Cut Your Earnout
February 17, 2016 |
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 this episode, Stephan Spencer details three strategies he pursued to withdraw from his business’s day-to-day operations. By 2010, he was able to take a six-month sabbatical which ultimately lead to a sale in 2010 with only a six-month earnout.
Stephan Spencer went to sell his consulting business in the late 1990s but buyers all wanted him to sign up for a long, painful, and risky earnout. Keen for a clean exit, Spencer took the business off the market and set out to make it less dependent on him personally. In the episode, he details the three unique strategies he pursued for withdrawing from the day-to-day operations of his business. By 2010, Spencer had the business running so independently that at one point he was able to take a six-month sabbatical. That’s when he knew he could sell without such a lengthy earnout. Ultimately, Spencer sold his business to Covario in 2010 for a combination of cash, stock and a six-month earnout—an earnout so short it’s almost unheard of for a marketing services business sale.
Spencer was able to make a clean break from his company because he had transitioned from being a “Hub & Spoke” manager to being what we call an “Apple Picker”. To find out where you sit on this continuum, get your Value Builder Score now. This will rate your business for its dependency on you, as well as the other seven drivers of company value.
Our guest
Stephan is an internationally recognized SEO expert and bestselling author. He is the co-author of The Art of SEO and Social eCommerce, author of Google Power Search, and the inventor of the GravityStream SEO technology. Stephan founded Netconcepts in 1995 and grew it into a multinational SEO agency before selling it to Covario in 2010. He now works as a much sought-after SEO and digital strategy consultant. His past clients include Zappos, Sony Store, Quiksilver, Bed Bath & Beyond, and Chanel. Stephan has spoken at hundreds of marketing events, including SES, SMX, PubCon, Internet Retailer, and Shop.org, and he’s been a contributor to the Huffington Post, Multichannel Merchant, Practical Ecommerce, Search Engine Land, and DM News.
Related to this topic
Lessons from Home Depot’s Acquisition of a $100 Million Juggernaut Blinds.com
Jay Steinfeld started selling blinds online in 1993. The e-commerce pioneer went on to build Blinds.com into a $100 million category killer before Home Depot decided enough was enough and made Steinfeld an offer he couldn’t refuse.
How To Get Acquired By Facebook (Twice)
The market for digital assistants is booming. Apple has Siri, Amazon has Alexa and Google has Google Assistant. Now, thanks to Charles Jolley, Facebook has Ozlo, a digital assistant designed to outsmart Siri and Alexa at their own game.
How a Simple Strategy Led to a 35% Higher Valuation for Conversio
In 2014, Adii Pienaar started an email marketing platform for retailers, which became Conversio. By 2019, Pienaar had $2 million in revenue and 14 employees.
From Nothing to $25 Million in 12 Months
SnapSaves was created by Buytopia, which has a deal-of-the-day business model similar to Groupon. Started by Michele Romanow and her partners in Buytopia, the idea was to let shoppers snap a picture of their grocery receipt using the app.
Derek Sivers sold CD Baby for $22 million dollars and decided to do something interesting with the money.
The One Question You Never Answer
, a T-shirt business he quickly scaled from start-up to sale in 18 months.
A strategic acquisition is a different animal. The strategic acquirer will place a value based on how much more of their product they can sell, which is exactly what Business Objects did when they bought Next Action Technologies, for 8X revenue.
5 (Sobering) Lessons from the Sales of Hammocks.com
David Fairley estimates he has sold more than 20 online properties but admits it was the sale of Hammocks.com—one of his first exits—that taught him the most.
Cracking the Amazon e-Commerce Code
Sophie Howard built and sold a 7 figure Amazon e-Commerce business in less than two years. Here’s how she did it.
The Philosophy of Building to Sell
Dan Faggella started Science of Skill, an e-commerce website selling self-defense videos and paraphernalia, in 2013. His goal was to sell the business as soon as possible, and he started soliciting offers just 14 months later.
Bitcoin – The Investor vs. The Acquirer
Back in 2013, Dave Ripley became fascinated with Bitcoin. The cryptocurrency market was gaining notoriety and Ripley and a friend decided to start Glidera, a company focused on creating tools to help developers integrate cryptocurrency.
From Food Stamps To A Seven-figure Exit
While Michael Pedone survived off of food stamps as a kid, he dreamed of living a lifestyle where money wasn’t scarce. Fast-forward a few decades, and Pedone sold his first company for $1.2MM.