Built to Sell Radio

Ian Ippolito started Rent a Coder as an online marketplace for hiring technical talent. He quickly expanded to go beyond technical professionals and re-branded as vWorker. Ippolito built vWorker up to $11.5MM in annual revenue before he received an acquisition offer from Australia's Freelancer.com

Freelancer.com had been courting Ippolito for months but their original offer was too low in Ippolito's view. That's when Ippolito decided the only way for him to get any real negotiating leverage was to seek out a second bidder. In this episode, you'll learn:

• the dangers of a proprietary deal
• what to do when you get a low-ball offer
• why a BATNA is critical to every deal
• how to time your exit
• strategic stalling and how to do it
• why 90% of earn-outs fail

Peter Shankman started Help A Reporter Out (HARO) to connect experts with journalists who needed people to quote for stories. HARO sent a simple email three times a day to subscribers and because every email had the potential to be a reporter from a media outlet like The New York Times, the email open rates were close to 80%. Most days Shankman worked from his sofa with two employees helping him remotely.

Within three years, Shankman was generating $1.5MM from selling simple text ads on his email blasts. That's when Shankman's largest advertiser approached him to buy HARO. In the episode you'll learn:

• the remarkable relationship between ADHD and entrepreneurship
• the surprising upside of selling instead of scaling your business
• the truth about who is most likely to buy your business
• the best way to find a strategic buyer for your company

Bobby Albert took over the family moving business when his father died unexpectedly. Determined to succeed, he transformed his father's five-person business into a fast growth company, eventually employing 150 people before The Albert Group of Companies was approached by a strategic acquirer.

Rather than simply accept their first acquisition offer, Albert patiently negotiated the offer up by more than 100% before he agreed to be taken over.

In this episode, you'll learn:

- The difference between an abundance and a scarcity mindset.

- What distinguishes your company's core values from the founder's core values.

- How to 5X your revenue.

- The secret to getting discretionary effort from your employees.

- The difference between a values-driven company that gets results and a results-driven company that has values.

- Why aspirational values kill a company's culture.

- How to more than double your next acquisition offer.

Julie Pickens and her partner Mindee Hardin created Boogie Wipes, a moistened tissue Moms use so their sick kids can avoid a raw nose in cold season. They patented their formula and won orders from Rite Aid, Walmart and Target leading to annual revenue of $15 million.

But all was not well in Boogie land—in fact, the partners' relationship became strained when Hardin announced she wanted out, forcing Pickens to find a buyer for their company. The result would leave Pickens disappointed with her exit while partner Hardin had to file for bankruptcy.

What follows is a cautionary tale of what happens when partners decide to go their separate ways.

Bert Martinez is a best-selling author and a national radio host who has sold a dozen businesses in his career. In this episode, you'll hear the story of Accelerator, a supplements company he sold for just under $1.6MM in 2014.

Accelerator's main supplement was ephedra, a weight loss pill that was selling well despite a growing group of customers who were getting sick from misusing it.

Martinez started to worry that ephedra could be banned so he put his business on the market, only to realize it was worth a lot less than he thought.

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.

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.

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 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.