So You Attracted An Offer...
The very best time to sell your business is when someone wants to buy it. Even though it may seem irresistible to continue to grow your business forever - particularly when things are going well - this decision comes with a number of risks.
Take a look at the story of Rand Fishkin, who joined his mother's marketing agency as a partner.
After realizing how difficult it was for his mom's customers to get their business listed on Google, Fishkin delved into the field of Search Engine Optimization (SEO).
His SEO consulting and software company grew out of a blog called SEO Moz. By 2007, Fishkin decided to focus solely on software and stopped consulting.
Growing by 100 percent per year, by 2010 Moz was generating around $650,000 in revenue each month, attracting Brian Halligan, co-founder of marketing software giant HubSpot.
HubSpot wanted to buy Moz for $25 million in cash and HubSpot stock - an offer almost five times as much as Moz's last financial year's revenue of $5.7 million.
It wasn't enough for Fishkin. He believed a SaaS company with rapid revenue growth would be worth four times as much by year's end and was certain Moz would reach $10 million by then.
Fishkin countered, saying he would accept $40 million. The HubSpot executive declined.
New Plans Instead
Rather than selling Moz, Fishkin raised venture capital and diversified away from SEO tools into a broader set of marketing tools. As Moz veered away from its core activity in SEO, his business began losing money.
In 2014, Moz was in full crisis mode, and Fishkin was suffering from depression. As a result, he decided to resign as CEO. The reason for his resignation is "lots of sadness, a heap of regrets, and a sprinkling of resentment."
The venture capitalists had preferred rights in a liquidity event, making Fishkin a minority shareholder.
A Difficult Lesson Learned
HubSpot has risen to nearly 20 times its initial value since turning down Halligan's offer.
According to Fishkin, his liquid net worth is $800,000 - money he is about to spend on elder care for his grandparents. He may or may not have value in the Moz stock after the venture capitalist gets their preferred return. Fishkin also estimated HubSpot's offer of $25 million in cash and HubSpot stock, based on the increased value of HubSpot's stock, would now be worth more than $100 million.
Fishkin's story serves as a cautionary tale about selling your company at the right moment.
Would you accept an offer for your business today?
Would you be ready to sell?
If you declined, would you regret it?
Thank you for your time & attention!
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