Built to Sell Radio

Have you ever considered how you would tell your employees you've sold your business? It's one of the conversations most founders fear. You hope your employees will be happy for you, but you also worry some will view you as a sellout. 

Dr. Michael Filosi experienced the entire spectrum of reactions when he told his 35 employees he had sold his dental practice, the biggest in Adelaide, to private equity. While he had some congratulations, he also had one team member walk out saying "that's a bit disappointing," and another who wouldn't meet his eye for three days.

Lior Pozin started AutoDS to run his own eBay dropshipping stores. The software finds trending products to sell, tracks supplier price and stock changes, and fulfills orders automatically so a dropshipper never touches the inventory. He bootstrapped the company for eight years, keeping the bank balance at zero on purpose, and grew it to 200 employees and more than $20 million in annual recurring revenue. Along the way he turned down a $38 million private equity offer one day before signing, and still ended up selling to publicly traded Fiverr for roughly $55 million in cash plus a $36 million earnout. 

In this episode of Built to Sell Radio, Lior walks through what made him kill the private equity deal, why he chose Fiverr over higher bids, and how the earnout changed the way he ran the business.

Jim Fitzgerald bootstrapped Taradel from a spare bedroom into a $30 million direct mail company. In 2016 he took the business to market, and the five buyers who made it to an indication of interest all offered roughly 4x EBITDA, about half of what Jim had in mind. He had spent years reinvesting every dollar in growth, and the market told him growth alone wasn't enough. 

So Jim rebuilt his company around profit. He started pulling cash out of the business so it couldn't be poured back in, and built a leadership team that could operate without him. When he went back to market, 120 teasers produced nine indications of interest, seven management presentations in two days, and a low eight-figure sale, all cash.

Clean Energy Associates acted as the eyes and ears on the ground in China for solar and battery storage buyers, inspecting factories to make sure the products they ordered were built correctly before they shipped. 

In 2016, a banker sat down with founder Andy Klump in Shanghai and asked him three questions. How would he triple his business in a short period of time? Who was on his executive team? Did any single customer account for more than 20% of revenue? Andy had no investment plan and no leadership team beyond one salesperson, and one client made up 40 to 50% of his sales. The banker's verdict was that the company wasn't sellable and there was nothing he could do to help. 

Six years later, Intertek Group acquired Clean Energy Associates for $112 million, and the banker who had delivered that verdict ran the sale. In between, Andy survived six straight months of losses, heard from an executive coach that his team saw him as a micromanager, and went through five hires to find the right head of sales.

Zac Smith was a mechanical engineer who wanted more flexibility and upside than a corporate career could offer. He bought an existing CertaPro Painters franchise in North Carolina with three employees and under $1 million in revenue. He put down about 10% in cash and financed the rest with an SBA loan and a small seller note, backed by a personal guarantee. 

Three years later, the company was on track for $3 million in revenue and $600,000 in profit. Smith sold it for $1.5 million, all cash at closing.