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August 12, 2015 |
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The hidden dangers of agreeing to an earn out when selling your business.
In this episode of Built to Sell Radio, you’ll hear how Jason Swenk built up his digital advertising agency from nothing to thirteen million dollars in sales before he sold it to a strategic acquirer in 2012. Swenk then went to work for the new owner — but the new owner’s business got acquired nine months later by an even larger firm. Swenk found himself two levels away from power and struggled to hit his earn out. What follows is a success story with a cautionary tale about the dangers of agreeing to an earn out as part of the sale of your business.
Jason Swenk founded a successful digital agency, and over the span of 12 years as CEO championed in the digital advertising arena for clients such as Aflac, Lotus Cars, Hitachi, AT&T, Coke and Legal Zoom. Jason sold his agency in 2012 for 7 figures and went on to author a book and develop a smartphone nutrition app. Today, he continues creating proprietary business tools, client coaching, blog writing and podcasting. Operating out of his office of solitude in Atlanta, Georgia, Jason makes the most of his in-the-trenches experience and today’s cutting edge business strategies to help innocent businesses defend themselves against villainous competition.
Jim Remsik’s Adorable Exit Was Just Right
When a health scare sent Jim Remsik looking for a buyer for his company, he had to decide whether to sacrifice a high-multiple exit for his personal priorities.
Built to Sell Radio Q&A Feature
This week on the show, we tried something a little different.
Instead of interviewing an owner about their exit, we canvassed founders for their questions about building to sell and asked the host of Built to Sell Radio, John Warrillow, to answer them.
In this episode, John draws on his experience interviewing more than 300 founders on Built to Sell Radio to answer five essential questions.
5 Lessons from growing a startup to a 9-figure exit in 2 years
David Yaffe was working at Google when he spotted an opportunity to connect advertisers with smaller publishers competing for online advertising dollars. He and two friends started Arbor, raised more than $2 million in seed capital and built a prototype. Two years later, Arbor had grown to 25 employees when LiveRamp acquired them for more than $100 million.
Rory Fatt began his entrepreneurial journey running marketing seminars for restauranteurs. After several owners approached Fatt to do their marketing for them, he decided to launch Royalty Rewards in 2005.
The business was a multimedia marketing platform that helped small businesses market their products and services by rewarding loyal customers. The company took off, hitting just over $2 million in revenue in its first year.
Inspired to achieve financial freedom, Fatt began to explore selling his company. In 2022, he accepted an offer from Schianti Partners that would set his family up for life.
The Inside Story of Stripe’s Acquisition of Indie Hackers with Co-Founder Channing Allen
In 2016 Channing Allen and his brother Courtland founded Indie Hackers, a blog and forum that encourages founders to transparently share their ideas and stories.
After only eight months, the brothers had grown the business to $8,000 in revenue when they received an unexpected email from Patrick Collison (co-founder and CEO of Stripe), who was looking to acquire the company.
Although tempted to keep building, Stripe’s offer was too good to refuse. The brothers agreed to be acquired by Stripe in March 2017.
One Company, Two 8-Figure Exits
Ed Buckley started Peerfit, which allows companies to offer fitness classes as part of their employee benefits package. The company grew to more than 150 employees before receiving an acquisition offer for almost $100 million from a major fitness brand widely reported to be Peloton. Buckley retained some of the IP, which, in a strange twist, he was able to sell in another eight-figure exit months later.
Looking Smaller to Make Your Company Bigger
In 2008, Gavin Hammar started Sendible, a platform that allows companies to manage all their social media accounts from one place.
The company grew steadily until 2016, when Hammar hit a sales plateau. Challenged to combat a high churn rate, Hammar took several unique steps to humanize his business.
Becoming a more approachable brand worked. Sales increased by 30% year-over-year and by 2021, Sendible had 47 employees when they were approached by ASG with an acquisition offer Hammar couldn’t refuse.
Libsyn’s Acquisition of AdvertiseCast: The Tell-All
In 2016 Trevr Smithlin and Dave Hanley founded AdvertiseCast, a marketplace connecting podcasters with advertisers. The company experienced tremendous growth, doubling revenue year-over-year until 2020. That’s when the uncertainty triggered by the COVID-19 pandemic caused Smithlin and Hanley to consider their strategic options.
In March 2021, Smithlin and Hanley signed an acquisition agreement from Libsyn for $30 million.
6 Lessons From Selling Your Company to a Growth Equity Investor
Despite starting with just $10,000 in 2004, Jon Morris built Rise Interactive, a digital marketing agency, to more than 100 employees before deciding to sell part of the business to Quad, a global marketing services provider.
How To Place A Value On Your Sales Team
Mark Deutschmann started Village Real Estate in 1996 and by 2018 he had grown it to 350 salespeople. Then six of his agents decided to compete with him. Anyone would be upset, but you’ll be surprised at what Deutschmann did next.
How To Increase An Acquisition Offer Without Appearing Greedy
In 2012, Gabriela Isturiz co-founded Bellefield Systems, a company offering a timekeeping application for lawyers. Over the next seven years, Bellefield grew to 45 employees when Isturiz decided to hire an advisor to find a strategic investor. Given Bellefield’s growth and success, Isturiz was hoping the process would garner a valuation of 5-7 times Bellefield’s Annual Recurring Revenue (ARR).
How to Sell Your Business to a Competitor
Alex Rink built 360pi, a software application that provided online retailers with competitive pricing information.
360pi grew into a multi-million-dollar company with 40 employees when Rink began hearing his business might be worth as much as 3-6 times revenue.
