Andrew Warner and his brother were in their 20s when they burnt out and decided to sell their Internet company, Bradford & Reed, which made most of its money from selling advertising in online greetings cards. At one point theirs was the 19th most visited site on the Internet, generating more than $38 million in sales.
Now recovered from the exhaustion brought on by building that venture, Warner's latest project is a podcasting website called Mixergy.com, which serves as a can of Red Bull for 100,000+ new and would-be entrepreneurs who visit his site each month for start-up advice and inspiration from A-list entrepreneurs like Tim Ferriss of 4-Hour Workweek fame; Gary Vaynerchuk, the author of Crush It!; and Jimmy Wales, the founder of Wikipedia.
I spoke with Warner recently and asked him to share some of what he learned from building and selling a $38-million company.
1. Sell it in parts
Most business owners focus on selling their business in its entirety, but Warner and his brother decided to split Bradford & Reed up into a number of pieces. 'We were getting offers for chunks of our business, so we decided to break it up and sell just the piece each buyer wanted most.'
The brothers Warner ended up selling their database of customers to a publicly traded company and their greeting card business to a competitor.
2. Get out when the going is good
Timing your exit is tricky, and you never know when the economy will turn or exhaustion will set in. In Warner's case, both hit at about the same time: 'At our peak, we were 55 employees, and then the economy tanked. We dropped all the way down to 30 people, and I became exhausted. I promised myself that if we could turn things around, I would get out.'
Warner stabilized the business and sold its most valuable parts. After the deals closed, he gave away everything but his 'money, bike and books' and went on an extended trip to Europe and felt free for the first time in years.
'The best way I can describe the feeling of selling is liberation. At Bradford & Reed, I was responsible for everything: employees, clients, partners. . . I was even responsible for making sure our office didn't get robbed, that we had a security system in place. Once we sold the business, I felt this massive weight being lifted off my shoulders.'
3. Your competitor may be your best acquirer
In Warner's case, selling to a rival meant he could get out quickly: 'We sold the greeting card part of our business to a competitor because we knew they could take care of our customers. We basically got a little bit of money up-front, a percentage of sales in the future and a guarantee they would take good care of our customers. I was able to walk away 30 days after the deal closed.'
4. Take money out along the way
The entrepreneurial stereotype involves years of struggle followed by a one-time 'liquidity event,' where the entrepreneur sells his or her business and rides off into the sunset with a wheelbarrow full of cash. In Warner's case, he was methodical about pulling money out of the business each year in the form of dividends, and it paid off. He says, 'In total, we made more money from regularly pulling profits out of the company each year than we did in selling.'
You can listen to Andrew Warner interviewing fascinating entrepreneurs each week on mixergy.com.