Ep 569 35 Employees, 4 PE Offers, and the Staff Reaction That Burned a Hole in His Soul

Have you ever considered how you would tell your employees you've sold your business? It's one of the conversations most founders fear. You hope your employees will be happy for you, but you also worry some will view you as a sellout.  Dr. Michael Filosi experienced the entire spectrum of reactions when he told his 35 employees he had sold his dental practice, the biggest in Adelaide, to private equity. While he had some congratulations, he also had one team member walk out saying "that's a bit disappointing," and another who wouldn't meet his eye for three days.

Lior Pozin started AutoDS to run his own eBay dropshipping stores. The software finds trending products to sell, tracks supplier price and stock changes, and fulfills orders automatically so a dropshipper never touches the inventory. He bootstrapped the company for eight years, keeping the bank balance at zero on purpose, and grew it to 200 employees and more than $20 million in annual recurring revenue. Along the way he turned down a $38 million private equity offer one day before signing, and still ended up selling to publicly traded Fiverr for roughly $55 million in cash plus a $36 million earnout.  In this episode of Built to Sell Radio, Lior walks through what made him kill the private equity deal, why he chose Fiverr over higher bids, and how the earnout changed the way he ran the business.

Jim Fitzgerald bootstrapped Taradel from a spare bedroom into a $30 million direct mail company. In 2016 he took the business to market, and the five buyers who made it to an indication of interest all offered roughly 4x EBITDA, about half of what Jim had in mind. He had spent years reinvesting every dollar in growth, and the market told him growth alone wasn't enough.  So Jim rebuilt his company around profit. He started pulling cash out of the business so it couldn't be poured back in, and built a leadership team that could operate without him. When he went back to market, 120 teasers produced nine indications of interest, seven management presentations in two days, and a low eight-figure sale, all cash.

Clean Energy Associates acted as the eyes and ears on the ground in China for solar and battery storage buyers, inspecting factories to make sure the products they ordered were built correctly before they shipped.  In 2016, a banker sat down with founder Andy Klump in Shanghai and asked him three questions. How would he triple his business in a short period of time? Who was on his executive team? Did any single customer account for more than 20% of revenue? Andy had no investment plan and no leadership team beyond one salesperson, and one client made up 40 to 50% of his sales. The banker's verdict was that the company wasn't sellable and there was nothing he could do to help.  Six years later, Intertek Group acquired Clean Energy Associates for $112 million, and the banker who had delivered that verdict ran the sale. In between, Andy survived six straight months of losses, heard from an executive coach that his team saw him as a micromanager, and went through five hires to find the right head of sales.

Zac Smith was a mechanical engineer who wanted more flexibility and upside than a corporate career could offer. He bought an existing CertaPro Painters franchise in North Carolina with three employees and under $1 million in revenue. He put down about 10% in cash and financed the rest with an SBA loan and a small seller note, backed by a personal guarantee.  Three years later, the company was on track for $3 million in revenue and $600,000 in profit. Smith sold it for $1.5 million, all cash at closing.

Adam Spector co-founded LiftIgniter in 2014, which used machine learning to personalize websites the way YouTube does. Growth stalled, and with no way to prove the company was causing the results customers saw, it could never charge what the work was worth. The board brought in a new CEO to sell, and when Adam argued to keep building he was outvoted two to one. It sold in 2018, mostly for its engineers, and he left soon after.  Like a lot of owners, he wanted to stay in the game. Keeping a hand in, backing people doing interesting work, staying near the part of the job he really enjoyed. For Adam that meant putting money into other people's startups. More than a decade in, that portfolio shows seven to eight times on paper. In cash, it is roughly break even.

Heath Adams bootstrapped TCM into a company with two revenue lines: hacking into companies' systems to expose vulnerabilities, and selling courses and certifications that trained others to do the same work. He owned every share, raised no outside capital, and never relied on outbound sales. Every lead came through a YouTube channel that grew to more than a million subscribers.  A competitor then raised $50 million and began matching TCM on price and quality. On the advice of a friend who had sold his own company, Heath started answering the acquisition emails he had been deleting for years. One became a letter of intent for more money than he had ever seen. Half of it was an earnout, so he turned it down, hired a sell side firm, and put the company in front of 300 buyers. Four wrote letters of intent. The one he signed was worth more than double what he had turned down. In this week's episode of Built to Sell Radio, you discover how to  Turn the acquisition emails you've been ignoring into free valuations and a rehearsal for diligence  Tell the difference between the money in an offer and the promise attached to it  Pass on the highest offer and pick the buyer instead  Build a walk away number backwards from the life you want to fund rather than a multiple of earnings  Hold diligence at arm's length so it does not paralyze the company you are selling 

Broadly speaking, there are two ways to build a company. Some entrepreneurs swing for the fences, spending decades building one big business. Others play for singles, building a series of smaller companies they can sell and repeat.  Stuart Faught has made a career of the second approach.  He has started and sold 20 software businesses, making him the number-one seller on Acquire.com. His model is deliberately small: build a simple tool for a niche of local businesses, grow it to $50K to $100K in annual recurring revenue, sell it for four to five times that, and move on to the next one. 

Garren Hilow bootstrapped Abveris, an antibody discovery business doing $12 million in revenue, and sold it in 2021 for $150 million up front with another $40 million available in an earnout. His team came within one percent of the revenue target. The acquirer said they had missed it, refused to share the accounting behind that conclusion, and dared him to sue.  Rob Walling sold Drip with 40 percent of his purchase price tied to an earnout and collected all but a fraction of it.  In this episode of Built to Sell Radio, John Warrillow puts the two founders side by side to work out what actually separated the two outcomes, and you discover how to negotiate an earnout you have a chance of collecting.  You'll learn:  Why a revenue-based earnout hands the acquirer the calculator, including the right to change how your revenue is recognized partway through the year  Walling's ranking of earnout milestones from worst to best, and the one type he tells founders to refuse outright  Why taking more cash at close makes an acquirer less likely to fight you over the back end  What a private equity buyer admitted over dinner about how often his firm plans to replace the founder  The reporting clause Hilow left out of his agreement, and what its absence cost him  How old Slack messages and a verbal instruction to work from home became grounds for a termination with cause  Why an acquirer who intends to fold your company into theirs should not be offering an earnout at all 

Dane Pan and his wife built Monet Brands to $1.3 million in revenue with two employees, selling a $24.99 skincare tool that cost them $6.10.  When they took the company to market in 2025, nine buyers cleared the proof-of-funds screen and four of them wrote an LOI. The best offer came in close to four times SDE with a holdback attached. Dane countered for all cash at close, watched two of his four offers disappear, and signed at 3.6