The Downside Of Being Upfront With Employees
July 19, 2017 |
Want to increase the value of your business by up to 71%?
Take the 13-minute survey and get your Value Builder Score
About this episode
Subscribe:
In 2011 Josh Holtzman, the founder and CEO of American Data Company, gathered his employees into a conference room to announce “Fifteen Cubed”, a company-wide initiative to grow to $15 million in revenue by the year 2015.
As part of the program, Holtzman had “Fifteen Cubed” bracelets made for each employee and promised to share 15% of the business’s sale proceeds with his team.
His team left the conference room energized. The only problem was, American Data failed to grow: it remained stuck between $3 million and $4 million in revenue for the next two years.
Fast approaching the 2015 deadline, Holtzman decided the only way for American Data to reach their goal would be for him to sell his business to a similar company.
In this episode, you’ll learn:
- How to value your shares when you merge with another company.
- Why an earn out should never be tied to your employment contract.
- The definition of personal risk tolerance and how to know when you’ve reached it.
- The surprising power of a great name.
- The metrics around how many pitches you’ll have to make to get a term sheet.
- One little known reason companies make strategic acquisitions.
Magnet 360 acquired American Data for an amount about equivalent to their top line revenue because Magnet 360 was looking for a fast way to create a geographic beachhead on the West Coast. Have you considered how your location might (or might not) make you attractive to a buyer? That’s one of the questions you’ll ponder when you complete The Short List Builder, Module 11 in The Value Builder System™—get started for free by completing your Value Builder questionnaire.
Our guest
Josh Holtzman is an entrepreneur and business coach based in Los Angeles, California. Holtzman began his entrepreneurial journey at the age of 26 and grew his technology consulting firm into one of the fastest growing companies in the nation. He ultimately sold the organization to a national player. Together they grew that business 300% in three years and ultimately sold it a second time to a publicly traded global IT services firm. Holtzman currently works with entrepreneurial leadership teams to help them get what they want from their organizations through a simple set of proven tools and disciplines.
Related to this topic
Four Mistakes To Avoid When You Get An Acquisition Offer
Ian Ippolito started Rent a Coder as an online marketplace for hiring technical talent. He quickly expanded and re-branded as vWorker. Ippolito built vWorker up to $11.5MM in revenue before he received an acquisition offer from Freelancer.com
One Bold Move That Can Make Your Company More Valuable
Henry Hyder-Smith and Steve Denner started UK-based Adestra in 2004. Adestra is a digital marketing software that helps big companies handle email campaigns, among other things. The company grew nicely. By 2016, it had around $9 million in revenue and a client list that featured some of the U.K.'s best companies. Hyder-Smith and Denner decided it was time to go beyond their borders and enter the U.S. and Asian markets. To fund the effort, they raised $7.2 million from the Business Growth Fund (BGF), one of the U.K.'s largest private equity groups. BGF's investment valued Adestra at around $35 million — a little shy of four times revenue.
From Billion Dollar Startup To Bankruptcy And Back Again
when he took the company public in 1999 on the way to a market capitalization of more than $3 billion. Until the bubble burst.
How Cigar City Brewing Got Oskar Blues To Triple Their Acquisition Offer
Joey Redner started Cigar City Brewing in Tampa Bay in 2009 with a vision of being the first quality craft beer in Tampa at a time when craft beer was gaining popularity across the country.
How Hawking Pool Chemicals On Subscription Led To An Offer From An Industry Giant
century. When they started looking for new funding, they found a buyer instead.
How to Punch Above Your Weight Class With Acquirers
Peter Carlin started Logicearth to improve how companies teach their employees online. They built e-learning courses that were almost as good as being there in person. They caught the attention of a marketing agency called The Creative Engagement Group (TCEG), which had clients that needed online courses.
Exiting the Automatic Business
up to $4 million in revenue before he sold it in a multimillion dollar exit in 2015. Schoen was able to attract a number of buyers because he had created an operating manual employees could follow.
Entrepreneurs can be categorized into two groups. On one hand, you have the doers. These are the people who organically grow a business over time. They plod along for years, or even decades in the same business. They look for small, incremental improvements every day.
Getting A Second Bite Of The Apple
Richard Manders co-founded iAutomation and built it up to $12M before deciding it was time to recapitalize. Manders sold 75% of his company for almost 8 times EBITDA to a Private Equity Group (PEG) and held 25% interest in the company after the sale.
The Founder of the “Female Viagra” Sells Her Business for $1 Billion
Cindy Whitehead started Sprout Pharmaceuticals and created the drug ADDYI, which has become known as the “female Viagra”.