Why Did These 17 Percenters Decide to Exit?
As you know, we are in the midst of our 17% club series, wherein we interview those individuals who have successfully exited their businesses - we've had some great interviewees with some very unique experiences! So we thought that, this week, we would take a look at some of the reasons these guests decided to exit their businesses and the things that ultimately lead to that decision. Enjoy!
Randy Haran, Episode 108
Well, our business was getting close to that $5 million EBITDA figure. Also, we'd kind of done a dance sometime between 2012 and 2013 with another company that was interested; Unfortunately we didn't sell to them at that time, but we at least got to go through the process and kind of do a dress rehearsal of the due diligence process. You know what type of questions to expect, the way we should think about things. Some of my other partners were keen on selling, but they were coming from a more emotional standpoint of, "I'm tired of this, I need to do something else,"while I wanted to do more of a strategic-type of sale. That's kind of where everything came together in 2014; Our revenue and market share - it just made sense.
Mitch Felderhoff, Episode 107
Well, we created a new vertical and category within the business and we borrowed heavily against it. We reinvested every penny - everything we ever made from the company continued to go straight into the business - and so we were heavily leveraged and we got to the point where borrowing a million dollars at a time was no longer feasible in helping to continue the growth where it needed to be. We were at a point where our choices were to sit stagnant and save every penny we make in order to reinvest it in five to eight years and hope the market doesn't pass us by, or get aggressive and go find professional money to build the facilities, and the business, that we needed to build. Because we had watched the business get passed up by others for 3 generations. At some point, my great-grandfather got passed by people that could mill flour better and cheaper than him. My grandfather got passed because the industry consolidated and moved out of his reach. My dad got passed by the natural pet food because we didn't put more extruders in and have more space to work with. We didn't want to get passed again. We had started something really, really strong, and we wanted to continue to leverage that and we didn't have the resources we needed without bringing in help.
Tom Washington, Episode 106
We got approached several times by someone in our industry that was very interested in acquiring our territory. They were already a reseller of all the software that we sold and just wanted to grow their footprint. We got an offer that was really hard to turn down - a 60 day close, no due diligence, all cash offer - which is just unheard of, but because of the similarity in makeup our businesses had we were able to do so.
John Humphrey, Episode 105
Well, you can learn how important an asset is to someone by what percentage of their net worth it accounts for. And for me, the company was a huge piece of my net worth - and for a couple of other partners, it wasn't. I was taught that shareholders own the business, that companies exist to return value to those shareholders, and that that manifests itself in a free cashflow. Early on, our margins were 45% or 46% gross and we were generating, I don't know, 18% to 22% EBITDA. It felt good. But the further we got into this journey, we added layers of overhead. For one, oddly enough, we had the same cohort for front office people that we had for back office people. If you were an associate level two for instance, a consultant, and you were generating, let's say, a quarter of a million dollars a year in revenue per head, we would say, "Well, that AP clerk who's a level two as well should have that same cohort." It got to be very expensive, and our SGNA got higher and higher and higher. I experienced a bit of a personal- rather, a family crisis during that time as well, and I just thought the business should be run differently. That's where partners sort of get it wrong is they don't really talk through a lot of those issues. So I figured that rather than to have a public fight in a private company, and since I had a really solid buy-sell agreement, that I would just take my toys and go play somewhere else. I still think that was the right decision because I'm a builder, I'm not a maintenance guy. And so by the time we got to 30 million, 40 million in revenue, people couldn't really figure out what to do with me.
Want to learn more? Check out this week's 17% club podcast, featuring Randy Haran! VIEW IT HERE
ABOUT THE AUTHOR
Tom Bronson is the founder and President of Mastery Partners, a company that helps business owners maximize business value, design exit strategy, and transition their business on their terms. Mastery utilizes proven techniques and strategies that dramatically improve business value that was developed during Tom’s career 100 business transactions as either a business buyer or seller. As a business owner himself, he has been in your situation a hundred times, and he knows what it takes to craft the right strategy. Bronson is passionate about helping business owners and has the experience to do it. Want to chat more or think Tom can help you? Reach out at email@example.com or check out his book, Maximize Business Value, Begin with The Exit in Mind (2020).
Mastery Partners, where our mission is to equip business owners to Maximize Business Value so they can transition their business on their terms. Our mission was born from the lessons we’ve learned from over 100 business transactions, which fuels our desire to share our experiences and wisdom so you can succeed.