Business owners often ask themselves, “When is the best time to sell my business?” In my experience, the very best time to sell your business may be when someone wants to buy it! While it can be tempting to think about growing your business forever (particularly when things are going well), that option comes with a significant potential downside risk.
Wealthpreneur Spotlight
Rand Fishkin’s Painful Lesson
Rand Fishkin dropped out of the University of Washington in 2000 to work as a web designer in his mother’s small business marketing firm. In 2004, he created the SEOmoz blog, which became the world’s most popular community and content resource for search marketers over the next decade.
In 2007, SEOmoz, Inc. (“Moz”) transitioned its focus from consulting to software and Fishkin became the CEO. During his 7 years as CEO, Fishkin grew Moz to 130+ employees, $30 million+ in annual revenue, and 30 million+ visitors per year.
He also raised two rounds of venture capital funding, led three acquisitions, and launched a rebranding effort. Fishkin stepped down as CEO in 2014 during a bout of depression and departed the company 4 years later.
In 2018, Fishkin and co-founder Casey Henry started SparkToro, LLC (a software company focused on marketing and audience research). That same year, Fishkin published his book Lost and Founder: A Painfully Honest Field Guide to the Startup World. He had previously co-contributed to two other books, Art of SEO and Inbound Marketing & SEO.
An Offer, But No Deal
Rand Fishkin started his entrepreneurial journey when he joined his mother’s marketing agency. When Fishkin realized how much his mom’s customers struggled to get their companies displayed prominently in a Google search, he immersed himself in the emerging field of Search Engine Optimization (SEO).
Fishkin began writing a blog called SEOmoz, which led the company to transition from marketing to SEO consulting and software. Moz was generating $850,000 a year in revenue by 2007 when Fishkin decided to drop consulting and focus solely on becoming a software business.
The company’s sales began to grow by 100% per year, and by 2010, Moz was generating around $650,000 in revenue each month. This explosive growth attracted the attention of Brian Halligan, co-founder of a company that would grow into marketing software giant HubSpot. HubSpot (a privately owned company at the time) offered to buy Moz for $25 million in cash and HubSpot stock – an offer almost 5x Moz’s $5.7 million of revenue in its most recently completed financial year.
But Fishkin wasn’t satisfied. He believed a fast growth software as a service (SaaS) company was worth 4x future revenue and was confident Moz would reach $10 million in revenue by the end of that year. Fishkin made a counteroffer of $40 million. HubSpot declined.
The Wrong Road Taken
Instead of selling Moz, Fishkin raised a round of venture capital funding and began diversifying into a broader set of marketing offerings. The further Moz veered away from its core competency in SEO services, the more money the business began to lose.
By 2014, Moz was in full crisis mode, and Fishkin was battling with depression. He decided to step down from his role as CEO, describing his resignation as a “lot of sadness, a heap of regrets and a smattering of resentment.” Fishkin became a minority shareholder in a company he no longer controlled where venture capitalists had preferred rights upon a liquidity event.
A $400 Million Mistake
In October of 2014, HubSpot went public on the New York Stock Exchange. As a public company, Hubspot’s shares began trading at nearly 20 times their value per share at the time of Halligan’s offer to Fishkin in 2010.
In a 2019 interview, Fishkin revealed that his liquid net worth at that time was approximately $800,000 – much of which would soon be spent on care for his grandparents. The value of Fishkin’s Moz stock he held upon its ultimate acquisition in 2021 by a subsidiary of J2 Global was significantly reduced by the preferred return due to the venture capitalist investors.
Based on April 2024 market prices, it is estimated that HubSpot’s 2010 offer of $25 million in cash and HubSpot stock would now be worth more than $400 million (due to the increased value of HubSpot’s stock). Fishkin’s story is a cautionary reminder that the best time to sell your business may be when someone wants to buy it!
The Wealthpreneur Lesson
Many Wealthpreneurs miss out on the opportunity to sell their businesses because they simply haven’t thought about their endgame. Creating a detailed plan that aligns with your objectives will not only help shape your current strategies and decisions but also increase your ability to achieve a successful exit.
