Built To Sell Radio

When you get an acquisition offer for your business, it is natural to focus on the offer price, but your employment contract can be a key element of your remuneration. I know, you don’t want to be an employee but, when you sell, you’ll likely have to sign on for a transition period or earn-out where you will officially be an employee again. The terms of this employment contract are a key element of any deal. Just ask Eric Sit. Sit’s company was acquired by Detection Technologies in 2013. Six months later, Detection was acquired and Sit lived to regret the employment contract he had signed.

Barry Hinckley founded Bullhorn with his two partners Art Papas and Roger Colvin. The software company built an application recruiters used to manage candidates and clients. Bullhorn raised three rounds of financing and went on to sell for $135MM in 2012. Hinckley and his team raised money from family, friends, and venture capitalists and have the scars to prove it. In this interview you’ll learn: what to do when a venture capitalist wants to fire the founders. the difference between raising money in good and bad markets. the tricks venture capitalists use to try and dilute your equity. the tactic some venture capitalists use to wipe out the equity of investors of a family and friends round. what re-trading is and how to stop it.

The first book I ever read about entrepreneurship was The E-Myth by Michael Gerber. I loved it. Gerber’s knack for simplifying the complex art of starting and growing a company resonated with me immediately. Although I’ve never met Michael, I consider him to be one of my very first teachers. I have not read his more recent books so when his publicist contacted me last week to see if I would interview Michael on Built to Sell Radio, I was keen to hear what he had been up to since The E-Myth. In this interview, you’ll get a summary of his new book, Beyond The E-Myth including: Why every company should be built as a product to sell. The four stages of building a sellable company. How to engage “the beginner’s mind”. The four rolls of every founder. The hierarchy of growth. For the better part of 40 years, Michael Gerber has been encouraging business owners to work “on, not in” your business. That’s exactly what we do with owners that leverage The Value Builder System™. Each month, you’ll get focused time with

Frank Cottle led an investor group to buy Hi-Mark Software for 10 times EBITDA. Cottle then sold a chunk for 15 times and ultimately sold his last tranche of equity for more than 16 times EBITDA to Lufthansa. In this interview, you’ll get deep inside the mind of a private equity buyer and learn: three reasons acquisition deals fall apart. the difference between your reputation and your brand and which one acquires value most. the definition of “suicide by investor” and the dangers of getting into bed with a private equity group. how stock clawbacks can dilute your position to zero in the company you started. how a stock re-capitalization works. one key decision every entrepreneur must make in growing their company. why cross-selling as an investment thesis is flawed.

Most of our Built to Sell Radio episodes have been success stories but this week’s show is a cautionary tale of what happens when you don’t plan ahead. It features Dan Bradbury, a young entrepreneur who was growing a successful business right up until the day he had a cycling accident and ended up in a coma. Bradbury made a full recovery after seven months, but his business didn’t make out as well. It suffered in his absence, and instead of committing to build it back up upon his recovery, Bradbury decided to sell it, reasoning he needed to safeguard his family’s finances should anything bad happen again. After a long search, Bradbury found a buyer but the offer he received revealed his weakened negotiating position.You’ll hear Bradbury's cautionary tale along with: How to build leverage into your negotiations. Why you need a BATANA (Best Alternative To A Negotiated Agreement) when exiting your business. How you can you-proof your business. How you can use accretive value to your advantage.

Mark Stephenson and his partners grew their conference business, Media Edge Communications, to north of $10 million in annual revenue when they were approached by an acquirer. They agreed to a deal that was just shy of eight times EBITDA—85% of the deal was in cash with 15% in an earn-out. If Stephenson had the deal to do over again, he would change his earn-out structure to avoid leaving money on the table. You’ll learn about Stephenson’s earn-out mistake along with: - The emotional impact of selling. - How buyers try to grind you down during diligence (and how to counter). - How to tell the difference between a time-kicker and a serious acquirer. - How long it takes to negotiate the sale of a business.

Steve Huey bought The Learning House, a company that creates online courses on behalf of colleges, for $2.7MM in 2007 because he saw the opportunity to professionalize the sales and account management of the business. Five years later, Huey sold the business to Weld North, a private equity company for $27.5 MM earning his shareholders an 8 to 1 return.  In this episode, you’ll hear Huey’s advice on: how to raise  a $4MM angel round in 7 days an inexpensive way to figure out what your business is worth buying a business with little of your own money down Handling a buyer who drops their offer after signing an LOI Differentiating between an earning out an escrow

Joe Saul Sehy is the host of Stacking Benjamins, a popular personal finance podcast on which he has interviewed everyone from Jean Chatzky to David Bach. Sehy’s journey to becoming a podcasting sensation was a little unusual: he started as a financial advisor, building a firm with $65 million in assets under management. Then, on his 40th birthday, Sehy received a letter from a friend which was the trigger that made him want to sell his business. His friend’s letter became a catalyst for him to switch careers and become a professional podcaster. In this episode of Built to Sell Radio, Sehy describes the sale of his financial planning practice and you’ll learn: How to use employee systems to “you-proof” your business. How to hire people inclined to follow systems (rather than renegades who want to re-invent your business). How to sell a franchise. The one thing Sehy wished he had done, which he estimates could have boosted the value of his business by 15–25%. What to do with your money after you sell your busi

Doug Chapiewsky built CenterPoint Solutions Inc. into an Inc. 500 company with $5 million in revenue and more than $3 million in EBITDA before he sold it to Israeli-based Nice Systems. In this episode of Built to Sell Radio, Chapiewsky describes how to: scrutinize the various currencies used by acquirers (cash vs. stock vs. options). dress up your company to sell it. use an office manager to increase the perception—and ultimately the value—of your company. stimulate an unsolicited offer for your business. structure your employment agreement to keep control of your employees after you sell.

Manny Fernandez started HomeBuyingCenter.com in 2007, just as the real estate market started to wobble in the United States. As it turned out, his timing was perfect as his site helped underwater homeowners unload their real estate. In fact, Fernandez was generating so many opportunities for one real estate brokerage, that he received an unsolicited offer from them to purchase his business. He took their offer and parlayed it into a competing offer that helped provide the competitive tension to get a deal done – proving once again, it often takes two offers to maximize the value of your business.

Of course you want an all-cash offer at a beefy multiple with no strings attached, but what do you really need from the sale of your company? That’s a question Dr. Frank Gibson thought a lot about. He had a successful healthcare business but had stumbled on a new opportunity in a related field. He wanted to sell his company to fund the new idea and, at the same time, needed to retain the rights to some intellectual capital in his old business.

James Garvey and his partner grew Objective Loyalty from a standing start in 2005 to $2.5 million in EBITDA before they decided to sell their email marketing platform. Garvey’s investment banker spent six months shopping the deal without a single offer. Then Garvey decided to switch tactics and approach the strategic partners who already knew the company well. Garvey got an offer and was able to double it quickly through some shrewd negotiation. Find out how Garvey 2X'd his original offer by listening now.

An earn out is a way to bridge the gap between what you want for your business and what a buyer is willing to pay. In an earn out, a portion of the sale price of your business is set aside for payment in the future if you reach certain goals the acquirer sets for your business. You’ll need to stay on for a few years  as an employee of the acquiring company to lead your team to hit the earn out goals. Most owners would prefer all of their cash the day they sell their business and most buyers would prefer to pay the entire amount contingent on future performance. Deals get done in the middle where some portion of your money is paid up front with another slice available if you meet your goals as a division of the acquiring company. Traditional earn outs are typically tied to the profitability of your company as a division of your new owner and they are fraught with problems. Buyers may thwart you ability to hit your number in any number of ways.  In this episode of Built to Sell Radio, you’ll hear from Mac Lacke

Peach New Media was launched in 2001 by Dave Will, who carried the title “Chief Peach” until he sold the business in 2015. Will had built his learning-management software company up to 40 employees when he received an offer from the private equity group Accel-KKR that he simply could not refuse. In this interview, Will shares his wisdom on: - How to create a company acquirers will want to buy. - How to figure out when to sell. - How to look at your business as an investor would. - Cup-holder ideas and how they impact your company’s value.

Jim Beach sold American Computer Experience for $200 million, which sounds like a fantastic exit, but when I asked Beach if he had any regrets I was surprised by how long a list of lessons he had to share including: How creating new divisions can help grow revenue but reduce the overall value of your company. - The dangers of raising venture capital. - Why growing faster than your cash flow may end up costing you more equity in your business than you want to give up. - The perils of partnering with a celebrity entrepreneur. - Why you should never take an angel investment from a friend or family member. - How to avoid a $250,000 legal bill when selling your company.

In 1999, Andrew Weinreich sold Six Degrees, a social networking site based on the same idea that sparked the likes of LinkedIn and Facebook, for $125 million. In the following years, he went on to sell three other companies including one to IBM and another to Match.com. Most founders are lucky to have one successful exit, but Weinreich has already had four. In this interview, you’ll learn: The common denominator among all four of Weinreich’s exits. Where to find the company with the highest probability of acquiring you. How to hire an M&A professional for a “Dual Track” mandate. The mistake most entrepreneurs make when they assemble a board. The simple technique Weinreich used to let buyers know he was interested in being acquired (without sounding desperate).

Intellectually, you know you need recurring revenue, but how do you build an annuity stream in an industry where subscription billing is not the standard? Take a look at the example of Laura Steward, the founder of Guardian Angel Computer Services. She was in the business of fixing her clients’ computer problems when a valuation specialist told her that Guardian Angel was worth less than 50% of one year’s revenue. Determined to get more for her business, she underwent a makeover focusing on her Angel Watch subscription program. Steward went on to sell her business two years later for four times what the valuation consultant thought it was worth. In this interview you’ll learn how to: Switch customers from hourly to subscription billing. Overcome the objections hourly customers have for making the switch. Ensure customers stop asking for your personal attention on their job through one simple idea. Maximize the value of your contracts in the eyes of an acquirer.

Rod Drury is the founder and CEO of Xero, a cloud-based accounting platform that competes head on with Intuit’s QuickBooks. Started in 2006, Xero now boasts 700,000 subscribers and a market capitalization of almost $3 billion. Xero was picked by Forbes as the World’s Most Innovative Growth Company in 2014 and 2015. Drury got the capital to start Xero from selling another software company, AfterMail, for $15 million plus another $30 million in a potential earn-out—not bad for a company with a little more than $2 million in revenue. Drury offers all kinds of insight in this interview including:   How to avoid the mistake he made in structuring his earn-out, which ended up costing him $30 million. The definition of R&D by acquisition. How to use public company arbitrage to increase the value of your company. How to transition from offering a service to a product. How to get an acquirer to come to you. How to exhibit at a trade show if your goal is to get acquired by someone in your industry.

Have you ever stayed in a fancy hotel and wondered how much they pay Aveda for those little bottles of shampoo? Turns out, there is a company called Pacific Direct that acts as a middleman between the hotel chain and the company supplying the shampoo. U.K.-based Pacific Direct was earning £3.3 million when founder Lara Morgan decided to sell. She got multiple offers for her company and ultimately sold it to a private equity group for £20 million. During our interview, Morgan shared her wisdom on how to sell your company, including: What to do if your acquisition falls apart at the last minute. How to reward your employees when you sell. How a “drag and tag” clause in a sale to a private equity acquisition works. How to evaluate multiple offers to buy your business.

A direct competitor can often be the most likely buyer for your business. A competitor already knows your industry and may see your company as a way to consolidate market share and gain more pricing control. They may also be able to buy your business and eliminate redundancies in your back office, meaning your business is worth more in their hands than in those of many other potential buyers. The challenge with negotiating the sale of your business to a competitor is, if the deal falls through, you can end up regretting all the secrets you shared with them in the process. John Bodrozic is the co-founder of Meridian Systems, which offered project management software to the construction industry. In 2005, Bodrozic began negotiations with a direct competitor and ended up living to regret it.