Built to Sell Radio

Latest Episodes:

Ep. 75 How Shapeup Got Richard Branson To Boost His Acquisition Offer By 50% Dec 28, 2016

Show notes

Rajiv Kumar and Brad Weinberg started ShapeUp, a software company designed around getting people to improve their health. Instead of going direct to consumers, they decided to license the platform to large Fortune 500 companies looking to reduce their insurance expenses by getting employees to improve their health.

The partners sold 20% of the company for $300,000 in start-up capital and went on to raise five more rounds of capital at increasing valuations. They got the business up to $20 million in recurring revenue when they got a call from Richard Branson-backed Virgin Pulse.

Kumar was able to gin up Virgin's initial offer by 50% based on some savvy negotiation skills. In the episode, you'll learn:

The definition of fixed cost leverage.
Why you should start with pitching your worst investor first.
What "escape velocity" means and how it impacts your company's valuation.
How optionality gives you negotiating leverage.
When companies are bought vs. sold.
The difference between an evergreen fund and one with a liquidity horizon.

Ep. 74 Would You Have the Audacity to Turn Down $40MM for a $9MM Company? Dec 21, 2016

Show notes

In 1992 Stephanie Breedlove started a payroll company to make it easier for parents to pay their nannies. It began small and she self-funded their growth, which averaged 20% per year.

By 2012 they had hit $9 million in annual sales when she got a call from Sheila Marcelo, the CEO of venture-backed Care.com. Marcelo wanted to buy Breedlove's company and offered her almost $40 million—more than four times Breedlove's revenue, an astronomical multiple that only serves to underscore Breedlove's audacity when she turned it down.

Breedlove wanted more and ultimately settled on a price of $55 million for her $9 million business. In this episode, you'll learn:

how to strategically walk away from an offer.
what to do when you reach a negotiation impasse.
three criteria every owner should consider when selling.
the pros and cons of accepting stock as compensation.

Ep. 73 The Second Most Important Thing to Negotiate When Selling Your Business Dec 14, 2016

Show notes

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.

Ep. 72 Raising Money? Avoid This Sleazy Investor's Trap Dec 07, 2016

Show notes

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.

Ep. 71 An Interview with The E-Myth's Michael Gerber Nov 30, 2016

Show notes

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 one of our Certified Value Builders to help you build your company as if it were a product to sell. Get started by completing your Value Builder questionnaire.

Ep. 70 Inside the Mind of a Private Equity Investor Nov 23, 2016

Show notes

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.

Ep. 69 A Cautionary Tale Nov 16, 2016

Show notes

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.

Ep. 68 How to structure your earn-out Nov 09, 2016

Show notes

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.

Ep. 67 The 8:1 Flip Nov 02, 2016

Show notes

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

Ep. 66 Are you stacking a few Benjamins? Oct 26, 2016

Show notes

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 business.
Why the 4% rule of investing may be too conservative for most entrepreneurs.

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