30 Nov Built to Sell Radio: The Kevin Harrington Way to Structure the Sale of Your Business
Mark Timm built Cottage Garden, a company selling decorative music boxes, to $8 million in revenue and around $1 million in EBITDA when he decided to sell it.
Timm sold the business for around 4.5 times EBITDA. He got half of his cash up front, with the other half paid over a five-year earn-out. Timm not only stayed for his earn-out, but when the acquirer decided to move the offices of Cottage Garden, Timm agreed to repurchase the business, only to sell it two years later, for a second time.
Selling the same business twice gave Timm a do-ever, and he took what he learned from the first sale and used it to maximize the return for all of his shareholders.
This interview is jam-packed with wisdom, including:
- What Timm learned about structuring deals from Shark Tank’s Kevin Harrington (the co-author of Timm’s book, Mentor to Millions).
- How guaranteeing your EBITDA can help you structure a deal.
- Why a guarantee should come with the removal of a cap on your earn-out.
- Why you need both an M&A attorney and an HR lawyer when you sell.
- The downside of selling your assets vs. shares.
- The importance of selling earlier than feels natural.
- The difference between a good deal and a fair deal.
During the interview, Timm shares his philosophy for creating a fair deal for both sides, which inevitably means being open to receiving some of your proceeds based on your company’s future performance in the hands of a seller. The more options you’re willing to consider, the more likely you will receive an offer. More offers mean more leverage, which in turn means you’ll likely have a better shot at dictating the ones you want. In an ironic twist, the more flexible you appear to acquirers, the better the chances you’ll be able to dictate your terms. Find out about the five ways you can structure a deal to sell your business by completing your PREScore™ questionnaire now.