As an entrepreneur, you can surely relate to a business becoming all-consuming. And it's easy to imagine the host of wonderful activities you'd engage in if you just had the time and energy.
Many -- if not most -- business owners continue to simply dream of such things. But not Timothy Ferriss, who turned his sports nutritional supplements company, BrainQUICKEN, from an 80-hour-a-week time suck to a four-hour-a week 'muse'.
With that extra time, Ferriss -- who chronicled the transformation in his bestseller, The 4-Hour Workweek -- became a tango champion and, along with dance partner Alicia Monti, holds the Guinness Book of World Records record for the most consecutive tango spins in one minute; he also won a national Chinese kickboxing title, learned multiple languages and traveled to virtually every country worth seeing.
So when I heard Ferriss recently sold BrainQUICKEN to a London-based private equity firm, I needed to know why he sold a business that clearly wasn't taking up much of his time, while paying for a good bit of fun.
Warrillow: In The 4-Hour Workweek, you advocate readers set up a muse to fund their lifestyle. Your muse was BrainQUICKEN. How could you sell your cash flow engine that started it all?
Ferriss: First of all, I was getting bored of it. Secondly, my brain felt like a computer running antivirus software in the background. Even though the company didn't take much time to run, it was consuming more than 10 percent of my mental energy.
Warrillow: How did you go about marketing your business for sale?
Ferriss: I was traveling in Mexico with a friend of mine who invests in companies. I asked him if he wanted to see how I run my company. I logged onto my email and sent off a few messages, and in the span of 20 minutes, I was done for the week. My friend was impressed and told me to let him know if I ever wanted to sell.
Shortly after the Mexico trip, I spoke at an Entrepreneurs' Organization (EO) event and mentioned casually that I would be interested in selling my business, and a number of people approached me after my talk. I went back to my traveling friend and said, if you're serious, now is the time.
Warrillow: Was it awkward to negotiate with a friend?
Ferriss: We kept it very simple. We agreed on a fair price, which included all of the usual reps and warranties. As is normal, they asked me to stay on as a consultant for a while. I really wanted to move on to free up the mental energy my business was consuming, so I offered to drop the price by 20 percent if they would allow me to make a clean break.
Warrillow: It can't have been that easy….
Ferriss: It was up until the U.K. pound tanked against the value of the U.S. dollar. The acquiring group was based in London, and as the U.K. pound dropped, the price we agreed to in U.S. dollars kept going up. Right before the deal was to close, the pound took another major drop, and we had to renegotiate. I didn't want to reduce the price, so they agreed to pay me 50 percent up front, with the other 50 percent in the form of a promissory note that would become due on either of two conditions: six months' time elapsing from the closing date or a predetermined strike price of the pound to the U.S. dollar was reached. In the end, that gave the acquirers a little bit of currency protection, and we got the deal done.
Warrillow: What did you learn from the process of selling your company?
Ferriss: I had always assumed that my company was unsellable because the supplements were not protected by any patents—just trademarks and brand equity. What I had underestimated was how valuable the model and customers were. I had created a low-friction business that used capital efficiently and printed money, with a solid database of reliable customers as a cherry on top. That's what the acquirers bought.
Timothy Ferriss's upcoming book is called The 4-Hour Body: An Uncommon Guide to Rapid Fat Loss, Incredible Sex and Becoming Superhuman.