The problem was that Wilmink and Schneck couldn't afford to buy the business outright. Wilmink proposed that Grassadonia retain part of the business and stay on as a consultant for a minimum of three years. "She felt she needed my expertise in the dive industry," says Grassadonia. Still, he hesitated to do a partial sale, since he really wanted out. But he didn't want to sell the magazine only to have it fall apart in someone else's hands. That's what had happened when he sold Santa Cruz Weekly, a newspaper he had founded in the early 1980s.
So he was open to staying on as long as someone else took over the publisher's day-to-day responsibilities. But Wilmink had to convince him that she was up to the task. And convince him she did. "Susan came in with a vision," says Grassadonia. "She had a complete layout of what she wanted to do with editorial, sales and marketing, the whole nine yards." Wilmink outlined plans for a Dive Travel Web page, a quarterly newsletter, and a repositioning of the magazine's editorial product. So thorough and persuasive was her presentation that Grassadonia felt confident that she was someone he could stand to watch running his business. "She made me a believer," he says.
But if Grassadonia was sticking around, he wanted ample compensation. "I figured I'd make more money in the long run with a partial sale than if I waited around for someone to buy the whole thing," he says. His reasoning was that Wilmink seemed to have the vision and creativity to make the magazine even more successful. If he held back a percentage of the business, he might expect to see his stock increase in value.
The negotiations took place over a six-month period, back and forth by phone between Germany and California, and then face-to-face in Santa Cruz. Both parties concede that the discussion may have begun with numbers, but it quickly veered into the world of psychology and emotion, not all that uncommon in the sale of small private companies.
As good as the fit between Wilmink and Schneck and Dive Travel had seemed, their negotiations got tense at times. During one particularly stormy bargaining session, Grassadonia and his wife, Gloria; Wilmink and Schneck; and their respective brokers and attorneys sat haggling around the conference table. Emotions ran high. Voices were raised. At one especially charged moment, Barkley, Grassadonia's 13-year-old golden Labrador, walked over to Wilmink's chair, jumped up, and licked her face. Everyone started laughing, and Wilmink decided that the name of the new business would be Barkley Publishing.
Through her contacts at Ziff-Davis, Wilmink was able to glean a thing or two about what key numbers to look at and what she could expect to pay. The buyers looked at the asking price of $450,000 and thought about what they would have to invest in the magazine to get it moving again. (During the time the business was for sale, Grassadonia admits, he wasn't really concentrating on sales growth, but instead "just wanted to maintain the market we had.") They also thought about how much it would cost to generate from scratch the advertising base Grassadonia had put together over the years. By April 1995, they finally agreed on a price of $215,000 -- representing a balance between what Wilmink and Schneck could afford and what Grassadonia was willing to settle for.
Wilmink and Schneck would pay 51% of that for controlling interest. Wilmink would be the new president and publisher, and Schneck would act as part-time chief financial officer while commuting to Germany to run his software company. Grassadonia would have the title of director of new-market development and would be responsible for finding new advertisers. He would be paid consulting fees for the next three years. (After that, he plans to sell his stock.) Wilmink and Schneck have a written right of first refusal, but they're counting on their (so far) good relationship with Grassadonia to see them through a fair valuation for the stock.
In addition, Grassadonia negotiated to receive a portion of the company's total revenues -- not profits, but revenues. (Neither party would specify the exact percentage.) Schneck was particularly unhappy with that decision, and Wilmink understood that it was risky. But she was really keen on the opportunity Dive Travel represented for them. Plus, she agreed with Grassadonia's argument that it's too easy to bury profits in a company like Dive Travel, and that he wouldn't have any control over the spending or expansion decisions they made. Meanwhile, what he could do was bring in advertising dollars.
A year later Grassadonia says he's very pleased with the arrangement. The magazine's circulation is now close to 13,000 , up from 5,700 when he sold it. Total revenues have almost doubled, from a 1994 year-end figure of $300,000 to a projected 1996 total of $550,000. But no one comes to him with the workaday crises anymore. He doesn't have to worry about paying the bills or meeting payroll. "Emotionally, I'm in semiretirement," he says. Not bad for a 44-year-old beach bum.
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Reporter Christopher Caggiano can be reached at chris_caggiano@incmag.com
