If you listened to Part 1 of The Exit this week, you already know the story about what happened. I had three companies approach me in the summer of 2018 to potentially acquire my first company, Bump Club and Beyond. I said no to two of them fast. The third one, I said yes to.
I want to use the space here today to tell you about the one question I didn’t ask before I signed the deal. It was the biggest mistake I made and the one that may be the most useful to you whether you’re selling or just building. It applies to all major business decisions.
The company who bought mine, and their representatives making the deal, told me everything I wanted to hear. They promised me I could run the business as usual, but they’d be giving me “rocket fuel” to scale it. This was to come in the form of resources. They also told me that my community would still be the top priority (they failed to tell me that everything would become a P&L sheet.)
I believed every word of it, because I wanted to believe it. And there was no one else in on the negotiation with me to tell me otherwise.
Here is what I didn’t do, and what I would do if I could go back to 2018 and give myself one piece of advice. Honestly, I’m going to say it and you’re going to think: “How dumb is she? That is so obvious.” And maybe you’re right. But I was so far in and I just wanted to sell it and be done.
Before you sign anything that changes who controls your business, find a founder that buyer has already acquired. Not a reference the buyer hands you, because that reference has been chosen for a reason. Find someone through your own network, through LinkedIn, through a mutual connection, and ask them one direct question. “Did the buyer do what they told you they would do?”
I didn’t do this. I had no idea, at the time, that it was even a step other founders took. I was too trusting and I admit that. They did their due diligence. I failed in that department to do mine. I trusted it all because they were saying all the right things and moving with the kind of urgency that made it feel real.
It took less than a year for me to understand what I could have learned had I made that simple call. tAfter I sold and I was in the fold of the new company, two acquired founders inside called me to tell me they had similar experiences.
The team that flew me around the country to make introductions to internal contacts who were supposed to grow my business, didn’t actually understand my business. I needed resources in email marketing, social media ads, and content creation. They were introducing me to teams at their retail agencies for Kroger.
Six months in, my team still didn’t have company computers. The woman who had led the acquisition, the one who actually understood what she was buying, left the company within months, replaced by someone with no experience in my industry. My biggest revenue relationship, the one that impacted my earn out, got taken from my team and given to someone internally. Despite my protests.
A single phone call to a founder who had already been through a deal with this company would have told me all of this was coming. It was only after the deal was signed that I found this out first hand. Buyers do not usually change their patterns from deal to deal. If they broke promises to the last founder they acquired, they will very likely break them to you too.
I want you to look at this advice beyond the scope of how it looks when you’re selling a business. Most of you reading this aren’t currently fielding acquisition offers, and that’s fine. The lesson though, applies to almost any big decision where someone else is asking you to trust them with something you built. This could be an investor or a partner, or a landlord if you are looking for a brick and mortar location. It could be an agency or a coach. Whoever it is, find someone who has already been on the other side of a deal with that person or entity, and ask them one direct question about whether the promises were followed through on.
It’s a quick call that most people skip because it feels awkward, or because they’re excited, or because they don’t want to slow down a deal that’s finally moving. I understand all three of those reasons. I felt all three of them myself. That doesn’t change my advice: Make the call.
I’m talking all about my exit in a two-part podcast episode this week. I’m also sharing what it looked like after I exited in a new four-part series right here called The Aftermath. The first part dropped last week. Part 2 drops this Thursday.
For today, here is your Quick Win. Before you say yes to anything that chnages the face of your business, or to w deal that could place real control in someone else’s hands, find someone who has already said yes to that same person or entity, and ask them if they followed through on the promises made and the contract signed. Make the call before you make the decision, not after.
If this was useful, forward it to a founder who’s about to make a big decision and needs to hear it before she does.
So much more coming your way this week,
Lindsay Pinchuk, Host + Founder of Dear FoundHer…
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