same website? We have a lot of people that do this and make it into a pretty lucrative career. We often call them the Flipper Fred. They’ll often buy a content based website (or ecommerce, whatever their particular skill set is tailored for), build up that website and sell it.
So while they might have bought a site for $60,000, they can often come back and resell it a year later for $120,000-$150,000 because they doubled profit, plus the longer traffic track record can help increase the overall value of the site. Not only are they doubling the price they initially bought the site at, but they also earned a healthy monthly income from the site for the 12-18 months they owned it as well.
That can be a pretty awesome ROI for the savvy website buyer