I can't believe there's a risk you could be fired on day 2, and not receive any of the (bulk of the) stock.
How much can you "love" a company that would put you in the position of facing this possibility?
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#72Why would you vest an offer worth 3x revenue over 4 years unless your business was about to collapse? That's an atrocious offer as stated. You should get 3x earnings today (or some multiple depending on prospects and margins) and earn out more over 3-4 years. Edit: Sorry I must be tired. This is a revenue multiple not income. Revenue multiples are not particularly helpful in valuing a company with a mature business m…
very good point - over that period the biz will earn that money anyway.
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#73drop me a line. i'm well versed in this process, the current environment, etc.
I'd take that offer in a heartbeat.
Please do this.
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#74This looks like classical negotiation tactics from people knowing how to play hardball. They try to take control of the situation by setting limits to the offer.
YOU DON'T HAVE TO ACCEPT THESE LIMITS !!! THIS IS A CLASSICAL NEGOTIATION TRAP NEWBIES FALL INTO !!! THEY WILL TRY TO MAKE YOU BELIEVE THAT SURRENDERING TO ANY OF YOUR COUNTER REQUESTS IS A VALUABLE CONCESSION. IT IS NOT. THEY HAVE SET THE OFFER FAR TOO LOW FOR THAT SPECIFIC REASON !!! DON'T FUCKING BUY IT !!!
Guys, you have to learn to play bitches: i) be very patient (time is on your side, you are profitable), ii) talk to other interested parties (i.e. confront the offers to raise the price, and yes I mean multiple rounds; one shark smell blood? get more sharks in the pond! now is the right time!!), iii) don't show you cards, reveal your intentions or commit now, because you are in the process of finding what your intentions are and it depends of theirs too, iv) set YOUR own rules ON THEM whenever necessary (have no hard feelings about it, because they don't have any for you by making a low offer; from your own description, they are not being nice to you), v) never ever buy into whining and strong or manipulative emotions from other parties, they know how to play bitches like you don't (and sometimes, bitches fake friendship, caring and honesty very well; they send the nicest guy/lady, the one that has the highest chance to win your sympathy; it is nothing more than fucking smoke to get a better deal than they actually deserve; YOU did the hard work).
If you don't feel comfortable enough, find an independent professional negotiator with strong AND proven experience who can do that job for you. Discuss the limits within which you are ready to sell and list what you consider acceptable and unacceptable terms. Be honest and candid about it, no early concessions. Then, (re)open discussions starting with the double (at least).
Reward the negotiator with a percentage of the deal. Pay him well, because he/she will obtain a value that you will never ever be able to obtain yourself considering your experience in negotiations.
The hardest thing to understand (or to remember) is that 'no deal' is better than a 'bad deal' in your case. You must be ready to consider that option as the best option, especially if there is no zone of possible agreement between you and the other parties. Negotiating IS PRECISELY about finding out if there is such a zone.
And don't listen to those saying you should turn the offer down because 20% 'is an insult'. They are ignorant morons of no value (really). Now is SURELY NOT the time to quit discussions.
You are in the power position, but you don't act like you know it, or that you know how to play it. Take your time. Buy no drama. No rush. Let your brains run this show, not your hormones.
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#75This looks like classical negotiation tactics from people knowing how to play hardball. They try to take control of the situation by setting limits to the offer. YOU DON'T HAVE TO ACCEPT THESE LIMITS !!! THIS IS A CLASSICAL NEGOTIATION TRAP NEWBIES FALL INTO !!! THEY WILL TRY TO MAKE YOU BELIEVE THAT SURRENDERING TO ANY OF YOUR COUNTER REQUESTS IS A VALUABLE CONCESSION. IT IS NOT. THEY HAVE SET THE OFFER FAR TOO LOW…
Good stuff, all of it.
Especially the point about getting an experience negotiator in there, you are not the right person at the table because you have too much riding on this deal.
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#76Earlier quoted context omitted.
He explained why-- he got the feeling that the professionals are trying to sell him a bill of goods, perhaps independently of an actual need, so he's coming here for a second opinion.
No, he said that they were being courted by attorneys and bankers who want the business. I understand why you wouldn't want to just take the first person who calls you. But he also asked if they should involve their attorney, which implies to me that they have one (they'd have to, right?). It just blows my mind that they're considering accepting an offer for possibly tens of millions and they haven't asked their atto…
Fully agreed, I also completely fail to understand how they got this far without a set of good advisors.
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#77I have been in this position twice before with a services-based consultancy. The first time it was a similar low-ball offer with 50% paid up front and remainder over 4 years as an earn-out. The total deal was for roughly 4x revenues, and was all cash. We actually didn't think it was such a great deal at the time, but we ended up going all the way to closing. Lo and behold, they actually tried to change one of the material terms of the deal AT CLOSING. These folks were not to be trusted at all. We immediately said "GOOD BYE!" and hung up the phone (we were in Switzerland at the time working for a client and actually tried to do the closing virtually). I don't think they expected that we would just walk away if the deal went sour, but they had nickled-and-dimed us so much along the way that the trust was already frayed. By the time we were done, there was no trust left. Without trust, you can't do any deal.
Fortunately, like you, we were already profitable. Almost five years later, we've actually made more money (and pocketed) than we would have gotten in the deal. Meanwhile, the other company has gone belly-up. If we had taken the deal, we would have been screwed.
The other deal was such a stupid lowball, we couldn't even take it seriously. We simply replied, "this is not a good deal. Make us another offer." We felt it would be ridiculous for us to counter offer such a stupid deal that rejecting it out of hand and making them negotiate against themselves was a better option. Needless to say, they didn't make a better deal. Good riddance.
This is a great conversation here (tagged for future reference). For those of us who are trying to learn as much from other startups' experiences, would it be possible to keep us updated (in the same sort of anonymous style you have done here)? It may not be possible, but I'm very interested to hear what you end up doing with this offer.
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#78Why would you vest an offer worth 3x revenue over 4 years unless your business was about to collapse? That's an atrocious offer as stated. You should get 3x earnings today (or some multiple depending on prospects and margins) and earn out more over 3-4 years. Edit: Sorry I must be tired. This is a revenue multiple not income. Revenue multiples are not particularly helpful in valuing a company with a mature business m…
> Gross profit would be far more useful.
Yes, and they have not mentioned their margins anywhere. 3x revenues might be generous (no further growth, lousy margins) or it might be terrible (lots of growth, great margins).
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#79Why would you vest an offer worth 3x revenue over 4 years unless your business was about to collapse? That's an atrocious offer as stated. You should get 3x earnings today (or some multiple depending on prospects and margins) and earn out more over 3-4 years. Edit: Sorry I must be tired. This is a revenue multiple not income. Revenue multiples are not particularly helpful in valuing a company with a mature business m…
very good point - over that period the biz will earn that money anyway.
It may, it may not. There is a lot of information lacking.
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#80Bootstrapped and highly profitable after only 5 years with an 8-figure deal on the table? Enviable, my friend.
>>In the worst case, they could fire us on day #2 and we'd have only the token money we got up front to show for it.
If you're 'highly profitable', it hardly seems worth that risk.