The Founder Exit Report: What Happens When You Sell a Company?

Roughly 5 million businesses are created every single year in the US. Also every single year, about 1000 businesses exit via IPO or acquisition. Which means doing some math, about 1 in 5000 businesses exit. That's 0.02%. If you are watching this, it's likely because you are already on your way to having one of those successful exits. Which means that it's important that you know things like how not to lose out of money exit and why retirement, despite whatever your intentions are, is likely not your next step. And also with the single biggest mistake that most founders make when going through an exit is. The problem is, as we established, this is a rare event. And that means that probably one of the most life-changing things that is ever going to happen to you is a total blind spot. But the good news is that this show and the community that it's made for, but it's not exactly a rare event to exit because it's a community for successful founders. So we've gathered some information via a quantitative survey that we did internally at Hampton with Exited Founders. We've talked to Exited Founders internally at Hampton. And also over 100 interviews for this podcast. And we have come up with the six things that you need to know about what it's like to actually go through a major exit. Oh, and if you're new here, my name is Jackie Lamport. This is Moneywise and it is a podcast. As you may have guessed, for the Hampton community, don't worry, it's not another one of the shows about how to get rich or how to become a successful founder. This is specifically made for the people who are already in the grind, which means that we're going to get super, super transparent about finances, but the raw personal journey, the emotions, the things that people who are experiencing it are the only ones who can really express. So that's what this podcast is for. And if you are a founder and you're not already in the Hampton community, you should check it out at joinhampton.com. If you're doing at least 3 million in revenue, it's definitely worth your time. Joinhampton.com. And now transition. Number one, that big number, that sold for number, that means nothing. What actually matters is the deal structure. Nearly every single founder that we spoke to said the same thing. If they have regrets about the deal itself, it's not about the total price. It's about the structure of it. Urnauts and complicated deals can make the payout, the total payout seem way bigger. But the reality is that the founders who push for more cash, they're the ones who are happier, regardless of what that end total might be. Which by the way, those earnouts are often below expectations. Our internal survey of exited founders at Hampton showed that about 47% said that they received less than they expected. In part, that's because by virtue of exiting, you are relinquishing control. And if urnauts are based on future performance, that future performance is in the hands of somebody else. Somebody else who wasn't you, which is the performance that got it to where it was in the first place. The other thing about urnauts is that in most cases, it also means that you're still attached to the business in some way, which means you kind of have one foot in and one foot out. And it's a little bit of an awkward place to be. We talked to a lot of founders who didn't enjoy that and kind of wish that they never did. Vanilla higher math is probably the most interesting example because he actually just did walk away early. And because of that, he walked away from a lot of money. Just because he didn't want to do it anymore. Listen to what he said. So you left 60 million, but that 60 million, you're going to have to work for how long? That would have been over a full four years. And there were like a couple different tranches of like payout and all this stuff. I was actually struggling with it quite a bit because you think about these numbers and you're like, "Okay, I've made a lot, but this is still a lot." And it's like, "Should I stay?" I went to the red woods. And essentially within the red woods, I was joke that I'm in a polyamorous relationship with like redwood trees and whoever else. But within five minutes of going on my first hike of unplugging, I just looked at the trees. And dude, I swear to God, the trees like spoke to me. Where's your sober? I was sober. I was sober. And the trees like spoke to me. They're like, "What is the point?" They're like, "Awe, Eve." Yeah! (laughing) Yeah, I exactly did. I love that. That's so funny. So point number one is this. Opt for cash. Always just opt for cash. Which brings us to point number two, which is that it doesn't matter how much you make. You might end up feeling poorer after the sale anyway. Poor. More poor. Less rich. Something that people don't actually expect. But it's surprisingly common. Is that it doesn't matter if it's seven figures or eight figures or whatever. Having a lump sum in the bank and not having cash flow can still make you feel financially insecure. With an exit, particularly from a cash flowing business, you kind of go from this money machine thing to having to protect a pot of gold. Basically, it's a finite resource suddenly, instead of a continuously flowing resource. And that just feels different. And whether or not it's true that you're poor, you're not. You might feel that way. Alex Ramozi had this exact experience, and he told us about it when he joined the show. Check it out. I felt poorer after I sold the company than before. Your company was a sell on cash flow, and you had a lot of cash flow. So yeah, you cut off the fire hose. Yeah. And so I don't think I'll do that. I don't think I'll do that again. Because I felt, and then all I thought was like, well shoot, now I got to take this cash and go buy that amount of cash flow. And I was like, well shit, it's going to be hard for me to buy that amount of cash flow with the money that I've got. Now, there are some rules that you can do for your spending. You could also do some math. And just like, kind of logically know that you're not actually going to run a money unless you're deciding to buy a G6 or something, unless you get afforded that. But it's still a difficult thing to get your head around. This is a difficult and potentially dangerous mental trap to get into. Because basically what happens is that that number for you to feel secure, then it goes up because you're like, wow, I actually don't have enough because it's this finite thing now. I need a little bit more for protection. And then you get there and then you go up a little bit more and then you get there and you go up a little bit more. And it's this trap that a lot of the people that we've spoken to have said that they have fallen into. And from my experience interviewing probably now over 150 different exited founders and also a financial advisor that we spoke to about a month, maybe two months ago, who deals with specifically high net worth people. The people who are worth like single-digit millions are the people who are happier. And that's because they have let go of that anxiety of needing more to feel secure. They feel secure. They know that they've made it. You could still make more money. That's okay. But just know that you're good. You are secure. You did make it. So it's okay. Now you don't necessarily just need to get over it. You can also just use your anxiety by finding more cash flow. Get a job, start a new company, do another project. And that brings us to point three, which is that you're likely going to do that anyway. Alright, money wise listeners, here's the deal. 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Their expert coaches are available seven days a week. So you can rest assured knowing that you have someone to hold you accountable every single day and to keep you on track. You can have it all. They offer a 100% money back guarantee within 30 days no questions asked. Make a change, check them out. DailyBodyCoach.com/MoneyWise. Again, that's dailybodycoach.com/MoneyWise. Yeah, number three is you're probably not going to retire even if you thought you were going to a business is work, right? And we're not really expected to like work. There are those who are lucky enough to enjoy their jobs. I know that I love my job, but you might love your job, love working and still think, yeah, but if I did just let it all go. And I focused on my hobbies, my passion projects or whatever life would be better. It would be more enjoyable. You'd probably be wrong in our survey of Hansen members. It was actually 92% of exited founders who were already working on their next venture. And it's not even a money thing because the exits that were worth $100 million or more. Yeah, like 0% of those people are not doing something way back in episode nine. We spoke to a guy named Jeff and he is by the way worth about $120 million. He put it pretty nicely. So take a listen to this. You have this vision, right, that you're going to be jetting around doing cool shed and the hanging out in the winter circle alive. But it's just it's not real. Most people are back at work. The vacation is great. But I mean, can you eat a hot fudge Sunday every meal for just the meal? You know, eventually it's like I got to have something else. It's a challenge to replace the things that you think you want to get away from. They're actually holding you up. And yes, I'll admit it. Hampton might not be the most unbiased place to get this kind of data because you know, it's a community of founders who love building businesses. So yeah, of course they're going to want to build another business. But I mean, you're listening to this podcast. So welcome. Number four is a fun one. Expect an impending identity crisis. This is a quote from an essay in the Harvard Business Review. Congrats on selling your business now get ready for a depression. When you put everything you have into something, regardless of how much you want to sell or get to your next project, losing that thing, it's still a loss. What founders might not often even realize themselves is just how emotionally attached to their businesses they are. In fact, while researching for this video, I came across one study that was comparing the brain responses for founders thinking about their businesses and thinking about their children. I hope that you care about your children just a little bit more. But, I mean, that's pretty crazy. In our survey, 67% of people who yes were initially elated further exit, later reported that they were experiencing significant identity challenges. And that's something that is pretty consistent with the interviews that we've had for this podcast over the past year and a half, two years. You do have to give yourself some grace and remember that it's temporary. You just went from a significant period of time in your life having all of this pressure of this thing riding solely on your shoulders or maybe a co-founder shoulders, but really a lot of pressure to suddenly not having that. That's an adjustment period that you're going to have to just go through. It's something that across all the interviews that we've talked to, people have pretty much brought this up for every single case when there's been an exit, which means that I could pull a lot of clips of people talking about it. However, let's go back to episode four when we spoke to a guy named Ryan because he kind of put the whole experience in nice little sound light for us. I think the identity problem was big for me the first year. I think I realized that was because myself, worth, was based in how hard I worked on something. Like how many hours I put into something, how many times I think about it, how many podcasts I listen to and Jason Lemkin blog posts I read and like newsletters, I could, like, it was all based on all of this, like hustle and then I didn't have that. Like almost it takes maybe six or eight months or whatever to really transition and get new leadership and all that stuff. Then after that, I didn't have that anymore. And I was searching for that next kind of grind or addiction to work on something and that's that lost period. And before we move on from this point, it's also, I mean, pretty obvious, but the founders who have been involved in their business for over five years, those are the people who tend to get that identity crisis hit the hardest. Number five, you're likely going to regret that big purchase. When we're talking about seven or eight figures or even in some cases on the show, nine figures, just dropping into your bank account, you get the inevitable, well, what would you do with that money? It's hard to resist buying the trophy car or the house or that luxury item that you've always wanted because, well, you can afford it and you've earned it. So why not? Years why not? There's a decent chance that you will regret that even if it's something seemingly practical like a house. In our survey, 33% of founders who specifically bought a house said that they regretted it. And 72% of people who made big purchases said that they wished that they had just waited. If it was that simple, then you'd probably just rent stuff. But by nature of owning things, it means that you're responsible for them and the more money something is, I mean, it's going to feel like a lot more responsibility and it likely is a lot more responsibility kind of how that works. That's why the common sentiment that we hear from guests and anybody we've talked to and in the Hampton community too is that the things you own will end up owning you. So you've got to be really careful. That doesn't mean that you can't or shouldn't buy big, fancy things if you want to and you can afford it. It just means that it's really important to take some time, think it through and adjust to this new level of wealth before you jump into anything that you might not realize is going to cause you a lot more stress down the road. I mean, how many times has Sam Par mentioned on this show that he wishes he didn't buy that ranch? By the way, the exit report that I'm referencing for this entire episode, it has a lot of other information too that might not necessarily be relevant to this conversation, which is why I'm not bringing it up. But there was a really cool thing about what you're likely to buy or do with your money based on the industry that you were in for the business that you sold. And you know, sometimes stereotypes, you know, sometimes. But yeah, I'm not going to get into that. If you are curious, I'm going to link that report down in the comments. A.I. search is quickly becoming one of the easiest ways for companies to get in front of customers right now. And the best way to take advantage of it is with mentions.so. It was built by a Hampton member and it gives you one simple dashboard that shows you exactly how your company ranks inside LLMs like ChatGPT. And more importantly, what you need to do to get ChatGPT to recommend your product or service to potential customers. Every 10 years or so, a new growth channel is born. And for a small window of time, companies are able to get attention for cheap and drive massive growth. 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Who are behind the SEO campaigns are some of the biggest and fastest growing companies in tech like Beehive, Kajabi and American Express. That's Mensions.so code MoneyWise for 50% off your first month and a free search audit. And lastly number 6. The timing is never going to be right. Like anything in life, the timing is never ever going to be perfect, no matter how hard you try. And if you try to make it work so that you get the best outcome possible, well really what you're doing is setting yourself up for failure or disappointment because it just doesn't work that way. But our numbers are obviously people who did get lucky enough and had a successful exit. However, the people who actually tried to time the market or in a sense kind of did, they were twice as likely to have a second guess over the actual sale itself. And it was only 15% of those people who timed the market that actually felt very satisfied, which obviously is the top of the spectrum for the survey. 15%. That's not to say that timing shouldn't be considered at all. Sometimes things align and it makes sense. And you know, so you go with it. In fact, 33.3% of the founders that we talked to did sell because the timing felt right in the market. But that's different from waiting for that time. That's jumping on an opportunity. It's not expecting an opportunity to eventually just present itself. You control the business. You understand the market. You research the trends. You can see things in the economy. But you know what? You can't control pretty much everything else. You can try to wait and see when things are going to work out. You can do some guesswork. But if you're waiting for that moment where everything just kind of works out, I mean, even if it all looks like it's going to, there are things like COVID. I don't want to talk about that. But you know what I mean. But even if you are that rare exception and everything works out, you had the maximum outcome at the perfect time and everything just aligned. You're still not doing it for you. You're waiting for that, meaning you're waiting for the market and you're ignoring what you want. So what we found based on the numbers, based on the things the stats that I just shared with you, the people who are the most satisfied with their exits are the people who did it when they were ready, not when the market was ready for them. Okay, so that was the sixth thing that you need to know in however many minutes that took to say. But what if I give you nine more as a bonus as quickly as possible? These are verbatim quotes from the Hansen community from Exited Founders. And I've broken it up into three sections. Let's go. Okay, so let's go. Okay. So let's go. Okay, so let's go. Okay, so that's what we found. And then, let's go. Okay, so let's go. Okay, so let's go. So let's go. Okay, so let's go. Okay. So let's go. Okay, so let's go. Okay, so let's go. Okay. So now we have the number one. Okay, so let's go. Okay, so let's go. Okay. Okay, so that's what I'm going to say. Okay, so let's go. Okay. Okay. Okay. our early. Section three, on Let 'n Go seven. Take care of your best people with some dollars. Life is long. Eight, you're now the project's uncle or aunt not the parents. And number nine, know what you are planning to do next before you make the exit. High-power entrepreneurs will not sit still. Okay, yeah, I had to cut a couple times. It was hard to do that under pressure. And I will do a bonus on the bonus. Number 10, this is not a verbatim quote, which is why it's a bonus bonus. But perhaps one of the most interesting things that we actually learned in this survey is that the loss over control of company culture is the most cited post exit frustration. That's interesting, right? Now this whole thing has been specifically related to the exit, which means that the finances are also tied to the immediate period of time post sale. But if you're curious about some incredibly unique and rare insights into what these now wealthy founders do with their money long-term and how it impacts their lives. We also did an episode breaking down a wealth report that we conducted, and you can check that out by scrolling back through our feed. Thanks again for listening. My name is Jackie Lamport. This is MoneyWise, and we'll see you next week.