How do you master something you’ve never done before, like selling your business? First, it’s important to know that the skills used to start your business won’t be the ones used to sell it. This week on Succession Stories, Jeffrey Feldberg joins host, Laurie Barkman, to discuss maximum-value exits. Jeffrey and his partners founded Embanet, an e-learning company, and when time came to sell, they rejected a seven-figure offer. Two years later, they sold for nine figures. Jeffrey shares insight on this remarkable achievement and how having an excellent team of trusted advisors can help maximize your business value.
Listen in to learn more about:
- Finding product market fit
- How to approach partnerships for success
- Mastering the art and science of a liquidity event
- What to know before accepting unsolicited offers from buyers
- Preparing for a liquidity event
Show links:
Connect with the host, Laurie Barkman on SmallDotBig.com and sign-up for an insights newsletter to build value in your company.
Show Links:
About Succession Stories Podcast
Succession Stories is an award-winning podcast hosted by Laurie Barkman, The Business Transition Sherpa– guiding business owners from transition to transaction. From building value to letting go. Subscribe to Succession Stories and share a review if you enjoy the show!
Learn more at https://thebusinesstransitionsherpa.com
Book a 1:1 Advisory call at: www.meetlauriebarkman.com
_______________________________________
Become an Official Patron of Succession Stories Podcast:
https://www.patreon.com/lauriebarkman
Don’t leave your exit to chance.
Stony Hill Advisors works with owners like you to get ready and maximize value when you’re ready to sell.
Visit www.stonyhilladvisors.com/podcast for a complimentary business valuation.
Transcript
Intro:
How do you master something you’ve never done before, like selling your business? Entrepreneurs don’t start and build their companies on their own. And neither should they plan their business transition or exit strategy without trusted experts in their corner.
My guest, Jeffrey Feldberg is the Co-founder and CEO of Deep Wealth, a company that helps business owners learn how to prepare for a maximum-value exit.
Jeffrey founded and scaled an eLearning company, Embanet, with his partners and eventually sold the business. Incredibly, they rejected the first offer for seven figures, but ended up selling it two years later for nine figures.
I loved my discussion with Jeffrey on the story behind the story of this impressive accomplishment. Key to his success was understanding that the skills that he used to build his business were not the same skills to sell it. Having excellent advisors and preparing before a merger or acquisition also can help you increase the value. You have one chance, don’t gamble with your future. If you’re thinking about selling your company one day, you’ll want to take lots of notes. Enjoy this week’s Succession Stories with Jeffrey Feldberg.
Laurie Barkman:
Jeffrey Feldberg, welcome to Succession Stories. We met because of your show, which is a great show, the Deep Wealth Podcast, and I was so fortunate to be one of your guests, and encourage listeners to listen and check it out and learn so much more about you. We had a great conversation and it’s my honor to welcome you to the show today.
Jeffrey Feldberg:
Well, Laurie, thank you so much. It’s a pleasure, honor, delight to be here. Congratulations, you just celebrated your 100th episode a few episodes back, a big, big milestone, and it’s really an honor to be part of your community, so thank you.
Laurie Barkman:
Thank you. We’re gonna talk a lot about the successes that you’ve had as an entrepreneur and what you’re doing today to help other entrepreneurs, but I want to use the time machine and go back and talk about your background, because I think that’s a great place to start so often on my show, we ended up talking about the entrepreneurial gene, I’m convinced there is an entrepreneurial gene. I’m wondering what you think, in your experience, and your background? Did it start from a young age?
Jeffrey Feldberg:
Yeah, I was born an entrepreneur and I don’t know, I’m not going to, I may lose some friends, I may make some enemies with what I’m going to say, I do think you are born either you have it or you don’t and I mean, I was very fortunate.
My heroes growing up, my mentors, the people who really sculpted and molded me were both my father and his brother, my uncle, and in their own right two very successful entrepreneurs so as a young boy, I still remember as you and I talk about this, I’m smiling, because I remember I was six, maybe seven, and I would dream about the day I have my own business. I didn’t know what that was, I didn’t really know what does that mean, and what that’s going to look like, but I just had an inkling, “Okay, Jeffrey, you’re going to have your own business one day, you’re going to be a business owner,” and my dad would fuel the fire. I would work in his business and my dad passed away and unfortunately, we all miss him but he was a sucker for infomercials and he would see all these…there’s a Think and Grow Rich infomercial that came out and he bought me the book and got me hooked on that and all these different business things so he really fueled the fire for me, at a young age, to really begin to appreciate okay, what what’s business all about? And what does that mean? And how can I make a difference out there so for me, I was born into an entrepreneurial line of family and really growing up wanted to at least do as well, maybe even better if I could then what my family had done to that point.
I was really first generation, one and a half generations, my family was immigrants coming to the country and you’ve heard all the stories, I’m sure we hear them out there maybe even on your podcast or others, they came with nothing, but the clothes on their back and work the way through and that is really true with my family and so growing up and having that immigrant mentality, you got to prove yourself, you’ve got to work harder, you got to show everyone why you as opposed to someone else and not take anything for granted was really instilled in me day in day out.
Laurie Barkman:
What was the business that your father and your uncle were in, and did you want to work with them?
Jeffrey Feldberg:
Well, there were two separate businesses. My father was a pharmacist, and it’s interesting, my uncle didn’t go to university. He worked so my father could go to school and the two of them were very close. There’s a whole story behind the story, but my father was a pharmacist. He eventually had his own pharmacy and it wasn’t just a retail pharmacy, he serviced nursing homes and retirement homes. He joked with everyone he was a drug peddler, a drug pusher, he would have prescriptions go to the nursing homes and the retirement homes and my uncle in his own right and with his side of the family built up a very successful furniture business.
Truth be told, I was offered to go into my father’s business. Never really broached it with my uncle. I suspect, perhaps it would have been an opportunity there but in my mind, I didn’t want to do it because I said to myself, “Geoffrey, create your own opportunity. You’re either going to hang yourself by your own rope, or you’re going to climb out of the pit but whatever you do, it’ll be on you either way, and let’s just see what you can do.” I really wasn’t passionate about most of the things that I was doing at that time and I didn’t realize where my trajectory would take me.
I mean, pharmacy was great for my dad, it just wasn’t really for me and didn’t really turn the dial for me, but I was a geek growing up, I loved technology and if you gave me the choice, okay, you can geek out and Beyond Computers had just come out at the time, the Internet was nowhere near around. It didn’t exist. We’re talking when I was a teenager, it was in the early 80s, just to date myself a little bit and it was more like CompuServe, America Online, and I just loved going on those services and learning about technology but I also had a passion for education, and for helping people and didn’t really know at the time, where that would lead but thankfully, I played to my strengths, when I eventually went out there and ended up doing that. I knew if I didn’t do that, if I went into the family business, I would likely be bored, wouldn’t have a great outcome and you hear all those stories about family dynamics and family businesses. For some people that works. For me, it likely wouldn’t have.
Laurie Barkman:
Well, it’s good to know yourself and it’s good; number one thing is fit. I love when people can find something that they’re truly good at but then they also enjoy it. Isn’t that the best? As young people, it’s hard. We don’t really know until we’re older and we can look back and go, “Oh, why didn’t I do that sooner,” so there was something within you where you were interested in education, you were interested in technology, we’re giving the audience a little bit of a flash forward, we’re gonna get there in a moment where you build a company and long hard work, but eventually sold that business, so we’ll hold that thought for a moment. I want to talk about the things that you started in between where maybe they weren’t the home run, you didn’t sell those other businesses for nine figures like you did your education business. Let’s talk about the businesses that got you there along the way, especially if they didn’t make it. I’m really interested to hear what you’ve learned on that journey.
Jeffrey Feldberg:
For sure, and Laurie, let’s get one thing straight, I have made more mistakes and have had successes. This is not a story that Jeffrey just woke up and threw his hat in the ring and was successful from start to finish. As I jokingly say, if I could get paid even $1 for every mistake that I made, I wouldn’t have needed my liquidity event, I would have been well ahead of that for all the mistakes that I made.
Growing up being entrepreneurial, one of the first things that I got into outside of working at my father’s pharmacy and doing the deliveries with them and just getting a sense of the business and doing the banking with them on the weekends for the business, I got into a multi-level marketing opportunity. I was selling water purifiers and looking back, God bless my family, because they tolerated me and my neighbors but I look back now and I didn’t realize that at the time, Laurie, I was terrible. I mean, I would get up, I would do these presentations and I was nervous and I was sweating and I remember this one presentation in particular I was reading the next door neighbor and I’m presenting to the husband and one of his kids is there and the kid says to dad, “Hey Dad, why is water coming down from Jeffrey’s face? Is the water purifier not working? What’s happening? It was just a disaster with that.
Again, presentation wasn’t natural for me. In the beginning, I had the inkling that I wanted to be in business, but I stuck with that and I did okay on the multilevel marketing side and did that throughout high school but again, that immigrant mentality and that whole background was, “Jeffrey focus on school and we’ll make sure that you’re not going to lack for anything.” My family was, in the beginning, lower middle class. I didn’t want for anything, but didn’t really know any better at the time.
Anyways, life was just great growing up and eventually as my dad’s business when I was later on in my late teenage years and young adult, he became more successful and the family moved up status wise, but growing up they provided for what I needed and then when I was in university, the multilevel marketing gave way to a video production company, and so mitzvahs, Bat Mitzvahs, weddings. My dad even got us a corporate gig with a pharmacy company who was launching a new product and doing that and just now really being out there. Again, there’s the technology part and helping the people and just putting together these beautiful narratives and stories of the events and the recaps and just seeing the joy on people’s faces when they got the finished product and that’s what happened throughout university particularly in undergrad.
Laurie Barkman:
You developed sales skills, which is not easy, and I love the story about you sweating with this water purifier. It’s a funny image but good for you for trying in high school even. That’s not easy. Most kids are just trying to get through high school with their lockers in there and the angst but you were learning selling skills and you were making customer connections through the video production business. Did you end up closing those eventually and saying, “This isn’t for me. I want to try something different.” That’s when you got your masters?
Jeffrey Feldberg:
Well, yeah, I mean, for me, it was never a choice, really. I was just brainwashed. It was, “Okay, Jeffrey, you’re gonna go to school, you’re gonna go to university,” and when I was part way through university, “Okay, Jeffrey, you’re gonna now specialize, think of something that you want to do.”
I’ll share a little secret with everyone. I had to work hard at school. I did well in school, but it wasn’t easy for me and so I applied to go both into an MBA program and also to become a lawyer and those standardized tests, the GMAT and the LSAT? Oh, my goodness, wow, they just steamrolled me and I remember, I got a call from the law school, and I must have been at the bottom of the list. After they went through everyone that they wanted, and they still had a space or two, they called me and they said, “Okay, we have to know right now, do you want to come to law school or not?” I had also applied to my MBA program, and I hadn’t heard back and so I had to make it at that point.
Looking back, it was a life changing decision. I had no idea at the time so while I’m still waiting here about going to share their options, you really have to know, “Can I think about it? No, we have to know right now,” and so I just didn’t feel right and that will be a recurring theme as we go through this. I said, “You know what, I’m just going to take a pass, it doesn’t feel right. Thank you for the opportunity. I wish you all the very best.” That prompted me to call the Director of Admissions at the MBA program and I remember calling up and here’s where the multilevel marketing and the presentations came into play a little bit. I said, “You know what? I don’t think no news is good news. I haven’t heard from you so I suspect either you’ve rejected me and I haven’t heard back yet. Or you’re thinking about me, and who knows where that’s gonna go. So if you’re gonna tell me no, tell you what, let me come meet you in person. Look me in the eye and if at that point, you want to tell me no, terrific. No offense taken, at least we both know. What do you say?” And I was told, “Okay, Jeffrey, come on, in, let’s meet,” and we had that meeting and it was that fire in the belly, that I suspect, the Director of Admissions saw, that eventually led me getting an offer into the MBA program. I was young, I was only 23 at the time so what really made the difference was the entrepreneurial experience. He said, “Look, we see you have some businesses that you’ve done, outside of school, you don’t really have the work experience that some of the other people, your other colleagues would have but there’s a fire in your belly. Let’s see what you can do,” and I took that opportunity.
Laurie Barkman:
You really learned a valuable lesson and I’m glad you shared that.So many 23 year olds would probably say, “Oh, I haven’t heard back, I’m going to just continue on my way,” but you circled back and you had that internal fortitude to get the ‘no’. Some of us so often fear the ‘no’, but we shouldn’t, we should just go for it and you got the ‘Yes’, which is awesome. Let’s flash forward, you decided to start a company and at the time, this would have been what kind of the mid 90s when the internet was a thing and businesses were starting but we certainly hadn’t got to the level of technology we have today but you created a technology based education platform. Tell me about that.
Jeffrey Feldberg:
Well, the company Embanet, as it later became known actually is tied to the MBA and that’s where those life changing decisions that we make when we’re really so young, or we just make in life that we don’t even realize where it’s going to take us. I started my MBA program and by the way, for those that are watching this, you can see I had a whole lot more hair and if this is audio, you won’t see a lot of hair with me, but I had a whole lot more hair going into my MBA and I just lost it – the hair – and I was stressed. In my MBA program in particular, there was a lot of group work and so my group, we were meeting before class, during classes, obviously after class, on the weekends on the weeknights on the weekend nights. We were just meeting all the time. We were doing terrible. We were bickering with each other, people were dropping out of the program and it was a terrible experience.
It was a terrible experience and I said, “I can’t take two years of this. There’s got to be a better way,” and so that’s where the inner geek in me said, “Okay, Jeffrey, figure this out. Let’s do some kind of technology,” and so I created a system for my own group and we went from the worst group to the best group in no time flat and I kind of felt guilty for my classmates so I approached my strategy professor at the time and I said, “Hey, you know, let me show you what we’ve been doing in our group. This is what really has given us back our time, we’re enjoying the program, we’re getting better grades,” and really thanks to him, he loved it. He says,”Jeffrey, I want you to introduce this to your entire class and you’ll do it in my class when we all get together,” so I introduced it and it was a little system that was running out of my bedroom. It was a dial up modem, it was running on a Mac, it was a dial up modem and my year, the first years started to use it, word spread, second years started to use it, Executive MBAs started to use it, faculty started to use it.
The dean called me in his office and said, “Hey, what’s going on, you have this renegade system that I hear is changing the face of education in the school. How can we work with each other because this is a good thing for the school?” Again, taking lemons and making lemonade.
At the time in my MBA program. It was terrible on the technology side, it was old dilapidated technology. This is back when you had computer labs and everything and it just wasn’t happening. That gave me the opportunity to be able to put something together and so as crazy as it sounds, acres of diamonds right below your feet, I had no idea what I was going to do heading into graduation and the second year of the program and it wasn’t until the week of graduation, I said, “You know, Jeffrey, if you do this for your MBA program, I bet other MBA programs probably have a similar kind of problem that you can help them with.” That’s where Embanet–electronic MBA network–that’s where it initially started and so that was the beginning of the e-learning company and there’s really two different chapters for the e-learning company.
Chapter one, hosting Technical Support course development and we did that better and faster than what the internal IT departments could do and I hadn’t heard of online learning or distance education, as was called back in the day, kind of stumbled into that. I remember one of my business profs always said, “Jeffrey, give me the choice of being lucky or smart. I’d rather be lucky than smart,” and so I was lucky. We stumbled upon this whole distance education, actually our first client, Colorado State University, the Business School was doing videotapes and they said, “We have this terrible retention problem, can you help us with it?” And we did and they became more profitable and we said, “Wow, there’s a whole new world out here, not just with business programs, but with distance education,” and what we now call e-learning programs, “and we’re one of the early ones,” and that’s how we got into that.
The second chapter was really, again, going back to what is an entrepreneur, what is a business owner? Well, we go out, we find painful, painful problems that we’re passionate to solve and we’re world class at it and so the same client, Colorado State University, I was having a call with them and my favorite question was, “Hey, what keeps you up at night?” “Well, Jeffrey, funny you should mention that. I’m having a board meeting.” This was the Associate Dean, John Clark, “I’m having a board meeting,” and John said, “I’ve got to go in front of my board and tell them that enrollments are down and we got this video conferencing coming in, my competitors are setting up in town and you got this crazy thing called the internet, I don’t know where this thing is going to head. Can you help me fill the seats?” “So John, give me two weeks?” Wow, was I fooling myself two weeks into two years? But going down that rabbit hole of, how do you feel the seats, that was a market inflection point, because at that time, I knew things were going well, but I knew if we didn’t change, they wouldn’t go well. Technology was becoming more accessible, it was becoming easier and if we didn’t change and find the next big problem, we’d be put out of business. If you’re going to go out of business, put yourself out of business, so you can put yourself into a bigger business and the second chapter of Embanet, that’s exactly what it did, where we now filled the seats and then kept the seats filled.
Laurie Barkman:
You filled the seats because of marketing programs that you would help the client run or you did that because of other things?
Jeffrey Feldberg:
No, so going into a little bit more detail, what we ended up doing was we ended up not just filling the seats. We did the marketing, but we did something that people said was impossible and for everyone listening out there, I’m just a big believer as entrepreneurs, impossible to an entrepreneur is spelled I’m possible and so what we did was, it took us two years to figure this out so it didn’t happen overnight and it sounds easy. Looking back, it’s so obvious, it really wasn’t at the time. I mean, first we tried certificate programs, and then community college and then undergrad, and eventually we landed on graduate programs.
We would go to the President of the University and say, “Tell you what? We’re gonna pay for all the marketing. Here’s who we are, we’re the golden child in the industry, we’re going to fill your seats, it’s going to be on our nickel won’t cost you a dime, we’ll pay for your faculty, you will own all your IP and you know what? The first learner in the seat, you’re already profitable. But it’s going to take us many, many years to recoup that investment and let’s do a revenue share, where we’ll split the revenue and it’ll end up, over a period of time, equalizing out,” and everyone said, Jeffrey, “Come on. No University worth its salt is going to sign an exclusive long term agreement, where they’re doing a very high percentage of revenue share.”
But what ended up happening was, we painted the narrative, everyone got excited and when they looked internally, they realized they had nothing to lose because, left to their own devices, they knew where they were heading, but why not try this new thing and see where it’s going and it worked wonders. Boston University was first and then George Washington University, Vanderbilt University and we started to really get out there with Tier One institutions to make a difference and as I like to say, back then, and we take this philosophy, even through today, with what we do, we were changing the social fabric of society, one e-learner at a time, from a single mother, to a high ranking government official to someone who’s in law enforcement to a fortune 10, 100, 500 CEO, giving them the tools to make better decisions for themselves, for their community, for the people in our lives and it really made a difference.
Laurie Barkman:
You talked about pain points. That is so important. A lot of times, especially with technology, we have this great tech, we want to put it out there, we want to make sure that the world knows how great our technology is, but we don’t focus enough on what pain point it’s solving. It’s the classic with the quarter inch hole versus the quarter inch drill bit, what do you really need, you don’t want the drill but you want the hole and you talked about pain points a lot from the inception, where you were the student and you were having problems, and then your fellow students and they improve another team and then it went on and on and on. I loved how you really took that, embraced that as a company and listened to your customers and tried to be nimble with what you saw the market needing that is critical. At what point did you find that what we call the product market fit? Was it five years down the road two years down the road? How long did it take?
Jeffrey Feldberg:
We had those two chapters in Embanet and for everyone listening, at least in my case, when it comes to projections, my adage is typically take your revenues and cut them in half, take your expenses and do a 2x or 3x and that’s probably where you’re going to end up. The first chapter of Embanet, Embanet One as I like to say, really took us close to five years, between three and five years to really turn a corner three years, we started to turn a corner but not until five years where we really hit our stride. Then for Embanet Two, it was a good two years and again, this is now coming at it with experience. We had a team, we had a reputation, we had a system but it still took us a good two plus years watching our life savings dwindled down, month over month and having the losses creep up and jeez, if we make the right decision, is this going to work out? But it does take time to figure it out.
Laurie Barkman:
Did you take on any partners or were you the sole owner? Did you have any venture money?
Jeffrey Feldberg:
The company was bootstrapped. I’m a big believer in cockroach startups and that whole mentality and being bootstrapped and I was incredibly blessed I had and have two business partners that really made the difference all the way through and we were the perfect trifecta. We just complimented each other where one was weak, the other was strong and we just had different archetypes that played off of each other that really made it work.
Laurie Barkman:
When you say that one cockroach startup, what’s a cockroach startup?
Jeffrey Feldberg:
A cockroach startup was whatever it was, and it’s what most companies are who choose to bootstrap and so why a cockroach startup that term, which I didn’t invent, but it it refers to a cockroach, which yes, it’s ugly, and not the prettiest thing to be talking about but cockroaches are virtually indestructible. You can cut off its head, it’ll still live a week, it’ll survive. We’re told a nuclear kind of attack and it doesn’t need a lot of food and it’s just been around for a gazillion years. So if you take that kind of adage to live another day, and just to be around, so a cockroach startup mindset is where you’re bootstrapping yourself but everything is singularly focused on how do we live another day? How do we get real paying customers and actual profits, unlike what you hear with, back in the day, venture capital or what we now call private equity, where it’s a very different game.
Laurie Barkman:
Gotcha, and when you talk about the business partners, I’ve had a couple folks come on the show and we talked about what made a successful partnership or what made it challenging. You talked about a successful three way trifecta. One of the things you mentioned as to why is the complementary skills. What were some other things, maybe from lessons learned, if someone’s thinking about having a partner, and they’re listening, and they’re wondering, oh, what else did they do to help make that work? Was it 33% and everybody had 33%, and it was really split evenly or how did you think about the governance side of things, too?
Jeffrey Feldberg:
Sure. It started with myself and my then girlfriend at the time, who later became my wife. It started with the two of us and then we met at a trade show, Steve Wells, and we were talking back and forth with Steve Wells, and before we decided to work with Wells, we said to Steve, “Hey, Steve, you know, we’re going to be in town,” he lives just outside Orlando, “We’re going to be in town at a conference. Let’s meet your wife, Christy, why don’t we have dinner, break some bread and see what goes on,” and we wanted to meet Christy because I knew that if we liked Christie and Christie liked us things were going to work but if that wasn’t the case, we were doomed for failure. We had a wonderful chemistry but really what made the partnership work, it goes back to everyone had integrity and we were honest, and we had each other’s back and there was no misintention, there was no selfishness, it was really all about helping each other and I was blessed. This was really my first partnership and it really jaded me in the best of ways, but also in the worst of ways, because when I’ve gone into other partnerships, outside of that, when I thought, oh, all partnerships are like this, and boy, was I wrong and when I thought everyone’s going to be like another sea of whales or another Alaska. I know that that wasn’t the case and I got into problems with that so it really goes, you can have all the agreements that you want, and all the papers and everything else, but if the people component side, if it’s not a good person, at the start, it doesn’t matter what happens afterwards is not going to have a good ending.
Laurie Barkman:
You seem to be a person that has a strong intuition. You’ve used phrases about it feeling right, you’ve used the word intuition in this conversation so yes, it was a little bit of luck but you certainly had an intuition about your wife, your life partner, and your other, and your business partner and so that’s, that’s important. Some people have that leap of faith mentality, “I’ll just jump in and see where it goes,” and so you did from there. Let’s flash forward, then. Let’s say okay, you know, Embanet One & Embanet Two, we’re talking, seven, eight years now. At what point did you have thoughts about selling? Were you getting little blue birds flying by and knocking on your door saying, “Hey, we’re interested in acquiring you?” Or was it something amongst the partners where you all were just getting ready for a change, you wanted to do something different in your life?
Jeffrey Feldberg:
That’s where a great partnership comes in and it’s really Wells who said, “You know, what, guys, I’m a little bit further on this journey than you are and I’m just kind of looking down the road and, you know, maybe at one point, we should talk about selling the company,” and I’m glad he did that, because left to my own devices, I probably would have just… my persistence and we’re going to make this work no matter what, and keep it going. I probably would have just ridden the company as far as I could, and I don’t know. I don’t think that would have been such a good thing on a go-forward basis. To the spirit of the partnership, where we always looked out for each other and said, “Okay, you know, one of us feels this way, so we’re not going to ignore it just because I don’t necessarily feel that way. Let’s look to explore that,” and so that began the whole journey and right around that time, we also got an unsolicited offer and there’s a whole story behind the story on that and that’s that’s really what began the journey not just for the liquidity event, but that also I didn’t know what at the time was setting up the next chapter after Embanet with deep wealth when we had this unsolicited offer from a very experienced successful buyer Fortune 10 company didn’t know it at the time, it was the proverbial wolf in sheep’s clothing, knocking at the door with a seven figure offer everyone who knew about it. “Hey, guys, that’s terrific.” He made it, “Look what you can do,” but again, Laurie, to your point, it didn’t feel right to and we said no, and thank goodness, we said no, because there was so much more that was waiting for us that we didn’t know at that time.
Laurie Barkman:
I want to talk about timing because I am just so curious, so when Steve said, “Hey, let’s talk about selling the company,” was it around that seven, eight year period after launch?
Jeffrey Feldberg:
Well, Steve came into the picture… would have been around four or five years afterwards so it’s a little bit of different timing but the company was sold in the 13th year of operation and so we had begun speaking about this in and around the 9-10 year mark.
Laurie Barkman:
Okay. Gotcha. Yeah, that sounds just trying to understand, so when you when you launched that company, I guess if you think all the way back, did you begin with the end in mind, did you think you wanted to build, John Warrillow, his book Built to Sell talks about so many entrepreneurs do this, where they have the intent, and the intention, but there’s a lot of entrepreneurs that don’t they just get the company off the ground, and then just see what happens. Many people who may be part of your, and we’ll talk about deep wealth and your education company in a moment, but some people wait to the last year of maybe even their work their work life or their end of life, they just wait, wait, wait, and they think there’s going to be some transition? Maybe it happens, maybe it doesn’t, you guys had some foresight here? Did you always know that it was the intention to sell when you decide, “Hey, I’m gonna run this thing till I’m ready to retire.”
Jeffrey Feldberg:
Yeah, I’ll share a little secret with you, just between us, no one else is listening. Whenever that was started, I had no big plans or dreams that this is going to become some huge company, just hey, can I just start a company that I really liked that I can make a difference, that can create a great lifestyle, after not before, after I’ve helped enough people to get that lifestyle, that that’s really what I wanted and let’s see where that goes so I didn’t start out in business and this is going to be a monster of a business that’s going to do this. In the early days, I would say to myself, “Okay, let’s just get to 10,000 students, 10,000 learners,” as we got closer to 10,000 learners, that the number kept on changing and me that would go on to do millions of enrollments but in the beginning, that’s really where it was. Again, that’s where partnerships are tough and generally speaking, I don’t recommend them to most people, which may sound like I’m talking out of both sides of my mouth but partnerships are really hard to do. I’ve been in terrific partnerships, I’ve been in lousy partnerships and they’re easier said than done. If you’re in a good partnership, consider yourself fortunate, count your blessings. It was really because of the partnership, Laurie that we started to go down the let’s explore the whole sell your business side and see Wells gets a full credit for putting it on onto the radar screen. For myself, it probably would have been, ‘let’s just run this company and will continue to change and evolve’ because that’s an example I had from my father and my uncle who had done that and that was really the model in my mind of what I thought I’d be doing.
Laurie Barkman:
When this unsolicited offer came your way, was that roughly around year 10?
Jeffrey Feldberg:
It was around, yes, it was around your nine or ten, somewhere in and around there.
Laurie Barkman:
That’s exciting, because you probably don’t know what the number is right here. They put a number in front of you and you’ve said that I think you’ve said even just now and also in other episodes, I’ve listened to you talk about your experience. It was a seven figure offer, which is not shabby. It’s pretty, it’s a good number. For those of us that think, “Oh, wow, there’s a lot of zeros there. That’s a good number,” how did you know that wasn’t your number?
Jeffrey Feldberg:
I’m gonna drive some of your community members nuts because what I’m going to share doesn’t show up in the spreadsheet. I didn’t take the numbers and run it and put into all these formulas, “Oh, this is a terrible deal.” It was just a gut feel. I don’t know what it is. I can’t tell you exactly. “It just doesn’t feel right to me. Let’s not do it,” and so it was an instinct to call it the universe. Some people call it God, some people just call it a gut feel. To me, it just felt off.
Laurie Barkman:
You didn’t have any advisors saying, “Hey, we ran a professional valuation for you and your EBITDA multiplier is this and they’re using this,” and you had the math behind it, there was truly just intuition?
Jeffrey Feldberg:
Laurie, we were just so inexperienced at that time as successful as company were, we were inexperienced, the potential buyer knew that saw that, he best thing we could have done would have been to hire someone like yourself and get professional representation and you would have gone right away, “Jeffrey, why are you wasting your time with this? Let’s forget it. You know, let me work my magic. I’ll put together a competitive bid for you and we’ll really see what the company can do. But let me help you along the way to do a few things before you get there,” but no, so it was just ourselves dealing with this one buyer and if someone else out there, unsolicited offers are the worst thing that can happen, they’re not the best thing and there’s a reason that buyers love unsolicited offers.
Laurie Barkman:
They, people, like to get proprietary…sometimes it’s hard. It’s hard. I think if we take an objective on both sides, sometimes it can be a win because they don’t have the time or energy to run a process themselves but let’s talk about let’s talk about your process. You said no to the unsolicited offer, a couple years go by, and then what’s happening? What did you do in those years in between, to prepare the company to sell?
Jeffrey Feldberg:
What’s interesting about the entrepreneurial journey is if we do it, we can take what some people would say is your biggest loss, and turn that into your biggest win so when we said no to the seven figure offer, we said yes to mastering the art and science of a liquidity event and we learned a lot, we learned a lot about where our company wasn’t. Because we saw what the buyer saw, we saw all the shortcomings.
Now in our mind, we knew what the company could do, we just didn’t have the right way of sharing that narrative or being able to show the results and so we reverse engineer the process and we said, “Okay, based on what the buyer went through, based on all as we now call them, today, a deep all the skeletons in the closet that the buyer was only too happy to put in our faces. Let’s deal with those. And let’s find all the other ones that weren’t found. And let’s knock them off one by one by one. But let’s also speak to other people who have good intentions who don’t want to pick up the company for a song and a dance, that can give us some good guidance.”
We literally as the proverbial saying goes with the phoenix rising out of the ashes. That was us the ashes of saying no to a seven figure deal. Some people thought we were nuts, and we should have done it. We learned from that and we spoke to other people in the M&A world, buyers, sellers, investment bankers, M&A, lawyers, strategists, you name it, and people who won big people who lost big and we began to put together a playbook or best practices, what we now call the default nine step roadmap and we then put that to the test and we tested it on ourselves as a company. What was amazing was preparing for a liquidity event, the same strategies helped our company grow and become more resilient and become that much better so we’ve still made lots of mistakes along the way, don’t get me wrong, lots of mistakes, but when we showed up this time, to competitive bid, and we picked the right investment banker, at the time, and went to the whole thing, it was a different company, and you would not have recognized one to the other, but we could not have got there. Unless we had the so-called failure, saying no to the seven figure offer.
Laurie Barkman:
That’s very consistent with what I talk a lot about on the show with other entrepreneurs who have been through a process, whether it’s a success or a failure, you can kind of see that, that end that end in mind, where the process of making your company ready to sell makes it a better company and it’s just it makes good economic sense to why not work on the skeletons in the closet, if it’s for and you can maybe share a few examples, whether it’s on the financial side, whether it’s in competitive marketplace, whether it’s processes, the team, there’s no short list, there’s an infinite number of things that could be what were the things that you found Jeffrey where, if you recall, maybe the categories or some specific examples?
Jeffrey Feldberg:
Of what made the difference?
Laurie Barkman:
Yeah, where you worked on those skeletons? What were some of those skeletons?
Jeffrey Feldberg:
For sure and just a quick side note for all the listeners, because it’s worth mentioning, and I’ll talk about the things that made the difference, but Laurie, you’re incredibly modest, I’ll just, throw this out there for everyone listening. As business owners and speaking we’re all business owners on this call, and everyone who’s listening from one set of business owners to another set of business owners, you cannot master, we cannot master something that we’ve never done before. For most business owners selling a business, that’s really something foreign to us. The skills that built our business are not the same skills to sell it. Laurie, you know that and I know that but some people may not know that and so one of the biggest takeaways was to surround myself with the best the world class, absolute best advisors lawyer didn’t know you at the time, I probably should have, you would have made that much more of a difference for me back in the day but for all the listeners, if you’re thinking about selling your company, get Laurie on board and have her help you prepare and then do the whole process and the competitive bid.
You have one chance, don’t gamble with your future and you want to stack the odds in your favor. You don’t want to level the playing field, you want to tilt the playing field and so that was one thing, Laurie, was surrounding ourselves with really world class people who had the experience, I had the pedigree, to have the track record to be able to help us we didn’t have that skill set, we relied on them for that. The other big thing, and this is where a lot of business owners find themselves, the business doesn’t run without them and I don’t care if you’re a 20 person company, and you don’t have a management team, or you’re a 200 person company, and you do have a management team. Oftentimes, nothing happens without the owner and that’s a big, big impediment because buyers want to do two things, they want to, first and foremost, minimize risk and when they minimize risk, and only when they minimize risk, they’re going to maximize return on investment and they’re really mutually exclusive so when the business doesn’t run without the business owner, so there’s no management team that’s independent, that’s a big red flag, and one or two things will happen, there won’t be a deal, or the value or the enterprise value, as we like to say, it just gets penalized, and it goes down, down, down.
That’d be another example and we’ll round it out with a third one. In deep wealth in our nine step roadmap, we call these X factors that insanely increase the value of your business so what’s an X factor? An X Factor is an area that a business is world class, but the challenge is, so for starters, most businesses have two to 3x factors, if not more, but the challenge is that most business owners say, “I’m the same as the competition, we all do the same thing. There’s really not that big of a deal or difference.” Stop that thinking it’s completely wrong, and no judgments here but really look within every company is unique. You have your own world class set of things that you’re wonderful in. Your future buyer knows your X factors, may not know all of them, which I’ll get to in a moment but they’re not going to tell you the X factors that they know. Because if they do, guess what? They’re paying more and so it’s like you’re going to buy a home.
Laurie, if I’m walking through your house, and it’s up for sale am I going to tell you, “Laurie, my goodness, this looks like the cover of a magazine and your furniture is terrific and your lawn and layout, I wouldn’t change a thing. This is my dream home?” Well, if I tell it to you, in your mind, you said, “Okay, Jeffrey, pay up. I got one here. I got one here . There goes my I’m going to exceed my asking.” Or Laurie, and we’re more likely to tell you, “Oh, yeah, it’s a nice house but there’s some issues with it here, I really got to think about this and looking at a few other houses that I think we might meet a little bit better so I don’t know, let’s see where that goes.” Same thing with a buyer but when you tell your buyer that you know what your X factors are, number one, the gig is up, they know that you know, but you may also share with them X factors that they never realized and those X factors you can demonstrate you can show and tell why those X factors are going to solve a buyers problem.
The more of a problem that you can solve, the more you’re worth to that buyer, then they get excited. Again, for all of you logical people out there, all your numbers, people out there are gonna frustrate you. My experience is people make decisions, even buying a company for hundreds of millions of dollars. They make it on emotion first, and they will justify it with logic later. And just take my word for that or don’t that’s been my experience. When you get your buyer excited through your X factors. Another thing we call Rembrandt’s or other areas as you know a lot of them are X factors as well but when you can get a buyer excited through your narrative and through how you position your facts and your data with your X factors, and you’re in a competitive process, and you have someone like Laurie who’s leading the charge, that’s where things really make the difference and that’s where you’re getting top dollar.
Laurie Barkman:
That’s awesome. I love how you are helping us understand how to look at the business with the eyes of the buyer. A business that’s not transferable is viewed as more risky, which then more risk means less lower price, right, a discount applied to the price so whether it’s asking, as you said with the house, how often are we going to get I guess it depends on the market supply demand. If we have a really niche it’s a well run company that teams in place all these X factors are there, plus a plus others. Yeah, we should get top dollar and the emotional side is really interesting because so many times this is a fact based type of thing but I’ve been in some conversations where it’s a privately held company buying another privately held maybe their family businesses and seeing the generation two talking to generation one across the table and what it’s meant to them and what their family business means to their company. There is something special about that. Now and your situation. I’m thinking ahead here because the nine figure exit was probably to a publicly traded company if I’m going to guess. Was that correct that you sold to a public company?
Jeffrey Feldberg:
Close, it was actually two private equity firms that one firm, smart or they’re all smart but in particular, this one firm figured out who the competition was and they said, “Hey, why let’s not beat up each other, let’s just join together and you know, something if something’s better than something of nothing,” and so it was to a private equity firms that ended up buying Embanet..
Laurie Barkman:
Gotcha and then they did a roll up, or they were just kind of buying a couple of firms where you’re the only investment in this space?
Jeffrey Feldberg:
We were the first platform, then they did another acquisition and very proud to say they did very, very well, where they then sold the company, and say, five to seven years later, and just did some remarkable things and the company continues to run and do incredible things.
Laurie Barkman:
That’s also something we talked about on this show, which is really educational, some people have an understanding of a strategic buyer, and others have an understanding of this financial buyer here, you’ve got exposure to both in the story. A financial buyer, like a private equity group, with an exit in five to seven years that is very common to hear that timeline, and sometimes we’ll use the phrase that they get us, as the entrepreneur, when you sell to a PE group, if you stay on, and then they are doing a roll up and they have a second exit exit, you get a second bite at the apple. Did you have that benefit that you had a second bite at the apple?
Jeffrey Feldberg:
We retained a very small percentage of the company, it was a little bit of the icing on the cake, you know, for us so there was something that wasn’t a big part but there was a small part that was sold there when they eventually sold.
Laurie Barkman:
When you were doing the deal, deal’s done, and now day one, okay, are you now an employee of the company? Or are you a consultant? Did you have an urn out what what was after the transaction what happened?
Jeffrey Feldberg:
We were adamant in the system that we created that we now bring to market to help prepare business owners for their own liquidity event. We banish the word earnouts. We don’t even… it’s not even in our vocabulary, it’s the E word. We don’t even know what that is and because we had clarity, and we had our deal points that are no fly zones, we were very clear upfront with all of our advisors, “There will be no E word. If there’s even an E word in the letter of intent, that is off the table, we’re not looking at it,” and so in the competitive process, all the buyers knew, “Hey, don’t put an earnout in there, because it’s not going to get you anywhere,” so if you’re going to do the deal here, you’re going to have to work around that and the service ones complied with that and it was a terrific experience and off we went with that.
We were very transparent the whole way through when we. My goodness, there’s hundreds of people or buyers that were circling in and looking and the number of letters of intent that we received were way up there but when we narrowed it down to the top three or five within researched each of the top contenders and what we found for that one of the top contenders was they did a bait and switch and so before we even went to any next level and discussions, this is where we want to revise and say, “Look, here’s what we’ve heard about this particular group, please tell them, there won’t be a bait and switch because if they do that the deal’s off, and we’ll just go. If we choose to speak with them, we’ll then go to the next person so the number that we’re seeing here, please check with them that this is the actual number because unless there’s some kind of material change, this is what’s going to say when all of a sudden it’s done,” and so just being very upfront, like that doing your homework, being prepared really made a difference.
Laurie Barkman:
Can you elaborate on that? What does that mean, you talked to another firm and you heard of their challenges, or you picked up on something? What was the bait and switch you’re referring to?
Jeffrey Feldberg:
Let’s just say it was buyer A, so buyer A was notorious in the letter of intent for saying, “I’m going to pay you X dollars,” and they made it a high number and then they were selected and then they’re going through the diligence process and then part way through diligence, “Oh, by the way, I know we said X but the number is really X minus Y because here’s what we found in diligence,” and it was really not quite that case and that was really their intent from the beginning.
Laurie Barkman:
How did you know that? That’s from the word of mouth kind of back channeling that?
Jeffrey Feldberg:
Back channeling, speaking to people where deals had failed where deals had gone on speaking to people who knew the group, just asking everyone and anyone. Today it’d be so much easier because again, this is in the mid 2000s 2007. To be precise the internet was there but it wasn’t quite where it is today and so it was a lot of back channels and phone calls.
Laurie Barkman:
Gotcha. Yeah, I think sometimes I’ve heard the word retraining with a retrain, the deal which can feel awful when you’re on the other side of the table so what we’re talking about, I guess we should probably clarify for the audience, in case they’re not familiar, is sometimes referred to as an auction process where the organizer of the process and your case, the investment banker, is inviting companies to participate in a defined timeframe and defined process so maybe we just give a little bit of color, what was it that an interested buyer needed to do?
Jeffrey Feldberg:
The interested buyer, what they needed to do was they got the sim the confidential information memorandum and all of that they signed a nondisclosure, which, by the way, isn’t worth its weight on paper, unless you’re prepared to defend it. A quick story, Steve was flying back to Orlando, and he’s in the airport, at the gate waiting to board the plane, and he can’t help it overhear the two other gentlemen behind them, and they’re talking about our deal, and all the details, and they weren’t a part of the process and so someone had spoken to someone, so you just got to know that going in and for us, we didn’t focus on that. Legals and lawyers and courts and this and that, what does it really get you at that point, but just know that going in? What was involved was, there was a limited set of due diligence documents that was available enough to give people a sense of what was there to come up with some concrete assumptions, and to come up with an offer with some specifics of what was around that offer. That’s what was in the letter of intent, “Okay. Yeah, we’re interested in the company based on these assumptions here, here’s where we value the company at,” and that’s what we were looking at.
Laurie Barkman:
That’s really helpful just to give people a sense of the process. Let’s jump to what you decided to do next and when you decided, because it’s gotta have been, like letting your baby go, at this point, it was probably 15 years after you started the company. Now it’s changed. The ownership’s different, you’ve had a transition with an integration. Now, what did you really look forward to the day where you could do something different? Or were you dreading it?
Jeffrey Feldberg:
It was both, it was both and part of the decision was the company was growing and it’s always difficult as a founder in a company, a lot of times the employees who helped get you there aren’t going to be the same employees to get you to the next level and that eventually caught up with us because we’ll ask Steve, myself, we’re not really corporate types and the company needed a corporate type of thinking a corporate executive, who’s very experienced and skills in that area and could we do that? Yeah, probably, maybe. Would we enjoy it? Probably not. Will we be great at it? Not really and so we knew that whether we sold the company or didn’t sell the company, we would need to have really an executive corporate kind of mindset in the company. Partly because of the liquidity event, partly because of where the company was, we’d brought on a whole management team to run the company, we did that a little bit late. The buyers, rightly so, penalized us for that, because we didn’t have enough time in the seat, for the management team to really show and give some confidence to the buyers, although the management team was terrific with what they had done so it was bittersweet, but I knew it was time to really have the company go and if you look at it as a child, I know this is controversial. For some people, a company is a child and it’s not but to me, I said, “Okay, hey, this is really a child, and I’m giving the best opportunity for the company to impact even more lives,” ad yeah, that’s something I would be really proud of that the company could then go become even bigger and affect more lives continue to change the social fabric of society, and I can take pride of ownership of, “Hey, yeah, I was there at the beginning, and was the steward to get it to this next level and then some new stewards came along, to take it even further.”
Laurie Barkman:
I’ve had some conversations with entrepreneurs. Sarah Dusek was on the show, she had founded a company with her husband, and there was definitely an emotional side when she was leaving and she was pretty transparent about that and I appreciate how you shared what you just said, it’s always a balancing act. At what point did you say, “Hey, I kind of want to get in this education game again?” You created the Deep Wealth Experience, which is now and maybe we could just talk about that for a bit because I think it’s awesome. I think it’s an amazing program for business owners who are wondering what they can do to improve and get ready for a liquidity event of their own. You’ve created a curriculum based on your experience. You mentioned that a few minutes ago. What does it entail to go through the experience and what did they expect on the other side? How does it help them?
Jeffrey Feldberg:
It’s a 90 day system and it’s based on the exact formula, the exact system that was created for Embanet with a bot and the bot is even better. Because you’ll hear me say these fancy terms, oh, we got the nine step roadmap and the default experience while truth be told, we didn’t have nine steps in our liquidity event. Some of the steps that are in the nine step roadmap came from our failures that we reverse engineered, and then put them into the system so it’s a nine step system, there’s three pillars.
One Pillar, it’s all online, of course, the online guy here, or your own time, your own convenience, about 30 minutes a day, you’re learning the strategies for each of the different modules so each module is two weeks in length and so you have six modules for 12 weeks, and then another two weeks, which we for the mastermind group, which I’ll get to in just a moment so you’re learning the strategies, week one, then week two, for every module, you take what you’ve learned, and you apply it to your business.
The first module, no surprises, X factors, because this is foundational for everything else that you do. In week number two, based on what you’ve learned, you’re doing your recording for your mastermind group, pillar number two, okay, here are my X factors and here is how I’m going to take them to market and you’re sharing this recording with a mastermind group and what’s unique about this is, you are the world’s expert in your business, no one knows it better than you, you can bring in the best management consultant, the most expensive management consultant, but they will not know the business as well as you know it.
As business owners, we often have the answers, we don’t have the question so we’ll give you the questions. You put that recording out there. pillar number two, your mastermind group. offline, the mastermind group is watching the recording and Susie comes along. “Hey, Jeffrey, I saw your recording, guess what we tried exactly what you said, Don’t do it. It failed for us. I can’t recommend it.” Or, “Geoffrey saw your recording, we did exactly what you did and it was incredible. In fact, here are three things you may not have thought of. These three things were a game changer for us. Give this a try,” and so now you have learning from different companies or not competitors, different industries. You’re learning their best practices, you’re learning from each other. It’s going back and forth and you have a bonding that’s taking place and then the mastermind group is meeting weekly, real time so synchronously, and it’s with a success coach for one week.
The next week is with a success coach, an ‘ask me anything’ expert who’s coming in and Laurie, we got to get you in on one of those and I know it’ll be a game changer for everyone who’s going to participate in that and then the third pillar is the success coaching, where you’re getting very specific feedback on your recordings on the workbooks that you have. There’s close to 400 pages of workbooks that go along with it and so when all of a sudden done on the 90th day, have you sold your company, no, you haven’t sold your company but you’ve done three really important things.
Number one, you’ve created a very specific blueprint of how to grow your business that is specific to your business that you’re really not going to get anywhere else. Number two, you stop believing and you start knowing you don’t want to gamble with your financial future. You’ve got to know this is the best advisor. This is the best deal that this is the best team whatever the case may be and then the third thing as important is you can now go to Laurie and say, “Hey Laurie look I’ve been through the Deep Wealth Experience and here’s my internal data. I’m ready. I found all my skeletons, they’re gone. Here’s my X factors from my REM brands,” and it allows someone like Laurie truly operate at a much higher level than she could otherwise to take your business value to the next level because of that preparation.
Laurie Barkman:
It’s an awesome opportunity. If people want to learn more about you, Jeffrey, get in touch, they want to learn more about Deep Wealth Experience, how do they do that?
Jeffrey Feldberg:
Just email me directly. I monitor all my emails. You’ll get a direct response from me. It’s jeffrey@deepwealth just like it sounds so jeffrey@deepwealth.com.
Laurie Barkman:
You can put your feet up on the desk, you can probably travel the world and multiple times in a year you can fly around and do amazing things. You’ve probably generated wealth for your family that you know when you think back to your father and uncle that story of coming first generation they would never have imagined but what I love about what you’re doing Jeffrey is you’re you’re truly paying it forward I can tell you are doing this because you’re passionate about it and you care about the entrepreneurs who come in your circle and I feel very grateful to be part of your ecosystem and I truly hope that people listening if they want to learn more, I think it’ll help them quite a bit and of course I want to be a resource you know for the listeners too and they know that and that’s why their listeners too for the show but your show also again I want to give it another another shout out. It’s a great program and I definitely hope people check it out. Thank you so much, Jeffrey, for being on the show today.
Jeffrey Feldberg:
Laurie, thank you so much. It’s been a true pleasure and honor. Congratulations again on this significant milestone for your podcast and for your show and thank you for doing what you’re doing and making such a difference out there.
Laurie Barkman:
Thank you so much.
Laurie Barkman:
To our listeners. Thank you so much for your support. You can always catch Succession Stories on any of your favorite podcast players or of course on YouTube. Don’t forget to like and subscribe to the show that really means a lot to us. If you want to maximize the value of your business and plan for future transition, reach out to me for a complimentary assessment at meetlauriebarkman.com. Join me next time for more insights from transition to transaction. Until then, here’s to your success.
