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Authentic Deal-Making Deal-Driven Growth

Speaker Management & Deal-Making Pivots

Li Hayes is a returning guest (you can listen in to her previous episode, From Concept to Oscars: Overcoming Barriers to Entry in a New Industry, right here). Li is a phenomenal entrepreneur, television host, speaker’s agent, and inventor. After two decades in the corporate world, she summoned the courage to take the entrepreneurial plunge! She started by founding Go Leeward Speaker Management. Li works with associations, masterminds, corporations and more to help them make their events wildly successful. Her invention, the Cool Me scarf, helps to discreetly relieve hot flash symptoms for women dealing with menopause. (It was featured at the Oscars After party!)

The Impact of the Pandemic

Last time I interviewed Li was early 2020 — right before everything changed with Covid. She had just had her Cool Me scarf shown off at the Oscars, and was headed into larger scale production. We also talked a bit about public speaking, as Li continues to head Leeward Speaker Management. As you can imagine, both of those elements of her work went through changes as a result of the pandemic.

Li notes that the pandemic is something that happened to everybody; all business owners can relate to unexpected challenges, shifts, and pivots that have occurred in the last year. She’s no different!

In February 2020, Li was riding a post-Oscar high. Things had gone tremendously well, and she was really excited for production to ramp up. She was booked on Good Morning Connecticut to do a live interview, and everything was falling into place. Until, suddenly, it wasn’t. A week later, the interview was canceled. A few weeks after, she got a message from Amazon: “Please be advised, your product has been deprioritized.”

What many people don’t realize is that Amazon is a conglomerate of many businesses, in terms of who you’re actually purchasing from. When Covid hit, Amazon focused in on all products that were pandemic related. This included masks, gloves, disinfectant, groceries, and more. If your product didn’t pertain, it was not a priority. For Li’s Cool Me scarf, that meant you couldn’t even find it on Amazon at all. And if you can’t find it, you obviously can’t buy it!

The traction Li had been garnering died in its tracks.

Boom or Bust?

I’ve talked about this a bit over the last few months, but it’s worth mentioning again. Covid hit many businesses and industries hard. For example, restaurants and public speaking! Others, however, were able to use the pandemic as a catalyst for immense growth and success. Has terrible as it has been overall, it definitely hasn’t spelled disaster for everyone across the board.

Li’s scarf business died fast. Her speaker management agency also took a hard hit. She happened to be heavily involved in two industries that did not fare exceptionally well. However, Li notes that just because public speaking in general took a nosedive does not mean that all public speakers suffered. She shares that some of her speakers have done exceptionally well by finding ways to pivot with other strengths and abilities. For instance, one of her speakers also did website design and creation. When everything started shutting down, she pivoted into that capacity, and experienced a banner year.

Looking back now, Li sees two major waves. In Wave One, everyone hit the brakes hard. This was when the rule of thumb was just canceling any and all events, which was happening left and right. A few months into that, Wave Two came. This was mostly related to cautiously optimistic postponements. Rather than cancel a summer event, people were looking ahead and hoping to be able to hold the event in October or November instead.

Obviously, that mostly didn’t pan out! Those Wave Two postponements mostly resulted in early fall cancelations when it became clear that things were not reopened the way we had once imagined they might be.

Pivoting to Virtual & Maximizing Hybrid Models

It used to be that “real” events with high calibre speakers and large turnouts were always in-person. After the pandemic was mid-stride, there was a boom of virtual-only events to compensate.

Now, Li is seeing the rise of hybrid events, and she says they are flourishing. She loves this! In her personal life, Li notes that she genuinely loves attending events. However, there is a cap to how many she can legitimately travel to throughout the year while also balancing the rest of her work and life. With the hybrid option, she can choose to travel to some, and attend others virtually.

As this model continues to grow, Li expects to see an expansion in the events industry, as well as in those who are seeking speaker management agencies.

I remembered a Miami event I was supposed to have attended in March 2020. This was immediately after the lock-down, and the host scrambled to convert the whole thing into digital. She also let us all know that not only could we attend the virtual event, we would also get to attend a live event when the opportunity was again available.

After day one, we debriefed and she got excellent feedback. In fact, she decided to take that event (which she typically offered live 5x per year) and convert at least two of those into virtual experiences to increase access. Many people are finding that there are major pros to attending events virtually, and that they are willing to attend at least some events that way moving forward. (Obviously there are lots of reasons to love in-person events as well, and I don’t think we’ll see those going away!)

Speaker Management & Deal-Making

Li notes that speaker-related deals have been changing! 

When things first went virtual, she had immediately recommended to her speakers that they look at price adjustments. Some refused to do so, which they based on the value of their speaking, which they argued remained the same whether they were on stage or on camera. Although Li gets that argument, she would return with the idea that you have to be able to flex according to demand and needs.

So many events needed decreased prices because they had had to significantly reduce ticket prices. An event they may have charged $500 per ticket for live was suddenly being offered virtually for $50 per ticket. With those sorts of adjustments, profit margins significantly change.

For speakers who were willing to be flexible and work with those new realities, there were bookings to be found. For those who refused, it was hard to find openings.

Li notes that she had a number of speakers who would typically charge $30,000 for on-stage appearances. When the pandemic struck and many events couldn’t work with that, they began offering $5,000 appearances virtually. They ended up with more engagements and a better bottom line than previous years, because they got a lot of opportunities.

In general, I absolutely believe in knowing your value and remaining firm with your rates. However, I know that I made different choices as a speaker last year as well. In the law firm, our rates remained consistent and we were busier than ever (deal-making, as an industry, stayed quite busy!). On the speaking front, the “hold firm” strategy wouldn’t have played out as well.

Rigidity Kills Deals

Something I write about in my negotiation book is the reality that rigidity is a major reason for deal failure. It’s one thing to own your value and stay the course….but another to fail to realize changes in circumstances that should necessitate adjustments.

Personally, I was able to do a number of talks that I deeply enjoyed, even though my rate was not what it normally is. In fact, I now have multiple groups that are excited to bring me in live when things open up again; all because they got to experience me virtually during this pandemic. 

By choosing to be flexible and acknowledging the changing circumstances that were impacting the market, I was able to continue making deals that benefitted all parties. A win-win that I’m proud of.

Li noted that one major deal-making shift they went through in speaker management was brokering deals with the long-term in mind. For example, a speaker might be willing to offer a deeply discounted speaking engagement virtually now, in exchange for an opportunity to be the featured keynote speaker at the next live event when things opened back up. In this way, they were able to leverage both current and future opportunities.

There were incredible insights on this episode — it’s a must listen!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

 

Categories
Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Repeatable Processes For Organizational Success

As CEO, Martin Hershberger has scaled two companies to 8-figures and beyond. As a small business owner, he’s sold to Apple, HP, and American Express, to name just a few. He has spent the last fifteen years of his career consulting for businesses in the 5-50 million dollar range. Today, he helps business owners and CEO’s prepare for successful transitions by developing and executing strategies for repeatable processes that lead to profitable growth.

Martin believes that many change initiatives fail because they only offer partial solutions. He’s developed a framework that allows every element of an organization to get into sync and support strategies, leading to success. As Martin knows, all too often people underestimate the profitability you can grow with repeatable processes and solid systems. (A few weeks back, DealQuest guest Joel Block talked about the move towards subscriptions. This is a classic form of repeatable processes that lead to profit!)

Early Deal-Making 

Martin shares that being a business consultant wasn’t on his radar as a kid. In fact, he wanted to be a baseball player for the Red Socks. Although that never came to be, he’s pretty happy with how things turned out.

Martin was part of a team of three that shut down a supercomputer division of an organization. As part of that experience, he negotiated settlements for over 300 members. He notes he learned a lot about negotiating there! 

Upon starting his own company, he started signing major deals quickly while experiencing rapid growth. (Their first deal was with American Express!) Of course that feels amazing, but that kind of expansion early on can also lead to all sorts of struggles as well. Martin notes that there were often logistically difficult clients and a lot of specific needs that had to be met as part of these deals. Learning to navigate those was a major deal-making feat that required ongoing strategic planning.

Early Partnership Mistakes

Now, Martin works with industrial manufacturers and supply chain strategies. He notes that he transitioned from corporate to consulting as part of having experienced downsizing in the 4 billion dollar company he was working with. As part of his services for them, he had brainstormed solutions to major problems; problems he realized that everybody was having. He put together his own business plan, based on his prowess at solving systems problems, found a partner, raised funds, and launched his first company.

Building a partnership and raising funds were two major deal experiences he had early on. Martin notes he was incredibly naive when it came to raising capital, and that ultimately it would have been difficult to choose worse partners! Because of how he structured those early deals, Martin ended up with negative net equity almost immediately. Although he was able to sell to major corporations (like Apple and HP), he found he was having to do major “explaining” when it came to his balance sheets. 

Martin’s strategy was always to cash out of that business within 5-10 years. Unfortunately, with five offers on the table, his early investors wouldn’t accept any of the proposed deals. Having come out of the mainframe business, Martin knew that electronics prices were going to fall. As a result, he wanted to be able to get out of the business while it was at a peak, rather than waiting for prices to lower. Eventually, he ended up cashing out; his investors stayed in and ended up losing ground with failing internet sales.

Navigating Those Dotcom Bubbles

I remember the days of the dotcom bubbles and crazy inflation as well! Martin noted that the investors passed on a 20 million dollar deal for the business, because they just *knew* the company would be worth over a hundred in another 5 years. 

In my own 30+ law career, I saw clients navigate huge amounts of money, and put major deals on the table. I also remember how inflation rates were such that you could generate huge revenues but never make any profits. A client of mine was in exactly that position; even though there was a massive amount of money involved, he wasn’t taking anything home. Since then, he’s been able to create businesses that actually create more profit; on the flip side, he’ll never be able to sell them for the kinds of money that his early business went for.

Martin notes that he was seeing those same things, which is what motivated him to sell his shares and move on when he did. His original partner was able to do all right as well, and they left the investors behind to wait for those phantom larger numbers.

Building Partnerships

Although his investment partners didn’t work out, Martin notes that his early business partner was a great fit. Their skill sets and abilities complemented each other well, and they were able to work together to create success. Between them, they had a strong understanding of what they were looking for in a business.

Looking back, however, Martin also notes that they had a verbal understanding rather than a written one. Even though things ended well, that was more luck than anything. If there had been problems, it would have been really difficult to navigate them since nothing was in writing. Now, Martin would never do that again!

Finding That First Deal

When Martin was getting his business started, he knew that everyone was going to be worried about working with them. After all, no one wants to be the first to work with a new company, no matter how innovative their ideas are. (Or maybe especially if their ideas are innovative!)

Their first deal was based on a combination of solid systems, great salesmanship, and strategy. Martin knew that the client wasn’t going to be able to find anyone else who could offer what they could in terms of shipping. In fact, he sent them to FedEx to ask about their options so they could hear it from them themselves! He’d have them go there first, then he’d get them at the table and present his own value proposition.

Martin notes that he had some advantages here. He deeply understood the problem, and he had an excellent value proposition. Because he understood the larger picture that the industry operated within, as well as the more specific picture of how he could shrink a particular company’s pipeline, he was well positioned to make deals. 

Not many people can say that, as a competitive advantage, they actually sent people to the competition to learn exactly what their options were!

Repeatable Processes & Systems

Creating repeatable processes and systems makes a major difference when it comes to selling out or making deals! Martin’s philosophy is that any company should always be ready to sell if needed, and part of that means having systems in place.

An early client had commented to Martin, “You know, when I want to sell my company, no one wants to buy it.” Why? Because he wanted to sell in a downturn. By having systems and processes in place, as well as a transition plan in the back of their minds, business owners can actually position themselves to sell when they have the most leverage. (Which is much better than having to settle for what you can get in a buyer’s market!)

This is achieved by preparing yourself personally and your business organizationally to be ready to sell. Too many owners have a vague idea that of course they’ll want to get out at some point….but when they feel ready to sell they are so enmeshed in the business that it’s not clear what would happen if they left it.

Repeatable processes, clear systems, and the understanding that you will have to leave at some point can help remediate this. Martin recommends that business owners focus on repeatable success, which comes from systems and processes!

Listen in to the full episode here to hear more insights about repeatable processes and systems. They are the force that will enable you to exit when the time comes!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Deal-Making Authentic Leadership Authentic Negotiating Deal-Driven Growth

Capital Gains Rates and Deals

In this solocast, I talk about how potential increases in capital gains rates can have an impact on deals. Last year we started seeing this, and it’s only continued to grow coming into this year. We don’t know if capital gains rates are going to continue going up. However, we do know the Biden administration is proposing increases. The marketplace, of course, is watching and waiting. Regardless of your politics, you’ll want to be thinking through the business and deal-making implications of capital gains rate increases.

Capital Gains Rates & Deal-Making

When we started seeing the potential significant increases in capital gains rates at the end of last year, many businesses pushed deals through quickly. They were able to get them done in November and December of 2020, just in case the rates did change. It was a very busy time for deal-makers, despite the pandemic.

That acceleration has continued into this year. Now, possible increases in capital gains rates now appear to have been pushed back to 2022. As a result, many deals are occurring, and many businesses are positioning themselves to pursue active deal-making. On the M&A side of things, that means we’re headed for a robust year. Pair that with the reopening economy and the increased gains in Covid vaccinations, and I believe we’ll see deals continuing to move ahead full force in the upcoming months.

Other market factors are driving deals as well, such as valuation trends. However, an awareness of potential increases in capital gains rates is certainly present on everyone’s minds.

Deal-Making Timelines 

If your timeline for selling was about 5 years out (or more), you likely don’t need to make any major adjustments. However, if you were hoping to sell within the next year or two, it would be wise to have some awareness of how things are changing, and how that could impact your plans. It’s wise to be aware of how tax rates will impact you as both a seller and buyer, and it makes sense to mitigate losses when you’re able to.

Something worth noting, however, is that the primary driver of decisions is not tax policy. There are so many other factors impacting deals, including strategic reasons to buy/sell/acquire/merge, that tax policy cannot be considered the primary driver of deals.

When capital gains rates go up, there can be a depression of capital available for people wanting to invest. The increased rate of taxation makes returns less attractive, which can change people’s actions on the market. However, results and trends do show that these rates are not the only factors on the deals and investments people are making. Many factors contribute to deal-making, and taxes are only a single factor.

Should You Accelerate?

If you’re in the position to sell your company and you have a short term horizon, it may make sense to look into accelerating and taking action this year. Although capital gains rates may not increase, we do feel pretty sure they will either stay the same or go higher. They aren’t going down!

I definitely don’t think there is any call for panic though! Just because capital gains rates might be going up, you don’t need to feel pressed into selling if the time isn’t right for you. It’s wisest to make a measured, wise decision that takes both short and long term considerations into mind.

Maximizing net returns on capital is key for investors, for example, and their ability to do so is a more compelling decision-making factor than capital gains rates alone. Again, there are so many complex factors in deal-making that surpass tax rates. Although capital gains rates can impact things, the reality is that investors will be looking to deploy capital and get back multiples on that capital, and they’ll do it via investing.

Now, they may also choose to take the higher tax rates into consideration when coming to the deal table. This may change deal structures and offers, and may be something worth considering. The opportunity for growth within the market, however, will still be the largest factor in whether deals get done.

Overall Impact

There is a knee-jerk logic that says raising capital gains rates will automatically depress investment. I don’t think that is necessarily true, an idea that historical rates supports. Now, if the rates stay high for an extended time, we may see more negative results.

At the end of the day, it may happen or may not happen. In business, we have to deal with what is and minimize adverse impacts as we’re able to. Ultimately, entrepreneurs will keep building companies, investors will keep investing, and deals will be made.

Short-term, deal-growth and acceleration are being spurred by the possibility of capital gain rate increases. In the long-term, we’ll have to see whether the rates increase even gets passed at all. If it happens, I believe most operational business owners will find that there are many other factors that have more primacy than these rates over whether deals happen or not. 

There is honestly so much money out there that is ready to be deployed; deals aren’t going to dry up overnight because of increases to these rates. However, if you are positioned to make a deal this year, it makes the most sense to close it out before the end of the year. This way, you can avoid potential losses as a result of capital gains rate increases. We’ll be ⅓ of the way through the year when this episode goes live. Because deals take time, you’ll want to get moving if you know that you want to complete yours this year. If not, there’s no need to rush into anything based on this one factor.

Those are my thoughts. I’d love to hear from you how you’re choosing to react to the possibility of capital gains rates increases!

Listen in to the full episode here.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Authentic Leadership Deal-Driven Growth

Coaches, Deal-Making, and Buyouts

Remy Blumenfeld is one of the world’s leading business coaches and advisors. He’s contributed more than 50 articles to Forbes. Remy was also listed by an independent newspaper as one of the Top 20 Most Influential LGBTQ People in the United Kingdom. He’s been featured in Forbes, Inc., The New York Times, and more!

Listen to our full interview here.

Getting His Start

Remy shares that, as a kid, he knew he wanted to be in the communication business. He had a little cassette recorder, and he would go around interviewing his friends. (He even found the old tapes from it recently!) His first real job was actually as a reporter for The Wall Street Journal television show in New York City. He didn’t stick with it for his full career, but it was an enjoyable start!

His first deal-making experience was at a school fundraiser. There were all sorts of little booths, and people were selling things to raise money for the school. Remy spent 5 pounds and purchased a set of prints that had been connected to a puppet show theatre. He then resold them for a few hundred! Ebay wasn’t in existence yet, but he was still flipping goods.

Remy and I also discussed the difference between looking 4 years into the future versus a hundred or more years into the future — you can listen in to hear about that!

Later, Remy transitioned into what he’s known for now: coaching and advising. While running multiple businesses, he had found that he was naturally fulfilling a sort of coaching relationship with his employees. (The only difference, he joked, was that he had no coaching training and they hadn’t actually hired him for his input!) 

Now, however, Remy coaches leaders, primarily in the creation sectors. He finds they are usually looking for a combination of coaching and business advice. As a result, he provides a hybrid model based on their needs. 

Early Deal-Making Experiences

Some of Remy’s largest deals include the businesses he’s sold. He started his first production company out of his bedroom in Brixton because he was out of a job. Remy decided he wanted to sell ideas to broadcasters. However, he realized that he couldn’t get companies to invest money into him as an individual person. As a result, he rebranded as a company and kept on trying. Looking back, he notes he was doing many things he now advises his clients to do. At the time, though, he was doing it by accident. In essence, he was making programs about where he lived and what he knew best. At the time, Remy was living in a rough area as a young, gay Jewish man. The shows he was making were often about the edges of society. (Those edges have since become the middle in many ways).

The production company that started in his bedroom made the first Black music show on Terrestrial TV in the UK, the first Asian pop culture show on the BBC, the first gay dating show, and more. He notes they did quite well by doing what they knew best. They understood it, they loved it, and they did it the best.

That lesson holds true in any sort of business and sales endeavor: you’ll do best by doing what you know best. It truly helps to be an expert in whatever you’re doing, as the buyer realizes that you are truly the best choice for them.

Years later, Remy sold his bedroom-started company for a high-multiple figure to a larger production company. Later, they became the company that produced Big Brother!

Leaning Into the End Game

Remy notes that, at a certain point, he understood that the production company had a saleable value that he hadn’t initially recognized. When he had started it, there wasn’t really a true market in the field. 

About 6-7 years into running things, however, independent production companies became something that investors were interested in. Big companies started buying up smaller companies, and he realized he was ready to sell. This required facing many realities about the business that their team had never really thought about before. For instance, Remy and his team realized that if you don’t have processes in place, big companies aren’t interested in buying you. Strangely run companies with weird or lacking systems get overlooked in buyout opportunities. Remy suggests running your small company as if it’s a big company in terms of utilizing systems, procedures, and watching the bottom line. (Watch your growth line!)

Now, Remy always advises people to imagine, from day one, that they are going to sell. He notes that you should be attempting to create a story with numbers — a story of growth, consistency, and profitability.

Remy now works with founders to implement checklists early on so they can create something others would actually want to buy from the beginning. (Rather than trying to “dress the bride on the way to the altar”!)

I noted that it’s possible to get deals done with a last minute scramble, but it’s surely not ideal. Preparing in advance is the best!

The Psychology of Buying a Company

Beyond the numbers, Remy thinks psychology is the most important aspect of the sale of a business. (In fact, he notes that ego tends to get in the way of the best and truest job quite often!)

In the creative sector, Remy notes that people often want to show they’ve done the best possible job tapping into every possible revenue stream and protecting their rights. You won’t feel very proud of yourself if you’ve just “forgotten” to access a revenue stream or market. There is a level of pride involved that can make owners want to emphasize that they’ve done everything.

However, a buyer wants to feel there is room for growth and improvement. If everything has been done that can be done, and growth can’t occur, it will be less attractive to them. A buyer wants to believe they can run the company better than you, or at least that there is room for them to do something bigger and better!

Remy does note, however, that sometimes in show business people forget the business and run the show! In a business deal, it’s key to be able to show that the business elements have been well handled so they can be moved through.

(Listen in to learn more about Remy’s thoughts on how the buyers will be approaching your business just like a home they recently purchased; there will be changes!)

The Power of Coaches & Coaching

I noted that I’ve worked with coaches myself, and asked Remy to share a bit more about the power of coaching. 

Remy noted that one of the things he finds to be most powerful is helping people commit to their own goals and standards, independent of anybody else. It’s key to be able to hold these apart from your partner, parents, clients, or anyone else in your life. As a coach, Remy also finds it useful that he’s not involved in his client’s lives or goals in a personal way. He’s able to provide feedback and accountability that is received differently than that of a friend or colleague would be.

I see that as the deal clients and coaches make between one another, in terms of how they will hold one another accountable and show up.

Listen to our full interview here.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

 

Categories
Authentic Deal-Making Deal-Driven Growth

Licensing Deals

This week, we’re talking about licensing deals! Personally, I think licensing deals are underutilized. I’d love to see more of them happening, as there is so much that can be leveraged in this form of deal-making.

What Can You License?

Anything that is created by you or your team (physical or intangible), is potentially licensible. Who will license it? Someone who will want access because they know they can leverage it in their own life, business, or community. 

Licensing Deals & Inventions

First off, we have things that are patentable. This includes inventions and products; something you’ve created you can put a patent on. Chemical, mechanical, systemic, software; all of these types of inventions are things you can license. Bigger companies are especially interested in paying for tools that will enable them to manufacture, market, or otherwise use what you’ve built. Now, a large company would probably prefer to outright purchase what you’ve created — but don’t let them make you believe that that is your only option! 

Even if you make a worldwide, exclusive, into perpetuity license that states only they can use it (and you won’t sell it to anyone else), you can still create a licensing deal rather than outright sale. 

Of course you can also be thinking about ways in which to license your invention out to many companies, including competitors! By licensing the rights to what you’ve created, you can make a lot of money. It’s worth considering!

Also, think beyond physical items for this one. Training programs, keynotes addresses, workbooks, and so on; all of that can be licensed and sold to organizations who would love to use your content, curriculum, handouts, and frameworks. In the full episode I dive further into how you can make this desirable for your clients as well!

Listen here to catch my full interview on leveraging intellectual property rights with Bill Cates.

Structuring a Licensing Deal

A major early question that always comes is what the licensing fee or royalty is going to be. Every industry is a little different here; for instance, there could be a lump sum of money up front in order to get the rights to the license. In other cases, that isn’t an expectation.

In any industry, however, the idea of an ongoing royalty paid out to the owner is pretty standard. Monthly, quarterly, annually or other iterations are common. Total percentage varies greatly by industry; as a deal-maker, you’ll want to take a look at the norms within your industry as you consider this option.

The licensor will want to ensure that the base for setting the commission is top-line revenue, or a percentage of gross revenue. Why? Because once you get below that gross revenue line with a licensing deal, there is a lot of ability to manipulate and control what the number being used. Gross revenue is very clearly defined and diminishes game-playing.

As the licensor, you’ll also want to clarify some form of reporting to accompany your scheduled payments. This gives you a framework to ensure that the payments are appropriate to your deal. Keep in mind, however, that a report doesn’t mean that much if you can’t verify that it is accurate. The only way you can ensure accuracy is to retain some form of audit rights. You’ll want to know that you, or a third party provider, can double check to ensure that everything is above board. 

Exclusive vs. Non-exclusive Deals

Depending on your industry and product, this may go either way. What should you do? 

First of all, the licensor will want to lean towards non-exclusive deals. It makes sense that you stand to generate the most income by being able to create licensing deals with multiple parties for the same invention or intellectual property. However, that isn’t always an option.

For example, some organizations may need to know that they have exclusive rights to use a certain tool or framework. Now, this may extend to only certain industry competitors or geographic areas that you agree not to create deals within, or this could be complete exclusivity across all sectors. If you license it to one company in healthcare, for instance, you may agree that you will not license it to other healthcare groups, but that you can license it to a group outside of their domain, such as an automotive group.

Worldwide exclusivity that disallows you from licensing the group to anyone ought to be tied to minimum returns. This can at least ensure that you will make a return, even though you are limited to a single licensee. Now, if the minimum is not met, there are a few options.

For instance, the licensee may be allowed to maintain the license, but lose exclusivity. Or, the licensee may lose access to the product altogether. All of this needs to be included in the agreements!

Areas to Be Aware Of

Each state has variations on their rules about licensing. Something to be very aware of is the difference between a license and a franchise, which will differ in each state, and also has federal law attached.

For instance, McDonalds is a large franchise. You can’t start introducing your own food products into McDonalds, even if you are running your own location, because it is a franchise. There are expectations around how things have to look, how food is cooked, and what decisions you get to make. In a licensing deal, however, this level of restriction doesn’t usually apply. Does this mean that licensing is a free for all?

Well, as a licensor you do want and need standards! After all, your property and the elements of your brand or name that are being utilized are things you still want to reflect positively on yourself. If a licensee is using your product or performing in a way you no longer desire to be connected to, you may want to allow yourself an escape hatch. 

Creating these standards can begin to cross line between licensing and franchising, which is why it’s so essential you understand the differences in your state. I highly recommend working with a professional for that part!

To learn more about finding licensees and getting started with licensing deals, listen in to the whole episode!

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.

If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

 

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Authentic Deal-Making Authentic Negotiating Deal-Driven Growth

Internal Succession

Today’s guest, Michael Vann, is a highly motivated and driven Business & Transaction Advisor at the Vann Group. Michael has over 18 years of experience in both corporate and entrepreneurial settings. He has a passion for the growth and development of high impact companies. He’s also shown a proven ability to advise clients in a manner that results in growth and success. Using his knowledge and expertise, he is able to work with clients to develop strategies and solutions that build on a company’s existing foundation, unlocking its unrealized value. Ultimately, Michael also works with clients on succession deals, including internal succession.

Early Deal Making

Having grown up in an entrepreneurial family, Michael notes he always had a bug for business. Although M&A wasn’t on his radar early on, creating businesses and doing deals certainly was! The first big deal Michael was part of involved selling a coffee shop, which went quite well.

Now, Michael’s activities focus on serving as a trusted advisor to owners and leadership teams that require insight and execution of strategic initiatives and transactions. This includes areas like mergers & acquisitions; the development of joint ventures & strategic alliances; the acquisition of financing and capital; and the launch of new business models & divisions. As an industry agnostic, Michael has successfully worked in a wide range of industries, including insurance/financial services, industrial/business services, manufacturing, and food & hospitality.

Internal Succession Deals

Michael and his father, Kevin Vann, recently co-authored Buying Out the Boss: The Successor’s Guide to Succession Planning. (And back on Ep. 88, I did a solocast on internal succession deals and opportunities!) So I knew my discussion with Michael about internal succession deals would be a great follow-up.

First off, Michael notes that there are many moving pieces in a succession deal. Those moving parts are what attracts Michael to internal succession, as he finds them challenging and enjoyable to work on.

Small, local companies play a large role in the economy, as well as in their own communities. Internal succession deals are a way to keep them locally owned and operating, even when the original founder steps down or moves on. Another key component to succession? Maintaining company continuity and growth through a succession.

Michael notes a stat that over 50% of business owners don’t believe their successor was prepared. He works with business owners to help them build the support and systems needed for a healthy succession.

The Buyers Don’t Always Know What They’re Getting In To

At the start of the succession deal, Michael notes that buyers are often at quite a disadvantage. They don’t always know the ins and outs of everything they are getting into, and they are sometimes coming from the position of being an employee. Even if they know the business, that knowledge is usually constrained to a specific area.

Transitioning to being the full fledged owner and CEO of a business is a huge shift. It’s not just about taking on a new title. This may help us understand why only 6% of successions involve an existing employee.

Michael notes that not every employee has a desire to take over a business and become the CEO either. Just because an internal succession deal may seem desirable, he cautions business owners to remain aware that they may not have an employee who would truly make sense to take over.

If you know you’ll one day desire to transition out of your business, you need to know it can run without you! It’s tempting to remain heavily involved, but you can make yourself more attractive to both internal and external buyers if you can demonstrate that the business can remain stable without your constant oversight and presence.

Conversations with Owners

Michael notes that there is a difference between scale and value. Many people can find a way to scale, but not everyone can build long term value that lasts.

From the perspective of a potential buyer, long term value is much more important than the ability to scale. Business owners need to move beyond short term thinking and consider what parts of their business are saleable, or worthy of passing on to the next generation.

Unfortunately, family businesses tend to have low statistical success rates across the generations. Michael has seen that keeping the second generation vibrant and growing is key to their success. Beyond that, however, he tends to see a downward spiral in experience moving into the 3rd and 4th generations of family businesses. Sometimes later generations are coming into the business from a place of entitlement, and other times they are there out of obligation. Either way, it doesn’t tend to translate to success.

I noted a practical problem that also occurs is that most generations get successively larger. The math gets quite hard when ownership is splintered among 15+ people, as getting people on the same page can be quite hard and the business needs to support more people.

Family strife, differences in vision and direction, and willingness to take risks all come into play for multi-generational businesses.

Trends in the M&A Market

When Covid hit, Michael’s group saw three deals stop dead in their tracks. Eventually one moved forward, but the other two died. Around May, however, they saw things start moving again.

He attributes this to business owners who are accelerating their transition processes after having watched the way the market has been moving. Increased uncertainty has caused a number of owners to decide to get out now while they can, even if their numbers are a little lower than expected.

Michael did note that they haven’t seen any large valuation impacts yet. He’s encouraged clients not to panic, and has seen plenty of active buyers in addition to sellers. By making wise decisions from a calm place, most business owners should have the ability to make solid decisions regarding their futures despite challenging times.

For deals that are moving forward, there has been an uptick in clawback provisions. This creates a balance for both sides of the transaction, and may be worth considering if you enter a deal in the near future. As a structure, it protects both sides and creates a bit more deal security. I agreed, noting that our firm has seen a similar trend.

In Massachusetts where Michael is located, he notes they’re in a strong manufacturing market, with precision aerospace and medical devices especially. There is a great asset base there, and the deals tend to be quite solid.

Whether you’re looking to buy or sell, the market is solid and deals are getting done every day!

Listen in to Episode 94 to hear the full interview and get Michael’s take on some of the biggest mistakes people make while trying to get deals done.

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast

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If you want to find out how deal-ready you are, take the Deal-Ready Assessment today!

Categories
Authentic Business Relationships Authentic Deal-Making Deal-Driven Growth

A Capital Raising Journey

Sherisse Hawkins is a multi-talented builder, learner, risk taker, motivator, rainmaker, and speaker. She has a strong engineering background. Beyond that, she is the creative minded CEO & founder of Pagedip. Sherisse also has a proven record of meeting impossible deadlines, delighting customers, and re-imagining how things can be done. She believes anything is possible in the digital world, and is passionate about driving innovative content. She’s appeared in Vanity Fair and on Shark Tank. In this interview she shares more about her capital raising journey and other business experiences.

Early Deal-Making Experiences

Sherisse notes that she didn’t think of deals or deal-making until she became an entrepreneur. In her earlier work experience she had thought of decisions and deals pertaining to technology usage as being more technical. You examined which systems were most sound and used those. Pretty clear cut!

Moving into the entrepreneurial world and becoming a founder & CEO revealed how many other factors come into play. There are so many factors beyond “by the book” choices. Even when dealing with the objective facts of technology and science, things weren’t as clear as they had once seemed.

Becoming an Entrepreneur 

Not everyone is cut out for entrepreneurship. This isn’t just about having the dream, or being financially set up for success. Instead, there is a necessary personal mindset shift that must be experienced. This shift is what allows some people to make entrepreneurship a reality. 

Having worked in very large organizations, such as Walt Disney Imagineers, Sherisse hadn’t had the experience of working in a small company prior to starting her own. She understood that there were going to be financial risks. But she also knew there were going to be risks of not following her dream. She recognized that she liked starting things, and enjoyed getting things into the state they needed to be. That might be connected to her engineering background.

Sherisse shared that, throughout her life, she’s found that it’s intensely satisfying to take things apart and put them back together. There is a sense of exhilaration when a set of code works, or something comes together for the first time.

She found that same exhilaration in entrepreneurship. Although she had a great title, a corner office, and a bonus system at her role, she had a pull within her heart. She knew she could not deny the call to entrepreneurship. The field of communication and the development of digital tools held huge potential, and Sherisse knew she could make an impact. Finally, she took the leap.

You often hear of people in their young 20’s and even late teens starting companies and becoming millionaires. However, the average entrepreneur starts their business in the 30’s, 40’s, and later. There is no real time in life that it’s too early OR too late to become an entrepreneur.

Seeking a Co-Founder 

With Pagedip, Sherisse shares that she feels they’ve created what Microsoft Word might have been if they had created a word processor in the time of the internet. Essentially, they’ve created an editor that allows the user to marry core content with other elements. This combination creates a narrative flow that compels the reader to actually use the content you create. (Unlike traditional documents or PowerPoints!) Additional information can be added into what you’re sharing, all while allowing readers to stay on one page. 

As a result, materials can be kept up to date. Analytics are possible, so you can see where readers spend the most time, and which addition information mattered to them. Best of all, everything can live in one place. Pagedips are interact-able, measurable, engaging, and secure documents that create experiences for their users.

In terms of raising capital, Sherisse shares that she initially started the company with her own money. She was hoping for a technical co-founder, but had a bit of trouble finding the perfect person. Many of her peers didn’t want to take the risk. Eventually, she found a new graduate who seemed like a good fit.

Shortly after, they headed to an accelerator in Australia to get things moving! (She learned of this from Jen Matthews, who she had connected with after hearing her speak.) With her co-founder, she was able to further incubate the idea and started to understand the role capital raising could play in getting the organization off the ground. Sherisse sees that bootstrapping likely makes sense in some instances. For Pagedip, however, it was clear that bringing in outside capital made the most sense.

Notes on Capital Raising

After their first pitch, there were a number of investors interested in their idea. Not surprisingly, since that initial pitch, Pagedips has pivoted, as most businesses do. That initial interest was a great early start!

Sherisse shares that if she had known everything she knew about how difficult fundraising can be, she might not have taken the leap. (So she’s glad she didn’t know!) Raising money can be really hard. It’s made even more difficult for women and people of color. When she looks back at those early experiences now, she sees that the data supports the experience she had.

The company has now had two rounds of seed investments. Sherisse notes that fundraising takes longer than you think. It really is a full time job. There is a tension between wanting to move the company forward and invest time there, and needing to devote a huge amount of time to actually fundraising.

Along the way she’s had feedback that the company is thinking too small. Some investors have said they should be aiming to be much bigger and larger. She’s also gotten feedback that the idea is too big. This advice is usually paired with a warning that they need to think more reasonably. Between the two, “too small” is most common. Investors want to invest in something that will earn them back the largest possible dividend. That means more income, more markets, and larger numbers. It means casting a bigger vision with more dollar signs.

Want to hear about Sherisse’s appearance on Shark Tank? Curious as to why many companies DON’T need to seek investors? Listen in to the full episode!

Capital Raising as a Woman, a Person of Color, and Engineer

Sherisse shares that she approached this journey as an entrepreneur, a woman, and a person of color. Those identities came into play throughout her business building and fundraising journey. Although you cannot know what your experience would be if you did not possess those identities, she did feel that there were still some stereotypes. This was especially true about what technologists and professionals in the space were expected to look like.

She knew that her company was changing how people would experience information sharing forevermore. That’s a bold statement and huge undertaking! In a five minute pitch for that level of technology, there’s not time to dig into your background, prowess, and ability to pull that off. (And still share about the actual idea you’re presenting).

You don’t have the opportunity to share about the relevant experience you’ve had throughout your 20+ year career. You don’t have time to combat stereotypes AND establish your ability to succeed with a new venture.

Somehow you have to find ways to convey that experience and expertise. You can do this through non-verbal communication to save time. In addition, Sherisse noted that it was essential to bring that background to the forefront. Sometimes that did mean spending a bit more time on those areas than others who more apparently fit the funded founder check-boxes might need to. (Which also means less time to spend on pitching the actual idea itself.)

Sherisse found it was vital that she was able to own the fact that she is a technologist and a visionary in her field. That ownership was a key element in her ability to create a compelling pitch with confidence.

Studies have shown that perceptions about gender and race create huge assumptions about a person’s ability and capability. Everything from music auditions (read about the impact of blind orchestra auditions here), being considered for a Ph.D. program  (read about the impact of name and gender here), to the weight that GPA, professional experience, race, and gender play in hiring (read about the impact of these and other factors here) can be impacted by a person’s perceived race and gender. Appearance can immediately play a role in whether you can even secure the opportunity to show what you’re capable of. (Not only “can”….studies show that it most definitely DOES.)

Personal Growth and the Internal Journey

Sherisse shares that she is tenacious to a fault. Something she’s grappled with in her journey is when (and if) there is a time to say, “This is enough.” She hasn’t found that place yet! Instead, she keeps on pushing forward and growing.

One thing that fuels her is the belief that if you can see it, you can be it. She knows that there aren’t a lot of women, or women of color, within her field. Years ago, Vanity Fair brought Sherisse, as well as other women of color who had raised over a million dollars in capital, together in one place. They all fit in a really small room. There just weren’t that many people in those categories to invite! As someone who knows what it is to be one of the first, Sherisse notes there can be a lot of doubt about what is possible.

She also shares that she would be remiss not to mention that there IS a little part of her brain always processing what is possible in our time and within her industry. There aren’t a lot of people who look like her who have experienced a large amount of success in her industry. That’s a big undertaking, and an interesting journey!

In general, founders raising capital are a small group of entrepreneurs. Capital raising and making over a million dollars, an even smaller group. Among these small groups, white men continue to make up a majority. This means we still have this picture of representation that validates that we belong in the space, and that we can succeed.

As someone who has benefited from some of those privileges and has been committed to use that privilege to promote equity, provide opportunities and stand for representation of people of all backgrounds, I appreciate Sherisse sharing her journey with authenticity. Her commitment and drive to overcome the challenges of not fitting the mold and breakthrough and reshape the mold for her own benefit and that of others inspires me. 

Learn More

To learn more about Sherisse, Pagedip, and the capital raising journey, listen in the full episode! You can connect with Sherisse directly by emailing [email protected].

Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out how deal-ready you are, take the Deal- Ready Assessment today!