The Prof G Pod with Scott Galloway
00:25:33 · Scott Galloway, S3, David Senra
[00:25:33] S1: We'll be right back after a quick break. Ad[00:25:41] S3: This episode is brought to you by Google Chrome. You think you know a browser, but Gemini in Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50 page restoration block or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses, setup required, compatibility, and availability varies 18 plus. [00:26:08] S1: Welcome back. Question number four comes from a x n r zero on Instagram. How do you decide when it's the right time to sell a company or a business? I have some thoughts here. Go ahead, David. [00:26:20] S2: I think you should go first because you sold businesses.
00:26:24 · Scott Galloway
[00:26:24] S1: Simply put, do not trust your emotions. As a matter of fact, go the opposite. On when to sell or not sell, go the opposite way. Cause this is what happens as an entrepreneur. Oh my gosh, business is awesome. Let's hold on and ride this out. Of course we're not gonna sell. Things are just jamming right now. Oh wait, things are wobbly. Our... The the economy looks wobbly. Our business is wobbly. I got some key people who are threatening to leave. Oh god. We should sell. The opposite. Acquirers are smart. When you're jamming and it's so bright outside, you gotta wear shades, that's... If you get an inbound offer, that's when you hire a banker. Now having said this, I've sold companies for hundreds of millions. I've never scaled a company to billions. Because once a company is really jamming and I get an offer, I start thinking about selling. Because I think it is hard to get... There's infant mortality, but also there's a lot of death among adolescents. And I was always... I had a huge fear of being the guy who built a company with a 100 or $200,000,000 in an effort to go to 1,000,000,000, gave it all back. That's my biggest fear, or one of my bigger fears. So what do you do, or what I've done? When things are jamming, that's when you take the calls. Because acquirers are smart. And when they come in and do diligence and see, oh my gosh, the revenues are up 50% this year, and no one has left in a year, they have almost perfect retention, and their clients love them, and their profitability is reaching scale, that's when you sell. Because whereas when things are shaky, the acquirer figures it out really fast. And your emotions are your enemy. You wanna hold on and keep on trucking when the business is good? I believe that's actually the best time to sell. And then when things aren't great, you've gotta hunker down, make hard choices, work your ass off, and right size the company. But that is not the time to sell because selling is an enormous distraction. And when the company isn't doing well, if you're distracted through a sales process and you don't have capital, it can end up being the walking pneumonia that takes the business down. Because if you don't get sold, you were distracted, the business was hurting to begin with, and you can you can really, if you will, fall into a bit of a downward spiral. So in sum, don't trust your emotions.
00:28:50 · Scott Galloway, David Senra
When the business is jamming, that's the time to sell or consider a transaction versus when the when the business isn't doing that well. Thoughts, David? [00:28:59] S2: So I would say the... To the degree that... I mean, there's obviously a ton of entrepreneurs that listen to both my podcasts all over the world. To the degree that I have any influence on this, I'm kind of like anti start scale sell. Yep. I think pod... I think podcasting is my life's work. I've been doing it for over ten years. The first five and a half years I was doing it, no one even listened at all. Mhmm. People are always like, oh, if you love what you do, you know, they [00:29:22] S1: The money will follow. [00:29:24] S2: Well, I was I was gonna say something else. It's just like, well, if if you love what you do, you do for free. It's like, No. I paid to podcast. [00:29:31] S1: Yeah. It cost you money. Well, that's being an entrepreneur. You write a check at the end of the month.
00:29:35 · David Senra
[00:29:35] S2: Yes. My savings went down every month. And I was like, no. I I I just believe I'll figure out the business model, you know, and things will turn around. It took me five and a half years to do that. So what I would say is like there's countless examples of people selling and they're very happy. It sounds like in your example, know, obviously, I think you'd fall into that category. I would offer some other... Like, one of the greatest autobiographies I ever read was the guy that that started Trader Joe's. And the book is called, I think, Becoming Trader Joe. And he loved Trader Joe's. Like, he built a cult following. It was his life's work. I think in the seventies, things got really shaky. The interest rates were high. There was the the oil crisis, and he decided in, like, kind of like a... In a panic to sell Trader Joe's. So 90% of the book is him developing Trader Joe's, loving it, you know, being completely obsessed. Then the last 10% is after he sells. He starts to live like another three or four decades. He's like, yeah. I did some consulting. I invested in real estate, wrote some angel checks. And then the very last page, he goes, I have to tell you something. Have to be honest with you. I regret selling... You know, essentially, he was the biggest regret of his life. I had to live with that, you know, for multiple decades. And he goes, thanks for listening, and he signs off. I think his name is Joe Coulombe or something like that. Book comes out, dies the next week. And the reason I bring up that book is I think that that book is actually a service to future generations of entrepreneurs because a lot of people say, yeah. But you got all this money. Yeah. He was just like... But the money wasn't what I was going after. He was just like, I had a business that I love. So I think you have to ask yourself, one, like, why are doing what you're doing? If it's economic security, then, start, scale, sale is a hell of a good path to wealth generation. But if you if you think this is your best idea in your life's work, I would say never sell. There's Ted Turner's autobiography when he sells his media company. He can't understand after he, you know, gets a bunch of money, gets billions of dollars, why they're not listening to his ideas and then eventually kick him out of the company. And they're like, yeah. That's what the money's for.
00:31:21 · David Senra
I'm friends with John Mackey, the founder of Whole Foods. I've talked to him about the sponge. He's also in his book where he sells to Amazon for 13 or $14,000,000,000 because, you know, he's worried about the future of his his his baby, which is Whole Foods, something he worked on for forty years. And then they're like yelling at him. He's on Zooms with Amazon executives because he's like, hey. I think we should do this. And like, shut up, John. You're not running the company anymore. And to... When you talk to John today, that's like devastating. It's like heartbreaking to him. So, again, those are like missionary. If you're like these kind of missionary founders, then then the answer is like hold on to it. Essentially, what I would say is like, for me, like my extra strategy is death. Like, you're in the podcast business. The amount of acquisitions or investments or stuff that I've turned down, it's just like, I don't even wanna know the number. I don't care about the number. I wanna do that you're gonna pry the microphone out of my cold dead hands. Like, I'm not doing it for money. I'm doing it because I love to do it. I get sad when I don't podcast. So for that, like, the the, you know, the equation there is simple. It's just like I'm already... There's a great line in the the the show called Yellowstone that I love where Kevin Costner is playing like the patriarch of the family. They have this giant ranch in either Wyoming or Montana, and they've had it for a hundred years. And his adult kids, they have the offer to sell the company or to sell the ranch for like $500,000,000. And his adult kid's like, dad, take the money. And he has this great line. He goes, leverage is knowing that if you had all the money in the world, this is what you'd buy. He goes, if I... You gave me $500,000,000, I'd wanna buy this ranch. I already have the ranch, so therefore, I'm not selling. And I think there's just a lot of wisdom in that, you know, throwaway line on TV show.
00:32:52 · Scott Galloway
[00:32:52] S1: Yeah, so again I'm not a Hallmark commercial here, and that is I've always started businesses thinking I was gonna sell them at some point. And you're not supposed to say that. I think I'm more like most entrepreneurs, especially tech entrepreneurs, who usually get on stage and have this bullshit. I just wanted to build something I loved. I never thought about the money. That means they're obsessed with money. Look, I don't I've always and the issue I have is, so take Prof G Media. I find building enterprise value and third party market validation is really good for a business because it keeps you honest and there's a correlation between the economic value and the actual value you're adding. And that's not to say that that's the only measure, but it holds you accountable and it creates I like having value, enterprise value as a metric because it forces us to be innovative and add more value. And transactions have always been key to my business strategy, because my business strategy has always been, and granted I've never scaled to a billion dollar. I've sold companies for... My first company I sold for 30,000,000,000. My second company went public on the Nasdaq at a market cap I think of $1.20, and I sold my last company for 158,000,000. So I've never scaled a company like some of these guys we're talking about. But I have had successful, you know, eight and nine figure exits. The only way I've been able to get there is by hiring and retaining great people. It's just the only... Greatness is in the agency of others. And while I'd like, you know, while I get most of the credit for these companies, the reality is the only thing I did really well was I found really talented people, and I figured out economic and non economic compensation to keep them in the company when they were getting offers from Google and Salesforce and other companies. And part of my compensation strategy has always been the following. I give on average employees two to three x the equity they would get at a venture backed startup because I'm the venture capitalist, so I have more equity and more control to throw around. Whenever I've exited a company, I usually own, you know, kind of 30 to 40 or 50%. Because I... And because I've given... Not because I've done multiple rounds of financing, but because I've given a lot of the equity away.