Linda Nottingham joins me today to talk about her experience selling her healthcare insurance agency. SIN began as a joint venture with a like-minded business partner. After a successful growth in their business, and personal events, Linda’s partner left the company. She recounts what it was like to make that transition.
Eventually, Linda decided to sell her company to a larger insurance company. She had high hopes for the merger in the beginning, but she soon learned what is said around the negotiation table isn’t always honored after the fact. Linda tells me how she bounced back from her disappointing experience and found a new path as a business mentor.
You will learn about:
- Linda’s background in education.
- How she stumbled into healthcare.
- The small insurance agency Linda founded with her business partner.
- How they build the largest private company in Chicago for the time.
- Why Linda and her partner decided to go into insurance.
- How their partnership was structured.
- Why Linda’s partner left the company and how they handled her departure.
- How Linda found the best people in her industry.
- The process of the company’s sale.
- The issues that surfaced after the fact.
- The importance of finding a capable attorney.
- Why Linda sued her buyer.
- How she coped with the aftermath.
- Linda’s time in retail.
- What is SCORE?
- The power of admitting mistakes.
- How to be a good CEO.
Of all the things you wished you’d known to do, today’s guest has covered a couple of the super important ones in business. Linda Nottingham had the spectacular experience of being on bad terms with her acquirer — both in the sense of poorly worded terms in her sale agreement and being on bad terms with the individuals themselves (and going as far as lawsuits on both sides).
If that doesn’t catch your interest as an entrepreneur, I don’t know what will. Linda’s situation is all-too-common and can happen to anybody, but here are some key points to take away from her experiences.
Document, Document, Document
Everything you do with your partners or potential buyers that pertains to the sale of the business should be documented. Despite wanting to see the best in everybody, you really have to protect yourself. And, honestly, if your buyer is upfront and honest with you, what issue could he or she have with committing verbally agreed-upon terms to paper? So you want to ensure those clauses and stipulations get in there in ink, not just a handshake or verbal agreement.
The one huge boon Linda had working for her was having a buy-sell agreement in place from day one. Before her company earned any revenue or had to make any big decisions, she and her partner sought a professional to write up a buy-sell agreement for them which covered what would happen should one of them need to leave the company. This saved them so much hassle when Joan’s husband got sick and she had to leave the company sooner than anticipated. By following the document they created before a time of stress and need was upon them, Linda and her partner were able to complete their buy-out discussions in 30-40 minutes.
Can you think of how many man hours they saved by doing this early? How much money? And also, how many personal relationships stayed intact by having this document agreed upon in times of cooler heads?
Conversely, Linda lacked the right wording in her purchase agreement and that caused her tons of stress and hardship. Not only did she eventually have to take legal action, ultimately suing the people who bought her company, she also had to leave her company sooner than she wanted to because of the damaged relationships. When Linda drafted the document, she had her attorney write up the terms. Unfortunately, M&A was not his expertise, and he left out some critical information and stipulations—including those which would have secured her compensation.
This leads to our next point…
You Don’t Know What You Don’t Know
Admit it, you don’t know everything. We all have our specializations and there’s nothing wrong with that. In fact, it allows us to excel at what we’re doing. However, to do that, we sometimes need to seek outside counsel. In Linda’s case, she should have picked out an M&A lawyer to help her draft the purchase and sale agreement to ensure her compensation structure (which was, naturally, based off of profits) wouldn’t be impacted by purchases or other slippery factors that can cause your hard-earned buyout to diminish.
While she followed her passion and went to court over the issue, the litigation lawyer she used there was also unsatisfactory—and was, in fact, a recommendation from her business attorney (who, again, is not in the M&A field).
While you can’t know what your lawyer knows, necessarily, you can vet them through previous clients, reputation, education and relevant experience to see if he or she is a good fit for you. This goes for anyone you are getting into a business relationship with. At the end of the day, you are going to rely on this person for something which will impact the business’ finances, and yours. Your job is to make sure that you’ve got the right person for the right job, so don’t be afraid to ask those hard questions.
Step Up, Don’t Back Down
If you’ve risen to the challenge of becoming an entrepreneur, you can rise to any challenge thrown at you. When you aren’t getting what you deserve out of your business, you need to step up. Backing down isn’t what grew your business; you stepped up into the market and carved a niche out for yourself by fulfilling a need better than your competitor does. Never forget that as you enter negotiations, whether it’s with a customer or a buyer.
If there is breach of contract or other legally sensitive issues, don’t be afraid of taking the next step. Your business will be stronger for the mandates you enforce, and your financial, emotional and mental well-being are worth fighting for. Not every case is a winner, so you do need to be prepared for the financial cost of bringing cases to court; however, if you’ve done your research and sought the appropriate counsel, you will have a better idea of whether or not the issue is worth pursuing.
Considering the legal implications your documents have on yourself and your business, do you feel your operating agreements etc. are up to snuff?
Linda’s story is pretty common. The main lessons I think I take away from it is you don’t know how the deal is going to work out until it is done. It’s okay to be cautious in any business agreement. Make sure, you ask all the right questions and have the right professionals on your side of the table. Know what you want to achieve and structure the deal to meet those goals.
Links and Resources
Linda Nottingham currently serves as the President of JAX Realty Advisors, Inc., a real estate valuation and consulting company. She also serves as a Facilitator for CEO roundtables in the GrowFL Economic Gardening Institute. In 2010 she accepted an appointment to the board of directors of the Jacksonville Urban League. She also served for seven years as a facilitator for the Business Advisory Council program on behalf of the Jacksonville Women’s Business Center.
She is the past-chair of the Jacksonville chapter of SCORE, Counselors to America’s Small Business. In that capacity, she was responsible for the local management of a national volunteer organization serving the greater Jacksonville area in developing and supporting small business.
Ms. Nottingham has advanced degrees in education and management. She facilitated the development of a nine-volume instructional design series for educators, which received the Golden Apple award for the state of California. She has taught graduate-level courses in management development and educational psychology.
In 1987 she co-founded Syer & Nottingham, Inc., a healthcare consulting and insurance agency in Chicago. As the company diversified, she founded SNI Management Associates, Inc. in 1992. SNI managed multi-million dollar managed care contracts for physician and hospital groups. When she sold the company in 1996, the organization employed over 100 healthcare professionals.
Ms. Nottingham has served in senior management positions in the healthcare and insurance industries. She has lectured extensively on leadership, management training and organizational development.
She was selected as the Alumna of the Year at her alma mater in 2000 and has been inducted as an honorary member of Delta Kappa Gamma, an international women’s educational society for her contributions to women in education. She also serves on the Women’s Resource Center Advisory Board at La Sierra University.