Built to Sell Radio

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.

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.

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.

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

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

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.

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.

Doug Chapiewsky built CenterPoint Solutions Inc. into an Inc. 500 company with $5 million in revenue and more than $3 million in EBITDA before he sold it to Israeli-based Nice Systems. In this episode of Built to Sell Radio, Chapiewsky describes how to:

• scrutinize the various currencies used by acquirers (cash vs. stock vs. options).
• dress up your company to sell it.
• use an office manager to increase the perception—and ultimately the value—of your company.
• stimulate an unsolicited offer for your business.
• structure your employment agreement to keep control of your employees after you sell.

Doug Chapiewsky built CenterPoint Solutions Inc. into an Inc. 500 company with $5 million in revenue and more than $3 million in EBITDA before he sold it to Israeli-based Nice Systems. In this episode of Built to Sell Radio, Chapiewsky describes how to:

• scrutinize the various currencies used by acquirers (cash vs. stock vs. options).
• dress up your company to sell it.
• use an office manager to increase the perception—and ultimately the value—of your company.
• stimulate an unsolicited offer for your business.
• structure your employment agreement to keep control of your employees after you sell.

Manny Fernandez started HomeBuyingCenter.com in 2007, just as the real estate market started to wobble in the United States. As it turned out, his timing was perfect as his site helped underwater homeowners unload their real estate.

In fact, Fernandez was generating so many opportunities for one real estate brokerage, that he received an unsolicited offer from them to purchase his business. He took their offer and parlayed it into a competing offer that helped provide the competitive tension to get a deal done – proving once again, it often takes two offers to maximize the value of your business.