How Founder Can Take Chips Off the Table with Partial Exits
What up, Dealpreneurs!
In today’s edition I wanted to detail a few strategies to unlock liquidity as a founder.
For example, I sold my last company for $26M.
But when I tried to sell it as one business, no one wanted to write me a check.
It took me 9 transactions with 8 different buyers to unlock an the full value of the business.
Here are the five most profitable deals you can do in your business to unlock exit value NOW.
Partner buyouts with a Mexican shootout.
When you’ve been running the business with a partner for a while and you feel like its time to go your separate ways. Invoke a Mexican Shootout or Buy/Sell clause.
Simple game—you set the price, I say whether I’m buying you out or you are buying me out.
This has helped me end partnerships & keep friendships while allowing the equity to get new energy on the bus.
You aren’t building the conglomerate you think you are.
The more niches you enter, the fewer buyers you have.
No trampoline operator wanted an axe throwing business.
Silo the business to its specific niche & sell off each silo to the highest bidder.
Rarely will the highest bidder for the business also be the highest bidder for the real estate.
One is okay with active ownership, the second pays on cap rate for passive ownership. Sell them what they want.
When we split the real estate out to a separate purchaser and increased the rent that the location paid, we added $2M to the total exit value.
Recapitalizing the business is when you bring on new debt in order to buy out old equity partners.
We did this a few times in order to make space in the ownership group to incentivize operators and bring in new partners that had a more robust skillset than the original partners that we started the business with.
Too often, sellers want all of the cash upfront for the business.
I get it, nothing sounds better than getting a full asking price for the business and running away into the sunset. However, now is not the time to be penny wise and pound foolish.
The buyers of the business want to know that you have confidence in the fact that the business will continue to succeed after you leave, and one of the best ways to show them that you have skin in the game in the business is to take a seller note.
Across the whole $26M exit, I took on $3.1M of seller financing that was paid monthly. In the negotiations it allowed me to show them that I still had a vested interest in the performance of the locations because I could lose real money if things went poorly.
I want to invest in your business:
I’m looking for my 4th deal in 2023.
My most recent deal has doubled the Trailing 12 Profit in the 4 months since we’ve owned it and the owner works half as much as she used to, while focusing on the part of the business she loves.
Here’s what I buy:
Owner led looking for a big exit in 3-5 yrs (we buy in and help)
Digital Businesses (courses, newsletter personal brands, certifications)
Min 500k trailing 12 profit
Product must be awesome
Less than 15% of sales spent on advertising
I rarely buy the entire business, I don’t want in if you want out, but I want to hop in the boat with you, relieve the operational burdens and quadruple the exit multiple with you.
Send me your info at dealmaven.io!
I respond to all inquiries within 24 hours.
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