Built to Sell Radio

Melbourne-based David Trewern grew DT, a digital advertising agency, to $10 million in annual revenue before he sold it to STW Group in 2007 for almost 10 times profit after tax. Trewern was able to get maximum value for his business and preferred terms because he started to look at the world through the eyes of his would-be acquirer.

Lois Melbourne and her husband started Acquire Solutions, a software business that helped large companies manage their employees. After 18 years, the self-funded business had grown to 85 people and the Melbournes received an offer from a private equity firm rolling up software companies in the human resources field.

Acquirers are a secretive bunch. They typically operate behind confidentiality agreements with their motives and tactics disguised from the public. That's one reason I enjoyed my interview with Rocky Romanella so much.

Anthony Amos and his brother started HydroDog, an Australian company offering a mobile dog washing and grooming service. For $10, the Amos brothers would show up at your door with a giant dog bath on the back of their trailer and wash your dog.

How many people will you have to approach about buying your business before you end up getting an offer?

In this week's episode, you'll hear from John Arnott who gives you a breakdown of the statistics on how many people he approached, the conversion rate of those approached to those who signed a Non-Disclosure Agreement (NDA), what proportion of people under NDA requested a face-to-face meeting and, of the people he met with, how many offers he received.

It's the first time that we at Built to Sell Radio have received such specific conversion rate statistics on a single deal. Arnott's story is treasure trove of hard-fought wisdom, including:

• How to figure out "your number."
• How to time your exit.
• A detailed breakdown of what's included in an Offering Memorandum (OM).
• How to prepare for a face-to-face meeting with a potential acquirer.

Dan Lok packaged a set of table tennis video tutorials into a membership website and charged a subscription fee to join. Over eight years, Lok managed to build a five-figure recurring revenue stream from subscribers to Table Tennis Master.

Table Tennis Master was one of 20 businesses Lok was developing simultaneously when tragedy struck his family. That's when he decided to simplify his life and sell off some of his business interests.

In Lok's case, speed and ease of transaction were more important than maximizing his financial take, so in this episode you'll hear the story behind the sale of Table Tennis Master and learn some unconventional tactics, such as:

• How to sell your business in a few weeks.
• A sure-fire way to tell if you should keep or sell your business.
• How to identify and engage friendly acquirers who can make a quick offer.
• How to structure your deal when speed and efficiency are more important than value.

The Mortgage Reports publishes information about mortgages for home owners. Site founder Dan Green, capitalized on the internet traffic they generated by selling leads to mortgage lenders.

Within three years, Green crested a million dollars a year in annual revenue. That's when he began to worry about new regulations and compliance as his business went from being a hobby to a major player in the mortgage leads industry. Green decided to sell and quickly got three offers from the companies he was selling leads to.

The first offer was mostly cash. The second was for half cash and the other half "at risk" in an earn-out tied to meeting lead volume goals in the future. The third offer included a small payment up front with a rich potential earn-out if Green was able to send the acquirer enough quality leads. You may be surprised to learn which of the three offers Green picked.

In this episode, you'll learn:

• The difference between being a core product and an add-on feature
• The importance of breaking bread with your potential acquirer
• What terms and conditions to include in an earn-out contract
• How to vet a potential buyer when an earn-out is involved

Laura Gisborne has started nine companies and sold six of them, including The Art of Wine, the subject of this week's episode. The Art of Wine is a tasting room with a subscription-based wine club division. With a little more than $1MM in annual revenue, The Art of Wine was still a relatively small business, but when the lease came up for renewal Gisborne reasoned it was the perfect time to look for a new owner.

Gisborne channeled her experience from six exits into the sale of The Art of Wine, and in this episode you'll learn how to:

• Attract a steady flow of inbound offers for your business
• Pick your number (hint: it may be lower than you think)
• Ensure a competitor does not get their hands on your private information while marketing your business
• Use your location to attract a buyer
• Use the buyer's ego to your advantage
• Build systems to you-proof your company

Most sellers want to be paid all of their money up front, and most buyers want to avoid paying anything up front. Deals usually get done somewhere in the middle, where the seller agrees to accept some cash and to be paid some of their proceeds over time.

Eric Weiner, for example, started All Occasion Transportation in college and by the time he turned 35, his company was grossing more than $3MM a year. That's when Weiner decided he wanted out.

Weiner found a buyer and agreed to accept half of his money in a five-year consulting contract, which sounded great in theory but ended up becoming hard to enforce. In this cautionary episode, you'll learn:

• How to structure a vendor take back
• How to market your business for sale without competitors finding out
• How to create sticks and carrots to ensure your deal is honored
• The definition of recourse and why you need some in any non-cash offer
• How to pick a walk-away number and use it to accelerate your negotiation
• The biggest blooper in structuring a consulting contract with an acquirer

Have you ever noticed the ads that run before you watch an official online video clip from shows like Saturday Night Live or Jimmy Kimmel? You can thank Nicholas Seet for that. Seet developed the video player that hosts both the content and the ads for some of the world's biggest media companies. His business, Auditude, was recently acquired by Adobe for more than $100 million according to UCLA's Anderson School of Management.

Although a spectacular exit, Seet had to give up a large chunk of the company—and the CEO title—to scale up, so in this episode of Built to Sell Radio we ask the age-old question: 'Is it better to own a big chunk of a small company or a small slice of a big company?' You may be surprised by Seet's response.

You'll also learn:

• How to handle the customer who wants exclusivity
• The biggest mistake most engineers make when building a company
• The benefits of a "Super Angel"
• Who the "Goose Society" is and why you might want them as investors
• How to avoid the dilution of common shareholders when venture capitalists insist on preferred shares