Today we are playing a drinking game on the podcast and discussing the mistakes we made when selling our company.

Introduction

We talk about the mistakes we made while selling our company and introduce the game 'Never Will I Ever'.

How to Sell a Company

We discuss the importance of Qualified Small Business Stock (QSBS) and the potential tax benefits it offers when selling a company.

Ignoring QSBS

We share a personal story about shutting down a company without exploring the option to sell, and the lessons learned from that experience.

Not Trying to Sell

We discuss the importance of not acting desperate during negotiations and the need to have multiple options.

Avoiding Desperation

We emphasize the need to identify the key decision maker in the buying company and understand their motivations.

Assuming the Buyer

We highlight the importance of negotiating the best offer, not just the highest offer, and the value of non-zero-sum negotiations.

Conclusion

Learn how being stubborn can give you an advantage in negotiations, as illustrated by a story about the speaker's father.

The Power of Stubbornness in Negotiations

Understand the significance of being organized, especially when running a company and preparing for a potential sale.

The Importance of Being Organized

Discover the benefits of conducting business meetings in person and the impact it can have on deal closures.

The Value of In-Person Meetings

An offer from high-quality people you want to do more business with

To determine the likelihood of the deal closing

The buyer's reputation matters more than the cost of the deal

The buyer's motivation and needs determine the success of the deal

The buyer's position in the company hierarchy affects the negotiation process

The buyer's negotiating style determines the outcome of the deal

It helps you maintain control of the negotiation

It prevents the other party from taking advantage of you

It helps create a positive impression of the company

It ensures a smooth transition for the buyer

It prevents legal issues during the sale process

In-person meetings build trust and clear up concerns

- The video is about mistakes made when selling a company and how to avoid them
- The hosts are playing a drinking game called "Never Will I Ever" to discuss their mistakes
- They mention the importance of knowing about Qualified Small Business Stock (QSBS) and how it can save on taxes when selling a company
- They also discuss the mistake of shutting down a company without trying to sell it first
- One of the hosts shares a story about a successful app they created but failed to monetize effectively

- The speaker wrote a blog post about a $100 million mistake they made with a messaging app.
- They regret not exploring options to sell the app or its technology to existing messaging companies.
- Bitmoji, a similar app, sold for $100 million to Snapchat by taking this approach.
- The speaker admits to making multiple costly mistakes in the past.
- They discuss the importance of not acting desperate in negotiations and having multiple options.
- The speaker shares their experience of being desperate to sell their company and the negative impact it had on negotiations.
- They emphasize the importance of being okay if no deal happens and caring less than the other party in negotiations.
- The speaker advises not to go with the highest offer, but to choose the offer that is most likely to close successfully.

- The speaker shares a story about how they turned down a high offer and chose to do business with people they trusted and wanted to work with in the future.
- They highlight the importance of considering the likelihood of a deal closing and the need to apply a discount factor to new offers.
- The speaker emphasizes the significance of understanding the motivations and incentives of the buyer and tailoring the negotiation accordingly.
- They discuss the value of making the buyer feel great and addressing their concerns during the negotiation process.
- The speaker acknowledges their different approach to negotiation compared to the person they were working with, but recognizes the importance of getting what both parties want in a non zero-sum negotiation.

- The speaker emphasizes the importance of being willing to be uncomfortable in order to succeed in their business.
- They share a story about their dad using stubbornness to win a negotiation.
- The speaker discusses the significance of being organized when selling a company and shares their own experience of being disorganized and the challenges it caused.
- They highlight the importance of being organized from the beginning and not making mistakes like not incorporating or filing necessary paperwork.

- The speaker discusses the 83b election, which allows individuals to exercise shares in a company and request immediate taxation on the gain.
- They mention the manual process of filing a letter with the IRS within a specific timeframe and requesting proof of receipt.
- The speaker shares advice they received about selling a company, including the importance of sprinting after receiving an offer and organizing the company like a "giant buy button" to facilitate the sale.
- They caution against treating the company as a personal piggy bank and emphasize the need for clean and simple books for potential buyers.
- The speaker also emphasizes the importance of in-person meetings and recounts personal experiences of getting on a plane to close deals.

- The speaker's car breaks down in the middle of the road while on the way to an important meeting
- The speaker's wife encourages him to go to the meeting while she waits for AAA
- The speaker runs to the coffee shop and the deal comes back to life during the meeting
- The speaker believes that if he hadn't gone to the meeting, the deal wouldn't have happened
- The speaker mentions that this is an "anti ad" for BMW
- The speaker and the interviewer discuss their plans for future episodes and ask for feedback from viewers

The video discusses mistakes made when selling a company and provides advice on how to avoid them. It covers topics such as the importance of knowing about Qualified Small Business Stock (QSBS), not shutting down a company without trying to sell it first, and the value of exploring options to sell or monetize a product. The speakers emphasize the significance of not acting desperate in negotiations, choosing the offer most likely to close successfully, and understanding the motivations and incentives of the buyer. They also stress the importance of being organized, making in-person meetings, and being willing to be uncomfortable to succeed in business. The video concludes by asking for feedback from viewers and discussing plans for future episodes.

No more small boy spreadsheets, build your business on the free HubSpot CRM: https://mfmpod.link/hrd

Episode 522: Shaan Puri (https://twitter.com/ShaanVP) and Sam Parr (https://twitter.com/theSamParr) play the  drinking game “Never Will I Ever,” revealing all the painful mistakes they made when selling their +$10M companies.

—
Show Notes:
(0:00) Intro
(2:30) Ignoring QSBS
(7:30) Shutting down a company
(13:00) Putting out desperate vibes
(17:30) Choosing the highest offer over the best offer
(22:00) Assuming you’re talking to the decision-maker
(27:00) Not getting uncomfortable in a negotiation
(37:00) Being disorganized
(43:00) Muddying your margins
(47:00) Closing a deal remotely

—
Links:
• $100M mistake” - https://tinyurl.com/yphh46sk

—
Check Out Shaan's Stuff:
• Try Shepherd Out - https://www.supportshepherd.com/
• Shaan's Personal Assistant System - http://shaanpuri.com/remoteassistant
• Power Writing Course - https://maven.com/generalist/writing
• Small Boy Newsletter - https://smallboy.co/
• Daily Newsletter - https://www.shaanpuri.com/

Check Out Sam's Stuff:
• Hampton - https://www.joinhampton.com/
• Ideation Bootcamp - https://www.ideationbootcamp.co/
• Copy That - https://copythat.com/


For more quality videos subscribe here → https://tinyurl.com/46rjnckx
🔔 Turn on notifications to stay updated with new uploads

Today we are playing a drinking game on the podcast and we're playing Never Will I Ever and it's a game where we're talking about all the mistakes that we made when we were selling our company and saying never will we ever make this mistake again and if you ever want to sell a company or you've sold a company, if you sold a company, you're gonna be able to relate to some of these mistakes.

I'm sure if you wanna someday sell your company, it's good to listen to so that you don't have to pay the same price that we did and make these mistakes.

♪♪♪ Today we are talking about how to sell a company.

And in fact, we're talking about how not to sell a company.

These are mistakes that we made, selling our company.

So Sam sold the hustle to HubSpot and a big deal sold to a public company.

I've had 2 exits now under my belt and I've sold 1 to a big company, Amazon and 1 to a small group of private buyers.

And every time you sell your company, you learn a bunch of lessons, but we're going to make this fun.

So if you've ever played the drinking game, never have I ever we have a new drinking game for you.

This is never will I ever And never will I ever is a game where we say never will I ever do blank again because we made so many mistakes.

We made these mistakes so you don't have to we died so you don't have to hear and if you listen to this, you're going to be a lot smarter when it comes to selling your company.

here, but I got some greens in the morning.

I'm looking a little athletic and I got some greens.

Not sponsored, but you know, send me a free box.

And I love that it doesn't taste that great because to me, I don't want my healthy shit tasting good.

I don't like my hot people to be funny, too.

I don't like when things are not supposed to go together.

No, I'm not watching that special number 1 on Netflix.

Let's start with the most straightforward thing.

QSBS, for those who don't know, I didn't know about it until like a year before I sold.

QSBS, I'm going to try and state the law here.

So it stands for Qualified Small Business Stock.

QSBS protects up to 10x of your investment from long-term capital gains taxes of $10 million or 10x your initial investment.

What that means, and a lot of people only pay attention to the $10 million thing.

So with QSBS, How long do you have to hold it?

So a privately held company, that's a C Corp.

And you have to hold it for 10 or 5 years.

And it has to be valued originally or the assets of the company, which is the value has to be 50 million or less.

You hold it for 5 years and you can save $10 million in capital gains.

So like let's say you sell for 10, all 10 would be tax free for at a federal level.

And many states also honor QSPS, not California, but many states also do.

So you could walk away paying 0 in taxes if you sold for $10 million, which is remarkable.

Or, and now here's the or part that a lot of people forget.

Or you can save up to 10 times your investment, whichever is greater, the 10 times or the 10 million.

Now what that means is, let's say that theoretically, you start as an LLC or you don't have a...

Let's say you start as an LLC and you convert to a C Corp.

And when you convert, you value your company.

And it usually has to be done by a third party.

Let's say you're doing 15 million in revenue.

Let's say you're doing 20 million in revenue.

And you say, Great, I think we're a $40 million company, you get third party that does it.

So you can save 10 times $40 million in taxes.

That's a $400 million tax shield right there.

Now this law, a lot of people don't know about it it's maybe besides real some real estate laws for tax savings and real estate it's probably the greatest thing there

it's better than real estate because in real estate you have let's say depreciation or the 1031 exchange these are great but they're deferrals whereas this is not a deferral This is simply you just have a you know, you have a exclusion on 100% of your gains up to some number.

So it is way better than a deferral is way better than real estate.

I was talking to a real estate guy yesterday and I said, I have the greatest tax thing that no real estate guy has.

I said, yes, but you don't have QSPS because real estate is not eligible for QSPS.

There's only certain types of businesses can do it.

So for example, what some people do, they have QSBS for themselves, but it's per tax return.

You can create trusts for your kids and give each of them equity.

And then each trust gets a $10 million exclusion in addition to your own.

So you could have, you know, I was joking around with a QSBS guy and he's like, yeah, if you have 3 kids, I can get you, I can get you 40 million, 50 million in QSBS.

And I was like, I was like, Oh, this kid I have, you know, this next kid I'm going to have this is this is just a walk in QSBS shield here.

And it used to be that it was does that mean

that your kid when they're but when you're kids at the age of 18 have say in control of your business

they're going to have just a small equity.

Like you're just giving them enough so that they have a shield.

They have like, you know, they have less less tax and you, you know, while they're minors, you control the state.

I don't think what a lot of people having is like little kids that 18 years later are like succession hostile taking over like the company as they band together.

I don't I don't think that's the that's the thing to worry about.

And we'll wrap this 1 up by there's a big asterisk here, which is this.

I don't like calling it a loophole because that's first of all, I hate that we're loophole because loopholes are good.

Like when someone says a loophole, I'm like, okay, but you're trying to spin this negative, but like you're just following the law.

Try tying a shoe without a loophole, huh?

Or when people say shortcuts, they're like, that's a shortcut.

If I can arrive at the same destination just as safe and faster than a long cut, Let me take on the shortcut.

But so this loophole, there's an asterisk here because I think 2 years ago it was, it was up to vote if they were going to ax it.

And the idea was they might make it only 50% or so they might reduce it by half.

I don't know if this is going to be in play for how much longer.

This is not like real estate where it's going to last forever.

Yeah, but it's been out for a while, and it's amazing, especially in the tech industry.

HubSpot is a CRM platform, so it shares its data across every application.

No out of sync spreadsheets or dueling databases.

Never will I ever just shut down a company without trying to sell.

I before I sold before my first exit, I had built many companies, many products before that, and they all had reached some version of like, you know, an outcome.

Some had like some momentum, but not break out.

And it was either wasn't worth our time or wasn't able to get funding or whatever.

I specifically remember 1 app that we made that was if you remember Bitmoji, we had basically made an app that was like way better than Bitmoji.

And Bitmoji was giving you in like a personal avatar A

little character for yourself that would be in these, and then it would give you like, kind of like these stickers that were in funny, like positions or phrases.

Making the world a better place, 1 emoji at a time.

Exactly, emojis are 1 of the greatest products ever, right?

So you, we had made an app that created a character of you.

And then you could, and then you could type any word.

You can just type hashtag, whatever, boogie down, and it would make your character boogie down.

And we had every like whatever you could think of, like you could put, you could say hashtag single ladies and it would dress your character up like Beyonce right away doing the single ladies dance.

Like whatever you could think of, we would be had because we would just every day we would rank the top tagged terms And our artists would create like hundreds of these per day.

So very quickly, we had tens of thousands of combinations.

It was really fun because you could just type something in just to see, does it do it or not?

We got half a million people to download the app in the first month.

They were just pounding like tons of these little stickers.

It didn't have great longevity, but it had this like amazing novelty factor.

And we were trying to do it as its own messaging app, which was too hard.

Like people wanted WhatsApp, they wanted facing messenger, they wanted all these things.

And I wrote this blog post called my $100 million mistake, because we took that and we said, well, this is not really sticky as a messenger.

It's not big enough where you're going to get all your friends to switch and start texting you here.

We don't want to build a sticker company.

So I guess we'll just crumble it all up and just Kobe and just throw it away.

What we should have done is taken that little app to all of the existing messaging companies and be like, hey, this feature is unbelievable.

We've proven that people really like to do this.

Look how many like the average person is doing 60 of these.

You know, just buy this and put this into your keyboard.

And shortly after Bitmoji sold for $100 million to Snapchat doing exactly that, because they couldn't make it as a standalone app either.

And I have no idea why our instinct was just to like, just pivot, just turn it off and pivot versus like, take 30 days and have like 5 conversations, even if it doesn't go through like you owe it to yourself after you know, 9 months of hard work or a year of hard work and creativity on something.

You said we got 100 or sorry, we got 500,000 downloads in 60 days and had a brief moment at number 1 on the charts before falling into mediocrity.

easily tens of millions easily like you know you think so either wasn't going to sell at all because there's only like 8 buyers for this.

There was like 8 messaging at their major at the time.

It was like line and kick and you know, what's up and Facebook Messenger is Snapchat.

Those all you know, there's 8 players that like could benefit from something like this.

And either just wasn't going to sell at all, but like that's actually unlikely.

There's a kind of like a price for every buyer.

The hard part would have been our team wouldn't have wanted to go with the acquisition.

And so we would have had to like either try to just sell the tech, which is really hard or sell the whole company including the team and then disband for a year then come back together and we just you know, we didn't but the thing is we didn't even really get to that point.

Like, we should have gone and seen what our options were, right?

Like, in poker, if you've already paid the blind, we'll just see the flop.

Maybe something good will come out of it.

Did you, by the way, if you Google $100 million mistake Sean Perry, you have a medium blog.

Because your main investor didn't give a shit?

It's not like we had a conversation and 1 side said, yes, 1 side said no, and we debated it.

And then 1 side said, no, I have the voting control.

We literally had lunch and then we just moved on.

Like, it was just like, it's the worst types of mistakes.

The worst types of mistakes are the ones where you didn't even really explore the possibilities.

You didn't even ask yourself, what could I do here?

You just sort of quickly glossed over it.

Didn't didn't even give it the thought to make a decision.

That's like your third or fourth or fifth multi, like multi tens of millions of dollars mistake.

The first 1 being not joining Stripe as employee 30 or 50 or something like that and not selling this app.

I'm Shooter McGavin in Happy Gilmore when he says, I eat pieces of shit like you for breakfast.

And then happy goes, you eat pieces of shit for breakfast.

I've I've made mistakes more expensive than your net worth is like you've made the stakes like this and it's like, yeah, multiple, multiple.

You have on here, you will only have 1 option.

But when I was building my company, I wanted an exit so badly.

Like a 12, like when I was 12 years old and a cute girl complimented my braces.

It's like, I want to close this so badly.

If you don't like me, no 1 will like me and I'm a piece of shit.

I had all of my personal net worth, my emotional net worth tied into this exit and I acted like a little bitch.

And 1 of the ways not to do this is to have multiple options.

That's the easiest, most tactical 1 is to have lots of options.

You basically have to act like a hot girl.

Do you track your like your finances somewhere?

And I remember 1 day I just added like 10 million.

And I just had other And I just manually typed in $10 million.

And I would stare at that for like 6 months.

And it actually helped me believe that I already had it.

And so I was a little bit less desperate.

And when you are desperate, you have 0 power.

And when you have 0 power, that is the worst part to be in when you negotiate.

And the best part when you can negotiate is to walk away.

And to be able to walk away, you typically just don't give a shit.

So you're just passionate about whatever you're doing and you don't need the money or you have other options.

And I remember being desperate and that just like to that 12 year old girl who was into me, Aaron, you know, like they could sense it.

They could they could smell the firm, the hormones on you.

Like Anyone could any hot girl could tell we could be desperate.

They could tell what a confident man is like and I was not a confident man.

And that last bit which is the rules the rules of negotiating when you are when you're trying to sell your company.

Number 1, the most important rule is you must be okay if no deal happens.

Meaning, not just like, I'll be all right, like a funeral has happened, but you know, option 1 should always be we do no deal and we're totally fine.

I would love to keep going and whether that's true or not, there is should be no grieving.

convince yourself that that's true that You don't want your options to just be offer number 1 or offer number 2, because guess what?

See all My First Million transcripts on Youtube

My $100M Mistake + 6 Company Exit F**k Ups To Avoid (#522)