Michael Alter, CEO of SurePayroll, shares three crucial lessons in this video interview on the sale of his company to Paychex for $115 million. Here are the highlights:
Your Company Is the Product
As managers, leaders and owners of companies, we spend all our time producing and selling things: products, services, processes. We think about how to create, position, price, brand and sell. But what happens when we try to sell the whole enchilada? It turns out the best process is the same, on a larger scale – the company becomes the product, and the same sales and marketing elements apply.
A radical example – recall the sale of ICQ’s Instant Messenger to AOL way back. The owners of ICQ proudly told the world that prior to selling to AOL for $425 million they had not taken in one dollar in revenue.
Make Sure Your Product (The Company) Is Fully Baked
Michael is brilliant on this point – because price isn’t the whole story. It’s easy to say you should sell when it’ll get the highest valuation. But what does that mean? Any smart buyer has a plan for making your maximized outcome her bargain price, from which she can later brag about what a steal she got when she underpaid for you. Michael said that for his 12-year-old venture, the decision to sell was not about flipping the company for a quick profit. With 30,000 customers and 160 employees, much was at stake. Even in the face of selling the company and turning the keys over to someone new, Michael said you have to ask, where do you want the company to go from here?
Go In With a Bigger Plan
This doesn’t just mean a plan to sell. Michael said that seven years ago SurePayroll got an offer but declined. The decision to wait proved to be the right choice. A sale process acquires momentum and picks up speed as you go along. It gets hard to change course. Your plan has to remain global and future-oriented even while you are packaging your company up with a pretty little bow on top. Michael took a global look at SurePayroll and saw that with big differences in client base, SurePayroll would not go through significant change following the purchase. Paychex had a strong presence with traditional payroll customers, while SurePayroll catered to online use by small businesses. He accomplished the shareholders’ goals for sale while taking care to insure SurePayroll’s ongoing viability.
It’s always emotional when exiting a VC-backed company. Investors don’t go in without eventually wanting a way out (sorry Warren B., I love Berkshire Hathaway but VC aren’t built for forever as a holding period). Great founders don’t flip and don’t treat their creations lightly. But sale is a common outcome.