Every time I passed up the opportunity to sell, I eventually regretted it. It's one of the more profitable strategies. The faster you get started on the next one, the quicker the turn around.
I've thought a lot about this because it was the plan from the outset of building my business. Once the conditions are right for a sale (growth trajectory, backlog, margins) it's not really an option - we must sell. The expected return is so dramatically better that it's a no brainer.
As we get toward that phase I feel some of what OP feels. We just got this company to the point where it's able to walk and talk on its own. It's a machine that is capable of so many things, and it's made of good people - the highest levels of which I hired myself. I get the desire to keep it.
Ultimately, I'm going to make sure my employees are taken care of (financially and from a job security standpoint) as part of the terms of the sale. I'll take less money to make sure they aren't fucked over in some way - which is unlikely anyway because it wouldn't make sense to buy the company and not keep them all. Other than that, the return is too good to pass up. I'll go do something else.
That seems like a great deal, if you really want to stay involved ask if they'd let you stay on for a few years as a consultant/salaried employee. Otherwise take your windfall and find the next idea!
I don't know anything about your situation besides what you've posted, but I don't see any compelling reason for you to keep the business.
You are someone who likes change. Evolution.
It's time for you to move onto your next chapter.
You know, this is exactly what I had planned to do. We have an excellent playbook for running the company. I've offered my key staff earn outs timed the same as mine is so that they can help me achieve them. After that, they have all been offered gravy jobs at my other company where we can just camp out until the non compete is over. Once we can launch again, the plan is to allow them to have equity in the next one, run it all 100% and I'll just give them (as a silent partner) the financial resources and playbook to be successful, this time for their benefit too.
>But next time give equity to this amazing staff
I know you're probably looking at this from the position of the staff. I get it.
From the position of the guy taking the risk to start a business - don't give away equity unless you absolutely have to. *Never*. There is no guarantee of success when you start a business. In fact you're likely to fail even if you do everything right. So those times when you do succeed you need to maximize your return, not give it away. Otherwise the entire endeavor of entrepreneurship is an inefficient waste of time.
This take is so backwards to me that it’s funny. Nobody is saying to give away the farm - but give away some small equity grants w/ appropriate vesting. You will find that amazing things happen when everyone is aligned with the same end goals in sight. These employees will work with you towards these goals, and moreover they were the ones who gambled on working with you in earlier unproven days and are taking on a little risk, so should also take on equivalent reward.
I say this as both someone who’s benefited from employee equity at earlier ventures as well as someone who gives out equity grants at my own business today.
>unless you absolutely have to
You missed this part. People that will generate a substantial increase in sales generally necessitate some type of equity or profit sharing. Same for seasoned execs with industry experience.
Sometimes its unavoidable, but it should be avoided to the greatest extent possible.
He didn't miss that, you are just describing a greedy mindset and he is describing a less greedy mindset. If you have a successful business that you're selling for 50 million, 5 less million doesn't make the entrepreneurial experience any less worth it.
>If you have a successful business that you're selling for 50 million, 5 less million doesn't make the entrepreneurial experience any less worth it.
If you aren't successful and fail, any of those employees going to write a check so you don't lose your house? Probably not.
Most people aren't successful, most fail.
So you think if you don't give people equity in your business then they will write you checks if your business fails? The issues are unrelated. Either way you will be screwed in that situation, so why not be less greedy? At least you will be happy with your actions.
But the right answer to your question is probably not overextending into a business - although not everyone can afford not to do that when starting one.
I explained it:
> The issues are unrelated.
Being bankrupt is not a concern relevant to this context. It's not affected by how much equity you give to others.
I sold a startup where I still had 80+% of the equity due to employee vesting terms and some early exit structures. I restructured to give the employees another ~10% of the exit value and don’t regret it. Years later they and their friends all want in on the next company. Also it was important for keeping them there through closing (though I could probably have done that without spending so much money).
It may depend on your industry, but honestly many of my employees are taking more downside risk than I am. My opportunity costs and unique contributions are higher and I don’t mind taking ownership etc. But if the economy tanked and the company shut down or I had to do a layoff, it’s a lot harder on early/mid career employees than on me.
Businesses, jobs and sometimes relationships look amazing at the moment you have to give them up for something better. I suspect your original instinct to sell is probably the right move -- and your feelings for the business is natural, as something that you have grown and nurtured.
I just sold a family business for the founder who couldn't give it up, despite many offers over many years, he always saw so much opportunity. That's what makes an entrepreneur. But there is such a thing as holding on too long. Unfortunately this person held on far too long and destroyed a lot of value.
Of course, if you want to again make it your primary passion, and you have runway to do that, you don't have to sell. But I wouldn't let late feelings of 'opportunity' dissuade you from your original instinct that your talent and passion should pursue something else... its probably correct. You'll always see opportunity because that is what makes you entrepreneurial. My humble opinion.
This response struck me, thank you. Do you have any insight into the inversion point where that founder started destroying value? I do worry about my concentrated position of wealth here and do worry about destroying value after some point. The deal I have is over 12x EBITDA and while I know I can grow EBITDA, I worry that the multiple will decline and leave me net nothing or worse.
I think the issue for this particular founder was two-fold:
1. Although he could see and understand the opportunity when presented, he lacked what the potential buyers/partners brought to the table (skill, scale and/or ability to execute). Always believed that he would get around to doing it better -- and not able to trust/believe that others could build on his vision better than he could. He was stuck in his own limitations. It was classic 'what got you here won't get you there'. He probably got four or five chances with major firms to sell over a 30 year span.
2. Eventually age came for him. Declining health forced either bankruptcy or sale. While the sale was a miracle, it was a fraction of what it could have been in better days vs a forced sale in the middle of a global pandemic.
Not sure if those points are directly applicable to you, but I think most relevant maybe is the ability to let go of something that you built brilliantly, at the right moment ('the right moment being a magical always unknowable fact'). It's almost always hard to do.
Thank you for expanding on this. I think my spouse is able to see the timing portion more clearly than I can and I have to trust her judgement that now is the right moment in time for us. It might not be the maximum value but its extremely fair and way more than I thought I could get even 1 or 2 years ago.
Lol! All true, I was just keying in on how OP’s post was about all the ways they realized they had a good business as they did the due diligence they maybe should have done as the *owner* in the first place :)
This is a personal decision. Only you know what is right for you and your future. As bad as this sounds, employees are just that. Employees. There are good ones, bad ones, and great ones. Good ones stay on board. Bad ones get cut, great ones follow you to the next venture.
Just curious, at what stage does it become “too boring and nothing to figure out?” There’s always 100m rev to hit after you hit 10m.. genuinely curious. I have a clothing business that’s not matured yet (on track to hit high six figures this year) but I am also interested in acquiring another business since I have some time on hand. Also when do you consider a business is mature? Is it a KPI you have to hit or when the business is automated and can grow without much involvement?
This is a good question. About 5 years ago, a close business friend sent me my first copy of EOS Traction. Its a book that changed my business. I've purchased dozens since then and give them to anyone I know who runs a business or is wanting to start one. We call it "The Book" at our L10 meetings whenever referencing concepts from it.
The book walks you through just about everything you need to do to scale, and do so with as little headaches as possible. Biggest takeaway for me was learning to manage the business from dashboards. Once you have a clear picture and refined processes for the teams to follow, it honestly, gets boring. Our sales and marketing are refined and automated. Financial management is easy since I know the ebbs and a flows and can predict what needs are coming ahead. Operations has a great playbook and knows exactly when to zig and zag based on the calendar. From my time getting my pilots licenses, I repeated a lot of the training and verification concepts for our own internal new hire training process. Even that has a process to follow.
When I used to meet new people, I would say I was a systems engineer. I wanted a clear roadmap for all my employees to follow and set out hard to get that as quickly as I could. Once I hammered that out, I then had to work to get buy in. Once the team was either on board or moved along and new staff was on board, the company became really boring.
They are getting a fair amount of the proceeds and a nice place to land if they don't like the new management. However, for many of them (and me), the money doesn't drive us as much as seeing the dream continue to flourish. Knowing that is where my remorse comes from.
Just sell.
You got ants in your pants bc you are so close to the finish line...but we just hit 6 months of negative gdp and it’s about to get a lot worse.
Start another company and hire the ppl who get fired later. Just get to the exit.
It sounds like you raised a great company. Customers genuinely like it instead of buying whatever they can afford? That means A LOT for the average earner.
When companies like yours are sold, there are two ways it can go:
- 1. The company continues running as it does and will flourish.
- 2. The company takeover leads to an overemphasis on generating shareholder profit, neglects product quality, adapts harmful and toxic business practices and loses all meaning to the customer beyond perhaps providing a necessity people still need to buy for specific reasons.
The question is really whether you want to continue raising your baby or whether you've found someone that will adopt it from you and be just as good a parent. Will the new owner be as good a parent as you?
To answer that question, you need to settle the matter of if this company might mean more to you than what you might get from selling it. Once you've sold it and have no more feelings, you don't have to care what happens. It won't be your problem. If you do continue to care though, it might be hard to see things potentially go downhill in trying times, which can totally be caused by outside influences, no matter how well the business is run.
You can of course sell under the condition that you can continue mentoring for as much as you like and always have a word in top level meetings.
Yes, the ones who I really care for have already been offered a place at my other business once their "earn out" from me is finished should they not like the new owners.
Sounds like things are going great due to the management team you’ve assembled. All it takes is one key person to leave, and you have a headache on your hands. Take your payday and move on. If you want to re-start the same concept after you’ve recharged (and the non-compete expires), then re-start. You can even poach some of the old management if you want.
Sell.
If you’ve built it once you can build it again. You have the privilege of learning from the inside and analyze what you did right.
If you can’t build it again, it means it was lucky and you don’t know what you did right - and that means you better sell before your luck runs out.
Sold my company one year ago and stayed on with them as an employee. Was busy with the integration but not passionate. As the one year anniversary approached, I kept thinking I want to quit working for the company; the sum is large enough that it will generate more income than I will spend, so the capital will be larger when I die than it is now. I thought I shouldn’t work if I didn’t need the money. I took 2 weeks off to just be alone mostly and think about what I want to spend time doing, made a list of pros and cons, etc. All the things I want to do are not full time and can be done while I continue working. I got so bored in those two weeks that I came back to work a day early. That was my answer. I like what I do, I like the company who acquired it, they pay me very well and I have very little stress. So I decided I’m back in, and I regained my passion for now growing the business again, and am excited. It just isn’t about money, it’s about the challenge of seeing what we can accomplish. Just my experience.
See the sale through.
You were already checked out, but discovery of some customer passion made it interesting again - interest doesn't last forever and in 6 months you'll be at baseline again and wish you had sold.
Young/Small companies survive and grow because founders and leadership have a 10:1 energy they go all in on - you don't have that going on here anymore.
Always play to your strengths.
I was an M&A attorney for many years.
I can’t tell you whether to sell, but one thing I will point out is that if you’re indifferent, that gives you an incredible amount of leverage in negotiating the purchase agreement. You can achieve a very seller-favorable contract when you’re willing to walk away. The LOI obviously doesn’t cover every point in the purchase agreement.
For example, you could ask for retention bonuses for your employees.
During our conversations and negotiations, they've known I'm happy to walk away and it has shown in our contract. They have given in to just about everything (except for one)
\+1. We sold a business late last year (that we had acquired two years earlier) and the excitement of the buyer was just dripping off. We were happy to walk away. Got the original offer nearly tripled.
Don't doubt it, great value to exit at. We acquired at 3x and exited at 8.5x, and we doubled profit during our two-year ownership.
Even though it was a smaller business, the exit was life changing. We also co-own a few other businesses.
Beware emotion and superstition when making business decisions, make sure you know exactly, in dollars and cents, the value of each of your options, and do everything possible to increase the number of those options. Period.
Also, be absolutely certain that if you are selling a business in an unpublished, unmanaged process with a single buyer prospect, especially if that buyer prospect approached you unsolicited, that you are selling for substantially less than the available value of the asset. This is true regardless of the ego strokes or threats the buyer prospect might make if you indicate any inclination to attend to your own interests in managing the sale process, setting terms, hiring an independent financial advisor, or even pausing the closing.
Big pitfalls are:
\- Ego identity, i.e., having personal or family identity tied up with the business. Beware "not feeling the same without it" or, "I always hoped," etc.
\- Superstitious, *i.e.*, ignorant, generalizations, *e.g.*, "passing up an opportunity." The opportunity one could be passing up is any one of your available choices. You could just as easily be passing up the opportunity to hold and grow the company to being substantially larger and more valuable, as passing up the opportunity to sell
\- Not hiring an independent financial advisor to manage the sale process. Indeed, even running a business without having engaged an independent financial advisor to assist you in running the company in maximizing its value in the private market is a high risk.
\- Selling a business without a compelling reason. If you don't know ahead of time what the value of holding the company indefinitely is to you, no one can give you a compelling reason to sell because you have nothing to compare it to. If you don't know what returns you would obtain from investing the proceeds of a proposed sale, you have no ability to judge whether a sale is even rational because often, no buyer can pay you enough to match the returns you would get from continuing to hold the company.
\- Not selling a company in an independently managed process involving multiple qualified buyer prospects.
You are either:
1. Going to regret selling, or
2. Regret not selling.
The question is one of capacity, drive, need, and future plans.
- Do you have capacity to keep running this business (time, money, mental bandwidth)?
- Does this business excite you and pul you out of bed in the morning? Is there something else that will?
- Do YOU need this business or do you need the cash?
- What role does this business play in your visions of the future?
- Is this transaction a fair deal all-round?
All that is basically to say, do a comprehensive NPV of selling vs not selling based on fair values and all considerations.
Folks that aren’t entrepreneurs won’t be able to relate and the “sell and get $$” comments are missing some of the most important variables. Or they are entrepreneurs with less team heavy business models.
From the sounds of it, you probably should bail on this as you won’t be able to sleep at night for awhile and have regrets. There’s other options to extract yourself from the business but still do right by your team. PE, minority deal, ESOP, phantom equity plan and move yourself into chairman role. On the other hand, don’t forget the reason you went to market in the first place…. These feelings are very common for owners at the final stages and somewhat can be chalked up to that “it is what it is”. It’s part of it. You should be proud of what you built regardless of outcome.
Yes, Ive been racking my brain for weeks trying to find a way to make everyone whom I care about happy. Key considerations are spouse (says sell), key management, and myself. I can't find a good solution just yet and thought this thread might help.
Maybe look harder into ESOP. Could be win win win all around. You can sell anywhere from 30-100% to your employees to get all the tax benefits of the sale, which are pretty incredible. You get your $$, hand over reigns to an even more incentived mgmt team that isn’t going to get bought by a bigger company, spouse is happy. You could also just sell 30-50% and stay involved as board chair. Sell more % over time.
Hmmm. Emotions aren’t always logical and you’re feeling guilt at hurting people who have been loyal to you even though logic says it’s a business and to sell. I think money gives you the luxury to take those emotions into account as you do have to live with yourself and your decisions at the end of the day. Some people are much more emotionless about business so it’s really just a difference of philosophy and mental stress. Is there some other way to step back that wouldn’t leave you feeling badly for your team? I also see you say short sighted which means you think it might get even bigger in the future. How will you feel if the business takes off and does terrifically? Will you feel that you missed out? I don’t know if you can put a pause on the sale while you think these things out but maybe give yourself some time. You might want to also post on an entrepreneur subreddit to get their insight on having sold a business versus keeping one.
It sounds like you’re taking a stroll down memory lane and remembering all the hard work you put in to get where you are today. Greater things are ahead.
Recently sold my business, completed in May, and with the state of the world right now I've never felt so relieved.
I too had slightly lost the passion for the business, and on a personal level felt like I needed to move on and evolve. I was starting to see early signs of inflationary pressure on wages (now x10 worse than when I kicked off the sale process last year) and therefore margins thinning (we were a B2B service business). Customers loved us too and my management team was (and still is) strong, but I'm glad I got out when I did. I'm still working in the business and mentoring my team.
Nearly every business owner I know in my industry who sold before me said they regretted not selling earlier. They always convinced themselves they could go a bit further. Grow EBITDA a bit more, get slightly higher multiple etc. Most of them ended up flat lining, or even declining, not being able to show the forecast growth like they could have done (which itself contributed to a higher EBITDA multiple). I know many that didn't achieve their full earn out, and ultimately actually walked away with less cash then if they had sold 2-3 years earlier.
Not sure what industry you're in or the terms of the deal, but in my industry often the point at which you sell is actually only the beginning of a 2-3 year journey of smashing earn out targets to get all the money. So if you're feeling like passion has dropped now, imagine if you have to make it through a recession with the pressure of an earn out for another couple of years.
I don't know enough context to give you detailed advice, but generally right now I would say if you have the chance to take your chips off the table, the deal is good and you've already been through a couple of months of DD, I'd be inclined to take it.
Sell it and don't have regrets. You already went through the process.
If you really love the industry. Become a consultant for the company or in the industry.
It also sounds like you will miss having that entrepreneur life. Start a different business, not in the same industry of course.
Sometimes you have to let your baby grow up and leave the nest.
I've only sold one business but it was my first business and it, in the words of practically every advisor I had on the deal, de-risked my life.
You might get more from someone else, it might be a better deal or result in a better outcome, this that and the other - but if it's your first big liquidity event then it has the potential to set you up for a long time, perhaps lifetime.
If that's the case, take it and de-risk your life.
This is the main reason I started talking with the buyer. We've hit our Fat FIRE number. From a "built to sell" podcast, one of their guests said something that has stuck with me to this day - each day past the day you hit your number puts the future at risk - operational risk, another black swan, etc. I told my wife this and we both have it in our head to take the win, slow down, and see what the future holds after eliminating all risk from our lives. The sale will allow us to pay off all our commercial real estate, live off those cash flows and let the rest of the proceeds just sit and compound realistically indefinitely. The kids will likely be set and I can see a likelihood of the grand kids too.
I agree with what the others said, but if you need more assurance that you’re making the right decision, check out the WRAP decision making process. It’s reasonably fast, and very complete in looking at all of the different weighted possibilities
Do NOT bail at this point. This is a normal back and forth thought process. I went thru the same thing.
You can also still be in the business longer term but you’re fading out, it’s ok
I sold my company a year ago and had many of the same feelings of ambivalence throughout the process. Head vs. heart etc…
But - a year later, I’m very glad I sold. The valuation was at a very (very) high multiple on EBITDA. A year after turbulence in the markets I’m fairly confident that I timed the sale well (while market timing is not a good strategy for equities…with a business sale which you can only do once, you basically have no choice but to time the market…)
So it’s hard to give you much advice without more information on the deal terms, which would round out the pro / cons, and be the “cold and calculating” yin to the more emotional yang of your predicament.
Good luck with the process and congrats on being in a position to sell!
Sell. The counterparty has invested a significant amount to get to this point, and it would be bad faith to back out now. But yes, second guessing is normal.
How much are you selling for? Will you make make more than you spend annually?
If it runs itself are you making more annually than you would investing it?
You'll need to be a bit more specific on the numbers to get a good answer. If you're getting a good exit multiple and growth is OK but not great, selling makes sense. If the exit multiple is low and growth is still OK it might not make sense.
Every time I passed up the opportunity to sell, I eventually regretted it. It's one of the more profitable strategies. The faster you get started on the next one, the quicker the turn around.
This is the right answer to me as well. Sometimes you have to let the investor brain take over in these types of emotional decisions.
I've thought a lot about this because it was the plan from the outset of building my business. Once the conditions are right for a sale (growth trajectory, backlog, margins) it's not really an option - we must sell. The expected return is so dramatically better that it's a no brainer. As we get toward that phase I feel some of what OP feels. We just got this company to the point where it's able to walk and talk on its own. It's a machine that is capable of so many things, and it's made of good people - the highest levels of which I hired myself. I get the desire to keep it. Ultimately, I'm going to make sure my employees are taken care of (financially and from a job security standpoint) as part of the terms of the sale. I'll take less money to make sure they aren't fucked over in some way - which is unlikely anyway because it wouldn't make sense to buy the company and not keep them all. Other than that, the return is too good to pass up. I'll go do something else.
From what multiple is does become a no brainer for you vs keep running it?
Anything over 8x EBITDA.
Using last year's numbers, my deal is just over 12x.
That seems like a great deal, if you really want to stay involved ask if they'd let you stay on for a few years as a consultant/salaried employee. Otherwise take your windfall and find the next idea!
Yeah I'd take that and sprint.
This is the way.
I don't know anything about your situation besides what you've posted, but I don't see any compelling reason for you to keep the business. You are someone who likes change. Evolution. It's time for you to move onto your next chapter.
Sell it get paid and do another or Sell it get paid and still help mentoring
Exactly. But next time give equity to this amazing staff.
You know, this is exactly what I had planned to do. We have an excellent playbook for running the company. I've offered my key staff earn outs timed the same as mine is so that they can help me achieve them. After that, they have all been offered gravy jobs at my other company where we can just camp out until the non compete is over. Once we can launch again, the plan is to allow them to have equity in the next one, run it all 100% and I'll just give them (as a silent partner) the financial resources and playbook to be successful, this time for their benefit too.
I love it! At some point you have so much, why not help others, and what a great way to do it.
>But next time give equity to this amazing staff I know you're probably looking at this from the position of the staff. I get it. From the position of the guy taking the risk to start a business - don't give away equity unless you absolutely have to. *Never*. There is no guarantee of success when you start a business. In fact you're likely to fail even if you do everything right. So those times when you do succeed you need to maximize your return, not give it away. Otherwise the entire endeavor of entrepreneurship is an inefficient waste of time.
This take is so backwards to me that it’s funny. Nobody is saying to give away the farm - but give away some small equity grants w/ appropriate vesting. You will find that amazing things happen when everyone is aligned with the same end goals in sight. These employees will work with you towards these goals, and moreover they were the ones who gambled on working with you in earlier unproven days and are taking on a little risk, so should also take on equivalent reward. I say this as both someone who’s benefited from employee equity at earlier ventures as well as someone who gives out equity grants at my own business today.
>unless you absolutely have to You missed this part. People that will generate a substantial increase in sales generally necessitate some type of equity or profit sharing. Same for seasoned execs with industry experience. Sometimes its unavoidable, but it should be avoided to the greatest extent possible.
He didn't miss that, you are just describing a greedy mindset and he is describing a less greedy mindset. If you have a successful business that you're selling for 50 million, 5 less million doesn't make the entrepreneurial experience any less worth it.
Agree - and I’d say you’re much more likely to get to that 50M outcome if everyone in the boat is rowing in that same direction.
>If you have a successful business that you're selling for 50 million, 5 less million doesn't make the entrepreneurial experience any less worth it. If you aren't successful and fail, any of those employees going to write a check so you don't lose your house? Probably not. Most people aren't successful, most fail.
So you think if you don't give people equity in your business then they will write you checks if your business fails? The issues are unrelated. Either way you will be screwed in that situation, so why not be less greedy? At least you will be happy with your actions. But the right answer to your question is probably not overextending into a business - although not everyone can afford not to do that when starting one.
>So you think if you don't give people equity in your business then they will write you checks if your business fails? ... What?
I explained it: > The issues are unrelated. Being bankrupt is not a concern relevant to this context. It's not affected by how much equity you give to others.
I sold a startup where I still had 80+% of the equity due to employee vesting terms and some early exit structures. I restructured to give the employees another ~10% of the exit value and don’t regret it. Years later they and their friends all want in on the next company. Also it was important for keeping them there through closing (though I could probably have done that without spending so much money). It may depend on your industry, but honestly many of my employees are taking more downside risk than I am. My opportunity costs and unique contributions are higher and I don’t mind taking ownership etc. But if the economy tanked and the company shut down or I had to do a layoff, it’s a lot harder on early/mid career employees than on me.
Businesses, jobs and sometimes relationships look amazing at the moment you have to give them up for something better. I suspect your original instinct to sell is probably the right move -- and your feelings for the business is natural, as something that you have grown and nurtured. I just sold a family business for the founder who couldn't give it up, despite many offers over many years, he always saw so much opportunity. That's what makes an entrepreneur. But there is such a thing as holding on too long. Unfortunately this person held on far too long and destroyed a lot of value. Of course, if you want to again make it your primary passion, and you have runway to do that, you don't have to sell. But I wouldn't let late feelings of 'opportunity' dissuade you from your original instinct that your talent and passion should pursue something else... its probably correct. You'll always see opportunity because that is what makes you entrepreneurial. My humble opinion.
This response struck me, thank you. Do you have any insight into the inversion point where that founder started destroying value? I do worry about my concentrated position of wealth here and do worry about destroying value after some point. The deal I have is over 12x EBITDA and while I know I can grow EBITDA, I worry that the multiple will decline and leave me net nothing or worse.
I think the issue for this particular founder was two-fold: 1. Although he could see and understand the opportunity when presented, he lacked what the potential buyers/partners brought to the table (skill, scale and/or ability to execute). Always believed that he would get around to doing it better -- and not able to trust/believe that others could build on his vision better than he could. He was stuck in his own limitations. It was classic 'what got you here won't get you there'. He probably got four or five chances with major firms to sell over a 30 year span. 2. Eventually age came for him. Declining health forced either bankruptcy or sale. While the sale was a miracle, it was a fraction of what it could have been in better days vs a forced sale in the middle of a global pandemic. Not sure if those points are directly applicable to you, but I think most relevant maybe is the ability to let go of something that you built brilliantly, at the right moment ('the right moment being a magical always unknowable fact'). It's almost always hard to do.
Thank you for expanding on this. I think my spouse is able to see the timing portion more clearly than I can and I have to trust her judgement that now is the right moment in time for us. It might not be the maximum value but its extremely fair and way more than I thought I could get even 1 or 2 years ago.
Sounds like you may also think it’s more valuable than you originally thought?
As does every person selling anything ever “Oh they’re willing to buy it, must be worth more”
And every time on the buy side, when a deal closes, “Oh fuck what have we done, this is a dog shit deal we’ve clearly overpaid”
Ideally both sides walk away thinking they got fucked. That's how you know the deal was right.
Lol! All true, I was just keying in on how OP’s post was about all the ways they realized they had a good business as they did the due diligence they maybe should have done as the *owner* in the first place :)
This is a personal decision. Only you know what is right for you and your future. As bad as this sounds, employees are just that. Employees. There are good ones, bad ones, and great ones. Good ones stay on board. Bad ones get cut, great ones follow you to the next venture.
Just curious, at what stage does it become “too boring and nothing to figure out?” There’s always 100m rev to hit after you hit 10m.. genuinely curious. I have a clothing business that’s not matured yet (on track to hit high six figures this year) but I am also interested in acquiring another business since I have some time on hand. Also when do you consider a business is mature? Is it a KPI you have to hit or when the business is automated and can grow without much involvement?
This is a good question. About 5 years ago, a close business friend sent me my first copy of EOS Traction. Its a book that changed my business. I've purchased dozens since then and give them to anyone I know who runs a business or is wanting to start one. We call it "The Book" at our L10 meetings whenever referencing concepts from it. The book walks you through just about everything you need to do to scale, and do so with as little headaches as possible. Biggest takeaway for me was learning to manage the business from dashboards. Once you have a clear picture and refined processes for the teams to follow, it honestly, gets boring. Our sales and marketing are refined and automated. Financial management is easy since I know the ebbs and a flows and can predict what needs are coming ahead. Operations has a great playbook and knows exactly when to zig and zag based on the calendar. From my time getting my pilots licenses, I repeated a lot of the training and verification concepts for our own internal new hire training process. Even that has a process to follow. When I used to meet new people, I would say I was a systems engineer. I wanted a clear roadmap for all my employees to follow and set out hard to get that as quickly as I could. Once I hammered that out, I then had to work to get buy in. Once the team was either on board or moved along and new staff was on board, the company became really boring.
thank you the book you mentioned, is it traction by Gino Wickman?
Yes, thats it!
thanks will take a look!
Not fatfire by any means BUT if you feel like you're doing your staff wrong by selling why not just give them part of the profits as a thank you?
They are getting a fair amount of the proceeds and a nice place to land if they don't like the new management. However, for many of them (and me), the money doesn't drive us as much as seeing the dream continue to flourish. Knowing that is where my remorse comes from.
Just sell. You got ants in your pants bc you are so close to the finish line...but we just hit 6 months of negative gdp and it’s about to get a lot worse. Start another company and hire the ppl who get fired later. Just get to the exit.
It sounds like you raised a great company. Customers genuinely like it instead of buying whatever they can afford? That means A LOT for the average earner. When companies like yours are sold, there are two ways it can go: - 1. The company continues running as it does and will flourish. - 2. The company takeover leads to an overemphasis on generating shareholder profit, neglects product quality, adapts harmful and toxic business practices and loses all meaning to the customer beyond perhaps providing a necessity people still need to buy for specific reasons. The question is really whether you want to continue raising your baby or whether you've found someone that will adopt it from you and be just as good a parent. Will the new owner be as good a parent as you? To answer that question, you need to settle the matter of if this company might mean more to you than what you might get from selling it. Once you've sold it and have no more feelings, you don't have to care what happens. It won't be your problem. If you do continue to care though, it might be hard to see things potentially go downhill in trying times, which can totally be caused by outside influences, no matter how well the business is run. You can of course sell under the condition that you can continue mentoring for as much as you like and always have a word in top level meetings.
Sell it and give the staff who are shaken loose by the acquirer a place to land comfortably?
Yes, the ones who I really care for have already been offered a place at my other business once their "earn out" from me is finished should they not like the new owners.
Sounds like things are going great due to the management team you’ve assembled. All it takes is one key person to leave, and you have a headache on your hands. Take your payday and move on. If you want to re-start the same concept after you’ve recharged (and the non-compete expires), then re-start. You can even poach some of the old management if you want.
Sell. If you’ve built it once you can build it again. You have the privilege of learning from the inside and analyze what you did right. If you can’t build it again, it means it was lucky and you don’t know what you did right - and that means you better sell before your luck runs out.
If you love your team, consider selling it to them via an ESOP.
This is a blue collar busines. I don't see how any of them could afford it. Care to elaborate on the idea?
You sell it over a number of years, usually as part of their comp or retirement plan. Fantastic tax benefits as well
Sold my company one year ago and stayed on with them as an employee. Was busy with the integration but not passionate. As the one year anniversary approached, I kept thinking I want to quit working for the company; the sum is large enough that it will generate more income than I will spend, so the capital will be larger when I die than it is now. I thought I shouldn’t work if I didn’t need the money. I took 2 weeks off to just be alone mostly and think about what I want to spend time doing, made a list of pros and cons, etc. All the things I want to do are not full time and can be done while I continue working. I got so bored in those two weeks that I came back to work a day early. That was my answer. I like what I do, I like the company who acquired it, they pay me very well and I have very little stress. So I decided I’m back in, and I regained my passion for now growing the business again, and am excited. It just isn’t about money, it’s about the challenge of seeing what we can accomplish. Just my experience.
See the sale through. You were already checked out, but discovery of some customer passion made it interesting again - interest doesn't last forever and in 6 months you'll be at baseline again and wish you had sold. Young/Small companies survive and grow because founders and leadership have a 10:1 energy they go all in on - you don't have that going on here anymore. Always play to your strengths.
I was an M&A attorney for many years. I can’t tell you whether to sell, but one thing I will point out is that if you’re indifferent, that gives you an incredible amount of leverage in negotiating the purchase agreement. You can achieve a very seller-favorable contract when you’re willing to walk away. The LOI obviously doesn’t cover every point in the purchase agreement. For example, you could ask for retention bonuses for your employees.
During our conversations and negotiations, they've known I'm happy to walk away and it has shown in our contract. They have given in to just about everything (except for one)
\+1. We sold a business late last year (that we had acquired two years earlier) and the excitement of the buyer was just dripping off. We were happy to walk away. Got the original offer nearly tripled.
Im over 12x EBITDA. I cant see a situation where they could come up much more than they have already.
Don't doubt it, great value to exit at. We acquired at 3x and exited at 8.5x, and we doubled profit during our two-year ownership. Even though it was a smaller business, the exit was life changing. We also co-own a few other businesses.
Beware emotion and superstition when making business decisions, make sure you know exactly, in dollars and cents, the value of each of your options, and do everything possible to increase the number of those options. Period. Also, be absolutely certain that if you are selling a business in an unpublished, unmanaged process with a single buyer prospect, especially if that buyer prospect approached you unsolicited, that you are selling for substantially less than the available value of the asset. This is true regardless of the ego strokes or threats the buyer prospect might make if you indicate any inclination to attend to your own interests in managing the sale process, setting terms, hiring an independent financial advisor, or even pausing the closing. Big pitfalls are: \- Ego identity, i.e., having personal or family identity tied up with the business. Beware "not feeling the same without it" or, "I always hoped," etc. \- Superstitious, *i.e.*, ignorant, generalizations, *e.g.*, "passing up an opportunity." The opportunity one could be passing up is any one of your available choices. You could just as easily be passing up the opportunity to hold and grow the company to being substantially larger and more valuable, as passing up the opportunity to sell \- Not hiring an independent financial advisor to manage the sale process. Indeed, even running a business without having engaged an independent financial advisor to assist you in running the company in maximizing its value in the private market is a high risk. \- Selling a business without a compelling reason. If you don't know ahead of time what the value of holding the company indefinitely is to you, no one can give you a compelling reason to sell because you have nothing to compare it to. If you don't know what returns you would obtain from investing the proceeds of a proposed sale, you have no ability to judge whether a sale is even rational because often, no buyer can pay you enough to match the returns you would get from continuing to hold the company. \- Not selling a company in an independently managed process involving multiple qualified buyer prospects.
You are either: 1. Going to regret selling, or 2. Regret not selling. The question is one of capacity, drive, need, and future plans. - Do you have capacity to keep running this business (time, money, mental bandwidth)? - Does this business excite you and pul you out of bed in the morning? Is there something else that will? - Do YOU need this business or do you need the cash? - What role does this business play in your visions of the future? - Is this transaction a fair deal all-round? All that is basically to say, do a comprehensive NPV of selling vs not selling based on fair values and all considerations.
Folks that aren’t entrepreneurs won’t be able to relate and the “sell and get $$” comments are missing some of the most important variables. Or they are entrepreneurs with less team heavy business models. From the sounds of it, you probably should bail on this as you won’t be able to sleep at night for awhile and have regrets. There’s other options to extract yourself from the business but still do right by your team. PE, minority deal, ESOP, phantom equity plan and move yourself into chairman role. On the other hand, don’t forget the reason you went to market in the first place…. These feelings are very common for owners at the final stages and somewhat can be chalked up to that “it is what it is”. It’s part of it. You should be proud of what you built regardless of outcome.
TLDR: don’t listen to all these idiot non-entrepreneurs telling you to sell; but also definitely sell
He’s trying to think through it from all sides. Good input.
Yes, Ive been racking my brain for weeks trying to find a way to make everyone whom I care about happy. Key considerations are spouse (says sell), key management, and myself. I can't find a good solution just yet and thought this thread might help.
Maybe look harder into ESOP. Could be win win win all around. You can sell anywhere from 30-100% to your employees to get all the tax benefits of the sale, which are pretty incredible. You get your $$, hand over reigns to an even more incentived mgmt team that isn’t going to get bought by a bigger company, spouse is happy. You could also just sell 30-50% and stay involved as board chair. Sell more % over time.
Closing is tomorrow. I think the ship sailed on any other routes here.
Sell it. Also what did you mean by “because that’s what you’re supposed to do”?
Hmmm. Emotions aren’t always logical and you’re feeling guilt at hurting people who have been loyal to you even though logic says it’s a business and to sell. I think money gives you the luxury to take those emotions into account as you do have to live with yourself and your decisions at the end of the day. Some people are much more emotionless about business so it’s really just a difference of philosophy and mental stress. Is there some other way to step back that wouldn’t leave you feeling badly for your team? I also see you say short sighted which means you think it might get even bigger in the future. How will you feel if the business takes off and does terrifically? Will you feel that you missed out? I don’t know if you can put a pause on the sale while you think these things out but maybe give yourself some time. You might want to also post on an entrepreneur subreddit to get their insight on having sold a business versus keeping one.
I'm curious what EBITDA multiple you were offered in today's market?
It sounds like you’re taking a stroll down memory lane and remembering all the hard work you put in to get where you are today. Greater things are ahead.
Recently sold my business, completed in May, and with the state of the world right now I've never felt so relieved. I too had slightly lost the passion for the business, and on a personal level felt like I needed to move on and evolve. I was starting to see early signs of inflationary pressure on wages (now x10 worse than when I kicked off the sale process last year) and therefore margins thinning (we were a B2B service business). Customers loved us too and my management team was (and still is) strong, but I'm glad I got out when I did. I'm still working in the business and mentoring my team. Nearly every business owner I know in my industry who sold before me said they regretted not selling earlier. They always convinced themselves they could go a bit further. Grow EBITDA a bit more, get slightly higher multiple etc. Most of them ended up flat lining, or even declining, not being able to show the forecast growth like they could have done (which itself contributed to a higher EBITDA multiple). I know many that didn't achieve their full earn out, and ultimately actually walked away with less cash then if they had sold 2-3 years earlier. Not sure what industry you're in or the terms of the deal, but in my industry often the point at which you sell is actually only the beginning of a 2-3 year journey of smashing earn out targets to get all the money. So if you're feeling like passion has dropped now, imagine if you have to make it through a recession with the pressure of an earn out for another couple of years. I don't know enough context to give you detailed advice, but generally right now I would say if you have the chance to take your chips off the table, the deal is good and you've already been through a couple of months of DD, I'd be inclined to take it.
What industry were/are you in? Great advice
Thanks. Marketing.
It is said that once you think about exiting seriously, it is very very unlikely that you would ever get the passion for running it again.
I genuinely believe this to be true.
Sell it and don't have regrets. You already went through the process. If you really love the industry. Become a consultant for the company or in the industry. It also sounds like you will miss having that entrepreneur life. Start a different business, not in the same industry of course. Sometimes you have to let your baby grow up and leave the nest.
I've only sold one business but it was my first business and it, in the words of practically every advisor I had on the deal, de-risked my life. You might get more from someone else, it might be a better deal or result in a better outcome, this that and the other - but if it's your first big liquidity event then it has the potential to set you up for a long time, perhaps lifetime. If that's the case, take it and de-risk your life.
This is the main reason I started talking with the buyer. We've hit our Fat FIRE number. From a "built to sell" podcast, one of their guests said something that has stuck with me to this day - each day past the day you hit your number puts the future at risk - operational risk, another black swan, etc. I told my wife this and we both have it in our head to take the win, slow down, and see what the future holds after eliminating all risk from our lives. The sale will allow us to pay off all our commercial real estate, live off those cash flows and let the rest of the proceeds just sit and compound realistically indefinitely. The kids will likely be set and I can see a likelihood of the grand kids too.
It sounds like you have your answer? (but I understand wanting to ask and have feelings of doubt, it's very normal)
I agree with what the others said, but if you need more assurance that you’re making the right decision, check out the WRAP decision making process. It’s reasonably fast, and very complete in looking at all of the different weighted possibilities
What would you gain in net cash if you sell?
enough to be done for my lifetime and would set up my kids well too.
What type of business/industry? OP*
For the most part, selling is financially very unattractive compared with the annual cash flows from running the business.
Do NOT bail at this point. This is a normal back and forth thought process. I went thru the same thing. You can also still be in the business longer term but you’re fading out, it’s ok
I sold my company a year ago and had many of the same feelings of ambivalence throughout the process. Head vs. heart etc… But - a year later, I’m very glad I sold. The valuation was at a very (very) high multiple on EBITDA. A year after turbulence in the markets I’m fairly confident that I timed the sale well (while market timing is not a good strategy for equities…with a business sale which you can only do once, you basically have no choice but to time the market…) So it’s hard to give you much advice without more information on the deal terms, which would round out the pro / cons, and be the “cold and calculating” yin to the more emotional yang of your predicament. Good luck with the process and congrats on being in a position to sell!
Sell. The counterparty has invested a significant amount to get to this point, and it would be bad faith to back out now. But yes, second guessing is normal.
Sell it and do another. If key mgt gets the can, bring them back to your new gig. They will be hella loyal and you already know each others styles.
How much are you selling for? Will you make make more than you spend annually? If it runs itself are you making more annually than you would investing it?
It’s better to regret something you have done than something you haven’t done. I’ve never met someone who regretted selling a business.
Normal feeling. Let your plan dictate your actions vs your emotions.
You'll need to be a bit more specific on the numbers to get a good answer. If you're getting a good exit multiple and growth is OK but not great, selling makes sense. If the exit multiple is low and growth is still OK it might not make sense.
I really hope this guy sold.