1: What I learned from (almost) selling my company

This is issue #1 of my newsletter, Modern Capitalist. Sign up here to get weekly insights on how to scale yourself and your business in the modern age.

Hey team,

Happy Monday.

Welcome to the first installment of my newsletter, Modern Capitalist. 

In this issue:

• 💵 Lessons learned from almost selling my business last year
• 📗 What I’ve read/watched this week
• 🐦 Tweet/thread of the week

Let’s get into it.

🏢 What I learned from (almost) selling my company

In December 2020, I received an offer on my business EDMProd. 

Sonny—one of the buyers—and I had had a call earlier in the year. I’d expressed my boredom with the business and desire to start something new. He had asked if I’d ever be interested in selling, to which I said “yes.” And it didn’t go any further than that.

I didn’t think anything of it. Life and business carried on as usual.

4 months later, I receive this email:

I said yes.

Two weeks later, Sonny and his partner Gregg made an offer.

I started thinking about the money in my account. I started thinking about the freedom I’d have to pursue a new opportunity.

The problem was, the business was doing incredibly well. Our organic traffic & revenue was massively up due to the COVID effect (online courses were booming), and I was confident that we’d have a great year in 2021.

So I responded saying that it would be hard for me to take the offer as it currently stands.

We then went through months of offers, counter-offers, due diligence… ultimately ending in no sale. 

This 6 month period starting in Dec 2020 and ending around June 2021 was a rollercoaster ride I wasn’t prepared for 🎢

I would fluctuate between desperately wanting to sell, and not wanting to sell at all. 

I’d wake up one morning and be happy with my decision to sell (I’d already signed an LOI and all signs were pointing towards an acquisition)…

And then by the evening I’d be dreading the idea.

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The sale didn’t go through for a few reasons:

1. I ultimately pulled out and said I can’t do it (for a number of reasons, some of them were stupid reasons in hindsight).
2. A counter-offer was made. I wasn’t super happy with it.
3. Business revenue was down significantly, and our SEO traffic had dropped by 40%. The business was not worth what it was 6 months earlier—and I didn’t like the idea of selling it for less than the original offer.
4. We ultimately decided to mutually end the sale process. We’re all on good terms, and I still talk to Sonny on a regular basis. He’s a mentor and a friend. 

I’ll share more of the details and story behind the sale at a later point (if enough people want to know about it—I honestly think it’s pretty boring). In this newsletter, I want to share the lessons. 

Lesson #1: There’s a big difference between an idea and reality

Before receiving the offer, I’d always thought that I’d sell EDMProd in a heartbeat if I had the opportunity.

When that opportunity arose, I actually had to think through all the pros and cons. The consequences. What it really meant.

In the past, my frame of mind was, “Well, I’ve done this for 7 years. I’m kinda bored. I’d definitely sell because it means I could take chips off the table and start a new venture.”

When the offer was made, all kinds of questions and considerations entered my head:

• “If I sell, I won’t have a platform that I can leverage and experiment with.”
• “If I sell, I won’t have a solid stream of income. It might be a while before I can build another one. And I don’t want to get a job.” 
• “If I don’t sell, my business could decline and ultimately fail over the next 12-24 months—I could sell and secure the bag.”

The list goes on. But the lesson is that it’s difficult to think through the consequences of a decision until you’re actually faced with that decision. 

Lesson #2: Only YOU can make the decision

I sought counsel from a bunch of entrepreneur (and non-entrepreneur) friends while going through this process. 

They all had different opinions.

One friend said, “Dude. You NEED to sell. This is what you’ve been waiting for.”

Another said, “Why would you sell an online business in this environment? Stupid idea. Don’t do it.”

And another said, “I’m not going to share my thoughts with you because I don’t want to sway you either way. This is your decision to make.”

A part of me wanted a simple answer to a complex decision. And while it’s helpful to seek advice, I think I was trying to outsource my decision making. I wanted someone to make the decision for me. But it doesn’t work like that.

Lesson #3: It’s not always about the best financial outcome

From a strictly financial & business perspective, I think the decision not to sell made sense at the time. 

Cashflows were still solid, there was a clear growth trajectory, and I didn’t really know what I’d do with the money from the sale.

Looking back, selling would have freed up space to pursue a new opportunity and venture without the responsibility of an existing business. I didn’t value this highly enough at the time. 

Selling your business isn’t just a monetary event, it’s a life event. I think I was too focused on the $ side of it, and what made sense from a numbers perspective (which is important, but it wasn’t a life-changing amount of money, so I should have weighted the entrepreneurial opportunity cost more). 

Lesson #4: Avoid making decisions at emotional peaks

There were numerous times where I emailed the buyers and said “I’m in.” Or, “I’m out, sorry.”

At least 50% of the time I did this, I was in some sort of emotional peak state.

I had convinced myself of the right path, or had an “epiphany.” And then acted on it.

In hindsight, this was immature. I should have slowed down and let the emotional peak pass. 

Note to self: high stakes decisions will rarely have a clear “hell yes” path. Be wary of the “hell yes” or “hell no” feeling when faced with a decision you know is complex and unclear. It may be an irrational desire for certainty that’s affecting your judgment.

Lesson #5: “You’ll always be a better businessman than your lawyer”

I actually received this advice from Gregg, one of the buyers, after the deal had fallen through.

Because this was the first business I’ve ever sold, and really the first time working with an M&A lawyer in any capacity, I basically deferred to my lawyer on everything.

He’d make comments about the financial aspects of the deal (which I was qualified to make judgments about myself) and I’d just agree, because when you’re paying someone $500+ per hour you think they know best—and they usually do.

But lawyers generally don’t know your personal situation, where your emotions are, and how you’re feeling about your business.

They might say, “Push back on the earn-out component of the deal, especially from an international buyer. You might never see that money.”

But if the earn-out component is insignificant to you, and you don’t really mind if you get it or not (you’re just interested in the upfront cash), then should you take the lawyers advice? Maybe not. 

Note: I’m not advocating that you ignore legal advice. There were numerous things I had absolutely no idea about while going through this process, and my lawyer was incredibly helpful. I’m talking about the more subjective opinions that M&A lawyers might hold from past deals—which should be taken into consideration, but not taken as gospel IMO.

Conclusion

There were dozens more lessons I learned, but these were the major ones.

Overall, I’m extremely grateful I went through this experience, even though it didn’t result in an exit. I learned a hell of a lot, grew as a person, and built some great relationships along the way. 

I’m also confident I’ll exit one or more businesses in the future, and I feel more prepared having gone through this experience. 

What I read/watched this week

• ​The second episode on Graham Stephan’s podcast with Alex Hormozi. I particularly recommend the second half of the episode for advice on how to make positive improvements in your life. While I don’t agree at all with Hormozi’s nihilist philosophy, I do find his mental frameworks extremely useful. 
• ​What is Money, Anyway? Brew a cup of coffee or tea, remove distractions, and read this article for a high-level understanding of currency, monetary systems, and the future. 
• Related to the above, I enjoyed watching Ray Dalio’s latest video on The Changing World Order. I’ve been slowly chipping away at his book with the same title.
• ​Revisited Patrick Collison’s article on career advice. The younger you are, the more this applies.

Tweet/thread of the week

​Steph Smith’s viral thread on generation-defining stats of today is an amazing read.