To the founder of a company, a business is a like a child. You’ve tended to and nurtured it through the years, agonizing over decisions, celebrating triumphs and sweating through missteps. Time flies by and then suddenly, somehow far sooner than expected, your baby is all grown up and moving on into the world—without you.
“It’s the fastest 20 years you will spend in your life, and you’re not quite ready for it to end,” says Carey Smith, who recently sold the cooling systems company, Big Ass Solutions, which he founded in 2009 (CHK). “It is ending, and you knew that because selling is a lengthy process, but somehow you’re still not prepared.”
Smith’s Lexington, Kentucky-based company had grown steadily since its inception, from six people and $34 million in annual revenues to 800 employees and more than $260 million in 2017. While there was no burning need to exit, he was approaching age 65 with no heir apparent in the wings and offers pouring in over the transom. “It was sort of like when you decide you want a cookie and then all of a sudden you start seeing cookies,” he recounts.
The desire to do right by longstanding employees who owned stock appreciation rights (SARs) in the company also drove his decision. Because of the way the company was structured, a portion of its eventual $500 million price tag was disbursed among 140 employees. “Writing $48.8 million worth of checks to people you’ve worked with for years is a really good feeling,” says Smith. “A lot of them told me, ‘This is life-changing.’”
LinkedIn Co-Founder Reid Hoffman and co-author Chris Yeh share secrets for scaling your business at the CEO2CEO Summit.
Dec. 6, 2018 | New York City | Details and Registration today!
Selling, however, proved a more arduous personal and professional journey than Smith anticipated—one he emerged from with plenty of newfound knowledge to share:
- Know your number. Unless you’ve unloaded a company before, you’ll have a lot less expertise about setting a sales price than your potential buyers—but you do know what it’s worth to you to let it go. “These guys will find all sorts of ways and reasons your company isn’t worth what you think,” says Smith, who wanted, and ultimately got, his $500 million asking price. “Part of negotiating is to say, ‘Hell no, get out of my life if you can’t give me what I need.’”
- Invest in outside expertise. Don’t cheap out when hiring bankers and lawyers for the transaction, warns Smith. “We have lawyers in Kentucky, but for this we went to New York and got the best lawyers available. This is one of those things in life, like good doctors or good childcare, where paying more ends up being the best bargain.”
- Establish an internal team. Selling demands time and resources, not all of which can be outsourced. Meanwhile, you and your employees still have a business to run. Smith designated a team of six employees who worked full time on the sale process for six months, and “it was still hard,” he says.
- Get all the way out. Resist the urge to hang on to an interest in the company. “That’s like the camel putting its nose under the tent. At the end of the day, the camel will be in the tent and you will be out in the desert.”
- Find a new purpose. “Anyone who has bootstrapped a business feels forever associated with it in some way. You want it to succeed the way you want a child to succeed, but you have to divorce yourself from that and recognize that it’s not you and you are not it. It’s time to move on and do other things.”