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Stage 13. RESILIENCE - focus & exit planning



  • We started seeing the end of the tunnel in our fifth year. The consulting business was growing fast but more importantly, the subscription revenues were catching up and soon would cover our costs. It was the time I chose to terminate our consulting operation. The team did not understand the decision as that represented a significant drop in revenues. But consulting was always a tactical activity and never part of the intended business model. Now we could focus all our efforts on our strategic auction operation.


  • By the end of year 5, we had built a subscription service that kept our customers captive and we were organizing auctions for many millions of dollars. Our own revenues were approaching $1M with 20% profit. The operation was simple to run. Transactions were all digital, automated, and transparent. We could foresee an organic growth of 20% a year for the foreseeable future just from the expansion of our existing customers. And this growth was only going to generate minor cost increases, essentially trickling down to the bottom line.


  • I could start disconnecting and preparing the set for an eventual exit.


  • I increasingly delegated the operation to a talented and reliable manager. Our family moved to Spain and I started to commute to Russia for a few days every month, then every three months, and soon I only totaled about 3 weeks a year in Russia. The rest of the time I was living the family life I had aspired to and controlling the business right from my computer. It only took me an hour a day to do so.


  • I want to stress how critical and planned this disconnection was. Remember that my objective was a total exit of the business. I had to show any potential buyer that there was a solid team that could run the operation without me, and even perhaps that I was the one who slowed down the potential of the company by my lack of ambition.


  • This is exactly what happened a few years later when various financial investment groups realized we were servicing the majority of the retail trade across Russia with our solutions. Our business was simple and solid with almost $4M in revenues, 40% profit, and still a large organic growth potential. These companies understood that we could grow 50+% per year instead of the 20% we were enjoying if only I was ready to work harder…


  • I coincided with their analysis and explained that I had another life outlook, but that they were welcome to enjoy the benefits of that growth by buying the company... They sensed that there was a good deal to secure. They all insisted to tie me up to the company for 3 years but I categorically refused while arguing that they had a great team in place with the perfect manager to run the organization and that I was willing to discount the valuation to secure my freedom.


  • A discount is something financial groups can rarely resist when all their potential concerns are addressed anyways. It took 30 days from the time we signed a letter of understanding with one of the groups, to receiving the cash into my bank account and being completely disconnected from the company. I had secured a cash buyout of fourteen million dollars which, after taxes and ensuring all investors enjoyed a good return, exceeded my personal objective.

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  • Many businessmen reading this story will think that I sold the company too cheaply. A fair value was probably between $16 and $18m at the time. So, in some ways, they would be correct. But that would have meant working hard for another 3 years in conditions that I was not ready to contemplate.


  • Others will ponder why to sell a company that was representing a significant annuity. There were two main considerations:

    1. I was increasingly worried about my ability as a foreigner living away from Russia to defend the company from potential interferences from unscrupulous local actors as the business became progressively more attractive.

    2. There is a big difference between cash in hand and a company’s potential valuation.


  • My instincts proved correct when, within 2 years after the sale, the Cyprus bank crisis and the invasion of Ukraine by Russia significantly impacted Russian businesses and the ruble exchange rate. The growth profile of the country also dramatically shifted. CISLink was servicing the local retail market and kept strong throughout these events, but its valuation in US dollars would have easily halved.


  • By being ready to sell the company on its way up and to discount it for my freedom, I created very attractive conditions for a buyer and secured the transformation I aspired to. It was a win-win situation that ensured the sale went through very quickly and smoothly.

  • Over the years, I have seen many entrepreneurs miss out on a potential exit by trying to maximize the value of their company on its way up and living to regret it a couple of years later as the market turned around or technology changed. They missed an opportunity to drastically change their personal financial reality.


  • Naturally, there are other instances of businessmen securing an optimal sale value by holding on and fiercely negotiating. It is always a case by case, but my personal bias is to secure my objective as early as possible provided it transforms my life. Time has a value that most people do not consider as much as I do.


  • My ambition is not to maximize my finances but to maximize my free time while securing my number. Contrary to many, I consider it a higher ambition and a hard objective to achieve.


 

TRAVEL UPDATE - STAGE 13


Distance: 29.7 km

Cumulative Elevation: 697 m

Time: 7 hours

Weather: Very windy & sunny




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