Why “Off-Boarding” Is an Essential Ingredient in Building to Sell

Transcript

Disclaimer: Transcripts may contain a few typos. With most episodes lasting 60+ minutes, it can be difficult to catch some minor errors.

John Warrillow:

So are you looking to sell your business? My guess is you’re actually not, my guess is that you’d like to know that you could sell your business down the road, but right now you’re busy building it. And if that’s the case, standard operating procedures can be your secret sauce. These are the documents that you need to show your employees how to do their work, and we just developed a new eBook. You can get it at BuiltToSell.com/SOP.

Have you ever heard of the Foxhole Leadership Test? Grab a team and ask them, if they were at a war time situation, if the bullets were flying, who would they want at their back, at their side? It’s an interesting question for a teammate because the clique’s and the friendships that exist among teams somewhat become secondary. When you’re really against the wall, who you would want at your back Isn’t really an important question, and it forces people to think about who they think of as their leaders.

And I’d be curious for you, if you consider yourself a foxhole leader, someone that your team would want at their back, their side when the going gets tough, are you in the trenches with your team? Are you not delegating anything that you wouldn’t do yourself, all admirable traits of great leaders, however, if you think about it, they can also hold you back because your company will be limited to the number of hours in your day.

And so that’s I think, one of the great paradoxes of entrepreneurial leaderships, the things that endear you to your people, the willingness to get in the trenches, do the work also have the potential to hold you back. And my next guest, Michèle Hecken lived this the hard way. Michèle built the translation company, but realized she had to get out of the trenches doing the work she had to off-board herself, and she did it successfully. Here to tell you how she did it is Michèle Hecken.

Michèle Hecken, welcome to Built to Sell Radio.

Michèle Hecken:

Hey John. I’m super happy to be here today. Thanks for inviting me.

John Warrillow:

Tell me about Alpha Translations, you grew up in Germany, so you obviously spoke German, and you moved to Canada. Tell me the story about how this company came to be.

Michèle Hecken:

Okay. Well, I was born in Toronto, Scarborough, and my mom was Canadian, my dad was German and they moved back and forth. So which was really beneficial for me because I grew up fully bilingual in German and in English, and then once I started kindergarten school, I started grade one in Toronto, kindergarten in Germany, then left, always in the middle of the school year, right? It couldn’t just happen during the summer, no. So then, end of grade two move back to Germany and that’s where we stayed until I moved back to Canada in ’93. So yeah, the majority of my life, well, maybe that’s not true anymore, but I did grow up for a large amount of time in Germany.

John Warrillow:

Sprechen sie Deutsh? Ich bin John! That’s my extent of my German. That’s all I got. So don’t ask me anything else.

Michèle Hecken:

[foreign language 00:03:53]

John Warrillow:

Danke schoen. That’s the third one.

Michèle Hecken:

It worked, it worked.

John Warrillow:

Good deal. Okay. So you start off in ’93, how did you make money translating stuff? How does that work? How do you make money?

Michèle Hecken:

Okay, well, I actually started a little bit before ’93, ’93 is when we moved back to Canada, but I actually started when I was in Germany. So when I was in university, I studied Languages, Law, and Art History, and I started translating books. There was a TV series that was really popular in North America, called Quantum Leap, and they were bringing that show to Germany. So I was translating that book, that was the first book I ever translated. And I was, like I said, in university, and then I translate a couple of other books and short stories, and that was fun, it didn’t pay very well, which was okay, I enjoyed it. I was still in school.

But then I got asked to do a different translation, like a more legal translation, business translation for a car manufacturer, and so I started doing that, and because I was studying law as well, and I was fully bilingual, I just focused on the legal translations and I had that one-

John Warrillow:

So this is taking a legal document, a contract and transcribing it. So the essence of the legal commitment was honoured in both languages, the nuances of the legal needs was reflected in both languages.

Michèle Hecken:

Correct. Correct. I mean, obviously I wasn’t a lawyer, but I did understand the implications, and so I did a lot of those translations, legal, as well as business translations. And then we decided to move to Canada, and this was in about ’92, ’93. And my client was like, “No, we really like having you here, and we really want to continue working with you.”

And I had read an article about this lady who lived in Australia, and who was a translator. I never wanted to become a translator, I was going to be a lawyer, or journalist, or something like that, and she would spend all day at the beach till about 3:00 p.m, and that’s when she’d go home and start translating because her clients in the US were waking up at that time. And I’m like, “Wait a minute, we’re moving to Canada, Alberta specifically, that’s an eight-hour time difference.” So I went back to my client and I said, “Look, when you guys leave at five o’clock or 5:30 or 6:00 p.m, that’s when I’m waking up, I’m eight hours behind. Why don’t you fax me your translation?” Because now we have this amazing technology called a fax machine. It was super exciting, come on.

And so they thought that was fantastic. And service in Germany at that time was not amazing, I don’t know if it’s amazing today, it’s just one of those things. So I had the service component, the expertise, and the time component on my side at a time when many translators were still typing the translations on a typewriter, printing them out and sending them by mail. So time was super of the essence, right? Translations are an afterthought, “Oh, by the way, we need this in a different language.”

So that was what I always called my purple cow after Seth Godin’s book, and that’s what happened. And so I would get up and I would have 10, 20, 30 pages of thermal paper fax continuously. I couldn’t afford a fax machine with a cutter, right? Because those were really expensive like –

John Warrillow:

I remember those things, those big circular things. Oh my Gosh.

Michèle Hecken:

I know, right? On a circle paper, and I still have a binder with some of my earliest translations. Of course, they’re all blank, right? Because nothing’s on them anymore.

John Warrillow:

Anyone, by the way, under 35 right now is listening to this going, “What on earth are they talking about? These freaks, these old people.” So you were doing time zone arbitrage, was your purple cow, if you will?

Michèle Hecken:

That’s exactly what I did, timezone arbitrage, I’ve never actually heard anybody say it so succinctly, but that’s what it was.

John Warrillow:

But that’s what it was, and that’s what worked for you. Take me through the transition from Michèle selling her time effectively, to building a multi-million dollar company. Like what was the inflection point when it went beyond just you and became a company?

Michèle Hecken:

I love that question. So obviously the first thing that happened is thing that always happens. I’m working 20-hour days doing translations, and I didn’t want to say no to any of my clients because I was going to build a business. If I say, no, they’re going to go elsewhere. I got referred and referred and referred because nobody was doing what I was doing. So it grew and the workload just became too much for me to handle, and I had to face a choice, either I turned a client down, or I train some translators to do this with me, and I chose the latter.

So I started training translators, which then eventually led to me proofreading 20 hours a day, and editing 20 hours a day, and teaching and training, and then eventually, I got the translators to proofread, and my role shifted, which was actually, if I can elaborate on that a little bit, it was actually really important pivotal point in my business where I purposefully off-boarded myself from translating and proofreading.

And it was not an easy decision. Well, it was an easy decision, it wasn’t easy in the execution because I kept getting pulled back in. So at this point, my then husband was doing project management for me, and I had been basically fired by my hairdresser, my nail tech, my dentist, I’m sure my doctor fired me if he could, because I never knew how much work was coming in. So I’d make appointments, and I’d be always canceling them because, right? So I was excited, there was this one pivotal day and I said, “I’m not going to do this, I’m not proofreading, I’m not translating, my job is bringing in business.” But I didn’t articulate it like that, I just said, “I’m not doing that anymore.”

And so there’s one day I came, and I got called into the office and my then husband said, “Hey, can you just proofread these three lines for me? By the time I send it to the proofreader, it’s going to take much longer.” And I have my gym clothes, I have my car keys in my hand, I’m ready to go, I’m excited I can leave the house. And I said, “No, I’m not going to do that.” And he was like, “But why? It’ll take you five minutes, It’ll take me much longer.” Like, “No, I’m not going to do it, because then I’m going to get sucked back in, you’re going to ask me this, and then you’re going to ask me again, and ask me again.” And that was the last no I had to say, and let’s just say we didn’t have a good day together.

John Warrillow:

Now. I know why it’s like, “My then husband,” the preface then, now it’s there.

Michèle Hecken:

No, no, no. In all fairness, he was a great guy, had nothing to do with that. But yes, it does sound like that a little bit. No, but it was just a pivotal point, and that’s where I realized, and I actually said to him, “I’m not a translator anymore, I’m not a proofreader anymore, I am your head of marketing and sales and my job is bringing in business.” So that was a real pivotal point, which allowed the company to scale, and my job was bringing in clients and bringing in business.

John Warrillow:

Michèle, I think a lot of people are listening to this saying, “I know I need to do that, I know I need to stop inspecting the work of my employees, and let go, and let them do it.” But they fear that whether their name is on the door, certainly their reputation is on the line, and they just can’t let go. What’s your advice to someone who finds himself in that spot?

Michèle Hecken:

Yeah. You just have to off-board yourself. What really helped me is reframing what I was doing, because there’s a permission that has to happen, and whether it’s your husband, or employees, or your COO, right? There’s always going to be people trying to pull you back because that change is difficult. But most importantly, I think as entrepreneurs, we feel guilty saying, “No, I’m not going to do that anymore,” invokes a change, it invokes something that we have to say no to our team, and typically we’re really close with our team, so we have a lot of guilt.

And that off-boarding process can feel like, “I’m doing something for me that is a luxury that I shouldn’t do.” And that’s, I think where a lot of entrepreneurs get stuck. What helped me was reframing it, instead of saying, “Oh, I’m not going to challenge it anymore, I’m not going to proofread anymore,” I reframed it to say, “I’ve changed positions within the company, and here’s why, my responsibility is to keep everybody busy, I’ve made a commitment to my translators, they’ve turned down jobs, full-time jobs to work freelance for me, I have a commitment, and so my job is now this.”

So reframing it as the job, even though you’re the CEO is just really important, and if we can make our teams, help our teams, not make our teams, help our teams understand where we’re bringing our strengths to the company, it can make a little bit easier. Does that make sense?

John Warrillow:

It does a 100%, and I love the way you use the word guilty, because I think there’s a sense of guilt to your own point, it’ll take you five minutes, right? And you feel that sense of guilt? Like, “Am I above it all to now that I don’t…” Right. Defining your role with great clarity, and specificity is important. How did you get people doing the work as well as you would? I mean, did you document, we hear a lot about standard operating procedures or processes. Did you do any of that stuff?

Michèle Hecken:

I probably should have. I was in my mid-twenties, I didn’t know the first thing about processes or running a business, and process is not something that comes easily to me. I think like most entrepreneurs, I fly by the seat of my pants and I hire people to do the process because my brain is not that patient. So no, but I should have. And eventually, of course later I did, I trained by doing, and it’s actually interesting, some of the processes I used unwittingly became a staple in training, and educating translators, and proofreaders, and a big part of our quality control process later on as we were a much bigger company.

But it was really the feedback loop, I would first proofread and then give feedback, give feedback, give feedback, give feedback. And then, at some point I needed to let it go, which was also the other reason why I didn’t look at those two sentences because, yeah. I was that arrogant that I thought, “I’m going to do it better”, as we all are. It’s like, “Oh, we have to micro look at everything because we think we can do it better.” But at the end of the day, then we’re trading time for money. And the best thing to do is put my best translators, my best proofreaders on, do quality control checks, do education, do workshops for them and, just keep that community going.

John Warrillow:

I’m glad you bring up time for money, because I’d love to know, how did you bill for your services? Was it by the hour, by the project? What was your model?

Michèle Hecken:

It was by the word –

John Warrillow:

By the word?!

Michèle Hecken:

It was by the word, yeah. And it was also by the line, like Europe had a standard where they would charge by the line, without spaces, or with spaces, and everybody did differently, and it used to be by target line, and now it’s a little bit more standardized with tools and everything, it’s typically by source word. So if you’re sending an English text, I’m going to build based on how many texts are in that original document.

John Warrillow:

Got it.

Michèle Hecken:

Yeah.

John Warrillow:

When you started off, your point of differentiation was times on arbitrage or purple cow, how did that evolve by the time you became a multi-million dollar company? What was your… We call it monopoly control, what was your enduring point of differentiation as you became a much larger company?

Michèle Hecken:

It lasted surprisingly much, much, much longer than what I thought, also really the specialization in legal translations, I made a choice fairly early on to differentiate and say, “We’re going to focus on legal translations, and we’re going focus on legal translations in a way that the quality, as well as the speed is going to be unmatched.” Now, most of our clients were in Europe, so that time difference that applied, that never went away, and translations are always urgent when there’re big deals for law firms, they need it done, and they need it done well, and they need it done quickly.

So we did a great job, and we built their trust, and we got referred, and referred, and referred. So by the time I sold, you think about in the high 50s, 58 or 59 or something like that, of the top 100 law firms were our clients.

John Warrillow:

Wow. Wow. Huh. That’s incredible. What was your cash flow model? How did you bill for your services? And how did you finanance your growth? Was it… I’ll let you answer that.

Michèle Hecken:

Okay. Thanks for avoiding the stacked questions, because I always forget, I appreciate it. I [inaudible 00:18:56] myself with those two all the time. So what was your question again?

John Warrillow:

What was your cash flow model like? Did you pay your translators, and then get paid, or did you get paid first and then pay your translators?

Michèle Hecken:

Okay. So we were also very fortunate that typically in Germany, people pay their bills faster than in North America, and I know this is a gross generalization, and we did have some law firms that have the attitude to say, “We’ll pay you when our clients pay us.” But I would say 90% of our clients would pay us within two to four weeks. So we’d pay our translators typically twice a month as well, typically, Net 30. We did have some times where we needed to strike some deals with our translators, specifically during the Lehman Brothers Crisis, 2007, 2008, that was a really tough cash flow year for us, and just a tough year in general. But typically we tried to pay our translators every two weeks, but like two weeks delayed, or at the same time.

So while we did have some cash flow crunches, when we had bigger clients, corporate clients, for the most part, we were fortunate, we had the few clients that paid us 90 or 120 days.

John Warrillow:

Got it. As you’re growing this company, have you got a sense of what it might be worth? Have you got any valuation multiple in your mind as you’re growing it?

Michèle Hecken:

As I’m growing it? No, it didn’t occur to me that maybe I would sell, it wasn’t an original thought that I was going to build something to sell, right? I was in my early twenties, I was trying to make a livelihood, I was building my company and then, eventually, I was a single mom, and raised my kids while I was growing the company, and it never felt like something that, “Okay, I’m going to sell this.” Never even occurred to me until probably 20 years, 18, 20 years in, when I joined EO, when I joined different peer groups, my horizon expanded, and I looked at the possibilities, and then it became, “Okay, yeah. Eventually I want to do this.”

John Warrillow:

And so what changed, I guess from, “Yeah, maybe, eventually I’ll want to do this to proactively,” planning your sale. Was there a straw that broke the camel’s back or some trigger that put things on the front burner?

Michèle Hecken:

Great question. So I had set up, if I can go back just a little bit, the way I set up and run my business really, there was no reason for me to sell. It ran basically without me, I had an amazing COO in place who really ran everything I focused on. Eventually I focused on what I love to do best, which was strategy, which was visiting some key accounts, but I wasn’t doing sales anymore, I had my sales team who were amazing. Sometimes they’d ask me to come with, but honestly I worked maybe a day a week, two days a week, if that, and when-

John Warrillow:

Sounds awesome!

Michèle Hecken:

Yeah. That’s my super power, that’s my superpower, how to off-board yourself, and so grow your company. That what I know how to do really well.

John Warrillow:

But it does beg the question, why sell? Because, working one day a week, and things are cruising, you got a COO doing all the hard work. Why sell?

Michèle Hecken:

It makes total sense. Exactly, why sell? And so the trigger came when machine translation, and we’d use machine translation, we’d use translation tools as well, we were a bit sheltered because we were focused on legal translation, so companies in the technology space or, different areas could leverage machine translation and AI much more than we could in the legal field. So we were sheltered, but I saw it coming that we would need to invest heavily and deeply in AI, in machine translation in order to really serve our legal clients in the best possible way, and we started doing that. But by this time, my daughters are grown, I’ve been doing this for 20-somewhat years, and I just knew I didn’t have the energy to basically reinvent my company to keep that trajectory going.

John Warrillow:

I think there’s a ton of people listening to this who feel exactly the same right now, right? They’re looking at a huge investment to keep up with technology, to keep up with what’s around the bend, And they’re like, “I don’t know if I have the stomach for it.”

Michèle Hecken:

Right. And what I did know is that my company was fantastic, that my team was amazing, but I wasn’t the CEO, as the CEO, you’re really the Chief Energy Officer, you’re the chief of culture, that’s what drives and motivates your entire team. And while I looked forward to going to work, and spending time with my team and doing strategy, I could also increasingly see that I was not the right person to take this amazing company that I built to that next frontier of reinventing it, new technology.

John Warrillow:

So give us the economics, like revenue, where are you at this point in the game? Profitability? That kind of stuff.

Michèle Hecken:

That’s a good question. We were probably at about 4 million to 3 million for, sorry, if I’m talking, I’m talking Canadian dollars, right? So probably about two, 3 million, maybe four, just under 4 million USD. And we had had three amazing-

John Warrillow:

Topline.

Michèle Hecken:

Yeah. Top line. We had had three amazing years under our belt, Our gross margins were great, our EBITDA was really good.

John Warrillow:

What would you be netting on an EBITDA basis on the four percentage basis?

Michèle Hecken:

Well, yeah. It was… So when we sold at 4.4, our normalized EBITDA was just under a million, so it was probably about half a million, something like that.

John Warrillow:

Got it. And did you have any sense, Michèle? So you’re almost at a million dollars of EBITDA. Did you have any sense of what it might be worth on a multiple of EBITDA, or were you thinking multiple of revenue? Were you starting to zero in on what you thought was a reasonable multiple?

Michèle Hecken:

Yeah, I did. I had an idea. I mean, so there was a technology that was changing, there was also another development in that the industry was converging. So at that time, which was really only two, now three years ago, actually it was about three years ago that I made the decision that I was going to go forward with the sale, or that I was going to try and get acquired, but there was a lot of convergence. So three years ago, there was not even one billion-dollar player in this industry, not a single company was worth a billion dollars, and so there was so much consolidation happening, and the buyers were out there, and the buyers were looking to find quality companies that were profitable. I was in a niche that was desirable, specialized, and I had built my company in a way that, whether I was there or not really didn’t impact what was happening, because for the most part, I wasn’t there anyways. So that’s where I was. Okay. So all of these factors coming together, it’s time.

John Warrillow:

And did you have a multiple that you thought was fair, like a multiple of EBITDA at this point? What did you think?

Michèle Hecken:

I did. I was hoping to maybe get two times revenue, or maybe seven to eight times EBITDA being super optimistic. [inaudible 00:27:46]

John Warrillow:

And before we go further, I want to just get a sense. You mentioned you had kids, you’d raise them, you’re looking down the barrel of this major investments to keep up with all the technology innovations in the translation space. Was there also an element of… “Man it’s seven times EBITDA, this is a big chunk of my net worth, and I’m gambling in the face of Google translate, and all these other technologies, maybe I need to get some chips off the table.” I don’t want to put words in your mouth, but was that also part of the calculus?

Michèle Hecken:

Not really, because I always had faith that the company would continue to grow, I wasn’t worried that if I stayed in the company, I would lose it, I knew I would do the right thing, I just gave myself permission to choose not to.

John Warrillow:

Got it. Okay. So where does it go from there? You’ve got a sense of what you think it might be worth, how did you go about marketing the company for sale? What was the next step in your process?

Michèle Hecken:

Okay, so I took a bit of an unorthodox approach because, I mean, if you have an investment banker, and they’re great, and I love them, all my friends, they do a great job, but for a company of my size, the cost can be prohibitive, even lawyer costs and all of those things are already a big consideration.

So what I did is I went to a Language Industry Conference in Poland, actually in August, 2018, and I talked to some of my peers, and one person, specifically, who I have known for twenty-somewhat years, who’s been in the industry for over 30, and I knew that he knows everybody, and who’s who, and he knew who was buying, and all of that, and so I sat down with him and I said, “Here’s what I’m thinking.” And he’s like, “I don’t blame you, I think it’s a perfect time.” I said, “So who’s buying.” And he’s like, “Well, I can do this for you, this is what I’m going to charge,” which was much, much less than an investment banker would charge.

But there was also much, much less that he did for that, but that were… And so, yeah. We put together a prospective, and he sent it out to his network, and eventually we got an offer and it actually came fairly quickly. I think we put the memorandum out at the end of August, beginning of September, and then we had a couple of expressions of interest, and sent a little bit more, and by the way, I knew I would very likely be selling to a competitor. So that’s a whole different ball game because, you have to be so much more careful with respect to your clients.

And I can elaborate on that as well, if you like. So we had an offer, the offer that I then ended up accepting came in on October 2nd, which was the day before my birthday, and I took that as a bit of a sign, and it was an all cash offer, which I was very clear, I said, “I will not accept an earn-out, if I’m going to sell, I’m going to walk, don’t bring me anything at all, I won’t even look at it.” So I was really clear about that.

John Warrillow:

Wow. That’s surprising given the fact that it’s a service business. And what was the reaction to the broker that you met in Poland? What was his reaction to this notion that like, “I want all cash, no earn-out.” Did he push back at all of that? Or what was his reaction?

Michèle Hecken:

No, there was no pushback. I think I was that clear.

John Warrillow:

Interesting. And why was that the case? What had you heard about earn-outs that made you feel so emphatically that you did not want one?

Michèle Hecken:

It wasn’t necessarily about the earn-outs, even though, that played a bit of a role, but for me it was, I’ve been an entrepreneur since I was 14 years old, I have never worked for anybody in my life, and I’ve always had my freedom, and freedom is my biggest value. So I was able to design both my business and my life to serve me and my family so that we could live the life that we truly wanted to live by design, and still have the company grow.

So the thought of reporting to somebody, and actually having that freedom curtailed to some extent, I just couldn’t wrap my brain or my gut around it. It just was not something that was ever on the table, which, it’s interesting because of course, I could have done that, I couldn’t have taken an investment, and built it up, and then maybe sold it for 20 or 30 or 50 million years down the road, but I wanted to do something different, and back to, I don’t want to work for anybody. And then also on the earn-out side, which, I heard from other EOs and other entrepreneurs that a lot of times, they’ve told me that while they didn’t stay long enough, so they didn’t get it, or that it felt like a carrot.

And the biggest thing I heard that the earn-out was often not in their control. So it was something that the acquiring company made decisions, and then they didn’t meet the goal, and their earn-out went away, and none of that sounded appetizing to me.

John Warrillow:

Yeah. Yep. Yep. Yep. Makes sense. Michèle, you’ve referenced EO a couple of times. I want to make sure all of our listeners know it’s Entrepreneurs Organization, you can Google it, it’s a peer group for entrepreneurs. And it sounds like you were a member, which is great. Okay. So all-cash offer was your bottom line, October 2nd comes and you get an offer, what was your reaction to the number? What was the offer for, and what was your reaction?

Michèle Hecken:

I can talk about the sale price, I can tell you that the offer was the sale price. So I was happy with that, they didn’t play any games, they were very fair acquirer. So I was like, “Okay, let’s see where we’re at with that.” And at that time too, I was, again, first time doing this, I was a little concerned, because I had heard stories that, they try and get the price down, and they try and pick things out to due diligence, and for me, that didn’t happen, they were super fair.

John Warrillow:

Fantastic. So RWS is the name of the acquirer, they published the price as 6 million US, which, if we back into it implies a 6.7 times EBITDA on normalized earnings point, almost a million dollars, 900,000. Got it. So that’s a fantastic result. It fell slightly below your expectations, but it was all cash. How did you reconcile those two things? Did you think, oh, maybe I’m leaving a little bit, how did you go from seven, to eight, to six? Did you hesitate at all? Or was it like-

Michèle Hecken:

Well, again, being a Canadian company, $6 million at that time was 8 million US. So I was okay with that number.

John Warrillow:

I see. So the currency had flipped [inaudible 00:35:46] Yep.

Michèle Hecken:

Right. But it was still a little bit, I was hoping maybe for a little bit more, but the other thing that happened too, they were one of the companies that I wanted to sell to, they were a good company, they still are, they’re now, I believe the largest, I don’t keep up with the news as much anymore, but I believe they are now after their most recent acquisition. The only billion-dollar player in the industry, and they are the largest one. So I’m very proud that my little Alpha Translations lives on with them, and it was a company that I had heard really good things about that other colleagues have been acquired by, and they had a reputation in the industry of being fair, and it was important to me to take care of my team.

So really early on, I asked about… Because there were other acquirers out there, and I had conversations with a couple of other people, and I knew some of them were known for just getting rid of the team, and just pulling it in, and I really didn’t want that, so I was picky about who I was going to sell to because I was concerned about my team. And so as far as I know, most people are still there two years later. So that also makes me very happy.

John Warrillow:

How did you approach the topic of telling your team? Was there anyone that you told before you accepted the check effectively? How did you handle it?

Michèle Hecken:

Oh my goodness. Yeah, no, that’s always the hardest thing to do, and it was very difficult. I told my COO very early on because we did everything together, I told her very early that I was thinking-

John Warrillow:

What was her reaction?

Michèle Hecken:

I had broached her before, a couple of years ago to say, “Hey, eventually, I think I’m going to sell, so I’m not going to do this forever.” So it was already on the table, and then I told her, I was like, “Yeah, I think I’m going to actually do this properly now, and see if I can get an offer for it.” And I think she was more shocked than she led on, like in retrospect, but being the loyal and dedicated and amazing COO that she was, she stood by my side and went through it with me.

And then we had to bring in a couple of people from the team because it was so much work to do the due diligence. So we then had our office manager and my EA, who knew, and it was a small office, so I know it felt really difficult for them, I know that year, nobody wanted to do a Christmas party because, people didn’t want to be beside people, and somebody knew and the other person didn’t know it, and I think that was a really difficult time for everybody, especially for my team.

John Warrillow:

What was your reaction, or what was the reaction of your COO when she heard the numbers? I guess, and I’ll tell you why I’m asking this, to give you the time to buy some time to think about it, but I guess, she’d been running the company in your own admission, you were working one day a week on the fun strategy stuff, while she’s putting in the hard yards, doing the really heavy-lifting, a lot of people might feel a little resentful, right? When Michèle rides off into the sunset with this big check, was there any resentment? Or how did you navigate those waters?

Michèle Hecken:

Well, I don’t want to elaborate on that because that’s personal for her as well, and I [inaudible 00:39:37], I don’t want to say how she felt, because I feel like this is a public forum and I want to be respectful. I feel like I could have handled it better, for sure, I think she probably felt somewhat resentful, but again, that’s my interpretation, and I don’t want to talk about how somebody else feels because I don’t know.

John Warrillow:

True. How did you feel then?

Michèle Hecken:

I felt that I had always been fair in the compensation, whether she felt that or not I don’t know, I think she did, and that there was going to be a bonus. I could have handled it a little bit better, or probably much better in being more specific about the number that I would share with her, but being my first acquisition, I didn’t even know how this was going to work, I didn’t know how much taxes I needed to pay, and I didn’t know if I was going to get the final number, I didn’t believe anything was going to happen until it actually happened. It felt completely unreal to me, to wrap my brain around it. So perhaps I could have made a commitment earlier on as to the number I was willing to share with her, and I didn’t then, I think that was a mistake.

John Warrillow:

I’m so glad you spoke for your own self because yeah, she’s not here to say her own opinion, but I think that is one of the most difficult things for entrepreneurs to deal with, right? Because I think as entrepreneurs, we get the fact that the role of shareholder is different than the role of employee, and you had two roles, right? You were both ultimately the CEO, a strategist, but you were also the shareholder, and sometimes for employees, that can be hard to differentiate, right? And they don’t necessarily see the roles as different.

Michèle Hecken:

I think so. And I think why I slept well at night thinking I had done well, and that I’d been fair was also knowing, I mean, whenever there was a crisis, or whenever there was cash flow issues, or specifically during the Lehman Crisis, I didn’t take the salary, I was the one who put the cash into the business, right? I lived off my savings, I funded the company to make sure everybody got paid.

So, I mean, maybe that’s something we tell ourselves to feel less… But we took all the risks, we did all of that, but yeah, I guess it’s harder for somebody else to wrap their brain around it, but I think she’s still there, I think she’s happy, and I’m definitely incredibly grateful for the amazing job that she’s done together with me, and for the company over the years.

John Warrillow:

Yeah. For what it’s worth, I don’t think you should feel guilty for a second, I think you took all the risks, you did it for 20 years, you started the business, you put the cash in, you had your old… A huge part of your net worth tied to it for two decades. So I’m letting you off the hook, even if you don’t let yourself off.

Michèle Hecken:

Thank you. Can I get off the hot seat now?

John Warrillow:

What’s that?

Michèle Hecken:

Can I get off the hot seat now?

John Warrillow:

Yeah.

Michèle Hecken:

[inaudible 00:43:19]

John Warrillow:

This is great. I think it’s such important advice for folks to think through one of the biggest regrets that folks have after selling, it’s like, “Oh, I wish I had a do-over on how I told my employees, how I handled it.” It all comes so quickly, and it can be very shocking when it actually gets done. Where were you when the wire hit your bank account? Do you remember that moment?

Michèle Hecken:

Yeah, I was in Edmonton. Yeah, it was here, my lawyer who’s amazing, amazing, amazing. Definitely don’t know if I can give shout outs, but she’s fantastic.

John Warrillow:

Sure. Go ahead. What’s her name or his name?

Michèle Hecken:

Her name is Heather Barnhouse at Dentons, and she just held my hand through it, she did an amazing job, because she did well, and yeah, she was just fantastic, and she called me and she’s like, “Funds are here.” And it was like eight o’clock in the morning, or something like that, and I’m like, “Ow.” And it was a little anticlimactic because still, I hadn’t seen it. There’s a bunch of zeros, what does that mean? Hey, I didn’t come from a wealthy family, so that’s more money on one pile that I ever imagined to see in my lifetime, right?

John Warrillow:

Yeah.

Michèle Hecken:

Yeah. It was surreal. It was surreal.

John Warrillow:

In the truest sense of the word. What did you do to celebrate? Was there a trophy you bought, or did buy yourself a fancy car, or a house or something? How did you mark the achievement?

Michèle Hecken:

It’s funny, it took me a while to give myself permission to spend some of the money, I really didn’t understand it, and I know some other people I’ve spoken to have, have felt that same way. It’s still feels, I have no concept of it. So one of the things on my dream board that I had was this Rolex watch that I wanted to get myself, and I did, eventually I got it.

John Warrillow:

Awesome.

Michèle Hecken:

But it took about eight months to give myself permission and get the silly watch. I mean, yes, it wasn’t cheap, but we just talked about the numbers and the cash in my account. I mean, it was much less after all the taxes and all the fees, and all of that kind of stuff, but still, it definitely warrants me buying myself a watch, and I had the hardest time with it.

John Warrillow:

That’s interesting.

Michèle Hecken:

Yeah.

John Warrillow:

Yeah. Well, I’m glad you did it. I think there’s a huge… I’m not a big, conspicuous, consumption guide on buying of monuments to your success, but there’s something nice about a tangible thing you can touch and feel that reminds you of the achievement of the 20-year journey.

Michèle Hecken:

I agree. And it had been on my dream board for a long time, and what it symbolized was, “One day I’m going to make it,” because while the company was doing well, and I paid myself well, and there a lot of perks that I could travel, and all of those fun things, My life didn’t really change that much, right? I was doing well, I was traveling as much as I wanted to, I had a nice car, I had nice shoes, and purses, and I didn’t feel like I’m really needed anything. So even now, my life’s not that different. I really think I’m a lot cheaper now because the cash flow that would just come in for working a day a week is no longer there, right? So that changes things too.

John Warrillow:

Yeah. Flying business class to Munich doesn’t all of a sudden feel worth it anymore, maybe? I don’t know.

Michèle Hecken:

No, it’s true. It’s really true. Well, here’s a funny story. I think it was a month after the deal closed, or a couple of months after the deal closed, and we’re watching TV, and this is when it’s hitting me that I have no money coming in, right? Because I said, “I’m going to take a year off, and I’m going to write my book, and then I want to just do something different.” And so this was my year off, and probably three or four months in, and we’re watching TV, and my mom says, “So how about this movie?” And I’m like, “Is there nothing free on Netflix, why do we spend four or 5.99 for movies?” And he looked at me, he’s like, “Really? Seriously?” I’m like, “Well, that’s expensive!”.

John Warrillow:

It’s so funny, you’re not the first person to say that there is a huge difference between living off your income of an operating business, and living off your capital, ask any retiree, doesn’t matter how many zeros they have in their bank account, when you’re living off your capital, it somehow changes every purchase. I love that story.

Michèle Hecken:

It does. It really does. So I went from before feeling… We always think everybody else does it better. We always say, “Oh, this entrepreneur is smarter, or this person is…” And we don’t realize how many people look at us, and think that we have it all figured out. But during that time, I felt like, oh, okay, I’m doing well, I have money, I have cash flow, but I never really had a lot of money in the bank because it all went back into the business. So that would be something I would for sure do differently. I would take money out along the way, and, invest it separately from the business. That’s something I didn’t do. So I went from having great cash flow, but no assets, other than the business, to having a lot of assets and no cash flow, middle of the road would be great.

John Warrillow:

It’s great insight because I don’t think you’re alone, and I think you’ve done a great job of articulating, I’d say. What are you doing now? So tell us about what’s going on. I understand there’s a book in the works, tell us where people can find you and learn more about the book.

Michèle Hecken:

Awesome. Yeah. So I am writing a book, I’m hoping it will be published in the fall, it doesn’t have a title yet, but what it is about is off-boarding yourself and make space for your company to grow while living your ideal fun and fearless life, which is what I did, and I did it well. My passion is helping other entrepreneurs achieve that for themselves as well.

John Warrillow:

Fantastic. Where can people find you online? Is there a website they can go to or LinkedIn?

Michèle Hecken:

Yeah, there is. Yeah. LinkedIn for sure, Michèle Hecken, my website is MicheleHecken.com, with one L, and yeah, email is Michele@MicheleHecken.com if anybody wants to schedule some time and pick my brain, if they’re going through something, I’m happy to share my experience one-on-one.

John Warrillow:

That’s very generous. Michèle is with one L, and we’ll put all that in the show notes at BuiltToSell.com. Michèle, this was a real treat for me. Thank you for doing it.

Michèle Hecken:

I had a lot of fun. Thank you so much, John. And thank you for making this a warm and welcoming, and making it easy to share. I appreciate it.

John Warrillow:

Danke schoen.

Michèle Hecken:

Bitte schoen. Thanks a lot, John.

John Warrillow:

Hey, if you like today’s episode, you’re going to love my new book, The Art of Selling Your Business. The book was inspired by the cohort of my guests over the years who have been able to negotiate an exit far better than the benchmark in their industry, sometimes two or three times more than I would have expected. I was curious to understand the tactics and strategy to these entrepreneurs, and what they do differently from average performers. The result is a playbook for punching above your weight when it comes to selling your business.

To learn more, go to BuiltToSell.com/Selling, where we put together a collection of gifts for listeners who order the book, just go to BuiltToSell.com/Selling.

Built to Sell Radio is produced by Haley Parkhill, our audio and video engineer is Denis Labattaglia. If you like what you’ve just heard, subscribe to get a new episode delivered to your inbox each week, just go to BuiltToSell.com.

Outro:

Thanks for listening to Built to Sell Radio with John Warrillow. For complete show notes, with links to additional resources, visit BuiltToSell.com/Blog. John is the founder of The Value Builder System™. To find out how to improve the value of your business by 71%, visit ValueBuilderSystem.com. John is also the author of Built to Sell: Creating a Business That Can Thrive Without You, and The Automatic Customer: Creating A Subscription Business In Any Industry. Connect with John at Facebook.com/BuiltToSell, or on Twitter @JohnWarrillow, W-A-R-R-I-L-L-O-W. Thanks for listening.