Speaker
So this is part three of how to drive massive shareholder value in a business. So we’ve already talked about how you could use an acquisition of a merger in order to create scale. We then talked about having liquidity in your stock through using capital markets could then further increase the valuation. If this doesn’t make an awful lot of sense to you, then obviously, it will make a lot more sense after you’ve done the Harbour Club where we run through specific case studies of deals like this that we’ve done.
Speaker
But the next thing I want to touch on is how important redundancy is in the creation of shareholder value. And I don’t mean the redundancy of any of your staff. I mean your own redundancy. How do you take yourself out of the picture so that you’re really selling your shares, and not selling yourself? Because what happens more often than not is that somebody buying a business will want to pay everybody apart from the entrepreneur. I’ve seen deals where… Actually I had somebody come on the Harbour Club recently where they had a venture capital person who came in to buy 50% of the business. They then got an offer from another VC to buy the business for $18,000,000. And the deal was half cash, half shares. But the difficult bit was they wanted to offer the half cash to the other VC, and the half shares to the entrepreneur. So the deal was $18,000,000, but the entrepreneur got zero in cash. They had to take everything in stock that would be locked in, and that they would potentially get later.
Speaker
So this being really heavily involved in the business is a blessing and a curse, but it’s, when it comes to selling the business, it’s really a curse because you’ll have these golden handcuffs contracts. You’ll have earn outs. You’ll have all sorts of things that are basically designed to keep you poor and keep you hungry and keep you working in the business. So we want to make sure that we get you out of the business clean and with your wealth intact.
Speaker
So redundancy is a really important way to drive your shareholder value. And again, I’m a one trick pony. The one size fits all solution to this is a merger, or an acquisition, because actually to make yourself redundant in a business through succession planning, so through finding somebody to come and work for your business, is notoriously difficult. And in fact, whenever I’ve tried it, it’s never really worked properly. Employing an MD to take over your position never really works particularly well. So I believe the best place to find a person who’s really good at running a business that looks like yours is to find a person who’s running a business that looks like yours and merge with that business or acquire that business.
Speaker
Now the great thing is that the ego clash that you normally get in a merger will dictate that they really want to be CEO. They really want to run it. So armed with the knowledge that I’m giving you, you can realize that actually, if you just leave your ego at the door, and you let them run it, you get the opportunity to sell the business with them in it. So you can effectively exit the company properly. You can be that 50% VC that gets all the cash, and they’re the 50% that gets all of the shares.
Speaker
So it’s really important to make sure that you’re in a non-executive, non-functioning part of the business when it comes to selling it. So remember, you need the scale. You need the liquidity. And you need to be not involved. You need to be redundant. You need to be a shareholder.
Speaker
So thank you for tuning in to this, but next time we’re going to touch on the financial engineering that you can do. Thank you.
Announcer
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