Jeff DeGarmo from Tulsa, Oklahoma joined the podcast to share his entrepreneurial journey. He's a USC and University of Colorado graduate with degrees in aerospace technology, Navy veteran, father of five children (ages 13-30), and triathlon enthusiast who accidentally discovered the sport through friends. Career Transition Jeff made an interesting pivot from a highly technical aerospace background to digital marketing. While serving in the Navy at Tinker Air Force Base, he taught himself web development during the early internet boom (mid-1990s). He left the military in October 2001 (just weeks after 9/11) to join an advertising agency as a web developer, though his initial contract was cut short due to the economic downturn. Building the Business Starting in 2003 with five partners (later reduced to four), Jeff and his team built a digital marketing agency that evolved from 90% web development into a full-service agency specializing in destination marketing, placemaking, and travel/tourism. The partnership worked because each partner had distinct roles:
- Jeff: Technology, finance, accounting, HR, payroll
- President: Business development and networking
- Chief Creative Officer: Creative output oversight
- Fourth Partner: Messaging, strategy, and content development
The Exit Process Key Achievement: 5X+ EBITDA Multiple. The company was sold for over 5 times EBITDA - significantly above the typical 3-4X average for most businesses. Timeline & Process:
- Initial Goal: Find an investor to grow from 20 to 50 employees
- Market Process: 7 months from engagement to LOI
- Total Timeline: 10 months from broker engagement to closing
- Final Offers: Two LOIs - one partial buyout (retaining 5%) and one full acquisition by a public company
Deal Structure
- 50/50 split: Cash upfront and earnout over 3 years
- Employment agreements: 3-year terms for all four partners
- Protection clause: If terminated, partners still received 50% of earnout payments
- Graduated earnouts: Based on KPIs with upside potential
Key Lessons & Advice On Partnerships
- Four equal partners can be challenging but worked due to complementary skills
- Success required shared values and ability to "leave egos at the door"
- Clear role definition prevented conflicts over decision-making
On Using Brokers
- Highly recommended but emphasized being selective
- Brokers provide valuable market reality checks on business valuation
- Negotiate broker agreement terms carefully
- Look for brokers with "heart of a teacher" to guide through unknowns
On Due Diligence
- Public company acquisitions involve extensive due diligence (internal and external accountants, attorneys)
- Communication strategy is crucial: Plan how to tell employees, vendors, and customers
- Contract review essential: Ensure customer agreements have transfer clauses
- Transparency helped: Took entire team to meet potential buyer
Personal Outcome Jeff left after 9 months (rather than completing the 3-year employment agreement) due to role redundancy and cultural differences, but his protection clauses ensured he still received earnout payments. He noted this timing was fortunate given COVID's impact on the business in years 2-3.Current Activities. Jeff now works in business brokerage, helping other entrepreneurs prepare for and execute exits. He emphasizes that businesses should be "prepared to exit from day one" and does volunteer work helping veterans acquire existing businesses through the ETA (Entrepreneurship Through Acquisition) space. Key Takeaway: The most impactful moment was the sense of relief on closing day - not just from personal financial security, but from the responsibility of providing jobs for 20 families, highlighting the weight successful business owners carry for their employees' livelihoods.
If we can help you build your business before the sale, let me know.[email protected]Thanks for listening!
