This week on Life After Business we have the benefit of an appearance from an absolute master, Sam Thompson. This man built up his business, hired the right partners and then sold to them at a price that everybody was happy with. He sold at the perfect time… with time left to spare. It took him seven years of careful planning, but Sam is an example of just how much can be gained by thinking about your exit at the earliest opportunity. He even took heed of the advice from one of our previous guests on the LAB podcast, John Warrillow.
Sam combined his exit planning with a rock-solid strategy for his next career and basically achieved the ultimate life after business.
When did he first take on his partners?
The first partner came on board four years after he started.
Why did they buy in?
Sam openly courted partners because he knew he needed them to grow the business. They were all incentivised with bonus shares which proved to be a very effective strategy.
What were the company sales?
Approximately $5m for a number of years, then post 9-11 they had to radically change the business model to be less dependant on people flying in. They bought a warehouse and focussed on teambuilding for local businesses.
Why did he decide to sell?
There wasn’t one event. He thought about exiting casually, went to seminars, and bought the book Built-to-Sell by John Warrillow. There was agreement among the partners that they needed to do something.
What was the first thing he did after he decided to sell?
He empowered his team of employees to have more responsibility by promoting a number of people, and thus safeguarded the value of the business without him.
How did he cope with the delegation?
It was tough, but worth it.
How long did it take?
Seven years in total.
How did he prepare himself for life after business?
He did some research, went to a convention and eventually became certified to be a business intermediary.
How did they value the business?
When Sam wanted to sell, the other partners didn’t, so the only way he could exit would be for the partners to buy his share. They arrived at a figure by using the average of an accountant’s valuation and a less conservative valuation from a business broker.
What were the stumbling blocks?
The main stumbling block was how much Sam would be missed, but because of the increased responsibility that Sam had given other members of the business, this was eventually overcome.
What was their agreement?
Originally there was an SBA loan along with a promissory note of 10%. Basically he got a loan from a bank that was financed using the company cash flow and a personal guarantee on a stream of payments of a certain period of time.
Would he have got more money from a third party?
Probably, but the exit option he chose felt better for him and everyone overall.
What happened next?
He stayed on for a year first but then said to the partners after six months that it was time to stop – they didn’t need him. All of the key employees stayed on after the sale and the business continued to be successful.
What would he do differently?
The transaction went well but maybe he should have used an exit planner.
Wise words for the road:
“You want a business attorney when selling a business. They know how to get these deals done.””
“You want a business attorney when selling a business. They know how to get these deals done.”
“There’s a lot of good businesses out there but they hit a brick wall & they’re ready to move on.”
“There’s a lot of good businesses out there and there’s nothing wrong with them – they’re like me, they hit a brick wall and they’re ready to move on and do something different.”
“Make sure when you’re ready to sell that you’re making money”
“Make sure when you’re ready to sell that you’re making money. Sometimes owners don’t realize that… they’re doing everything they can at the end of the year not to take a tax hit. But when you’re ready to go, you need three good years.”
How to contact Sam:
email – firstname.lastname@example.org
phone – 612 282 750
Sam Thompson Bio:
Sam Thompson is founder of metroConnections, a Minneapolis based event and conference planning company that has been in business for over 32 years. In 2012 Sam sold his shares of metroConnections to his three partners and began his next career as a business intermediary helping business owners sell their businesses. Sam is past president of the Association of Destination Management Executives International (ADMEI) and has received the Lifetime Achievement Award from both ADMEI and Meet Minneapolis (Minneapolis Visitors Bureau). Sam is certified with the International Business Brokers Association and is very active with the Edina Rotary Club. Sam has a BS degree from the University of Wisconsin- Stout in Hospitality Management. Sam lives in downtown Minneapolis and had 3 daughters ages 23 and 19 (identical twins).